Even With A Crummy Revenue Forecast And 12,000 Layoffs, Analyst Wants Cisco CEO John Chambers To Stay

John Chambers frownBloomberg via Getty ImagesCisco CEO John Chambers

Cisco CEO John Chambers, 64, has been talking about retirement, and then pushing it off, for years. He
has promised to stay until 2014 ormaybe 2016.

Should he go next year, or keep plugging along for another two? The evidence is mounting his turnaround plan to find growth has stalled, if not failed. But he’s also a respected business leader and admired by many of his employees.

With it’s most recent quarter announced this week, the company warned revenues will decline 8% to 10% year-over-year next quarter. Analysts had expected growth. That kind of miss was unheard of prior to Cisco’s tailspin in 2011.

That dire projection sent the stock diving about 11% on Thursday. The stock has languishing below $US35 for over a decade.

Chambers’ overhaul involved closing down or selling off consumer business units like the Flip camera and Linksys home WiFi routers, and investing in enterprise tech like its $US2.7 billion purchase of computer security company Sourcefire, which closed in October.

After years of trying to turn Cisco into another Microsoft, a company that spanned enterprise and consumer markets, he changed gears to chase IBM’s model. He wants enterprises to buy more than just network gear from Cisco, but also software and consulting services.

However, networking equipment still makes up over 60% of the company’s revenues and there’s increasing competition in that market from new technologies and up-and-comer companies like Arista Networks. Arista is led by the woman that helped build Cisco’s networking business empire, Jayshree Ullal.

Last quarter, after Chambers laid off another 4,000 people, bringing the two-year total layoffs to 12,000, analyst Paul Kedrosky called for his head on Bloomberg TV. Kedrosky is a former tech stock analyst, an investor, and the guy behind the popular financial blog “Infectious Greed.”

Chambers is a growth-through-acquisitions CEO. What the company needs now is an “efficiency expert,” Kedrosky said.

But Mark McKechnie, an analyst at Evercore Partners LLC who has rated the stock the equivalent of “hold,” thinks Chambers is “probably doing the right things” even though “Cisco’s in a tough position,” he told Bloomberg’s Peter Burrows.

McKechnie wants Chambers to stay and see the turnaround through. “I’d rather see Chambers stay on board, rather than put the company through a management change.”

In the meantime, John Chambers’ salary almost doubled last year. His total compensation was $US21.05 million compared to about $US11.7 million a year earlier, mostly through stock awards, according to documents filed with the SEC.

We reached out to Cisco for comment and will update with its response.

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