<SUBMISSION>
<ACCESSION-NUMBER>0000891618-03-001007
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>3
<PERIOD>20030125
<FILING-DATE>20030224
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>CISCO SYSTEMS INC
<CIK>0000858877
<ASSIGNED-SIC>3576
<IRS-NUMBER>770059951
<STATE-OF-INCORPORATION>CA
<FISCAL-YEAR-END>0731
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>000-18225
<FILM-NUMBER>03576702
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>170 WEST TASMAN DR
<CITY>SAN JOSE
<STATE>CA
<ZIP>95134-1706
<PHONE>4085264000
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>225 WEST TASMAN DR
<CITY>SAN JOSE
<STATE>CA
<ZIP>95134-1706
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>f87804e10vq.htm
<DESCRIPTION>FORM 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>Cisco Systems, Inc. Dated 1/25/2003</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

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<HR size="1" noshade color="#000000" style="margin-top: -10px">






<P align="center"><FONT size="4"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B></FONT>

<DIV align="center"><FONT size="3"><B>WASHINGTON, D.C. 20549</B>
</FONT>
</DIV>

<P align="center"><FONT size="5"><B>FORM 10-Q</B></FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" COLSPAN="3"><FONT size="2"><B>(Mark one)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B><FONT face="wingdings">x</FONT></B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="CENTER" valign="top"><FONT size="2">
<B>For the quarterly period ended January&nbsp;25, 2003</B></FONT></TD>
</TR>

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    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="CENTER" valign="top"><FONT size="2">
<B>OR</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B><FONT face="wingdings">o</FONT></B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

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    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="CENTER" valign="top"><FONT size="2">
<B>For the transition period from
<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u> to
<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2"><B>Commission file number 0-18225</B></FONT>

<P align="center"><FONT size="6"><B>CISCO SYSTEMS, INC.</B></FONT>

<DIV align="center"><FONT size="2"><B>(Exact name of Registrant as specified in its charter)</B>
</FONT>
</DIV>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD ALIGN="CENTER" valign="top"><FONT size="2"><B>California<br>
(State or other jurisdiction of<BR>
incorporation or organization)</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="CENTER" valign="top"><FONT size="2">
<B>77-0059951<BR>
(I.R.S. Employer<BR>
Identification Number)</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2"><B>170 West Tasman Drive<BR>
San Jose, California 95134<BR>
(Address of principal executive office and zip code)</B></FONT>

<P align="center"><FONT size="2"><B>(408)&nbsp;526-4000<BR>
(Registrant&#146;s telephone number, including area code)</B></FONT>

<P align="left"><FONT size="2">Indicate by check mark whether the Registrant (1)&nbsp;has filed all reports
required to be filed by Section&nbsp;13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12&nbsp;months (or for such shorter period that the
Registrant was required to file such reports), and (2)&nbsp;has been subject to
filing requirements for the past 90&nbsp;days.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><FONT size="2">YES <FONT face="wingdings">x</FONT></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top"><FONT size="2">
NO <FONT face="wingdings">o</FONT></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule&nbsp;12b-2 of the Exchange Act).
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><FONT size="2">YES <FONT face="wingdings">o</FONT></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top"><FONT size="2">
NO <FONT face="wingdings">x</FONT></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">As of February&nbsp;19, 2003, 7,111,864,780 shares of the Registrant&#146;s common stock
were outstanding.
</FONT>
<P>
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<HR size="4" noshade color="#000000" style="margin-top: -10px">






<P align="center"><FONT size="2">&nbsp;</FONT>
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<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
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</TR>
<TR><TD colspan="9"><A HREF="#000">PART I. FINANCIAL INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">Item&nbsp;1. Financial Statements (Unaudited)</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#002"> Consolidated Statements of Operations for the three and six months ended January 25, 2003 and January 26, 2002</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#003"> Consolidated Balance Sheets at January 25, 2003 and July 27, 2002</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#004"> Consolidated Statements of Cash Flows for the six months ended January 25, 2003 and January 26, 2002</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#005"> Consolidated Statements of Shareholders' Equity for the six months ended January 25, 2003 and January 26, 2002</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006"> Notes to Consolidated Financial Statements</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#007">Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008">Item 3. Quantitative and Qualitative Disclosures About Market Risk</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#009">Item 4. Controls and Procedures</A></TD></TR>
<TR><TD colspan="9"><A HREF="#010">PART II. OTHER INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#011">Item 1. Legal Proceedings</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012">Item 2. Changes in Securities and Use of Proceeds</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#013">Item 4. Submission of Matters to a Vote of Security Holders</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#014">Item 6. Exhibits and Reports on Form 8-K</A></TD></TR>
<TR><TD colspan="9"><A HREF="#015">SIGNATURE</A></TD></TR>
<TR><TD colspan="9"><A HREF="f87804exv99w1.htm">EXHIBIT 99.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="f87804exv99w2.htm">EXHIBIT 99.2</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>






<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>FORM 10-Q for the Quarter Ended January&nbsp;25, 2003</B></FONT>

<P align="center"><FONT size="2"><B>INDEX</B></FONT>

<CENTER>
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<TR valign="bottom">
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    <TD width="5%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Page</B></FONT></TD>
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    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">Part I</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Financial Information</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Item&nbsp;1.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Financial Statements (Unaudited)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Consolidated Statements of Operations for the three and six months
ended January&nbsp;25, 2003 and January&nbsp;26,&nbsp;2002
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">3</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Consolidated Balance Sheets at January&nbsp;25, 2003 and July&nbsp;27,
2002
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">4</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Consolidated Statements of Cash Flows for the six months ended January&nbsp;25, 2003 and January&nbsp;26, 2002
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">5</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Consolidated Statements of Shareholders&#146; Equity for the six
months ended January&nbsp;25, 2003 and January&nbsp;26,&nbsp;2002
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">6</FONT></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Notes to Consolidated Financial Statements
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">7</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Item&nbsp;2.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">28</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">Item&nbsp;3.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Quantitative and Qualitative Disclosures About Market Risk
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">61</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Item&nbsp;4.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Controls and Procedures
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">62</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">Part II</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Other Information</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Item&nbsp;1.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Legal Proceedings
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">62</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">Item&nbsp;2.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Changes in Securities and Use of Proceeds
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">63</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Item&nbsp;4.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Submission of Matters to a Vote of Security Holders
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">63</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">Item&nbsp;6.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Exhibits and Reports on Form&nbsp;8-K
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">64</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Signature
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">65</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">2</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "PART I. FINANCIAL INFORMATION" -->
<DIV align="left"><A NAME="000"></A></DIV>
<P align="LEFT"><FONT size="2"><B>PART I. FINANCIAL INFORMATION</B></FONT>

<!-- link1 "Item&nbsp;1. Financial Statements (Unaudited)" -->
<DIV align="left"><A NAME="001"></A></DIV>
<P align="LEFT"><FONT size="2"><B>Item&nbsp;1. Financial Statements</B></FONT>

<!-- link2 " Consolidated Statements of Operations for the three and six months ended January 25, 2003 and January 26, 2002" -->
<DIV align="left"><A NAME="002"></A></DIV>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.<BR>
CONSOLIDATED STATEMENTS OF OPERATIONS<BR>
(In millions, except per-share amounts)<BR>
(Unaudited)</B></FONT>

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    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
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    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

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    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Three Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">NET SALES:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Product</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,022</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Services</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,654</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,586</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total net sales</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">COST OF SALES:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Product</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,381</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Services</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">253</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">502</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">509</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total cost of sales</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,846</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,883</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,602</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">GROSS MARGIN</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,317</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,675</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,662</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OPERATING EXPENSES:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Research and development</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">826</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">862</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,650</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,779</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Sales and marketing</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,071</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,073</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,167</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">General and administrative</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">299</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amortization of purchased intangible assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">78</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">136</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">In-process research and development</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total operating expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,217</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,564</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OPERATING INCOME</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">753</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,432</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,098</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">353</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">467</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other loss, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(51</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(54</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(526</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(976</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">INCOME BEFORE PROVISION FOR INCOME TAXES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">932</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">589</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Provision for income taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">272</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">650</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">197</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">NET INCOME</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">991</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income per share&#151;basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income per share&#151;diluted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shares used in per-share calculation&#151;basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,187</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,217</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shares used in per-share calculation&#151;diluted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,286</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,496</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,307</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2">See Notes to Consolidated Financial Statements</FONT>

<P align="center"><FONT size="2">3</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<!-- link2 " Consolidated Balance Sheets at January 25, 2003 and July 27, 2002" -->
<DIV align="left"><A NAME="003"></A></DIV>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.<BR>
CONSOLIDATED BALANCE SHEETS<BR>
(In millions, except par value)<BR>
(Unaudited)</B></FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>July 27,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">ASSETS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current assets:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9,484</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Short-term investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,523</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,172</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts receivable, net of allowance for doubtful accounts</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">of $317 at January&nbsp;25, 2003 and $335 at July&nbsp;27, 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,107</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inventories</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">880</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred tax assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,116</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,030</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Lease receivables, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">175</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">239</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prepaid expenses and other current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">523</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,289</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,433</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,661</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property and equipment, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,890</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,102</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Goodwill</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,717</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,565</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchased intangible assets, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">606</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">797</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Lease receivables, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">TOTAL ASSETS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">37,346</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">37,795</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">LIABILITIES AND SHAREHOLDERS&#146; EQUITY</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current liabilities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">518</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income taxes payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">773</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">579</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrued compensation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,251</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,365</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred revenue</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,920</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,143</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other accrued liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,280</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,496</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restructuring liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">322</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">322</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,064</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred revenue</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">817</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">749</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Commitments and contingencies (Note 6)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Minority interest</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shareholders&#146; equity:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Preferred stock, no par value: 5 shares authorized;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">none issued and outstanding</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Common stock and additional paid-in capital, $0.001 par value:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">20,000 shares authorized; 7,150 and 7,303 shares issued and</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">outstanding at January&nbsp;25, 2003 and July&nbsp;27, 2002, respectively</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Retained earnings</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,346</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,733</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accumulated other comprehensive income (loss)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">295</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(27</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total shareholders&#146; equity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28,455</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28,656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">TOTAL LIABILITIES AND SHAREHOLDERS&#146; EQUITY</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">37,346</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">37,795</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">See Notes to Consolidated Financial Statements</FONT>

<P align="center"><FONT size="2">4</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<!-- link2 " Consolidated Statements of Cash Flows for the six months ended January 25, 2003 and January 26, 2002" -->
<DIV align="left"><A NAME="004"></A></DIV>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.<BR>
CONSOLIDATED STATEMENTS OF CASH FLOWS<BR>
(In millions)<BR>
(Unaudited)</B></FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="5"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash flows from operating activities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adjustments to reconcile net income to net cash</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">provided by operating activities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">783</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">935</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Provision for doubtful accounts</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">76</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Provision for (benefit from) inventory</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred income taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(103</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(445</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tax benefits from employee stock option plans</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">In-process research and development</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net (gains)&nbsp;losses on investments and provision for losses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">509</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,014</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in operating assets and liabilities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts receivable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(78</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">256</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inventories</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prepaid expenses and other current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(55</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(273</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income taxes payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(79</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrued compensation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(114</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">356</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred revenue</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(155</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other accrued liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(134</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(110</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restructuring liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(108</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>


<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,426</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,391</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="5"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash flows from investing activities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchases of short-term investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,312</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,762</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from sales and maturities of short-term investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,173</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchases of investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8,356</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8,441</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from sales and maturities of investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchases of restricted investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(61</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from sales and maturities of restricted investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Acquisition of property and equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(341</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(482</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Acquisition of businesses, net of cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in lease receivables, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">202</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchases of investments in privately held companies</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(88</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(37</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Lease deposits</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(73</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase of minority interest of Cisco Systems, K.K. (Japan)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(59</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(65</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(43</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,589</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,704</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="5"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash flows from financing activities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Issuance of common stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">231</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Repurchase of common stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,552</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(601</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in financing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,308</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(223</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="5"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net (decrease)&nbsp;increase in cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,471</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">464</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="5"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents, beginning of period</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,484</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,873</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="5"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents, end of period</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,337</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">See Notes to Consolidated Financial Statements</FONT>

<P align="center"><FONT size="2">5</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<!-- link2 " Consolidated Statements of Shareholders' Equity for the six months ended January 25, 2003 and January 26, 2002" -->
<DIV align="left"><A NAME="005"></A></DIV>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.<BR>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS&#146; EQUITY<BR>
(In millions)<BR>
(Unaudited)</B></FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Common Stock</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Accumulated</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>and</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Other</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="LEFT" colspan="2"><FONT size="1"><B>Six Months</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Shares of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Additional</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Retained</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Comprehensive</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Shareholders'</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="LEFT" colspan="2"><FONT size="1"><B>Ended January 26, 2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Common Stock</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Paid-In Capital</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Earnings</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Income (Loss)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Equity</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BALANCE AT JULY 28, 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,324</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">20,051</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,344</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(275</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">27,120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in unrealized gains and losses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">on investments, net of tax</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Comprehensive income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">961</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Issuance of common stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">384</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Repurchase of common stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(40</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(111</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(490</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(601</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tax benefits from employee stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">option plans</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase acquisitions</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amortization of deferred stock-based</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">compensation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">102</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">102</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BALANCE AT JANUARY 26, 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,335</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">20,603</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">294</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">28,143</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Common Stock</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Accumulated</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>and</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Other</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="LEFT" colspan="2"><FONT size="1"><B>Six Months</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Shares of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Additional</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Retained</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Comprehensive</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Shareholders'</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="LEFT" colspan="2"><FONT size="1"><B>Ended January 25, 2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Common Stock</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Paid-In Capital</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Earnings</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Income (Loss)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Equity</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BALANCE AT JULY 27, 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,303</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">20,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,733</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(27</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">28,656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in unrealized gains and losses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">on investments, net of tax</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Comprehensive income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Issuance of common stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">231</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">231</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Repurchase of common stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(193</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(556</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,996</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,552</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Tax benefits from employee stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">option plans</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase acquisitions</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amortization of deferred stock-based</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">compensation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">78</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">78</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BALANCE AT JANUARY 25, 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,150</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">20,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,346</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">295</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">28,455</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">See Notes to Consolidated Financial Statements</FONT>

<P align="center"><FONT size="2">6</FONT>
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<!-- link2 " Notes to Consolidated Financial Statements" -->
<DIV align="left"><A NAME="006"></A></DIV>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2"><B>1. Description of Business</B></FONT>

<P align="left"><FONT size="2">Cisco Systems, Inc. (the &#147;Company&#148; or &#147;Cisco&#148;) manufactures and sells
networking and communications products and provides services associated with
that equipment and its use. Its products are installed at corporations, public
institutions, and telecommunication companies, and are also found in small and
medium-sized commercial enterprises. Cisco provides a broad line of products
for transporting data, voice, and video within buildings, across campuses, or
around the world.
</FONT>
<P align="left"><FONT size="2"><B>2. Summary of Significant Accounting Policies</B></FONT>

<P align="left"><FONT size="2"><I>Fiscal Year</I></FONT>

<P align="left"><FONT size="2">The Company&#146;s fiscal year is the 52- or 53-week period ending on the last
Saturday in July. Fiscal 2003 and 2002 are 52-week fiscal years.
</FONT>
<P align="left"><FONT size="2"><I>Basis of Presentation</I></FONT>

<P align="left"><FONT size="2">The accompanying financial data as of January&nbsp;25, 2003 and for the three and
six months ended January&nbsp;25, 2003 and January&nbsp;26, 2002 has been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The July&nbsp;27, 2002 Consolidated Balance Sheet was derived from
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles. However, the Company believes that
the disclosures are adequate to make the information presented not misleading.
These Consolidated Financial Statements should be read in conjunction with the
Consolidated Financial Statements and the notes thereto included in the
Company&#146;s Annual Report on Form&nbsp;10-K, as amended, for the fiscal year ended
July&nbsp;27, 2002.
</FONT>
<P align="left"><FONT size="2">In the opinion of management, all adjustments (which include normal recurring
adjustments except as disclosed herein) necessary to present a fair statement
of financial position as of January&nbsp;25, 2003, results of operations, cash flows
and shareholders&#146; equity for the three and six months ended January&nbsp;25, 2003
and January&nbsp;26, 2002, as applicable, have been made. The results of operations
for the three and six months ended January&nbsp;25, 2003 are not necessarily
indicative of the operating results for the full fiscal year or any future
periods.
</FONT>
<P align="left"><FONT size="2"><I>Employee Stock Options</I></FONT>

<P align="left"><FONT size="2">The Company accounts for stock-based awards to employees and directors using
the intrinsic value method of accounting in accordance with Accounting
Principles Board Opinion No.&nbsp;25 &#147;Accounting for Stock Issued to Employees&#148;
(&#147;APB 25&#148;). Under the intrinsic value method,</FONT>

<P align="center"><FONT size="2">7</FONT>
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</FONT>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2">because the exercise price of
the Company&#146;s employee stock options equals the market price of
the underlying stock on the date of grant, no compensation expense is
recognized in the Company&#146;s Consolidated Statements of Operations.
</FONT>
<P align="left"><FONT size="2">The Company is required under Statement of Financial Accounting Standards No.
123, &#147;Accounting for Stock-Based Compensation&#148; (&#147;SFAS 123&#148;), to disclose pro
forma information regarding option grants made to its employees based on
specified valuation techniques that produce estimated compensation charges.
</FONT>
<P align="left"><FONT size="2"><I>Computation of Net Income per Share</I></FONT>

<P align="left"><FONT size="2">Basic net income per share is computed using the weighted-average number of
common shares outstanding during the period. Diluted net income per share is
computed using the weighted-average number of common shares and dilutive
potential common shares outstanding during the period. Dilutive potential
common shares consist of employee stock options and restricted common stock.
</FONT>
<P align="left"><FONT size="2"><I>Recent Accounting Pronouncements</I></FONT>

<P align="left"><FONT size="2"><I>Costs Associated with Exit or Disposal Activities</I></FONT>

<P align="left"><FONT size="2">Statement of Financial Accounting Standards No.&nbsp;146, &#147;Accounting for Costs
Associated with Exit or Disposal Activities&#148; (&#147;SFAS 146&#148;), was issued in June
2002. SFAS 146 requires that a liability for costs associated with an exit or
disposal activity be recognized and measured initially at fair value only when
the liability is incurred. SFAS 146 is effective for exit or disposal
activities that were initiated after December&nbsp;31, 2002. The adoption of SFAS
146 did not have a material impact on the Company&#146;s operating results or
financial position.
</FONT>
<P align="left"><FONT size="2"><I>Guarantor&#146;s Accounting and Disclosure Requirements for Guarantees</I></FONT>

<P align="left"><FONT size="2">Financial Accounting Standards Board Interpretation No.&nbsp;45, &#147;Guarantor&#146;s
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others&#148; (&#147;FIN 45&#148;), was issued in November 2002.
FIN 45 requires that upon issuance of a guarantee, the guarantor must disclose
and recognize a liability for the fair value of the obligation it assumes under
that guarantee. The initial recognition and measurement requirement of FIN 45
is effective for guarantees issued or modified after December&nbsp;31, 2002. As of
January&nbsp;25, 2003, the Company&#146;s guarantees that were issued or modified after
December&nbsp;31, 2002 were not material. The disclosure requirements of FIN 45 are
effective for interim and annual periods ending after December&nbsp;15, 2002, and
are applicable to the Company&#146;s product warranty liability and certain
guarantees issued before December&nbsp;31, 2002. As of January&nbsp;25, 2003 and July
27, 2002, the Company&#146;s product warranty liability was $240&nbsp;million and $242
million, respectively (See Note 6 to the Consolidated Financial Statements.)
The Company&#146;s guarantees issued before December&nbsp;31, 2002, which would have been
disclosed in accordance with the disclosure requirements of FIN 45, were not
material.
</FONT>
<P align="center"><FONT size="2">8</FONT>
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<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2"><I>Consolidation of Variable Interest Entities</I></FONT>

