Cisco 2002 Annual Report Download - page 49

Cisco Systems, Inc. 2002 Annual Report 47
The following table presents net sales for groups of similar products and services (in millions):
Years Ended July 27, 2002 July 28, 2001 July 29, 2000
Net sales:
Routers $ 5,607 $ 7,179 $ 6,801
Switches 7,560 8,979 6,791
Access 980 1,855 2,205
Other 1,522 1,546 1,205
Product 15,669 19,559 17,002
Service 3,246 2,734 1,926
Total $18,915 $22,293 $18,928
The majority of the Company’s assets at July 27, 2002 and July 28, 2001 were attributable to its U.S. operations. In fiscal 2002,
2001, and 2000, no single customer accounted for 10% or more of the Company’s net sales.
13. Net Income (Loss) per Share
The following table presents the calculation of basic and diluted net income (loss) per share (in millions, except per-share amounts):
Years Ended July 27, 2002 July 28, 2001 July 29, 2000
Net income (loss) $ 1,893 $ (1,014) $ 2,668
Weighted-average shares—basic 7,301 7,196 6,917
Effect of dilutive potential common shares 146 – 521
Weighted-average shares—diluted 7,447 7,196 7,438
Net income (loss) per share—basic $ 0.26 $ (0.14) $ 0.39
Net income (loss) per share—diluted $ 0.25 $ (0.14) $ 0.36
Dilutive potential common shares consist of employee stock options and restricted common stock. The weighted-average
dilutive potential common shares, which were antidilutive for fiscal 2001, amounted to 348 million shares. Employee stock
options to purchase approximately 712 million shares in fiscal 2002 and 426 million shares in fiscal 2001 were outstanding,
but were not included in the computation of diluted earnings per share because the exercise price of the stock options was greater
than the average share price of the common shares and, therefore, the effect would have been antidilutive. The antidilutive
employee stock options were not material in fiscal 2000.
14. Subsequent Event
On August 19, 2002, Cisco entered into a definitive agreement to acquire privately held Andiamo Systems, Inc. (“Andiamo”). As
disclosed in Note 8, Cisco entered into agreements with Andiamo under which Cisco was granted the right to acquire Andiamo.
This definitive agreement represented Cisco’s exercise of this right. The acquisition of Andiamo is expected to close in the third
quarter of fiscal year 2004 (February to April 2004), but no later than July 31, 2004.
Under the terms of the agreement, common stock of Cisco will be exchanged for all outstanding shares and options of Andiamo
not owned by Cisco at the closing of the acquisition. The amount of the purchase price for the remaining equity interests in
Andiamo not then held by Cisco is not determinable at this time, but will be based primarily upon a valuation of Andiamo to
be determined by applying a multiple to the actual, annualized revenue generated from sales by Cisco of products attributable to
Andiamo during a three-month period shortly preceding the closing. Under its agreements with Andiamo, Cisco is the exclusive
manufacturer and distributor of all Andiamo products. The multiple will be equal to Cisco’s average market capitalization during
a specified period divided by Cisco’s annualized revenue for a three-month period prior to closing, subject to adjustment as follows:
(i) if the multiple so calculated is less than 10, then the multiple to be used for purposes of determining the transaction price shall
be the midpoint between 10 and the multiple so calculated; (ii) if the multiple so calculated is greater than 15, then the multiple
to be used for purposes of determining the transaction price shall be the midpoint between 15 and the multiple so calculated. There
is no minimum purchase price, and the maximum purchase price is limited to approximately $2.5 billion in shares of Cisco common
stock valued at the time of closing.
The acquisition has received the required approvals from both companies and is subject to various closing conditions and
approvals, including stockholder approval by Andiamo. In connection with this acquisition, Cisco filed a Current Report on Form 8-K.