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Filed by Cisco Systems, Inc.
Pursuant to Rule 425 under the Securities Act of 1933 and
deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Cisco Systems, Inc.
Commission File No.: 000-18225
CONFERENCE CALL
ARROWPOINT COMMUNICATIONS
FRIDAY, MAY 5, 2000
6:00AM PDT
LARRY CARTER INTRODUCTION
- - Good morning everyone, and thank you for joining us this morning.
- - This is Larry Carter in San Jose with Kevin Kennedy, Senior Vice President
of our Service Provider Line of Business and Ammar Hanafi, Vice President,
Business Development. I would also like to introduce Cheng-Wu, the CEO of
ArrowPoint, who is joining us from Boston. Cheng-Wu will be participating in
the Q&A session.
- - This morning Cisco announced a definitive agreement to acquire publicly
traded ArrowPoint Communications of Acton, Massachusetts (NASDAQ: ARPT) for
approximately $5.7 billion in stock.
- - The purpose of the call this morning is to review the strategy and specifics
of the acquisition and to answer any questions in regards to the
announcement.
- - The press release went out at 5:00 a.m. Pacific Time this morning and is
available on First Call, National Business Wire and the European Business
and Technical Wire.
- - You can also find the press release on our Web page at www.cisco.com
- - The matters we will be discussing today may include forward-looking
statements, and as such are subject to the risks and uncertainties that we
discuss in detail in our documents filed with the SEC, specifically the most
recent reports on Form 10-K and 10-Q, which identify important risk factors
that could cause actual results to differ from those contained in the
forward-looking statements.
- - Unauthorized recording of this conference call is not permitted.
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- - The terms of the transaction are as follows:
- Under the terms of the ArrowPoint agreement, approximately 89.7 million
shares of Cisco common stock will be exchanged for all outstanding
shares and options of ArrowPoint.
- Based on Cisco's May 4, 2000 closing price of $63 5/8, the stock
exchanged would have a value of approximately $5.7 billion.
- 2.1218 Cisco shares will be exchanged for each ArrowPoint share or
option.
- The ArrowPoint acquisition will be accounted for as a pooling of
interests and is expected to close in the fourth quarter of Cisco's
fiscal year 2000 (Q4 FY00).
- The acquisition has been approved by the board of directors of both
companies and is subject to various closing conditions including
approval under the Hart-Scott-Rodino Antitrust Improvements Act and by
ArrowPoint's shareholders.
- - The acquisition will have a neutral impact on FY00 and we believe will
become slightly accretive in calendar year 2001.
- - I will now turn the call over to Ammar Hanafi, who will further discuss the
terms of the deal and the market. Kevin Kennedy will then outline the
technology and organization. We will then open the call for Q&A.
- - Ammar.
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AMMAR HANAFI
Cisco Positioning
- - Thanks Larry.
- - The acquisition of ArrowPoint, a provider of content switching products that
optimize the delivery of Web content, gives Cisco a broad portfolio of
content networking solutions, providing even more choices for Cisco
customers.
- - As you know from past calls, when we do acquisitions, we look for several
key criteria - such as a corporate culture and management chemistry that can
produce win-win results, a shared vision, a strong engineering team and the
potential for future market share and exciting next-generation products.
- - The ArrowPoint acquisition fits these criteria extremely well, with Cisco
and ArrowPoint sharing the vision of providing end-to-end, next generation
solutions for content networking.
Valuation
- - I'd like to spend a few minutes on valuation.
- - The networking industry and the Web switching market in particular are
subject to rapidly changing conditions including dynamic technological
innovation, shorter product cycles, increasing levels of competition and
evolving customer requirements.
- - Content switching has become increasingly important to Cisco as customer
demands for QoS, differentiated service, scalability, Web hosting and
e-commerce capabilities increase.
- - To date, Cisco has relied on internal development, partnerships, investments
and acquisitions in order to deliver a complete Content Networking solution.
The acquisition of ArrowPoint adds content switching, a key content
networking technology for our customers.
- - ArrowPoint completed its initial public offering on March 31, 2000. It was
not until after ArrowPoint completed their public offering that we were able
to seriously engage the company to discuss the possibility of a strategic
relationship between Cisco and ArrowPoint.