<P align="left"><FONT size="2">Financial Accounting Standards Board Interpretation No.46, &#147;Consolidation of
Variable Interest Entities&#148; (&#147;FIN 46&#148;), was issued in January 2003. FIN 46
requires that if an entity has a controlling financial interest in a variable
interest entity, the assets, liabilities and results of activities of the
variable interest entity should be included in the consolidated financial
statements of the entity. FIN 46 requires that its provisions are effective
immediately for all arrangements entered into after January&nbsp;31, 2003. The
Company does not have any variable interest entities created after January&nbsp;31,
2003. For those arrangements entered into prior to January&nbsp;31, 2003, the FIN
46 provisions are required to be adopted at the beginning of the first interim
or annual period beginning after June&nbsp;15, 2003.
</FONT>
<P align="left"><FONT size="2">The Company is evaluating its debt investment in Andiamo Systems, Inc.
(&#147;Andiamo&#148;), which may be considered to be a variable interest entity under FIN
46. As a result, the Company may be required to consolidate Andiamo in its
consolidated financial statements beginning in the first quarter of the
Company&#146;s fiscal 2004. The Company has expensed its entire investment in
Andiamo as research and development costs, as if such expenses constituted the
development costs of the Company. Such costs recorded by the Company are in
excess of the operating losses recognized by Andiamo in its financial
statements from inception to date. Such costs do not consider the impact of
any potential non-cash stock compensation charges as the Financial Accounting
Standards Board is currently addressing the accounting and reporting
requirements related to this specific consideration. Excluding these potential
non-cash stock compensation charges, the impact of consolidation will not
materially affect the Company&#146;s financial results.
</FONT>
<P align="left"><FONT size="2">The nature of Cisco&#146;s debt
investment in Andiamo and other related disclosures is included in Note 6 to
the Consolidated Financial Statements.
</FONT>
<P align="left"><FONT size="2"><I>Accounting for Stock-Based Compensation</I></FONT>

<P align="left"><FONT size="2">Statement of Financial Accounting Standards No.&nbsp;148, &#147;Accounting for
Stock-Based Compensation &#151; Transition and Disclosure an Amendment of FASB
Statement No.&nbsp;123&#148; (&#147;SFAS 148&#148;), was issued in December 2002. SFAS 148 amends
SFAS 123 to provide alternative methods of transition for a voluntary change to
the fair value-based method of accounting for stock-based employee
compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS
123 to require more prominent disclosures in both annual and interim financial
statements regarding the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
alternative methods of transition of SFAS 148 are effective for fiscal years
ending after December&nbsp;15, 2002. The disclosure provision of SFAS 148 is
effective for interim periods beginning after December&nbsp;15, 2002. The Company
follows APB 25 in accounting for its employee stock options. The Company does
not expect the adoption of SFAS 148 to have a material impact on its operating
results or financial position.
</FONT>
<P align="center"><FONT size="2">9</FONT>
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<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2"><I>Reclassifications</I></FONT>

<P align="left"><FONT size="2">Certain reclassifications have been made to prior period balances in order to
conform to the current period presentation.
</FONT>
<P align="left"><FONT size="2"><B>3. Business Combinations</B></FONT>

<P align="left"><FONT size="2">During the first quarter of fiscal 2003, the Company completed the acquisition
of AYR Networks, Inc. to augment the continued evolution of Cisco IOS&#174;
Software, the network systems software for the Company&#146;s routing and switching
platforms. During the second quarter of fiscal 2003, the Company completed the
acquisition of Psionic Software, Inc. to complement its continued development
of network security software in the vulnerability assessment and management
security services areas. A summary of the purchase acquisitions completed in
the first six months of fiscal 2003 is summarized as follows (in millions):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Consideration</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Purchased</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Including Assumed</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>In-Process</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Intangible</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="LEFT" colspan="2"><FONT size="1"><B>Acquired Company</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Shares Issued</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Liabilities</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>R&#038;D Expense</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Goodwill</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Assets</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">AYR Networks, Inc.</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">59</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Psionic Software, Inc.</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">67</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The purchase prices of both acquisitions were also allocated to tangible assets
and deferred stock-based compensation.
</FONT>
<P align="left"><FONT size="2">As of January&nbsp;25, 2003 and July&nbsp;27, 2002, the Company&#146;s total remaining
unamortized deferred stock-based compensation was $129&nbsp;million and $182
million, respectively, and was reflected as a debit to additional paid-in
capital in the Consolidated Statements of Shareholders&#146; Equity for all
acquisitions to date. Deferred stock-based compensation represents the
intrinsic value of the unvested portion of the restricted shares exchanged or
options assumed and is amortized as compensation cost over the remaining future
vesting period of the restricted shares exchanged or stock options assumed of
each acquired company. In the first six months of fiscal 2003, the additional
deferred stock-based compensation net of canceled unvested options was $25
million. In addition, in the first six months of fiscal 2003, the amortization
of deferred stock-based compensation was $78&nbsp;million.
</FONT>
<P align="left"><FONT size="2">The Company&#146;s methodology for allocating the purchase price to in-process
research and development (&#147;in-process R&#038;D&#148;) is determined through established
valuation techniques in the high-technology communications equipment industry
and expensed upon acquisition because technological feasibility has not been
established and no future alternative uses exist. Total in-process R&#038;D expense
for the first six months of fiscal 2003 and 2002 was $0 and $37&nbsp;million,
respectively. The in-process R&#038;D expense that was attributable to stock
consideration for the first six months of fiscal 2002 was $25&nbsp;million.
</FONT>
<P align="center"><FONT size="2">10</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2">The Consolidated Financial Statements include the operating results of each
business from the date of acquisition. Pro forma results of operations have
not been presented because the effects of these acquisitions were not material
on either an individual or aggregate basis to the Company&#146;s results.
</FONT>
<P align="left"><FONT size="2">During the first six months of fiscal 2003, the Company issued approximately
2.7&nbsp;million shares of common stock with a value of $39&nbsp;million to the former
shareholders of AuroraNetics, Inc. as a result of the achievement of certain
agreed-upon milestones. Such amounts were allocated to goodwill and deferred
stock-based compensation totaling $31&nbsp;million and $8&nbsp;million, respectively. The
Company may also be required to issue up to an additional 2.7&nbsp;million shares of
common stock to such former shareholders under the terms of the definitive
acquisition agreement if certain other agreed-upon milestones are achieved.
</FONT>
<P align="left"><FONT size="2">The following tables present details of the Company&#146;s total purchased
intangible assets (in millions):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Accumulated</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="LEFT" colspan="2"><FONT size="1"><B>January 25, 2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Gross</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Amortization</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Net</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Technology</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">737</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(373</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">364</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Technology licenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">523</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(382</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Patents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">115</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(58</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">135</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(91</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,510</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(904</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">606</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Accumulated</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="LEFT" colspan="2"><FONT size="1"><B>July 27, 2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Gross</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Amortization</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Net</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Technology</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">893</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(429</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">464</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Technology licenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">523</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(323</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Patents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(54</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">135</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(76</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">59</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,679</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(882</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">797</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">11</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2">The estimated future amortization expense of purchased intangible assets as of
January&nbsp;25, 2003 is as follows (in millions):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="81%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="LEFT" colspan="2"><FONT size="1"><B>Fiscal Year:</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Amount</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2003 (remaining six months)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2004</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">236</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2005</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2006</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2007</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">606</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The following table presents the changes in goodwill allocated to the Company&#146;s
reportable segments during the first six months of fiscal 2003 (in millions):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Balance at</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Balance at</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>July 27,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Acquired</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Americas</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,335</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,379</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">EMEA</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">624</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asia Pacific</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">140</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Japan</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">497</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">65</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,565</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,717</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">In the first six months of fiscal 2003, the Company purchased a portion of the
minority interest of Cisco Systems, K.K. (Japan). As a result, the Company
increased its ownership from 92.4% to 94.8% of the voting rights of Cisco
Systems, K.K. (Japan) and recorded goodwill of $54&nbsp;million.
</FONT>
<P align="center"><FONT size="2">12</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2"><B>4. Restructuring Costs and Other Special Charges</B></FONT>

<P align="left"><FONT size="2">On April&nbsp;16, 2001, the Company announced a restructuring program, which
included a worldwide workforce reduction, consolidation of excess facilities,
and restructuring of certain business functions. The following table summarizes
the activity related to the liability for restructuring costs and other special
charges as of January&nbsp;25, 2003 (in millions):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Consolidation of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Impairment of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Excess Facilities</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Goodwill</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Workforce</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>and</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>and Purchased</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Reduction</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Other Charges (3)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Intangible Assets</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Initial charge in third quarter of fiscal 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">397</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">484</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">289</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Noncash charges</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(71</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(141</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(289</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(501</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash payments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(265</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(18</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(283</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance at July&nbsp;28, 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">325</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">386</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adjustments (1)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(35</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">93</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash payments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(26</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(131</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(157</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance at July&nbsp;27, 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">322</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">322</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adjustments (2)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(40</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(40</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash payments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance at January&nbsp;25, 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">322</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">322</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Note 1: Due to changes in previous estimates, in fiscal 2002, the Company
reclassified $35&nbsp;million of restructuring liabilities related to the workforce
reduction charges to consolidation of excess facilities and other charges. The
initial estimated workforce reduction was approximately 6,000 regular
employees. Approximately 5,400 regular employees have been terminated and the
liability has been paid. In addition, during the third quarter of fiscal 2002,
the Company increased the restructuring liabilities related to the
consolidation of excess facilities and other charges by $93&nbsp;million due to
changes in real estate market conditions. The increase in restructuring
liabilities was recorded as research and development ($39&nbsp;million), sales and
marketing ($42&nbsp;million), general and administrative ($8&nbsp;million) expenses and
cost of sales ($4&nbsp;million) in the Consolidated Statements of Operations.
</FONT>
<P align="left"><FONT size="2">Note 2: During the first six months of fiscal 2003, the Company increased the
restructuring liabilities related to the consolidation of excess facilities and
other charges by $40&nbsp;million, which was recorded during the first quarter of
fiscal 2003, due to changes in real estate market conditions. The increase in
restructuring liabilities was recorded as research and development ($16
million), sales and marketing ($16&nbsp;million), general and administrative ($4
million) expenses and cost of sales ($4&nbsp;million) in the Consolidated Statements
of Operations.
</FONT>
<P align="left"><FONT size="2">Note 3: Amounts related to the net lease expense due to the consolidation of
excess facilities will be paid over the respective lease terms through fiscal
2010.
</FONT>
<P align="center"><FONT size="2">13</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2"><B>5. Balance Sheet Details</B></FONT>

<P align="left"><FONT size="2">The following tables provide details of selected balance sheet items (in
millions):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>July 27,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><I>Inventories:</I></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Raw materials</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Work in process</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">297</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Finished goods</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">434</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Demonstration systems</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">880</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><I>Property and equipment, net:</I></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Land, buildings, and leasehold improvements</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,364</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,352</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Computer equipment and related software</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,097</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,021</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Production, engineering, and other equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,206</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,061</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Operating lease assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Furniture and fixtures</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">360</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">366</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,305</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Less, accumulated depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,676</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,203</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,890</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,102</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><I>Other assets:</I></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Deferred tax assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,488</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,663</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Investments in privately held companies</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">515</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Income tax receivable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Structured loans, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">373</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">466</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><I>Deferred revenue:</I></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Services</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,315</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,207</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Product</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,685</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,737</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,892</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:30px; text-indent:-10px"><FONT size="2">Less, current portion</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(2,920</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,143</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Non-current deferred revenue</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">817</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">749</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">14</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2"><B>6. Commitments and Contingencies</B></FONT>

<P align="left"><FONT size="2"><I>Leases</I></FONT>

<P align="left"><FONT size="2">The Company leases office space in several U.S. locations, as well as locations
elsewhere in the Americas International; Europe, the Middle East, and Africa
(&#147;EMEA&#148;); Asia Pacific; and Japan. Future annual minimum lease payments under
all noncancelable operating leases with an initial term in excess of one year
as of January&nbsp;25, 2003 were as follows (in millions):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="LEFT" colspan="2"><FONT size="1"><B>Fiscal Year:</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Amount</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2003 (remaining six months)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2004</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2005</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">225</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2006</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">173</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2007</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">137</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Thereafter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">755</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><I>Product Warranties</I></FONT>

<P align="left"><FONT size="2">The Company accrues for warranty costs based on historical trends in product
failure rates and the expected material and labor costs to provide warranty
services. The majority of products sold are generally covered by a warranty
for periods ranging from 90&nbsp;days to one year. The following table summarizes
the activity related to the product warranty liability during the six month
period ended January&nbsp;25, 2003 (in millions):
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Amount</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance at July&nbsp;27, 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">242</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrual for warranties issued during the period</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">184</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Payments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(186</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance at January&nbsp;25, 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><I>Derivative Instruments</I></FONT>

<P align="left"><FONT size="2">The Company conducts business on a global basis in several currencies. As such,
it is exposed to adverse movements in foreign currency exchange rates. The
Company enters into foreign exchange forward contracts to minimize the
short-term impact of foreign currency fluctuations on certain foreign currency
receivables, investments, and payables. The gains and losses on the
</FONT>
<P align="center"><FONT size="2">15</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2">foreign exchange forward contracts offset the transaction gains and losses on
certain foreign currency receivables, investments, and payables recognized in
earnings.
</FONT>
<P align="left"><FONT size="2">The Company does not enter into foreign exchange forward contracts for trading
purposes. Gains and losses on the contracts are included in other income
(loss), net, in the Company&#146;s Consolidated Statements of Operations and offset
foreign exchange gains or losses from the revaluation of intercompany balances
or other current assets, investments, and liabilities denominated in currencies
other than the functional currency of the reporting entity. The Company&#146;s
foreign exchange forward contracts related to current assets and liabilities
generally range from one to three months in original maturity. Additionally,
the Company has entered into foreign exchange forward contracts related to
long-term customer financings with maturities of up to two years. The foreign
exchange contracts related to investments generally have maturities of less
than one year.
</FONT>
<P align="left"><FONT size="2">The Company periodically hedges foreign currency forecasted transactions
related to certain operating expenses with currency options. These transactions
are designated as cash flow hedges. The effective portion of the derivative&#146;s
gain or loss is initially reported as a component of accumulated other
comprehensive income (loss)&nbsp;and subsequently reclassified into earnings when
the hedged exposure affects earnings. The ineffective portion of the gain or
loss is reported in earnings immediately. These currency option contracts
generally have maturities of less than one year. The Company does not purchase
currency options for trading purposes. Foreign exchange forward and option
contracts as of January&nbsp;25, 2003 are summarized as follows (in millions):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Notional</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Fair</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Amount</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Value</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Forward contracts:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchased</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">634</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(1</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Sold</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">549</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(8</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Option contracts:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchased</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">313</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Sold</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">285</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The Company&#146;s foreign exchange forward and option contracts expose the Company
to credit risk to the extent that the counterparties may be unable to meet the
terms of the agreement. The Company minimizes such risk by limiting its
counterparties to major financial institutions. In addition, the potential risk
of loss with any one counterparty resulting from this type of credit risk is
monitored. Management does not expect any material losses as a result of
default by counterparties.
</FONT>
<P align="center"><FONT size="2">16</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2"><I>Legal Proceedings</I></FONT>

<P align="left"><FONT size="2">The Company is subject to legal proceedings, claims, and litigation arising in
the ordinary course of business. While the outcome of these matters is
currently not determinable, management does not expect that the ultimate costs
to resolve these matters will have a material adverse effect on the Company&#146;s
consolidated financial position, results of operations, or cash flows.
</FONT>
<P align="left"><FONT size="2">Beginning on April&nbsp;20, 2001, a number of purported shareholder class action
lawsuits were filed in the United States District Court for the Northern
District of California against Cisco and certain of its officers and directors.
The lawsuits have been consolidated, and the consolidated action is purportedly
brought on behalf of those who purchased the Company&#146;s publicly traded
securities between August&nbsp;10, 1999 and February&nbsp;6, 2001. Plaintiffs allege that
defendants have made false and misleading statements, purport to assert claims
for violations of the federal securities laws, and seek unspecified
compensatory damages and other relief. Cisco believes the claims are without
merit and intends to defend the actions vigorously.
</FONT>
<P align="left"><FONT size="2">In addition, beginning on April&nbsp;23, 2001, a number of purported shareholder
derivative lawsuits were filed in the Superior Court of California, County of
Santa Clara and in the Superior Court of California, County of San Mateo. There
is a procedure in place for the coordination of such actions. Two purported
derivative suits have also been filed in the United States District Court for
the Northern District of California, and those federal court actions have been
consolidated. The complaints in the various derivative actions include claims
for breach of fiduciary duty, waste of corporate assets, mismanagement, unjust
enrichment, and violations of the California Corporations Code; seek
compensatory and other damages, disgorgement, and other relief; and are based
on essentially the same allegations as the class actions.
</FONT>
<P align="left"><FONT size="2"><I>Investment in Andiamo Systems, Inc.</I></FONT>

<P align="left"><FONT size="2">On August&nbsp;19, 2002, Cisco entered into a definitive agreement to acquire
privately held Andiamo. The acquisition of Andiamo is expected to close in the
third quarter of fiscal 2004, but no later than July&nbsp;31, 2004.
</FONT>
<P align="left"><FONT size="2">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&#146;s average market capitalization during a specified
period divided by Cisco&#146;s annualized revenue for a three-month period prior to
closing, subject to adjustment as follows: (i)&nbsp;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)&nbsp;if the multiple so calculated is greater than 15,
<P align="center"><FONT size="2">17</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

</FONT>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2">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&nbsp;billion in shares of Cisco common stock valued at the time
of closing.
</FONT>
<P align="left"><FONT size="2">The acquisition has received the required approvals from both companies and is
subject to various closing conditions and approvals, including stockholder
approval by Andiamo.
</FONT>
<P align="left"><FONT size="2">As of January&nbsp;25, 2003, Cisco has made an $84&nbsp;million investment in Andiamo in
the form of convertible debt, which is convertible into approximately 44% of
the equity in Andiamo, subject to certain terms and conditions. Furthermore,
Cisco is also committed to provide additional funding to Andiamo in the form of
non-convertible debt through the closing of the acquisition of approximately
$100&nbsp;million. As of January&nbsp;25, 2003, the Company has funded $20&nbsp;million of
this non-convertible debt. The entire investment in Andiamo has been expensed
as research and development costs, as if such expenses constituted the
development costs of the Company.
</FONT>
<P align="left"><FONT size="2"><I>Purchase Commitments with Contract Manufacturers and Suppliers</I></FONT>

<P align="left"><FONT size="2">The Company uses several contract manufacturers and suppliers to provide
manufacturing services for its products. During the normal course of business,
in order to reduce manufacturing lead times and ensure adequate component
supply, the Company enters into agreements with certain contract manufacturers
and suppliers that allow them to procure inventory based upon criteria as
defined by the Company. As of January&nbsp;25, 2003, the Company has purchase
commitments for inventory of approximately $730&nbsp;million, compared with $825
million as of July&nbsp;27, 2002.
</FONT>
<P align="left"><FONT size="2"><I>Other Commitments</I></FONT>

