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Cisco Systems Frequently Asked Questions v1.2
"Empowering the internet generation"


This message is meant as a beginning tool for prospective Cisco investors. It is by no means a comprehensive analysis, but it is a good starting point for covering the basic idea behind Cisco, the worlds' #4 most admired company, http://www.fortune.com/fortune/mostadmired/,
and some frequent questions about the company.

Chambers: This is an industry you either grow with or you get left behind. We have the confidence that there's almost nothing we can't achieve if we really focus on it. We really believe that here at Cisco, and we've executed. We tell people what we're going to do and we do it, and we do it differently than others have done.


Table of Contents

-What does Cisco do?
-Who do they sell to?
-What do they sell?
-What about acquisitions?
-Who runs Cisco?
-Who are their competitors?
-Growth and Valuation
-Stock Splits
-Optical
-ASP
-VoIP
-RuleMakers
-Gorillas
-History
-Annual Report


What does Cisco do?

Cisco Systems, Inc. is the worldwide leader in networking for the Internet. Cisco operates in one industry segment and creates hardware and software solutions that link computer networks so that people have easy access to information without regard to differences in time, place or type of computer system. Cisco's strategy is to provide end-to-end networking solutions to help its customers improve productivity and gain a competitive advantage in today's global economy. Cisco's product portfolio offers a broad range of end-to-end networking solutions and fall into several categories: Routing, Switching, Access, System Network Architecture/Local-area Networks (SNA/LAN), Internet Services, Cisco Internetwork Operating System (IOS) Software, and Network Management.

Cisco trades on the NASDAQ under the ticker CSCO.

Fool's snapshot of CSCO: http://quote.fool.com/Snapshot/snapshot.asp?symbols=CSCO&currticker=CSCO

Yahoo's profile of CSCO: http://biz.yahoo.com/p/c/csco.html

Yahoo's research on CSCO: http://biz.yahoo.com/z/a/c/csco.html

Fool's financials of CSCO: http://quote.fool.com/Snapshot/financials.asp?symbols=CSCO&currticker=CSCO

A chart of the last year's performance: http://quote.fool.com/Chart/chart.asp?symbols=CSCO&currticker=CSCO

CSCO's SEC filings: http://biz.yahoo.com/e/l/c/csco.html

***Be sure to check out the Cisco's website, www.cisco.com, a great source of information.***

Who does Cisco sell to?


Cisco serves customers in three target markets:

Enterprises - Large organization with complex networking needs, usually spanning multiple locations and types of computer systems. Enterprise customers include corporations, government agencies, utilities and educational institutions.
Service Providers - Companies that provide information services, including telecommunication carriers, Internet Service Providers, cable companies, and wireless communication providers.
Small/Medium Business - Companies with a need for data networks of their own, as well as connection to the Internet and/or to business partners

What does Cisco sell?

Of course Cisco's bread and butter is their switchers and routers, but here's a more comprehensive look at what they do from the company itself.

Check out this great slide provided by Cisco (requires Acrobat Reader): http://www.cisco.com/warp/public/750/images/market_segment.pdf

A brief description of Cisco's main product lines: http://www.cisco.com/warp/public/752/prodover.html

A list of the technologies Cisco deals in: http://www.cisco.com/public/products_tech.shtml

What's with all the acquisitions?

Ciso is known as perhaps the master of successful acquisitions, in fact, they do so many, we really can't list them all here, but this page provides a list of all their acquisitions, with a brief overview of each: http://www.cisco.com/warp/public/750/acquisition/summarylist.html

This is the beginning of a Fortune article (Oct 1999)about Cisco's acquistion success, follow the link to read the rest:

Forty-Two Acquisitions and Counting The Internet giant's awesome M&A machine can acquire and integrate six companies at once. Its experts share tips for finding the best buy and making the deal work.

No company typifies the new world of M&A better than Cisco Systems. To find a business that has handled acquisitions as well, you'd have to go back to the AT&T of the early part of the century, when Theodore Vail, its legendary CEO, bought hundreds of tiny phone companies and assembled the first nationwide network, giving birth to Ma Bell.

It's fitting that Cisco, the $12.2-billion-a-year giant that provides the hardware and software behind state-of-the-art Internet networks, now wears the mantle of M&A king. To understand how it has built its empire, forget all you know about corporate raiders and their swashbuckling tactics. (That's so Dallas circa 1984.) Disregard the stereotypes of ruthless capitalist villains aiming to gobble up corporate America's finest. (That's so Wall Street.) And ignore everything that's happening on the services side of the telecommunications industry. (It's way too early to tell whether WorldCom can successfully swallow MCI and Sprint.)

Think of Cisco as an acquisition engine, as cleverly designed and highly tuned as the giant routers it builds to handle vast surges of Internet traffic. Like those routers, the acquisition engine runs on Internet time. In the past six years, Cisco has spent $18.8 billion on 42 acquisitions (as of the date this story went to press). Armed with a killer currency (Cisco stock has risen 162% in the past year and is now trading at $72) and a team of well-practiced execs, the company prowls Silicon Valley--and the world--snapping up companies to expand existing product lines or support entirely new initiatives.

The action this August was typical: Cisco absorbed two startups (Monterey Networks and Cerent), closed two other acquisitions, and negotiated two more. Cisco moves at breakneck speed, in some cases sealing a deal after 24 hours of negotiation and closing it in a month or two. "I haven't found anybody in any industry that has a process that is as tuned," says Jon Bayless, a general partner at Sevin Rosen Funds, a Dallas venture capital firm that helped negotiate the Monterey acquisition.

http://library.northernlight.com/PN19991029040000150.html?cb=13&sc=0#doc

Who runs Cisco?

