Cisco Systems Acquires HyNEX

Cisco Systems, Inc. Monday acquired privately-held HyNEX,
Ltd.
of Shefayim, Israel for an estimated $127 million in common stock
and cash.

The deal has already been approved by both companies’ boards. Cisco also said it would take a one-time charge of a penny per share to pay for the deal. However, it did not specify the quarter in which the charge will be reflected.

HyNEX, a subsidiary of Elbit, Ltd.
is an of intelligent access device developer whose
products are used to design ATM networks. The deal marks another move by
Cisco to accelerate its international deployment of
voice and video hardware.

This is Cisco’s fourth acquisition in Israel and underscores Cisco’s
growing global technology development strategy. HyNEX’s products are
optimized for international markets and will strengthen Cisco’s global
service provider solution by offering a migration path from traditional,
circuit switch networks to open, packet-based networks.

According to Cahners In-Stat Group, the
worldwide networking equipment market reached $10.8 billion in the first
quarter showing a modest 3 percent increase from fourth quarter 1999 sales.

In-Stat’s report indicated that Cisco maintained its number one market
share ranking, followed by Nortel
Networks, Inc.
, 3Com
Corp.
and Lucent Technologies, Inc.

Although revenue growth in beginning of this year was outpaced by the 13
percent growth achieved in the final quarter of 1999, In-Stat attributed
the sluggish sales performance as merely a seasonal downtrend.

Gemma Paulo, In-Stat voice and data research analyst said she believes the
networking equipment market is positioned for more robust growth in 2000,
and expects year-end total revenues to hit $50 billion.

“Although growth slowed in Q1 2000, the networking equipment market will
pick up steam in the remaining quarters of 2000, fueled by enterprise
backbone purchases and continued service provider network build out,” Paulo
said. “With the exception of high-end switches, LAN equipment markets are
suffering from rapid price erosion. Top vendors have pushed into the
lucrative WAN equipment markets, targeting service providers.”

In-Stat noted that 3Com took a first quarter revenue
hit due to its reorganization, but that the firm still led in the small
business networking equipment market segment.

Although In-Stat indicated that Lucent is moving away from
the enterprise market, the former offspring of AT&T Corp. Monday unleashed
its aggressive multi-vendor Virtual Private Network Alliance aimed at
providing resellers and enterprise customers its comprehensive integration,
monitoring and administration services.

Lucent’s VPNA is comprised of a multitude of sales channels through Alteon WebSystems, Inc. , RSA Security, Inc.
, Sun Microsystems,
Inc.
, UUNET and
other leading Internet industry firms.

Touting its unique program, Ron Silver, Lucent senior marketing manager
said the alliance is a great place for ISPs and professional service
vendors to come together and offer more simplified VPN choices.

“With the VPNA, customers now have a one-stop shop for buying all of their
VPN infrastructure and application products plus a full suite of
professional services and Internet access services,” Silver said.

Meanwile, Cisco announced it is also the worldwide leader of the broadband
equipment market for service providers.
According to recent reports from leading analyst firms Cisco showed
significant market share growth in the broadband aggregation, DSL and cable
equipment markets.

According Michael Howard, Infonetics
Research, Inc.
founder and principal analyst, Cisco ranked number one
in both units shipped and total worldwide aggregation revenue in broadband
equipment during the first quarter of this year.

“Our recent report shows Cisco is the leader in Subscriber Services Routers
with almost 55 percent marketshare of units shipped worldwide and over 40
percent marketshare in terms of revenues,” Howard said. “In addition to the
Cisco 6400 aggregator, Cisco shipped a new version of the Cisco 7200 IP
service platform filling the need for a low-end DSL aggregator in the
marketplace.”

Scott Marshall, Cisco group vice president, said Cisco achieved top rank in
broadband DSL aggregation space, showed the largest market share growth in
the DSL access concentrator space, and further extended its top market
share position in the cable headend segment.

“The industry reports show how service providers are embracing Cisco’s
broadband strategy to provide intelligent services to a variety of devices
over any broadband network,” Marshall said. “The report reinforces what
service providers and cable operators around the world recognize, that
Cisco’s broadband products offer the best set of advanced IP services with
a broad range of performance options unmatched in the industry.”

Cisco’s newly acquired HyNEX products complement its family of access
routers of high-end network convergence products. HyNEX’s products are
optimized to meet the specific needs of international service provider
markets and currently support European (ETSI) and North American (ANSI)
standards.

The acquisition works to maintain Cisco’s ongoing strategy to develop its
piece of the high-end voice and video hardware market segment in addition
to its worldwide router and broadband network equipment leadership.

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