<P align="left"><FONT size="2">In fiscal 2001, the Company entered into an agreement to invest approximately
$1.0&nbsp;billion in venture funds managed by SOFTBANK Corp. and its affiliates
(&#147;SOFTBANK&#148;). These venture funds are required to be funded upon demand by
SOFTBANK. As of January&nbsp;25, 2003, the Company has funded $174&nbsp;million of this
investment commitment, compared with $100&nbsp;million as of July&nbsp;27, 2002.
</FONT>
<P align="left"><FONT size="2">The Company provides structured financing to certain qualified customers to be
used for the purchase of equipment and other needs through its wholly owned
subsidiary, Cisco Systems Capital Corporation. As of January&nbsp;25, 2003, the
outstanding loan commitments were approximately $120&nbsp;million, subject to the
customer satisfying certain financial covenants, of which approximately $60
million was eligible for draw down. As of July&nbsp;27, 2002, the outstanding loan
commitments were approximately $948&nbsp;million, of which approximately $209
million was eligible for draw down. These loan commitments may be funded over
a two- to three-year period provided that these customers achieve specific
business milestones and satisfy certain financial covenants.
</FONT>
<P align="center"><FONT size="2">18</FONT>
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<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2">The Company has entered into several agreements to purchase or develop real
estate, subject to the satisfaction of certain conditions. As of January&nbsp;25,
2003, the total amount of commitments, if certain conditions are met, was
approximately $355&nbsp;million, compared with $491&nbsp;million as of July&nbsp;27, 2002.
</FONT>
<P align="left"><FONT size="2">As of January&nbsp;25, 2003, the Company has a commitment of approximately $130
million to purchase the remaining portion of the minority interest of Cisco
Systems, K.K. (Japan), compared with $190&nbsp;million as of July&nbsp;27, 2002.
</FONT>
<P align="left"><FONT size="2">The Company also has certain other funding commitments of approximately $130
million as of January&nbsp;25, 2003 related to its privately held investments,
compared with $152&nbsp;million as of July&nbsp;27, 2002.
</FONT>
<P align="left"><FONT size="2"><B>7. Shareholders&#146; Equity</B></FONT>

<P align="left"><FONT size="2"><I>Stock Repurchase Program</I></FONT>

<P align="left"><FONT size="2">In September 2001, the Board of
Directors authorized a stock repurchase program to acquire outstanding common
stock. Under the program, up to $3&nbsp;billion of Cisco common stock could be
reacquired over two years. In August 2002, the Board of Directors increased
Cisco&#146;s stock repurchase program by $5&nbsp;billion to a total of $8&nbsp;billion of
Cisco common stock available for repurchase through
September&nbsp;12, 2003.
</font>

<P align="left"><FONT size="2">During
the first six months of fiscal 2003, the Company repurchased and retired 193
million shares of Cisco common stock for an aggregate purchase price of $2.6
billion. As of January&nbsp;25, 2003, the Company has repurchased and retired 317
million shares of Cisco common stock for an aggregate purchase price of $4.4
billion since inception of the program and the remaining authorized amount for
stock repurchases under this program was $3.6&nbsp;billion.
</FONT>
<P align="left"><FONT size="2"><I>Comprehensive Income</I></FONT>

<P align="left"><FONT size="2">The components of comprehensive income, net of tax, are as follows (in
millions):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Three Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">991</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other comprehensive income:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in unrealized gains and losses
on investments, net of tax</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">581</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(10</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">676</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">961</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">19</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2">The change in net unrealized gains and losses on investments of $300&nbsp;million
and $581&nbsp;million, net of tax, during the first six months of fiscal 2003 and
2002, respectively, was primarily due to the effects of the recognition of
charges in the Consolidated Statements of Operations of $412&nbsp;million and $858
million, pre-tax, respectively, attributable to the impairment of certain
publicly traded equity securities during the first quarter periods. The
impairment charges were related to the decline in the fair value of certain
publicly traded equity investments below their cost basis that were judged to
be other-than-temporary.
</FONT>
<P align="left"><FONT size="2"><B>8. Employee Stock Option Plans</B></FONT>

<P align="left"><FONT size="2"><I>Stock Option Program Description</I></FONT>

<P align="left"><FONT size="2">The Company has two plans under which it grants options: the 1996 Stock
Incentive Plan (the &#147;1996 Plan&#148;) and the 1997 Supplemental Stock Incentive Plan
(the &#147;Supplemental Plan&#148;).
</FONT>
<P align="left"><FONT size="2">Stock option grants are designed to reward employees for their long-term
contributions to the Company and provide incentives for them to remain with the
Company. The number and frequency of stock option grants are based on
competitive practices, operating results of the Company and government
regulations. Since the inception of the 1996 Plan, the Company has granted
options to all of its employees and the majority has been granted to employees
below the vice president level. No options have been granted to directors or
executive officers under the Supplemental Plan.
</FONT>
<P align="left"><FONT size="2"><I>Distribution and Dilutive Effect of Options</I></FONT>

<P align="left"><FONT size="2">The following table illustrates the
grant dilution and exercise dilution (in millions, except percentages):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Six Months</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Fiscal Year</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25, 2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>July 27, 2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Shares of common stock outstanding</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,150</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,303</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Granted and assumed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">99</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Canceled</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(29</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(82</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net options granted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Grant dilution (1)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exercised</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exercise dilution (2)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.3</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Note 1: The percentage for grant dilution is computed based on options granted
and assumed less options canceled as a percentage of total outstanding shares
of common stock.
</FONT>
<P align="center"><FONT size="2">20</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2">Note 2: The percentage for exercise dilution is computed based on options
exercised as a percentage of total outstanding shares of common stock.
</FONT>
<P align="left"><FONT size="2">The following table summarizes the options granted to the Named Executive
Officers. The Named Executive Officers represent the Company&#146;s Chief Executive
Officer and the four other most highly paid executive officers whose salary and
bonus for the Company&#146;s fiscal year ended July&nbsp;27, 2002 were in excess of
$100,000.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Six Months</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Fiscal Year</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25, 2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>July 27, 2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options granted to the Named Executive Officers</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">1 million</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><FONT size="2">10 million</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><HR size="4" noshade width="55%"></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><HR size="4" noshade width="80%"></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options granted to the Named Executive Officers as a % of net options granted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><HR size="4" noshade width="55%"></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><HR size="4" noshade width="80%"></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Options granted to the Named Executive Officers as a % of outstanding shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.01</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><HR size="4" noshade width="55%"></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><HR size="4" noshade width="80%"></TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cumulative
options held by Named Executive Officers as a % of total options outstanding</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><HR size="4" noshade width="55%"></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="center"><HR size="4" noshade width="80%"></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Basic and diluted shares outstanding for the quarter ended January&nbsp;25, 2003
were 7.2&nbsp;billion shares and 7.3&nbsp;billion shares, respectively. Diluted shares
outstanding include the dilutive impact of in-the-money options, which is
calculated based on the average share price for each fiscal period using the
treasury stock method. Under the treasury stock method, the tax-effected
proceeds that would be hypothetically received from the exercise of all
in-the-money options are assumed to be used to repurchase shares. In the first
six months of fiscal 2003<B>, </B>the dilutive impact of in-the-money employee stock
options was approximately 84&nbsp;million shares or 1.2% of the average basic shares
outstanding based on Cisco&#146;s average share price of $12.92.
</FONT>
<P align="left"><FONT size="2">The maximum number of shares issuable over the term of the 1996 Plan is limited
to 2.5&nbsp;billion shares. The share reserve was increased pursuant to the
automatic share increases effected annually beginning in December 1996 and
expired in December 2001. The share reserve had automatically increased on the
first trading day of each December by an amount equal to 4.75% of the
outstanding shares on the last trading day of the immediately preceding
November.
</FONT>
<P align="center"><FONT size="2">21</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2"><I>General Option Information</I></FONT>

<P align="left"><FONT size="2">A summary of option activity follows (in millions, except per-share amounts):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="61%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Options Outstanding</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Options</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Weighted-Average</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Available</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Exercise Price</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>for Grant</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Outstanding</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>per Share</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BALANCE AT JULY 28, 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">522</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,060</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29.41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Granted and assumed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(282</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17.72</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exercised</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(54</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.99</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Canceled</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">82</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(82</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36.94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Additional shares reserved</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><HR size="1" noshade width="75%"></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><HR size="1" noshade width="60%"></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BALANCE AT JULY 27, 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">664</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,206</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Granted and assumed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(99</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">99</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exercised</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(18</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Canceled</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(29</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33.45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Additional shares reserved</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><HR size="1" noshade width="75%"></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><HR size="1" noshade width="60%"></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BALANCE AT JANUARY 25, 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">595</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,258</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">26.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><HR size="4" noshade width="75%"></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><HR size="4" noshade width="60%"></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2">The following table summarizes significant ranges of outstanding and
exercisable options as of January&nbsp;25, 2003 (shares and aggregate intrinsic
value in millions, except number of years and per-share amounts):
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="15"><FONT size="1"><B>Options Outstanding</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Options Exercisable</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="15"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Weighted-</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Average</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Weighted-</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Weighted-</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Remaining</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Average</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Average</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Contractual</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Exercise</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Aggregate</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Exercise</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Aggregate</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Range of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Life</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Price</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Intrinsic</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Price</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Intrinsic</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Exercise Prices</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Outstanding</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(in Years)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>per Share</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Value</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Exercisable</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>per Share</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Value</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="3" align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">$0.01-5.60&nbsp;&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4.46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4.54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,154</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">

<TD colspan="3" align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;5.61-9.74&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">799</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7.24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">489</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">

<TD colspan="3" align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;9.75-15.48</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">147</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12.75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12.40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">173</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">15.49-16.24</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7.62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15.96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3" align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">16.25-20.61</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">179</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7.49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">20.62-36.71</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">147</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27.76</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27.75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3" align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">36.72-51.90</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">139</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.71</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">49.10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">48.80</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">51.91-55.42</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">54.37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">83</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">54.37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3" align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">55.43-72.56</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">67</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">63.96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">64.19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3" align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,258</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.04</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">26.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,199</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">693</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">24.86</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3" align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2">As of July&nbsp;27, 2002, 634&nbsp;million outstanding options were exercisable and the
weighted average exercise price for exercisable options was $23.51. The
aggregate intrinsic value in the table above represents the total pre-tax
intrinsic value based on Cisco&#146;s closing stock price of $13.86 as of January
24, 2003, that would have been received by the option holders had all option
</FONT>

<P align="center"><FONT size="2">22</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2">holders exercised their options as of that date. The total number of
in-the-money options exercisable as of January&nbsp;25, 2003 was 299&nbsp;million options. The following table presents the
option exercises for the six months ended January&nbsp;25, 2003 and option values as
of that date for the Named Executive Officers (in millions):
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Number of Securities</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Intrinsic Value of Unexercised</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Underlying Unexercised</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>In-the-Money Options at</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Acquired</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Options at January 25, 2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>January 25, 2003</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>on</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Value</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><HR size="1" noshade></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><HR size="1" noshade></FONT></TD>

</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Exercise</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Realized</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Exercisable</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Unexercisable</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Exercisable</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Unexercisable</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Named Executive Officers</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Pro forma information under SFAS 123 is as follows (in millions, except
per-share amounts):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="63%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Three Months</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Six Months</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Fiscal Year</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>July 27,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income &#151; as reported</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">991</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,893</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Compensation expense, net of tax</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(313</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(681</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,520</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income &#151; pro forma</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">928</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">373</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Basic net income per share &#151; as reported</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Diluted net income per share &#151; as reported</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Basic net income per share &#151; pro forma</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Diluted net income per share &#151; pro forma</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD colspan="13" align="left"><FONT size="2">The value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions.</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Employee Stock Option Plans</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Three Months</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Six Months</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Fiscal Year</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>July 27,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Expected dividend</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.0 </FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.0 </FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.0 </FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Risk-free interest rate</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.3 </FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.2 </FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.7 </FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Expected volatility</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">47.4 </FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">46.2 </FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">47.5 </FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Expected life (in years)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The Black-Scholes option pricing model was developed for use in estimating the
value of traded options that have no vesting restrictions and are fully
transferable. In addition, option pricing
</FONT>
<P align="center"><FONT size="2">23</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

</FONT>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2">models require the input of highly subjective assumptions including the
expected stock price volatility. The Company uses projected data for expected
volatility and expected life of its stock options based upon historical and
other economic data trended into future years. Because the Company&#146;s employee
stock options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the estimate, in management&#146;s opinion, the existing valuation models do
not provide a reliable measure of the fair value of the Company&#146;s employee
stock options. Under the Black-Scholes option pricing model, the
weighted-average estimated values of employee stock options granted during the
three and six months ended January&nbsp;25, 2003 and the fiscal year ended July&nbsp;27,
2002 were $6.52, $5.04 and $8.60 per share, respectively. The value of shares
of common stock relating to the Employee Stock Purchase Plan included in
compensation expense was not material.
</FONT>
<P align="left"><FONT size="2"><B>9. Income Taxes</B></FONT>

<P align="left"><FONT size="2">The Company paid net income taxes of $813&nbsp;million and $550&nbsp;million for the
first six months of fiscal 2003 and 2002, respectively. The Company&#146;s income
taxes currently payable for federal and state purposes have been reduced by the
tax benefits from employee stock option transactions. These benefits totaled
$11&nbsp;million and $49&nbsp;million in the first six months of fiscal 2003 and 2002,
respectively, and were reflected as a credit to additional paid-in capital in
the Consolidated Statements of Shareholders&#146; Equity.
</FONT>
<P align="left"><FONT size="2"><B>10. Segment Information and Major Customers</B></FONT>

<P align="left"><FONT size="2">The Company&#146;s operations involve the design, development,
manufacturing, marketing, and technical support of networking and
communications products and services. Cisco products include routers, switches,
access, and other networking equipment. These products, primarily integrated by
Cisco IOS&#174; Software, link geographically dispersed LANs and WANs.
</FONT>
<P align="left"><FONT size="2">The Company conducts business globally and is managed geographically. The
Company&#146;s management relies on an internal management system that provides
sales and standard cost information by geographic theater. Sales are attributed
to a theater based on the ordering location of the customer. The Company&#146;s
management makes financial decisions and allocates resources based on the
information it receives from this internal management system. The Company does
not allocate research and development, sales and marketing, or general and
administrative expenses to its geographic theaters in this internal management
system, as management does not use the information to measure the performance
of the operating segments. Management does not believe that allocating these
expenses is significant in evaluating a geographic theater&#146;s performance. Based
on established criteria, the Company has four reportable segments: the
Americas; EMEA; Asia Pacific; and Japan.
</FONT>
<P align="center"><FONT size="2">24</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2">Summarized financial information by theater for the second quarter and first
six months of fiscal 2003 and 2002, as taken from the internal management
system previously discussed, is as follows (in millions):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Three Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net sales:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Americas</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,559</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,327</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">EMEA</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,364</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,606</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,556</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asia Pacific</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">481</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">978</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">919</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Japan</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">412</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">647</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">641</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9,558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gross margin:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Americas</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,027</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,933</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,258</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,795</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">EMEA</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,076</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,992</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asia Pacific</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">445</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">385</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">804</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">722</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Japan</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">535</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Standard margin</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,799</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,722</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,721</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Production overhead</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(143</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(160</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(276</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(351</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Manufacturing variances and other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">related costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(339</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(592</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(770</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,000</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,317</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">6,675</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,662</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The Company has reclassified net sales for each geographic theater for the
three and six months ended January&nbsp;26, 2002 to reflect the breakdown of
services revenue for EMEA, Asia Pacific and Japan theaters, all of which were
previously included in the Americas theater.
</FONT>
<P align="center"><FONT size="2">25</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="2"><B>Cisco Systems, Inc.</B></FONT>

<P align="center"><FONT size="2"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</B></FONT>

<P align="left"><FONT size="2">The following table presents net sales for groups of similar products and
services (in millions):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Three Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net sales:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Routers</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,232</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,502</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,863</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Switches</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,897</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,882</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,893</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,613</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Access</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">495</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">499</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">516</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">395</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">968</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">703</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Product</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,022</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Services</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,654</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,586</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9,558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">The majority of the Company&#146;s assets as of January&nbsp;25, 2003 and July&nbsp;27, 2002
were attributable to its U.S. operations. In the second quarter and first six
months of fiscal 2003 and 2002, no single customer accounted for 10% or more of
the Company&#146;s net sales.
</FONT>
<P align="left"><FONT size="2"><B>11. Net Income per Share</B></FONT>

<P align="left"><FONT size="2">The following table presents the calculation of basic
and diluted net income per share (in millions, except per-share amounts):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Three Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">991</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Weighted-average shares &#151; basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,187</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,217</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect of dilutive potential
common shares</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">99</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">171</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Weighted-average shares &#151; diluted</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,286</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,496</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,307</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income per share &#151; basic</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income per share &#151; diluted</FONT></DIV></TD>

<TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

<TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

<TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

<TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Dilutive potential common shares consist of employee stock options and
restricted common stock. Employee stock options to purchase approximately 870
million shares and 562&nbsp;million shares in the second quarter of fiscal 2003 and
2002, respectively, and 919&nbsp;million shares and 618&nbsp;million shares in the first
six months of fiscal 2003 and fiscal 2002, respectively, 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.
</FONT>
<P align="center"><FONT size="2">26</FONT>
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<P align="center"><FONT size="2">Cisco Systems, Inc.</FONT>

<P align="center"><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Unaudited)</FONT>

<P align="left"><FONT size="2"><B>12. Pending Business Combination</B></FONT>

<P align="left"><FONT size="2">In January 2003, the Company announced a
definitive agreement to acquire Okena, Inc. for a total purchase price of
approximately $154&nbsp;million payable in common stock. This acquisition will be
accounted for as a purchase and is expected to close in the third quarter of
fiscal 2003.
</FONT>
<P align="center"><FONT size="2">27</FONT>
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<!-- link2 "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" -->
<DIV align="left"><A NAME="007"></A></DIV>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Management&#146;s Discussion and Analysis of Financial Condition
and Results of Operations</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>Forward-Looking Statements</B></FONT>

<P align="left"><FONT size="2">This Quarterly Report on Form&nbsp;10-Q, including this
Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements regarding future events and our
future results that are based on current expectations, estimates, forecasts,
and projections about the industries in which we operate and the beliefs and
assumptions of our management. Words such as &#147;expects,&#148; &#147;anticipates,&#148;
&#147;targets,&#148; &#147;goals,&#148; &#147;projects,&#148; &#147;intends,&#148; &#147;plans,&#148; &#147;believes,&#148; &#147;seeks,&#148;
&#147;estimates,&#148; variations of such words, and similar expressions are intended to
identify such forward-looking statements. In addition, any statements which
refer to projections of our future financial performance, our anticipated
growth and trends in our businesses, and other characterizations of future
events or circumstances, are forward-looking statements. Readers are cautioned
that these forward-looking statements are only predictions and are subject to
risks, uncertainties, and assumptions that are difficult to predict. Therefore,
actual results may differ materially and adversely from those expressed in any
forward-looking statements. Readers are referred to risks and uncertainties
identified below, under &#147;Risk Factors&#148; beginning on page 42 and elsewhere
herein. We undertake no obligation to revise or update publicly any
forward-looking statements for any reason.
</FONT>
<P align="left"><FONT size="2"><B>Critical Accounting Policies</B></FONT>

