Our market is in transition,
and our company is in transition.
And the time is right
to define this transition
for ourselves and our industry.
I understand this.
It's time for focus.
-- "Message From John Chambers: Where Cisco Is Taking the Network," by John Chambers, 2011
Chambers' "I'm sort-of sorry" note to his employees lends itself easily to poetic diction. Now all I need is a drum machine and an autotuner, and we'll have a viral YouTube hit on our hands.
A grand tradition
The mildly apologetic memo from the CEO of Cisco Systems (Nasdaq: CSCO) to his troops brings back memories of similar statements from the past. The "Peanut Butter Manifesto" by Yahoo! (Nasdaq: YHOO) senior vice president Brad Garlinghouse lambasted the online powerhouse for a lack of focus and decision-making prowess. On a break from his CEO duties, Starbucks (Nasdaq: SBUX) leader Howard Schultz wrote a cold, hard Valentine's memo to a coffee chain that had lost its soul. More recently, freshly installed Nokia (NYSE: NOK) CEO Stephen Elop compared the Finnish phone company to a burning oil platform.
Most of these missives, however scathing, sent the critiqued stocks upward for a while. The exception is Nokia, though that particular memo came with a side of platform commitment to the Microsoft (Nasdaq: MSFT) Windows Phone software -- a fairly obvious strategic blunder that deserved swift punishment.
Cisco could sure use a boost after watching its shares decline 34% over the past year even as the broader market kept climbing. Chambers is getting what he wanted: Cisco jumped more than 5% today.
The message
There's no writerly flair in the vein of peanut butters, burning rafts, or soulless coffee shops here; Chambers is all business. The memo promises bold decisions and stricter discipline. At the same time, Chambers says that his strategy is sound and he "will not fix what is not broken." Taken together, these promises might add up to a leaner and meaner Cisco, one that's ready to shed underperforming units in spinoffs or sales and refocus on the core networking business that brought the company this far.
The danger here is that Chambers might not agree with you, me, or the networking market on exactly what is and isn't broken. The way I see it, Cisco's downfall began when it made rivals out of longtime partners including IBM (NYSE: IBM) and Hewlett-Packard (NYSE: HPQ), all in a bid to sell end-to-end datacenter computing solutions. Chambers still likes his Unified Computing project and is only pouring more gasoline on that fire, which I suppose is the correct action at this point because it's just too late to go back.
I'm afraid that the string of bad calls that started there is likely to continue. Bold action would cut Cisco down to a focused networking company with a smattering of closely related side projects such as bandwidth-hungry video conferencing and perhaps some cloud services. Instead, Chambers outlines five "company priorities" that cover pretty much everything an HP or IBM would do for its customers.
The next step
John, the world already has one IBM and a ton of wannabes. We don't need another one. Your next memo needs to go a lot further than this one did. The transition is under way, just like you said. I'm just not convinced that you're taking Cisco in the right direction. This is the time to lose the machismo, admit that you were wrong, and start doing what's right.
