Chambers: Cisco Will 'Emerge Stronger Than Ever'

Cisco Systems (CSCO) chief executive John Chambers told shareholders at the company’s annual meeting Nov. 19 that the vendor’s resilient nature will enable it to come back from its current sales woes.

That sounds eye-of-the-tiger inspirational, but is it realistic? Is it possible Chambers was giving his blueprint to revamp Cisco, an initiative he kicked off some two years ago, a vote of confidence or, better yet, a kick in the pants?

Fundamental changes to the networking world have threatened Cisco’s supremacy in switches, routers and other networking equipment for data centers. As a result, Chambers has had some explaining and defending to do, with the company’s stock price off nearly 14 percent since mid-September. Moreover, even though Cisco’s stock price has increased by 16 percent in the last 12 months, that’s about half the uptick in value the Nasdaq has posted.

But it appears Chambers mostly is sticking by his guns—dropping low-margin business, homing in on switches and router sales, growth through acquisition and staff layoffs—amid slower spending from telecoms and weaker-than-expected results from counted-on growth markets and EMEA.

“We get the transitions right at Cisco,” Chambers said to shareholders. “We get knocked down sometimes, but we get up in a way that no other company does.”

It wasn’t so much Cisco’s Q1 2014 sales miss and income slide that raised eyebrows but more its dire Q2 forecast for an 8 percent to 10 percent revenue decline, at least double what analysts were expecting.

Still, on the Q1 analysts’ conference call, Cisco restated its guidance that it can grow as much as 7 percent long term and the current strategy isn’t going to change because the short term is muddied.

The strategic tweak, of course, is Insieme Networks, setting Cisco up for software-defined network (SDN) dust-ups with Arista, Big Switch, Cumulus, Juniper (JNPR), Hewlett-Packard (HPQ), VMware (VMW) and others. As The VAR Guy noted, with both established and new companies chasing SDN, are Cisco’s channel partners ready?

For the longest time, Cisco didn’t say much about SDN even as the idea and the technology ate into its core switching and routing business, prodding Chambers to alter his strategic blueprint with Insieme.

Is SDN what’s making Chambers so confident now in Cisco’s resiliency?