SAN JOSE, Calif., November 9, 1999 - Cisco Systems, Inc., the worldwide leader in networking for the Internet, today reported its first quarter results for the period ending October 30, 1999.
Net sales for the first quarter were $3.88 billion, compared with $2.60 billion for the same period last year, an increase of 49%. Pro forma net income, which excludes the write-off of purchased in-process R&D and the amortization of goodwill and purchased intangible assets, was $837 million or $0.24 per share, compared with pro forma net income of $561 million or $0.17 per share for the first quarter of 1999, increases of 49% and 41%, respectively.
During the first quarter of fiscal 2000, Cisco completed the acquisitions of Monterey Networks, Inc. and MaxComm Technologies, Inc. for a combined purchase price, including assumed liabilities, of approximately $590 million and took a one-time charge of $381 million, or approximately $0.11 per share on an after-tax basis, as a write-off of purchased in-process R&D. Additionally, Cisco completed the acquisitions of StratumOne Communications, Inc., TransMedia Communications, Inc. and Cocom A/S, which were accounted for as pooling of interests. All historical financial information contained herein has been restated to reflect the acquisitions of StratumOne Communications, Inc. and TransMedia Communications, Inc.
Actual net income for the first quarter, including the above-mentioned write-off of purchased in-process R&D and the amortization of goodwill and purchased intangibles, was $438 million or $0.13 per share, compared with $512 million or $0.15 per share in the same period last year.
"The Internet continues to be a powerful force fueling the global economy," said John Chambers, president and CEO of Cisco Systems. "In the U.S. for example, the Internet economy grew 68% from the first quarter of 1998 to the first quarter of 1999, according to a recent study by the University of Texas. This strong economic growth coupled with Cisco's role and expertise in the Internet economy positions Cisco to be the company that will lead the Internet Revolution."
Cisco continues to advance its end-to-end Internet solutions for each of its key markets.
In the service provider marketplace, Cisco continued to gain acceptance for its New World strategy of integrated data, voice, and video and made significant progress in its key areas of broadband access and optical networking. In the broadband area, Cisco strengthened its strategy to deploy fixed wireless solutions by forming partnerships with 10 leading companies to create standards for wireless Internet technology. At the center of this activity is a new wireless technology that should provide affordable Internet access to a broader segment of the population that may otherwise not have access.
In the access space, customers are increasingly adopting Cisco's cable and DSL solutions. This demand spurred two acquisitions in the access area, Cocom A/S and MaxComm Technologies. Cocom's technology will enhance Cisco's cable product portfolio to support international standards and MaxComm addresses the growing demand for xDSL services in the home.
Cisco entered the optical transport market with the acquisitions of Cerent Corporation and Monterey Networks, Inc., which were completed in November and October 1999, respectively. These acquisitions complement the strength of Cisco's optical switching solutions and give service providers an accelerated migration from old world circuit-based equipment to the New World of the Internet.
In the enterprise market, Cisco furthered its New World vision by launching Cisco AVVID (Architecture for Voice, Video and Integrated Data) and announced its intent to acquire Calista, Inc. Cisco introduced six voice-capable products based on the Cisco AVVID architecture. Calista's technology enhances the Cisco AVVID architecture by allowing traditional phones to work over an open Internet-based infrastructure for the first time.
Expanding its offering in the data center, Cisco introduced delivery of its Content Networking framework to enable broad deployment of Web-based server solutions. Cisco also announced the acquisition of Tasmania Network Systems, Inc. whose network caching software technology will enable Cisco to offer its customers leading-edge content networking services. In the application technology space, Cisco's acquisition of WebLine Communications Corp. provides customers with Internet-based technology for their customer support center environments. Finally, Cisco and IBM formed an alliance to deliver networking technologies and services to service providers worldwide. As part of this agreement, Cisco has agreed to acquire portions of IBM's networking intellectual property.
In the small and medium-sized business market, Cisco joined with IBM and Microsoft to expand its ecosystem of partners to accelerate the delivery of Internet applications and services to businesses of all sizes. Cisco's hosted application initiative allows businesses to deploy applications such as e-commerce and unified messaging cost-effectively, reliably, and with minimal IT resources. Cisco also announced the intent to acquire Aironet Wireless Communications, Inc., a leader in high-speed wireless LAN technology.
On September 8, 1999, Cisco and the United Nations Development Program launched the world's largest, most technologically advanced web site dedicated to end one of the world's most serious and seemingly impossible problems, extreme poverty. The site, www.netaid.org, connects people, companies, and countries around the world who want to help those in need. NetAid demonstrates how the power of the Internet can be used as an ongoing information resource to end poverty worldwide.
"Over the last decade, the Internet has dramatically changed century-old business models and is driving a global Internet economy. By providing the systems that make the Internet work, Cisco is helping customers survive and succeed in this new economy. By applying the Internet economy business principles to humanitarian causes, we truly can empower the Internet generation and affect social change worldwide," concluded Chambers.
Cisco Systems
Cisco Systems, Inc. (NASDAQ: CSCO) is the worldwide leader in networking for the Internet. News and information are available at http://www.cisco.com.
This release may contain projections or other forward-looking statements regarding future events or the future financial performance of the Company that involve risks and uncertainties. Readers are cautioned that these statements are only predictions and may differ materially from actual future events or results. Readers are referred to the documents filed by Cisco with the SEC, 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, including risks associated with acquisition strategy, dependence on new product offerings, competition, patents, intellectual property and licensing, future growth, rapid technological and market change, manufacturing and sourcing risks, Internet infrastructure and regulation, international operations, volatility of stock price, financial risk management and potential volatility in operating results, among others.
