News Release

Cisco Systems Reports Fourth Quarter Earnings

SAN JOSE, California -- August 15, 1996 -- Cisco Systems,
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SAN JOSE, California -- August 15, 1996 -- Cisco Systems, Inc., (Nasdaq: CSCO), the leading global supplier of internetworking solutions, today reported its fourth quarter and annual results for the period ending July 28, 1996. Actual reported financial results include StrataCom., Inc. and associated StrataCom merger costs of $15.5 million.

Net consolidated sales for the fourth quarter were $1,292.1 million, compared to $701.2 million for the same period last year, an increase of 84%. Net consolidated income was $276.6 million, or $.41 per share, versus $155.3 million or $.24 per share during the fourth quarter last year, increases of 78% and 71% respectively.

Net consolidated sales for the 1996 fiscal year were $4,096.0 million, compared to $2,232.7 million for the 1995 fiscal year, an increase of 83%. Net consolidated income was $913.3 million, or $1.37 per share, versus $456.5 million or $.72 per share for fiscal year 1995, increases of 100% and 90% respectively.

Pro forma Cisco financial results, excluding StrataCom, Inc. and associated merger costs were: pro forma fourth quarter net sales were $1,176.4 million, compared to $621.2 million for the same period last year, an increase of 89%. Pro forma net income was $266.9 million, or $.45 per share, versus $143.7 million, or $.26 per share during the fourth quarter of last year, increases of 86% and 73% respectively.

Pro forma net sales for the 1996 fiscal year were $3,698.2 million, compared to $1,978.9 million for the 1995 fiscal year, an increase of 87%. Pro forma net income was $861.6 million, or $1.47 per share, versus $421.0 million, or $.76 per share for fiscal year 1995, increases of 105% and 93% respectively.

The fiscal 1995 consolidated and pro forma results include a one-time pre-tax charge of $95.8 million, or $.11 per share on a post-tax, pro forma basis incurred by the company upon the acquisition of the net assets of LightStream Corporation in the second quarter.

The net income per share and number of shares used in per share calculations for all periods presented reflect the two-for-one stock split which was effective February 16, 1996.

On July 31, 1996, Cisco's Board of Directors approved an increase to the stock repurchase program authorizing an additional 10.0 million shares of Cisco common stock to be used to meet several of the Company's common stock requirements, primarily its employee stock plans. When added to the remaining shares authorized under the initial repurchase program approved by the Board in August 1994, Cisco is now authorized to repurchase up to 16.8 million shares of Cisco common stock.

"We are pleased to report a solid financial performance for Cisco's fourth fiscal quarter of 1996," said John Chambers, president and CEO of Cisco Systems.

"The strength of the quarter was due to several factors, including Cisco's ability to deliver leadership products across the key internetworking market sectors -- an accomplishment enabled in large part by our business unit structure put in place 15 months ago. Our unique position makes Cisco the beneficiary of growth in both the enterprise market and the Internet," said Chambers.

Throughout the quarter, Cisco continued to extend its reach through an array of internal product developments, strategic alliances, minority investments, and acquisitions. During this quarter, Cisco closed the acquisition of StrataCom and announced its intent to purchase Telebit Corporation's high-density digital modem technologies for dial access.

The addition of the LightStream 1010 Asynchronous Transfer Mode (ATM) campus switch, the AS5200 dial platforms and StrataCom's wide area network (WAN) switching products to Cisco's portfolio establishes the Company as the only vendor to offer end-to-end, best-in-class internetworking solutions.

"Some of our leading-edge customers are beginning to see the Strategic advantages of aligning with a single networking vendor and its partners for a large portion of their network requirements. Choosing Cisco provides the benefits of one vendor with world-class service and support, leadership in numerous key market areas, global presence and Cisco IOS(TM) software as the consistent fabric of the network," said Chambers.

"I'd like to thank our customers, employees and partners for an outstanding performance in the quarter and in fiscal 1996," he concluded.

Cisco Systems (NASDAQ: CSCO) is the leading globalsupplier of http://www.cisco.com.Cisco is headquartered in San Jose, California.

# # #

This release may consist of forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to the documents filed by Cisco with the S.E.C., specifically the most recent reports on Form 10-K and 10-Q, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements.

Cisco IOS and Cisco Systems are trademarks, and Cisco and the Cisco Systems logo are registered trademarks of Cisco Systems, Inc. All other trademarks, service marks, registered trademarks or registered service marks mentioned in this document are the property of their respective owners.


Cisco Systems

CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)




July 28, 1996 July 30, 1995
Pro Forma
Cisco (1)
Consolidated (2) Pro Forma
Cisco
Consolidated
Assets
Current Assets:
Cash and equivalents $ 166,677 $ 279,695 $ 204,846 $ 284,388
Short-term investments 702,049 758,489 234,681 279,754
Accounts receivable, net 555,149 622,859 384,242 421,747
Inventories 289,695 301,188 71,160 81,805
Deferred income taxes 86,535 101,827 75,297 88,038
Other current assets 86,437 95,582 25,743 28,428
Total current assets 1,886,542 2,159,640 995,969 1,184,160
Investments 801,809 832,114 403,855 410,798
Restricted investments 228,644 228,644 173,073 173,073
Property and equipment, net 278,948 331,315 136,635 172,561
Other assets 67,469 78,519 47,747 51,357
Total assets $3,263,412 $ 3,630,232 $1,757,279 $1,991,949
Current Liabilities:
Accounts payable and other accrued expenses

$ 524,301

$ 599,459

$ 266,173

$ 316,911

Income taxes payable 153,161 169,894 71,583 71,970
Total current liabilities 677,462 769,353 337,756 388,881
Minority interest 41,257 41,257 40,792 40,792
Shareholders' equity 2,544,693 2,819,622 1,378,731 1,562,276
Total liabilities and shareholders equity $3,263,412 $ 3,630,232 $1,757,279 $1,991,949

(1) Excludes StrataCom, Inc. and related merger costs of $13.5M

(2) Includes StrataCom results as of June 30, 1996 and related merger costs of $15.5M,$2.0M of which have previously been recorded by StrataCom.


