HEALTH

Cisco Systems, Inc., the worldwide leader in networking for the Internet, reported its second quarter results for the period ended January 29, 2005. Net sales for the second quarter of fiscal 2005 were $6.1 billion, compared with $5.4 billion for the second quarter of fiscal 2004, an increase of 12.3 percent, and compared with $6.0 billion for the first quarter of fiscal 2005, an increase of 1.5 percent. Business Highlight - Cisco announced that SOFTBANK BB Corp. (providers of "Yahoo! BB"), the National Institute of Informatics' SuperSINET research network in Japan, and the Pittsburgh Supercomputing Center have chosen the Cisco CRS-1 Carrier Router System as a key component for building out their IP network infrastructures. Net income for the second quarter of fiscal 2005, on a generally accepted accounting principles (GAAP) basis, was $1.4 billion or $0.21 per share, compared with $724 million or $0.10 per share for the second quarter of fiscal 2004, and compared with $1.4 billion or $0.21 per share for the first quarter of fiscal 2005. Net income on a GAAP basis for the second quarter of fiscal 2004 included a non-cash cumulative stock compensation charge of $567 million, or $0.08 per share relating to the implementation of Financial Accounting Standards Board Interpretation No. 46(R). Pro forma net income for the second quarter of fiscal 2005 was $1.5 billion or $0.22 per share, compared with $1.3 billion or $0.18 per share for the second quarter of fiscal 2004, and compared with $1.5 billion or $0.21 per share for the first quarter of fiscal 2005. 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 2005 were $12.0 billion, compared with $10.5 billion for the first six months of fiscal 2004, an increase of 14.6 percent. Net income for the first six months of fiscal 2005, on a GAAP basis, was $2.8 billion or $0.42 per share, compared with $1.8 billion or $0.25 per share for the first six months of fiscal 2004. Pro forma net income for the first six months of fiscal 2005 was $2.9 billion or $0.44 per share, compared with $2.5 billion or $0.35 per share for the first six months of fiscal 2004. During the second quarter of fiscal 2005, Cisco completed the acquisitions of BCN Systems, Inc., Jahi Networks Inc., NetSolve, Incorporated and Perfigo, Inc. "This quarter's solid results, highlighted by record net income and continued order growth across our routing, switching, and advanced technologies, indicate continued product leadership and solid market momentum," said John Chambers, president and CEO, Cisco Systems. "Our strategy uniquely differentiates Cisco from the rest of the industry by providing an integrated technology and business architecture perspective." Chambers added, "Not only are we creating what we expect will be a number of new billion dollar revenue streams for Cisco, but our value proposition to customers continues to expand as these advanced technologies integrate into the core network fabric." Cisco will discuss second quarter 2005 results and business outlook on a conference call and Webcast at 1:30 p.m. Pacific Time today. Call information and related charts are available at http://investor.cisco.com. Financial Highlights -- Cash flows from operations were $1.8 billion for the second quarter of fiscal 2005, compared with $1.6 billion for the second quarter of fiscal 2004, and compared with $1.5 billion for the first quarter of fiscal 2005. -- Cash and cash equivalents and total investments were $16.5 billion at the end of the second quarter of fiscal 2005, compared with $19.3 billion at the end of the fourth quarter of fiscal 2004, and compared with $17.7 billion at the end of the first quarter of fiscal 2005. -- During the second quarter of fiscal 2005, Cisco repurchased 140 million shares of common stock at an average price of $19.30 per share for an aggregate purchase price of $2.7 billion. As of January 29, 2005, Cisco had repurchased and retired 1.3 billion shares of Cisco common stock at an average price of $18.07 per share for an aggregate purchase price of approximately $22.6 billion since the inception of the stock repurchase program. -- Days sales outstanding (DSO) in accounts receivable at the end of the second quarter of fiscal 2005 were 34 days, compared with 28 days at the end of the fourth quarter of fiscal 2004, and compared with 27 days at the end of the first quarter of fiscal 2005. -- Inventory turns were 6.5 in the second quarter of fiscal 2005, compared with 6.4 in the fourth quarter of fiscal 2004, and compared with 6.5 in the first quarter of fiscal 2005. "Our focus and execution on several long-term financial priorities are producing tangible results marked by the eleventh consecutive quarter of Cisco's pro forma net income exceeding $1 billion," said Dennis Powell, chief financial officer, Cisco Systems. "We also achieved pro forma profit of 24.4 percent of revenue while increasing investments in strategic areas of the business to drive future growth." More Business Highlights -- Cisco announced it has been selected by China Telecom as the primary equipment provider for the business network portion of the China Telecom Internet Protocol (IP) Next-Generation Network (also known as ChinaNet Next Carrying Network or CN2). -- Cisco and Fujitsu Limited announced a memorandum of understanding indicating their intent to enter into a strategic alliance focusing on development of high-end routers, future cooperation in routing and switching, and collaboration on continuous quality improvement, enhanced support and service. -- Cisco introduced more than 20 new Cisco Catalyst switch offerings to enable customers to widely deploy higher levels of availability, integrated security and networkwide 10GbE and 10/100/1000 PoE. -- Cisco announced the sale of its 4 millionth Cisco Internet Protocol (IP) telephone. -- Cisco announced that Staples is providing wireless network connections, based on Cisco technology, in all 1,200 of its U.S.-based office supply retail stores. Cisco also announced that Best Buy has successfully deployed wireless networks across its corporate campus and in more than 640 of its retail stores nationwide. -- Cisco and EMC Corporation announced plans to provide customers with an end-to-end storage consolidation solution for remote-office data by combining the recently announced Cisco wide area file services (WAFS) technology and EMC network attached storage (NAS). -- Cisco announced that 15 partners are now delivering or scheduled to deliver solutions in the first calendar quarter of 2005 that have met test criteria for interoperability with the Network Admission Control (NAC) program. -- Linksys, a division of Cisco Systems, Inc. and Vonage Holdings Corporation announced the availability of the Wireless-G Broadband Router with two phone ports bundled with Vonage's VoIP service. Linksys and Intel Corporation announced the Linksys Wireless-G Media Link, the next product in a line of wireless entertainment devices from Linksys that allows consumers to enjoy digital video, music and photos on their home televisions and stereos. -- Cisco announced that neuf telecom has extended its network to 3,000 French cities and is delivering television over DSL based on Cisco technology. -- Cisco announced its intent to open a research and development center in Tokyo, Japan. The facility is expected to open in February 2005 and will represent an initial $12 million investment over the next five years. -- Cisco announced definitive agreements to acquire privately held Protego Networks, Inc. and Airespace, Inc.