<P align="left"><FONT size="2">The preparation of financial statements and related disclosures in conformity with
accounting principles generally accepted in the United States requires
management to make judgments, assumptions, and estimates that affect the
amounts reported in the Consolidated Financial Statements and accompanying
notes. Note 2 to the Consolidated Financial Statements in the Annual Report on
Form&nbsp;10-K, as amended, for the fiscal year ended July&nbsp;27, 2002 describes the
significant accounting policies and methods used in the preparation of the
Consolidated Financial Statements. Estimates are used for, but not limited to,
the accounting for the allowance for doubtful accounts and sales returns,
inventory allowances, warranty costs, investment impairments, goodwill
impairments, contingencies, restructuring costs and other special charges, and
taxes. Actual results could differ materially from these estimates. The
following critical accounting policies are impacted significantly by judgments,
assumptions, and estimates used in the preparation of the Consolidated
Financial Statements.
</FONT>
<P align="left"><FONT size="2">The allowance for doubtful accounts is based on our assessment of the
collectibility of specific customer accounts and the aging of the accounts
receivable. If there were a deterioration of a major customer&#146;s
creditworthiness, or actual defaults were higher than our historical
experience, our estimates of the recoverability of amounts due to us could be
overstated, which could have an adverse impact on our revenue.
</FONT>
<P align="left"><FONT size="2">A reserve for sales returns is established based on historical trends in
product return rates. If the actual future returns were to deviate from the
historical data on which the reserve had been established, our revenue could be
adversely affected.
</FONT>
<P align="left"><FONT size="2">Inventory purchases and commitments are based upon future demand forecasts. If
there were to be a sudden and significant decrease in demand for our products,
or if there were a higher incidence of inventory obsolescence because of
rapidly changing technology and customer requirements, we could be required to
increase our inventory allowances and our gross margins
</FONT>
<P align="center"><FONT size="2">28</FONT>
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<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">could be adversely affected.
</FONT>
<P align="left"><FONT size="2">We accrue for warranty costs based on historical trends in product failure
rates and the expected material and labor costs to provide warranty services.
If we were to experience an increase in warranty claims compared with our
historical experience, or costs of servicing warranty claims were greater than
the expectations on which the accrual had been based, our gross margins could
be adversely affected.
</FONT>
<P align="left"><FONT size="2">We have experienced significant volatility in the market prices of our publicly
traded equity investments. These investments are recorded on the Consolidated
Balance Sheets as of January&nbsp;25, 2003 at a fair value of $522&nbsp;million, compared
with $567&nbsp;million as of July&nbsp;27, 2002. We recognize an impairment charge in the
Consolidated Statements of Operations when the decline in the fair value of our
publicly traded equity investments below their cost basis is judged to be
other-than-temporary. We consider various factors in determining whether we
should recognize an impairment charge including, but not limited to, the length
of time and extent to which the fair value has been less than our cost basis,
the financial condition and near-term prospects of the issuer, and our intent
and ability to hold the investment for a period of time sufficient to allow for
any anticipated recovery in market value. The ultimate value realized on these
equity investments is subject to market price volatility until they are sold.
We also have investments in privately held companies, many of which can still
be considered in the start-up or development stages. These investments are
inherently risky as the market for the technologies or products they have under
development are typically in the early stages and may never materialize. As of
January&nbsp;25, 2003, the investments in privately held companies were $515
million, compared with $477&nbsp;million as of July&nbsp;27, 2002.
</FONT>
<P align="left"><FONT size="2">We perform goodwill impairment tests on an annual basis and between annual
tests in certain circumstances for each reporting unit, which are the operating
segments as described in Note 10 to the Consolidated Financial Statements. In
response to changes in industry and market conditions, we may be required to
strategically realign our resources and consider restructuring, disposing, or
otherwise exiting businesses, which could result in an impairment of goodwill.
</FONT>
<P align="left"><FONT size="2">We are subject to the possibility of various loss contingencies arising in the
ordinary course of business. We consider the likelihood of loss or impairment
of an asset or the incurrence of a liability, as well as our ability to
reasonably estimate the amount of loss in determining loss contingencies. An
estimated loss contingency is accrued when it is probable that an asset has
been impaired or a liability has been incurred and the amount of loss can be
reasonably estimated. We regularly evaluate current information available to us
to determine whether such accruals should be adjusted.
</FONT>
<P align="center"><FONT size="2">29</FONT>
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<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>Net Sales</B></FONT>

<P align="left"><FONT size="2">We manage our business based on four geographic theaters: the
Americas; EMEA; Asia Pacific; and Japan. Net sales, which include product and
service revenue, for each theater are summarized in the following table (in
millions):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Three Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net sales:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Americas</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,559</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,327</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">EMEA</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,364</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,606</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,556</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asia Pacific</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">481</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">978</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">919</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Japan</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">412</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">647</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">641</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9,558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<tr>
    <TD colspan="19"><FONT size="2">Net sales in the second quarter of fiscal 2003 decreased by $103&nbsp;million or
2.1% from $4.8&nbsp;billion in the second quarter of fiscal 2002 to $4.7&nbsp;billion.
Net sales in the first six months of fiscal 2003 increased by $294&nbsp;million or
3.2% from the first six months of fiscal 2002. The following table is a
breakdown of net sales between product and service revenue (in millions):
</FONT></td>
</tr>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Three Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net sales:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Product</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,022</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Services</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,654</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,586</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9,558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="19"><FONT size="2"><B>Net Product Sales</B></FONT></td>
</tr>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="19"><FONT size="2">Net product sales in the second quarter of fiscal 2003
decreased by $131&nbsp;million or 3.3% from $4.0&nbsp;billion in the second quarter of
fiscal 2002 to $3.9&nbsp;billion. Net product sales in the first six months of
fiscal 2003 increased by $226&nbsp;million or 2.9% from $7.7&nbsp;billion in the first
six months of fiscal 2002 to $7.9&nbsp;billion. The following table is a breakdown
of net product sales by theater (in millions):
</FONT></td>
</tr>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Three Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net product sales:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Americas</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,936</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,987</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,113</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,991</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">EMEA</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,146</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,267</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asia Pacific</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">499</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">889</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">827</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Japan</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">388</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">588</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,022</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">30</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Net produce sales in the Americas
theater consist of net product sales in the United States and
Americas International, which includes Canada, Mexico and Latin
America. Net product sales in the Americas theater in the second
quarter of fiscal 2003 decreased by $51&nbsp;million or 2.6%,
compared with the second quarter of fiscal 2002. Net product sales in the
United States were $1.8&nbsp;billion in the second quarter of fiscal 2003, compared
with $1.7&nbsp;billion in the second quarter of fiscal 2002, an increase of $31
million or 1.8%. The change in net product sales in the United States was not
material. Net product sales in the Americas International were $177&nbsp;million in
the second quarter of fiscal 2003, compared with $259&nbsp;million in the second
quarter of fiscal 2002, a decrease of $82&nbsp;million or 31.7%. Net product sales
in the EMEA theater in the second quarter of fiscal 2003 decreased by $66
million or 5.4%, compared with the second quarter of fiscal 2002. The
decreases
in net product sales in the Americas International and EMEA were due to the
slowdown in the economy, over-capacity, and constraints on information
technology-related capital spending, in particular service provider customers.
Net product sales in the Asia Pacific theater in the second quarter of fiscal
2003 increased by $64&nbsp;million or 14.7%, compared with the second quarter of
fiscal 2002, due to infrastructure builds, broadband acceleration and
investments by Asian telecom carriers. Net product sales in Japan in the
second quarter of fiscal 2003 decreased by $78&nbsp;million or 20.1%, compared with
the second quarter of fiscal 2002 due to lower revenue from both enterprise and
service provider customers.
</FONT>
<P align="left"><FONT size="2">Net product sales in the first six months of fiscal 2003 in the Americas
theater increased by $122&nbsp;million or 3.1%, compared with the first six months
of fiscal 2002. Net product sales in the United States were $3.7&nbsp;billion in
the first six months of fiscal 2003, compared with $3.5&nbsp;billion in the first
six months of fiscal 2002, an increase of $215&nbsp;million or 6.1%. The increase
in net product sales in the United States was due to the year-over-year growth
in sales to the United States federal government during the first quarter of
fiscal 2003. Despite these modest increases, the slowdown in the economy, over-capacity,
and constraints on information technology-related
capital spending have continued to impact both enterprise and service provider
customers, in particular service provider customers. Net product
sales in Americas International in the first six months of fiscal
2003 were $373&nbsp;million, compared with $466&nbsp;million in the
first six months of 2002, a decrease of $93&nbsp;million or 20.0%. Net product sales in the EMEA theater in the first
six months of fiscal 2003 increased by $47&nbsp;million or 2.1%, compared with the
first six months of fiscal 2002, as incumbent service providers began deploying
products during the first quarter of fiscal 2003. Net product sales in the
Asia Pacific theater in the first six months of fiscal 2003 increased by $62
million or 7.5%, compared with the first six months of fiscal 2002, due to
infrastructure builds, broadband acceleration and investments by Asian telecom
carriers. The change in product sales for the Japan theater was not material.
</FONT>
<P align="left"><FONT size="2">The following table presents net sales for groups of similar products (in
millions):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Three Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net product sales:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Routers</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,232</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,502</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,863</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Switches</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,897</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,882</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,893</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,613</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Access</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">495</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">499</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">516</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">395</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">968</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">703</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,022</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">31</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Net product sales related to routers, which represented 31.7% of our total
product sales in the second quarter of fiscal 2003, decreased by $270&nbsp;million
or 18.0%, compared with the second quarter of fiscal 2002. Net product sales
related to routers in the first six months of fiscal 2003 decreased by $315
million or 11.0%, compared with the first six months of fiscal 2002. The
decrease in the second quarter and first six months of fiscal 2003, compared
with the same periods in fiscal 2002, was due to decreases in sales of our
mid-range and low-end routers.
</FONT>
<P align="left"><FONT size="2">Net product sales related to switches, which represented 48.8% of our total
product sales in the second quarter of fiscal 2003 was $1.9&nbsp;billion, compared
with $1.9&nbsp;billion in the second quarter of fiscal 2002. Net product sales
related to switches in the first six months of fiscal 2003 increased by $280
million or 7.7%, compared with the first six months of fiscal 2002. The
increase in the first six months of fiscal 2003, compared with the first six
months of fiscal 2002, was primarily due to increases in our sales of fixed and
WAN switches.
</FONT>
<P align="left"><FONT size="2">Net product sales related to other products, which represented 13.3% of our
total product sales in the second quarter of fiscal 2003, increased by $121
million or 30.6%, compared with the second quarter of fiscal 2002. Net product
sales related to other products in the first six months of fiscal 2003
increased by $265&nbsp;million or 37.7%, compared with the first six months of
fiscal 2002. The increase in the second quarter and first six months of fiscal
2003, compared with the same periods in fiscal 2002, was primarily due to
increases in our sales of IP telephony, security, network management and
content networking products.
</FONT>
<P align="left"><FONT size="2">Changes in access product sales, which
represented 6.2% of our total product sales in the second quarter of
fiscal 2003, were not material compared with the second quarter and
first six months of fiscal 2002.
</FONT>
<P align="left"><FONT size="2">Net product sales may be adversely affected in the future by changes in the
sales cycles and implementation cycles of our products, changes in the mix of
our customers between service provider and enterprise, changes in the mix of
direct sales and indirect sales, variations in sales channels and final
acceptance criteria of the product, system or solution as specified by the
customer. Service provider customers typically have longer implementation
cycles, require a broader range of service including design services and often
have acceptance provisions, which can lead to a delay in revenue recognition.
Net product sales may also be adversely affected by fluctuations in demand for
our products, especially with respect to Internet businesses and
telecommunications service providers, price and product competition in the
communications and networking industries, introduction and market acceptance of
new technologies and products, as well as the adoption of new networking
standards.
</FONT>
<P align="center"><FONT size="2">32</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>Net Service Revenue</B></FONT>

<P align="left"><FONT size="2">Net service revenue in the second quarter of fiscal 2003
increased by $28&nbsp;million or 3.5% from the second quarter of fiscal 2002. Net
service revenue in the first six months of fiscal 2003 increased by $68&nbsp;million
or 4.3% from the first six months of fiscal 2002. The increase in net service
revenue for the second quarter and the first six months of fiscal 2003 compared
with the same periods in fiscal 2002 was primarily due to increased technical
support service contract initiations and renewals associated with product
sales. In addition, revenue from advanced services, which provides consultative
support of our technologies for specific networking needs, also increased. Net
service revenue is generally deferred and, in most cases, recognized ratably
over the service period obligations, which are typically one to three years.
</FONT>

<P align="left"><FONT size="2"><B>Gross Margin</B></FONT>

<P align="left"><FONT size="2">The following table shows the total gross margin for each theater:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Three Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gross margin:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Americas</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,027</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,933</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,258</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,795</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">EMEA</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,076</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,992</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asia Pacific</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">445</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">385</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">804</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">722</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Japan</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">535</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Standard margin</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,799</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,722</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,721</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Production overhead</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(143</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(160</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(276</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(351</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Manufacturing variances</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">and other related costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(339</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(592</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(770</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,000</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,317</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">6,675</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,662</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<tr>
<td colspan="19"><FONT size="2">The following table shows the standard margin for each theater:
</FONT>
</td>
</tr>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Three Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="LEFT" colspan="3"><FONT size="1"><B>Standard margin:</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Americas</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">79.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">75.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">79.9</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">73.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">EMEA</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">81.4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">78.9</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">81.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">77.9</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asia Pacific</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">82.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">80.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">82.2</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">78.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Japan</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">82.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">79.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">82.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">78.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">80.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">77.3</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">80.8</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">75.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Our standard margin varies due to a number of reasons including, but not
limited to, shifts in product mix, sales discounts, and sales channels, changes
in component costs and impact of value engineering. Production overhead is
primarily related to labor, depreciation on equipment,
</FONT>
<P align="center"><FONT size="2">33</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">and facilities charges associated with manufacturing activities. Manufacturing
variances and other related costs are primarily related to warranty, freight,
provision for inventory and other nonstandard costs.
</FONT>
<P align="left"><FONT size="2">Gross margin for product and services in the second quarter and first six
months of fiscal 2003 and 2002 was as follows (in millions, except
percentages):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Three Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gross Margin:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Product</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,747</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,429</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,523</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,585</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Services</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">541</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,317</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">6,675</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,662</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Three Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gross Margin:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Product</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">70.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">60.4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">69.9</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">59.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Services</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">69.3</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">68.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">69.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">67.9</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">70.4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">61.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">69.8</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">61.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>Product Gross Margin</B></FONT>

<P align="left"><FONT size="2">Product gross margin increased from 60.4% in the second quarter of fiscal 2002
to 70.6% in the second quarter of fiscal 2003. Product gross margin increased
from 59.7% in the first six months of fiscal 2002 to 69.9% in the first six
months of fiscal 2003. The increase in product gross margin for the second
quarter and first six months of fiscal 2003, compared with the same periods in
fiscal 2002, was due to lower component costs and value engineering, partially
offset by the impact of product pricing reductions. Value engineering is the
process by which the production costs are reduced through component redesign,
board configuration, test processes and transformation processes. Product
gross margin in the second quarter and first six months of fiscal 2003,
compared with the same periods a year ago, was also impacted by lower provision
for inventory, offset by an excess inventory benefit in the second quarter and
first six months of fiscal 2002.
</FONT>
<P align="left"><FONT size="2">Product gross margin may be adversely affected in the future by increases in
material or labor costs, excess inventory and obsolescence charges, changes in
shipment volume, loss of cost savings due to changes in component pricing,
charges incurred due to inventory holding periods if parts ordering does not
correctly anticipate product demand, price competition, and changes in channels
of distribution or in the mix of products sold. If warranty costs associated
with our products are greater than we have experienced, product gross margin
may also be adversely
</FONT>
<P align="center"><FONT size="2">34</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">affected. Product gross margin may also be affected by geographic mix, as well
as the mix of configurations within each product group.
</FONT>
<P align="left"><FONT size="2">Two-tier distribution channels are given business terms which allow them to
return a portion of inventory, receive credits for changes in selling prices,
and participate in various cooperative marketing programs. In addition,
increasing two-tier distribution channels generally results in greater
difficulty in forecasting the mix of our products and, to a certain degree, the
timing of orders from our customers. We recognize revenue to two-tier
distributors based on a sell-through method utilizing information provided by
our distributors and we also maintain accruals and allowances for all
cooperative marketing and other programs.
</FONT>
<P align="left"><FONT size="2"><B>Service Gross Margin</B></FONT>

<P align="left"><FONT size="2">Service gross margin increased from 68.1% in the second
quarter of fiscal 2002 to 69.3% in the second quarter of fiscal 2003. Service
gross margin increased from 67.9% in the first six months of fiscal 2002 to
69.6% in the first six months of fiscal 2003. The increase in service gross
margin for the second quarter and first six months of fiscal 2003, compared
with the same periods in fiscal 2002, was primarily due to the increase in
service revenue combined with continued efficiencies in the delivery of our
services. Service gross margin will typically experience some variability over
time due to various factors such as the changes in mix between technical
support services and advanced services, as well as the timing of technical
support service contract initiations and renewals.
</FONT>
<P align="left"><FONT size="2"><B>Research and Development, Sales and Marketing, and General and Administrative Expenses</B></FONT>

<P align="left"><FONT size="2">Research and development (&#147;R&#038;D&#148;), sales and marketing, and general and
administrative (&#147;G&#038;A&#148;) expenses are summarized in the following table (in
millions, except percentages):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Three Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Six Months Ended</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>January 26,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Research and development</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">826</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">862</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,650</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,779</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Percentage of net sales</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17.9</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17.3</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19.2</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Sales and marketing</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,071</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,073</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,167</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Percentage of net sales</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22.2</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23.4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">General and administrative</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">299</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Percentage of net sales</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.2</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">R&#038;D expenses in the second
quarter of fiscal 2003 decreased by $36&nbsp;million or
4.2% from the second quarter of fiscal 2002. R&#038;D expenses in the first six
months of fiscal 2003 decreased by $129&nbsp;million or 7.3% from the first six
months of fiscal 2002. The decrease in R&#038;D expenses
</FONT>
<P align="center"><FONT size="2">35</FONT>
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<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">for the second quarter and the first six months of fiscal 2003, compared with
the same periods in fiscal 2002 was due to lower expenditures on prototypes,
lower depreciation on lab equipment, and reduced discretionary spending. We
have continued to invest in R&#038;D efforts in a wide variety of areas such as
data, voice, and video over IP; advanced access and aggregation technologies
such as cable, wireless, mobility and other broadband technologies; advanced
enterprise switching; optical; storage networking; content networking;
security; network management; and advanced core and edge routing technologies;
among others. We have also continued to purchase or license technology in order
to bring a broad range of products to market in a timely fashion. If we believe
that we are unable to enter a particular market in a timely manner with
internally developed products, we may license technology from other businesses
or acquire businesses as an alternative to internal R&#038;D. All of our R&#038;D costs
have been expensed as incurred.
</FONT>
<P align="left"><FONT size="2">Sales and marketing expenses in the second quarter of fiscal 2003 decreased by
$96&nbsp;million or 9.0% from the second quarter of fiscal 2002. Sales and
marketing expenses in the first six months of fiscal 2003 decreased
by $94&nbsp;million or 4.3% from the first six months of fiscal 2002. The decrease in
sales and marketing expenses for the second quarter and the first six months of
fiscal 2003, compared with the same periods in fiscal 2002, was related to the
decrease in the size of our sales force and marketing organization, marketing
and advertising investments and reduced discretionary spending. However, we
plan to continue to invest in both our new growth market opportunities and our
branding strategy.
</FONT>
<P align="left"><FONT size="2">G&#038;A expenses in the second quarter of fiscal 2003 increased by $26&nbsp;million or
17.6% from the second quarter of fiscal 2002. G&#038;A expenses in the first six
months of fiscal 2003 increased by $29&nbsp;million or 9.7% from the first six
months of fiscal 2002. The increase in G&#038;A expenses for the second quarter and
the first six months of fiscal 2003, compared with the same periods in fiscal
2002 was primarily related to real estate related charges.
</FONT>
<P align="left"><FONT size="2">During the first six months of fiscal 2003, we increased the restructuring
liabilities related to the consolidation of excess facilities and other charges
by $40&nbsp;million, which was recorded during the first quarter of fiscal 2003, due
to changes in real estate market conditions. The increase in restructuring
liabilities was recorded as R&#038;D ($16&nbsp;million), sales and marketing ($16
million), G&#038;A ($4&nbsp;million) expenses and cost of sales ($4&nbsp;million) in the
Consolidated Statements of Operations. There can be no assurance that future
changes in real estate market conditions will not result in additional real
estate liabilities.
</FONT>
<P align="left"><FONT size="2"><B>Amortization of Purchased Intangible Assets</B></FONT>

