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Cisco CEO: 'We have disappointed our investors'

John Chambers outlines turnaround strategy in lengthy memo

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John Chambers has led Cisco into becoming too broadly spread, undisciplined and caused three quarters of poor results disappointing investors. Now he wants to turn the tide and get Cisco back on track.

The company's performance in the past three quarters has gotten Cisco to the point where Chambers has had to do something exceptional, and that is nothing less than a call-to-arms memo. The memo was published outside the company to reassure employees, customers, investors and partners that Cisco's self-inflicted disease has been diagnosed and a treatment regime is being planned.

Chambers' long memo identifies a few problems with the computer networking company. According to the memo, Cisco needs to simplify processes for employees, and to install discipline. Chambers sums it up by saying: "We have disappointed our investors and we have confused our employees."

He asserts that Cisco's core strategy is correct and then points to operational issues as the problem area: "It is aspects of our operational execution that are not [sound]. We have been slow to make decisions, we have had surprises where we should not, and we have lost the accountability that has been a hallmark of our ability to execute consistently for our customers and our shareholders. That is unacceptable. And it is exactly what we will attack."

Chambers recently appointed Gary Moore as the chief operating officer, and his memo mentions Moore and indicates that the new COO will be helping drive the changes Chambers says are needed.

Five focus areas

The company's five focus areas are laid down: "Our five company priorities are established: leadership in core routing, switching and services; collaboration; data centre virtualisation and cloud; architectures; and video."

Then Chambers goes into "tough decisions" mode: "We will take bold steps and we will make tough decisions. With change comes disruption, and you will see this necessary and healthy disruption as we make meaningful decisions in a timely, targeted and measurable way. We will address with surgical precision what we need to fix in our portfolio and what we need to better enable."

In other words, some products are liable to get chopped because they aren't delivering the goods. The internal processes that enabled such crap products to get out there are going to have to be fixed as well. Chambers does not say in any detail what will be done and in which areas products will be scrapped, but there is a thumping great omission from the five priority areas above: home or consumer products. That is clearly not a focus area.

This means that ūmi telepresence, Valet and Linksys home networking, Flip video and cable set-top boxes now have question marks over their status.

Chambers also says that Cisco faces great competition in switching: "In switching we understand that our customers are buying across broader segments and specific needs in this market. We understand that our competitors in this area are fierce, with different business models and architectures... we will not leave or devalue this business. "

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