Cisco overhauls mgmt system

Cisco Systems overhauled a management structure that investors and former employees say slowed decisions, fuelled market-share losses and led to an exodus of senior executives.

Cisco, the world’s largest maker of computer-networking equipment, said in a statement today it will reorganise the sales, services and engineering operations to focus on five areas aimed at spurring growth in network and internet use. Global field operations will be concentrated in three regions, and Cisco will refine its council-style management structure.

CEO John Chambers vowed in April to make changes to help the company regain lost credibility after earnings disappointed investors for four straight quarters. Employees have grown impatient with the council-based structure, put in place by Chambers in 2005, that was designed to spur cooperation among units yet created a slow-moving bureaucracy.

“They’ve got a culture that frustrates talented people,” said Robert Ackerman, founder of venture firm Allegis Capital, which has sold three companies to Cisco. “They’ve got a lot of talented people feeling like they’re beating their head against the wall.”

Pressure on Chambers has mounted amid a stock dive and market-share losses. In routers, which made up 16 per cent of Cisco’s sales last year, Cisco’s share dropped to 55 per cent last year from 66 per cent in 2006, according to IDC, a market- research firm in Framingham, Massachusetts. Cisco also lost more than 10 per centage points of share in network-security hardware.

“Having a clear, concise purpose has gotten away from them,” said Kim Caughey Forrest, an analyst at Pittsburgh-based Fort Pitt Capital Group which manages about $1.1 billion and recently sold Cisco shares. She said the management structure is “very confusing”. Cisco, based in San Jose, California, declined 34 per cent on the Nasdaq Stock Market in the past year.