Cisco on the slowdown: 'We didn't see this one coming...'

NEWS Cisco is well on the road to recovery, an ebullient John Chambers, CEO of Cisco Systems, told a packed auditorium at the company's European Networking event in Copenhagen today. "With the company's restructuring plan now in place, we can focus on profitability and products," he said. A market growth of 10 per cent is on the cards as the company targets "tornados", or fast growing industry segments capable of generating billion dollar revenues. But Chambers refused to name which segments he was referring to. Ongoing cost cutting exercises include the expansion of an e-learning system to train Cisco employees. Introduced two years ago, the in-house scheme is now bearing fruit. "My training costs are now the $16,000 needed to maintain e-learning as opposed to the $1.4m spent on sending staff on courses," said Chambers. Goals have also been set to double per-person productivity over the next few years from its current figure of $500,000 to one $1m. However, Chambers claimed the past few months were the toughest he had ever faced admitting even Cisco had failed to spot the downturn. "We saw our 70 per cent growth decline to minus 30 per cent sequentially in 45 days. We never anticipated such an abrupt slow down and it wasn't a traditional country by country one either. This was a slow down by industry segments starting with PCs, then mobiles, service providers and onwards through the whole industry," he said. But he was optimistic about the company's future. "We have $18.5bn in the bank and right now that is a good thing to have. We are seeing brutal consolidation and a shakeout where a number of companies aren't going to make it - but we have staying power." Cisco currently generates $400m to $700m cash assets per quarter. Cisco's attempts to continue acquiring companies seem to have been put on hold. Chambers did claim he has had more opportunities to buy-out his peers over the last three months than at any other time, but the fact that he has not acted on these offers prove that he is concentrating on getting his own house in order, analysts believe. Romolo Pusceddu, analyst at IDC, said: "Cisco is interested in Lucent or even Alcatel, but Chambers is waiting until the time is right. In two to three months' time Lucent's stock value will be a lot lower - the price might then be right. This is business. It's not nice and sometimes it isn't fair but Cisco will wait for the moment. Right now it is focusing internally." Pusceddu believes the market is overflowing with players, and that Cisco will be one of the few left standing. The competitors of one year ago such as Lucent, Nortel and 3Com are not are not strong enough to compete today, he said.