<P align="left"><FONT size="2">Amortization of purchased intangible assets included in operating expenses was
$78&nbsp;million in the second quarter of fiscal 2003, compared with $136&nbsp;million in
the second quarter of fiscal 2002. Amortization of purchased intangible assets
included in operating expenses was $192&nbsp;million in the first six months of
fiscal 2003, compared with $282&nbsp;million in the first six months of fiscal 2002.
The decrease in the amortization of purchased intangible assets for the second
quarter and the first six months of fiscal 2003, compared with the same periods
in fiscal
</FONT>
<P align="center"><FONT size="2">36</FONT>
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<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">2002 was primarily related to the accelerated amortization for certain
technology and patent intangibles in the prior year period due to a reduction
in their estimated useful lives, which have now been fully amortized. For
additional information regarding purchased intangible assets, see Note 3 to the
Consolidated Financial Statements.
</FONT>

<P align="left"><FONT size="2"><B>In-Process Research and Development</B></FONT>

<P align="left"><FONT size="2">The methodology for allocating the purchase
price to in-process research and development (&#147;in-process R&#038;D&#148;) is determined
through established valuation techniques in the high-technology communications
equipment industry and expensed upon acquisition because technological
feasibility has not been established and no future alternative uses exist.
Total in-process R&#038;D expense for the first six months of fiscal 2003 and 2002
was $0&nbsp;million and $37&nbsp;million, respectively. The in-process R&#038;D expense that
was attributable to stock consideration for the first six months of fiscal 2002
was $25&nbsp;million (See Note 3 to the Consolidated Financial Statements.) The
fair value of the existing purchased technology and patents, as well as the
technology under development, is determined using the income approach, which
discounts expected future cash flows to present value. The discount rates used
in the present value calculations are typically derived from a weighted-average
cost of capital analysis and venture capital surveys, adjusted upward to
reflect additional risks inherent in the development life cycle. We consider
the pricing model for products related to these acquisitions to be standard
within the high-technology communications equipment industry. However, we do
not expect to achieve a material amount of expense reductions as a result of
integrating the acquired in-process technology. Therefore, the valuation
assumptions do not include significant anticipated cost savings.
</FONT>
<P align="left"><FONT size="2">For acquisitions completed to date, the development of these technologies
remains a significant risk due to the remaining efforts to achieve technical
viability, rapidly changing customer markets, uncertain standards for new
products, and significant competitive threats from several companies. The
nature of the efforts to develop these technologies into commercially viable
products consists principally of planning, designing, experimenting, and
testing activities necessary to determine that the technologies can meet market
expectations, including functionality and technical requirements. Failure to
bring these products to market in a timely manner could result in a loss of
market share or a lost opportunity to capitalize on emerging markets, and could
have a material adverse impact on our business and operating results.
</FONT>
<P align="left"><FONT size="2">The key assumptions underlying the valuations for our purchase acquisitions
primarily consist of an expected completion date for the in-process projects,
estimated costs to complete the projects, revenue and expense projections
assuming the products have entered the market, and discount rates based on the
risks associated with the development life cycle of the in-process technology
acquired. Failure to achieve the expected levels of revenue and net income from
these products will negatively impact the return on investment expected at the
time that the acquisitions were completed and may result in impairment charges.
Actual results from the acquired companies to date did not have a material
adverse impact on our business and operating results except for certain
purchase acquisitions where the purchased intangible assets were impaired and
written down as reflected in the Consolidated Statements of Operations.
</FONT>
<P align="center"><FONT size="2">37</FONT>
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<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>Interest Income</B></FONT>

<P align="left"><FONT size="2">Interest income was $174&nbsp;million in the second quarter of
fiscal 2003 compared with $233&nbsp;million in the second quarter of fiscal 2002.
Interest income was $353&nbsp;million in the first six months of fiscal 2003,
compared with $467&nbsp;million in the first six months of fiscal 2002. The decrease
in interest income for the second quarter and the first six months of fiscal
2003, compared with the same periods in fiscal 2002 was primarily due to lower
average interest rates.
</FONT>
<P align="left"><FONT size="2"><B>Other Income (Loss<B>)</B>, Net</B></FONT>

<P align="left"><FONT size="2">Other income (loss), net, primarily consists of net realized gains (losses)&nbsp;and
impairment charges on investments, as well as provision for losses on
investments in privately held companies. Other loss, net, was $51&nbsp;million in
the second quarter of fiscal 2003 compared with $54&nbsp;million in the second
quarter of fiscal 2002. Other loss, net, was $526&nbsp;million in the first six
months of fiscal 2003, compared with $976&nbsp;million in the first six months of
fiscal 2002. The other loss, net, in the first six months of fiscal 2003 and
2002 included a charge of $412&nbsp;million and $858&nbsp;million, pre-tax, respectively,
related to the impairment of certain publicly traded equity securities during
the first quarter periods. The impairment charges were due to the decline in
the fair value of certain publicly traded equity investments below their cost
basis that were judged to be other-than-temporary.
</FONT>
<P align="left"><FONT size="2"><B>Provision for Income Taxes</B></FONT>

<P align="left"><FONT size="2">The effective tax rate was 28.6% in the second
quarter of fiscal 2003 and 28.8% for the first six months of fiscal 2003. The
effective tax rate was 29.2% in the second quarter of fiscal 2002 and 33.4% for
the first six months of fiscal 2002. The effective tax rate differs from the
statutory rate primarily due to the impact of nondeductible in-process R&#038;D,
acquisition-related costs, research and experimentation tax credits, state
taxes, and the tax impact of non-U.S. operations.
</FONT>
<P align="left"><FONT size="2">Our future effective tax rates could be adversely affected by earnings being
lower than anticipated in countries where we have lower statutory rates,
changes in the valuation of our deferred tax assets or liabilities, or changes
in tax laws or interpretations thereof. In addition, we are subject to the
examination of our income tax returns by the Internal Revenue Service and other
tax authorities. We regularly assess the likelihood of adverse outcomes
resulting from these examinations to determine the adequacy of our provision
for income taxes.
</FONT>
<P align="center"><FONT size="2">38</FONT>
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<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2"><B>Liquidity and Capital Resources</B></FONT>

<P align="left"><FONT size="2">The following sections discuss the effects of the changes in our balance
sheets, cash flows, and commitments on our liquidity and capital resources.
</FONT>
<P align="left"><FONT size="2">Balance Sheet and Cash Flows</FONT>

<P align="left"><FONT size="2"><I>Cash and Cash Equivalents and Total Investments</I>
Cash and cash equivalents and total investments were $21.2&nbsp;billion as of
January&nbsp;25, 2003, a decrease of $259&nbsp;million or 1.2% from $21.5&nbsp;billion at July
27, 2002. The decrease was primarily a result of cash used for the repurchase
of common stock of $2.6&nbsp;billion and capital expenditures of $341&nbsp;million. This
was partially offset by cash provided by operating activities of $2.4&nbsp;billion.
</FONT>
<P align="left"><FONT size="2">We expect that cash provided by operating activities may fluctuate in future
periods as a result of a number of factors, including fluctuations in our
operating results, shipment linearity, accounts receivable collections,
inventory management, and the timing of tax and other payments. For additional
discussion, see the Risk Factors section.
</FONT>
<P align="left"><FONT size="2"><I>Accounts Receivable, net </I>Accounts receivable was $1.1&nbsp;billion as of January
25, 2003 and July&nbsp;27, 2002, respectively. Days sales outstanding (&#147;DSO&#148;) in
receivables as of January&nbsp;25, 2003 and July&nbsp;27, 2002 were 21&nbsp;days. Our accounts
receivable and DSO were primarily impacted by shipment linearity and
collections performance. Our targeted range for DSO performance continues to be
40 to 50&nbsp;days.
</FONT>

<P align="left"><FONT size="2"><I>Inventories </I>Inventories were $775&nbsp;million as of January&nbsp;25, 2003, a decrease
of $105&nbsp;million or 11.9% from $880&nbsp;million at July&nbsp;27, 2002. Inventories
consist of raw materials, work in process, finished goods, and demonstration
systems. Approximately 36.9% of our finished goods inventory was located at
distributor sites as of January&nbsp;25, 2003. Inventory turns were 7.0 turns in the second quarter of
fiscal 2003 and 7.1 turns in the fourth quarter of fiscal 2002. Inventory
levels and the associated inventory turns reflect our ongoing inventory
management efforts. Inventory management remains an area of focus as we balance
the need to maintain strategic inventory levels to ensure competitive lead
times against the risk of inventory obsolescence because of rapidly changing
technology and customer requirements.
</FONT>

<P align="left"><FONT size="2">Commitments</FONT>

<P align="left"><FONT size="2"><I>Investment in Andiamo Systems, Inc.</I>
On August&nbsp;19, 2002, we entered into a definitive agreement to acquire
privately held Andiamo Systems, Inc. (&#147;Andiamo&#148;). The acquisition of Andiamo is
expected to close in the third quarter of fiscal 2004 but no later than July
31, 2004.
</FONT>
<P align="left"><FONT size="2">Under the terms of the agreement, our common stock will be exchanged for all
outstanding shares and options of Andiamo not owned by us at the closing of the
acquisition. The amount of the purchase price for the remaining equity
interests in Andiamo not then held by us is not
</FONT>
<P align="center"><FONT size="2">39</FONT>
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</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">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 our products attributable to Andiamo during a
three-month period shortly preceding the closing. Under agreements with
Andiamo, we are the exclusive manufacturer and distributor of all Andiamo
products. The multiple will be equal to our average market capitalization
during a specified period divided by our annualized revenue for a three-month
period prior to closing, subject to adjustment as follows: (i)&nbsp;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)&nbsp;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&nbsp;billion in shares of Cisco common stock valued at the time
of closing.
</FONT>
<P align="left"><FONT size="2">The acquisition has received the required approvals from both companies and is
subject to various closing conditions and approvals, including stockholder
approval by Andiamo.
</FONT>
<P align="left"><FONT size="2">As of January&nbsp;25, 2003, we have made an $84&nbsp;million investment in Andiamo in
the form of convertible debt, which is convertible into approximately 44% of
the equity in Andiamo, subject to certain terms and conditions. Furthermore, we
are also committed to provide additional funding to Andiamo in the form of
non-convertible debt through the closing of the acquisition of approximately
$100&nbsp;million. As of January&nbsp;25, 2003, we have funded $20&nbsp;million of this
non-convertible debt. The entire investment in Andiamo has been expensed as
research and development costs, as if such expenses constituted our development
costs
</FONT>
<P align="left"><FONT size="2"><I>Purchase Commitments with Contract Manufacturers and Suppliers </I>We use
several contract manufacturers and suppliers to provide manufacturing services
for our products. During the normal course of business, in order to reduce
manufacturing lead times and ensure adequate component supply, we enter into
agreements with certain contract manufacturers and suppliers that allow them to
procure inventory based upon criteria as defined by us. As of January&nbsp;25, 2003,
we have purchase commitments for inventory of approximately $730&nbsp;million,
compared with $825&nbsp;million as of July&nbsp;27, 2002.
</FONT>
<P align="left"><FONT size="2"><I>Other Commitments </I>In fiscal 2001, we entered into an agreement to invest
approximately $1.0&nbsp;billion in venture funds managed by SOFTBANK Corp. and its
affiliates (&#147;SOFTBANK&#148;). These venture funds are required to be funded upon
demand by SOFTBANK. As of January&nbsp;25, 2003, we have funded $174&nbsp;million of this
investment commitment, compared with $100&nbsp;million as of July&nbsp;27, 2002.
</FONT>
<P align="left"><FONT size="2">We provide structured financing to certain qualified customers to be used for
the purchase of equipment and other needs through our wholly owned subsidiary,
Cisco Systems Capital Corporation. As of January&nbsp;25, 2003, the outstanding loan
commitments were approximately $120&nbsp;million, subject to the customers
satisfying certain financial covenants, of which approximately $60&nbsp;million was
eligible for draw down. As of July&nbsp;27, 2002, the outstanding loan commitments
were approximately $948&nbsp;million, of which approximately $209&nbsp;million was
</FONT>
<P align="center"><FONT size="2">40</FONT>
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<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations</B></FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">eligible for draw down. These loan commitments may be funded over a two- to
three-year period, provided that these customers achieve specific business
milestones and satisfy certain financial covenants.
</FONT>
<P align="left"><FONT size="2">We have entered into several agreements to purchase or develop real estate,
subject to the satisfaction of certain conditions. As of January&nbsp;25, 2003, the
total amount of commitments, if certain conditions are met, was approximately
$355&nbsp;million, compared with $491&nbsp;million as of July&nbsp;27, 2002.
</FONT>
<P align="left"><FONT size="2">As of January&nbsp;25, 2003, we have a commitment of approximately $130&nbsp;million to
purchase the remaining portion of the minority interest of Cisco Systems, K.K.
(Japan), compared with $190&nbsp;million as of July&nbsp;27, 2002.
</FONT>
<P align="left"><FONT size="2">We also have certain other funding commitments of approximately $130&nbsp;million as
of January&nbsp;25, 2003 related to our privately held investments compared with
$152&nbsp;million as of July&nbsp;27, 2002.
</FONT>
<P align="left"><FONT size="2">Stock Repurchase Program</FONT>

<P align="left"><FONT size="2">In September 2001, the Board of Directors authorized a
stock repurchase program to acquire outstanding common stock. Under the
program, up to $3&nbsp;billion of our common stock could be reacquired over two
years. In August 2002, the Board of Directors increased our stock repurchase
program by $5&nbsp;billion to a total of $8&nbsp;billion of our common stock available
for repurchase through September&nbsp;12, 2003.
</FONT>
<P align="left"><FONT size="2">During the first six months of fiscal 2003, we repurchased and retired 193
million shares of common stock for an aggregate purchase price of approximately
$2.6&nbsp;billion. As of January&nbsp;25, 2003, we have repurchased and retired 317
million shares of common stock for an aggregate purchase price of
$4.4&nbsp;billion since inception of the program
and the remaining authorized amount for stock repurchases under this program
was $3.6&nbsp;billion.
</FONT>
<P align="left"><FONT size="2"><B>Liquidity and Capital Resource Requirements</B></FONT>

<P align="left"><FONT size="2">Based on past performance and current expectations, we believe that our cash
and cash equivalents, short-term investments, and cash generated from
operations will satisfy our working capital needs, capital expenditures,
investment requirements, stock repurchases, commitments (see Note 6 to the
Consolidated Financial Statements), future customer financings, and other
liquidity requirements associated with our existing operations through at least
the next 12&nbsp;months. In addition, there are no transactions, arrangements, and
other relationships with unconsolidated entities or other persons that are
reasonably likely to materially affect liquidity or the availability of our
requirements for capital resources.
</FONT>

