Cisco Systems Purchases Equity Stake in Terayon Corp.; Agreement Marks Cisco's Third Recent Cable Data Infrastructure Announcement.

SAN JOSE, Calif.--(BUSINESS WIRE)--Jan. 15, 1996--Cisco Systems Inc. today announced an agreement to purchase an equity stake in privately held Terayon Corporation, an innovator in the fast-growing field of cable-based digital communications.

The investment is intended to accelerate the delivery of advanced technology and products to service providers who are exploring the use of cable television systems for Internet access, electronic commerce, education and other services such as special interest user groups. The companies did not release the financial terms of the equity relationship.

For its investment, Cisco will use Terayon's Synchronous Code Division Multiple Access technology (S-CDMA) and gain a seat on Terayon's board of directors. Cisco will also collaborate with Terayon on the design, manufacture and marketing of a Rhead-end" or high-capacity cable delivery system that incorporates Cisco's hardware and software expertise.

The use of Terayon's S-CDMA in this cooperative effort should result in an integrated cable-based digital communications module for Cisco products. S-CDMA has the potential to eliminate the Rupstream" barrier cable operators are experiencing in bringing cost-effective high-speed data (e.g., the Internet) and digital video communication support to Hybrid Fiber/Coax (HFC) networks.

Cable Market Shows Promise

Cable system operators are among the service providers exploring the growing deployment of residential high-speed networks, building off their existing network infrastructure and customer base. According to the National Cable Television Association, 96 percent of homes are passed by cable, and there are 61 million residential cable subscribers.

The investment in Terayon is Cisco's third announced activity in the area of high-speed data communications over cable systems. These actions are part of a strategy to diversify Cisco's offerings to the small office, home office and consumer markets. In November 1995, Cisco announced agreements with both Zenith and Toshiba/Time Warner. Cisco's announcement with Zenith concerned joint development of head-end and subscriber units for HFC systems. This non-exclusive agreement will help businesses sell into cable properties that use or plan to use Zenith modems. The development involves the porting of Cisco IOS(tm) software to the current Zenith HomeWorks(tm) Universal cable modem and a new modem under development.

Cisco IOS software is a sophisticated networking software suite that ensures robust, reliable internetworks by supporting both LAN and WAN protocols, optimizing WAN services and controlling internetwork access. The new Zenith modem will have spread-spectrum return path and VSB-16 modulation on the forward path and plans to have a prototype ready by the National Cable TV (NCTA) show in April. Toshiba Corporation announced Cisco will help it participate in a series of technical trials using a high-speed system for data transfers over cable networks in San Diego, Calif. The trials will run until the end of May 1996, and will be jointly conducted with Time Warner Cable's (TWC) San Diego Division.

Toshiba's trial system comprises all hardware and software required to operate the system, from the head-end and distribution hubs operated by CATV companies to a new generation of high-speed cable data modems developed by Toshiba and installed at the users' premises.

Corporate Background

Terayon Corporation is a leading innovator and manufacturer of innovative solutions for the rapidly growing market for high-speed data and voice communications over cable networks. The company, headquartered in Santa Clara, Calif., was founded in 1993 and has 45 employees. For more information about Terayon and its technology, call the company at [phone] ext. 321 or visit their World Wide Web site http://www.terayon.com.

Cisco Systems (NASDAQ: CSCO) is the leading global supplier of enterprise internetworking solutions, including routers, LAN and ATM switches, dial-up access servers and network management software. These products, integrated by the Cisco IOS (TM) software, link geographically dispersed LANs, WANs and IBM networks. Cisco news and product/service information are available at World Wide Web site http://www.cisco.com. Cisco is headquartered in San Jose, Calif.

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Note to Editors: Cisco IOS is a trademark of Cisco Systems, Inc. Cisco, Cisco Systems and the Cisco Systems logo are registered trademarks of Cisco Systems, Inc. All other trademarks, registered or otherwise, are the property of their respective holders.

CONTACT: Cisco Systems Inc.

Adam Stein, 408/526-7388

[e-mail]

or

Cunningham Communication, Inc.

Lisa Hempel (for Cisco), 408/764-0738

[e-mail]

or

Terayon Corporation

Tom Brigham, 408/345-9321 ext. 321

[e-mail]

or

White & Co.

Lisa Copass (for Terayon), 415/274-8119

[e-mail]