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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2cents 12/4/2012 | 7:54:02 PM
re: Reorg Rips Through Cisco's Ranks Cisco should buy NT. It's cheap now. That would be a true IP+Optical powerhouse.

spungold 12/4/2012 | 7:54:14 PM
re: Reorg Rips Through Cisco's Ranks Your right - it's gone. Printed it out on 8/3 so it's been pulled after that. Sorry.

here is a link to another bio but it is not as detailed. http://www.nishansystems.com/c...
green 12/4/2012 | 7:54:19 PM
re: Reorg Rips Through Cisco's Ranks hi,

I heard the HFR project is getting canned/put on back burner? any one have any inside info on this?
exphoton 12/4/2012 | 7:54:27 PM
re: Reorg Rips Through Cisco's Ranks checked ipunity - no bio for ullal; actually, not on bod! (bod consists of Vinod Khosla, Robert T. Coneybeer, Tom Jermoluk, Morgan Jones, Dr. Hasan Kamil, Arun Sobti, Dave Welsh)

what did i miss ?

butYouYes 12/4/2012 | 7:54:35 PM
re: Reorg Rips Through Cisco's Ranks "Does it have anything to do with the doomed Pirelli acquisistion."

How can you think that a failed acquisition can bring to such a career?!
optical_guy 12/4/2012 | 7:54:38 PM
re: Reorg Rips Through Cisco's Ranks The only decent optical candidate for aquisition is Corvis, but I think that they would firsthave to pry it out of Huber's cold dead hands , he won't give it up willingly.
spungold 12/4/2012 | 7:54:40 PM
re: Reorg Rips Through Cisco's Ranks AyeGǪThere's the rub... Good thoughts.

Jayshree (Ms. Ullal) actually sits on the board of IP Unity and there is a decent bio on her there. Anyone who thinks the Cisco made the GǣRusso decisionGǥ is a victim of serious denial. Russo is a risk taker - you don't have to look too far back in career to see that. He can do what is takes but this is still John's company. Russo is not going to blindly follow behind like the rest of the herd. He's just not built that way. I will put my $$$ where my mouth is - hold on Cisco - buy on Russo. When the right thing comes along heGll have a Gǣleave of absenceGǥ too, and poor Jayshree. Russo is right to exit the picture now. John just doesnGt know what he is loosing G but that have been his problem all along.

PS... if all Russo wanted was a SB ranch and a learGǪ would he be dealing with this dysfunctional family? G GUARANTEED NOT!

PSSGǪ Anyone got an extra copy of GǣLeading ChangeGǥ laying around that we can send John???
Lighteating 12/4/2012 | 7:54:40 PM
re: Reorg Rips Through Cisco's Ranks It is hard to see CSCO retreating into enterprise; as HM states everyone and his dog is moving into storage, and the future is optical.

My sense of the re-org is that they are setting up for an aquisition. Part of the pitch will be "Look at us - we have no one in optical - you manage the show for us." They certainly have the needed war chest. The key questions are Who? and When?

With regard to timing do they wait until the market turns or do they act in the near term and work out the kinks before the market picks up? I think they move sooner rather than later.

The real question is who?
your_mama 12/4/2012 | 7:54:41 PM
re: Reorg Rips Through Cisco's Ranks there is just no way these guys will get anywhere
in optical..PERIOD...there are too many incumbents
and/or strong mid-sized companies with too good
traction...454 is not optical..it is a souped up
sonet/sdh box soon to have much competition...
as far as pure optical, these guys are history....
every empire rises and falls, the sin of arrogance
...these guys have had their share and a lot
of success in the router market which DUPED many
to think they would repeat...not this time....
get out....
HarveyMudd 12/4/2012 | 7:54:42 PM
re: Reorg Rips Through Cisco's Ranks The reorganization at Cisco is not going to make any difference. If any thing, it will lead to further detotoriation in Cisco's product lines and its market share.

From the very beginning, John Chambers was sorrounded very small and minor stature person in the industry. Close to 90% of the management team did not have any substantial management and technology experience. Some people who were first line product managers in very isignificant companies received 5-6 promotions in two years without acquiring management and other skills to run business. John Chambers has been so unsure of his own abilities that he never hired any other person with good technology management experience. This probably did not make any difference during the hey days of internet when Cisco was the lone player. But the situation has changed and the businees management requires more skills than ever before.

Mr. Mario Mazola used to have a start-up company by the name Cresendo Communications with about twenty five employees or including Jay Shree Ullal. He used a small product line of workgroup switches that did not require any significant effort in terms of marketing and development efforts.

It is notclear what special skills does Mario Mazzola so as to enable him to manage 11 new technology groups. It is a very questionable choice as are other appointments.

There are over 40 SAN companies most whose future is questionable. So for Cisco to start something on storage is not a commendable effort.

Mr. Chambers has given responsibilities because f his personal liking rather than the basic and intrinsic qualifications of individuals.

Cisco has been misinforming industry analysts about its optical marketing share. It was claiming between 6-8% of the market, whereas in reality it had close to 1% market share because of the lack of carrier grade products.

Jay Shree Ullal has no experience in the optical networking industry. so it is very strange that she would replace Carl Russo. In fact, she used for Mario Mazoola as a marketing manager. Such steep promotions without experience are a recipe for disaster for Cisco. Mr. John Chambvers can not fool the industyry and the carriers any more.

Cisco's Wall Stret success was just a fluke rather any deliberate strategy. John Chambers has clearly demonstrated that endless and mad acquisition of companies do not work and he can not use it to enhance revenues forever.

One dowmside of acquyiring companies left and right have been its inability to assign its workforce acroos the projects. Its work force has swelled a lot but it can not make effective use of its enginners as most of them idle. This will remain a problem for Cisco for a number of years. It has reduce its workforce considerably in order to return to profitability.

Cisco's strategy of funding service providers has largely failed. It did so as it thought that it would be able to sell other carriers without their evaluating the fitness and deployability of its products. It has backfired.

Cisco has many times refused in evaluation of its products by experts. It goes directly to the customers and attempts to fool them by its marketing gimmick.

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