-- Q1 Net Sales: $6.5 billion (9.7% increase year over year)

-- Q1 Net Income: $1.3 billion GAAP (includes a first-time stock-based compensation expense of $228 million, net of tax) compared with $1.1 billion for Q1 FY'05, including pro forma stock-based compensation expense; $1.6 billion non-GAAP (pro forma) compared with $1.5 billion for Q1 FY'05

-- Q1 Earnings Per Share: $0.20 GAAP (includes a first-time stock-based compensation expense of $0.04) compared with $0.17 for Q1 FY'05, including pro forma stock-based compensation expense; $0.25 non-GAAP (pro forma) compared with $0.21 for Q1 FY'05

Cisco Systems, Inc., the worldwide leader in networking for the Internet, today reported its first quarter results for the period ended October 29, 2005.

Net sales for the first quarter of fiscal 2006 were $6.5 billion, compared with $6.0 billion for the first quarter of fiscal 2005, an increase of 9.7 percent, and compared with $6.6 billion for the fourth quarter of fiscal 2005, a decrease of 0.5 percent.

Net income for the first quarter of fiscal 2006, on a generally accepted accounting principles (GAAP) basis, was $1.3 billion or $0.20 per share which includes stock-based compensation expense of $228 million, net of tax, or $0.04 per share, due to the implementation of SFAS 123(R). Net income prior to fiscal 2006 did not include stock-based compensation expense. Including the pro forma stock-based compensation expense previously disclosed in Cisco's financial statements footnotes, net income for the first quarter of fiscal 2005 would have been $1.1 billion or $0.17 per share and net income for the fourth quarter of fiscal 2005 would have been $1.3 billion or $0.20 per share. Please refer to the table on page 8 for a quarter-to-quarter comparison of net income including the effect of stock-based compensation expense. Net income on a GAAP basis, which does not include the effect of stock-based compensation expense, for the first quarter of fiscal 2005 was $1.4 billion or $0.21 per share and for the fourth quarter of fiscal 2005 was $1.5 billion or $0.24 per share.

Non-GAAP (pro forma) net income for the first quarter of fiscal 2006 was $1.6 billion or $0.25 per share, compared with $1.5 billion or $0.21 per share for the first quarter of fiscal 2005, and compared with $1.6 billion or $0.25 per share for the fourth quarter of fiscal 2005. A reconciliation between net income on a GAAP basis and non-GAAP (pro forma) net income is provided in a table on page 8.

During the first quarter of fiscal 2006, Cisco completed the acquisitions of KiSS Technology A/S, Nemo Systems, Inc. and Sheer Networks, Inc.

"Q1 was a solid quarter for Cisco, with balanced execution across most of our geographies, market segments and product categories," said John Chambers, president and CEO, Cisco Systems, Inc. "We are especially pleased with the improving business momentum in the U.S. and Asia Pacific, the strength of our product families and the accelerated growth of the commercial marketplace, which has become our fastest growing customer segment."

Chambers continued, "Cisco's long-term product architecture strategy is taking hold. We are seeing an increased trend toward customers choosing integrated networking solutions that combine our core products with advanced technologies. By coupling routing and switching with our advanced technologies such as security, enterprise IP communications and wireless, Cisco's architectural approach is allowing customers to more effectively scale their IT operations. Going forward, we will continue to foster a culture of innovation, incorporating internal development, acquisitions and partnerships to anticipate the evolving needs of customers and extend our core competitive advantage."

Cisco will discuss first quarter 2006 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 $1.4 billion for the first quarter of fiscal 2006, compared with $1.5 billion for the first quarter of fiscal 2005, and compared with $2.4 billion for the fourth quarter of fiscal 2005.

-- Cash and cash equivalents and investments were $13.5 billion at the end of the first quarter of fiscal 2006, compared with $16.1 billion at the end of the fourth quarter of fiscal 2005.

-- During the first quarter of fiscal 2006, Cisco repurchased 194 million shares of common stock at an average price of $18.03 per share for an aggregate purchase price of $3.5 billion. As of October 29, 2005, Cisco had repurchased and retired 1.7 billion shares of Cisco common stock at an average price of $18.14 per share for an aggregate purchase price of approximately $30.7 billion since the inception of the stock repurchase program.

-- Days sales outstanding (DSO) in accounts receivable at the end of the first quarter of fiscal 2006 were 33 days, compared with 31 days at the end of the fourth quarter of fiscal 2005.

-- Inventory turns on a GAAP basis were 6.5 in the first quarter of fiscal 2006, compared with 6.6 in the fourth quarter of fiscal 2005. Non-GAAP (pro forma) inventory turns were 6.4 in the first quarter of fiscal 2006.

"Our performance this quarter demonstrated once again that our focus and execution on long-term financial priorities translates to sustained profitable growth and a strong competitive advantage," said Dennis Powell, chief financial officer, Cisco Systems. "Non-GAAP (pro forma) quarterly earnings per share of $0.25, net income of $1.6 billion, and 68.5 percent product gross margins are all strong indicators of the momentum we're achieving in our business, while we continue to ramp resources for continued execution throughout the fiscal year."

Business Highlights

-- Intel Corporation and Cisco expanded their existing alliance in an effort to enhance wireless LAN reliability, deliver higher-quality services and allow businesses to use computers and the network as a combined defense against security threats.

-- MCI, Inc. is expanding its managed IP Communications offerings to the business market with the launch of Managed IP PBX, which is based on Cisco technology and includes the Cisco CallManager product suite.

-- SOFTBANK BB Corporation expanded its Cisco IP Next-Generation Network (IP NGN) architecture with the Cisco Carrier Routing System (CRS-1) and Cisco Catalyst(R) 6500 Series switches to enable nationwide expansion of advanced video services, including broadband program broadcasting and video on demand (VoD).

-- Linksys, a division of Cisco Systems, and Skype teamed to launch a new cordless handset designed to enable users to place Skype Internet phone calls while sitting at home or at the office.

-- Cisco introduced the company's newest emerging technology, the Cisco Internet Protocol Interoperability and Collaboration System (IPICS), designed to integrate disparate push-to-talk radio systems with other communication resources such as voice, video and data devices.

-- Cisco announced a $40 million commitment in a multiphase, three-year education "21S Initiative" in the Gulf Coast region, which will begin in Mississippi, for reconstructing and improving schools.

-- Cisco announced its investment initiative plans for India, totaling up to US$1.1 billion. This announcement highlights the growing importance of the Indian market in the global economy.

-- Cisco reached a major milestone in the IP Communications market with the sale of its 6-millionth Internet Protocol (IP) phone worldwide.

-- Cisco introduced the Cisco Business Communications Solution, specifically designed for small to medium businesses (SMBs) and mid-market companies through voice and switching products.

-- Underscoring its focus on social responsibility, Cisco won the prestigious State Department Award for Corporate Excellence (ACE) for its education program in Jordan designed to teach young people information-technology skills. It also issued its first-ever Corporate Social Responsibility (CSR) report, a summary of the company's responsible business practices and social investment programs for fiscal years 2004 and 2005.