* Q3 Net Sales: $7.3 billion
* Q3 Net Income: $1.4 billion GAAP; $1.8 billion non-GAAP
* Q3 Earnings Per Share: $0.22 GAAP; $0.29 non-GAAP

Net income for the third quarter of fiscal 2006, on a generally accepted accounting principles (GAAP) basis, was $1.4 billion or $0.22 per share, which includes stock-based compensation expense related to employee stock options and employee stock purchases of $188 million, net of tax, or $0.03 per share. Net income prior to fiscal 2006 did not include stock-based compensation expense related to employee stock options and employee stock purchases. Including the pro forma stock-based compensation expense previously disclosed in Cisco's financial statements footnotes, net income for the third quarter of fiscal 2005 was $1.2 billion or $0.18 per share. Net income for the second quarter of fiscal 2006, on a GAAP basis, was $1.4 billion or $0.22 per share, which includes stock-based compensation expense related to employee stock options and employee stock purchases of $188 million, net of tax, or $0.03 per share. Please refer to the table on page 9 for a 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 third quarter of fiscal 2005 was $1.4 billion or $0.21 per share.

Non-GAAP net income for the third quarter of fiscal 2006 was $1.8 billion or $0.29 per share, compared with $1.5 billion or $0.23 per share for the third quarter of fiscal 2005, and compared with $1.6 billion or $0.26 per share for the second quarter of fiscal 2006. A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in a table on page 8.

A tax benefit of $124 million or $0.02 per share relating to a foreign tax settlement was reflected in both the GAAP and the non-GAAP results for the third quarter and first nine months of fiscal 2006.

Net sales for the first nine months of fiscal 2006 were $20.5 billion, compared with $18.2 billion for the first nine months of fiscal 2005.

Net income for the first nine months of fiscal 2006, on a GAAP basis, was $4.0 billion or $0.64 per share, which includes stock-based compensation related to employee stock options and employee stock purchases of $604 million, net of tax, or $0.10 per share. Including the pro forma stock-based compensation expense previously disclosed in Cisco's financial statements footnotes, net income for the first nine months of fiscal 2005 was $3.4 billion or $0.52 per share. Net income on a GAAP basis, which does not include the effect of stock-based compensation expense, for the first nine months of fiscal 2005 was $4.2 billion or $0.63 per share.

Non-GAAP net income for the first nine months of fiscal 2006 was $5.0 billion or $0.80 per share, compared with $4.4 billion or $0.67 per share for the first nine months of fiscal 2005.

During the third quarter of fiscal 2006, Cisco completed the aforementioned acquisition of Scientific-Atlanta, Inc. and the acquisition of SyPixx Networks, Inc.

"Cisco's third quarter was marked by record revenues and strong results in orders and earnings per share," said John Chambers, president and CEO, Cisco Systems, Inc. "We saw a number of highlights this quarter, notably the growth of our U.S. and emerging markets, the continued strength of the commercial market segment and advanced technologies, and the balanced performance across most of our key product categories."

"The technology industry is being redefined as intelligence moves throughout the network," Chambers continued. "Not only is the network becoming the primary driver of IT, but it is also driving all forms of communications. Cisco anticipated this market evolution years ago, and today, we are seeing the benefits from our investments. We believe Cisco is uniquely positioned to enable the future of IT and communications."

Cisco will discuss third 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 $2.3 billion for the third quarter of fiscal 2006, compared with $1.9 billion for the third quarter of fiscal 2005, and compared with $1.9 billion for the second quarter of fiscal 2006.

* Cash and cash equivalents and investments were $18.2 billion at the end of the third quarter of fiscal 2006, compared with $16.1 billion at the end of the fourth quarter of fiscal 2005, and compared with $15.0 billion at the end of the second quarter of fiscal 2006.

* During the third quarter of fiscal 2006, Cisco repurchased 60 million shares of common stock at an average price of $20.34 per share for an aggregate purchase price of $1.2 billion. As of April 29, 2006, Cisco had repurchased and retired 1.8 billion shares of Cisco common stock at an average price of $18.21 per share for an aggregate purchase price of approximately $32.6 billion since the inception of the stock repurchase program.

* Days sales outstanding (DSO) in accounts receivable at the end of the third quarter of fiscal 2006 were 36 days, compared with 31 days at the end of the fourth quarter of fiscal 2005, and compared with 35 days at the end of the second quarter of fiscal 2006.

* Inventory turns on a GAAP basis were 7.7 in the third quarter of fiscal 2006, compared with 6.6 in the fourth quarter of fiscal 2005, and compared with 6.5 in the second quarter of fiscal 2006. Non-GAAP inventory turns were 7.4 in the third quarter of fiscal 2006, compared with 6.4 in the second quarter of fiscal 2006.

* During the third quarter of fiscal 2006, Cisco completed its debt offering of senior unsecured notes in an aggregate principal amount of $6.5 billion.

"Our third quarter results demonstrate another solid quarter of profitable growth," said Dennis Powell, chief financial officer, Cisco Systems, Inc. "With total revenue of $7.3 billion, up 12% year over year, excluding the impact of Scientific-Atlanta, $2.3 billion of cash generated from operations and strong earnings per share growth, we are pleased with how we are executing against our plan for long-term growth."

Powell continued, "We would like to congratulate the Scientific-Atlanta and Cisco teams on a successful combined first quarter of operations."

Business Highlights

* Cisco announced the Cisco Unified Communications system, a new suite of voice, data and video products and applications specifically designed to help organizations of all sizes communicate more effectively.
* Deutsche Telekom AG and Cisco announced that T-Online, a division of Deutsche Telekom, is driving growth of its "T-Home" triple-play service delivered over T-Com's broadband network. This network is based on the Cisco Internet Protocol Next-Generation Network (IP NGN) architecture.
* BT Group awarded a contract to Cisco for the supply of IP NGN technologies in the core and metro area network domains in BT's 21st Century Network.
* Cox Communications will standardize on Cisco IP Contact Center solutions to provide customer service and support to its subscribers.
* The Airport Authority Hong Kong deployed a Cisco Unified Wireless Network Solution to replace its existing installation, creating one of the world's largest airport wireless local area networks in terms of coverage and number of access points.
* Cisco announced it is working with Intel, Nokia, Research In Motion and other technology leaders to drive enterprise adoption of voice-ready wireless networks.

About Cisco Systems

Cisco Systems, Inc. (NASDAQ: CSCO) is the worldwide leader in networking for the Internet. Information about Cisco can be found at http://www.cisco.com. For ongoing news, visit http://newsroom.cisco.com.

Source: Cisco Systems

Source: Wired News