- - ArrowPoint provides a strong product platform and represents an explosive
market opportunity for content-based infrastructure solutions. Based on the
valuations of comparable companies, we believe that the valuation for
ArrowPoint is in-line with that of other companies in this sector.
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- - In addition, we believe that the premium paid for ArrowPoint's stock is
in-line with acquisition premiums being attained in the Internet
infrastructure sector and the technology sector in general.
More details on the deal:
<TABLE>
<CAPTION>
ARROWPOINT COMMUNICATIONS
-------------------------
<S> <C>
EMPLOYEES 337 (Sales = 176, engineering = 71, training/support =
(AS OF APRIL 27, 2000) marketing = 19, manufacturing = 13, Finance/HR/IS = 31)
LOCATION Acton, MA (neighboring Boxborough, MA)
CEO Chin-Cheng Wu (Lou Volpe, President)
REVENUES $12.4 million for year ended 12/31/99; $9.5 million for
quarter ended 3/31/00.
CUSTOMERS 225+ customers, incl. EMC, Exodus, Navisite, Road Runner
80 new customers in Q1'00
FORMED Public, founded in April 1997
RELOCATION ArrowPoint will remain in Acton, Massachusetts. Over
time, Cisco may integrate ArrowPoint with our other
Massachusetts site. Cisco will evaluate the appropriate
time frame for this relocation based on ArrowPoint's
and Cisco's needs going forward.
</TABLE>
- - I'll now turn the call over to Kevin to discuss the technology and
organizational aspects of the deal.
~ Kevin.
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KEVIN KENNEDY
- - Thanks, Ammar
Product/Technology Positioning
- - Content switching has become a critical element of the Internet business and
is increasingly important to our customers as they deploy content networking
solutions.
- - Whereas traditional switching relies on Layer 2 and Layer 3 information,
such as Ethernet and IP addresses, in order to route traffic, Content
switching focuses on delivering a new level of content networking services
by switching traffic based on higher layer information, namely Layer 4/
Layer 7.
- - Today's announcement is evidence that Cisco recognizes this trend and is
responding with an acquisition that gives us greater customer intimacy via a
team of people that have approached URL switching with a higher layer
implementation (a layer 7 software focus).
- - The acquisition of ArrowPoint gives Cisco a broad portfolio of content
networking solutions in the market today.
- - In addition, ArrowPoint's solutions strengthen Cisco's presence in emerging
markets that include ASPs (Application Service Provider), AIPs (Application
Infrastructure Provider) and "dot com" companies
- - ArrowPoint's advanced higher layer capabilities allow it to look deeper into
a data flow to switch traffic based on the content being requested, the
location of the content or the identity of the requestor. This signature
(layer 7) software functionality will be used as an ingredient element
across Cisco's product lines over time
- - The ArrowPoint platforms can provide both the functionality and flexibility
customers demand because of their unique combination of a software and
hardware-based architecture.
- - ArrowPoint's products include both large scale, chassis-based solutions
(CS-800) that meet the needs of the most demanding customers as well as
smaller, space-efficient solutions (CS-50 and CS-150) that meet the needs of
smaller customers, such as hosted or co-location customers.
- - ArrowPoint's products share the WebNS software platform which provides an
easy method of adding functionality and features through future software
upgrades. In addition, ArrowPoint's advanced software capabilities can be
leveraged across
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different Cisco product lines to meet the evolving needs of our diverse
customers.
- - ArrowPoint's products also complement the Cisco Catalyst family of high
performance multilayer switching products that are deployed in the
enterprise and service provider environments.
- - ArrowPoint has over 225 customers ranging from large service providers to
Web portals and e-commerce sites. ArrowPoint added 81 new customers during
its last quarter. Its current customer base includes EMC, Excite@Home,
Exodus, Global Crossing, Lycos, NaviSite and Road Runner. Approximately
two-third's of ArrowPoint's revenue is attributable to ISPs, hosting
companies and other service provider customers, with the remaining share
split between portals, e-commerce companies and other customers.
