Contrite Cisco Regroups Before Skeptical Wall St.

Cisco Systems, where he is chief executive, is in a slump. The management system he put in place slowed decision-making and innovation. The company’s growth has slowed and its profits are falling.

His latest sales pitch is that he can revive Cisco — a technology colossus that makes computer networking equipment — by pruning its sprawling business and refocusing on its strengths.

But investors, Wall Street analysts and customers are a little bit skeptical of Mr. Chambers’s promises. No major improvement in Cisco’s finances is expected when it reports third quarter earnings on Wednesday.? Given Cisco’s size, the scope of the overhaul and the increasing competition that is eroding the company’s market share, a turnaround could take time.

Last week, Cisco said it would reduce bureaucracy by eliminating a crazy-quilt management structure that had executives responsible for geographic regions as well as serving on “councils” that were supposed to encourage cooperation between the different groups. Instead, it slowed decision-making. ?

Last month, Mr. Chambers, who declined to be interviewed for this article, took his first step to fix Cisco by suddenly shutting down its Flip video camera business. Only two years earlier, Cisco had acquired Flip’s parent company for $590 million to expand its nascent consumer products division. The camera was popular and, indeed, the company was days away from release of the latest version of the video camera.

“This isn’t simply a midcourse correction,” said Jeffrey Kvaal, an analyst with Barclays Capital. “They’re facing challenges that are multi-year.”

The doubt in Mr. Chambers’s sales pitch began last year when Cisco’s sales started to show weakness that Mr. Chambers initially attributed to the sour economy. When profits continued to wither quarter after quarter, Mr. Chambers alternately blamed a decline in government spending and a “transition” after the introduction of new switches for computer networks.

In the last 12 months, its shares have fallen 31 percent as the Nasdaq index gained 22 percent. While Cisco’s shares fell, those of its rivals like Juniper Networks rose 35 percent. Alcatel-Lucent’s shares doubled.

In April, in a memo to employees, Mr. Chambers acknowledged systematic problems at Cisco. He blamed slow decision-making and a lack of accountability. “We have disappointed our investors and we have confused our employees,” Mr. Chambers wrote. “Bottom line, we have lost some of the credibility that is foundational to Cisco’s success — and we must earn it back.”

The contrition is unusual for Mr. Chambers, who is known for his unwavering optimism during his 16 years leading Cisco. He has paused his cheerleading only once before — during the dot-com crash more than a decade ago, when Cisco was unprepared for customers sharply cutting back orders. Cisco had been one of the hottest companies of the Internet boom of the 1990s with a high-flying stock to match. Much of the blame for its shortcomings fell on Mr. Chambers, much as it does today.

The last few years should have been golden for Cisco. Telecommunications companies worldwide were rapidly expanding their infrastructure to accommodate growing traffic from online streaming and mobile phones.

But Cisco failed to keep pace with changes in the network switching and routing equipment, which accounts for nearly half its revenue. The industry has shifted from more standardized technology — a landscape in which Cisco thrived — to specialized equipment for various niche markets.

For example, Cisco’s market share in edge routers, used by Internet providers to route traffic near the edges of their networks, dropped 11 percentage points over three years to 42.2 percent in 2010, according to the Dell’Oro Group, a market research firm.

“They’ve been lagging,” said Shin Umeda, an analyst with the Dell’Oro Group. “As a result, the competitors have been able to move in.”

 

US Skeptical About Syrian Law Changes

 David Gollust | State Department ?April 19, 2011

Mourners attend the funerals of protesters killed in earlier clashes in the Syrian city of Homs, April 18, 2011

The United States expressed skepticism Tuesday that a vote by Syria’s cabinet to end 48 years of emergency rule will actually ease human rights conditions there. The State Department confirmed U.S. opposition to Syria’s candidacy for the U.N. Human Rights Council.

Officials here say any gains from the vote lifting the state of emergency in Syria would apparently be negated by companion legislation regulating public protests, and they are renewing their call on authorities in Damascus to end violence against demonstrators.

The action by the Syrian cabinet followed a speech by Syrian President Bashar al-Assad Saturday in which he promised to end the harsh emergency law in effect since 1963.

The cabinet Tuesday ratified draft legislation ending the state of emergency, and abolishing a special security court widely criticized by human rights activists. But it also approved a measure regulating peaceful protests that would require permission from the Syrian Interior Ministry for any demonstration.

At a news briefing, State Department Acting Deputy Spokesman Mark Toner said the Syrian legislation, awaiting the signature of President Assad, may not yield any net gain for human rights in the country.

