8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported): February 4, 2003

CISCO SYSTEMS, INC.

(Exact Name of Registrant as Specified in Charter)

California
(State or Other Jurisdiction
of Incorporation) 0-18225
(Commission
File Number) 77-0059951
(IRS Employer
Identification No.)

170 West Tasman Drive, San Jose, California
(Address of Principal Executive Offices) 95134-1706
(Zip Code)

Registrant’s telephone number, including area code: (408) 526-4000

TABLE OF CONTENTS

	Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
	Item 9. Regulation FD Disclosure.
SIGNATURES
EXHIBIT INDEX
EXHIBIT 99.1

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

(c) Exhibits.

99.1 Press Release of Registrant, dated February 4, 2003, reporting Cisco Systems, Inc.’s (the “Registrant”) second quarter results for the period ended January 25, 2003 (furnished and not filed herewith solely pursuant to Item 9).

Item 9. Regulation FD Disclosure.

     On February 4, 2003, the Registrant reported its second quarter results for the period ending January 25, 2003. A copy of the press release issued by the Registrant on February 4, 2003 concerning the foregoing results is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

     In light of new Securities and Exchange Commission requirements that will be effective March 28, 2003 concerning the furnishing of additional information by registrants regarding Non-GAAP financial measures and results of operations or financial condition for completed quarterly or annual periods, the Registrant is electing to furnish the information for its most recently completed fiscal quarter under Item 9. The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing. The information in this report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The furnishing of the information in this report (including the exhibit hereto) shall not be deemed an admission that such furnishing is required by Regulation FD or that the information in this report contains material information that is not otherwise publicly available.

     The Registrant provides pro forma net income and pro forma net income per share in the press release as additional information for its operating results. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from pro forma measures used by other companies. Pro forma net income has been adjusted to exclude the effects of acquisition charges, payroll tax on employee stock option exercises, gains and losses on public equity investments and restructuring charges. The Registrant’s management believes that this presentation of pro forma net income and pro forma net income per share provides useful information to investors regarding certain additional financial and business trends relating to its financial condition and results of operations.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CISCO SYSTEMS, INC.
Dated: February 4, 2003	By:	/s/ Larry R. Carter
	Name:	Larry R. Carter
	Title:	Senior Vice President, Finance and Administration, Chief Financial Officer, Secretary and Director

EXHIBIT INDEX

Exhibit
Number	Description of Document
99.1	Press Release of Registrant, dated February 4, 2003, reporting Registrant’s second quarter results for the period ending January 25, 2003.

