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Optical/IP

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
http://www.lightreading.com
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lighthearted 12/4/2012 | 7:55:05 PM
re: Reorg Rips Through Cisco's Ranks i would have expected an industry-wide upgrade by now...c'mon, the sell-side can't allow itself to be left behind again, can it?
abarbier 12/4/2012 | 7:55:03 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..."

In how many markets Lucent plays and wins?
Cisco wins a lot therefore 11 BUs could be a good idea.
Lucent lost nearly everywhere and 2 markets is what's left for them.

Your analogy does not apply...
let-there-be-light 12/4/2012 | 7:55:03 PM
re: Reorg Rips Through Cisco's Ranks Teacher to Russo:

How many times do I have to tell you, The word "optical" does NOT begin with "I"...

lcw 12/4/2012 | 7:55:03 PM
re: Reorg Rips Through Cisco's Ranks Cisco's gotten bit by having their business groups so far apart. e.g., they wound up with five distinct web load-balancing product lines that all directly compete with each other. What a waste of R&D...

It seems to make sense to have an internal structure based on technology instead of arbitrary customer classes. Maybe they'll sell more optical gear in the enterprise, now.
tintin 12/4/2012 | 7:55:00 PM
re: Reorg Rips Through Cisco's Ranks So, what's the plan to reorganize 60+ marketing groups into one?
Do i hear 90% layoff???
(product managers do not turn into engineers)
noitall 12/4/2012 | 7:55:00 PM
re: Reorg Rips Through Cisco's Ranks 1) to get rid of rbak, they were basically giving away other gear
2) to nail jnpr, they are cutting prices and giving away svcs and promising customers the world
3) this re-org is a joke. chambers is confusing activity with progress here.
4) they are no where in optics. 3% of revenues last qtr. what a joke. no wonder russo got demoted.

startups: time rally guys! you can beat cisco if you execute!
ccx_1999 12/4/2012 | 7:55:00 PM
re: Reorg Rips Through Cisco's Ranks Did you see the press release about "Cisco Captures Lead in 10 Gigabit High-end Routing Market With 36% Share Gain"?
<http: dlls="" hd_082301c.html="" newsroom.cisco.com="">
It looks like the "empire is striking back" at Juniper!</http:>
melao 12/4/2012 | 7:54:59 PM
re: Reorg Rips Through Cisco's Ranks "1) to get rid of rbak, they were basically giving away other gear
2) to nail jnpr, they are cutting prices and giving away svcs and promising customers the world
3) this re-org is a joke. chambers is confusing activity with progress here.
4) they are no where in optics. 3% of revenues last qtr. what a joke. no wonder russo got demoted.

startups: time rally guys! you can beat cisco if you execute!"

This is very odd, i really have the feeling that people from US ignore international giants for Optical networks.

We got Siemens, NEC, Alcatel, Marconi and Fujitsu.

I wonder what would the market share worldwide for Ciena and Cisco. Probably not even near of those companies listed.

The thing is, Cisco is not big at optical yet and that does not make any chances for new optical startups.
opticaltalent 12/4/2012 | 7:54:56 PM
re: Reorg Rips Through Cisco's Ranks
Quit stealing lines from Dumb and Dumber.

Cisco is going to pull off a miracle if it is ever going to get back to the $50-75 range.
hype 12/4/2012 | 7:54:55 PM
re: Reorg Rips Through Cisco's Ranks Hey...Carl still has to make that killer commute to San Jose in the morning...on his personal jet....take it easy on him...
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