Cisco CEO John Chambers should get to live through the disgrace of rebuilding the company he made and to stand at the door of the firm and hand out the pink slips.
One of the most important weapons embattled CEOs have is cutting costs. These usually include layoffs. People are expendable when a corporation’s performance slips, particularly when a chief executive needs to buy time to improve performance
Cisco (NASDAQ: CSCO) is no exception to the layoff rule. Chambers, for years the well-regarded dean of Silicon Vally chief executives, has lost his way. In the company’s third fiscal quarter, earnings fell 18% to 1.8 billion. Cisco’s forecasts were much weaker than analysts expected. Chambers promised to take $1 billion in expenses out of the company per year to help offset poor revenue results. Part of that effort will include letting go of about 4,000 to 5,000 people, according to Wall St. analysts who listened to Chambers’ presentation.
Cisco investors are pressuring Chambers to restructure the company. He has gone a bridge too far they say. Cisco should not have diversified as much as it did beyond its key router business. Or, once it decided to move into consumer electronics, it should have managed the move better. After all, other large enterprise companies like Oracle (NASDAQ: ORCL) have diversified through M&A activity and done it well.
Chambers should be fired, many investors say. The case for that is wrong. Chambers, a perfectly competent executive, should live through the dismantling of his empire and the firing of thousands of his most prized employees. His board could bring in a new chief executive, but that person could not possibly know as much about Cisco as Chambers does, and no one could be as badly shamed as the man who has run the company since 1995. Cisco’s board can cut Chambers’ compensation to the bone and then let him walk through the hell of sending people to the unemployment line for his mistakes.
The end of Chambers’ career should not be to leave with his pockets filled with millions of dollars in severance. The alternative that he stay and see the consequences of his actions is a better one.
Douglas A. McIntyre
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