EX-99.1 3 f87295exv99w1.txt EXHIBIT 99.1 EXHIBIT 99.1 PRESS CONTACT: INVESTOR RELATIONS CONTACT: Robyn Jenkins-Blum Blair Christie Cisco Systems, Inc. Cisco Systems, Inc. (408) 853-9848 (408) 525-4856 rojenkin@cisco.com blchrist@cisco.com CISCO SYSTEMS REPORTS SECOND QUARTER EARNINGS - Q2 REVENUES: $4.7 Billion - Q2 OPERATING CASH FLOW: $1.36 Billion - Q2 EARNINGS PER SHARE: $0.14 GAAP; $0.15 Pro Forma SAN JOSE, Calif. -- February 4, 2003 -- Cisco Systems, Inc., the worldwide leader in networking for the Internet, today reported its second quarter results for the period ended January 25, 2003. NET SALES FOR THE SECOND QUARTER of fiscal 2003 were $4.7 billion, compared with $4.8 billion for the second quarter of fiscal 2002, a decrease of 2.1%, and compared with $4.8 billion for the first quarter of fiscal 2003. NET INCOME FOR THE SECOND QUARTER of fiscal 2003, on a generally accepted accounting principle (GAAP) basis, was $991 million or $0.14 per share, compared with $660 million or $0.09 per share for the second quarter of fiscal 2002, and $618 million or $0.08 per share for the first quarter of fiscal 2003. PRO FORMA NET INCOME FOR THE SECOND QUARTER of fiscal 2003 was $1.1 billion or $0.15 per share, compared with pro forma net income of $664 million or $0.09 per share for the second quarter of fiscal 2002, and compared with $1.0 billion or $0.14 per share for the first quarter of fiscal 2003. A reconciliation between net income on a GAAP basis and pro forma net income is provided in a table immediately following the Pro Forma Consolidated Statements of Operations. NET SALES FOR THE FIRST SIX MONTHS of fiscal 2003 were $9.6 billion, compared with $9.3 billion for the first six months of fiscal 2002, an increase of 3.2%. NET INCOME FOR THE FIRST SIX MONTHS of fiscal 2003, on a GAAP basis, was $1.6 billion or $0.22 per share, compared with $392 million or $0.05 per share for the first six months of fiscal 2002. PRO FORMA NET INCOME FOR THE FIRST SIX MONTHS of fiscal 2003 was $2.1 billion or $0.29 per share, compared with pro forma net income of $1.0 billion or $0.13 per share for the first six months of fiscal 2002. "In what is probably the most challenging environment the information technology industry has ever faced, we are very pleased with our results in posting one of the best pro forma quarters in our history and the best GAAP quarter in terms of net income and earnings per share," said John Chambers, CEO of Cisco Systems. 1 "Our market performance reflects Cisco's ability to deliver differentiated value to our customers' highest priority -- productivity." Chambers continued, "From a global CEO and government leader perspective, we remain in a `show-me' economy. What I've heard from these leaders is clear: As their business improves, their investment priorities will center on productivity. The Intelligent Information Network provides the enabling infrastructure to integrate the applications, business processes and technologies to drive these productivity gains." OPERATIONAL HIGHLIGHTS - - Cash flows from operations were $1.36 billion for the second quarter of fiscal 2003, compared with $2.0 billion for the second quarter of fiscal 2002, and compared with $1.07 billion for the first quarter of fiscal 2003. - - Cash and cash equivalents and total investments were $21.2 billion at the end of the second quarter of fiscal 2003, compared with $21.5 billion at the end of fiscal year 2002, and compared with $21.2 billion at the end of the first quarter of fiscal 2003. - - During the second quarter of fiscal 2003, Cisco repurchased approximately $1.5 billion of common stock. The total amount of stock repurchases for the first six months of fiscal 2003 was $2.6 billion. - - Days sales outstanding (DSO) in accounts receivable at the end of the second quarter of fiscal 2003 were 21 days, consistent with the fourth quarter of fiscal 2002 and the first quarter of fiscal 2003. - - Inventory turns were 7.0 turns in the second quarter of fiscal 2003, consistent with the fourth quarter of fiscal 2002 and the first quarter of fiscal 2003. BUSINESS HIGHLIGHTS - - Cisco and SBC Communications Inc. forged a strategic marketing and sales agreement focused on accelerating the delivery of a new class of managed business services. SBC also plans to use Cisco IP networking technology in its core network infrastructure to deliver emerging services. - - Cisco and Lucent announced that Lucent will integrate and resell select Cisco packet data and media gateway products as part of Lucent's product offering for the mobile service provider market. The non-exclusive agreement will allow Cisco mobile wireless networking products to reach a broader segment of the service provider market. - - Cisco completed the acquisition of Psionic Software, Inc. and announced its intent to acquire Okena, Inc., both in the network security market segment. - - Lufthansa Airlines began trials of on-board high-speed Internet services for passengers, based on Cisco Aironet(R) 350 access points, a Cisco 3640 router, and Cisco Catalyst(R) 3548 XL switches. 2 - - Cisco announced it will provide networking technology for China Unicom's core network backbone and a major Code Division Multiple Access (CDMA) upgrade project for 15 Chinese cities and provinces. - - Cisco introduced several IP communications technologies and products, including new unified messaging and IP PBX applications, audio- and videoconferencing capabilities, and a lower-cost Internet Protocol (IP) telephone. Adoption of Cisco IP communications solutions continued to expand with new customers including Burger King Corporation, Crate and Barrel, NFL Films, and Roche. In addition, service providers FastWeb, Bredbandsbolaget, SingTel, ITXC, Equant and Sprint plan to deliver IP-based voice, data, and video services to their business and residential customers based on Cisco technology. - - Cisco entered into a reseller agreement with IBM, and HP announced its intent to enter into a reseller agreement, to distribute the Cisco MDS 9000 Series storage switches. - - Germany's Deutsches Forschungsnetz (DFN), and SuperSINET, Japan's high-speed Research Network, began upgrading their high-capacity, sophisticated IP network to include Cisco 12000 Series routers. - - Cisco introduced the Cisco Catalyst 2950 Long-Reach Ethernet (LRE) Switch, offering small and medium-size enterprises and multi-tenant building customers enhanced network-wide intelligent Layer 3 and 4 services. - - Zhejiang Telecom, a subsidiary of China Telecom, plans to deploy Cisco Metro Ethernet Switching products in the Zhejiang province in eastern China to further expand the Zhejiang Telecom's province-wide backbone network. In addition, 51 Degrees deployed the United Kingdom's first Ethernet-based broadband connectivity service to live operational customers using the Cisco Metro Ethernet Switching solution based on Ethernet over MPLS. EDITORS NOTE: - - Q2 FY03 conference call to be held at 1:30 p.m. PT on Tuesday, February 4, 2003. Conference call number is 800-369-1988 (United States); 312-470-7224 (international). - - Conference call replay available from 4:30 p.m. PT on February 4, 2003 to February 11, 2003 at 800-685-9460 (United States); 402-220-0287 (international). - - Additional information regarding Cisco's financials and corresponding Webcast with visuals designed to guide participants through the call are also available at 1:30 p.m. PT. Prepared remarks will be available after completion of the call. The prepared remarks should be viewed solely in conjunction with the related conference call Webcast. The Webcast will include both the prepared remarks, as well as the question-and-answer session. Please visit our Website at http://www.cisco.com under "About Cisco" in the Investor Relations section. - - Additional information regarding Cisco's Q2 FY03 will be available at http://newsroom.cisco.com, including: o Customer Highlights & Technology Innovation Fact Sheet 3 o Summary Q&A with Cisco CEO and CFO o Earnings call audio highlights ABOUT CISCO SYSTEMS Cisco Systems, Inc., (NASDAQ: CSCO) is the worldwide leader in networking for the Internet. News and information are available at www.cisco.com. ### 4 This release contains projections and other forward-looking statements regarding future events and the future financial performance of Cisco that involve risks and uncertainties. Readers are cautioned that these forward-looking 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, 10-Q and 8-K, each as it may be amended from time to time, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. In addition to these risk factors, other factors that could cause actual results to differ materially include the following: business and economic conditions and growth trends in the networking industry in various geographic regions; global economic conditions; uncertainties in the geopolitical environment; overall information technology spending; the growth of the Internet and levels of capital spending on Internet-based systems; variations in customer demand for products and services, including sales to the service provider market; the ability to successfully restructure existing businesses; the timing of orders and manufacturing lead times; changes in customer order patterns; insufficient, excess or obsolete inventory; variations in sales channels, product costs, or mix of products sold; the ability to successfully reduce overhead and manage expenses; the ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; increased competition in the networking industry; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; the trend towards sales of integrated network solutions; manufacturing and sourcing risks; Internet infrastructure problems and government regulation of the Internet; international operations; the timing and amount of employer payroll tax to be paid on employees' gains on stock options exercised; litigation involving patents, intellectual property, antitrust, stockholder and other matters; possible disruption in commercial activities occasioned by terrorist activity and armed conflict, such as changes in logistics and security arrangements, and reduced end-user purchases relative to expectations; exposure to credit risks relating to certain customers and credit exposures in weakened markets; the ability to recruit and retain key personnel; stock price volatility; financial risk management; and potential volatility in operating results, among others. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco's most recent reports on Form 10-K and Form 10-Q, each as it may be amended from time to time. Cisco's results of operations for the three and six months ended January 25, 2003 are not necessarily indicative of Cisco's operating results for the full fiscal year or any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco is only to provide guidance at certain points during the year. Actual events or results could differ materially and no reader of this release should assume later that the information provided today is still valid. Such information speaks only as of the date of this release. Cisco provides pro forma net income and pro forma net income per share data as additional information for its operating results. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from pro forma measures used by other companies. Copyright (C) 2003 Cisco Systems, Inc. All rights reserved. Aironet, Catalyst, Cisco, Cisco IOS, Cisco Systems and the Cisco Systems logo are registered trademarks or trademarks of Cisco Systems, Inc. and/or its affiliates in the U.S. and certain other countries. All other trademarks mentioned in this document or Web site are the property of their respective owners. The use of the word partner does not imply a partnership relationship between Cisco and any other company. ### 5 CISCO SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per-share amounts) (Unaudited)

