Summary
Arista Networks (ANET) announced a significant development in its ongoing litigation with Cisco Systems. The company entered into a binding term sheet to settle all pending lawsuits, agreeing to pay Cisco $400 million by August 20, 2018. This settlement also includes mutual releases of claims, a five-year stand-down period for utility patent infringement claims on current products, and a three-year dispute resolution process for new or modified features. Additionally, Arista will make certain modifications to its Command Line Interface (CLI). This settlement has a material impact on Arista's second quarter 2018 GAAP financial results. The company will record a $405 million legal settlement charge and a $99 million reduction in its provision for income taxes. This results in a revised GAAP net loss of $155.3 million for the quarter. Importantly, these adjustments do not affect Arista's non-GAAP financial results, as the company excludes litigation-related costs from its non-GAAP reporting.
Key Highlights
- 1Arista Networks has reached a binding term sheet with Cisco Systems to settle all pending litigation.
- 2The settlement involves a payment of $400 million to Cisco, due by August 20, 2018.
- 3Mutual releases of claims between Arista and Cisco, extending to customers, manufacturers, and partners, are part of the agreement.
- 4A five-year stand-down period for utility patent infringement claims on existing products and a three-year dispute resolution process for new features are included.
- 5Arista has agreed to make certain modifications to its Command Line Interface (CLI).
- 6The settlement necessitates a $405 million GAAP legal settlement charge and a $99 million tax provision reduction for Q2 2018.
- 7Revised Q2 2018 GAAP net loss is $155.3 million, but non-GAAP results remain unaffected by these litigation costs.