<P align="center"><FONT size="2">41</FONT>




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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P align="left"><FONT size="2">Set forth below and elsewhere in this Report and in other documents we file
with the SEC are risks and uncertainties that could cause actual results to
differ materially from the results contemplated by the forward-looking
statements contained in the Report.
</FONT>
<P align="left"><FONT size="2"><B>OUR OPERATING RESULTS MAY FLUCTUATE IN FUTURE PERIODS WHICH MAY ADVERSELY
AFFECT OUR STOCK PRICE</B>
</FONT>
<P align="left"><FONT size="2">Our operating results have been in the past, and will continue to be, subject
to quarterly and annual fluctuations as a result of a number of factors. These
factors include:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Fluctuations in demand for our products and services, such as has occurred in the last
two years, especially with respect to Internet businesses and telecommunications service
providers;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Changes in sales and implementation cycles for our products and the reduced visibility
into our customers&#146; spending plans and associated revenue;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Our ability to maintain appropriate inventory levels and purchase commitments;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Price and product competition in the communications and networking industries which can
change rapidly due to technological innovation;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The overall trend toward industry consolidation both among our competitors and our
customers;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The introduction and market acceptance of new technologies and products, as well as the
adoption of new networking standards;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Variations in sales channels, product costs, or mix of products sold;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The timing and size of orders from customers;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Manufacturing lead times;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Fluctuations in our gross margins;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Our ability to achieve targeted cost reductions;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The ability of our customers, channel partners and suppliers to obtain financing or to
fund capital expenditures;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The timing and amount of employer payroll tax to be paid on employees&#146; gains on stock
options exercised;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">42</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Actual events, circumstances, outcomes, and amounts differing from judgments,
assumptions, and estimates used in determining the values of certain assets (including
the amounts of related valuation allowances), liabilities and other items reflected in
our financial statements; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Changes in accounting rules, such as recording expenses for employee stock option grants.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">As a consequence, operating results for a particular future period are
difficult to predict, and therefore, prior results are not necessarily
indicative of results to be expected in future periods. Any of the foregoing
factors, or any other factors discussed elsewhere herein, could have a material
adverse effect on our business, results of operations, and financial condition
which could adversely affect our stock price.
</FONT>
<P align="left"><FONT size="2"><B>OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY THE UNCERTAIN GEOPOLITICAL
ENVIRONMENT, AND UNFAVORABLE ECONOMIC AND MARKET CONDITIONS</B>
</FONT>
<P align="left"><FONT size="2">Adverse economic
conditions worldwide have contributed to slowdowns in the communications and
networking industries and may continue to impact our business, resulting in:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Reduced demand for our products as a result of a decrease in capital
spending by our customers, particularly service providers;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Increased price competition for our products, partially as a
consequence of customers disposing of unutilized products;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Increased risk of excess and obsolete inventories;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Excess facilities and manufacturing capacity; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Higher overhead costs as a percentage of revenues.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">Recent political turmoil in many parts of the world, including terrorist and
military actions, may continue to put pressure on global economic conditions.
If the economic and market conditions in the United States and globally do not
improve, or if they deteriorate further, we may continue to experience material
adverse impacts on our business, operating results, and financial condition as
a consequence of the above factors or otherwise. We do not expect the trend of
lower capital spending among service providers to reverse itself in the near
term.
</FONT>
<P align="center"><FONT size="2">43</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P align="left"><FONT size="2"><B>OUR REVENUES FOR A PARTICULAR PERIOD ARE DIFFICULT TO PREDICT AND A SHORTFALL
IN REVENUES MAY HARM OUR OPERATING RESULTS</B>
</FONT>
<P align="left"><FONT size="2">As a result of a variety of factors
discussed in this report, our revenues for a particular quarter are difficult
to predict. Our net sales may grow at a slower rate than experienced in past
periods and, in particular periods, may decline. Our ability to meet financial
expectations could also be adversely affected if the nonlinear sales pattern
seen in certain of our past quarters recurs in future periods. We have
experienced periods of time during which shipments exceeded net bookings,
leading to nonlinearity in shipping patterns. This can increase costs, as
irregular shipment patterns result in periods of underutilized capacity and
periods when overtime expenses may be incurred, as well as leading to
additional costs arising out of inventory management.
</FONT>
<P align="left"><FONT size="2">In addition, to improve
customer satisfaction, we continue to attempt to reduce our manufacturing lead
times, which may result in corresponding reductions in order backlog. A decline
in backlog levels could result in more variability and less predictability in
our quarter-to-quarter net sales and operating results going forward. In the
past, long manufacturing lead times caused our customers to place the same
order multiple times within our various sales channels and cancel the
duplicative orders when the product is received from one of the channels from
where it was ordered, or place orders with other vendors with shorter
manufacturing lead times. Such multiple ordering (along with other factors) may
cause difficulty in predicting our sales, and as a result could impair our
ability to manage parts inventory effectively.
</FONT>
<P align="left"><FONT size="2">We plan our operating expense levels based primarily on forecasted revenue
levels. These expenses and the impact of long-term commitments are relatively
fixed in the short-term. A shortfall in revenue could lead to operating results
being below expectations as we may not be able to quickly reduce these fixed
expenses in response to short-term business changes.
</FONT>
<P align="left"><FONT size="2">Any of the above factors could have a material adverse impact on our operations
and financial results.
</FONT>
<P align="center"><FONT size="2">44</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P align="left"><FONT size="2"><B>WE EXPECT GROSS MARGIN VARIABILITY OVER TIME</B>
</FONT>
<P align="left"><FONT size="2">Although we have experienced
increasing product gross margins, product gross margins may be adversely
affected in the future by a number of factors, including but not limited to:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Changes in customer, geographic or product mix, including mix of
configurations within each product group;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Increases in material or labor costs;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Excess inventory;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Obsolescence charges;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Changes in shipment volume;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Loss of cost savings due to changes in component pricing or charges
incurred due to inventory holding periods if parts ordering does not
correctly anticipate product demand;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Increased price competition;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Changes in distribution channels;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Increased warranty costs; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Introduction of new products and costs of entering new markets.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">Changes in service gross margin may result from various factors such as the
changes in mix between technical support services and advanced services, as
well as the timing of technical support service contract initiations and
renewals.
</FONT>
<P align="left"><FONT size="2"><B>DISRUPTION OF OR CHANGES IN THE MIX OF OUR PRODUCT AND SERVICES
DISTRIBUTION MODEL OR CUSTOMER BASE COULD HARM OUR SALES AND MARGINS</B>
</FONT>
<P align="left"><FONT size="2">If we fail
to manage distribution of our products and services properly, or if our
distributors&#146; financial condition or operations weaken, our revenues and gross
margins could be adversely affected. Furthermore, a change in the mix of our
customers between service provider and enterprise, or a change in mix of direct
sales and indirect sales, can adversely affect revenues and gross margins.
</FONT>
<P align="left"><FONT size="2">We use a variety of channels to bring our products and services to our end user
customers, including system integrators, two-tier distributors and direct
sales. System integrators integrate our products and services into an overall
network solution then typically resell to an end user. Two-tier distributors
stock inventory and sell to resellers who may themselves be system integrators.
Direct sales occur to both enterprise accounts and service providers. A
substantial portion of our products and services is distributed through our
channel partners and the
</FONT>
<P align="center"><FONT size="2">45</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P align="left"><FONT size="2">remainder is distributed through direct sales. Our two-tier distribution
channels, in contrast to our one-tier distributors, are given business terms
which allow them to return a portion of inventory and participate in various
cooperative marketing programs. In addition, if sales through indirect channels
increase, this may lead to greater difficulty in forecasting the mix of our
products, and to a certain degree, the timing of orders from our customers. We
recognize revenue to two-tier distributors based on a sell-through method
utilizing information provided by our distributors and we also maintain
accruals and allowances for all cooperative marketing and other programs.
</FONT>
<P align="left"><FONT size="2">Historically, we have seen fluctuations in gross margins based on changes in
the balance of our distribution channels. Although variability to date has not
been significant, because each distribution channel has a unique profile, there
can be no assurance that changes in the balance of our distribution model in
future periods would not have an adverse effect on our gross margins, and
therefore, profitability.
</FONT>
<P align="left"><FONT size="2">For example:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">As we respond to demand from certain categories of customers to sell
directly to them, we could risk alienating channel partners and
adversely affecting our distribution model.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Because direct sales may compete with the sales made by channel
partners, these channel partners may elect to use other suppliers that
do not directly sell their own products.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Some of our system integrators may demand that we absorb a greater
share of the risks that their customers may ask them to bear,
affecting our gross margin.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Some of our channel partners may have insufficient financial resources
and may not be able to withstand changes in business conditions,
including the recent economic downturn. Revenues from indirect sales
could suffer if our distributor&#146;s financial condition or operations
weaken.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Service provider customers may demand rigorous acceptance testing or
prime contracting. As we develop more &#147;solution&#148; oriented products,
enterprise customers may demand similar terms and conditions. Such
terms and conditions can lower gross margin and defer revenue
recognition.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">46</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P align="left"><FONT size="2"><B>OUR INVENTORY MANAGEMENT RELATING TO OUR SALES TO DISTRIBUTORS IS COMPLEX, AND
EXCESS FINISHED GOODS MAY HARM OUR GROSS MARGINS</B>
</FONT>
<P align="left"><FONT size="2">We must manage our inventory relating to sales to our distributors effectively.
With respect to finished goods, inventory held by our two tier distributors
could affect our results of operations. Distributors may increase orders
during periods of product shortages, cancel orders if their inventory is too
high, or delay orders in anticipation of new products. Distributors also may
adjust their orders in response to the supply of our products and the products
of our competitors that are available to the distributor and to seasonal
fluctuations in end-user demand. If we have excess inventory, we may have to
reduce our prices and write down inventory, which in turn could result in lower
gross margins. Our two-tier distribution channels, in contrast to our one-tier
distributors, are given business terms which allow them to return a portion of
inventory and participate in various cooperative marketing programs. In
addition, if sales through indirect channels increase, this may lead to greater
difficulty in forecasting the mix of our products, and to a certain degree, the
timing of orders from our customers. We recognize revenue to two-tier
distributors based on a sell-through method utilizing information provided by
our distributors and we also maintain accruals and allowances for all
cooperative marketing and other programs.
</FONT>
<P align="left"><FONT size="2"><B>SALES TO THE SERVICE PROVIDER MARKET ARE ESPECIALLY VOLATILE AND CONTINUED
DECLINES OR DELAYS IN SALES ORDERS FROM THIS INDUSTRY MAY HARM OUR OPERATING
RESULTS AND FINANCIAL CONDITION</B>
</FONT>
<P align="left"><FONT size="2">Sales to the service provider market have been
characterized by large and often sporadic purchases with longer sales cycles.
We have experienced significant decreases in sales to service providers as
market conditions have changed. Sales activity in this industry depends upon
the stage of completion of expanding network infrastructures, the availability
of funding, and the extent that service providers are affected by regulatory,
economic, and business conditions in the country of operations. Continued
declines or delays in sales orders from this industry could have a material
adverse effect on our business, operating results, and financial condition,
particularly as we continue to invest in development of new products aimed at
this market segment. The slowdown in the general economy, over-capacity,
changes in the service provider market, and the constraints on capital
availability have had a material adverse effect on many of our service provider
customers, with a number of such customers going out of business or
substantially reducing their expansion plans. These conditions have had a
material adverse effect on our business and operating results, and we expect
that these conditions may continue for the foreseeable future. Finally, service
provider customers typically have longer implementation cycles, require a
broader range of service, including design services, demand that vendors take
on a larger share of risks, often have acceptance provisions which can lead to
a delay in revenue recognition and expect financing from vendors. All these
factors can add further risk to business conducted with service providers.
</FONT>
<P align="center"><FONT size="2">47</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P align="left"><FONT size="2"><B>A SHORTAGE OF ADEQUATE COMPONENT SUPPLY OR MANUFACTURING CAPACITY COULD
INCREASE OUR COSTS OR CAUSE A DELAY IN OUR ABILITY TO FULFILL ORDERS AND OUR
FAILURE TO ESTIMATE CUSTOMER DEMAND PROPERLY MAY RESULT IN EXCESS OR OBSOLETE
COMPONENT SUPPLY THAT COULD ADVERSELY AFFECT OUR GROSS MARGINS</B>
</FONT>
<P align="left"><FONT size="2">Our growth and
ability to meet customer demands also depend in part on our ability to obtain
timely deliveries of parts from our suppliers. We have experienced component
shortages in the past that have adversely affected our operations. We may in
the future experience a short supply of certain component parts as a result of
strong demand in the industry for those parts or problems experienced by
suppliers. If shortages or delays persist, the price of these components may
increase, or the components may not be available at all. We may not be able to
secure enough components at reasonable prices or of acceptable quality to build
new products in a timely manner in the quantities or configurations needed.
Accordingly, our revenues and gross margins could suffer until other sources
can be developed. There can be no assurance that we will not encounter these
problems in the future. Although in many cases we use standard parts and
components for our products, certain components are presently available only
from a single source or limited sources. We may not be able to diversify
sources in a timely manner, which could harm our ability to deliver products to
customers and seriously impact present and future sales.
</FONT>
<P align="left"><FONT size="2">We believe that we may be faced with the following challenges going forward:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">New markets that we participate in may grow quickly and thus, consume
significant component capacity;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">As we continue to acquire companies and new technologies, we are
dependent, at least initially, on unfamiliar supply chains or
relatively small supply partners; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">We face competition for certain components, which are supply
constrained, from existing competitors and companies in other markets.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">Manufacturing capacity and component supply constraints could be significant
issues for us. We use several contract manufacturers and suppliers to provide
manufacturing services for our products. During the normal course of business,
in order to reduce manufacturing lead times and ensure adequate component
supply, we enter into agreements with certain contract manufacturers and
suppliers that allow them to procure inventory based upon criteria as defined
by us. If we fail to anticipate customer demand properly, an oversupply of
parts could result in excess or obsolete components that could adversely affect
our gross margins. For additional information regarding our purchase
commitments, see Note 8, &#147;Commitments and Contingencies&#148;, on pages 38 to 40 of
our 2002 Annual Report to Shareholders. A reduction or interruption in supply,
a significant increase in the price of one or more components, a failure to
adequately authorize procurement of inventory by our contract manufacturers, or
a decrease in demand of products could materially adversely affect our
business, operating results and financial condition and could materially damage
customer relationships. Furthermore, as a result of binding price or purchase
commitments with suppliers, we may be obligated to purchase components at
prices that are
</FONT>
<P align="center"><FONT size="2">48</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P align="left"><FONT size="2">higher than those available in the current market. In the event that we become
committed to purchase components at prices in excess of the current market
price when the components are actually utilized, our gross margins could
decrease.
</FONT>
<P align="left"><FONT size="2">The fact that we do not own the bulk of our manufacturing facilities could have
an adverse impact on the future products supply and on operating results.
Financial problems of contract manufacturers on whom we rely, or reservation of
capacity by other companies, inside or outside of our industry, could either
limit supply or increase costs.
</FONT>
<P align="left"><FONT size="2"><B>THE MARKETS IN WHICH WE COMPETE ARE INTENSELY COMPETITIVE WHICH COULD ADVERSELY
AFFECT OUR REVENUE GROWTH</B>
</FONT>
<P align="left"><FONT size="2">We compete in the networking and communications
equipment markets, providing products and services for transporting data,
voice, and video traffic across intranets, extranets, and the Internet. These
markets are characterized by rapid change, converging technologies, and a
migration to networking solutions that offer superior advantages. These market
factors represent both an opportunity and a competitive threat to us. We
compete with numerous vendors in each product category. The overall number of
competitors providing niche product solutions may increase due to the market&#146;s
long-term attractive growth.
</FONT>
<P align="left"><FONT size="2">Our competitors include 3Com, Alcatel, Avaya, Avici, Check Point Software,
Ciena, Dell, Ericsson, Enterasys, Extreme Networks, Foundry Networks, Fujitsu,
Huawei, Juniper, Lucent, , NetScreen, Nokia, Nortel Networks, Redback Networks,
Riverstone, Siemens AG, and Sycamore Networks, among others. Some of these
companies compete across many of our product lines, while others are primarily
focused in a specific product area. Barriers to entry are relatively low, and
new ventures to create products that do or could compete with our products are
regularly formed. In addition, several of our current and potential competitors
may have greater resources, including technical and engineering resources, than
we do. In addition, as we expand into new markets, we may face competition from
our existing competitors, and will likely face competition from other companies
as well.
</FONT>
<P align="left"><FONT size="2">The principal competitive factors in the markets in which we presently compete
and may compete in the future include:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The ability to provide a
broad range of networking products and services;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>