Three Months Ended Six Months Ended --------------------------- --------------------------- January 25, January 26, January 25, January 26, 2003 2002 2003 2002 ---------- ---------- ---------- ---------- NET SALES: Product $ 3,891 $ 4,022 $ 7,904 $ 7,678 Services 822 794 1,654 1,586 ---------- ---------- ---------- ---------- Total net sales 4,713 4,816 9,558 9,264 ---------- ---------- ---------- ---------- COST OF SALES: Product 1,144 1,593 2,381 3,093 Services 252 253 502 509 ---------- ---------- ---------- ---------- Total cost of sales 1,396 1,846 2,883 3,602 ---------- ---------- ---------- ---------- GROSS MARGIN 3,317 2,970 6,675 5,662 OPERATING EXPENSES: Research and development 798 822 1,587 1,697 Sales and marketing 972 1,064 2,065 2,150 General and administrative 172 146 323 296 Payroll tax on stock option exercises -- 3 -- 6 Amortization of deferred stock-based compensation 33 46 76 96 Amortization of purchased intangible assets 78 136 192 282 In-process research and development -- -- -- 37 ---------- ---------- ---------- ---------- Total operating expenses 2,053 2,217 4,243 4,564 ---------- ---------- ---------- ---------- OPERATING INCOME 1,264 753 2,432 1,098 Loss on public equity investments -- -- (412) (858) Interest income 174 233 353 467 Other loss, net (51) (54) (114) (118) ---------- ---------- ---------- ---------- INCOME BEFORE PROVISION FOR INCOME TAXES 1,387 932 2,259 589 Provision for income taxes 396 272 650 197 ---------- ---------- ---------- ---------- NET INCOME $ 991 $ 660 $ 1,609 $ 392 ========== ========== ========== ========== Net income per share--basic $ 0.14 $ 0.09 $ 0.22 $ 0.05 ========== ========== ========== ========== Net income per share--diluted $ 0.14 $ 0.09 $ 0.22 $ 0.05 ========== ========== ========== ========== Shares used in per-share calculation--basic 7,187 7,311 7,217 7,309 ========== ========== ========== ========== Shares used in per-share calculation--diluted 7,286 7,496 7,307 7,480 ========== ========== ========== ==========

