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BARCELONA, Spain--Cisco Systems' CEO John Chambers gave a little more color Monday to comments he made last week regarding a slowdown in IT spending.

John Chambers

(Credit: Cisco)

Chambers, speaking at a preview event at the Mobile World Congress ahead of his keynote speech Tuesday, told analysts and reporters that the company only started seeing a slowdown in customer orders of its networking products in January, the last month of the second quarter of Cisco's fiscal year 2008. He also said that the current blip in orders is not as bad as previous downturns, most notably the major telecom bust of 2001.

"In situations like this, the classical approach is to look at how long will this last and how deep will it go," he said. "Based on what we've seen in the past, we think this will be relatively short in duration and relatively shallow."

Last Wednesday Cisco beat analysts' second fiscal quarter sales, but the company indicated that its orders on new products had slowed in Europe and the U.S. as companies pulled back on technology spending. The company said it expects growth in the third quarter of only 10 percent instead of Cisco's long-term growth rate expectation of between 12 percent and 17 percent, a range that Chambers expects the company to get back to within the next two to five quarters.

The news last week spooked investors, who sent the company's stock down about 8 percent. Cisco reported second quarter revenue of $9.8 billion, compared with $8.4 billion in the period last year. Net income for the quarter was $2.1 billion, up from $1.9 billion last year.

The man thought to be next in line for the CEO job at Cisco Systems has resigned, the company announced Thursday.

(Credit: Cisco Systems)

Charles Giancarlo, executive vice president and chief development officer, will be stepping down from his post as of December 31 after 14 years with Cisco. Giancarlo, 50, has taken a job as managing director and partner at Silver Lake, an investment firm focused on large-scale investments in technology. His first day at the new job will be January 2, 2008.

Cisco's CEO John Chambers said he had tried over the past six months to persuade Giancarlo to stay. He also said Giancarlo would always be a part of Cisco's extended family.

"Charlie is one of the few leaders that I lost and it wasn't the right time to lose him," he said. "Sometimes because of their expertise or certain skill sets it's the right time for people to do something else. But that wasn't the case with Charlie. We will miss him."

For Giancarlo the decision to leave Cisco came down to timing. He had been viewed as the most likely candidate to succeed John Chambers as CEO. But as Chambers indicated earlier this year, he doesn't plan to leave the CEO job for another five years. Giancarlo, who turned 50 this year, said he did the math and decided it was time for him to leave and do something else.

"I went home to my wife one day and told her that I fully realized what is meant by a biological clock," he said.

Giancarlo said it was a difficult decision he had been mulling over for about six months.

"I probably took longer than I should have to make the decision," Giancarlo said. "But it's a difficult family to leave."

"It has been a continuous pleasure for me to work at Cisco," he added. "Not a year has gone by that wasn't just a wonderful time in my life."

Giancarlo is the second potential CEO successor to leave this year. In February, Mike Volpi, former senior vice president and general manager of the Routing and Service Provider Technology Group, also left the company. He now heads up the video start-up Joost.

But Chambers said the company still has a deep bench of potential candidates to take the top spot when he eventually retires. And Giancarlo agreed.

"I see a number of candidates," Giancarlo said. "There are some interesting young turks coming up who will be great candidates a few years down the line."

Some of these candidates could come from the new development council that Cisco has created to help guide the company's future strategy. The council, which was announced earlier this month and was chaired by Giancarlo, reflects Cisco's move to a more collaborative leadership style that should help the company more effectively address market trends. The idea is that a group, rather than a few top executives, will be able to be more agile in charting the company's future.

Some of the leaders in this group include Kathy Hill, senior vice president for the Access Networking and Services Group; Ned Hooper, senior vice president of the Consumer and Small Business Group; Jayshree Ullal, senior vice president of the Data Center, Switching, and Services Group; Don Proctor, senior vice president of the Software Group; Tony Bates, who heads up the Service Provider Technology Group; Marthin DeBeer, who is in charge of the Emerging Technologies Group; and Senior Vice President Pankaj Patel.

Chambers also said the company will not fill Giancarlo's chief development officer position and instead will rely on the development council to handle Cisco's strategy planning.

I am in San Jose, Calif., for the annual Cisco Systems analyst shindig talking all things networking. The event kicked off with a presentation from CEO John Chambers. If you've never seen John in person, you really should. His communications skills, style, and charisma are second to none in the industry.