<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Product performance;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Price;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The ability to provide new products;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The ability to provide value-added features such as security,
reliability, and investment protection;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Conformance to standards;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">49</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Market presence; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The ability to provide financing.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">We also face competition from customers to whom we license or supply technology
and suppliers from whom we transfer technology. The inherent nature of
networking requires interoperability. As such, we must cooperate and at the
same time compete with many companies. Our inability to effectively manage
these complicated relationships with customers and suppliers, or the
uncontrollable and unpredictable acts of others, could have a material adverse
effect on our business, operating results, and financial condition and
accordingly affect our chances of success.
</FONT>
<P align="left"><FONT size="2"><B>WE DEPEND UPON THE DEVELOPMENT OF NEW PRODUCTS AND ENHANCEMENTS TO EXISTING
PRODUCTS AND IF WE FAIL TO PREDICT AND RESPOND TO EMERGING TECHNOLOGICAL TRENDS
AND CUSTOMERS&#146; CHANGING NEEDS, OUR OPERATING RESULTS AND MARKET SHARE MAY
SUFFER</B>
</FONT>
<P align="left"><FONT size="2">The markets for our products are characterized by rapidly changing technology,
evolving industry standards, new product introductions, and evolving methods of
building and operating networks. Our operating results depend on our ability to
develop and introduce new products into existing and emerging markets and to
reduce the costs to produce existing products. We believe the Internet and
other data, voice and video networks are evolving into a &#147;network of networks&#148;
which will require common technology platforms and broad end-to-end solutions
for particular applications rather than products aimed at particular market
segments. In that environment, customers will be more concerned with overall
solutions rather than with whether the solution is built around a particular
technology, such as routing or switching. The process of developing new
technology is complex and uncertain, and if we fail to accurately predict
customers&#146; changing needs and emerging technological trends, our business could
be harmed. We must commit significant resources to develop new products before
knowing whether our investments will result in products the market will accept.
In particular, if the &#147;network of networks&#148; does not emerge as we believe it
will, many of our investments may prove to be without value. Furthermore, we
may not execute successfully on that vision because of errors in product
planning or timing, technical hurdles which we fail to overcome in timely
fashion, or because of lack of appropriate resources. This could result in
competitors providing those solutions before we do, and loss of market share,
revenues and earnings. The success of new products is dependent on several
factors, including proper new product definition, component costs, timely
completion and introduction of these products, differentiation of new products
from those of our competitors, and market acceptance of these products. There
can be no assurance that we will successfully identify new product
opportunities, develop and bring new products to market in a timely manner, and
achieve market acceptance of our products, or that products and technologies
developed by others will not render our products or technologies obsolete or
noncompetitive.
</FONT>
<P align="center"><FONT size="2">50</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P align="left"><FONT size="2"><B>OUR BUSINESS SUBSTANTIALLY DEPENDS UPON THE CONTINUED GROWTH OF THE INTERNET
AND INTERNET-BASED SYSTEMS; CHANGES IN INDUSTRY STRUCTURE COULD LEAD TO PRODUCT
DISCONTINUANCES</B>
</FONT>
<P align="left"><FONT size="2">A substantial portion of our business and revenue depends on
growth of the Internet and on the deployment of our products by customers that
depend on the continued growth of the Internet. As a result of the economic
slowdown and the reduction in capital spending, which have particularly
affected telecommunications service providers, spending on Internet
infrastructure has declined, which has had a material adverse effect on our
business. To the extent that the economic slowdown and reduction in capital
spending continue to adversely affect spending on Internet infrastructure, we
could continue to experience material adverse effects on our business,
operating results, and financial condition.
</FONT>
<P align="left"><FONT size="2">Because of the rapid introduction of new products, and changing customer
requirements related to matters such as cost-effectiveness and security, we
believe that there could be certain performance problems with Internet
communications in the future, which could receive a high degree of publicity
and visibility. As we are a large supplier of networking products, we may be
materially adversely affected, regardless of whether or not these problems are
due to the performance of our own products. Such an event could also result in
a material adverse effect on the market price of our common stock independent
of direct effects on our business, and could materially adversely affect our
business, operating results, and financial condition.
</FONT>
<P align="left"><FONT size="2">In response to changes in industry and market conditions, we may be required to
strategically realign our resources and consider restructuring, disposing of,
or otherwise, exiting businesses. Any decision to limit investment in or to
dispose of or otherwise, exit businesses may result in the recording of special
charges, such as inventory and technology related write-offs and workforce
reduction costs, charges relating to consolidation of excess facilities, or
claims from third parties who were resellers or users of discontinued products.
Estimates relating to the liabilities for excess facilities are affected by
changes in real estate market conditions. Estimates with respect to the useful
life or ultimate recoverability of our carrying basis of assets, including
purchased intangible assets, could change as a result of such assessments and
decisions. Additionally, we are required to perform goodwill impairment tests
on an annual basis and between annual tests in certain circumstances. There can
be no assurance that future goodwill impairment tests will not result in a
charge to earnings.
</FONT>
<P align="left"><FONT size="2"><B>WE HAVE MADE AND EXPECT TO CONTINUE TO MAKE ACQUISITIONS; ANY ACQUISITIONS
COULD DISRUPT OUR OPERATIONS AND HARM OUR OPERATING RESULTS</B>
</FONT>
<P align="left"><FONT size="2">Our growth is dependent upon, market growth, our ability to enhance our
existing products, and our ability to introduce new products on a timely basis.
We have and will continue to address the need to develop new products through
acquisitions of other companies and technologies, including the personnel such
acquisitions may bring to us. Acquisitions involve numerous risks, including
the following:
</FONT>
<P align="center"><FONT size="2">51</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Difficulties in integrating the operations, technologies, products and personnel of
the acquired companies;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Diversion of management&#146;s attention from normal daily operations of the business;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Potential difficulties in completing projects associated with in-process research
and development;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Difficulties in entering markets in which we have no or limited direct prior
experience and where competitors in such markets have stronger market positions;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Initial dependence on unfamiliar supply chains or relatively small supply partners;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Insufficient revenues to offset increased expenses associated with acquisitions; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The potential loss of key employees of the acquired companies.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">Acquisitions may also cause us to:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Issue common stock that would dilute our current shareholders&#146; percentage ownership;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Assume liabilities;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Record goodwill and non-amortizable intangible assets that will be subject to
impairment testing and potential periodic impairment charges;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Incur amortization expenses related to certain intangible assets;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Incur large and immediate write-offs; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Become subject to litigation.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">Mergers and acquisitions of high-technology companies are inherently risky, and
no assurance can be given that our previous or future acquisitions will be
successful and will not materially adversely affect our business, operating
results, or financial condition. Failure to manage and successfully integrate
acquisitions we make could harm our business and operating results in a
material way. Prior acquisitions have resulted in a wide range of outcomes,
from successful introduction of new products and technologies to an inability
to do so. Even when an acquired company has already developed and marketed
products, there can be no assurance that product enhancements will be made in a
timely fashion or that all preacquisition due diligence will have identified
all possible issues that might arise with respect to such products.
</FONT>
<P align="left"><FONT size="2">From time to time, we have made acquisitions that result in in-process research
and development expenses being charged in an individual quarter. These charges
may occur in any particular quarter resulting in variability in our quarterly
earnings.
</FONT>
<P align="center"><FONT size="2">52</FONT>
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<P>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P align="left"><FONT size="2">See also the discussion of risks related to new product development, which also
applies to acquisitions, above under the risk factor entitled, <B>&#147;We depend upon
the development of new products and enhancements to existing products and if we
fail to predict and respond to emerging technological trends and customers&#146;
changing needs, our operating results and market share may suffer&#148;.</B>
</FONT>
<P align="left"><FONT size="2"><B>THE ENTRANCE INTO NEW OR DEVELOPING MARKETS EXPOSES US TO ADDITIONAL
COMPETITION AND INCREASES DEMANDS ON OUR SERVICE AND SUPPORT OPERATIONS</B>
</FONT>
<P align="left"><FONT size="2">As we
focus on new market opportunities, such as transporting data, voice, and video
traffic across the same network, we will increasingly compete with large
telecommunications equipment suppliers as well as startup companies. Several of
our current and potential competitors may have greater resources, including
technical and engineering resources, than we do. Additionally, as customers in
these markets complete infrastructure deployments, they may require greater
levels of service, support, and financing than we have provided in the past. We
expect that demand for these types of service or financing contracts may
increase in the future. There can be no assurance that we can provide products,
service, support, and financing to effectively compete for these market
opportunities. Further, provision of greater levels of services by us may
result in a delay in the timing of revenue recognition.
</FONT>
<P align="left"><FONT size="2"><B>PRODUCT QUALITY
PROBLEMS COULD LEAD TO REDUCED REVENUES AND GROSS MARGINS</B>
</FONT>
<P align="left"><FONT size="2">We produce highly
complex products that incorporate leading-edge technology, including both
hardware and software. Software typically contains &#147;bugs&#148; which can
unexpectedly interfere with expected operations. There can be no assurance that
our pre-shipment testing programs will be adequate to detect all
defects &#151; either in individual products or which could affect numerous shipments &#151; which
might interfere with customer satisfaction, reduce sales opportunities, or
affect gross margins if the cost of remedying the problems exceeded reserves
established for that purpose. In the past, we have had to recall certain
components. While the cost of such recalls was not material, there can be no
assurance that such a recall, depending on the product involved, would not have
a material impact. An inability to cure a product defect could result in the
failure of a product line, and withdrawal, at least temporarily from a product
or market segment, damage to our reputation, inventory costs, product
reengineering expenses, and a material impact on revenues and margins.
</FONT>
<P align="left"><FONT size="2"><B>INDUSTRY CONSOLIDATION MAY LEAD TO INCREASED COMPETITION AND MAY HARM OUR
OPERATING RESULTS</B>
</FONT>
<P align="left"><FONT size="2">There has been a trend toward industry consolidation in our
markets for several years. We expect this trend toward industry consolidation
to continue as companies attempt to strengthen or hold their market positions
in an evolving industry. We believe that industry consolidation may result in
stronger competitors that are better able to compete as sole-source vendors for
customers. This could lead to more variability in operating results and could
have a material adverse effect on our business, operating results, and
financial condition. Furthermore, particularly in the service
</FONT>
<P align="center"><FONT size="2">53</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P align="left"><FONT size="2">provider market, rapid consolidation will lead to fewer customers, with the
effect that loss of a major customer could have a material impact on results
not anticipated in a customer marketplace comprised of more numerous
participants.
</FONT>
<P align="left"><FONT size="2"><B>DUE TO THE GLOBAL NATURE OF OUR OPERATIONS, POLITICAL OR ECONOMIC
CHANGES IN A SPECIFIC COUNTRY OR REGION COULD HARM OUR COSTS, EXPENSES AND
FINANCIAL CONDITION</B>
</FONT>
<P align="left"><FONT size="2">We conduct significant sales and customer support
operations in countries outside of the United States and also depend on
non-U.S. operations of our contract manufacturers and our distribution
partners. For fiscal 2002 and the first six months of fiscal 2003, we derived
49% and 49% of our revenues, respectively, from sales outside the United
States. Accordingly, our future results could be materially adversely affected
by a variety of uncontrollable and changing factors including, among others,
foreign currency exchange rates; political or social unrest or economic
instability in a specific country or region; trade protection measures and
other regulatory requirements which may affect our ability to import or export
our products from various countries; service provider and government spending
patterns affected by political considerations; difficulties in staffing and
managing international operations; and adverse tax consequences, including
imposition of withholding or other taxes on payments by subsidiaries. Any or
all of these factors could have a material adverse impact on our costs,
expenses and financial condition.
</FONT>
<P align="left"><FONT size="2"><B>WE ARE EXPOSED TO FLUCTUATIONS IN CURRENCY
EXCHANGE RATES WHICH COULD NEGATIVELY IMPACT OUR FINANCIAL RESULTS AND CASH
FLOWS</B>
</FONT>
<P align="left"><FONT size="2">Because a significant portion of our business is conducted outside the
United States, we face exposure to adverse movements in non-U.S. currency
exchange rates. These exposures may change over time as business practices
evolve and could have a material adverse impact on our financial results and
cash flows. Historically, our primary exposures have related to
non-dollar-denominated sales in Japan, Canada, and Australia, and certain
non-dollar-denominated operating expenses in Europe, Latin America, and Asia,
where we sell primarily in U.S. dollars. Additionally, we have exposures to
emerging market currencies, which can have extreme currency volatility. An
increase in the value of the dollar could increase the real cost to our
customers of our products in those markets outside the United States where we
sell in dollars, and a weakened dollar could increase the cost of local
operating expenses and procurement of raw materials to the extent we must
purchase components in foreign currencies.
</FONT>
<P align="left"><FONT size="2">Currently, we hedge only those currency exposures associated with certain
assets and liabilities denominated in nonfunctional currencies and periodically
will hedge anticipated foreign currency cash flows. The hedging activities
undertaken by us are intended to offset the impact of currency fluctuations on
certain nonfunctional currency assets and liabilities. Our attempts to hedge
against these risks may not be successful resulting in an adverse impact on our
net income.
</FONT>
<P align="center"><FONT size="2">54</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P align="left"><FONT size="2"><B>WE ARE EXPOSED TO THE CREDIT RISK OF SOME OF OUR CUSTOMERS AND TO CREDIT
EXPOSURES IN WEAKENED MARKETS WHICH COULD RESULT IN MATERIAL LOSSES</B>
</FONT>
<P align="left"><FONT size="2">Most of our
sales are on an &#147;open credit&#148; basis, with payment terms of 30&nbsp;days typically in
the United States, and, because of local customs or conditions, longer in some
markets outside the United States. We monitor individual customer payment
capability in granting such open credit arrangements, seek to limit such open
credit to amounts we believe the customers can pay, and maintain reserves we
believe are adequate to cover exposure for doubtful accounts. Beyond our open
credit arrangements, we have also experienced demands for customer financing
and facilitation of leasing arrangements. We expect demand for customer
financing to continue. We believe customer financing is a competitive factor in
obtaining business, particularly in supplying customers involved in significant
infrastructure projects. Our loan financing arrangements may include not only
financing the acquisition of our products and services but also providing
additional funds for other costs associated with network installation and
integration of our products and services and for working capital purposes. We
do not recognize revenue on such loan financing arrangements until cash
payments are received.
</FONT>
<P align="left"><FONT size="2">Because of the current slowdown in the global economy, our exposure to the
credit risks relating to our financing activities described above have
increased. Although we have programs in place to monitor and mitigate the
associated risk, including monitoring of particular risks in certain geographic
areas, there can be no assurance that such programs will be effective in
reducing our credit risks. There have been significant bankruptcies among
customers both on open credit and with loan or lease financing arrangements,
particularly among Internet businesses and service providers, causing us to
incur economic or financial losses. There can be no assurance that additional
losses would not be incurred, and that such losses would not be material.
Although these losses have not been material to date, future losses, if
incurred, could harm our business and have a material adverse effect on our
operating results and financial condition.
</FONT>
<P align="left"><FONT size="2">A portion of our sales is derived through our resellers in two-tier
distribution channels. These resellers/customers are generally given business
terms which allow them to return a portion of inventory, receive credits for
changes in selling prices, and participate in various cooperative marketing
programs. We maintain estimated accruals and allowances for such exposures.
However, such resellers tend to have more limited financial resources than
other resellers and end-user customers and therefore, represent potential
sources of increased credit risk because they may be more likely to lack the
reserve resources to meet payment obligations.
</FONT>
<P align="left"><FONT size="2"><B>OUR BUSINESS DEPENDS UPON OUR PROPRIETARY RIGHTS, WHICH MIGHT PROVE DIFFICULT
TO ENFORCE, AND THERE IS A RISK OUR PRODUCTS COULD BE HELD TO INFRINGE RIGHTS
OF THIRD PARTIES</B>
</FONT>
<P align="left"><FONT size="2">We generally rely on patents, copyrights, trademarks, and trade
secret laws to establish and maintain proprietary rights in our technology and
products. While we have been issued a number of patents and other patent
applications are currently pending, there can be no assurance, that any of
these patents will not be challenged, invalidated, or circumvented, or that any
rights granted
</FONT>
<P align="center"><FONT size="2">55</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P align="left"><FONT size="2">under these patents will in fact provide competitive advantages to us.
Furthermore, many key aspects of networking technology are governed by
industry-wide standards which are usable by all market entrants, often with
little or no royalty owed in connection with the use of the standards. In
addition, there can be no assurance that patents will be issued from pending
applications, or that claims allowed on any future patents will be sufficiently
broad to protect our technology. In addition, the laws of some foreign
countries may not protect our proprietary rights to the same extent, as do the
laws of the United States. The outcome of any actions taken in these foreign
countries may be different than if such actions were determined under the laws
of the United States. While we are not dependent on any individual patents or
group of patents for particular segments of the business for which we compete,
if we are unable to protect our proprietary rights to the totality of the
features (including aspects of products protected by other than patent rights),
in a market we may find ourselves at a competitive disadvantage to others who
do not have to incur the substantial expense, time and effort required to
create the innovative products which have enabled us to be successful.
</FONT>
<P align="left"><FONT size="2">From time to time, third parties have asserted exclusive patent, copyright,
trademark and other intellectual property rights to technologies and related
standards that are relevant to us. These assertions have increased over time as
a result of our growth and the general increase in the pace of patent claims
assertions, particularly in the United States. Because of the existence of a
large number of patents in the networking field, the secrecy of some pending
patents and the rapid rate of issuance of new patents, it is not economically
practical nor even possible to determine in advance whether a product or any of
its components infringe or will infringe the patent rights of others. Third
parties, including customers, have asserted claims and/or initiated litigation,
and may in the future assert claims or initiate litigation, against us or our
manufacturers, suppliers, or customers, alleging infringement of their
proprietary rights with respect to our existing or future products or
components of those products. Regardless of the merit of these claims, they can
be time-consuming, result in costly litigation and diversion of technical and
management personnel, or require us to develop a non-infringing technology or
enter into license agreements; where claims are made by customers, resistance
even to unmeritorious claims could damage customer relationships. There can be
no assurance that licenses will be available on acceptable terms and
conditions, if at all, in all such circumstances, or that our indemnification
by their suppliers will be adequate to cover their costs if a claim were
brought directly against us or our customers. If any infringement or other
intellectual property claim made against us by any third party is successful,
or if we fail to develop non-infringing technology or license the proprietary
rights on commercially reasonable terms and conditions, our business, operating
results and financial condition could be materially and adversely affected.
</FONT>
<P align="left"><FONT size="2">Many of our products are designed to include software or other intellectual
property licensed from third parties. It may be necessary in the future to seek
or renew licenses relating to various aspects of these products. There can be
no assurance that the necessary licenses would be available on acceptable
terms, if at all. The inability to obtain certain licenses or other rights or
to obtain such licenses or rights on favorable terms, or the need to engage in
litigation regarding these matters, could have a material adverse effect on our
business, operating results, and financial condition. Moreover, the inclusion
in our products of software or other intellectual property licensed from third
parties on a non-exclusive basis could limit our ability to protect our
proprietary rights in our products.
</FONT>
<P align="center"><FONT size="2">56</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P align="left"><FONT size="2"><B>OUR OPERATING RESULTS AND FUTURE PROSPECTS COULD BE MATERIALLY HARMED BY
UNCERTAINTIES OF REGULATION OF THE INTERNET</B>
</FONT>
<P align="left"><FONT size="2">Currently, few laws or regulations
apply directly to access or commerce on the Internet. We could be materially
adversely affected by regulation of the Internet and Internet commerce in any
country where we operate. Such regulations could include matters such as voice
over the Internet or using Internet Protocol, encryption technology, and access
charges for Internet service providers. Our business could be materially
adversely affected by the changes in the regulations surrounding the
telecommunications industry. The adoption of regulation of the Internet and
Internet commerce could decrease demand for our products, and at the same time
increase the cost of selling our products, which could have a material adverse
effect on our business, operating results, and financial condition.
</FONT>
<P align="left"><FONT size="2"><B>OUR SUCCESS
LARGELY DEPENDS ON OUR ABILITY TO RETAIN AND RECRUIT KEY PERSONNEL AND ANY
FAILURE TO DO SO WOULD HARM OUR ABILITY TO MEET KEY OBJECTIVES</B>
</FONT>
<P align="left"><FONT size="2">Our success has
always depended in large part on our ability to attract and retain highly
skilled technical, managerial, sales, and marketing personnel. In spite of the
economic slowdown, competition for these personnel is intense, especially in
the Silicon Valley area of Northern California. Volatility or lack of positive
performance in our stock price may also adversely affect our ability to retain
key employees, all of whom have been granted stock options. The loss of
services of any of our key personnel, the inability to retain and attract
qualified personnel in the future, or delays in hiring required personnel,
particularly engineering and sales personnel, could make it difficult to meet
key objectives, such as timely and effective product introductions. In
addition, companies in the networking industry whose employees accept positions
with competitors frequently claim that competitors have engaged in improper
hiring practices. We have received these claims in the past and may receive
additional claims to this effect in the future.
</FONT>
<P align="left"><FONT size="2"><B>ADVERSE RESOLUTION OF
LITIGATION MAY HARM OUR OPERATING RESULTS OR FINANCIAL CONDITION</B>
</FONT>
<P align="left"><FONT size="2">We are a party
to lawsuits in the normal course of our business. Litigation can be expensive,
lengthy, and disruptive to normal business operations. Moreover, the results of
complex legal proceedings are difficult to predict. An unfavorable resolution
of a particular lawsuit could have a material adverse effect on our business,
operating results, or financial condition. For additional information regarding
certain of the lawsuits in which we are involved, see Item&nbsp;1, &#147;Legal
Proceedings&#148;, contained in Part II of this Report.
</FONT>
<P align="center"><FONT size="2">57</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P align="left"><FONT size="2"><B>CHANGES IN EFFECTIVE TAX RATES COULD ADVERSELY AFFECT OUR RESULTS</B>
</FONT>
<P align="left"><FONT size="2">Our future
effective tax rates could be adversely affected by earnings being lower than
anticipated in countries where we have lower statutory rates, changes in the
valuation of our deferred tax assets and liabilities, or by changes in tax laws
or interpretations thereof.
</FONT>
<P align="left"><FONT size="2"><B>OUR BUSINESS AND OPERATIONS ARE ESPECIALLY SUBJECT TO THE RISKS OF EARTHQUAKES,
FLOODS, AND OTHER NATURAL CATASTROPHIC EVENTS</B>
</FONT>
<P align="left"><FONT size="2">Our corporate headquarters,
including certain of our research and development operations and our
manufacturing facilities, are located in the Silicon Valley area of Northern
California, a region known for seismic activity. Additionally, certain of our
facilities, which include one of our manufacturing facilities, are located near
rivers that have experienced flooding in the past. A significant natural
disaster, such as an earthquake or a flood, could have a material adverse
impact on our business, operating results, and financial condition.
</FONT>
<P align="left"><FONT size="2"><B>MANMADE PROBLEMS SUCH AS COMPUTER VIRUSES OR TERRORISM MAY DISRUPT OUR
OPERATIONS AND HARM OUR OPERATING RESULTS</B>
</FONT>
<P align="left"><FONT size="2">Despite our implementation of network security measures, our servers are
vulnerable to computer viruses, break-ins, and similar disruptions from
unauthorized tampering with our computer systems. Any such event could have a
material adverse effect on our business, operating results, and financial
condition. In addition, the effects of war or acts of terrorism could have a
material adverse effect on our business, operating results, and financial
condition. The terrorist attacks in New York and Washington, D.C. on September
11, 2001 disrupted commerce throughout the world and intensified the
uncertainty of the U.S. and other economies. The continued threat of terrorism
and heightened security and military action in response to this threat, or any
future acts of terrorism, may cause further disruptions to these economies and
create further uncertainties. To the extent that such disruptions or
uncertainties result in delays or cancellations of customer orders, or the
manufacture or shipment of our products, our business, operating results and
financial condition could be materially and adversely affected.
</FONT>
<P align="left"><FONT size="2"><B>WE ARE EXPOSED TO FLUCTUATIONS IN THE MARKET VALUES OF OUR PORTFOLIO
INVESTMENTS AND IN INTEREST RATES; IMPAIRMENT OF OUR INVESTMENTS COULD HARM OUR
EARNINGS</B>
</FONT>
<P align="left"><FONT size="2">We maintain an investment portfolio of various holdings, types, and
maturities. These securities are generally classified as available for sale
and, consequently, are recorded on the Consolidated Balance Sheets at fair
value with unrealized gains or losses reported as a separate component of
accumulated other comprehensive income (loss), net of tax. Part of this
portfolio includes equity investments in several publicly traded companies, the
values of which are subject to market price volatility. Recent events have
adversely affected the public equities market and general economic conditions
may continue to worsen. As a result, we may recognize in earnings the
</FONT>
<P align="center"><FONT size="2">58</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P align="left"><FONT size="2">decline in fair value of our publicly traded equity investments below the cost
basis when the decline is judged to be other-than-temporary. For information
regarding the sensitivity of and risks associated with the market value of
portfolio investments and interest rates, refer to section titled &#147;Quantitative
and Qualitative Disclosures About Market Risk&#148; included in this Report and in
our Annual Report on Form&nbsp;10-K, as amended, for the fiscal year ended July&nbsp;27,
2002. Furthermore, our equity investments in both publicly traded companies and
private companies are subject to risk of loss of investment capital. These
investments are inherently risky as the market for the technologies or products
they have under development are typically in the early stages and may never
materialize. We could lose our entire investment in these companies.
</FONT>
<P align="left"><FONT size="2"><B>IF WE DO NOT SUCCESSFULLY MANAGE OUR STRATEGIC ALLIANCES WE MAY EXPERIENCE
INCREASED COMPETITION OR DELAYS IN PRODUCT DEVELOPMENT</B>
</FONT>
<P align="left"><FONT size="2">We have several
strategic alliances with large and complex organizations and other companies
with whom we work to offer complementary products and services. These
arrangements are generally limited to specific projects, the goal of which is
generally to facilitate product compatibility and adoption of industry
standards. If successful, these relationships may be mutually beneficial and
result in industry growth. However, these alliances carry an element of risk
because, in most cases, we must compete in some business areas with a company
with which we have a strategic alliance and, at the same time, cooperate with
that company in other business areas. Also, if these companies fail to perform
or if these relationships fail to materialize as expected, we could suffer
delays in product development or other operational difficulties.
</FONT>
<P align="left"><FONT size="2"><B>CHANGES IN
TELECOMMUNICATIONS REGULATION AND TARIFFS COULD HARM OUR PROSPECTS AND FUTURE
SALES</B>
</FONT>
<P align="left"><FONT size="2">Changes in telecommunications requirements in the United States or other
countries could affect the sales of our products. In particular, we believe it
is possible that there may be changes in U.S. telecommunications regulations in
the future that could slow the expansion of the service providers&#146; network
infrastructures and materially adversely affect our business, operating
results, and financial condition. Future changes in tariffs by regulatory
agencies or application of tariff requirements to currently untariffed services
could affect the sales of our products for certain classes of customers.
Additionally, in the United States, our products must comply with various
Federal Communications Commission requirements and regulations. In countries
outside of the United States, our products must meet various requirements of
local telecommunications authorities. Changes in tariffs or failure by us to
obtain timely approval of products could have a material adverse effect on our
business, operating results, and financial condition.
</FONT>
<P align="left"><FONT size="2"><B>OUR STOCK PRICE MAY CONTINUE TO BE VOLATILE</B>
</FONT>
<P align="left"><FONT size="2">Our common stock has experienced substantial price volatility, particularly as
a result of variations between our actual financial results, and the published
expectations of analysts, and as a result of announcements by our competitors
and us. Furthermore, speculation in the press or
</FONT>
<P align="center"><FONT size="2">59</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations</B></FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2"><B>RISK FACTORS</B></FONT>