Cisco Systems

CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per-share amounts)

Quarters Ended Years Ended
July 28, 1996 July 30, 1995 July 28, 1996 July 30, 1995
(unaudited)
Net Sales $1,292,150 $ 701,213 $ 4,096,007 $2,232,652
Cost of sales 452,651 233,165 1,409,862 742,860
Gross Margin 839,499 468,048 2,686,145 1,489,792
Operating expenses:
Research and development 124,184 66,858 399,291 210,815
Sales and marketing 229,550 132,997 726,278 399,983
General and administrative 46,393 27,575 144,270 85,271
Merger related costs 15,500 - 15,500 -
Purchased R&D - - - 95,760
Total operating expenses 415,627 227,430 1,285,339 791,829
Operating Income 423,872 240,618 1,400,806 697,963
Interest and other income, net 18,843 11,122 64,019 40,014
Income before provision for taxes 442,715 251,740 1,464,825 737,977
Provision for taxes 166,164 96,416 551,501 281,488
Net income $ 276,551 $ 155,324 $ 913,324 $ 456,489
Net income per share $ 0.41 $ 0.24 $ 1.37 $ 0.72
Shares used in per- share calculation 676,138 641,630 666,586 630,711


Cisco Systems

PRO FORMA STATEMENT OF OPERATIONS
Excluding Stratacom, Inc. and Related Merger Costs
(In thousands, except per-share amounts)

Quarters Ended Years Ended
July 28, 1996 July 30, 1995 July 28, 1996 July 30, 1995
(unaudited)
Net Sales $1,176,390 $ 621,184 $3,698,210 $1,978,916
Cost of sales 410,659 202,457 1,261,441 644,152
Gross Margin 765,731 418,727 2,436,769 1,334,764
Operating expenses:
Research and development 104,491 52,661 329,895 164,819
Sales and marketing 208,446 119,078 654,169 354,722
General and administrative 42,989 24,912 132,437 76,524
Purchased R&D - - - 95,760
Total operating expenses 355,926 196,651 1,116,501 691,825
Operating Income 409,805 222,076 1,320,268 642,939
Interest and other income, net 17,178 9,736 58,358 36,107
Income before provision for taxes 426,983 231,812 1,378,626 679,046
Provision for income taxes 160,119 88,089 516,985 258,038
Net income $ 266,864 $ 143,723 $ 861,641 $ 421,008
Net income per-share $ 0.45 $ 0.26 $ 1.47 $ 0.76
Shares used in per-share calculation 593,747 562,238 585,408 554,596

PRO FORMA ONLY


Cisco Systems

CONSOLIDATED INCOME STATEMENT BY QUARTER - CISCO AND STRATACOM
FYE July 28,1996
(In thousands, except per-share amounts)

Quarters Ended
Oct 29, 1995 Jan. 28, 1996 April 28, 1996 July 28, 1996
(unaudited)
Net Sales $ 798,291 $ 918,510 $ 1,087,056 $ 1,292,150
Cost of sales 267,742 312,315 377,154 452,651
Gross Margin 530,549 606,195 709,902 839,499
Operating expenses:
Research and development 78,180 89,695 107,232 124,184
Sales and marketing 145,251 163,527 187,950 229,550
General and administrative 28,267 31,462 38,148 46,393
Merger related costs - - - 15,500
Total operating expenses 251,698 284,684 333,330 415,627
Operating Income 278,851 321,511 376,572 423,872
Interest and other income, net 12,858 15,646 16,672 18,843
Income before provision for taxes 291,709 337,157 393,244 442,715
Provision for taxes 110,322 127,420 147,595 166,164
Net income $ 181,387 $ 209,737 $ 245,649 $ 276,551
Net income per-share $ 0.28 $ 0.31 $ 0.37 $ 0.41
Shares used in per-share calculation 652,174 666,177 669,960 676,138


Cisco Systems, Inc.

CONSOLIDATED INCOME STATEMENT BY QUARTER - CISCO AND STRATACOM
FYE July 30,1995
(In thousands, except per-share amounts)

Quarters Ended
Oct 30, 1994 Jan. 29, 1995 April 30, 1995 July 30, 1995
(unaudited)
Net Sales $ 433,959 $ 515,983 $ 581,497 $ 701,213
Cost of sales 144,244 172,470 192,981 233,165
Gross Margin 289,715 343,513 388,516 468,048
Operating expenses:
Research and development 37,271 50,400 56,286 66,858
Sales and marketing 76,543 88,333 102,110 132,997
General and administrative 16,511 18,130 23,055 27,575
Purchased R&D - 95,760
Total operating expenses 130,325 252,623 181,451 227,430
Operating Income 159,390 90,890 207,065 240,618
Interest and other income, net 7,899 8,971 12,022 11,122
Income before provision for taxes 167,289 99,861 219,087 251,740
Provision for taxes 63,438 37,721 83,913 96,416
Net income $ 103,851 $ 62,140 $ 135,174 $ 155,324
Net income per-share $ 0.17 $ 0.10 $ 0.21 $ 0.24
Shares used in per-share calculation 608,591 634,153 636,634 641,630