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To: Johnny Canuck who wrote (33040)	6/24/2001 11:45:25 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 70305

Chambers unveils Cisco's health plan By Simon Marshall, Total Telecom, in California 22 June 2001 Cisco Systems' chief executive John Chambers revealed Thursday a program of measures aimed at improving profitability over the next few months, in order to avoid repeating what he acknowledged was a disastrous previous quarter. Chambers is seeking future productivity levels of US$1 million per employee, and predicts that market consolidation will leave up to five major vendors globally. Although he declined in a presentation at Cisco's California headquarters to talk about the current fiscal quarter at all, he said systems were now in place to minimize the risk of further potential damage. For how long can Cisco maintain its position in the industry? Join our forum. Cisco will take a US$2.5 billion hit during the third quarter to write off excessive inventory, and Chambers is understandably keen to avoid the prospect again. "In the future, in terms of our financial models, our productivity and our systems, we will anticipate much higher peaks, much lower valleys - not having as much inventory during the peaks, and being able to adjust much quicker as the valleys occur," he said. He said Cisco has introduced a system to catch inventory build-up at the component level - rather than later in the production cycle at the contract level - in the hope of reducing Cisco's exposure in future. He also expects more from his employees from the beginning of the next financial year. "We're going to attempt to take productivity from US$457,000, back to US$700,000 per employee, then US$850,000 and then a stretch goal of US$1 million," he said. Among the measures he plans to achieve this are a series of sales portals, which staff on the road can use to check account information, adding he expects a "conservative increase in the productivity of sales staff of 25%." Asked when he expected the current downturn to bottom out, Chamber said there were still a number of variables at play. "The most important variable which will determine whether the industry downturn will bottom out at the end of this year or go into next [is] consumer spending in the U.S.," he told Total Telecom. "Historically, once interest rates in the U.S. have been reduced dramatically and tax cuts come within 9 to 12 months, the economy has come back strong. But this slow-down is like no other we've seen," he said. As a further measure, Cisco will split its yearly budgeting into two during the next calendar year, budgeting in August for the first six months, and then the remainder in February 2002. "We're now repositioned to take advantage of the market whether the downturn lasts two quarters or four quarters," he said, but warned that in the meantime, a rash of consolidation would occur. "My industry is going to consolidate at an unbelievable pace, and there will be 3 to 5 major players globally. The question is whether Cisco can use this consolidation as an opportunity to break away," he said. totaltele.com