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.

Cisco Succession Planning Takes A Second Hit

Cisco Systems, Inc., CSCO (NASDAQ) the networking gear maker lost another top executive, Charles Giancarlo - the chief development officer, who had been rumored to be heir-apparent to John Chambers (CEO). He resigned to join the private equity firm Silver Lake Partners. Earlier in the year, another top level executive, Michelangelo Volpi, resigned. Volpi was the Senior Vice President and General Manager of the Routing and Service Provider Group and was also considered a potential successor to Chambers. He left and ultimately joined the Internet TV firm, Joost.

According to the U.K. Register, Giancarlo,

... told reporters in a conference call yesterday that Cisco's management restructure did not fit with his ambitions to be at the helm of a company.

In a story by Mark Boslet in the Mercury News further elaboration was provided about Giancarlo's decision.

Rumors about his (Giancarlo) possible departure began spreading nearly a month ago after Chambers told the board earlier this year he would remain for three to five more years.

Observers said differences in style between Giancarlo and Chambers may have discouraged him about his chances to lead the company. "Charlie and John are very different people," said Tom Nolle, president of market researcher CIMI of Voorhees, N.J. "Charlie is much more of an intellectual. John is the ultimate salesman - he's a showman."

For better or worse, Chambers has put in place a new management structure. Chambers said the new management structure would,

"transition from a company that is driven from command and control to one that is built on teamwork and collaboration." ... “I believe this type of structure will be the future, given the complexities and ... market adjacencies we’re going to move into.”

As Cisco continues to thrive, will the so called "new management structure" have an impact on the firm? Will things remain the same or will there be real changes and what will be the results?

Stay tuned.

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