Facing a tough slump in the networking equipment business, Cisco Systems will reorganize the company into 11 technology groups, in its first major reorganization since 1997. CEO John Chambers said there are several changes in the executives' suite concomitant to the reorganization, including the departure of Kevin Kennedy, who was formerly senior vice president of the service provider line of business. The moves, announced Thursday, are aimed at pulling the company's sales effort out of its nosedive.
Earlier this month, Cisco reported revenue that plunged by 25% from year-ago results. But the free fall this year may be over. Chambers said in a statement that Cisco is "beginning to see signs that our business is stabilizing," with orders for October going as expected - so far. But meeting projections for a flat to slightly down October quarter isn't saying a lot, hence the decision to reorganize.
Cisco has abandoned the former alignment around the enterprise, service provider and commercial business lines, and will now group employees according to 11 technology areas. Those areas are: access, aggregation, network management, routing, optical, storage, voice, wireless, Ethernet access, Internet switching and services, and IOS Technologies. Chambers said the new structure is required because the former differences between customer segments had blurred.
The main development stemming from the reorganization is the elimination of the telecom unit, which has been among the poorest-performing units this year. To be sure, other communications equipment providers, such as Nortel and Lucent, have suffered as telecoms have cut their capital expenditures dramatically. At Cisco, the developments played a hand in the decision to eliminate the unit entirely. As a result, eight-year Cisco veteran Kennedy is departing the company, although Cisco said he will continue to have an informal role as industry and technical adviser.
Cisco said that Mario Mazzola, as chief development officer, will oversee the engineering efforts in each of the groups and will report directly to Chambers. Mazzola was previously senior VP of Cisco's new business ventures group. Charlie Giancarlo, formerly senior VP of the commercial line of business, will run four of the groups. Michelangelo Volpi, previously chief strategy officer, will run Internet Switching and Services. Both report to Mazzola. James Richardson, formerly senior VP of the enterprise line of business, will become chief marketing officer, reporting to Chambers.
Cisco eliminated 8,500 jobs earlier this year. No further staff reductions were announced.
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