Finding a New Angle on Cisco’s Tough Times in 2001

Cisco’s precipitous fall last April was a dope slap to anyone who thought the slowing economy was just about dotcoms and wouldn’t affect more established businesses that have solid sales and real profits. It was the two in the one-two punch of the downturn. We all adored Cisco. It represented everything that was smart and prosperous in our times. It was the model new economy company, centered in the information age with best practices in everything from high-tech human resources to e-commerce, plus a seasoned executive team that knew how to grow revenue and deliver both shareholder value and profit.

So it came as a shock to learn that this paragon was going to take a record-setting $2.2 billion write-off on its inventory and lay off some 8,500 people. How could Cisco of all companies have screwed up so badly? It felt like a betrayal. It was scary. The subsequent flurry of articles in the business and trade press reflected those sentiments and sought to explain this inconceivable turn of events in a way that would let the rest of us distance ourselves from the failure. The theories of culpability ran from Cisco’s voracious mergers and acquisitions strategy to its executives’ inability to predict the future, to a wanton act of God.

In late April, Senior Writer Scott Berinato told me he had a different take on what happened at Cisco, and he’d like to write the story. I had some reservations. I didn’t want to jump on the bandwagon of what seemed to be a mounting orgy of Cisco bashing. More important, I questioned whether this was really a story for CIO. We’re not a technology trade magazine?we don’t cover the vendor community. And we’re not a pure business book. There had to be an IT angle.

Two conversations and a lengthy e-mail later, Scott convinced me that there was an IT angle and that this was an important story for us to cover, in part because of Cisco’s iconic status. So many of our readers look up to Cisco and its systems and wish they had what Cisco has. Given how much Cisco does right, it’s important to understand what went wrong.

Still, “What Went Wrong at Cisco” (beginning on Page 52) is a different kind of story for us, and I’d like to know what you think about it. You can reach me at lundberg@cio.com.