CEO admits Cisco has lost some credibility
In a memo to employees, Cisco CEO John Chambers writes frankly about the company's recent performance, saying that it has "disappointed our investors and confused our employees."
Cisco has "disappointed our investors and confused our employees," CEO John Chambers said earlier this week in a kind of mea culpa about the company's weak performance recently. But, he promised, fundamental changes are ahead.
Revealing his thoughts in a memo sent to employees on Monday and published yesterday on a company blog, Chambers pointed to Cisco as a business that has lost some of the credibility that was key to its success. Seeing both the marketplace and his company as in transition, he said that it's time to focus to help define those transitions.
Chambers did tout several of Cisco's strengths, including its ability to anticipate and take advantage of changes in the marketplace, its continued growth in the data center, its focus on collaboration, and its big leap into the world of video technology.
But he said that in the face of the company's expansion, Cisco needs more discipline.
"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 said in the memo. "That is unacceptable. And it is exactly what we will attack."
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To get the company back on track, the CEO urged employees to prepare for what's next. Announcing that Cisco will make a series of "targeted moves in the coming weeks" and as it transitions into fiscal 2012, Chambers outlined several initiatives.
Stressing that he believes the company's overall strategy is still sound, Chambers said he would leave alone areas that are currently working and increase the focus on five key priorities: Cisco's leadership in routing, switching, and services; collaboration; data center virtualization and the cloud; architectures; and video.
But he acknowledged the need for "tough decisions," meaning that changes and disruptions are in store for areas of the business that aren't working. At the same time, he promised to make it easier for employees to do their jobs and work with customers and partners. Chambers added that the company's new chief operating officer, Gary Moore, was hired specifically to help spearhead this initiative.
Though results for Cisco's past few quarters have surpassed some expectations, earnings have still proven disappointing, according to Bloomberg, as the company continues to face a number of challenges.
Spending from certain sectors, such as U.S. state governments and European governments, dropped last year, resulting in a significant downturn in orders. Looking ahead, Cisco is predicting sluggish sales growth in both the third and fourth quarters, with results failing to meet analysts' forecasts.