Is Cisco the Madonna of networking?

Yesterday, Ashlee Vance of The New York Times grabbed my attention in an article about Cisco transitioning from boring switches and routers into "peddling e-mail software, video conferencing systems, cable TV boxes - even furniture." However, what really caught my eye in that article was the following statement by RBC Capital Markets Managing Director - Mark Sue:

"Cisco is kind of like the Madonna of networking, it is continuously trying to reinvent itself." Personally, I find the reinvented Madonna a boring failure. Why? Because she is mimicking younger generation artists and no longer has her "own unique personal style." I like my Elvis "karate kicking" his way across the stage in a jumpsuit, and if he were alive today, hopefully he would have transitioned into yet another totally unique persona.

Catching my attention on Network World, Cisco Subnet blogger Ken Presti recorded two podcasts on the following new directions being taken by Cisco: Collaboration and Virtualization At the end of the collaboration podcast, Ken Presti cautioned Cisco against taking their eye off the ball in the networking space – something that can easily happen when companies expand into new areas.

Perhaps Cisco's motivation to focus on new directions can be partly explained by last week's 2008 Cisco proxy statement, which revealed that over 90% of Cisco executive compensation was performance-based. There are 3 main components of this performance-based compensation: 1. Company Performance Factor (CPF) 2. Customer Satisfaction Factor (CSF) 3. Individual Performance Factor (IPF) The 2008 Cisco company performance factor (CPF) revenue target was $39.745 billion, or 13.8% growth, however revenue only grew to $39.540 billion, below target at 13.2%. Exceptionally, Chambers grew income to $11.652 billion, which at 12.9% was above the CPF target of $11.461 billion, or 11% growth. Unfortunately, yours truly believes pressure from Cisco's company performance factor (CPF) is pig-headedly forcing John Chambers into "the grass is greener somewhere else mentality," which is focusing Cisco away from its successful product mix. It is my opinion that by juggling so many balls in the air, Cisco is creating huge execution risks that will simultaneously cause Cisco's stock price to lag as investors become more and more confused about Cisco's business. Perhaps it's time for Cisco to spinoff its boring business units, giving investors the choice of which business direction to take!

Do you believe Cisco will successfully keep its eye on the ball while reinventing itself?

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