Cisco 2006 Annual Report Download - page 75

Download and view the complete annual report

Please find page 75 of the 2006 Cisco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 79

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79

78 Cisco Systems, Inc.
14. Subsequent Events
Acquisition of Meetinghouse Data Communications, Inc.
As of July 29, 2006, the Company announced a denitive agreement to acquire privately held Meetinghouse Data Communications, Inc.
The aggregate announced purchase price for this acquisition was approximately $44 million in cash. The acquisition closed in the rst
quarter of scal 2007.
Investment in Nuova Systems, Inc.
In the rst quarter of scal 2007, the Company made an investment in Nuova Systems, Inc. (“Nuova Systems”), which conducts research and
development on data center-related products. As a result of this investment, the Company owns approximately 80% of Nuova Systems and
will consolidate the results of Nuova Systems in the Company’s Consolidated Financial Statements beginning in the rst quarter of scal 2007.
This investment includes $50 million of funding and a license to certain of the Company’s technology. In addition, upon the occurrence of
certain events, the Company has committed up to an additional $42 million of funding to Nuova Systems beginning in the second quarter
of scal 2008.
In connection with this investment, the Company and Nuova Systems have entered into a call option agreement that provides the
Company with the right to purchase the remaining interests of approximately 20% in Nuova Systems. If exercised by the Company, the call
option provides that the minority interest holders would be eligible to receive two milestone payments based on a revenue formula set forth
in the call option agreement. The amounts due under the milestone payments will be recognized by the Company when it is determined that
the exercise of the call option is probable and payments will be made. These amounts will be recorded as compensation expense based on
an estimate of the fair value of the amounts earned by the minority interest holders pursuant to a vesting schedule. If the Company exercises
the call option, the potential amounts that would be paid on the milestone dates would be a minimum of $10 million and a maximum of
$578 million, beginning in scal 2008 and ending in scal 2009.
Notes to Consolidated Financial Statements