Cisco's CEO: We Must Improve Execution, Consistency

By CIOinsight  |  Posted 04-06-2011

Cisco Systems Chairman and CEO John Chambers remains confident in the company's strategy of expanding the role of the network in the modern technology environment. What's ailing the $40 billion company is its execution, according to Chambers, and that is going to change.

In a lengthy internal memo to employees that has since been posted as a blog on the company's Website, Chambers said he realizes that while the strategy may be sound, the execution problems have dogged Cisco for several quarters that have been plagued by lagging sales numbers, reduced profits and weak forecasts that have surprised analysts.

"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," Chambers said in the April 5 blog. "That is unacceptable.  And it is exactly what we will attack."

Cisco's announcement in February of its fiscal year 2011 second-quarter financial numbers illustrates the company's position. At a time when other technology giants like Intel, IBM and Google were turning in strong financial numbers, Chambers announced that Cisco saw increased revenues but falling net income, and gave a forecast that was below analyst expectations. While the company continued to see strength in such areas as data center products and collaboration solutions, there was continued weakness in Cisco's core switching lines and other businesses.

The announcement echoed what Cisco had presented in previous quarters, and the company felt the wrath from investors--its market value reportedly dropped 15 percent after the February earnings call--and analysts. Forbes.com ran an article questioning Chambers' leadership, suggesting that Cisco misread where the industry was headed and was not doing enough to shore up its businesses against increased competition, such as in the core networking space, where rivals such as Hewlett-Packard and Juniper Networks are making inroads.

As it has expanded into newer areas such as the data center and collaboration, Cisco also has grown its base of competitors, including the likes of IBM, Oracle, Dell and Polycom. In particular, HP--which had been a strong Cisco partner--is now a key rival in several significant areas, including networking, the data center and collaboration.

For more, read the eWEEK article: Cisco CEO Chambers: Company Has Lost Some Credibility.