One on One with Cisco CEO John Chambers
Thursday, March 05, 2009
|
|
|
|
SUSIE GHARIB: During this recession, most companies have been scaling back and cutting costs, but not Cisco Systems. The giant Internet equipment manufacturer is making acquisitions and going full speed ahead with its expansion plans. As we continue our series, "Reviving the Economy: What Should Business Do?" I sat down with Cisco CEO John Chambers and asked him to explain his business strategy.
JOHN CHAMBERS, CHAIRMAN & CEO, CISCO SYSTEMS: We see this as an opportunity for Cisco to move into many market adjacencies. We have been through this four times before, in '93, '97, 2001 and 2003. Each time we've gained market share and we have kind of if you will a playbook for how we deal with it. So we're going to be very aggressive through this downturn. We have $34 billion in cash. We have new business models and new organization structure which allow us to take on probably more than two dozen new opportunities.
GHARIB: John, you have been making acquisitions. You've been investing heavily in research and development. You've been expanding in China and India. It seems like an unusual strategy during a severe recession.
CHAMBERS: My parents were doctors. They taught me from the very beginning, focus on what you can control and influence. They taught me not to treat the symptoms of an issue but to focus on the real, underlying challenge and opportunities and not to get off message on how you deal with that. So if you watch me during these downturns, I will be very calm, very focused on what we can control and influence, don't lose a lot of sleep over what we can't change and I'll never get off track in terms of what we want the patient -- or the opportunity to look like three to five years out.
GHARIB: Your customers have been delaying their purchases. Cisco's orders are down something like 20 percent. At what point do you have to change your strategy?
CHAMBERS: The real key here is if your strategy was working before and you are about to catch market inflection points and you see many new growth areas, you not only don't change your strategy, you get more aggressive. There is no IPO market, so I can acquire more start ups, incorporate them into the network because the network is going to be the platform for delivering entertainment, all forms of communications and IT if we're right.
GHARIB: So many companies have told me that they've cut back on travel. They've been canceling sales meetings. Has this helped to increase your tele-presence systems -- those big teleconference TV screens?
CHAMBERS: Big time. Tele-presence is continuing to grow in hundreds of percent. It's the only technology I've ever had government leaders and CEO's walk up and say, John, that is the coolest thing I've seen and secondly, I'm going to buy a lot of them. And I'm more interested in the second than the first.
GHARIB: You've cut jobs. Do you expect to do more?
CHAMBERS: Susie, we've only done one across the board layoff during the almost 20 years I've been at Cisco. That was in 2001. It was about survival. We do regular spinning in and spinning out of businesses and that's something we do every quarter. At the present time, we have no plans for a broad-based, across the board layoff. If the market were to dramatically deteriorate vs. our expectations, we would adjust, but we're trying to do everything we can to avoid that and I think the odds are reasonably good that we can.
GHARIB: John, what's your sense of the outlook for tech spending in 2009?
CHAMBERS: All of our customers don't know when the upturn is going to occur. If you were to ask customers, probably the average think it's 2010. I'm a little bit more optimistic but I don't have a crystal ball either. If I had to bet exactly when it would occur, I would say right about the turning of the new year, so December, January, which is what I have been very open about predicting but I want to emphasize no one knows and by the way, my strategy doesn't change dramatically.
GHARIB: So what's your prediction about the recession? When do you think that'll end?
CHAMBERS: I hope that it ends quickly. It actually if you were a shareholder and saying what will the stock be three to five years out, it may be even better if it goes on longer because we will consolidate and our industry will also use as the chance to move into new market opportunities and do things because of our organization structure and our prior experience perhaps our peers cannot afford to do.
GHARIB: If the recession does drag on for a couple of years, what's Cisco's plan B?
CHAMBERS: Cisco's plan doesn't have to change dramatically. We are unusually strong in the industry. I feel very good about where we're headed. Our customers have re-emphasized that and we use market transitions to move into new markets. This is a very painful transition. We wish it had not occurred but for us as a company, it's something that we will take this terrible pain and say how do we position ourselves to really make major progress during this downturn? So I'm going to be very aggressive. We have no fear. A lot of healthy paranoia of what can go wrong and we're going to outline a vision for three to five years out for our shareholders, our customers, our employees and this is what Cisco normally does very, very well.
GHARIB: John, thank you so much. It's great seeing you again.
CHAMBERS: Susie, it's a pleasure, as always. Let's do the next session by tele-presence.