6 CISCO SYSTEMS, INC. PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per-share amounts) (Unaudited)

Three Months Ended Six Months Ended ---------------------------- --------------------------- January 25, January 26, January 25, January 26, 2003 2002 2003 2002 ---------- ---------- ---------- ---------- NET SALES: Product $ 3,891 $ 4,022 $ 7,904 $ 7,678 Services 822 794 1,654 1,586 ---------- ---------- ---------- ---------- Total net sales 4,713 4,816 9,558 9,264 ---------- ---------- ---------- ---------- COST OF SALES: Product 1,144 1,788 2,381 3,578 Services 252 253 502 509 ---------- ---------- ---------- ---------- Total cost of sales 1,396 2,041 2,883 4,087 ---------- ---------- ---------- ---------- GROSS MARGIN 3,317 2,775 6,675 5,177 OPERATING EXPENSES: Research and development 798 822 1,587 1,697 Sales and marketing 972 1,064 2,065 2,150 General and administrative 172 146 323 296 ---------- ---------- ---------- ---------- Total operating expenses 1,942 2,032 3,975 4,143 ---------- ---------- ---------- ---------- OPERATING INCOME 1,375 743 2,700 1,034 Interest income 174 233 353 467 Other loss, net (51) (54) (114) (118) ---------- ---------- ---------- ---------- INCOME BEFORE PROVISION FOR INCOME TAXES 1,498 922 2,939 1,383 Provision for income taxes 419 258 822 387 ---------- ---------- ---------- ---------- NET INCOME $ 1,079 $ 664 $ 2,117 $ 996 ========== ========== ========== ========== Net income per share--basic $ 0.15 $ 0.09 $ 0.29 $ 0.14 ========== ========== ========== ========== Net income per share--diluted $ 0.15 $ 0.09 $ 0.29 $ 0.13 ========== ========== ========== ========== Shares used in per-share calculation--basic 7,187 7,311 7,217 7,309 ========== ========== ========== ========== Shares used in per-share calculation--diluted 7,286 7,496 7,307 7,480 ========== ========== ========== ========== A RECONCILIATION BETWEEN NET INCOME ON A GAAP BASIS AND PRO FORMA NET INCOME IS AS FOLLOWS: GAAP net income $ 991 $ 660 $ 1,609 $ 392 In-process research and development -- -- -- 37 Payroll tax on stock option exercises -- 3 -- 6 Amortization of deferred stock-based compensation 33 46 76 96 Amortization of purchased intangible assets 78 136 192 282 Loss on public equity investments -- -- 412 858 Excess inventory benefit -- (195) -- (485) Income tax effect (23) 14 (172) (190) ---------- ---------- ---------- ---------- Pro forma net income $ 1,079 $ 664 $ 2,117 $ 996 ========== ========== ========== ==========

7 Cisco Systems, Inc. CONSOLIDATED BALANCE SHEETS (In millions) (Unaudited)

January 25, July 27, 2003 2002 ---------- ---------- ASSETS Current assets: Cash and cash equivalents $ 5,013 $ 9,484 Short-term investments 4,523 3,172 Accounts receivable, net of allowance for doubtful accounts of $317 at January 25, 2003 and $335 at July 27, 2002 1,107 1,105 Inventories, net 775 880 Deferred tax assets 2,116 2,030 Lease receivables, net 175 239 Prepaid expenses and other current assets 580 523 ---------- ---------- Total current assets 14,289 17,433 Investments 11,661 8,800 Property and equipment, net 3,890 4,102 Goodwill 3,717 3,565 Purchased intangible assets, net 606 797 Lease receivables, net 42 39 Other assets 3,141 3,059 ---------- ---------- TOTAL ASSETS $ 37,346 $ 37,795 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 518 $ 470 Income taxes payable 773 579 Accrued compensation 1,251 1,365 Deferred revenue 2,920 3,143 Other accrued liabilities 2,280 2,496 Restructuring liabilities 322 322 ---------- ---------- Total current liabilities 8,064 8,375 Deferred revenue 817 749 ---------- ---------- Total liabilities 8,881 9,124 Minority interest 10 15 Shareholders' equity 28,455 28,656 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 37,346 $ 37,795 ========== ==========

8 CISCO SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS) (UNAUDITED) Six Months Ended --------------------------- January 25, January 26, 2003 2002 ---------- ---------- Cash flows from operating activities: Net income $ 1,609 $ 392 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 783 935 Provision for doubtful accounts 76 60 Provision for (benefit from) inventory 10 (3) Deferred income taxes (103) (445) Tax benefits from employee stock option plans 11 49 In-process research and development -- 25 Net (gains) losses on investments and provision for losses 509 1,014 Change in operating assets and liabilities: Accounts receivable (78) 256 Inventories 98 570 Prepaid expenses and other current assets (55) 15 Accounts payable 48 (273) Income taxes payable (79) 35 Accrued compensation (114) 356 Deferred revenue (155) 623 Other accrued liabilities (134) (110) Restructuring liabilities -- (108) ---------- ---------- Net cash provided by operating activities 2,426 3,391 ---------- ---------- Cash flows from investing activities: Purchases of short-term investments (4,312) (2,762) Proceeds from sales and maturities of short-term investments 3,877 3,173 Purchases of investments (8,356) (8,441) Proceeds from sales and maturities of investments 4,519 5,680 Purchases of restricted investments -- (61) Proceeds from sales and maturities of restricted investments -- 191 Acquisition of property and equipment (341) (482) Acquisition of businesses, net of cash and cash equivalents 2 14 Change in lease receivables, net 61 202 Purchases of investments in privately held companies (88) (37) Lease deposits -- (73) Purchase of minority interest of Cisco Systems, K.K. (Japan) (59) (65) Other 108 (43) ---------- ---------- Net cash used in investing activities (4,589) (2,704) ---------- ---------- Cash flows from financing activities: Issuance of common stock 231 384 Repurchase of common stock (2,552) (601) Other 13 (6) ---------- ---------- Net cash used in financing activities (2,308) (223) ---------- ---------- Net (decrease) increase in cash and cash equivalents (4,471) 464 Cash and cash equivalents, beginning of period 9,484 4,873 ---------- ---------- Cash and cash equivalents, end of period $ 5,013 $ 5,337 ========== ========== 9 -----END PRIVACY-ENHANCED MESSAGE-----

EX-99.1

                                                                    EXHIBIT 99.1



PRESS CONTACT:                                 INVESTOR RELATIONS CONTACT:
Robyn Jenkins-Blum                             Blair Christie
Cisco Systems, Inc.                            Cisco Systems, Inc.
(408) 853-9848                                 (408) 525-4856
rojenkin@cisco.com                             blchrist@cisco.com


                  CISCO SYSTEMS REPORTS SECOND QUARTER EARNINGS

   -  Q2 REVENUES: $4.7 Billion
   -  Q2 OPERATING CASH FLOW: $1.36 Billion
   -  Q2 EARNINGS PER SHARE: $0.14 GAAP; $0.15 Pro Forma


      SAN JOSE, Calif. -- February 4, 2003 -- Cisco Systems, Inc., the
worldwide leader in networking for the Internet, today reported its second
quarter results for the period ended January 25, 2003.

