Cisco to restructure into 11 tech groups

Duncan Martell

SAN FRANCISCO: Cisco Systems Inc., the biggest maker of computer-networking

equipment, said on Thursday that it was restructuring into 11 technology groups

- its biggest reorganization since 1997 - and added that it sees signs its

business is stabilizing.

Company officials said the restructuring is designed to streamline and focus

Cisco's vast marketing and engineering operations. "We were pleased with

July's linearity and we've been pleased so far with August," Cisco chief

executive John Chambers told Reuters, adding that so far the quarter is in line

with its earlier guidance.

Cisco said earlier this month that it expected fiscal first-quarter sales to

be flat to down 5 per cent sequentially. Linearity refers to smoothness of

orders during the quarter.

San Jose, California-based Cisco said it was making the move to the 11 groups

from its current lines of business structure to reflect the blurring lines

between customer segments, and added that the move was customer-and

market-driven. It last reorganized in 1997, when it structured into three lines

of business to target the service provider, commercial and enterprise markets.

The networking giant also said that Kevin Kennedy, the head of its

telecommunications business, was leaving the company. Mario Mazzola, an

eight-year Cisco employee, has been named to the new position of chief

development officer, and will oversee the 11 technology groups, Cisco said.

Mazzola will report directly to Chambers.

The 11 groups are access; aggregation; Cisco IOS Technologies, which is its

operating system that runs its networking gear; Internet switching and services;

Ethernet access; network management services; core routing; optical; storage;

voice; and wireless.

When the service provider market, composed of telecommunications companies

such as the Baby Bells and their competitors known as competitive local exchange

carriers, or CLECs, started to take off, Cisco zeroed in on selling gear to the

newer and smaller rivals, an analyst said. However, the CLECs largely lost out

to their older rivals.

"Cisco really failed at developing momentum with the incumbent local

exchange carriers," or Baby Bells, said analyst Michael Cristinziano of

Gerard Klauer Mattison. "What they did is they supplied the arms to the

guys that were trying to knock off the incumbents."

"(Cisco) executed well on what they wanted to but what happened was the

incumbents won," he said. Charlie Giancarlo, formerly head of the company's

commercial line of business, will head four of these technology groups and

report directly to Mazzola. Michelangelo Volpi, a fast-rising star at Cisco and

former chief strategy officer, will now be in charge of the largest tech group,

Internet Switching and Services and will report to Mazzola.

James Richardson, formerly head of Cisco's enterprise line of business, would

now be the chief marketing officer, reporting to Chambers. Kennedy, who ran the

service provider line of business, will be leaving the networking company to

pursue other opportunities, the company said. He will remain an industry and

technical advisor to Cisco.

"I wanted Kevin to stay and offered him several positions, including

chief technical officer," Chambers said. "He just hit a time in his

career where it's the right time to make a change." Previously, Cisco was

organized into three lines of business: commercial, enterprise, and service

provider.

"By realigning this way, what we do if we execute right is increase

profit contribution," from individual product areas, Chambers said.

"This will free up resources to move into new market opportunities."

"These are changes to grow our business, not to reduce head count or other

issues," Chambers said. Cisco, a year and a half ago, was the world's most

valuable company. Recently, it cut 8,500 jobs.

Cisco, along with other networking-equipment companies and telecommunications

equipment providers has seen sales and profits tumble in the face of a high-tech

recession and an overall economic slowdown. "We would have made these

changes regardless of the timing," Chambers said, referring to the grim

state of the networking and telecommunications industries.

(C) Reuters Limited 2001