Cisco Systems Reports First Quarter Earnings
SAN JOSE, Calif.--(BUSINESS WIRE)--Nov. 5, 2001--Cisco Systems, Inc., the worldwide leader in networking for the Internet, today reported its first quarter results for the period ending October 27, 2001.
Net sales for the first quarter of fiscal 2002 were $4.4 billion, a sequential increase of 3% from the $4.3 billion in net sales for the fourth quarter of fiscal 2001. This compares to $6.5 billion in net sales for the same period last year, a decrease of 32%. Pro forma net income, which excludes the effects of acquisition charges, payroll tax on stock option exercises, net gains (losses) on investments, and an excess inventory benefit, was $332 million or $0.04 per share for the first quarter of fiscal 2002, compared with pro forma net income of $163 million or $0.02 per share for the fourth quarter of fiscal 2001, and $1.4 billion or $0.18 per share for the first quarter of fiscal 2001.
During the first quarter of fiscal 2002, Cisco recorded a non-cash $858 million impairment charge on certain publicly held securities in its investment portfolio. Similar to the reporting treatment of realized gains in the past, Cisco has excluded the impairment charge, and the related tax benefit, from pro forma earnings. Cisco reflects publicly held securities at current market value on its balance sheet, and as such, the economic loss of the current impairment charge was previously recorded in earlier quarters on the balance sheet as an unrealized loss. Accounting rules require that once a decline in value is other than temporary, the company must record a charge to income.
Cisco also completed the acquisitions of Allegro Systems, Inc. and AuroraNetics, Inc. The initial total combined purchase price recorded during the quarter, including assumed liabilities, was approximately $189 million. In addition, Cisco took a one-time charge of $37 million, or approximately $0.01 per share on an after-tax basis, as a write-off of in-process R&D.
Actual net loss for the first quarter of fiscal 2002 was $268 million or $0.04 per share, compared with actual net income of $7 million or $0.00 per share for the fourth quarter of fiscal 2001, and $798 million or $0.11 per share for the same quarter last year.
``Given the very challenging economic and capital spending environment, we were pleased to deliver a solid quarter with good order linearity, sequential revenue growth and profitable market share gains,'' said John Chambers, President and CEO of Cisco Systems. ``We were especially pleased with the size of the market share gains when compared to our industry peers who on average reported sequential revenue decreases in the high teens.''
Cisco continues to deliver best-of-breed products across an end-to-end architecture that spans each of its key markets and technology. As a result of its recent reorganization, Cisco is accelerating its innovation and speeding time-to-market by streamlining its marketing and engineering organizations and enabling greater customer satisfaction with its technology solutions.
Cisco's strategy for the service provider customer segment is to deliver reliable and scalable carrier-class IP technology that helps reduce the cost of delivery of service and helps drive new service revenue streams to service providers by connecting them with Cisco's knowledge, understanding and relationships in enterprise and commercial markets. During the first quarter, Cisco maintained the number one market share position in packet-based networking equipment for service providers worldwide. From a technology perspective, Cisco broadened its IP portfolio with significant new product additions for the metro and edge network markets. The new portfolio includes the Cisco 12404 Internet Router -- the smallest footprint 10-Gigabit router in the industry, delivering high bandwidth, reliability, and scalability in the most efficient platform available. Cisco also introduced the Cisco 12000 Series IP Services Engine (ISE), bringing the Cisco 12000 Series to the edge and combining the power of distributed processing with adaptive network processors to enable 10-Gigabit performance at the service provider edge. Finally, Cisco rounded out its IP portfolio with the new Cisco 10720 Internet Router. Coupled with the Cisco 12000 Series Internet Routers and Cisco's resilient packet ring technology, Dynamic Packet Transport (DPT), the Cisco 10720 enables service providers to cost-effectively expand their IP networks into the metro to deliver profitable services, while optimizing existing infrastructure investments and reducing operational complexity. Cisco announced significant service provider customer wins in the IP+Optical and aggregation areas, including Big Pipe, DACOM, Matav, Qwest, Shaanxi Tonghui, and Sigma Networks. Cisco also announced a voice-over-IP deployment at i-Next and cable wins at Axelero and Telia Stofa. In addition, the Cisco 6000 IP DSL Switch was recognized as one of the information industry's most innovative products by the International Engineering Consortium (IEC) InfoVision 2001 Awards.