Cisco, Cisco IOS, Cisco Systems, Catalyst, and the Cisco Systems logo are registered trademarks of Cisco Systems, Inc. in the U.S. and certain other countries. All other trademarks mentioned in this document are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any of its resellers. (9907R)
| PRO FORMA STATEMENTS OF OPERATIONS Excluding Purchased In-Process R&D and Amortization of Goodwill and Purchased Intangible Assets |
| Quarters Ended | |||
| October 30, 1999 (Unaudited) |
October 24, 1998 (Unaudited) |
||
| Net sales |
$3,877
|
$2,597
|
|
| Cost of sales |
1,364
|
897
|
|
| Gross margin |
2,513
|
||
| Operating expenses | |||
| Research and development |
519
|
333
|
|
| Sales and marketing |
803
|
518
|
|
| General and administrative |
101
|
76
|
|
| Total operating expenses |
1,423
|
||
| Operating income |
1,090
|
773
|
|
| Interest and other income, net |
106
|
66
|
|
| Income before provision for income taxes |
1,196
|
||
| Provision for income taxes |
359
|
278
|
|
| Net income |
$837
|
||
| Net income per share--basic |
$ .25
|
||
| Net income per share--diluted |
$ .24
|
||
| Shares used in per-share calculation--basic |
3,301
|
||
| Shares used in per-share calculation--diluted |
3,500
|
||
| PRO FORMA ONLY | |||
The above pro forma amounts for the quarter ended October 30, 1999 have been adjusted to eliminate the $381 million write-off of purchased in-process R&D, $8 million of amortization of goodwill, and $16 million of amortization of purchased intangible assets, net of related tax benefits of $6 million.
The above pro forma amounts for the quarter ended October 24, 1998 have been adjusted to eliminate the $41 million write-off of purchased in-process R&D, $3 million of amortization of goodwill, and $8 million of amortization of purchased intangible assets, net of related tax benefits of $3 million.
All historical financial information has been restated to reflect the acquisitions of StratumOne Communications, Inc. and TransMedia Communications, Inc. in the first quarter of fiscal 2000 which were accounted for as pooling of interests. In addition, the historical financial information has been restated to reflect the acquisition of Fibex Systems which was completed in the fourth quarter of fiscal 1999 and accounted for as a pooling of interests.
The net income per share and number of shares used in the per-share calculation for all periods presented reflect the two-for-one stock split effective June 21, 1999.
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| Quarters Ended | |||
| October 30, 1999 (Unaudited) |
October 24, 1998 (Unaudited) |
||
| Net sales |
$ 3,877
|
$ 2,597
|
|
| Cost of sales |
1,364
|
897
|
|
| Gross margin |
2,513
|
||
| Operating expenses | |||
| Research and development |
519
|
333
|
|
| Sales and marketing |
803
|
518
|
|
| General and administrative |
101
|
76
|
|
| Amortization of goodwill and purchased intangible assets |
24
|
11
|
|
| Purchased in-process R&D |
381
|
41
|
|
| Total operating expenses |
1,828
|
979
|
|
| Operating income |
685
|
721
|
|
| Interest and other income, net |
106
|
66
|
|
| Income before provision for income taxes |
791
|
||
| Provision for income taxes |
353
|
275
|
|
| Net income |
$ 438
|
$ 512
|
|
| Net income per share--basic |
$ .13
|
||
| Net income per share--diluted |
$ .13
|
||
| Shares used in per-share calculation--basic |
3,301
|
3,179
|
|
| Shares used in per-share calculation--diluted |
3,500
|
3,351
|
|
All historical financial information has been restated to reflect the acquisitions of StratumOne Communications, Inc. and TransMedia Communications, Inc. in the first quarter of fiscal 2000 which were accounted for as pooling of interests. In addition, the historical financial information has been restated to reflect the acquisition of Fibex Systems which was completed in the fourth quarter of fiscal 1999 and accounted for as a pooling of interests.
The net income per share and number of shares used in the per-share calculation for all periods presented reflect the two-for-one stock split effective June 21, 1999.
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| October 30, 1999 (Unaudited) |
July 31, 1999 (Unaudited) |
|
| Assets | ||
|
|
|
|
| Cash and short-term investments |
$ 1,765
|
$ 2,053
|
| Accounts receivable, net |
1,391
|
1,242
|
| Inventories, net |
655
|
652
|
| Deferred tax assets |
604
|
545
|
| Prepaid expenses and other current assets |
477
|
168
|
| Total Current Assets |
4,892
|
|
| Investments |
8,884
|
7,032
|
| Restricted investments |
1,079
|
1,080
|
| Property and equipment, net |
898
|
806
|
| Other assets |
1,654
|
1,194
|
| Total Assets |
$17,407
|
|
| Liabilities and Shareholder's Equity: | ||
| Current Liabilities: | ||
| Accounts payable and other accrued expenses |
$ 2,554
|
|
| Income taxes payable |
475
|
630
|
| Total current liabilities |
3,029
|
3,010
|
| Deferred tax liabilities |
452
|
--
|
| Minority interest |
44
|
44
|
| Shareholder's equity |
13,882
|
11,718
|
| Total Liabilities and Shareholder's Equity |
$17,407
|
$14,772
|
All historical financial information has been restated to reflect the acquisitions of StratumOne Communications, Inc. and TransMedia Communications, Inc. in the first quarter of fiscal 2000 which were accounted for as pooling of interests.
