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Cisco to restructure
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August 23, 2001: 5:33 p.m. ET
Network gear maker also says it sees signs of stabilization
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NEW YORK (CNNfn) - Cisco Systems, a leading supplier of the equipment used to route traffic over the Internet, said Thursday it is restructuring its business into 11 technology groups and that it sees signs of its business stabilizing.
The San Jose, Calif. Company outlined the reorganization in a press release issued after the closing bell, saying it is aimed at clearing up the blurring lines between customer segments.
Cisco (CSCO: Research, Estimates) executives also said that the company's current quarter is tracking with expectations.
"We are making these changes at a time when we are beginning to see signs that our business is stabilizing," said John Chambers, Cisco's CEO.
"Although we can't predict the future, our orders for the first weeks of this quarter are in line with the expectations we discussed in our fourth quarter earnings call," Chambers added.
Earlier this month, after reporting fiscal fourth-quarter profits that plunged 86 percent from the same period last year, Cisco told analysts to expect sales in the current quarter to drop as much as 5 percent from the $4.3 billion it reported in the fourth quarter. The company did not provide a specific per-share earnings estimate, but said its gross margin, the percentage of sales remaining after subtracting product costs, will be "low to mid-50 percent."
Analysts generally are expecting Cisco to report first-quarter earnings of 2 cents per share on revenue of roughly $4.2 billion, suggesting a 2.3 percent sequential decline, according to a survey conducted by earnings tracker First Call.
Cisco, one of the most highly valued and closely watched companies on Wall Street, had been booming along with the Internet. But since the U.S. economy stalled and the dot.com bubble burst, the company has been cutting back its financial targets, writing off excess inventory and cutting costs, in part through job cuts.
New structure includes management changes
The new organizational plan outlined Thursday, which includes several senior executives shifts, were made as part of an effort to align the company's focus around changing customer requirements and emphasize its advantages as the communications market consolidates, Cisco said.
The new organization will focus on 11 new technology groups, while marketing will focus on communicating Cisco's technology differentiation, the company said.
"Our line of business structure has served us very well in the past, when customer segments and product requirements were very distinct," Chambers said. "Today, the differences have blurred between these customer segments and Cisco is in a unique position to provide the industry's broadest family of products united under a consistent architecture designed to help our customers improve productivity and profitability."
Previously, Cisco had broken its business down into three lines: enterprise, service provider and commercial.
Under the new organization, the company will focus on the following technology areas: access; aggregation; Cisco IOS technologies; Internet switching and services; ethernet access; network management services; core routing; optical; storage; voice; and wireless.
In connection with the new organizational structure, Cisco announced a raft of executive changes.
Mario Mazzola, formerly senior vice president of Cisco's new business ventures group, has been named chief development officer and will oversee the 11 new technology groups that comprise Cisco's entire engineering organization.
Charlie Giancarlo, formerly senior vice president of the commercial line of business, will run four of the new technology groups. Michelangelo Volpi, formerly chief strategy officer, will be in charge of the largest technology area, internet switching and services. James Richardson, formerly senior vice president of the enterprise line of business, will run Cisco's marketing organization as chief marketing officer.
Kevin Kennedy, formerly senior vice president of the service provider line of business, is leaving the company.
Shares of Cisco, which have fallen more than 75 percent over the past year, rose 28 cents to $16.76 on Nasdaq ahead of the news, which was released after the closing bell. They rose another 57 cents to $17.33 in extended-hours trading. 
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