In the enterprise customer segment, Cisco continues to see widespread adoption of Cisco AVVID (Architecture for Voice, Video and Integrated Data). This quarter, Cisco continued its momentum in the IP telephony arena, announcing its enterprise-class unified messaging solution, Cisco Unity® 3.0, as well as 18 new additions and enhancements to its comprehensive IP telephony portfolio, which consists of software and hardware for IP phones, infrastructure, and IP contact centers. Recent enterprise customers deploying Cisco IP telephony solutions, such as Cray Inc. and H.B. Fuller Company, are using converged voice, video, and data networks to lower total cost of network ownership and maximize their return on investment. In the area of network security solutions, recent threats such as NIMDA and Code Red have elevated customers' awareness of the importance of a comprehensive approach to securing the e-business infrastructure. Cisco continues to enhance its SAFE blueprint with a complete portfolio of solutions that provide in-depth security. This quarter the company announced three key enhancements to its security portfolio with new firewall, intrusion detection system, and virtual private networking (VPN) acceleration capabilities and several new customers such as Volkswagen of America and Major League Soccer. Cisco also continues to see positive momentum in the storage market as customers begin deployments of the industry's first commercially available iSCSI platform, the Cisco SN 5420 Storage Router. Key customers in this area include Komatsu, University of Houston, and Data Peer. Cisco announced certification and interoperability for its storage solutions with 10 key storage vendors including Brocade, Intel, McData, and Veritas. In the areas of next-generation switching and routing, new customer deployments such as Deutsche Telekom, Lehman Brothers, Lockheed Martin, and Motorola demonstrate Cisco's continued leadership with the broadest portfolio of solutions on the market. The company announced enhancements to its Cisco 7000 Series routers including the Cisco 7300, 7603 and 7606. Also announced this quarter was the Cisco CTE 1400 Series Content Transformation Engine, which enables the delivery of content to a wide range of information devices. Cisco also announced and began shipment for the industry's first 10 Gigabit Ethernet module.
In the commercial customer segment, Cisco continued its commitment to helping small and medium-sized businesses (SMBs) and customers in key vertical markets increase their profitability and employee productivity by delivering networking solutions utilizing wireless access products, switches, and integrated communication systems. Also, Cisco continues to see an increase of business professionals who need secure, high-speed access to their corporate networks when they are on the road, at home, or at work through the Cisco Mobile Office program. To accelerate the adoption and availability of high-speed, secure, wireless local area networks (LANs) at the office and in public spaces, Cisco and Toshiba announced that the Toshiba Tecra 9000 Series and Portege 4000 Series notebook PCs would be the first to offer built-in Cisco Aironet® 350 Series Wi-Fi (IEEE 802.11b) technology and ``out-of-the-box'' wireless networking support for the IEEE 802.1x security standard. Cisco also announced its first mini-PCI embedded offering for the Cisco Aironet 350 Series portfolio that includes access points and bridges. Responding to customer demand resulting from the expanding role of teleworking programs, Cisco and Verizon joined forces to market high-speed, secure, and reliable work-at-home services. The two companies are targeting their offerings to Fortune 1000 and government customers in the United States seeking business-class network access at home that is similar to their access at the office.
``We are pleased with the progress we have made in our breakaway strategy,'' said Chambers. ``Although this is a tough economic environment, Cisco has made important progress on market share gains, improved our already strong financial position, and continued to build strong customer relationships.''
Cisco will discuss its first quarter results for fiscal 2002 on a conference call today, beginning at 1:45 p.m. PST. A Webcast of the conference call will be available to all interested parties on the Cisco Web site at www.cisco.com under the ``Investor Relations'' section...............
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