May 05, 2011, 11:46 AM — Usually when a company says it plans to "streamline" operations, it really means layoffs are around the corner.
And that may well be one result of Cisco Systems' announcement Thursday that it plans to adopt a "streamlined operating model" to replace the cumbersome "management by council" structure that has slowed down decision-making, frustrated employees, caused a loss of market share in the company's core router business, and triggered an exodus of top talent in recent years.
However, based on early April's mea culpa from chief executive John Chambers, it's clear the shift announced Thursday is more about fixing the process than trimming costs (though again, that may be a result).
"It's time to simplify the way we execute our strategy, and today's announcement is a key step forward," Chambers said in a statement.
Specifically, the Wall Street Journal writes:
Cisco said Thursday that it will streamline its sales, services and engineering organizations to focus on what it said are "the five areas driving the growth" of networks and the Internet: routing, switching and services; collaboration; data-center virtualization and cloud computing; video; and architectures for business transformation.
The move to streamline Cisco's structure comes after Mr. Chambers conceded in a memo last month that the company had suffered a lapse in operational execution, and had confused customers and disappointed investors.
True enough. Shares of Cisco (NASDAQ: CSCO) are down nearly 50 percent since November 2007 and the networking equipment giant has disappointed Wall Street with its last several quarterly reports.
Meanwhile, Cisco has all but abandoned its consumer market strategy, a decision underscored a few days after the Chambers memo was reported in the media when the company said it would discontinue making the Flip camcorder, for which Cisco paid nearly $600 million two years ago, even though the Flip was the most popular video camera in the U.S.
Now, regarding Cisco's "council" structure, it does sound epically stupid. Bloomberg has a good description of how it works (and I use that last word loosely):
Chambers set up the councils to support his push into more than 30 new markets, including computer servers, consumer videoconferencing gear and corporate social-networking software.