      NET SALES FOR THE SECOND QUARTER of fiscal 2003 were $4.7 billion,
compared with $4.8 billion for the second quarter of fiscal 2002, a decrease of
2.1%, and compared with $4.8 billion for the first quarter of fiscal 2003.

      NET INCOME FOR THE SECOND QUARTER of fiscal 2003, on a generally accepted
accounting principle (GAAP) basis, was $991 million or $0.14 per share, compared
with $660 million or $0.09 per share for the second quarter of fiscal 2002, and
$618 million or $0.08 per share for the first quarter of fiscal 2003. PRO FORMA
NET INCOME FOR THE SECOND QUARTER of fiscal 2003 was $1.1 billion or $0.15 per
share, compared with pro forma net income of $664 million or $0.09 per share for
the second quarter of fiscal 2002, and compared with $1.0 billion or $0.14 per
share for the first quarter of fiscal 2003. A reconciliation between net income
on a GAAP basis and pro forma net income is provided in a table immediately
following the Pro Forma Consolidated Statements of Operations.

      NET SALES FOR THE FIRST SIX MONTHS of fiscal 2003 were $9.6 billion,
compared with $9.3 billion for the first six months of fiscal 2002, an increase
of 3.2%.

      NET INCOME FOR THE FIRST SIX MONTHS of fiscal 2003, on a GAAP basis, was
$1.6 billion or $0.22 per share, compared with $392 million or $0.05 per share
for the first six months of fiscal 2002. PRO FORMA NET INCOME FOR THE FIRST SIX
MONTHS of fiscal 2003 was $2.1 billion or $0.29 per share, compared with pro
forma net income of $1.0 billion or $0.13 per share for the first six months of
fiscal 2002.

      "In what is probably the most challenging environment the information
technology industry has ever faced, we are very pleased with our results in
posting one of the best pro forma quarters in our history and the best GAAP
quarter in terms of net income and earnings per share," said John Chambers, CEO
of Cisco Systems.


                                       1

"Our market performance reflects Cisco's ability to deliver differentiated value
to our customers' highest priority -- productivity."

      Chambers continued, "From a global CEO and government leader perspective,
we remain in a `show-me' economy. What I've heard from these leaders is clear:
As their business improves, their investment priorities will center on
productivity. The Intelligent Information Network provides the enabling
infrastructure to integrate the applications, business processes and
technologies to drive these productivity gains."

OPERATIONAL HIGHLIGHTS

- -  Cash flows from operations were $1.36 billion for the second quarter of
   fiscal 2003, compared with $2.0 billion for the second quarter of fiscal
   2002, and compared with $1.07 billion for the first quarter of fiscal 2003.

- -  Cash and cash equivalents and total investments were $21.2 billion at the end
   of the second quarter of fiscal 2003, compared with $21.5 billion at the end
   of fiscal year 2002, and compared with $21.2 billion at the end of the first
   quarter of fiscal 2003.

- -  During the second quarter of fiscal 2003, Cisco repurchased approximately
   $1.5 billion of common stock. The total amount of stock repurchases for the
   first six months of fiscal 2003 was $2.6 billion.

- -  Days sales outstanding (DSO) in accounts receivable at the end of the second
   quarter of fiscal 2003 were 21 days, consistent with the fourth quarter of
   fiscal 2002 and the first quarter of fiscal 2003.

- -  Inventory turns were 7.0 turns in the second quarter of fiscal 2003,
   consistent with the fourth quarter of fiscal 2002 and the first quarter of
   fiscal 2003.

BUSINESS HIGHLIGHTS

- -  Cisco and SBC Communications Inc. forged a strategic marketing and sales
   agreement focused on accelerating the delivery of a new class of managed
   business services. SBC also plans to use Cisco IP networking technology in
   its core network infrastructure to deliver emerging services.

- -  Cisco and Lucent announced that Lucent will integrate and resell select Cisco
   packet data and media gateway products as part of Lucent's product offering
   for the mobile service provider market. The non-exclusive agreement will
   allow Cisco mobile wireless networking products to reach a broader segment of
   the service provider market.

- -  Cisco completed the acquisition of Psionic Software, Inc. and announced its
   intent to acquire Okena, Inc., both in the network security market segment.

- -  Lufthansa Airlines began trials of on-board high-speed Internet services for
   passengers, based on Cisco Aironet(R) 350 access points, a Cisco 3640 router,
   and Cisco Catalyst(R) 3548 XL switches.



                                       2

- -  Cisco announced it will provide networking technology for China Unicom's core
   network backbone and a major Code Division Multiple Access (CDMA) upgrade
   project for 15 Chinese cities and provinces.

- -  Cisco introduced several IP communications technologies and products,
   including new unified messaging and IP PBX applications, audio- and
   videoconferencing capabilities, and a lower-cost Internet Protocol (IP)
   telephone. Adoption of Cisco IP communications solutions continued to expand
   with new customers including Burger King Corporation, Crate and Barrel, NFL
   Films, and Roche. In addition, service providers FastWeb, Bredbandsbolaget,
   SingTel, ITXC, Equant and Sprint plan to deliver IP-based voice, data, and
   video services to their business and residential customers based on Cisco
   technology.

