Cisco CEO Comes Out Swinging

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CEO John Chambers planted his feet and aimed at his competitors during Cisco’s annual analysts’ day

Cisco Systems, which for years owned more than 50 percent of the Internet networking gear market but lost some 10 percent of that market share in the last few years, never had to position itself as aggressive in the marketplace because it was usually in a comfortable first-place position.

Today, the company still is in first place, but the situation is a lot more dicey. National and international competitors are gradually gaining market share, most of Cisco’s public-sector customers are wading through major income cuts, and the general world economy is still slumping.

Cisco has been forced into expansion into new markets, such as data centre servers and other equipment. It also has excised some of its lower-margin consumer businesses, including the popular Flip videocam—which it produced for only two years.

Due to lower than expected profit in 2011, Cisco was forced to reduce annual expenses by $1 billion (£614 million). The company cut some 3,000 employees who accepted buyouts with an early retirement program and has eliminated about 12,000 other jobs (about 14 percent of the 73,400 total employees before layoffs).

As a result of all this, the company and its media-savvy CEO, John Chambers (pictured), appear to be morphing from benevolent-but-gutsy market leaders into street fighters.

Chambers names names, take shots

At the company’s annual analysts’ day 13 September at its San Jose, California, headquarters, Chambers came out swinging at his competitors like a motivated boxer in the ring, naming names and calling the shots at the company’s major router-and-switch-making foes as he sees them.

“You’re going to see us go after Juniper. Juniper is the most vulnerable I’ve ever seen them,”  Chambers told the standing-room-only crowd on his home campus. “They’re spreading themselves too thin in terms of focus on [being a] service provider, and in their movement in the enterprise. Going into a market slowdown, where you have less than 20 percent market share in the enterprise … [they have] a lot of teams that don’t understand networking.

“You’re going to see us go after HP. Strategy is really hurting there. This is also the company that said we [Cisco] would never stay in the UCS [unified computing system] business, that we’d have to sell these on a foreign planet—so we’re selling a lot of them on a foreign planet.”

Avaya—it’s going to be a video world, and it’s going to be an architectural play. We clearly are going to own collaboration.”

Against China’s top networking company, Chambers had a distinctly different take.

“Huawei—it’s going to be a tough one,” he said. “Those first three [Juniper, HP and Avaya], I think we have a good chance of completely distancing them and leaving them behind, and I measure our success on whether we do that or not. Huawei is going to be a very tough long-term competitor.

“What’s Rule No. 1 with your long-term competitor? Take them on in their home market. You have to. You can’t let them make all their profits in China and then go against you with no profits in the rest of the world. And we will take them on in terms of ‘How do you change people’s lives,’ and ‘How do you do it in total?'”

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