<P align="left"><FONT size="2">investment community about our strategic position, financial condition, results
of operations, business or significant transactions can cause changes in stock
price. In addition, the stock market has experienced extreme price and volume
fluctuations that have affected the market price of many technology companies,
in particular, and that have often been unrelated to the operating performance
of these companies. These factors, as well as general economic and political
conditions, may materially adversely affect the market price of our common
stock in the future. Additionally, volatility or a lack of positive performance
in our stock price may adversely affect our ability to retain key employees,
all of whom have been granted stock options.
</FONT>
<P align="center"><FONT size="2">60</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P>
<!-- link2 "Item 3. Quantitative and Qualitative Disclosures About Market Risk" -->
<DIV align="left"><A NAME="008"></A></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;3.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Quantitative and Qualitative Disclosures About Market Risk</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">We maintain an investment portfolio of various holdings, types, and maturities. These
securities are generally classified as available for sale and, consequently,
are recorded on the Consolidated Balance Sheets at fair value with unrealized
gains or losses reported as a separate component of accumulated other
comprehensive income (loss), net of tax. Part of this portfolio includes equity
investments in several publicly traded companies, the values of which are
subject to market price volatility. During the first six months of fiscal 2003
and 2002, we recognized a charge of $412&nbsp;million and $858&nbsp;million, pre-tax,
respectively, attributable to the impairment of certain publicly traded equity
securities (see Note 7 to the Consolidated Financial Statements). The
impairment charges were related to the decline in the fair value of certain
publicly traded equity investments below their cost basis that were judged to
be other-than-temporary.
</FONT>
<P align="left"><FONT size="2">At any time, a sharp rise in interest rates could have a material adverse
impact on the fair value of our investment portfolio. Conversely, declines in
interest rates could have a material impact on interest earnings for our
investment portfolio. We do not currently hedge these interest rate exposures.
</FONT>
<P align="left"><FONT size="2">We have also invested in several privately held companies, many of which can
still be considered in the start-up or development stages. These investments
are inherently risky as the market for the technologies or products they have
under development are typically in the early stages and may never materialize.
We could lose our entire initial investment in these companies.
</FONT>
<P align="left"><FONT size="2">Readers are referred to pages 23 to 24 of the fiscal 2002 Annual Report to
Shareholders for a more detailed discussion of quantitative and qualitative
disclosures about market risk. The following analysis presents the hypothetical
changes in fair value of public equity investments that are sensitive to
changes in the stock market (in millions):
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="37%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Valuation of Securities</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Valuation of Securities</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Given X% Decrease</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Fair Value</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Given X% Increase</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>in Each Stock's Price</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>as of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>in Each Stock's Price</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><FONT size="1"><B>January 25,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(75%)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(50%)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>(25%)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>25%</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>50%</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>75%</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Corporate equities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">131</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">261</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">522</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">653</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">783</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">914</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Our equity portfolio consists of securities with characteristics that most
closely match the S&#038;P Index or companies traded on the Nasdaq National Market.
These equity securities are held for purposes other than trading. The modeling
technique used measures the hypothetical change in fair values arising from
selected hypothetical changes in each stock&#146;s price. Stock price fluctuations
of plus or minus 25%, 50%, and 75% were selected based on the probability of
their occurrence and are representative of the historical movements in the
Nasdaq Composite Index.
</FONT>
<P align="left"><FONT size="2">Our evaluation of equity investments in private and public companies is based
on the fundamentals of the business, including among other factors, the nature
of their technologies, and potential for financial return to us.
</FONT>
<P align="center"><FONT size="2">61</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link2 "Item 4. Controls and Procedures" -->
<DIV align="left"><A NAME="009"></A></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;4.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Controls and Procedures</B></FONT></TD>
</TR>
</TABLE>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">a.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><U>Evaluation of disclosure
controls and procedures.</U> Based on their
evaluation as of a date within 90&nbsp;days of the filing date of this
Report, the Company&#146;s principal executive officer and principal
financial officer have concluded that the Company&#146;s disclosure
controls and procedures (as defined in Rules&nbsp;13a-14(c) and 15d-14(c)
under the Securities Exchange Act of 1934 (the &#147;Exchange Act&#148;)) are
effective to ensure that information required to be disclosed by the
Company in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">b.</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><U>Changes in internal controls.</U> There were no significant changes in the
Company&#146;s internal controls or in other factors that could
significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.</FONT></TD>
</TR>
</TABLE>
<P>

<!-- link1 "PART II. OTHER INFORMATION" -->
<DIV align="left"><A NAME="010"></A></DIV>

<!-- link2 "Item 1. Legal Proceedings" -->
<DIV align="left"><A NAME="011"></A></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>PART II.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> OTHER INFORMATION</B></FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><B>Item&nbsp;1.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2"><B> Legal Proceedings</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">We are subject to legal
proceedings, claims, and litigation arising in the ordinary course of business.
While the outcome of these matters is currently not determinable, we do not
expect that the ultimate costs to resolve these matters will have a material
adverse effect on our consolidated financial position, results of operations,
or cash flows.
</FONT>
<P align="left"><FONT size="2">Beginning on April&nbsp;20, 2001, a number of purported shareholder class action
lawsuits were filed in the United States District Court for the Northern
District of California against us and certain of our officers and directors.
The lawsuits have been consolidated, and the consolidated action is purportedly
brought on behalf of those who purchased our publicly traded securities between
August&nbsp;10, 1999 and February&nbsp;6, 2001. Plaintiffs allege that defendants have
made false and misleading statements, purport to assert claims for violations
of the federal securities laws, and seek unspecified compensatory damages and
other relief. We believe the claims are without merit and intend to defend the
actions vigorously.
</FONT>
<P align="left"><FONT size="2">In addition, beginning on April&nbsp;23, 2001, a number of purported shareholder
derivative lawsuits were filed in the Superior Court of California, County of
Santa Clara and in the Superior Court of California, County of San Mateo. There
is a procedure in place for the coordination of such actions. Two purported
derivative suits have also been filed in the United States District Court for
the Northern District of California, and those federal court actions have been
consolidated. The complaints in the various derivative actions include claims
for breach of fiduciary duty, waste of corporate assets, mismanagement, unjust
enrichment, and violations of the California Corporations Code; seek
compensatory and other damages, disgorgement, and other relief; and are based
on essentially the same allegations as the class actions.
</FONT>
<P align="center"><FONT size="2">62</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P>
<!-- link2 "Item 2. Changes in Securities and Use of Proceeds" -->
<DIV align="left"><A NAME="012"></A></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Changes in Securities and Use of Proceeds</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">On December&nbsp;20, 2002, we issued an aggregate of 650,411 shares of our common
stock in connection with the acquisition of Psionic Software, Inc. On October
1, 2002, we issued an aggregate of 9,094,039 shares of our common stock in
connection with the acquisition of AYR Networks, Inc. On August&nbsp;29, 2002, we
issued an aggregate of 2,716,241 shares of our common stock in connection with
the acquisition of AuroraNetics, Inc. On July&nbsp;18, 2002, we issued an aggregate
of 3,074,603 shares of our common stock in connection with the acquisition of
Allegro Systems, Inc. On June&nbsp;26, 2002, we issued an aggregate of 5,639,404 shares of our
common stock in connection with the acquisition of Navarro Networks, Inc. On
June&nbsp;24, 2002, we issued an aggregate of 9,768,288 shares of our common stock
in connection with the acquisition of Hammerhead Networks, Inc. The offer and
sale of the securities were effected without registration in reliance on the
exemption afforded by Section&nbsp;3(a)(10) of the Securities Act of 1933, as
amended. The issuances were approved, after a hearing upon the fairness of the
terms and conditions of the transaction, by the California Department of
Corporations under authority to grant such approval as expressly authorized by
the laws of the State of California.
</FONT>

<P>

<!-- link2 "Item 4. Submission of Matters to a Vote of Security Holders" -->
<DIV align="left"><A NAME="013"></A></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;4.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Submission of Matters to a Vote of Security Holders</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">We held our Annual Meeting of Shareholders on November&nbsp;19, 2002. At the
meeting, our shareholders voted on the following five proposals and cast their
votes as follows:
</FONT>
<P align="left"><FONT size="2">Proposal 1: To elect as the following nominees as directors:
</FONT>

<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="41%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Nominee</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>For</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Withheld</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Carol A. Bartz</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,825,057,785</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">235,071,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Larry R. Carter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,984,438,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">75,690,649</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">John T. Chambers</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,988,006,165</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">72,123,168</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Carleton S. Fiorina</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,978,077,069</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">82,052,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Dr.&nbsp;James F. Gibbons</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,826,292,787</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">233,836,546</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Dr.&nbsp;John L. Hennessy</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,892,019,423</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">168,109,910</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">James C. Morgan</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,828,480,295</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">231,649,038</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">John P. Morgridge</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,987,481,484</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">72,647,849</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Arun Sarin</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,749,619,051</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">310,510,282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Donald T. Valentine</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,984,564,539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">75,564,794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Steven M. West</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,751,413,881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">308,715,452</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Jerry Yang</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,750,272,941</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">309,856,392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">Proposal 2: To ratify the appointment of PricewaterhouseCoopers LLP as our
independent accountants for the fiscal year ending July&nbsp;26, 2003:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
    <TD width="32%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Broker</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>For</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Against</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Abstentions</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Non-Votes</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">5,551,815,923</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">469,121,541</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39,075,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">116,625</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Proposal 3: A shareholder proposal that our board of directors adopt a policy
to cap fees for non-audit services provided by our independent auditor to 25%
of aggregate fees paid to our
</FONT>
<P align="center"><FONT size="2">63</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">independent auditor:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Broker</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>For</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Against</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Abstentions</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Non-Votes</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">424,927,748</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,436,630,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">169,968,608</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,028,602,174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Proposal 4: A shareholder proposal that a vote be given to the shareholders to
declare a quarterly dividend:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Broker</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>For</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Against</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Abstentions</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Non-Votes</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">278,978,490</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,676,189,213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">76,377,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,028,583,664</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<p><FONT size="2">Proposal 5: A shareholder proposal that our board of directors prepare a
report every fiscal year describing certain capabilities of our hardware and
software sold to government agencies and state-owned communications or
information technology entities</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Broker</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>For</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Against</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Abstentions</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Non-Votes</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">141,495,666</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,681,601,884</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">208,452,884</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,028,578,899</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>


<P>
<!-- link2 "Item 6. Exhibits and Reports on Form 8-K" -->
<DIV align="left"><A NAME="014"></A></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2"><B>Item&nbsp;6.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"><B> Exhibits and Reports on Form&nbsp;8-K</B></FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Exhibits</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The following documents are filed as Exhibits to this Report:</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">99.1</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"> Certification of Principal Executive Officer</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">99.2</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2"> Certification of Principal Financial Officer</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Reports on Form&nbsp;8-K</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">We filed one report on Form&nbsp;8-K during the quarter ended January&nbsp;25,
2003 as follows:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="90%">
<TR valign="bottom">
    <TD width="16%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="79%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left"><FONT size="1"><B>Date</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="1"><B>Item Reported On</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">December&nbsp;27, 2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Item&nbsp;5. On December&nbsp;23, 2002, we
announced that we had completed
the acquisition of Psionic
Software, Inc.</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">64</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link1 "SIGNATURE" -->
<DIV align="left"><A NAME="015"></A></DIV>

<P align="center"><FONT size="2"><B>SIGNATURE</B></FONT>

<P align="left"><FONT size="2">Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="51%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" valign="top" align="left"><FONT size="2">Cisco Systems, Inc.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Date: February&nbsp;19, 2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
By
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;Larry R. Carter</FONT></TD>
</TR>
<TR>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" valign="top" align="left"><FONT size="2">Larry R. Carter, Senior Vice President,<br>
Finance and Administration, Chief<br>
Financial Officer and Secretary</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">65</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2"><B>CHIEF EXECUTIVE OFFICER CERTIFICATION</B>
</FONT>
<P align="left"><FONT size="2">I, John T. Chambers, President and Chief
Executive Officer of Cisco Systems, Inc., certify that:
</FONT>
<P align="left"><FONT size="2">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this Quarterly Report on Form&nbsp;10-Q of Cisco Systems, Inc.
(the &#147;Registrant&#148;);
</FONT>
<P align="left"><FONT size="2">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this Quarterly
Report;
</FONT>
<P align="left"><FONT size="2">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this Quarterly Report;
</FONT>
<P align="left"><FONT size="2">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Registrant&#146;s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules&nbsp;13a-14 and 15d-14) for the Registrant and we have:
</FONT>
<P align="left"><FONT size="2">a) designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this Quarterly Report is being prepared;
</FONT>
<P align="left"><FONT size="2">b) evaluated the effectiveness of the Registrant&#146;s disclosure controls and
procedures as of a date within 90&nbsp;days prior to the filing date of this
Quarterly Report (the &#147;Evaluation Date&#148;); and
</FONT>
<P align="left"><FONT size="2">c) presented in this Quarterly Report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
</FONT>
<P align="left"><FONT size="2">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Registrant&#146;s other certifying officer and I have disclosed, based on our
most recent evaluation, to the Registrant&#146;s auditors and the audit committee of
Registrant&#146;s board of directors (or persons performing the equivalent
function):
</FONT>
<P align="left"><FONT size="2">a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the Registrant&#146;s ability to record, process,
summarize and report financial data and have identified for the Registrant&#146;s
auditors any material weaknesses in internal controls; and
</FONT>
<P align="left"><FONT size="2">b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant&#146;s internal controls;
and
</FONT>
<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Registrant&#146;s other certifying officer and I have indicated in this
Quarterly Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
</FONT>
<P align="left"><FONT size="2">Date: February&nbsp;20, 2003
</FONT>
<P align="left"><FONT size="2">&nbsp;
</FONT>
<P align="left"><FONT size="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;John T. Chambers<BR>
<HR align="left" size="1" width="20%" noshade>
</FONT>
<P align="left"><FONT size="2">John T. Chambers
</FONT>
<P align="left"><FONT size="2">President and Chief Executive Officer
</FONT>
<P align="left"><FONT size="2">(Principal Executive Officer)
</FONT>
<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2"><B>CHIEF FINANCIAL OFFICER CERTIFICATION</B>
</FONT>
<P align="left"><FONT size="2">I, Larry R. Carter, Senior Vice President, Finance and Administration,
Chief Financial Officer and Secretary of Cisco Systems, Inc., certify that:
</FONT>
<P align="left"><FONT size="2">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this Quarterly Report on Form&nbsp;10-Q of Cisco Systems, Inc.
(the &#147;Registrant&#148;);
</FONT>
<P align="left"><FONT size="2">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this Quarterly
Report;
</FONT>
<P align="left"><FONT size="2">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this Quarterly Report;
</FONT>
<P align="left"><FONT size="2">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Registrant&#146;s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules&nbsp;13a-14 and 15d-14) for the Registrant and we have:
</FONT>
<P align="left"><FONT size="2">a) designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this Quarterly Report is being prepared;
</FONT>
<P align="left"><FONT size="2">b) evaluated the effectiveness of the Registrant&#146;s disclosure controls and
procedures as of a date within 90&nbsp;days prior to the filing date of this
Quarterly Report (the &#147;Evaluation Date&#148;); and
</FONT>
<P align="left"><FONT size="2">c) presented in this Quarterly Report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
</FONT>
<P align="left"><FONT size="2">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Registrant&#146;s other certifying officer and I have disclosed, based on our
most recent evaluation, to the Registrant&#146;s auditors and the audit committee of
Registrant&#146;s board of directors (or persons performing the equivalent
function):
</FONT>
<P align="left"><FONT size="2">a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the Registrant&#146;s ability to record, process,
summarize and report financial data and have identified for the Registrant&#146;s
auditors any material weaknesses in internal controls; and
</FONT>
<P align="left"><FONT size="2">b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant&#146;s internal controls;
and
</FONT>
<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Registrant&#146;s other certifying officer and I have indicated in this
Quarterly Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
</FONT>
<P align="left"><FONT size="2">Date: February&nbsp;19, 2003
</FONT>
<P align="left"><FONT size="2">&nbsp;
</FONT>
<P align="left"><FONT size="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;Larry R. Carter<BR>
<HR align="left" size="1" width="20%" noshade>
</FONT>
<P align="left"><FONT size="2">Larry R. Carter
</FONT>
<P align="left"><FONT size="2">Senior Vice President, Finance and Administration,
</FONT>
<P align="left"><FONT size="2">Chief Financial Officer and Secretary
</FONT>
<P align="left"><FONT size="2">(Principal Financial Officer)
</FONT>
<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2"><B>EXHIBIT INDEX</B></FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="14%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="77%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>EXHIBIT</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>NO.</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="center"><FONT size="2">99.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Certification of Principal Executive Officer Pursuant to 18 U.S.C.
Section&nbsp;1350 as Adopted Pursuant to Section&nbsp;906 of the
Sarbanes-Oxley Act of 2002</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top" align="center"><FONT size="2">99.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Certification of Principal Financial Officer Pursuant to 18 U.S.C.
Section&nbsp;1350 as Adopted Pursuant to Section&nbsp;906 of the
Sarbanes-Oxley Act of 2002</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">&nbsp;</FONT>
</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>3
<FILENAME>f87804exv99w1.htm
<DESCRIPTION>EXHIBIT 99.1
<TEXT>
<HTML>
<HEAD>
<TITLE>EXHIBIT 99.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="right"><FONT size="2"><B>Exhibit&nbsp;99.1</B></FONT>

<P align="center"><FONT size="2"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350<BR>
AS ADOPTED PURSUANT TO SECTION 906<BR>
OF THE SARBANES-OXLEY ACT OF 2002</B></FONT>

<P align="left"><FONT size="2">I, John T. Chambers, President and Chief Executive Officer of Cisco Systems,
Inc. (the &#147;Company&#148;), do hereby certify, pursuant to 18 U.S.C. Section&nbsp;1350, as
adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002, that, to my
knowledge:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">the Quarterly Report on Form&nbsp;10-Q of the Company for the quarter ended
January&nbsp;25, 2003, as filed with the Securities and Exchange Commission
(the &#147;Report&#148;), fully complies with the requirements of Section&nbsp;13(a)
or 15(d) of the Securities Exchange Act of 1934; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;
</FONT>
<P align="left"><FONT size="2">Date: February&nbsp;20, 2003
</FONT>
<P align="left"><FONT size="2">&nbsp;
</FONT>
<P align="left"><FONT size="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;John T. Chambers<BR>
<HR align="left" size="1" width="15%" noshade>
</FONT>
<P align="left"><FONT size="2">John T. Chambers
</FONT>
<P align="left"><FONT size="2">President and Chief Executive Officer
</FONT>
<P align="left"><FONT size="2">(Principal Executive Officer)
</FONT>
<P align="center"><FONT size="2">&nbsp;</FONT>
</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>4
<FILENAME>f87804exv99w2.htm
<DESCRIPTION>EXHIBIT 99.2
<TEXT>
<HTML>
<HEAD>
<TITLE>EXHIBIT 99.2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P align="right"><FONT size="2"><B>Exhibit&nbsp;99.2</B></FONT>

<P align="center"><FONT size="2"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350<BR>
AS ADOPTED PURSUANT TO SECTION 906<BR>
OF THE SARBANES-OXLEY ACT OF 2002</B></FONT>

<P align="left"><FONT size="2">I, Larry R. Carter, Senior Vice President, Finance and Administration, Chief
Financial Officer and Secretary of Cisco Systems, Inc. (the &#147;Company&#148;), do
hereby certify, pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to
Section&nbsp;906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">the Quarterly Report on Form&nbsp;10-Q of the Company for the quarter ended
January&nbsp;25, 2003, as filed with the Securities and Exchange Commission
(the &#147;Report&#148;), fully complies with the requirements of Section&nbsp;13(a)
or 15(d) of the Securities Exchange Act of 1934; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&#149;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">&nbsp;
</FONT>
<P align="left"><FONT size="2">Date: February&nbsp;19, 2003
</FONT>
<P align="left"><FONT size="2">&nbsp;
</FONT>
<P align="left"><FONT size="2">/s/&nbsp;&nbsp;&nbsp;&nbsp;Larry R. Carter<BR>
<HR align="left" size="1" width="15%" noshade>
</FONT>
<P align="left"><FONT size="2">Larry R. Carter
</FONT>
<P align="left"><FONT size="2">&nbsp;
</FONT>
<P align="left"><FONT size="2">Senior Vice President, Finance and Administration,
</FONT>
<P align="left"><FONT size="2">Chief Financial Officer and Secretary
</FONT>
<P align="left"><FONT size="2">(Principal Financial Officer)
</FONT>

<P align="center"><FONT size="2">&nbsp;</FONT>




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</HTML>

</TEXT>
</DOCUMENT>
</SUBMISSION>
