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Back to the roots

Massive layoffs. Lagging stock. Declining profits. Cisco has never had it so bad since 2001 in the aftermath of the dot-com bubble burst.  The fact that Cisco is going to cut around 6,500 jobs across the board shouldn’t come as a surprise to anyone as many saw it coming when the company posted 11 percent decline in profit in the third quarter.  What really ails Cisco, which was once thought to be invincible? I guess the number one reason for the current rot is that Cisco has lost share and profit in its core business – switching and routing.  Though the company still has an obscene market share in both these areas, vendors such as HP and Brocade have been making steady inroads, eating into the profits of Cisco. Adding to the woes was the consumer electronics business, which has been hugely disappointing, to put it mildly.

Can Cisco bounce back? At its recent user show Cisco Live, where it was business as usual,  Cisco’s charismatic CEO John Chambers has pledged to go back to the basics and make Cisco a leaner and faster organisation and make it an easy company to do business with.  Part of the revival strategy would be a renewed focus on switching and routing, and some drastic measures such as shedding  unproductive or non-core businesses, as it did with the Flip video cam business. Chambers has admitted that Cisco has a bloated management structure that has stalled decision making and he promised customers to streamline its own internal structure to move a bit faster in future and be more attentive to customers. This is especially interesting as Cisco has often come under fire for being heavy handed in customer relations. In Chambers’ own words, Cisco’s commitment to its customers is innovation. For a company that invests around $ 5.3 billion dollars in R&D every year, that should be the easy part. What is really worth watching is whether Cisco can walk the talk and become a customer-friendly organisation.  Can it radically change once again and get back on the track? Going by its track record and the  steely resolve displayed by its head honcho, Cisco is likely to come back ‘stronger than ever.’

 

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