Cisco Announces Multi-Year Innovation and Sustainability Initiative in China

Company significantly increases investments across a broad range of business activities

BEIJING, China. - Cisco® today announced a multi-year investment initiative aimed at strengthening its business commitments and long-term corporate strategy in China. The program, announced today by Cisco Chairman and CEO John Chambers at a press conference in Beijing, defines a three- to five-year plan of increased investment in China in alignment with the country’s long term economic, societal and environmental goals.

“Today’s announcements underscore both China’s strategic importance to Cisco’s global operations and the broad range of growth opportunities presented by the China market, particularly as an innovator in the next wave of the Internet’s development in collaboration and Web 2.0 technologies. Cisco has made significant investments in our China business since we established operations in the country in 1994 and this program will lay the foundation for the next chapter in Cisco’s development in China,” said John Chambers, chairman and CEO of Cisco.

Cisco’s multi-year investment program will include:

* A significant increase in local procurement. In the past five years, Cisco has purchased more than USD $7 billion worth of China-sourced components and services, a critical part of the company’s virtual manufacturing supply chain. According to Cisco estimates, these procurement commitments provide employment to 50,000 people in manufacturing management roles and through contract manufacturing and supplier partners.
* The total value of Cisco’s commitments in China since 2002 are estimated at more than USD $8.5 billion, and under the initiative announced today, could expand to approximately USD $16 billion during the next five years, including significant increases in materials procurement, and increases in education, Cisco Capital, research and development, direct and indirect investments and sales and service operations.
* A Memorandum of Understanding with China Development Bank to explore a joint investment program that would provide capital and expertise for innovative Chinese businesses. The initiative is intended to support high-growth Chinese companies over multiple sectors, with a focus on information technology, “green” innovators, and other key segments (see separate announcement).
* A commitment to expansion of the Cisco Networking Academies program in cooperation with China’s Ministry of Education to add 300 additional academies in vocational colleges during the next three years, with a specific focus on China’s central and western provinces. Currently, there are more than 200 Networking Academies in 70 cities throughout China, which have trained more than 90,000 students since inception. The new initiatives will add the capacity to train an additional 100,000 students by 2010. Cisco will also donate more than USD $6 million worth of networking equipment to assist in establishing labs in the new academies.
* A memorandum of understanding with Alibaba Group, China’s largest business-to-business (B2B) on-line portal. Under the MOU, Cisco and Alibaba will explore ways to jointly offer collaboration and business management solutions to small and medium businesses (SMBs) in China. Under a previous agreement, Cisco will also invest USD $17.5 million in Alibaba.com Limited, a subsidiary of Alibaba Group, as part of its planned initial public offering on the Hong Kong Stock Exchange, becoming one of only eight cornerstone investors in the listing (see separate announcement).
* Establishment of incremental funding up to USD $400 million for Cisco Systems Capital China for providing financing facilities to Cisco customers in China during the next three to five years. Cisco Systems Capital China commenced captive financing operations in June 2006 and has funded USD $60 million in customer assets to date.
* The establishment of Cisco’s first global “green” technology center to address the increasing need for sustainable development, energy efficiency, reduction of electronic waste, and emission reductions inside and outside of China. The center will also augment existing programs underway by Cisco China’s R&D teams in the area of application specific integrated circuits (ASIC) power efficiency design and expand this into other product areas.
* Establishment of product and research teams to develop innovative networking equipment to address the SMB (small and medium business) market and emerging countries markets, leveraging local design and manufacturing resources.

Cisco first established operations in China in 1994 and now employs more than 2,300 staff in sales, customer support and service, research and development, BPO/IT outsourcing, Cisco Capital and manufacturing. The company has 12 offices in China, a major R&D facility in Shanghai, Scientific Atlanta R&D/manufacturing facilities, as well as several development centers supporting WebEx, which Cisco acquired in March 2007.