John Chambers on Cisco: We Will Make Changes

John Chambers, CEO of Cisco Systems, announced a range of changes to fix the ailing company:

Cisco Systems Inc. Chief Executive Officer John Chambers, after reporting disappointing earnings four quarters in a row, will makes changes aimed at regaining the company’s lost credibility and sharpening its focus.

“You will see Cisco make a number of targeted moves in the coming weeks,” Chambers said yesterday in a memo to employees at the San Jose, California-based company. He didn’t give details on what form the changes would take.

In the 1,500-word message, Chambers depicted a company that has lost focus and been slow to make decisions. Cisco has seen profitability erode and is struggling to meet sales growth goals while pushing into 30 new businesses. Tackling additional markets also has left Cisco vulnerable to rivals such as Hewlett-Packard Co. and Juniper Networks Inc., which are moving into its home turf.

My Comments
1. This is a telling tale of trying to do too much at once. “Pushing into 30 new businesses” is a hard ask, and while on one level Cisco could be commended for trying to broaden its appeal beyond its core product lines, the net result has not been good for investors or customers.

2. Companies – like people – that have too much cash on hand and don’t have to fight for survival each day, can become complacent and stop playing hard enough to win. Being a bit more resource-constrained can greatly help with focus on the essentials, rather than fiddling with the interesting possibilities and market extensions. But Cisco has been down-and-out before – after the great Internet bubble for example – and fought back to an elevated plain. Here’s hoping John and his team can do it again.

3. Cisco’s collaboration business remains core to its go-forward strategy. This includes WebEx for web conferencing, telepresence for high-end video meetings, and Cisco Quad and related collaboration software offerings.

4. For more on Cisco and collaboration, see my 2009 report, Cisco for Collaboration: Vendor and Product Analysis.

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