Cisco: the giant stumbles

Whither Cisco? Rumours swirl around the possibility that Cisco may be about to sell Linksys and -- possibly -- its WebEx collaboration division too.

My sources, who have direct links to people working in the Linksys division, suggest that this may be on the cards. But on the other hand, it would be in my source's interests to destabilise the Linksys business: all's fair in love and business, so it may also be a bit of kite-flying. On the other hand the story has been widely commented on, so many commentators clearly feel it could be a runner.

So what's going on? Cisco's numbers are down and it's indulged in some public flagellation. In a long memo last month, John Chambers wrote that: "We have disappointed our investors and we have confused our employees. Bottom line, we have lost some of the credibility that is foundational to Cisco’s success."

As a result, Chambers promised a big shake-up of the company: "We will simplify the way we work and how we focus our attention and resources. We will significantly rework our systems, tools and funding models to do this. We will reshape the operational foundation..."

What Chambers didn't mention was that HP is shaping up as a major challenger with its BladeSystem Matrix datacentre stack rivalling Cisco's Unified Computing System, along with revivified competition from Oracle/Sun, and from Dell -- more about Dell later.

We all care of course because Cisco is not just the world's biggest networking company, it's also a bellwether for the rest of the technology business. Cisco is notoriously tightly run, being among the first companies to cut costs when even the sniff of a downturn emerges, a reflex that has served it well in terms of survival and profitability over the years. It also sits at the centre of a huge ecosystem of suppliers, developers and others, all of whom are vulnerable if Cisco has problems. So when Cisco suffers, the odds are that anyone connected with the business will suffer.

So we understand Cisco's problem. What we don't yet know are the details of what it plans to do about them. Could the Linksys story be an early chop? There's no actual hard facts available yet: like all stock market-quoted companies, Cisco makes no comment either way when you ask whether such a rumour is true, and as a result the conspiracy theorists have had a field day. Despite that, the fact remains that no public company will comment publicly on rumours these days for fear of falling foul of anti-corruption legislation.

If you're buying Cisco gear, you might find it easier to pick up bargains (Bargains? Cisco gear? I hear you snort incredulously). On the other hand if a second punt comes true, there won't be any bargains.

This involves the possibility of merging with a server vendor -- how about Dell? This feature floats the idea, and it could hold water. It argues that Cisco needs its own server division to feed the growth of all-in-one systems, rather than the assemblage of gear from a bunch of different vendors that UCS currently consists of -- see an earlier blog for more about that. With Dell, Cisco could deliver both greater integration and a more credible offering than it can right now.

Can you see that happening? What's your take on the whole Cisco mess?