"In light of some of the comments we’ve seen from the interior minister, this new legislation may prove as restrictive as the emergency law it replaced," said Toner. "More fundamentally, there was more violence overnight, soldiers firing on peaceful protestors. Obviously the violence there continues to raise serious concerns. And it remains clear that the Syrian government need to urgently implement broader reforms."

Toner said that while President Assad has cast himself as a reformer, "we have seen a lot of words and not a lot of action" and that it is for the Syrian people to decide whether he has done enough.

Amnesty International says at least 200 people have been killed by security forces since demonstrations for democratic reforms began in Syria a month ago.

The? U.S. spokesman confirmed that the United States will oppose Syria’s candidacy for membership on the U.N. Human Rights Council.

Syria is running unopposed for one of four seats reserved for Asian countries on the 47-nation council. It is thus is likely to win a seat unless another Asian country comes forward to contest the vote, set for late May.

Spokesman Toner said the Obama administration believes that given the Damascus government’s actions against its own people, it would be "inappropriate and hypocritical" for Syria to join the Human Rights Council.

[All VOA blogs...]

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Memo From Havana: In a Changing Cuba, Many Remain Skeptical

 

HAVANA — For months, Cubans have been treated to an uncharacteristically blunt assessment of their future by none other than their president, Raúl Castro.

They do not work hard enough and live too much off the state dole, he has said. The economy has been based on an unworkable math in which two plus two “equals six or eight,” as he put it in a speech on Saturday. And the leadership has failed to groom a young generation to take over, leaving the upper echelon of the party dominated by standard-bearers of the revolution who are as old as 87.

No longer, he has promised, pushing forward a battery of changes, vastly expanding small businesses and, for the first time since the 1959 revolution, allowing Cubans to buy and sell private homes, something now done only through a bustling underground market.

But if winds of change — and it remains to be seen if they will end up being breezes or gusts — are emanating from the convention hall where the Communist Party held its sixth congress over the last three days, Cubans seem ambivalent, even skeptical, that the end result will upend the island.

“We have a way of making changes but keeping everything the same,” said Johan Rodríguez, 22, who supplements his meager state accountant salary by selling trinkets on the street. “The basic problem is we have no money. I am hoping what they are discussing will change that.”

Mr. Castro has steadfastly avoided using anything like the word capitalism in discussing the new economic platform, lest the United States get the impression a long-lost cousin was coming into the fold. Indeed, he has tended to avoid describing the changes as, well, changes, preferring to cast them as “modernizing” the Socialist model here.

Still, he has proved adept at diagnosing the precarious condition of the economy, warning that Cuba can no longer afford state workers who do little for their checks and even suggesting eventually doing away with the ration books that provide food and other necessities at heavily subsidized prices.

“How will we afford food?” said another young Cuban, a 36-year-old engineer who did not want his name used for fear his remarks would sound too critical to the government. “They will have to lower food prices a lot so people do not starve. This all seems so much so fast.”

Still, Mr. Castro has not been the radical reformer his speeches suggest he might be. He recently stepped back from announced plans to lay off 500,000 state workers, postponing the cuts indefinitely. Last year, he had cast the state’s “inflated work force” as an unsustainable expense, “tantamount to eating up our future and jeopardizing the very survival of the Revolution.”

But instead of the rapid economic overhaul previously laid out by the Communist leadership, Mr. Castro said much of the changes anticipated would come over the next five years.

And although he suggested top leaders like himself serve no more than two consecutive five-year terms, he also complained that the younger generation was ill prepared to take on top jobs.

How, analysts wondered, should that be interpreted as he officially ascends to the top spot in the party — Fidel Castro, 84, disclosed last month that he was no longer the party chief — and selects a new No. 2 at the party, the person who could succeed him as the nation’s president?

Rafael Hernández, a political scientist who edits the magazine Temas here, says there are legions of young party members in the bottom ranks who often hit a wall as they ascend.

“It is about a difficult political change between the generation that has been there for 50 years and the young generation,” he said. “It’s a difficult process and one that they have wanted to be done deliberately gradually so it would not be so traumatic.

“But,” he added, “I think it is not just about more young people. It’s about young people who think differently. We can have young people who think like the old ones or we can have young people who are young and think differently.”

Reading the tobacco leaves, as some call the Kremlinology here, can prove foolhardy since presumed rising stars streak and fizzle out. It is mostly a matter of matching relatively youthful ages with party rank and the frequency of television appearances, particularly near the Castros.

Much of the attention is on Marino Murillo, 50, who defended President Castro’s initiatives when he was the economy minister. Now he holds a new post as a kind of czar overseeing changes designed to push more people into private enterprise.