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In 1993, Cisco Systems Inc. reported net income of $172 million on revenues of $649 million. At the time, it employed about 1,000 workers, but foresaw its headcount ballooning as the company embarked on a string of acquisitions that would create the telecom behemoth it is today. To accommodate that growth, Cisco began an office-space expansion that year and financed it with synthetic leases in order to preserve cash and leverage for its upcoming M&A. Destined to become all the rage in the 1990s, synthetic leases are off-balance sheet financial tools that unload debt to special-purpose entities, or SPEs. Their purpose: to allow high-growth, but cash poor or below investment grade concerns to get the use of sizable amounts of relatively inexpensive capital without hurting their debt to equity ratios.

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