A steady hand in times of trouble

Wooed by CEO John Chambers, industry vet Mario Mazzola agreed not to retire and became Cisco's first chief development officer. Now he is trying to jump-start the company's growth engine.

newsmakers Cisco Systems executive Mario Mazzola knows the answer to the trivia question, "What was the first company acquired by the networking giant?"

Mazzola, 55, is part of a team of executives that still remain from that deal, for Crescendo Communications, finalized in September of 1993. After 72 more acquisitions, Cisco has turned to Mazzola to oversee technology development at the sprawling San Jose, Calif.-based equipment maker as it attempts to restart a stalled growth engine that has left many wondering if Cisco's best days are behind it.

Mazzola, who speaks with a heavy Italian accent, briefly flirted with retirement early last year after eight years at Cisco. It seemed like the right time--Cisco was riding an endless tide of business from both entrenched telecommunications companies and well-funded start-ups looking to quickly build networks. Furthermore, the company's stock was close to all-time highs.

As Mazzola's last day neared, he was peppered with phone calls from Cisco Chief Executive John Chambers concerning potential new assignments at the company. There was even a retirement party for him two weeks before his planned June 2000 departure. But, in the end, Mazzola decided to stay, drawn in part to the challenge of being the company's first chief development officer, the result of a recent management shuffle at the company.

The reworked Cisco organization consists of 11 technology-focused divisions, all reporting to Mazzola. The challenge is daunting. Cisco has been kicked off its lofty perch as one of the most valued companies on the planet and has had to eat a large portion of humble pie in recent months, as it has been forced to write-off assets and lay off employees for the first time in its history. Cisco also posted lower sales for its most recent quarter, a clear sign that the telecom boom of the late 1990s has indeed gone bust.

Into this uncertain environment steps the steady hand of Mazzola. CNET News.com sat down with the veteran executive at Cisco's San Jose, Calif., headquarters recently to discuss how the company is altering its strategy, what it plans to do to compete in a changing networking industry, and whether Cisco can innovate technology after years of relying on acquisitions.

Q: Cisco has long been known as a company that acquires technology. Can it now turn around and innovate?
A: I have a bias since I've been so closely associated with acquisitions, being myself part of an acquisition, and also because I've managed several acquisitions. The reality is it's a complex mechanism.  I can remember in times in which we were growing--hyper-growth, really--50 to 60 percent year to year in certain segments of the market, and sometimes even more. A lot of the innovation, in the cases that have been the most successful, has been done at Cisco. So I think Cisco's been doing a good job in many cases of leveraging talent. You know, in this industry, the technology is very perishable. So if you acquire a technology, in reality, many of those people (behind the technology) will quickly disengage. The important elements that allow all of this to work is a common vision and the capability and desire to engage teams.
Our acquisitions for a few years were considered much less than successful. One example, for instance, is Granite (a gigabit Ethernet start-up). We worked a lot with that team, and that's (now) one of the best teams in the industry. Now the results are coming (along) in a very strong way.

Is your role as chief development officer to organize a lot of these acquisitions that happened during the telecom boom of the late 1990s, when Cisco was acquiring more than 20 companies per year?
We acquire some talent that allows us to jump-start certain projects in the cases that are successful. But a lot of the innovation is carried on in the process of engaging people and defining the architecture and integrating the architecture with the other services that are required. This, for example, was a typical case with Selsius (an Internet telephony start-up). We decided not to sell the original Selsius product. In some cases, we are not acquiring technology in a state that it can be packaged and sold, so it will require 15 to 18 months of hard work and investment before all this can come to fruition.

What, if anything, does that signal about the company's plans for future acquisitions?
Looking ahead, I've been asked recently if the fact that I'm taking this position implies that we'll do (fewer) acquisitions and that we'll rely more on internal development. My personal inclination, and I think this is exactly the same direction provided by John Chambers and the top management of the company, is that the first preference for us is to develop internally, the second is to partner, and third is to acquire. The modulation of these three alternatives is also a function of how rapidly the market is growing. At a moment in which there is very rapid growth it makes more sense, in order not to lose a step, to acquire. I think Cisco has gotten a great deal of benefit from this. In the current climate, in terms of the economy, I think we'll evolve dynamically. I assume that by the second half of 2002 we'll start to see some growth. The current requirements are less (dependent) on acquisitions and more toward "let's make sure we don't have too many overlaps in our product lines."  It was very difficult for many of us, in particular for John Chambers, to lay off people.

Cisco is experiencing the first hiccup in growth of its lifetime. How do you think the company is handling this?
I can remember in times in which we were growing--hyper-growth, really--50 to 60 percent year to year in certain segments of the market, and sometimes even more. It was amazing to grow an enterprise more than 50 percent year to year. It's a very large base, a very large business. The messages, internally and externally, are that nothing is forever. The important element is the real structure and substance of a company and the management team. Ultimately, the goal of a company is to have the capability to appreciate reality in life and, to an extent, predict the possibility that certain things will have the promise of expansion and growth and to be, as much as possible, prepared--not only psychologically, but practically in terms of management (practices) and attitude.

And there's a difference in managing during this period than managing in a period of growth?
Sure, it's always easier to manage in a period of growth than to manage in periods of potential compression. But I think the response of the company has been very strong. Essentially, it is for us to lose. We have a very good position in the industry, not only in terms of technology, but in terms of distribution channels, partnerships, and financially. If we execute, there's an opportunity two or three years from now to make very evident an important level of distance between Cisco and many of the traditional competitors. But, as always, nothing is for free. It's very important and fundamental that we execute.

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