May 5, 2011 – By Jim Finkle and Sinead Carew
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BOSTON/NEW YORK (Reuters) - Cisco Systems Inc <CSCO.O> CEO John Chambers, cutting back a bloated management bureaucracy he helped build, has kicked off a sweeping overhaul to revive the networking equipment maker's flagging fortunes.
Cisco, the world industry leader which Chambers admits had lost its way after a string of disappointing results, will eliminate the business unit focused on fast-growing emerging markets, he said on Thursday.
The move, which follows news last month that Cisco would sell its money-losing Flip video camera business, is the first in a series of promised changes in coming months that could include sales of other underperforming assets.
Now the CEO also hopes to speed up decision-making by abolishing six of nine "councils" -- which he had introduced years ago -- that had made Cisco one of the most bureaucratic companies in the United States.
Analysts have faulted the elaborate system -- a slew of boards report to councils -- for making Cisco slow to respond to nimbler rivals such as Hewlett-Packard Co <HPQ.N>, Juniper Networks <JNPR.O> and China's Huawei Technologies Co <HWT.UL>.
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"This is a very top-heavy alignment. It looks like they're streamlining the number of people who make decisions in these organizations," said Avian Securities analyst Catharine Trebnick, who called the reorganization a "good first cut."
Cisco did not announce job cuts, though Chief Operating Officer Gary Moore said in a statement that one of the company's goals was to "manage expenses."
After an unsuccessful foray into consumer segments such as video cameras, Cisco said it would return to what it is best known for: selling network technology to telecommunications providers, businesses and other large organizations.
Cisco announced last month that it would dump its Flip video camera [ID:nN12157279] and offer early retirement packages to some employees [ID:nN28139899].
"It must mean the quarter isn't as robust as they'd want it to be," said Trebnick of Avian Securities.
The company, which operates four geographic units, said it is looking to simplify a bureaucratic sales and service structure that made it difficult to make decisions quickly.
After it eliminates its emerging markets division, it will be left with three geographic units -- the Americas; Asia; and Europe, the Middle East and Africa.
Spokeswoman Karen Tillman said this would "remove boundaries for getting things done."
Tillman declined to comment on the financial impact of the changes, saying that Cisco would provide an update on its larger expense management program, including Thursday's announcement and other restructuring moves, when it reports results next week. She did not say if the sales reorganization would involve job cuts.
"Knowing Chambers, this is just the first of many steps he is going to take to really return to the fiscal high ground," said ITIC analyst Laura DiDio.
Cisco's stock edged up 0.6 percent to $17.57 on Nasdaq.
(Editing by Edwin Chan and Richard Chang)