I read the Sunday NY Times business section every weekend. On June 23rd, there was an article by Matt Richtel titled ?¬¢‚Äö?ᬮ??¨A Cheerleader, for a Company in a Midlife Funk?¬¢‚Äö?ᬮ¬¨??. It was about John Chambers and a little about Cisco. After reading this, it reinforced a long held belief I have, and that is, how poorly the business press covers our industry. Does it matter to customers, shareholders, and potential shareholders if Mr. Chambers has two homes, a plane, makes donations to republican and democratic politicians, if his Dad tried to get him to collect stamps, or the number of children he and his wife are blessed with? Don´t get me wrong, I have a lot of respect for Mr. Chambers and his accomplishments, especially with the recent revelation of his dyslexia. In fact, I wish more CEOs and business leaders were like him. I´ve met with him one-on-one several times, shared a keynote with him and interacted with him while attending many Cisco analyst meetings when he was front and center. And I know the competitive Chambers too. I have clients that have heard the ?¬¢‚Äö?ᬮ??¨networking boosts productivity?¬¢‚Äö?ᬮ¬¨?? pitch, which is followed by the inevitable ?¬¢‚Äö?ᬮ??¨we want all of your networking business?¬¢‚Äö?ᬮ¬¨??.

He is a gentleman for sure, but he´s not running a political campaign, he´s running a business. My point is that the business press has failed our industry with meaningless fluffy articles like this that attempt to pump up a personality rather than give customers, shareholders or would be shareholders meaningful business information.

The only question for Mr. Chambers is: why make yourself available for such interviews so frequently? What is the return on that time investment for Cisco customers and shareholders? What is the motivation? Articles such as the above mentioned NY Times piece are essentially character development. Does Chambers have ambition to run for public office some day and use Cisco as his launch pad, much like Craig Benson has done with Cabletron? Is it ego? Is it a strategy of trying to pump Cisco stock up by pushing the brand out to the mass market, because you can bet that less then 1% of the mass market can tell you what a router or an Ethernet switch is or, in essence, what Cisco does. Is it to impress existing or potential customers, so that during meetings they feel blessed or fortunate that they are in the presence of a business celebrity? Does it shorten the sales cycle for CIOs seeking budget approval for a Cisco expenditure? Does it help him shape/maintain patrimonial authority within Cisco´s culture? Is it a strategy to put a face and personality on the company? Does Mr. Chambers or his handlers think he is above talking to customers via industry publications, the very publications his customers read? If Mr. Chambers is such a great team builder, as mentioned in the NY Times article, then why aren´t any of the other Cisco executives with him during these high profile opportunities? I don´t know the motivation; perhaps it´s all of the above.

But, for once, it would be refreshing to hear Mr. Chambers answer some of the tough Cisco and industry questions that present themselves today. For example, we all know that IT spending is down and there is, frankly, no end in sight. What is more alarming for Cisco, is that according to the June 14th Morgan Stanley CIO Survey Series: Release 3.4, enterprise network equipment spending is dropping in budget priority, from a high of 9 on the list down to 25, a 16 point drop! Along those lines, businesses worldwide spent like crazy in the late 1990s to avoid what many in the industry claimed was a potential catastrophe in the making: Y2K. Fear drove decisions to upgrade most IT systems. Mr. Chamber´s message of ?¬¢‚Äö?ᬮ??¨don´t be left behind?¬¢‚Äö?ᬮ¬¨?? during the same time frame added to the spending momentum. With much equipment updated in ?¬¢‚Äö?ᬮ?Ä??98 and ?¬¢‚Äö?ᬮ?Ä??99, is there no wonder that we have a drastic pullback now? How much is the industry paying for the hype of Y2K and the overspend that it created in the late
?¬¢‚Äö?ᬮ?Ä??90s?

Combine the following three facts: First, over 30% of CIOs are reevaluating their budget/spending plans according to the above -mentioned report. Second, more then 50% of CIOs are not planning to increase IT spending on software, storage hardware, computer hardware or network equipment. Third, a whopping 70% said they would not spend more on network equipment this year. To sum it up, IT spending is even tighter this year than last, and last year was horrific. So the question to Mr. Chambers is: with no forward visibility in IT spending, what spending falloff level would trigger a massive industry consolidation across storage, computing, applications and networking? If IT spending falls below this inflection point, what then is Cisco´s industry role?

If IT spending is down and going lower, then where will Cisco find the expected 10% growth, as Mr. Jim Harper, Cisco´s Analyst Relations Manager, communicated to me prior to the last Lippis Report: ?¬¢‚Äö?ᬮ??¨The Lippis Report #004: Who Will Be #2 In Enterprise Networking??¬¢‚Äö?ᬮ¬¨?? (http://www.lippis.com/backissues.htm)? Will it come from taking share from your competitors? An increase in VoIP or SAN sales? A resurgence in Telecom spending? Well, with WorldCom seemingly heading for bankruptcy court, and a few other mammoth service provide

Posted 2 July 2002 at 6:42 pm under Lippis Report. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.