Cisco’s CEO John Chambers has to be thrilled 2011 is over.This year he had to unwind acquisitions, sell or shut down businesses, watch as his rule-by committee management scheme failed, and listen to numerous calls for his head.
Even the normally passive CNN Money wrote, “Everybody Hates Cisco.”
How brutal is that?
So here’s a quick look back at John Chambers’ awful year.
In January, Boston Common Asset Management LLC sold most of its 167,000 shares in Cisco, claiming it was upset over Cisco’s human rights record — an issue that would plague the company through out the year.
In February, the excrement was starting to hit the fan. Oppenheimer & Co issued a bulletin calling Cisco’s sales strategy around it new switching product “poorly managed.” The report was spot on. Cisco’s announced second quarter results beat estimates but disappointed Wall Street because it was clear that Cisco was losing margin on its bread-and-butter switching products. The stock dropped 14% the next day.
That same month, Cisco appointed its first-ever COO, promoting a long-time Cisco executive Gary Moore. Chambers had been promising growth with an ADD-like strategy and at the start of 2011, this plan was looking ridiculous to investors. Chambers had Cisco involved in 30 areas that he called “market adjacencies.” Moore was tasked at making order out of this mess.
In March, Chambers appeared on 60 Minutes arguing in favour of his favourite topic: why the U.S. should let U.S. companies bring money stashed overseas back home tax free. Lesley Stahl showed how shady some of the tactics were by companies using this method. (In December he would still be yapping about it. He begged his shareholders to write their Congressmen about it, bribing them with dividends.)
In April, Chambers stunned everyone by shutting down its Flip video camera unit and laying off 550 employees. Cisco bought Flip maker Pure Digital for close to $600 million in 2009.
That month, Chambers had to eat crow and issue a memo, admitting Cisco “lost focus” thanks to its plan to move into 30 areas that had little-to-nothing to do with its core business, network gear.
In May, calls for Chambers head began to get louder. Analysts at Mizuho Securities USA started suggesting Cisco can Chambers. An investment firm RJ Reynolds went so far as to suggest that Cisco hire Lou Gerster to fix it.
Tensions were especially high in the summer. After Chambers promised to cut $1 billion in expenses, Cisco employees, investors, analysts and customers spent a couple of months bracing for massive layoffs. Sure enough, in August, Chambers cut another 6,500 employees albeit 2,100 of them were let go through an early retirement plan.
In August, Cisco also shed another 5,000 jobs by selling off its Mexican set-top box manufacturing facility to Foxconn.
In September, Cisco was sued by the Human Rights Law Foundation for allegedly helping the Chinese government hunt down and torture dissidents. Cisco would be slapped this year with two lawsuits over its work in China. In December, Activist shareholders would submit a proposal for Cisco to clean up its human rights act. It didn’t pass, as these things rarely do. But it did make Chambers spend a good long time defending his company’s human rights record at that meeting.
But by November, investors were growing immune. Chambers had to report that earnings were down 7% from last year, but the next day, the stock rose a tiny bit. Investors apparently expected worse.
In December, Chambers was still trying to find a sane organizational structure. It reorganized its ultra-important engineering team, giving more responsibility to outside talent hired from rival Juniper and partner VMware.
Despite all this, Chambers remains the power at the company, as chairman and CEO. He obviously still thinks he’s the best guy for the job. In 2011 he committed to stay put for three more years. Let’s hope those next three years are better than the last one.
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