August 23, 2001

Cisco Systems has announced several organizational changes that will centralize engineering into 11 key technology groups and focus marketing under one leadership team. In the following Q&A, Cisco president and CEO John Chambers provides further insight into these changes.

Why is Cisco changing its internal organization?

John Chambers: Changing customer requirements and the inherent market opportunity are at the heart of the change. When Cisco created its line of business structure in April 1997, our enterprise, commercial, and service provider customers were building separate networks with predominantly unique product requirements. Today, our customers want our products to move across all of these customer segments. They want a network of networks that is seamless and has transparent integration across extranets, intranets, and the Internet. As our customers and the industry evolve, Cisco continues to evolve its organization.

The new centralized technology groups and marketing organization are a logical extension of Cisco's Six-Point Plan unveiled in January, in which we began organizing the company around profit contribution, aligning resources to create efficiencies, and focusing on markets with growth opportunities. It is also consistent with our breakaway strategy to take advantage of inflection points in the market. We believe our changing customer requirements signal an important market transition point. Our new organizational structure will accelerate innovation and aggressively expand Cisco's product leadership capabilities consistent with customer expectations for a single product architecture and strategy with clear product roadmaps.

Likewise, this new structure will allow Cisco's technology differentiation to be at the forefront of our messaging and competitive positioning. I am confident that this change will lead to more efficiency in Cisco's time-to-market with products, better use of engineering resources, and deliver a stronger competitive position overall.

What new executive appointments were made today?

John Chambers: We are restructuring the LOBs into 11 new technology groups under Mario Mazzola's leadership as our new Chief Development Officer (CDO). We are also centralizing our technology and corporate marketing efforts under James Richardson as our new Chief Marketing Officer (CMO).

I believe that Mario is the ideal leader for our product engineering organization. In my opinion, Mario is the ultimate engineering leader for engineershe simply loves to build great products, has a track record that is unequaled in the industry, and is dedicated to doing what's right for customers and for Cisco. A number of multibillion-dollar products for Cisco were developed under Mario's leadership, and I admire his emphasis on number-one market share leadership, quick time-to-market, and profit contribution.

Seven of the 11 technology groups will report directly to Mario and the other four will report to Charlie Giancarlo, formerly the senior vice president and general manager of Cisco's Commercial line of business. Also, after more than a year as our chief strategy officer, Mike Volpi is assuming leadership of one of the largest technology groups, the Internet Switching and Services group.

By centralizing our corporate and LOB marketing efforts, and working tightly with field marketing, our intent is to provide one voice to our customers. James is uniquely qualified to do this as he has led field, engineering, and marketing operations roles worldwide. We've built strong brand awareness with a talented team, and we are shifting our marketing emphasis to technical differentiation.

What is the significance of the 11 technology groups?

John Chambers: The 11 new technology groups focus Cisco on our customers' requirements and are what we believe will be profitable growth opportunities in the future. They align Cisco's core competencies in IP and the growth opportunities we see for the communications industry. Cisco is the only company that can meet these demands across all customer segments with a single architecture that provides seamless integration of all our customer's network requirements.

How will Cisco stay focused on customer markets?

John Chambers: We're evolving our business structure consistent with customer feedback. Our number one priority has always been customer satisfaction and I believe this new structure actually puts us closer to the customer. We have the best field sales organization in the industry and, by working more closely with engineering and marketing, I'm confident our customer's best interests will remain a the forefront of our product and business decisions.

Does the reorganization and Kevin Kennedy's departure represent a change in Cisco's commitment to the service provider space?

John Chambers: Absolutely not. The service provider market remains a highly strategic area for Cisco and a core focus for the company. We have the market's leading products in key service provider segments, such as high-end routing, optical, content, wireless, and voice over IP. Cisco intends to continue our leadership role in these high growth markets and expand our current service provider base.

Cisco's ability to address the enterprise and small- and medium-sized business needs are key differentiators to service provider customers and strengthen our competitive advantage in this customer segment. By closely aligning product areas, Cisco will participate in the evolution of service providers and be a partner through this time of consolidation and change.

Kevin Kennedy's departure does not signal a change in our commitment to this space. Kevin is departing Cisco to pursue external opportunities but will continue to be an industry and technical advisor to us. He has been at Cisco for nearly eight years, and felt the timing was right to take on new challenges. Although he will be very much missed, we respect his decision.