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Cisco Boss Chambers Admits Credibility Issue

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

John Chambers has admitted that Cisco has lost credibility in a remarkably frank memo to staff

The boss of networking giant Cisco Systems has admitted that the company needs a radical overhaul in an effort to restore its credibility.

The leaked internal memo came from CEO John Chambers, the man who has been in charge of Cisco since 1995, and who is widely regarded as one of the most influential bosses in the IT sector after he transformed Cisco from annual revenues of $1.2 billion (£737 million) when he took over, to its current annual turnover of roughly $40 billion (£24.6 billion).

Despite this success, Chambers has been under pressure recently from investors because of Cisco’s financial performance in the last two quarters, and he has apologised for missing Wall Street’s financial targets. Growth has been slower than expected and Cisco is suffering from weaker margins as both intense competition and weak public spending take their toll.

Poor Execution

In his damning internal 1,500 word email to staff on Monday, which was seen by Reuters, Chambers admitted that Cisco had been slow to make decisions, which were then executed poorly, and lacked discipline in an aggressive expansion.

And Chambers warned Cisco’s 73,000 staff to prepare for a number of unspecified changes in the next few weeks and coming fiscal year, beginning in August.

“We have been slow to make decisions, we have had surprises where we should not, and we have lost the accountability that has been a hallmark of our ability to execute consistently for our customers and our shareholders,” Chambers reportedly wrote. “That is unacceptable. And it is exactly what we will attack.”

Shares in Cisco have been on a recent slide as well, losing a third of their value during the past year. Cisco shares are currently trading at $17.88 (£10.99) on Nasdaq., but this is a long way off its heights when in 2001 its shares were trading at the $40 (£24.60) mark.

“Bottom line, we have lost some of the credibility that is foundational to Cisco’s success – and we must earn it back,” Chambers wrote. “Our market is in transition, and our company is in transition. And the time is right to define this transition for ourselves and our industry.”

Future Roadmap?

So what is Chambers proposing? Well it is understood that Cisco will in future concentrate on five core areas, namely that of routing, switching and services; collaboration; data centre virtualisation; architectures; and of course video.

There is little doubt that Cisco has been facing more competition, especially in its core enterprise networking sector, as the company has been making a big push to broaden its appeal to the SMB sector.

And the company is also facing new threats from the likes of Oracle and Hewlett Packard. Indeed, in February 2010, Cisco and HP announced that they were parting ways, because of the intensified competition between the two to build data centres of the future.