Cisco Systems Reports First Quarter Earnings
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SAN JOSE, Calif.--(BUSINESS WIRE)--Nov. 4, 1998--Cisco Systems, Inc., the worldwide leader in
networking for the Internet, today reported its first quarter results for the period ending October 24, 1998.
Net sales for the first quarter were $2.59 billion, compared with $1.87 billion for the same period last year, an increase of 38%. Pro forma net
income, which excludes the write-off of purchased in-process R&D discussed below, was $559 million or $0.34 per share, compared with pro
forma net income of $416 million or $0.26 per share for the first quarter of 1998, increases of 34% and 31% respectively.
On September 30, 1998, Cisco completed its purchase of American Internet Corporation (''AIC''), a developer of high-performance Internet
infrastructure software, for approximately $56 million and took a one-time charge of $41 million, or approximately $0.03 per share on an after-tax
basis as a write-off of purchased in-process R&D.
Actual net income for the first quarter, including the above-mentioned write-off of purchased in-process R&D, was $518 million or $0.31 per
share, compared with $337 million or $0.21 per share for the first quarter of 1998.
The net income per share and number of shares used in the per-share calculation for all periods presented reflect the three-for-two stock split
that was effective September 15, 1998.
''We are pleased to report the 35th consecutive quarter of revenue and earnings growth,'' said John Chambers, president and CEO of Cisco
Systems. ''We have seen a dramatic increase in the awareness of the Internet's strategic value from business and government leaders
worldwide. More and more, the Internet is being accepted as a key economic driver that will level the playing field for businesses, countries, and
individuals in the Internet Economy.''
Cisco continues to advance its end-to-end Internet solutions for each of its key markets.
In the service provider marketplace, there is strong acceptance that traditional voice networks will convert into New World, packet-based data
networks. Leading customers across all service provider categories are beginning to deploy these integrated networks. Hewlett-Packard and
Bellcore announced plans to team with Cisco to deliver these end-to-end, packet-based networks. This move is indicative of the role that
strategic alliances will play in delivering New World, open, standards-based infrastructures.
Cisco also continues to expand its New World technology offerings with solutions in broadband access and network management through the
acquisitions of Clarity Systems (which closed in the second quarter of fiscal 1999) and AIC respectively. In the area of optical networking,
Sprint announced plans to deploy their Internet backbone based on the Cisco 12000 series router with optical interfaces.
In the small and medium-sized business space, Cisco continues to expand its lead in the two-tier distribution of network systems. Extending its
market presence, Cisco announced a key alliance with AT&T to distribute integrated, end-to-end Internet solutions to small businesses. Other
highlights include the expansion of the Cisco 1700 family of access routers that enable secure business transactions over the Internet.
In the enterprise marketplace, Cisco continued to gain market leadership in local area network (LAN) switching and acceptance of its end-to-end
Internet solutions. Cisco strengthened its integrated data, voice, and video offerings by introducing the IGX(tm) 8400 series of wide-area
network (WAN) switches. Other milestones in the quarter include the launch of the fourth phase of Cisco's five-phase data, voice, and video
strategy. Phase four builds, in part, on the technology from the pending acquisition of Selsius Systems, which is intended to accelerate the
transition from circuit-switched to network-based PBX systems.
''The Internet will have a similar impact on the global economy as the industrial revolution did. As leading customers deploy integrated, New
World communications infrastructures, Cisco and its partners are well positioned to provide end-to-end networking solutions for the Internet
generation,'' concluded Chambers.
About Cisco Systems
Cisco Systems, Inc. (NASDAQ: CSCO - news) is the worldwide leader in networking for the Internet. News and information are available at
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.
IGX is a trademark, and Cisco, Cisco Systems, 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.
Cisco Systems, Inc.
Pro Forma Statements of Operations
Excluding Purchased R&D and Realized Gain
(In millions, except per-share amounts)
Quarters Ended
October 24, October 25,
1998 1997
(Unaudited)
Net sales $2,588 $1,869
Cost of sales 894 652
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Gross margin 1,694 1,217
Operating expenses:
Research and development 327 224
Sales and marketing 514 334
General and administrative 84 56
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Total operating expenses 925 614
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Operating income 769 603
Interest and other income, net 65 37
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Income before provision
for income taxes 834 640
Provision for income taxes 275 224
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Net income $ 559 $ 416
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Net income per share -- basic $ .36 $ .27
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Net income per share -- diluted $ .34 $ .26
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Shares used in per-share
calculation -- basic 1,569 1,514
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Shares used in per-share
calculation -- diluted 1,652 1,585
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PRO FORMA ONLY
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.
The above pro forma amounts for the quarter ended October 25, 1997
have been adjusted to eliminate the $127 million write-off of
purchased in-process R&D, and the $5 million gain from the sale of a
minority stock investment, net of income tax benefit of $43 million.
The net income per share and number of shares used in the per-share
calculation for all periods presented reflect the three-for-two stock
split that was effective September 15, 1998.
Cisco Systems, Inc.
Condensed Consolidated Statements of Operations
(In millions, except per-share amounts)
Quarters Ended
October 24, October 25,
1998 1997
(Unaudited)
Net sales $2,588 $1,869
Cost of sales 894 652
------ ------
Gross margin 1,694 1,217
Operating expenses:
Research and development 327 224
Sales and marketing 514 334
General and administrative 84 56
Purchased R&D 41 127
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Total operating expenses 966 741
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Operating income 728 476
Realized gain on sale of
investment -- 5
Interest and other income, net 65 37
------ ------
Income before provision for
income taxes 793 518
Provision for income taxes 275 181
------ ------
Net income $ 518 $ 337
====== ======
Net income per share -- basic $ .33 $ .22
====== ======
Net income per share -- diluted $ .31 $ .21
====== ======
Shares used in per-share
calculation -- basic 1,569 1,514
====== ======
Shares used in per-share
calculation -- diluted 1,652 1,585
====== ======
The net income per share and number of shares used in the per-share
calculation for all periods presented reflect the three-for-two stock
split that was effective September 15, 1998.
Cisco Systems, Inc.
Condensed Consolidated Balance Sheets
(In millions)
October 24, 1998 July 25, 1998
(Unaudited)
Assets
Current Assets:
Cash and equivalents $ 961 $ 535
Short-term investments 920 1,157
Accounts receivable, net 1,333 1,298
Inventories, net 375 362
Deferred income taxes 315 345
Other current assets 94 65
----- -----
Total current assets 3,998 3,762
Investments 4,009 3,463
Restricted investments 640 554
Property and equipment, net 621 595
Other assets 597 543
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Total assets $9,865 $8,917
====== =====
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and other
accrued expenses $1,464 $1,357
Income taxes payable 405 410
----- -----
Total current liabilities 1,869 1,767
Minority interest 43 43
Shareholders' equity 7,953 7,107
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Total liabilities and
shareholders' equity $9,865 $8,917
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