Management Turnover as Change Agent

Wednesday, May 11, 2011

Cisco CEO Can He and Should He Survive?

Cisco Systems, Inc. CSCO (NASDAQ), the one-time darling of investors, finds itself in difficulty. The company designs, manufactures, and sells Internet protocol (IP)-based networking and other products related to the communications and information technology industry worldwide. Back in early April, the company’s well known CEO, John Chambers, was forced to admit the company had problems. According to a story in BizJournals, Chambers wrote a memo in early April to his employees in which he stated,
“We have disappointed our investors and we have confused our employees. Bottom line, we have lost some of the credibility that is foundational to Cisco’s success – and we must earn it back.”
Chambers went on to state,
… he will “address with surgical precision what we need to fix in our portfolio.”
The growing problems facing Cisco were made more problematic yesterday, when Microsoft announced the purchase of Skype. While most analysts have focused on the problems Microsoft’s acquisition could mean for Google and Apple, Cisco is also at severe disadvantage from this latest acquisition and is in a weaker position than the others to respond. While Microsoft has not shown great success in the past when it came to telecom acquisitions and the ultimate execution or integration of the acquisitions, the purchase of Skype was a brilliant move. If Microsoft can make the acquisition work, it will be beneficial in many ways for the firm and may even make its arrangement with Nokia a real winner going forward. Cisco on the other hand, only has more competition and a greater need for righting its ship.

Investors can expect tremendous pressure on Chambers going forward. His reign at Cisco seems more and more tentative as we move forward. He needs to make changes in the company and fast. Stay tuned.