Officers

Larry R. Carter
Senior Vice President, Finance and Administration, Chief Financial Officer and Secretary

John T. Chambers
President and CEO

This is a good PC Week interview with Chambers: http://www.zdnet.com/pcweek/stories/jumps/0,4270,2443951,00.html

Gary Daichendt
Executive Vice President, Worldwide Operations

Judith Estrin
Senior Vice President, Business Development and Chief Technology Officer

Charles H. Giancarlo
Senior Vice President, Small/Medium Business Line of Business

Edward R. Kozel
Senior Vice President, Corporate Development

Donald J. Listwin
Executive Vice President, Service Provider and Consumer Lines of Business, Corporate Marketing

Mario Mazzola
Senior Vice President, Enterprise Line of Business

Carl Redfield
Senior Vice President, Manufacturing and Worldwide Logistics

http://www.cisco.com/warp/public/750/execteam.html

Who are Cisco's competitors?

3Com, Nortel, Lucent, Ericsson, Cabletron, Alcatel and Juniper exemplify companies that compete with Cisco. Some companies compete across all Cisco's product lines, while others do not offer as wide a breadth of networking solutions.

Let me also throw newcomers like Redback Networks and Sycamore into the fold here.

Isn't Cisco extremely highly valued, does their growth justify their valuation?

Before deferring to a couple of excellent posts by others here, let me give you my opinion Cisco's valuation. Cisco always looks expensive. It's really as simple as that, look back at historical charts, Cisco has never really been cheap by standard metrics like P/E ratios. So, waiting for the price to drop so you can buy in at some preset P/E ratio you determine to be acceptable like 40 or 50 is probably the surest way to never buy Cisco.

Now for two excellent posts from others on the board.

The first, by Floggercat, deals with Cisco's valuation: http://boards.fool.com/Message.asp?id=1080142002196000&sort=postdate

The second, by fenway78, points out Cisco's accelerating growth: http://boards.fool.com/Message.asp?id=1080142002560001&sort=postdate

The inevitable question of STOCK SPLITS

The Cisco website provides an excellent discussion of stock splits, all past and pending splits, please check it out.

http://investor.cisco.com/media_files/nsd/csco/stocksplitfaq.html

What about OPTICAL?

As data volumes and demand for network services increase, and the cost of technology decreases, optical internetworking will become more critical—and accessible—to carriers of all sizes. Cisco is developing equipment and technologies that maximize the use of fiber, enabling SPs to get the most out of existing legacy circuit-switched infrastructures and take advantage of the service opportunities that optical internetworking has to offer.

http://investor.cisco.com/media_files/nsd/csco/optical.html

What is Cisco doing in the ASP market?

The following is an article from Redherring about Cisco and IBM in the ASP market.
http://www.redherring.com/insider/1999/1020/news-ciscoasp.html

What is Cisco doing about the coming Voice Data (VoIP) convergence?

Here are two excellent posts by a resident engineer, ticdoulouroux.

The first deals with Cisco and the VoIP market in general:
http://boards.fool.com/Message.asp?id=1080142002685001&sort=postdate

The second compares Cisco to Lucent in the VoIP market:
http://boards.fool.com/Message.asp?id=1080142002684002&sort=postdate

What is a RuleMaker, and is Cisco one?

According to The Motley Fool, a RuleMaker is a company that does exactly that, dominates their industry and sets the rules in it. Cisco is included in the RuleMaker portfolio.

For a complete explanation of RuleMakers, check out the RuleMaker portfolio: http://www.fool.com/portfolios/RuleMaker/RuleMaker.htm

To see why the Fool believes Cisco is a RuleMaker, check out their buy report on Cisco: http://www.fool.com/portfolios/rulemaker/Trades/RuleMakerTrade_csco980622.html

And, the Fool's assessment of Cisco's most recent quarter: http://www.fool.com/portfolios/rulemaker/2000/rulemaker000209.htm

Why do they call Cisco a gorilla?

The term gorilla, as applies here, comes from The Gorilla Game, by Geoffrey Moore, Paul Johnson, and Tom Kippola.
http://www.amazon.com/exec/obidos/ASIN/0887309577/o/qid=951536952/sr=8-1/102-7435448-5988858
Gorillas, are, as one would think, big hairy beasts that dominate the market they live in. The book details the idea behind "gorillas" in technology. It contains an entire section detailing Cisco's rise to dominance in the networking market. For more information on gorillas, visit the gorilla game message board here on the fool, http://boards.fool.com/messages.asp?id=1360002000270004,
or their website, www.gorillagame.com.

Just how much has Cisco grown?

Cisco is one of America's greatest corporate success stories. Since shipping its first product in 1986, the company has grown into a global market leader that holds No. 1 or No. 2 market share in virtually every market segment in which it participates. Since becoming a public company in 1990, Cisco's annual revenues have increased from $69 million in that year to $12.2 billion in fiscal 1999. As measured by market capitalization, Cisco is among the largest in the world.

Finally, here's a link to Cisco's most recent annual report:
http://www.cisco.com/warp/public/749/ar99/


Cisco Systems FAQ v1.2


Bourne
"Empowering the internet generation"
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