Cisco Systems Announces New Organizational Structure; Eleven Technology Groups Formed to Replace Line of Business Structure.

Business Editors/High-Tech Writers

SAN JOSE, Calif.--(BUSINESS WIRE)--Aug. 23, 2001

Further executing against its breakaway strategy and six-point business plan, Cisco Systems (Nasdaq:CSCO) today announced several organizational changes that align the company's focus around changing customer requirements and emphasize the company's advantages as the communications market consolidates. These changes include moving from the company's existing line of business structure to centralized engineering and marketing organizations. The new engineering organization will focus on 11 new technology groups, while marketing will focus on communicating Cisco's unique technology differentiation.

"At the heart of this change are our customer requirements and our clear market transition opportunity. Our line of business structure has served us very well in the past, when customer segments and product requirements were very distinct. Today, the differences have blurred between these customer segments and Cisco is in a unique position to provide the industry's broadest family of products united under a consistent architecture designed to help our customers improve productivity and profitability," said John Chambers, president and chief executive officer of Cisco Systems. "We are making these changes at a time when we are beginning to see signs that our business is stabilizing. Although we can't predict the future, our orders for the first weeks of this quarter are in line with the expectations we discussed in our fourth quarter earnings call."

Cisco also announced several executive changes related to the new organizational structure. Mario Mazzola, an eight-year Cisco veteran and former senior vice president of Cisco's new business ventures group, has been named chief development officer. Reporting directly to Chambers, Mazzola will oversee the 11 new technology groups that comprise Cisco's entire engineering organization. Charlie Giancarlo, formerly senior vice president of the commercial line of business, will run four of these technology groups and report directly to Mazzola. Michelangelo Volpi, who has played a key role as chief strategy officer, will take on a new operational role at Cisco. He will be in charge of the largest technology area, Internet Switching and Services, reporting to Mazzola. James Richardson, formerly senior vice president of the enterprise line of business, will run Cisco's marketing organization as chief marketing officer, reporting to Chambers.

Kevin Kennedy, formerly senior vice president of the service provider line of business, will be leaving Cisco to pursue external opportunities. Moving forward, Kennedy will be an industry and technical advisor to Cisco. During his eight years of leadership at Cisco, Kennedy has been responsible for leading Cisco's strategy to take advantage of the time-division multiplexing (TDM)-to-packet revolution in the service provider sector.

Commenting on the executive changes, Chambers noted, "I am very excited about these leaders. This new structure brings us even closer to our customers, encourages teamwork and eliminates product and resource overlaps," said Chambers. "Good teamwork requires a single point of decision-making to effectively share resources and allocate them to profitable growth areas. I also want to thank Kevin for his insights into the new organizational structure, and also congratulate him and his team for their accomplishments in areas such as access routers, VoIP excellence, high availability, and competitive positioning, just to name a few. We will all deeply miss Kevin, although we look forward to working with him in his role as industry and technology advisor."

Eleven Technology Groups

Cisco's transition from its three lines of businesses -- enterprise, service provider and commercial -- allows the company to focus specifically on the following technology areas:

--  Access                            --  Network Management Services
--  Aggregation                       --  Core Routing
--  Cisco IOS(R) Technologies         --  Optical
    Division (ITD)                    --  Storage
--  Internet Switching and Services   --  Voice
--  Ethernet Access                   --  Wireless

In 1997, Cisco organized around lines of business to address two major new market opportunities at that time: the service provider migration to IP services and the adoption of IP products by small and medium-sized businesses through channel distribution. The competitive landscape was characterized at that time by large service provider suppliers and by highly focused channel-oriented equipment suppliers. As evidenced by the dramatic growth achieved during Cisco's line of business structure -- from $6.4 billion in fiscal year 1997 to $22.3 billion in fiscal year 2001 -- this organizational strategy allowed the company to become the recognized leader in enterprise and service provider markets.

For a questions and answer with John Chambers, and further information please go to http://newsroom.cisco.com.

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.

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, 8-K, and 10-Q, 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, including risks associated with business and economic conditions and growth in the networking industry in various geographic regions; global economic conditions; overall information technology spending, especially service provider capital spending in the data or IP segments; variations in customer demand for products and services; 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 integrate and operate 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 and regulation; 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 and other matters; 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 twelve months ended July 28, 2001 are not necessarily indicative of Cisco's operating results for future periods.

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