Executives of the networking equipment giant this week described the company's loss--its first since going public 11 years ago--as an "anomaly" and a simple matter of over-ordering parts and subassemblies in advance of demand that never materialised.
But a closer look at the shocking plight of the once peerless company exposes a company with questionable fundamental business practices. In fact, some customers and analysts contacted this week said Cisco's problems can be traced directly to an arrogant and even lazy sales force, which is too used to taking orders rather than aggressively selling and serving customers. Others flat out question the innovation-by-acquisition strategy that has been the hallmark of President and CEO John Chambers' regime.
If Cisco cannot answer these questions effectively--and the company's performance over the next six months will tell much--then it may never match the heights it attained in recent years, when, for a time, it had the largest market capitalisation of any business in the world.
"I came right out and said, 'I think you guys are lazy, you're waiting for people to be coming to you,'" said Ginger Smith, a voice analyst in the Midwest who asked that her company not be named. Smith was interested in VOIP (voice-over-IP) products, but when she called her Cisco representative about 10 months ago, she said she was told by her rep to come into the Cisco office and speak about it. Then she was told, to her surprise, that Cisco offered the kinds of products she was looking for. She rejected the offer to come in, saying it was Cisco's responsibility to come to her.
A week later, Smith received a Cisco textbook on VOIP in the mail with a note from her rep saying, "This might help you."
"At first I thought, 'That was nice,'" Smith said. "Then I was a little bit offended because rather than coming out and explaining it to me--I mean it was a textbook." Smith never worked with Cisco on the project and remains leery of the company's ability in VOIP.
Tom Miller, senior director of corporate information systems at Affymetrix and an eWEEK Corporate Partner, looked at Cisco for switches but went with Foundry Networks. "We thought that Foundry was a lot more innovative and able to turn around products faster." Foundry's BigIron 8000 and 4000 network switches, Miller said, offered better price/performance than comparable Cisco products.
From Miller's perspective, Cisco has reached the same point IBM reached more than a decade ago. "Cisco is a safe bet. It's conservative, it's expensive," he said. "But what real value are they bringing to the industry these days?" Further, Miller finds the company's dabbling in diverse technologies like optical networking confusing: "Where is John (Chambers) taking Cisco?"
"They got fat and happy and got into just taking orders," said Aaron Goldberg, industry analyst and vice president of Ziff Davis Media, which publishes eWEEK. "Turning this around is going to be hard, and if they trip, this is where it will happen."
