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Q&A: Cisco CFO Discusses Changes and Future Plans for San Jose Coyote Valley Campus

October 23, 2001

Cisco recently changed the plans for its Coyote Valley campus. Cisco Chief Financial Officer Larry Carter discusses the changes and what Cisco's future plans are for that area.

Q: What changes are you making to your Coyote Valley campus plan and why?

A: After the economy slowed, we revised forecasts of our space needs and made changes to our real estate plans. As part of that we decided to scale back our plans in Coyote Valley. We still believe Coyote Valley is a great location for a corporate campus and will still be able to build there in the future if we need to.

Q: Originally, Cisco planned for a campus of 6.6 million square feet for up to 20,000 employees. What are your plans now?

A: Under our agreements with our partners, the parcel we may develop over time could hold roughly between one and three million square feet, which translates into a capacity for 3,000 to 9,000 employees.

Q: Given the change of scope to your Coyote Valley plans, are you also now thinking of moving the company from San Jose?

A: We are not considering moving from San Jose and we want to keep our headquarters and largest campus in San Jose. San Jose is an excellent location for Cisco for many reasons, including the extraordinary talent pool in this area.

Q: Where else have you made changes?

A: Over the past several months, we have evaluated and made changes to plans all around the world. For example, we have scaled back projects in other places in the Bay Area, such as Dublin and Alviso; elsewhere in the US, such as Richardson, Texas and the Boston area; and internationally in places such as Britain and Australia.

Q: Why were you planning for so much space around the world?

A: Real estate planning is a long-term process including multiple approvals, architectural planning and construction. At the rate we were growing, we would have needed all of that space and probably more. We had to ensure that in the years to come we would be able to accommodate a much larger workforce. But our plans have changed. Our workforce will still grow over time, but not nearly as fast as we had planned for before the economy slowed.

Q: Does this shift mean that Cisco's business is declining?

A: We are a strong, well-positioned company with a great future. The change of scope in our plans for Coyote Valley do not reflect any change in previously stated projections about growth, revenues or the future in general.

Q: What will happen to the rest of the land?

A: Cisco is a partner in a partnership that owns the land. Initially we expected to be the sole user of the land. The controlling partners of this partnership will now develop the rest of the land. Being in the real estate and development business, these partners are best equipped to identify additional companies for the remainder of the property.

Q: When will you start construction of the smaller campus?

A: We have always said that we would build in Coyote Valley over time, as we needed the space. We had anticipated needing the space as soon as possible. But with the changes I discussed earlier, we do not need the space right now. We will wait to begin building until we need more space.

Q: Why did you decide to hold on to some of the property instead of letting all of it go?

A: We think Coyote Valley is a great place for a campus and is a valuable asset. We decided it wasn't prudent to plan such a large campus now, but we also didn't want to lose our opportunity to build there in the future. What we've done is preserve our ability to build while reducing our expenses and risk.

Q: Was the long public review process a factor in your decision to reduce your commitment to the project?

A: No, the decision was based solely on our reduced need for office space in the foreseeable future. The review process, and the opportunity for public debate and disagreement, is a very important part of community planning and development. Cisco has always supported the process. We disagreed with objections some made to the project, changed our plans in many ways to accommodate some concerns, and ultimately earned widespread support for the project.

Q: Did Calpine's plans to build a power plant near the site affect your decision?

A: No. The Mayor and City Council successfully worked out a compromise with Calpine to address the health and safety concerns we expressed during the hearing process.

Q: If you don't begin construction of campus buildings, will construction still move forward on infrastructure construction?

A: We believe it will once all applicable permits have been obtained. Decisions regardinginfrastructure will be made by the controlling partners.

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