Following earlier job cuts of 6,000 employees at Cisco Systems Inc. (CSCO, -1.11%), the company has announced further trimming of personnel, this time at executive level.
Several of its senior executives in China are to be removed, following a drop in sales in China.
Cisco sales in China have fallen by approximately 20% following revelations by former NSA contractor, Edward Snowden, which aroused suspicions in China with regard to foreign technology vendors. Snowden alleged that in 2013 that the NSA had covertly installed surveillance equipment in some U.S. technology products sold overseas, including in China.
The removal of the senior executives as part of the streamlining of the China organizational structure is, however, in line with a global reorganization. This coming after the long serving CEO John Chambers, announced his own departure and the appointment of Chuck Roberts, another longstanding Cisco employee, as the Chief Executive.
Following the shrinking of the core management group from 13 down to 10 members, Mr. Roberts stated that he wants a structure that can make decisions more quickly.
The senior executives in China that have been asked to step down include Hahn Tu, president of Cisco China, and Freddy Cheung, the VP for Greater China, according to knowledgeable sources. Neither of the two executives concerned could be reached for comment and it is still unclear whether they will be replaced, or their positions eliminated.
The same sources said that the chairman of Cisco Greater China, Owen Chan, would be remaining in his position.
The 20 percent drop in sales in China during the quarter ended on the 25th of April, compared to the same period last year, showed a stark difference when compared to the 5.1% global increase in revenue. Cisco’s share of the router market in China fell from 21.2 percent in the previous year to 9.4 percent in the 1st quarter, with the surveillance fears partly responsible for the drop in sales.
Bernstein Research believes most of the lost sales have gone to local Chinese manufacturer and rival, Huawei Technologies Company.
In addition to the sales loss due to the allegations coming from the Snowden affair, Cisco is also facing competition from several software based alternatives to the products it manufactures.
Chuck Robbins is planning to look to resources from outside the company to fill a number of key positions in order to build Cisco’s position in new markets according to a blog post by him on June 4.
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