Cisco Systems

(CSCO) - Get Cisco Systems, Inc. Report

today called a press conference after

TheMarker.com

on Sunday exposed its plan to kill one of its five Israeli startups,

HyNEX

.

TheMarker.com exclusive revealed that Cisco would be trimming 25% of its local staff, despite a February denial of local cutbacks. But last week the company announced 8,500 job cuts following the 8,000 dismissals announced in February, in an effort to cut costs as its market implodes.

Cisco owns five Israeli startups employing 400 people: IP network technology firm

PentaCom

,

Class Data

,

Infogear

,

Sigal

and HyNEX.Cisco bought PentaCom in April 2000 for $118 million. In June it purchased HyNEX, a Shefayim, Israel, maker of computer-access equipment for asynchronous transfer mode, from

TheStreet Recommends

Elbit Ltd.

(ELBT)

for $135 million.

At the time of the deal, Elbit's management was vilified for selling its 94% of the startup for "only" $127 million, on which the company booked a capital gain of $51 million. Today it looks like Elbit correctly assessed that HyNEX had exhausted its potential as an independent company, and could only progress further with a major backer such as Cisco.

But even backing from Cisco evidently couldn't launch HyNEX into stratospheric growth, given the slumping telecom market.

On Sunday TheMarker.com reported that HyNEX's employees smelled a rat after hearing a "times are hard" lecture, and that the marketing department had been directed to scale back activities and to avoid cutting new deals. The workers also heard hints about a closure during the Passover break.

Cisco isn't the only multinational to pull the plug on Israeli operations.

Nortel

(NT)

closed down

Armon Networks

and

Lucent

(LU)

put the kibosh on

WebAccess

.