SAN JOSE, Calif., March 9, 2001 - Cisco Systems, Inc., the worldwide leader in networking for the Internet, today announced measures to reduce expenses to address the changing economic environment.

"We're taking these steps because of the continuing slowdown in the U.S. economy and initial signs of a slowdown expanding to other parts of the world. We also now believe that this slowdown in capital spending could extend beyond two quarters," said John T. Chambers, president and chief executive officer.

The measures include a reduction in workforce and other expense related items.

The reduction in workforce will include:

• 2,500 to 3,000 temporary and contract workers
• 3,000 to 5,000 regular employees through: voluntary attrition, involuntary attrition, and the consolidation of some positions.

As a result of these workforce reductions, Cisco is anticipating a one-time charge of $300 million to $400 million by the end of the fourth quarter of fiscal 2001.

This workforce reduction will occur over the remainder of the fiscal year. The reduction of regular permanent employees will be part of a broader effort to align personnel around profit contribution and improved efficiency. Cisco has a regular employee base of roughly 44,000 worldwide, and employs approximately 4,000 temporary workers.

Other expense reductions include aggressive cost cutting in discretionary spending such as contract services, travel, and marketing expenses.

"While Cisco is only five weeks into the third quarter and it is premature to quantify the impact of this current business climate, we do expect a wider range of estimates for the remainder of this fiscal year," said Larry Carter, chief financial officer.