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Sat, Aug 25, 2001 - Page 21 News List

Cisco reorganizes management

TOP BRASS SHUFFLE The computer-networking company is splintering into 11 different groups, each of which will focus on a specific area of technology

BLOOMBERG , SAN JOSE

Cisco Systems Inc introduced the biggest management reorganization since 1997, said telecommunications-products head Kevin Kennedy quit and affirmed that orders are meeting its forecast so far this quarter.

The shares rose as much as 5.8 percent.

The largest maker of computer-networking equipment is structuring the business into 11 groups focused on technology areas such as optical-networking gear and Internet switches, replacing three units aligned by customer type. The move became effective yesterday, spokeswoman Abby Smith said.

Cisco's net income plunged 99 percent last quarter on lower demand for its products, stemming from a US economic slump and declining spending by telephone and Internet companies. Chief Executive John Chambers said that the lines among the old divisions had blurred.

"What will follow will be a more focused effort on driving market share and then more importantly driving profitability levels," said Christian Koch, analyst at Trusco Capital Management, which owns the company's shares.

Cisco shares rose US$0.28 to US$16.76 and climbed as high as US$17.73 in after-hours trading. Its market value of US$122.2 billion is the highest among companies making communications equipment, though that's down from a March 2000 value of US$555.4 billion, when it was briefly the largest of all companies.

The San Jose, California-based company's orders in the "first weeks of this quarter," which began July 29, are meeting Cisco's forecast, and "we are beginning to see signs that our business is stabilizing," Chambers said.

"The market's thirsting for something positive to hang their hat on, and I think it's a good sign that Cisco is beginning to see stabilization," said Christopher McHugh, senior portfolio manager at Turner Investment Partners, which owned 8.59 million Cisco shares as of June 30.

While Chambers has already cut 8,500 jobs this year and trimmed product lines, no jobs or products are being eliminated in the reorganization, Smith said.

Cisco predicted on Aug. 7 that fiscal first-quarter sales would be unchanged to down 5 percent from the previous period's US$4.3 billion.

The new setup replaces a three-group structure formed in April 1997 that organized Cisco's business by type of customer: phone and Internet companies, large corporations and small to midsize offices.

Kennedy, 45, was senior vice president of Cisco's business that sells to telecommunications companies, which account for about one-third of Cisco's total sales. Kennedy will pursue unspecified "external opportunities" and advise Cisco, according to the statement. Smith said Kennedy wanted to become CEO or chief operating officer of another company. She said she didn't know whether it could be at a Cisco rival.

A woman who answered the telephone in Kennedy's office referred a reporter to Cisco's public-relations department.

In the statement, Chambers, who turns 52 today, thanked Kennedy "for his insights into the new organizational structure" and congratulated him and his team "for their accomplishments" in several technology areas.

Kennedy, an engineer and New Jersey native, took control of Cisco's telecommunications business last August after Executive Vice President Donald Listwin left to become CEO of software maker Openwave Systems Inc.

After spending the first 17 years of his career at Lucent Technologies Inc's Bell Laboratories, Kennedy joined Cisco in 1994 and later devised a 15-point plan to beat Lucent. Lucent posted a US$3.25 billion loss last quarter.

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