Reorg Rips Through Cisco's Ranks

Cisco Systems Inc. (Nasdaq: CSCO) this afternoon announced a complete corporate reorganization in which it will convert its existing line of business structure (organized around service provider, enterprise, and commercial customers) to a centralized engineering and marketing organization.

"Our line of business structure has served us very well in the past, when customer segments and product requirements were very distinct. Today, the differences have blurred between these customer segments," said John Chambers, president and chief executive officer of Cisco Systems, in a press release issued at 4:32 pm Eastern Time.

Two executives from Cisco's enterprise line of business won big positions in Cisco's optical networking business and its overall executive management team as a result of the shakeup.

Mario Mazzola, an eight-year Cisco veteran, has been named chief development officer, overseeing the 11 new technology groups that will be formed as a result of the reorg. He will report directly to Chambers. Mazzola was formerly in charge of Cisco's new business ventures group. (As such he was the mastermind behind Cisco's "Andiamo" storage networking caper. See: Cisco’s Secret SAN Strategies Revealed).

Jayshree Ullal takes over from Carl Russo, who is stepping down as group vice president, optical networking. Russo will now report to Ullal.

Russo came to Cisco via its acquistion of Cerent and was recently named the Number 1 Mover and Shaker in optical networking by this publication (see The Top Ten Movers and Shakers in Optical Networking ) "I'm not going anywhere," Russo told Light Reading in an interview this afternoon. "My perception of the opportunity in front of us is actually better than it's ever been.

"On a personal note, I don't want to be in an operating role. Jayshree has the combination of background and capability and reputation to do the job, and we're sticking together and going through this."

"In some ways, we'll be partners in crime," Ullal quipped.

Ullal and Mazzola both came to Cisco via its 1993 acquisition of Crescendo Communications Corp. Mazzola went on to lead Cisco's enterprise line of business. Ullal, who now sits on the boards of Nishan Systems Inc., Atoga Systems, and Abeona Networks, led Cisco's LAN switching business.

Now Ullal and Mazzola have taken more prominent roles at Cisco, as the company obfuscates its weaknesses in the service provider market by blurring the lines between where its enterprise business ends and where its service provider business begins.

Today's announcement included other interesting changes in Cisco's executive lineup. Former service provider boss Kevin Kennedy has left the company. As first reported in Light Reading, rumors that he was planning to leave have been circulating for some time (see Cisco's Kennedy Ready to Leave?).

Former CTO and chief strategy officer Michelangelo (no relation to the turtle) Volpi is now in an operational role under Mazzola (no relation to the salad oil), the company says. Volpi will head up Internet switching and services, the largest of the eleven new technology groups.

"That's a promotion, not a demotion. Chambers is applying [Volpi's] strengths to the largest and most important new group within Cisco," said one VC, who requested anonymity.

In other moves, Charlie Giancarlo, who led Cisco's commercial line of business, will now lead four of Cisco's 11 technology groups. James Richardson, the enterprise line of business boss who took over after Mazzola left for some time off, will lead Cisco's marketing efforts.

"Chambers is picking his team. He's using the restructuring to keep some people and get rid of the dead wood like Kennedy. There are also some that he'd probably like to keep, but are going anyway. Put Russo in that group," says the anonymous VC. "Chambers is also telling Wall Street where he sees the money coming from."

The eleven new groups formed in the re-structuring are: access, aggregation, Cisco IOS [router software] technologies division (ITD), Internet switching and services, Ethernet access, network management services, core routing, optical, storage, voice, and wireless.

Cisco says that its three lines of business were first formed to accommodate three different kinds of customers that were building three different kinds of networks. Out of the other side of its mouth, though, Cisco had always endorsed the idea that the Internet would be the dominant network and IP the dominant protocol.

In the late 90s, Cisco embraced new service providers as a potential source of growth, since those networks were upgrading quickly to handle the Internet boom. But despite the company's acquisitions, vendor financing, and aggressive pricing in the service provider market, Cisco has yet to take significant market share from Nortel Networks Corp. (NYSE/Toronto: NT) or Lucent Technologies Inc. (NYSE: LU), the top two telecommunications equipment vendors (see Lucent: They're the Tops! ).

