| SAN JOSE
SAN JOSE Cisco Systems Inc (CSCO.O) Chief
Executive John Chambers said on Tuesday that the office of the
CEO will be less hierarchical in five years, although he has
not yet decided on when he would hand over to a successor.
In one of his most candid remarks about the future
leadership of the world's top network equipment maker, Chambers
told Reuters he envisioned a more collaborative executive
"In terms of how we evolve our entire leadership team,
including the office of the CEO, it's very likely to be
different five years from now than it was five years ago,"
Chambers, one of Silicon Valley's longest-serving CEOs, told
Reuters in an interview.
"There will probably be a title of CEO, but the next CEO
will probably be more a leader of a council than a 'command and
control'," said Chambers, 58, who also is Cisco's chairman.
Since Chambers took the CEO role in January 1995, Cisco has
grown from a company with $1.2 billion in annual revenues to
around $40 billion, as the expansion of the Internet fueled
demand for routers and switches that direct Web traffic. Cisco
also has been expanding into new areas such as online video.
Many analysts say Cisco has a deep bench of executive
talent, but few have been identified as strong CEO candidates.
Two of Cisco's top executives, who were seen by Wall Street
as possible successors to Chambers, have left the company in
the last year: Michelangelo Volpi quit to join Internet video
service Joost, while Charles Giancarlo, who was chief
development officer, left for private equity firm Silver Lake.
After Giancarlo's departure, Cisco reorganized management,
installing a council of executives instead of appointing a CDO
replacement. Chambers said the new structure helped to speed up
business decisions and the concept could be applied to the CEO
role in the future.
"The CEO role at Cisco going back over the last five to 10
years has been very much 'command and control' and I think we
do it pretty well, and if we say 'turn right,' 65,000 people
turn right," Chambers said.
"That's very effective when you're in a couple product
areas or one or two major cross-functional initiatives per
year. It is not an effective leadership style or organization
structure if you're moving into a lot of market adjacencies and
you have a lot of major cross-functional priorities."
Chambers said that, while he was still committed to his job
for the next few years, the development of new leaders was
already taking place with four layers of top executives.
"The top layer is those who are ready today and there are
five of them," he said, adding that those in the lower layers
could become top leaders depending on timing.
READING THE ECONOMY
Chambers' office, a modest room in the company's sprawling
headquarters in San Jose, is decorated with photographs of him
with President George W. Bush, Secretary of State Condoleezza
Rice and others.
Because of his connections with such top policymakers as
Federal Reserve Chairman Ben Bernanke, as well as his ability
to read technology spending trends, Wall Street takes Chambers'
comments on business conditions seriously.
Asked about the weak U.S. economy, Chambers said many Cisco
customers see a recovery early next year.
"Most customers still see the turn probably late this year
or early next year. More of them looking toward early next
yea," he said.
In late May, Chambers said that, based on his conversations
with customers and economic leaders, the most likely scenario
would be for the economy to start picking up towards the end of
Since May, oil prices have continued to rise, dampening the
outlook for consumer spending and threatening to ignite
inflation. A deepening U.S. housing decline may also be a drag
on economic growth for months to come.
"I think most of us realize that it's probably going to be
a little bit longer than the one to two quarters that some
people had hoped for," Chambers said.
But he did not see the need for a dramatic change in
business strategy. Cisco plans to increase its head-count next
year, unlike in 2001 when the bursting of the technology bubble
brought on major job cuts.
Cisco's overseas expansion, including an aggressive push
into emerging markets, has helped the company grow, despite a
weaker domestic market.
The company has forecast long-term annual revenue growth of
12 percent to 17 percent, although it is expected to fall short
of that this year.
Cisco shares fell 2.3 percent in after-hours trading to
$22.35, compared with their Nasdaq close of $22.88.
(Editing by Carol Bishopric and Andre Grenon)