A year ago, some of networking equipment maker Cisco's investors were clamouring for CEO John Chambers's head. A series of missteps had resulted in both the company's profits and stock sliding. But Chambers, who has led the $43-billion company for the last 16 years, responded fittingly. With some deft cost cutting, which included laying off 6,500 people in 2011 and getting out of businesses such as the Flip video camera unit, he has restored the company to health. Its net income for the quarter ended January 2012 was $2.2 billion compared to $1.5 billion in the same period a year ago. Chambers visited India during the last week of March, when he spoke to Goutam Das. Edited excerpts:
VIDEO: CEO John Chambers on Cisco's progress in India
Are you happy with the progress Cisco has made in India so far?
We invested in India looking at where we want to be in five,10, 20 years. Our growth in India has usually been way above the industry average. We had a couple of tough quarters here and yet we gained market share. I am an optimist on India from a market perspective. This is also the second biggest R&D centre we have in the world. And we are not just R&D here - we are bringing in sales, business development and manufacturing.
You had announced that 20 per cent of CISCO's top executives would be re-located to the Bangalore globalisation centre. This has not happened. Is there a change in strategy?
Are we as committed now as we have ever been to India? Five years ago, we set a target most people thought was unlikely to be achieved - an aggressive goal of going from 1,700 people (in India) to 10,000. We will actually cross that number this year. Five years ago, we had one vice president. Today, we have 14. Five years ago, we had eight directors, today we have over 100. When Wim Elfrink [Chief Globalisation Officer] came over, he brought 20 executives with him to get the globalisation centre kick-started. Do we need more senior VPs here over the next three to five years? Absolutely. When you attempt to do something that has not been done, you've got to be realistic. There will be challenges in execution, and also challenges around whether this was the right thing to do.
Today, many of the top CEOs from around the world look at our centre here to create their own India models. We get 50 customer visits per month here, the majority of them coming from outside the country. So we are beginning to see the traction we want. Just yesterday (March 29), we announced two hot products, designed for emerging markets, designed in India.
The restructuring at Cisco over the past year has its critics, who point out that though Cisco is looking good once more, the improvement has come about through costcutting, not innovation.
I disagree. Our results speak for themselves. Twelve to 15 months ago, there was a fair amount of criticism. It was partially fair. But how have we fared compared to our peers, especially Juniper and HP, in the last 12 months? We gained major market share versus Juniper last quarter. In data centre, a new product category and a market HP had said we would exit, we grew 91 per cent with a $2.5 billion current run rate. We gained 20 percentage points of market share. In video, we grew 23 per cent last quarter - another area some people said we should consider exiting. We are delivering with tremendous innovation.
During the last year, a vast majority of our customers increased their share of wallet spend with us. Are there areas of innovation we can improve on? Absolutely. But in terms of leadership in many product areas, our results have been solid.
Cisco used to be bullish about creating 'smart cities' with network as the backbone, what it calls the 'Smart+Connected Communities' business. Many such projects in India, like Lavasa, have not materialised. How do you assess the investment climate?
If you look at the investment climate in India for the next five to 10 years, we are all fine. I don't make my decisions based on a quarter or a year. You are going to see us increase our investments in India, partnering with Indian companies and with the government. We will also use India as our globalisation centre. This has been set up as our second headquarters throughout this region and for the world as a whole. Barring a major surprise such as a change in government policies, that is where we are going. At present, total hi-tech spending is much lower than people expected. We have traditionally seen growth in the 20 to 30 per cent range, or more - the current environment is a little more challenging.
But I was with the CEOs of a number of large Indian financial organisations yesterday - they are much more optimistic about India's growth in the seven per cent range than they were several quarters ago. What we focus on is what we can change and influence. We are focused on smart connected communities around the world. The programme based out of India is going well.
Disclaimer: An earlier version of the interview misspelled Smart+Connected Communities as Smart Plus Connected. The error has been corrected.