Several audience members compare John's stage persona to former president Bill Clinton. Since it has been rumored that John would like to go into politics after Cisco, why shouldn't he go for the whole enchilada and run for president in 2012? Now I admit, I know nothing about many of John's views on things like the war in Iraq, gay marriage, and stem cell research. Heck, I don't even know his party affiliation. That said, John could be the first tech industry candidate, and he brings a number of attractive positions with regard to:

1. Innovation: John and Cisco are all about innovation and vision. My view is that we need a leader with Kennedyesque big goals. I could see John running on a platform like dedicating massive federal funds to clean renewable energy sources with a goal of reducing American oil consumption by more than 50 percent in 10 years. Ask not what your country can do for you...

2. Education: John is one of those tech CEOs who recognizes the need for radical changes to our education system. Again, the focus would be on creativity and innovation and not standardized testing. We need this kind of leadership to maintain and even bolster our position in a world that is growing smarter and more competitive each day.

3. Global development: Cisco looks for opportunities all over the world, and John is often on a plane or a TelePresence meeting as part of the sales process. If this behavior were applied to politics, John might be looking for cooperative opportunities for America. Invest a bit up front in other countries, build infrastructure, and then reap long term rewards. This seems like a better long-term bet to me than shock and awe.

Let me be extremely clear here. I am not endorsing a Chambers for president campaign but merely thinking out of the box a bit. It's interesting to ponder the agenda of a global business/high tech president but there are few who would have mass appeal or even want the job. John Chambers might be an intriguing choice. If anything, I know he'd stand out in the debates.

Cisco Systems CEO John Chambers has one word to describe where his company and the entire technology industry is headed in the coming years: collaboration.

During his kickoff keynote speech at the company's annual analyst conference in San Jose, Calif., on Tuesday, he talked about how collaboration will spur the next wave of technology innovation and productivity gains. From collaborative corporate tools like his company's video telepresence system to social-networking sites like Facebook, Chambers thinks that people, whether they are at work or at home, are looking for ways to connect with each other virtually.

"Our kids got it right, (the next wave of technology) is all about social networking," he said. And social networking, he added, is just a form of virtual collaboration.

This isn't the first time that Chambers has touted the notion of collaboration. In fact, he has been giving the same stump speech since Cisco's telepresence videoconferencing system was introduced late last year. And he turned up the volume on the subject earlier this year when the company bought WebEx, a Web-based collaboration service.

But on Tuesday, Chambers emphasized that this idea of collaboration is not just a theme for certain products or categories; it's a strategy that reaches across every product in the company, from its routers and switches to its unified communications software to its Linksys home routers.

Chambers has often referred to Cisco as the plumber of the Internet. But now he says the company will offer much more than plumbing. Instead, he sees Cisco as helping companies transform their businesses by being the company that offers an entire solution that allows companies to improve productivity by virtualizing communications and business processes. And in the consumer market, Chambers believes that Cisco can be the company that enables TV networks, movie producers, music labels, and other content providers to distribute their content to home users.

"Plumbing is great," he said. "But if you don't have anything to connect it with, it's not very exciting."

That's why, he said, the discussions Cisco is having today with companies like NBC Universal aren't just about them buying infrastructure gear like routers and switches, but it's about how Cisco can help distribute content securely and efficiently to more viewers.

While Cisco sees its role with customers expanding beyond just providing infrastructure, it won't be throwing the baby out with the bathwater. Chambers still sees huge growth potential for Cisco's infrastructure business as it helps companies change their processes so that they send more video and data over the Internet.

In support of this thesis, Chambers called upon Erik Huggers, group controller for future media at the BBC in London, who joined the discussion via Cisco's TelePresence videoconferencing system. Huggers explained how the BBC plans to make all of its content available digitally to viewers by 2012. And as it rolls out new services online, it's already seeing the volume of traffic on its network increase dramatically. Today BBC online users view and listen to 1.3 petabytes of content per month, Huggers said. That number is expected to jump to 5 petabytes of data per month within a year.

This is all good news for Cisco, which likely will cash in on this upgrade cycle. The company is already reaping the rewards of increased bandwidth demand on the carrier side. On Monday, it announced that it won a huge deal to supply AT&T with core Internet routers.

But in order for Cisco to live up to its own lofty expectations, it will have to become a dominant player--not just in switching and routing, but in other product categories such as unified communications, wireless and mobility, home networking, and security, just to name a few.

The battle won't likely be easily won as the company faces stiff competition from other technology heavyweights such as Microsoft. But Chambers said he believes that Cisco will end up on top. He said his company has already changed its internal processes and technology to a more collaborative style that he believes will help it innovate faster than its competitors.

"It took us about six years to grasp the power of social networking," he said. "But once we saw how it could change how we can interact with customers we moved. And in three years almost all of our customer interactions will be virtual."