Note: The Skinny blog is written by Rick Smith, editor and co-founder of WRAL Tech Wire and business editor of

RESEARCH TRIANGLE PARK, N.C. – Cisco’s seemingly immortal and invulnerable tech superman John Chambers bared his soul to the company’s employees – some whom he admits are upset with him – on Monday.

“[T]oday we face a simple truth: we have disappointed our investors and we have confused our employees. Bottom line, we have lost some of the credibility that is foundational to Cisco’s success – and we must earn it back. Our market is in transition, and our company is in transition. And the time is right to define this transition for ourselves and our industry. I understand this. It’s time for focus,” Chambers wrote after defending his and the company’s record.

He also promised changes with “targeted moves,” but apparently that won’t include a departure by the man who is the face of the company. “Emphatically no,” a Cisco spokesperson told Bloomberg when asked if Chambers was leaving.

The fact that Chambers felt that he had to in effect apologize to Cisco’s employees and investors for the networking giant’s recent problems is amazing.

No, make that stunning, although he did say basically “Sorry about that” to shareholders in November. (Read details here.)

Late Monday, Reuters had the text and posted it on the web for the world to read. So too did the Wall Street Journal. Then on Tuesday, Cisco (Nasdaq: CSCO) went ahead and posted the full text on its website.

In a memo that runs nearly 1,500 words, Chambers laid out in detail how Cisco had reached the point that drastic action – his confession combined with planned changes – was needed.

“Unacceptable” and “attack”

“We have been slow to make decisions, we have had surprises where we should not, and we have lost the accountability that has been a hallmark of our ability to execute consistently for our customers and our shareholders,” Chambers said. “That is unacceptable. And it is exactly what we will attack.”

After recent quarters through which Chambers and Cisco were pounded on Wall Street for earnings and sales woes, the company named its first chief operating officer (Gary Moore) a month ago. Share values are down by a third, and investors are nervous. On March 17, Cisco fell to a 52-week low of $16.97. (The 52-week high is $27.74.)

“Our growth strategy has been based on capturing the incredible opportunity afforded by this massive demand for the network,” Chambers wrote. “Many say that in the face of this expansion, Cisco needs more discipline. I agree.”

A top-of-the-cover story in the March 3 issue of Forbes proclaimed:

“Does Cisco have a John Chambers problem?”

Quentin Hardy wrote: “Cisco looks like a company facing redoubled competition just as it diversified in the wrong directions and misread the greatest shift in business technology: consumerization.”

Internal heat

Chambers not only faced external but internal criticism.

“You are telling me that there is a reason you are at Cisco – our culture, our values, our vision,” he wrote about Cisco’s workers – more than 4,000 of whom are based in RTP. “You’ve also made it very clear that we must make it simpler to do the work we love to do, and to accelerate the impact we know we are making for our customers.”

However, Chambers also doesn’t fall on his sword. He’s not quitting. He’s saying he will change.

“Many say that in the face of this expansion, Cisco needs more discipline,” he wrote of Cisco’s rapid growth and acquisitions outside its core networking markets. “I agree.”

But he stands by his vision.

“To be clear, I am confident that our vision and fundamental strategy is right –we are aggressively capturing the opportunity to take the network where our customers need it to be.”

He went on to stress key points:

“1. We will not fix what’s not broken …
“2. We will take bold steps and we will make tough decisions …
“3. We will accelerate our leadership across our five priorities … [leadership in core routing, switching and services; collaboration; data center virtualization and cloud; architectures; and video.]
“4. We will make it easier for you to work at Cisco, as we make it easier for our customers and partners to work with Cisco …”

Chambers also said he expects Cisco’s employees in helping getting the company back ontrack.

“The responsibility does not fall on one leader or one team. It will not be easy and I expect your participation, flexibility and feedback along the way. As I’ve said before, we will look back at this time in Cisco’s history and remember it as challenging, and important to the future of our company. Plain and simple – we need to roll up our sleeves and work it out, together.”

If Chambers’ strategy works and Cisco executes a turnaround, the next Forbes headline is likely to say:

“Where would Cisco be without John Chambers?”


(Read the full memo here.)

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