LAS VEGAS — Cisco Systems Inc. CEO John Chambers briefly addressed the company’s current challenges, restructuring and imminent layoffs during his keynote address at this week’s Cisco Live customer conference.
Cisco [NASDAQ: CSCO] may shed 5,000 and perhaps up to 10,000 positions early in its fiscal year 2012, which begins in August. The company is looking to cut $1 billion in expenses and dump unproductive or non-core product operations after consecutive quarters of uninspiring performance.
Cisco has lost share and profits in switching, and its foray into consumer electronics has been disappointing. Many blame ambitious incursions into adjacent markets through 145 acquisitions over two decades, which distracted the company from its core routing and switching business, as well as a bloated management structure that stalled decision making.
Chambers promised the audience changes.
“We are continuing to reinvent ourselves,” he said during his address. “We are looking at how to streamline to move a bit faster in the future. We were too complex (in innovation). We are making changes to move at a faster pace.”
The changes will help Cisco innovate faster, Chambers said. That means new products should get into the hands of customers faster. He also promised a Cisco that’s easier to do business with and more attentive to customers.
Cisco has come under fire recently for being heavy-handed in customer relations.
“You ask, we deliver,” Chambers told the customer-heavy audience of 15,000. “We’ve got to be easier to do business with, include you in driving our product direction, share our roadmaps, have an easy to use product portfolio. But innovation is the buzzword on where we’re going to go.”
In the past six months, Cisco announced 85 new products. But it also streamlined its operations and re-focused the company on five core areas of product development: routing, switching, security and services; video; collaboration; data centre, virtualization and cloud; and architectures.
“Collaboration will be the driver of productivity,” Chambers said. “Data centre, virtualization (and) cloud is the most network-centric architecture. Architectures are the way you tie products together. And video is the next voice.”
Chambers said there are 20 million meetings per month hosted on Cisco’s WebEx application, and that the company is “putting video into everything we do architecturally.”
Cloud will be the next IT architecture where everything is virtual, Chambers said. Traditional IT vendors did not move quickly into cloud or data center convergence for fear of losing server and other IT product sales, he said.
Cisco capitalized on that by releasing its Unified Computing System, which allowed it to quickly become the third leading vendor of blade servers.
“We are the disruptor,” Chambers said.
The five strategic product areas are also inter-related, he said. They include seven of the 11 product categories Cisco is either No. 1 or 2 in, and represent areas that can help grow Cisco’s core routing and switching business, which the company recognized back in 2001would not by itself be a growth engine.
Cisco also eliminated several groups within a single product category, like routing or switching, that were focused on the same product line and competing internally for resources and talent.
“We had three to five different groups on switching, operating systems, collaboration,” he said. “Those same capabilities slow you down.”
The streamlined groups lower costs, result in better decision-making and product development, and produce accountability, Chambers said. In a nutshell, they result in simplified operations and speedier decisions and development.
Chambers did not specifically address the impending layoffs. But in comparing Cisco’s situation now to the one it faced back in the dot-com bubble of 2001, in which 8,000 jobs were cut, he said Cisco came back from that “stronger than ever.”
“Where will we be two to three years from now?” he asked. “The leader in our five company priorities, faster on innovations, simplified, leaner, your trusted networking, IT and business partner. We will make faster decisions and be a more focused execution machine.”
But Chambers added that Cisco’s attention to the customer will not waver during the streamlining process.
“Part of what we will not change is our culture, our underlying focus on customers,” he said. “We have to be efficient to compete on a global basis. But one principle we never move away from: We will be customer driven. We’ll be there for you in a way no other company is.”
