Cisco CEO John Chambers said the reorganization and restructuring the company is undergoing will prove to be a competitive advantage against its rivals.
The painful and company-wide restructuring and job cuts at Cisco Systems,
brought on by several disappointing financial quarters, will prove to be a
competitive advantage for the networking giant going forward, according to CEO
to analysts and journalists Aug. 10 while announcing the company's fiscal
fourth-quarter financial numbers, Chambers noted that rivals are beginning to
undergo the same market pressures-such as significant drops in public sector
spending-that have haunted Cisco over the past year.
is months along a journey that competitors like Juniper Networks and Riverbed
Technology-both of which saw difficult quarters-are just about to begin, he
moves now give us the advantage over our competitors," Chambers said.
moves include streamlining
its sales, services and engineering units
, getting rid of businesses that
don't address Cisco's key markets-the company essentially cut its consumer
business and rid itself of its profitable Flip video camera unit-and reducing
the workforce by about 9 percent by cutting
about 6,500 jobs
. Seventeen percent of those workers at the vice president
level or higher were cut, and another 5,000 will leave Cisco when the company
sells its TV set-top box manufacturing plant in Mexico.
goal is to cut $1 billion in annual operating expenses, and the result will be
a more competitive and more focused Cisco, Chambers said.
last month announced an 11 percent drop in income on a 15 percent revenue
increase, numbers that missed analyst targets. Juniper officials said solid
numbers in their switching and router businesses were offset by the difficult
economy and other factors. Riverbed's stock also took a hit last month, despite
the company's 35 percent growth in revenues.
financial numbers were a mixture, though the overall story was one of a company
that seems to be finding its footing again. Revenues in the fourth quarter rose
3.3 percent, to $11.2 billion, and 7.9 percent for the entire fiscal year. In
addition, product orders jumped 11 percent. However, net income dropped 12.4
percent, to $2.2 billion.
the bright spots was data center equipment, in particular Cisco's UCS (Unified
Computing System) business, which saw its run rate jump to $1.1 billion and
another 2,000 customers sign on, bringing the total number of UCS customers to
more than 7,400.
there continue to be challenges, in particular the continued drop in public
sector spending, which accounts for as much as a fifth of Cisco revenues.
Federal government revenues fell 18 percent, while state and local
dropped 2 percent.
also acknowledged the difficult world economy, particularly in light of the
high volatility of stocks in recent days following the increasing problems in
the European Union and Standard & Poor's decision last week to lower the United
States' bond rating.
the current quarter, Cisco officials said they expect sales to grow as much as
4 percent-or between $10.8 billion to $11.1 billion-over the same period last