Cisco Systems 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 in a 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 business.
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.
"Today's 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."
Brian Marshall, an analyst at Gleacher & Co., said the moves are the latest in what could be a lengthy rehabilitation of the $40 billion company.
"[Cisco] hopes 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.
"Today, 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."
Cisco's 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 early-stage businesses.
The three management councils will focus on the enterprise, the service provider and emerging countries, according to Cisco.
"The 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.
The new structures within all the changes are designed to make the groups more accountable for profitability targets, he said.