Despite breaking down the division between its service provider business and its enterprise business, Cisco maintains that it is not retreating from the optical networking market. "We're not de-emphasizing optical; we're expanding," says Russo.

As well as "serving the needs of its customers" the reorganization will also present Cisco with a way to streamline its costs. Collapsing three business units into one operating group will cause some jobs to become redundant and unnecessary. Cisco hasn't announced any additional layoffs, yet, but hasn't ruled them out, either. Executives were cagey when questioned on the subject. "That's not the intention. But we can never say never. Time will tell," said Jayshree Ullal, group VP at Cisco.

Cisco shares closed up 0.41 (2.49%) to 16.89 in trading today.

- Phil Harvey, Senior Editor, and Stephen Saunders, Founding Editor, Light Reading
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farmboy 12/4/2012 | 7:55:21 PM
re: Reorg Rips Through Cisco's Ranks I guess that will move him off the #1 spot on the Top 10 Movers & Shakers.
csco 12/4/2012 | 7:55:18 PM
re: Reorg Rips Through Cisco's Ranks Russo and Ullal complement each other.
This is going to be good.
beachgolff 12/4/2012 | 7:55:16 PM
re: Reorg Rips Through Cisco's Ranks Typical move by a giant to boost stock price.
joe_average 12/4/2012 | 7:55:15 PM
re: Reorg Rips Through Cisco's Ranks reorganize!

Honestly - this is exactly what is happening. Prediction: There will be another reorg within 2 years which will look different still. There will be the same "customer focus" claims brought out at that time as well.

Oh well - let the big boys have fun playing chess. I'm going to get back to the 1s and 0s.
reoptic 12/4/2012 | 7:55:14 PM
re: Reorg Rips Through Cisco's Ranks Gee, didn't Lucent reorg a few years ago into 11 lines of business and then reorg back into two lines of business when that didn't work and created lots of duplication...this sounds similarly brilliant...

John's following the old maxim when you get new job from predecessor you get three envelopes to use when you get into trouble. First envelope says: blame economy. Second envelope says: reorganize. Third envelope says: write three envelopes...
wiseguy 12/4/2012 | 7:55:13 PM
re: Reorg Rips Through Cisco's Ranks Cisco to telecom market: What's the chance that we can get together?

Market to Cisco: I'd say one in a million...

Cisco to telecom market: Then you are saying I still have a chance!

your_mama 12/4/2012 | 7:55:11 PM
re: Reorg Rips Through Cisco's Ranks huh,

any LR top 10 blessing is a kiss of death...
look at ONIS...makes it in the list, next thing
the stock is down from 23 to like 14....russo
#1, i guess not......and an enterprise person
to head optical networking??...yeah, w. the
RBOCs and ILECs the last ones left with any
cash to spend, this seems like a real mike tyson
physical_layer_photons 12/4/2012 | 7:55:09 PM
re: Reorg Rips Through Cisco's Ranks Don't be sucked in by Cisco PR spin. Cisco has failed in the optical space except for Cerent, which has recently had it's growth rate lowered to a shrink rate. Everything else ( Monterey, Pirelli, Qeyton ) is for all intents and purposes dead or being taken off life support in the near future. As we move forward, Cerent too will become yesterdays news and Ulall will be tending shop alone, without Russo.

Future seems bright to me for the Optical group at Cisco....not!

froggy 12/4/2012 | 7:55:09 PM
re: Reorg Rips Through Cisco's Ranks It looks more and more like the godfather 4 at Cisco. Mazzola, Volpi, Russo, Giancarlo ...
Does it have anything to do with the doomed Pirelli acquisistion.


lighthearted 12/4/2012 | 7:55:05 PM
re: Reorg Rips Through Cisco's Ranks if you had a sweet several acre pad on the water in santa barbara, would you really care what your title is? i am surprised he bothers with anything anymore...
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