Cisco's Financial Analyst Day: 10 Thought-Provoking Takeaways

Next Up: The Next Cisco

The annual Cisco Financial Analyst Day brought Wall Street types galore to Cisco's San Jose, Calif.-based headquarters to hear from the company's top executives about how the moves Cisco has made this year are preserving and catalyzing its growth for the next several years.

Amid the broader restructuring, Cisco has also made a number of changes to its Worldwide Partner Organization (WWPO). Just this week, it confirmed to CRN that it will invest $75 million in its partner-led strategy for midmarket and SMB sales through the channel.

Here's a look at some of the key points made by Cisco Chairman and CEO John Chambers and his top lieutenants at Tuesday's event.

Cisco Was Too Fat

The big Cisco story of 2011 is the company's corporate restructuring, and a piece of that is the headcount cuts Cisco has been making since the spring. More than 22,000 Cisco employees have been "realigned," Chambers said, as part of the restructuring, and 12,700 people will have exited the company when Cisco's 6,500-person layoff, early retirements, shuttering of certain consumer businesses and the transfer of a Juarez, Mexico-based Cisco factory are taken into account.

"We were fat," Chambers told conference attendees. "We had an extra four to five inches around the waistline."

Wanted: Next-Gen Leaders

Cisco's Gary Moore, executive vice president and chief operating officer, said that the people Cisco let go of were "good people." But in many cases, Moore said, "they weren't the next generation of leadership."

On the other hand, said Moore, Cisco retained its best during the transition, and has attracted new and returning talent.

Moore made particular mention of the six executives Cisco poached from Juniper's service provider sales team in August. "They understand we are driving the service provider market," Moore said.

More Of Cisco's Teeth

Sources inside Cisco have told CRN that the company is focusing on its competitive image in response to stepped-up attacks from its various competitors, and there's evidence that public sabre rattling by Cisco -- traditionally a rare thing for the company -- is on the rise.

Cisco earlier this week made a big show of calling out Juniper in the edge router space, even putting up a Web site purporting to show how Juniper has over-promised and undelivered to customers in the space.

During the conference, Chambers called four of Cisco's top competitors in particular: Juniper, HP, Avaya and Huawei. Juniper, said Chambers, "is the most vulnerable I've ever seen them," and HP misjudged Cisco's prowess in the data center, he suggested.

Huawei, Chambers added, will be a "very tough long-term competitor" but Cisco will take it on.

Cisco Fell First, Will Recover First

Several Cisco executives said the macroeconomic climate is still uncertain, but Cisco recognized potential softness first and has acted fastest among its major competitors to make the necessary recovery moves.

"We moved with remarkable speed," Chambers said.

Frank Calderoni, Cisco's chief financial officer, said Cisco expects to hold or gain share in all of the markets in which it competes over the next three years.

Three-Year Growth: 5-7 Percent

Cisco's three-year compound annual growth rate (CAGR) is expected to be 5-7 percent, according to Calderoni -- a far more modest range than the 12-17 percent target Cisco had been fond of touting in recent years.

Cisco offered other growth metrics during the conference as well, including that it expects its addressable market growing 7 to 8 percent a year over the next three years, including expected 6 to 7 percent growth in products and 14 to 15 percent in services. Out of all its key market segments, Cisco sees collaboration (13-15 percent), service provider mobility (18-22 percent) and virtualization (18 percent) growing the most between now and 2014.

Out of its three major sales theaters, the Asia Pacific Japan China region is expected to grow 9 to 11 percent in the next three years, followed by Americas (7-9 percent) and EMEA (3-7 percent).

Customers Are Buying

Chambers and his team see willingness on the part of customers to invest in Cisco.

"I haven't called on a customer with Cisco in the last 120 days who isn't going to keep their spending with Cisco, or increase it," Chambers said.

Cisco's Moore said one of the big operational changes Cisco's seen this year is that the time to approve deals has improved dramatically. Moore said Cisco has seen an overall 70 percent reduction in the amount of time it takes Cisco managers to review deals.

Clear Leaders, Clear Roadmaps

For Cisco to become easier to do business with, it needed a simpler corporate governance structure, and now all of its key businesses have clearly defined leaders, Chambers said, whereas before, the line of site into who was accountable wasn't clear in some cases.

During the conference, Chambers put up a slide listing each of the executives in charge of those businesses -- video, for example, belongs to Marthin De Beer, senior vice president of Cisco's Emerging Business Group.

Cisco's various CTOs are also charged with bringing forth product roadmaps 18 months out, Chambers said, so Cisco can be more transparent with customers about what's coming next.

Mobility Is Everything

Stated Chambers: "Mobility is everything."

Chambers noted that customers, particularly in the last six months, have sought more comprehensive mobility solutions and products and services that succeed in the mobility space.


Cisco's shift toward an architectural IT play means business problems and opportunities, not routing and switching, and intelligent networks, not dumb pipes, said Chambers. He also mentioned that with much of the world moving toward software, Cisco is moving that direction as well.

"Make no mistake," said Chambers. "That is coming."

Mistake With WebEx

Cisco's mistake with WebEx, which it acquired in 2007, was leaving it alone too long, said Chambers, and not integrating it into the broader Cisco video and collaboration portfolio.

Collaboration continues to be one of Cisco's strongest growth areas. In its fourth quarter fiscal 2011 earnings, Cisco posted 11 percent year-over-year revenue growth in the unit.