Cisco CEO Says Shake Up 'Traumatic,' But Paying Off

Written by Tony Ibrahim     28/02/2012 | 01:27 | Category: ROUTERS AND SWITCHES

A year ago Cisco endeavoured to shave a billion dollars of its expenses. After the savage restructuring of operations, the shuffling of workers and termination of staff, the company has managed to achieve that goal, and many others.

12 months ago Cisco's stock was taking a beating following the company's lower-than-expected sales, profit and margin numbers. At the time, Cisco announced its plans to shave a billion dollars off its expenses and its roadmap to do so was grim.

ComputerWorld surmises the company began by instating its first ever Chief Operating Officer. It then simplified the structure of its management council, reorganised its sales, shuffled workers around its engineering department, laid off 6,500 employees, pulled the plug on its Flip consumer video business and sold off its CATV set-top box factory to Foxconn, shifting an additional 5,000 workers in the process.

A year on and CEO John Chambers sums the experiences up as 'traumatic.'

"Reinvention is hard," Chambers says. "We have done this five or six times over the last two decades, but it is still hard.

"It has been a traumatic 15 to 18 months."

The hard moves have paid dividends for the company, with second quarter earnings revealing more than a billion dollars in expenses have been shaved off a whole quarter earlier than expected.

Revenue was up by 11% year-over-year while its core product categories, including switches and routers, were up 8% and 11% respectively.
Despite the good results, last year's performance still lingers with Chambers. He believes the undergone product refresh—which was the largest in the company's history—was one of the things that set Cisco back.

"That hit the bottom line more than expected," Chambers said. He is quick to focus on the future though.

"We normally see [big transitions] things two to four quarters ahead of our peers…And most of our big bets on these transitions have pretty much come through." To support his claim Chambers cites Cisco's leadership in VoIP technology and the company's gains in videoconferencing.

Amongst their prized gamble is the company's Unified Computing Environment, which is now a billion dollar product line with sales thriving by 91% in the last quarter alone.

Now valued at $45 billion, Chambers believes Cisco will become more active in mergers and acquisitions.