Cisco to Emerge ‘Stronger’ From Slump, Chambers Says
Cisco Systems Inc. (CSCO) Chief Executive Officer John Chambers told shareholders at an annual meeting that the network-equipment maker will “emerge stronger than ever” from a sales slump by investing in developing markets.
“We get the transitions right at Cisco,” Chambers said at the meeting, held today at the company’s headquarters in San Jose, California. “We get knocked down sometimes, but we get up in a way that no other company does.”
Cisco has been grappling with slower spending by telecommunications companies, as well as weak economic growth in Europe, Asia and emerging regions. At the same time, competitors have taken share with simpler, cheaper models in some markets. Chambers, 64, has been cutting staff, eliminating low-margin businesses and pushing new versions of routers and switches as well as software that can boost network speeds and efficiency.
The world’s largest maker of networking gear missed analysts’ revenue projections in the fiscal first quarter, and last week said sales in the current period will drop 8 percent to 10 percent. Cisco’s shares have fallen 11 percent since the report.
Today, Chambers blamed the disappointing first-quarter sales in part on a sudden slowdown in developing regions.
On a conference call last week, Cisco said demand has declined in markets such as China, in part because of political concerns about buying from a U.S. supplier sparked by allegations of electronic eavesdropping by the U.S. government. The company has been acquiring software companies such as Sourcefire Inc. to bolster margins as profits on its routers and switches shrink amid rising competition.
At the meeting today, shareholders voted to approve the company’s executive compensation, and re-elected all directors.
Chambers, who became CEO in 1995, told Bloomberg News last year that he might step down as early as 2014. In an interview with CNBC on Nov. 13, he said he planned to remain CEO for two more years, at the request of Cisco’s board.
For fiscal 2013, Chambers earned a salary of $1.1 million, a cash bonus of $4.7 million, and restricted stock worth $15.2 million. His total pay package of $21.1 million was up from $11.7 million the previous year.
The company’s shares rose less than 1 percent to $21.42 at the close in New York. They have climbed 9 percent this year, compared with a 25 percent gain in the Standards & Poor’s 500 Index.
Chambers fired 4,000 workers in August. Including staff added through acquisitions, Cisco’s headcount was little changed last quarter.
To contact the editor responsible for this story: Pui-Wing Tam at firstname.lastname@example.org