Cisco's Turnaround
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Case Details:
Case Code : BSTA097
Case Length : 09 Pages
Period : 2004
Organization : Cisco
Pub Date : 2004
Teaching Note :Not Available
Countries : Global
Industry : Hardware, Computers
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Introduction
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On 5th November 2003 when Cisco announced its quarterly results, CEO John Chambers seemed to be back to his old self. The company's profits had shot up by 76%, to $1.1 billion for the previous quarter, while sales hit $5.1 billion, the highest level since January 2001. With orders on the upswing, Cisco said it expected to post 9% to 11% growth in the last quarter of 2003.
While battered rivals like Lucent Technologies (LU) and Nortel Networks (NT) were slowly returning to profitability, Cisco was reporting record profits. Cisco earned $3.6 billion in the most recent fiscal year, nearly a billion dollars more than its previous best in 2000. And with no long-term debt and $19.7 billion in cash and investments, Cisco's balance sheet was among the strongest in the tech industry.
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Indeed, Cisco looked like a case study of how a firm in disarray could use a slump to streamline operations and to build a better future. While Chambers had been late to recognize the worst tech downturn in history, once he realized it was no mere dip, he seemed to have seized the initiative and drastically restructured the company.
Chambers had imposed operating discipline on entrepreneurial staffers who had been too busy taking orders and cashing stock options and less concerned with efficiency, cost-cutting, or teamwork. Engineers who had earlier been able to chase any idea suddenly had to work only on technologies approved by a newly appointed head of engineering...
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