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Cisco says its business appears to be stabilizing

Aug 24, 2001

SAN FRANCISCO - - Cisco Systems Inc., the biggest maker of computer-networking equipment, said on Thursday it was restructuring into 11 technology groups and that it sees signs its business is stabilizing.

``We were pleased with July's linearity and we've been pleased so far with August,'' Cisco Chief Executive John Chambers told Reuters, adding that so far the quarter is in line with its earlier guidance. Cisco has said it expects fiscal first-quarter sales to be flat to down 5 percent sequentially.

San Jose, California-based Cisco said it was making the move to the 11 groups from its current lines of business structure to reflect the blurring lines between customer segments, and added that the move was customer- and market-driven.

Mario Mazzola, an eight-year Cisco employee, has been named to the new position of chief development officer, and will oversee the 11 technology groups, Cisco said. Mazzola will report directly to Chambers.

The 11 groups are access, aggregation, Cisco IOS Technologies, which is its operating system that runs its networking gear, Internet switching and services, Ethernet access, network management services, core routing, optical, storage, voice and wireless.

Charlie Giancarlo, formerly head of the company's commercial line of business, will head four of these technology groups and report directly to Mazzola. Michelangelo Volpi, a fast-rising star at Cisco and former chief strategy officer, will now be in charge of the largest tech group, Internet Switching and Services and will report to Mazzola.

James Richardson, formerly head of Cisco's enterprise line of business, will now be chief marketing officer, reporting to Chambers.

Kevin Kennedy, who ran the service provider line of business, will be leaving the networking company, Cisco said, to pursue other opportunities. He will remain an industry and technical adviser to Cisco.

``I wanted Kevin to stay and offered him several positions, including the chief technical officer,'' Chambers said. ``He just hit a time in his career where it's the right time to make a change.''

Previously Cisco was organized into three lines of business: commercial, enterprise and service provider.

``By realigning this way, what we do if we execute right is increase profit contribution'' from individual product areas, Chambers said. ``This will free up resources to move into new market opportunities.''

``These are changes to grow our business, not to reduce headcount or other issues,'' Chambers said.

Cisco, along with other networking-equipment companies and telecommunications equipment providers has seen sales and profits tumble in the face of a high-tech recession and an overall economic slowdown.

On Aug. 7, Cisco reported a fiscal fourth-quarter net profit of $7 million, sinking 99 percent from a year earlier and posted sales on the low side of expectations. It also posted its first annual loss in its 11 years as a public company.

``We would have made these changes regardless of the timing,'' Chambers said, referring to the grim state of the networking and telecommunications industries.

Cisco shares rose 28 cents, or 1.7 percent, to $16.76 on Nasdaq before the restructuring announcement. In trading after the close, the stock rose to $17.33.

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