- - ArrowPoint has partnered with leading service providers, resellers,
technology partners and OEMs to help deliver its content switching
solutions. Current service provider partners include Exodus, GlobalCenter
and Navisite. Exodus has selected ArrowPoint as the preferred platform for
its co-location customers. In addition, ArrowPoint has 37 resellers licensed
to sell its products.
Organizational Details
- - In typical Cisco fashion, we do these transactions for the people, and in
the case of ArrowPoint, we are getting some very senior talent.
- - Prior to founding ArrowPoint, Cheng Wu, Chairman of the Board and Chief
Executive Officer, co-founded Arris Networks. When Cascade Communications
acquired Arris in May 1996, Wu served as Cascade's vice president for remote
access engineering. Wu has over 20 years of high-tech engineering and
management experience holding executive management positions at Xyplex,
Prime Computer/ Computervision.
- - From an organizational standpoint, the ArrowPoint organization will become
part of Cisco's Public Carrier IP Group within our Service Provider Line of
Business
- - Cheng Wu will continue to lead his team and will report directly to me.
- - ArrowPoint has a global reach, with over 60 sales teams in more than 20
countries. Its sales and support infrastructure along with its focus on
meeting the international requirements for its products, have given
ArrowPoint a global footprint to deliver content switching solutions.
- - ArrowPoint's sales force will continue to focus on selling its content
switching products and will be integrated in a similar fashion as we handled
the Cerent team.
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LARRY CARTER
Q & A
~ We will now open the call for questions from sell side analysts and
shareholders.
~ We request that you ask only one question.
~ Operator, please begin the Q & A.
Closing remarks
~ Thank you for your participation in today's call. If you have further
questions, please call a Cisco IR representative.
~ This concludes our call.
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Cisco Systems, Inc. ("Cisco") plans to file a Registration Statement on SEC Form
S-4 in connection with the merger and ArrowPoint Communications, Inc.
("ArrowPoint") expects to mail a Proxy Statement/Prospectus to its stockholders
containing information about the merger. Investors and security holders are
urged to read the Registration Statement and the Proxy Statement/Prospectus
carefully when they are available. The Registration Statement and the Proxy
Statement/Prospectus will contain important information about Cisco, ArrowPoint,
the merger and related matters. Investors and security holders will be able to
obtain free copies of these documents through the web site maintained by the
U.S. Securities and Exchange Commission at http//www.sec.gov.
In addition to the Registration Statement and the Proxy Statement/Prospectus,
Cisco and ArrowPoint file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements and other information filed by
Cisco and ArrowPoint at the SEC public reference rooms at 450 Fifth Street,
N.W., Washington, D.C. 20549 or at the Commission's other public reference rooms
in New York, New York and Chicago, Illinois. Please call the Commission at
1-800-SEC-0330 for further information on public reference rooms. Cisco's and
ArrowPoint's filings with the Commission also are available to the public from
commercial document-retrieval services and at the web site maintained by the
Commission at http//www.sec.gov.
ArrowPoint, its directors, executive officers and certain members of management
and employees may be soliciting proxies from ArrowPoint's stockholders in favor
of the adoption of the merger agreement. A description of any interests that
ArrowPoint's directors and executive officers have in the merger will be
available in the Proxy Statement/Prospectus.
This report may contain projections or other forward-looking statements
regarding future events or the future financial performance of Cisco and
ArrowPoint. These projections or statements are only predictions. Actual events
or results may differ materially from those in the projections or other
forward-looking statements set forth herein. Among the important factors that
could cause actual events to differ materially from those in the projections or
other forward-looking statements are potential fluctuations in quarterly
results, dependence on new product development, rapid technological and market
change, acquisition strategy, manufacturing and sourcing risks, risks associated
with the Internet infrastructure and regulation, volatility of stock price,
international operations, financial risk management, and future growth subject
to risks. Readers are referred to Cisco's Annual Report to Shareholders and
Cisco's and ArrowPoint's filings with the Securities and Exchange Commission,
including their most recent filings on Form 10-K and 10-Q, for a discussion of
these and other important risk factors concerning Cisco and ArrowPoint and their
respective operations.
