Should Cisco Break Up?

Earlier today, I asked whether Cisco, in its continuous pursuit of new growth markets, might be spreading itself too thin.

After reading a Wall Street Journal piece by Ben Worthen and an impassioned commentary on that article by Henry Blodget, I strongly suspect that I was asking a salient question.

Well, a blind squirrel sometimes finds an acorn, a stopped clock is right twice a day, and a pauper occasionally wins a lottery. So I suppose it’s theoretically possible for me to stumble onto the path of relevance.

Anyway, as Worthen’s WSJ article explains, Cisco CEO John Chambers is being driven to pursue growth in new markets like a thoroughbred racehorse under the stinging whip of a maniacal jockey. (The metaphorical jockey would be the big-money investors with sizable stakes in Cisco.)

As Cisco’s established markets slow to a crawl — or go the wrong way — during this punishing downturn, the company keeps looking for new revenue sources, often in businesses far removed from the foundation of enterprise networking on which Cisco was built.

To manage these proliferating new businesses — more than two dozen and counting — CEO John Chambers has replaced Cisco’s conventional top-down decision-making structure with a labyrinthine edifice of committees staffed by the company’s top executives. Cisco has 59 of these committees.

Blodget thinks Chambers has lost his mind.

Rosabeth Kanter, a professor at the Harvard Business School, thinks judgment should be withheld. Says she:

“Cisco is in the middle of something that isn’t yet completed. Everything can look like a failure in the middle.”

The syntax of her last sentence is somewhat tortured (or, to be politically correct, interrogatively enhanced), and it can lead to some disturbing misinterpretations. Still, I understand her point. It’s just that I respectfully don’t agree with it.

Cisco has reached a point where it has become unwieldy, awkwardly spreading in so many disparate directions — video cameras over there, switches and routers here, and digital-signage networks somewhere else — that the center cannot hold. It will get worse, too, as this excerpt from the WSJ piece makes clear:

Mr. Chambers said he will soon expand the number of new businesses Cisco is targeting to 50. Cisco will increase the number of people who participate in the committees from 750 senior employees to about 3,000.

Blodget argues cogently that it’s for Cisco to break up the company.

Cisco is now a $40 billion company. It is extremely rare for $40+ billion companies to grow at impressive rates (which is why John has implemented this nutbag new management structure). But there is no law that says companies have to stay bigger than $40 billion.

The consumer and enterprise businesses are still radically different animals. Cisco should just bust itself in two, putting all the consumer-y stuff in one business and the enterprise stuff in the other.

That seems to make sense, doesn’t it? The alternative is the continuance and possible mutation of the Cisco committee structure illustrated below.

MK-AX641_Cisco_NS_20090805185740.gif

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