Cisco is realigning more of its businesses to improve performance and accountability. The moves follow April's shuttering of its consumer efforts, including the Flip camera.
executives are continuing to reorganize the company as they look to get the
networking giant back on track.
Cisco May 5
announced plans to streamline its sales, services and engineering units to help
the company focus on five key IT areas-routing and switching, collaboration,
data center virtualization and cloud, video, and what officials are calling
architectures for business transformation. It includes not only reorganizing
Cisco's sales and services, but also simplifying its management structure by
reducing the number of councils from nine to three.
The moves come
a month after CEO John Chambers told Cisco's 73,000 employees
memo that changes needed to be made to right the company after several quarters
of disappointing financial numbers and forecasts, as well as criticism from
journalists and analysts alike about Cisco's direction. A week after the memo
was released as a blog
on the Cisco Website, Chambers
announced the company was dumping its consumer efforts, including shuttering
the popular $590 million Flip video camera
While the most
recent moves-which Cisco expects to implement over the next four months-may not
get the same sort of attention that the Flip decision did, analysts said they
were important steps in getting Cisco moving again.
changes will make it easier for customers to work with Cisco, increase the
company's focus on its core businesses, raise accountability within the
organization and reduce bureaucracy," Brian White, an analyst with Ticonderoga
Securities, said in a research note. "In our view, this represents another step
in the right direction for Cisco."
Marshall, an analyst at Gleacher & Co., said the moves are the latest in
what could be a lengthy rehabilitation of the $40 billion company.
to simplify its business model and improve customer, partner and employee
experience with these actions," Marshall said in a research note. "While we
applaud [Cisco's] recent moves, we believe it will take a non-trivial amount of
time to move this tanker ship."
Cisco over the
past few years has been aggressively expanding its reach beyond the core
switching and router businesses, into such areas as collaboration and
communications, data center infrastructure and smart grid technologies, with
the idea that networking is the key underpinning of all these ventures.
However, in recent quarters, while some areas-such as collaboration and data
centers-have seen growth, Cisco has been hit hard in the switching and router
businesses by such rivals as Hewlett-Packard, Juniper Networks and Avaya.
In the memo to
employees, Chambers said Cisco had to regain some lost credibility it the
industry and figure out ways to better execute on what he said was still a
solid strategy. He also called for greater accountability within the company.
the market is driving toward simplification and it's why the network matters,"
Chambers said in a statement announcing the latest changes. "Our role as the
leading network platform provider is strong, we have great customers, talent
and expertise-and we know how to bring innovation to every aspect of the
network. It's time to simplify the way we execute our strategy, and today's
announcement is a key step forward."
worldwide field operations are being organized into three geographic
regions-the Americas, Europe, the Middle East and Africa, and Asia-while the
services unit will align with the field operations. In addition, Cisco's
engineering group will organize around all five of the company's priority
areas, and will include a new Emerging Business Group that will focus on
management councils will focus on the enterprise, the service provider and
emerging countries, according to Cisco.
broad-based Council & Board structure that was originally put in place in
2001 made sense on paper, but appears to have been slowing down the
decision-making process, while accountability was less clear," Ticonderoga's
White wrote in the note.
structures within all the changes are designed to make the groups more
accountable for profitability targets, he said.