Cisco's Difficult 2011 Paves the Way for a More Promising 2012
Chambers named Gary Moore, who had been executive vice president of services for Cisco, as its first chief operating officer in February 2011. The move gave Chambers a No. 2 person to help him not only continue to push Cisco into new markets but also to streamline operations and get the company back onto its financial feet.
Cisco had been roundly criticized for its aggressive efforts to quickly expand its reach into more than two dozen new markets, or what Chambers called "adjacencies." Cisco is now focused on five growth areas that form the foundation of everything the $40 billion company doescore routing, switching and services; collaboration; data center virtualization and the cloud; video; and "architectures for business transformation."
No More Flip
One of the markets that Cisco had been pursuing was the consumer space, with everything from wireless networking to a consumer-based telepresence offering, called Umi. However, Chambers had warned that Cisco would drop underperforming units, and in April 2011, the bulk of the consumer business was shut down. Included in that was the Flip video camera, which Cisco acquired in its $590 million deal for PureDigital two years earlier. The Flip was still making money, but apparently had no future with Cisco. The vendor stopped selling Umi in January.
Cisco shed a lot of jobs in an effort to cut $1 billion in expenses and streamline operations. At the beginning of 2011, the company had more than 73,000 employees. It currently has just under 63,900, according to the company Website.
In July 2011, Cisco sold a manufacturing plant in Mexico that builds set-top boxes to Foxconn, a Chinese firm best known for assembling smartphones, tablets and PCs for the likes of Apple, Dell and Hewlett-Packard. Along with the building and operations, Cisco also transferred almost 5,000 jobs at the plant to Foxconn.
Chambers in May 2011 announced that Cisco was reorganizing its sales, services and management operations to better align with the company's five new priorities. Cisco's worldwide field operations were organized into three geographic regionsthe Americas; Europe, the Middle East and Africa; and Asiawhile the services unit was aligned with the field operations. Cisco's engineering group was organized around the five priority areas, and now includes a new Emerging Business Group focused on early-stage businesses.
Along with the sales and management reorganization, Chambers also said he was reducing the number of management councils from nine to three, hoping to speed up decision making and improve accountability. The councils will focus on three areas: enterprise, service providers and emerging markets.
Chambers and other Cisco executives at one time had a goal of 12 to 17 percent growth every year. However, that was taken off the table in May 2011, and now the company is looking at growth more in the range of 5 to 7 percent.
Chambers has pushed to speed up the work of engineers, trying to lower the average amount of time it takes to get a product from concept to market from five years to three.
Emphasize the Positive
Cisco, no doubt, had a difficult series of quarters in 2010 and early 2011, and Chambers promised to shore up the problems. However, he not only addressed the problems, but he also loudly touted the positives, including the UCS gaining 11,000 customers in three years and becoming a key player in the x86 blade market, the growth of revenues in such areas as collaboration and video, and the traction the company was seeing in the data center.