- -  Cisco entered into a reseller agreement with IBM, and HP announced its intent
   to enter into a reseller agreement, to distribute the Cisco MDS 9000 Series
   storage switches.

- -  Germany's Deutsches Forschungsnetz (DFN), and SuperSINET, Japan's high-speed
   Research Network, began upgrading their high-capacity, sophisticated IP
   network to include Cisco 12000 Series routers.

- -  Cisco introduced the Cisco Catalyst 2950 Long-Reach Ethernet (LRE) Switch,
   offering small and medium-size enterprises and multi-tenant building
   customers enhanced network-wide intelligent Layer 3 and 4 services.

- -  Zhejiang Telecom, a subsidiary of China Telecom, plans to deploy Cisco Metro
   Ethernet Switching products in the Zhejiang province in eastern China to
   further expand the Zhejiang Telecom's province-wide backbone network. In
   addition, 51 Degrees deployed the United Kingdom's first Ethernet-based
   broadband connectivity service to live operational customers using the Cisco
   Metro Ethernet Switching solution based on Ethernet over MPLS.

EDITORS NOTE:

- -  Q2 FY03 conference call to be held at 1:30 p.m. PT on Tuesday, February 4,
   2003. Conference call number is 800-369-1988 (United States); 312-470-7224
   (international).

- -  Conference call replay available from 4:30 p.m. PT on February 4, 2003 to
   February 11, 2003 at 800-685-9460 (United States); 402-220-0287
   (international).

- -  Additional information regarding Cisco's financials and corresponding Webcast
   with visuals designed to guide participants through the call are also
   available at 1:30 p.m. PT. Prepared remarks will be available after
   completion of the call. The prepared remarks should be viewed solely in
   conjunction with the related conference call Webcast. The Webcast will
   include both the prepared remarks, as well as the question-and-answer
   session. Please visit our Website at http://www.cisco.com under "About Cisco"
   in the Investor Relations section.

- -  Additional information regarding Cisco's Q2 FY03 will be available at
   http://newsroom.cisco.com, including:

      o  Customer Highlights & Technology Innovation Fact Sheet



                                       3

      o  Summary Q&A with Cisco CEO and CFO

      o  Earnings call audio highlights

ABOUT CISCO SYSTEMS

      Cisco Systems, Inc., (NASDAQ: CSCO) is the worldwide leader in networking
for the Internet. News and information are available at www.cisco.com.

                                       ###








                                       4

This release contains projections and other forward-looking statements regarding
future events and the future financial performance of Cisco that involve risks
and uncertainties. Readers are cautioned that these forward-looking 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, 10-Q and 8-K, each as it may
be amended from time to time, which identify important risk factors that could
cause actual results to differ from those contained in the forward-looking
statements. In addition to these risk factors, other factors that could cause
actual results to differ materially include the following: business and economic
conditions and growth trends in the networking industry in various geographic
regions; global economic conditions; uncertainties in the geopolitical
environment; overall information technology spending; the growth of the Internet
and levels of capital spending on Internet-based systems; variations in customer
demand for products and services, including sales to the service provider
market; the ability to successfully restructure existing businesses; the timing
of orders and manufacturing lead times; changes in customer order patterns;
insufficient, excess or obsolete inventory; variations in sales channels,
product costs, or mix of products sold; the ability to successfully reduce
overhead and manage expenses; the ability to successfully acquire businesses and
technologies and to successfully integrate and operate these acquired businesses
and technologies; increased competition in the networking industry; dependence
on the introduction and market acceptance of new product offerings and
standards; rapid technological and market change; the trend towards sales of
integrated network solutions; manufacturing and sourcing risks; Internet
infrastructure problems and government regulation of the Internet; international
operations; the timing and amount of employer payroll tax to be paid on
employees' gains on stock options exercised; litigation involving patents,
intellectual property, antitrust, stockholder and other matters; possible
disruption in commercial activities occasioned by terrorist activity and armed
conflict, such as changes in logistics and security arrangements, and reduced
end-user purchases relative to expectations; exposure to credit risks relating
to certain customers and credit exposures in weakened markets; the ability to
recruit and retain key personnel; stock price volatility; financial risk
management; and potential volatility in operating results, among others. The
financial information contained in this release should be read in conjunction
with the consolidated financial statements and notes thereto included in Cisco's
most recent reports on Form 10-K and Form 10-Q, each as it may be amended from
time to time. Cisco's results of operations for the three and six months ended
January 25, 2003 are not necessarily indicative of Cisco's operating results for
the full fiscal year or any future periods. Any projections in this release are
based on limited information currently available to Cisco, which is subject to
change. Although any such projections and the factors influencing them will
likely change, Cisco will not necessarily update the information, since Cisco is
only to provide guidance at certain points during the year. Actual events or
results could differ materially and no reader of this release should assume
later that the information provided today is still valid. Such information
speaks only as of the date of this release.

Cisco provides pro forma net income and pro forma net income per share data as
additional information for its operating results. These measures are not in
accordance with, or an alternative for, generally accepted accounting principles
and may be different from pro forma measures used by other companies.

Copyright (C) 2003 Cisco Systems, Inc. All rights reserved. Aironet, Catalyst,
Cisco, Cisco IOS, Cisco Systems and the Cisco Systems logo are registered
trademarks or trademarks of Cisco Systems, Inc. and/or its affiliates in the
U.S. and certain other countries. All other trademarks mentioned in this
document or Web site are the property of their respective owners. The use of the
word partner does not imply a partnership relationship between Cisco and any
other company.

