Don't believe the hype #1

Louis Proyect lnp3 at
Tue Apr 17 08:20:12 MDT 2001

USA TODAY, August 13, 1996, Tuesday, FINAL EDITION

Aggressive Chambers powers Cisco Even rumors following AOL crash don't slow
it down

SAN JOSE, Calif. -- When Cisco Systems CEO John Chambers plays tennis, his
game plan is this: Hit a huge serve. Rush to the net and slam the ball away.

He runs Cisco Systems, one of the Silicon Valley's brightest stars, the
same way.

Cisco, founded in 1984, is the undisputed titan of networking. Its products
connect 80% of the world's personal computers to the Internet and make up
much of its backbone.

Cisco's stock has been a tremendous play, up 10,300% since Cisco went
public in 1990. If it doesn't have the technology to retain its dominance,
it buys it. In three years, Cisco has bought 12 companies.

"Cisco is clearly in the driver's seat," says PaineWebber's Paul Weinstein.


NY Times, April 17, 2001

Cisco Issues a Warning on Its Sales and Earnings


Offering fresh evidence that economic growth is slowing notably, Cisco
Systems said yesterday that its sales and profit were falling far short of
expectations. Cisco, whose startling success in the 1990's mirrored the
rise of the Internet, blamed a worldwide economic slowdown for its problems.

The boom in communications and information technology spending, which
powered the United States economy in the late 90's, has ended in painful
retreat for Cisco and other technology companies that a few months ago
could seemingly do no wrong.

Cisco's equipment undergirds much of the Internet, and over the last decade
it has grown from a tiny start-up in San Jose, Calif., to a corporate
titan. At its peak a year ago, Cisco, which leads the market for routers,
computers that manage data traffic on a network, was briefly the world's
most valuable company. In March 2000, its market capitalization reached a
peak of $560 billion, more than those of General Motors, Citigroup and
Wal-Mart combined.

But now Cisco, which as late as last fall was reporting quickly rising
sales, is shrinking faster than it grew.

The company estimated yesterday that its sales for the quarter ending April
30 would be about $4.7 billion, 30 percent lower than in the previous three
months. And Cisco warned not to expect a quick rebound, predicting that
sales would fall again next quarter, ending July 31.

With revenue declining so rapidly, Cisco has been caught with big surpluses
of its equipment. The company said that for accounting purposes it would
reduce the value of inventory by $2.5 billion this quarter, including $500
million in partly completed equipment and $2 billion of raw materials like
computer chips. The accounting procedure, known as a write-down, reflects
Cisco's belief that it will not be able to sell the equipment for as much
as it once expected.

"This may be the fastest any industry our size has ever decelerated," John
Chambers, the company's chief executive, said in a statement.

In a conference call later, Mr. Chambers compared the slowdown to a
100-year flood, adding that the economic challenges confronting the network
equipment industry are proof that "a 100-year flood can happen in your

"We never built models to anticipate something of this magnitude," he said.

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Louis Proyect
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