The Network Hub

Jul 10 2008   1:20PM GMT

Cisco: No quick turnaround for tech spending

Michael Morisy Michael Morisy Profile: Michael Morisy

Those hoping for a major boost in IT budgets shouldn’t hold their breaths: Cisco CEO John Chambers said he doesn’t expect a sales rally for at least five quarters, sending the companies shares on a sharp tumble while stirring some grumblings that maybe it’s time to form a better succession plan to keep top talent.

As Reuters reports, Chambers’ results have been impressive:

Since Chambers took the CEO role in January 1995, Cisco has grown from a company with $1.2 billion in annual revenues to around $40 billion, as the expansion of the Internet fueled demand for routers and switches that direct Web traffic. Cisco also has been expanding into new areas such as online video.

However, his unusual longevity in the top spot might have spurred others to depart:

Analysts have speculated his retirement plan, or lack thereof, was behind the recent departures of strategy chief Charlie Giancarlo, who was widely seen as Chambers’ heir apparent, as well as No. 2 executive Mike Volpi and Jayshree Ullal. Ullal was a rising star who headed Cisco’s switching group, its biggest business.

Chambers addressed those concerns in the Reuters interview, saying he expected the top management spots to look very different in five years, both with new personnel and a new style of leadership. “The next CEO will probably be more a leader of a council than a ‘command and control,” he said, which would play off Cisco CTO Padmasree Warrior’s collaborative focus and Cisco’s “human network” strategy in general.

While it’s nice Chambers is taking the future seriously, not everyone was pleased with his plans: “If Cisco in fact takes a collaborative approach to the corner office, we believe they would have taken their management experiment a little too far and would expect more defections from the senior ranks,” wrote JPMorgan analyst Ehud Gelblum in a research note.

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