                                       ###




                                       5

                               CISCO SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In millions, except per-share amounts)
                                   (Unaudited)



                                                               Three Months Ended                Six Months Ended
                                                          ---------------------------       ---------------------------
                                                          January 25,      January 26,      January 25,      January 26,
                                                             2003             2002             2003             2002
                                                          ----------       ----------       ----------       ----------
                                                                                                 
NET SALES:
   Product                                                $    3,891       $    4,022       $    7,904       $    7,678
   Services                                                      822              794            1,654            1,586
                                                          ----------       ----------       ----------       ----------
    Total net sales                                            4,713            4,816            9,558            9,264
                                                          ----------       ----------       ----------       ----------

COST OF SALES:
   Product                                                     1,144            1,593            2,381            3,093
   Services                                                      252              253              502              509
                                                          ----------       ----------       ----------       ----------
    Total cost of sales                                        1,396            1,846            2,883            3,602
                                                          ----------       ----------       ----------       ----------

   GROSS MARGIN                                                3,317            2,970            6,675            5,662

OPERATING EXPENSES:
   Research and development                                      798              822            1,587            1,697
   Sales and marketing                                           972            1,064            2,065            2,150
   General and administrative                                    172              146              323              296
   Payroll tax on stock option exercises                        --                  3             --                  6
   Amortization of deferred stock-based compensation              33               46               76               96
   Amortization of purchased intangible assets                    78              136              192              282
   In-process research and development                          --               --               --                 37
                                                          ----------       ----------       ----------       ----------
     Total operating expenses                                  2,053            2,217            4,243            4,564
                                                          ----------       ----------       ----------       ----------

OPERATING INCOME                                               1,264              753            2,432            1,098

Loss on public equity investments                               --                 --             (412)            (858)
Interest income                                                  174              233              353              467
Other loss, net                                                  (51)             (54)            (114)            (118)
                                                          ----------       ----------       ----------       ----------

INCOME BEFORE PROVISION FOR INCOME TAXES                       1,387              932            2,259              589
Provision for income taxes                                       396              272              650              197
                                                          ----------       ----------       ----------       ----------

   NET INCOME                                             $      991       $      660       $    1,609       $      392
                                                          ==========       ==========       ==========       ==========

Net income per share--basic                               $     0.14       $     0.09       $     0.22       $     0.05
                                                          ==========       ==========       ==========       ==========

Net income per share--diluted                             $     0.14       $     0.09       $     0.22       $     0.05
                                                          ==========       ==========       ==========       ==========

Shares used in per-share calculation--basic                    7,187            7,311            7,217            7,309
                                                          ==========       ==========       ==========       ==========

Shares used in per-share calculation--diluted                  7,286            7,496            7,307            7,480
                                                          ==========       ==========       ==========       ==========



                                       6

                               CISCO SYSTEMS, INC.
                 PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In millions, except per-share amounts)
                                   (Unaudited)



                                                               Three Months Ended                 Six Months Ended
                                                          ----------------------------      ---------------------------
                                                          January 25,      January 26,      January 25,      January 26,
                                                             2003             2002             2003             2002
                                                          ----------       ----------       ----------       ----------
                                                                                                 
NET SALES:
   Product                                                $    3,891       $    4,022       $    7,904       $    7,678
   Services                                                      822              794            1,654            1,586
                                                          ----------       ----------       ----------       ----------
    Total net sales                                            4,713            4,816            9,558            9,264
                                                          ----------       ----------       ----------       ----------

COST OF SALES:
   Product                                                     1,144            1,788            2,381            3,578
   Services                                                      252              253              502              509
                                                          ----------       ----------       ----------       ----------
    Total cost of sales                                        1,396            2,041            2,883            4,087
                                                          ----------       ----------       ----------       ----------

   GROSS MARGIN                                                3,317            2,775            6,675            5,177

OPERATING EXPENSES:
   Research and development                                      798              822            1,587            1,697
   Sales and marketing                                           972            1,064            2,065            2,150
   General and administrative                                    172              146              323              296
                                                          ----------       ----------       ----------       ----------
     Total operating expenses                                  1,942            2,032            3,975            4,143
                                                          ----------       ----------       ----------       ----------

OPERATING INCOME                                               1,375              743            2,700            1,034

Interest income                                                  174              233              353              467
Other loss, net                                                  (51)             (54)            (114)            (118)
                                                          ----------       ----------       ----------       ----------

INCOME BEFORE PROVISION FOR INCOME TAXES                       1,498              922            2,939            1,383
Provision for income taxes                                       419              258              822              387
                                                          ----------       ----------       ----------       ----------

   NET INCOME                                             $    1,079       $      664       $    2,117       $      996
                                                          ==========       ==========       ==========       ==========

Net income per share--basic                               $     0.15       $     0.09       $     0.29       $     0.14
                                                          ==========       ==========       ==========       ==========

Net income per share--diluted                             $     0.15       $     0.09       $     0.29       $     0.13
                                                          ==========       ==========       ==========       ==========

Shares used in per-share calculation--basic                    7,187            7,311            7,217            7,309
                                                          ==========       ==========       ==========       ==========

Shares used in per-share calculation--diluted                  7,286            7,496            7,307            7,480
                                                          ==========       ==========       ==========       ==========

