Cisco CEO Pledges to Accelerate Change

John Chambers tells Cisco shareholders that his company is going to move heaven and earth to maximize return for shareholders.

By Sean Michael Kerner | Posted Dec 8, 2011
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As competition continues to heat up and the economy cools down, Cisco Systems (NASDAQ:CSCO) is pushing forward.

During the company's Annual General Meeting held Wednesday, CEO John Chambers outlined Cisco's strategy for the road ahead. It's a strategy that emphasizes innovation and business enablement as opposed to just the network plumbing of switches and routers. Chambers also stressed that Cisco will aggressively compete against rival networking vendors including Juniper, HP and Huawei.

Chambers noted that the biggest market transition today is moving from Information Technology that was done in the back room with routing and switching to a business technology approach. He said that Cisco is continuing to evolve from being just a technology provider to being a technology partner with customers.

Part of that evolution involves the move to the cloud.

"There has never been a more network centric technology architecture than the cloud," Chambers said.

A key part of Cisco's overall cloud strategy is its Unified Computing System (UCS) architecture. The UCS marked Cisco's entry into the server space and it's a business segement that is growing at 120 percent, according to Chambers. He acknowledged that entering into new market segments can be a risk.

"When you think about high-tech, the only companies that not only survive but continue to grow returns for shareholders are those that take business risk," Chambers said. "If we continue to out-execute our peers in terms of our acquisitions strategy, the markets we go into and with a focused approach, this is what we will achieve our leadership upon."

During the 2011 fiscal year, Cisco hit a few bumps in the road, notably among them was a short-term decline in switching revenues. Chambers noted proudly that now Cisco's switching share is back up over 70 percent while rivals ,including HP have seen some share decline.

"We got some good body blows at the beginning of the year," Chambers admitted. "But we also said we have to change."

Chambers reminded the audience that back in 2002, Cisco also emerged out of tough environment to surpass the big networking vendors of the day including Nortel and Alcatel-Lucent. He said that now Cisco has the chance to beat competitors including HP, Juniper and Avaya.

"I think it's a little too early to declare victory and the challenge will be that we'll see new tough competitors come at us," Chambers said. "We're going to be aggressive on innovation and thought leadership and we'll also be aggressive in how we accelerate change."

During a question and answer period at the meeting, Chambers specifically addressed competition coming from Chinese networking vendor Huawei. Chambers said he has known for a long time that competitors would emerge from China and he's ready for the challenge.

"We've have studied Huawei very carefully for a decade, I can tell you where their leader's jobs were, what's important to him and what he's most likely to do on each move," Chambers said. "We don't copy from our peers, as Huawei did and as we caught them doing."

Chambers noted that the competition with Huawei isn't an issue of the U.S. versus China, but about a company that is different than other Chinese companies.

"We'll take them em on and we'll beat them," Chambers said.

Overall, Chambers stressed that the technologies that Cisco builds can help make the world a better place.

"I think that the Internet and Cisco as one of its key leaders, can change the standard of living around the world and human rights for everyone in a way that doesn't occur otherwise," Chambers said.

In the final analysis though, Cisco is in business to make money, which is a message that he strongly reiterated to his company's shareholders.

"My commitment to you is that we're going to move heaven and earth to maximize return for our shareholders," Chambers said. "We are completely committed as that is our number one goal."

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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