A RECONCILIATION BETWEEN NET INCOME ON A GAAP BASIS AND PRO FORMA NET INCOME IS AS FOLLOWS:

GAAP net income                                           $      991       $      660       $    1,609       $      392
   In-process research and development                          --               --               --                 37
   Payroll tax on stock option exercises                        --                  3             --                  6
   Amortization of deferred stock-based compensation              33               46               76               96
   Amortization of purchased intangible assets                    78              136              192              282
   Loss on public equity investments                            --               --                412              858
   Excess inventory benefit                                     --               (195)            --               (485)
   Income tax effect                                             (23)              14             (172)            (190)
                                                          ----------       ----------       ----------       ----------
Pro forma net income                                      $    1,079       $      664       $    2,117       $      996
                                                          ==========       ==========       ==========       ==========



                                       7

                               Cisco Systems, Inc.
                           CONSOLIDATED BALANCE SHEETS
                                  (In millions)
                                   (Unaudited)



                                                                    January 25,      July 27,
                                                                       2003            2002
                                                                    ----------      ----------
                                                                              
ASSETS
Current assets:
   Cash and cash equivalents                                        $    5,013      $    9,484
   Short-term investments                                                4,523           3,172
   Accounts receivable, net of allowance for doubtful accounts
    of $317 at January 25, 2003 and $335 at July 27, 2002                1,107           1,105
   Inventories, net                                                        775             880
   Deferred tax assets                                                   2,116           2,030
   Lease receivables, net                                                  175             239
   Prepaid expenses and other current assets                               580             523
                                                                    ----------      ----------

     Total current assets                                               14,289          17,433

Investments                                                             11,661           8,800
Property and equipment, net                                              3,890           4,102
Goodwill                                                                 3,717           3,565
Purchased intangible assets, net                                           606             797
Lease receivables, net                                                      42              39
Other assets                                                             3,141           3,059
                                                                    ----------      ----------

     TOTAL ASSETS                                                   $   37,346      $   37,795
                                                                    ==========      ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                 $      518      $      470
   Income taxes payable                                                    773             579
   Accrued compensation                                                  1,251           1,365
   Deferred revenue                                                      2,920           3,143
   Other accrued liabilities                                             2,280           2,496
   Restructuring liabilities                                               322             322
                                                                    ----------      ----------

     Total current liabilities                                           8,064           8,375

Deferred revenue                                                           817             749
                                                                    ----------      ----------

     Total liabilities                                                   8,881           9,124

Minority interest                                                           10              15

Shareholders' equity                                                    28,455          28,656
                                                                    ----------      ----------

     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                     $   37,346      $   37,795
                                                                    ==========      ==========




                                       8

                               CISCO SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (IN MILLIONS)
                                   (UNAUDITED)


                                                                          Six Months Ended
                                                                     ---------------------------
                                                                     January 25,      January 26,
                                                                        2003             2002
                                                                     ----------       ----------
                                                                                
Cash flows from operating activities:
   Net income                                                        $    1,609       $      392
   Adjustments to reconcile net income to net cash
    provided by operating activities:
     Depreciation and amortization                                          783              935
     Provision for doubtful accounts                                         76               60
     Provision for (benefit from) inventory                                  10               (3)
     Deferred income taxes                                                 (103)            (445)
     Tax benefits from employee stock option plans                           11               49
     In-process research and development                                   --                 25
     Net (gains) losses on investments and provision for losses             509            1,014
     Change in operating assets and liabilities:
      Accounts receivable                                                   (78)             256
      Inventories                                                            98              570
      Prepaid expenses and other current assets                             (55)              15
      Accounts payable                                                       48             (273)
      Income taxes payable                                                  (79)              35
      Accrued compensation                                                 (114)             356
      Deferred revenue                                                     (155)             623
      Other accrued liabilities                                            (134)            (110)
      Restructuring liabilities                                            --               (108)
                                                                     ----------       ----------
        Net cash provided by operating activities                         2,426            3,391
                                                                     ----------       ----------
Cash flows from investing activities:
   Purchases of short-term investments                                   (4,312)          (2,762)
   Proceeds from sales and maturities of short-term investments           3,877            3,173
   Purchases of investments                                              (8,356)          (8,441)
   Proceeds from sales and maturities of investments                      4,519            5,680
   Purchases of restricted investments                                     --                (61)
   Proceeds from sales and maturities of restricted investments            --                191
   Acquisition of property and equipment                                   (341)            (482)
   Acquisition of businesses, net of cash and cash equivalents                2               14
   Change in lease receivables, net                                          61              202
   Purchases of investments in privately held companies                     (88)             (37)
   Lease deposits                                                          --                (73)
   Purchase of minority interest of Cisco Systems, K.K. (Japan)             (59)             (65)
   Other                                                                    108              (43)
                                                                     ----------       ----------
        Net cash used in investing activities                            (4,589)          (2,704)
                                                                     ----------       ----------
Cash flows from financing activities:

   Issuance of common stock                                                 231              384
   Repurchase of common stock                                            (2,552)            (601)
   Other                                                                     13               (6)
                                                                     ----------       ----------
        Net cash used in financing activities                            (2,308)            (223)
                                                                     ----------       ----------
Net (decrease) increase in cash and cash equivalents                     (4,471)             464
Cash and cash equivalents, beginning of period                            9,484            4,873
                                                                     ----------       ----------
Cash and cash equivalents, end of period                             $    5,013       $    5,337
                                                                     ==========       ==========




                                       9