Cisco Changes Management Structure

A "development council" composed of several executives will replace Cisco Systems Inc. CEO heir-apparent Charles Giancarlo, who has resigned.

Cisco Chairman and Chief Executive John Chambers announced the appointment of the group of executives to oversee acquisitions and other business deals on Thursday after he confirmed Giancarlo, his chief development officer, was leaving.

Giancarlo, whose last day is Dec. 31, plans to join Silicon Valley investment firm Silver Lake as a managing director.

Chambers said in a conference call he and Giancarlo held with reporters that Cisco is shifting from a "command and control" organization to a network of task forces and other teams.

Such a structure is rare in the tech industry, where heroic and charismatic executives often cultivate loyal followings. But "management by committee" approaches have become more common in the legal and financial industries in the last decade.

Chambers said he had no intention of naming another individual to be chief development officer and he might appoint multi-person councils to lead other divisions of the company if it the development council works well.

"I believe this type of structure will be the future, given the complexities and ... market adjacencies we're going to move into," Chambers said. "The future of our company will be about how groups work together architecturally."

Giancarlo's resignation was a rare loss for Cisco, which makes the switches, routers and other gear that enable people to use the Internet. It is the second-most valuable Silicon Valley company after Google Inc.

Cisco is often ranked among the top companies to work for nationwide, and it's known for high morale and low turnover, at least by Silicon Valley standards. In February, it also lost Mike Volpi, senior vice president and general manager in charge of the routing and service provider technology group.

The entrepreneurial Volpi, 41, said his decision to leave was influenced by a desire to build a startup "where I have my signature, my DNA, within it."

Giancarlo joined Cisco 14 years ago when it bought Ethernet switch maker Kalpana. He started Cisco's business development organization and spearheaded its aggressive acquisition strategy, even in the lean years following the dot-com crash of 2000.

During the conference call, Chambers and Giancarlo were affable and nostalgic about their long working relationship -- but they never minced words: Chambers said he has little intention of stepping down in the near future; he emphasized that he would remain CEO for at least three years, more likely five.

Meanwhile, Giancarlo alluded to his ambitions to be at the helm of a company, and he was frank about the shrewd calculations he made about his career after turning 50 this year.

"I went home one day and talked to my wife and said, 'Honey, I now know what you mean by a biological clock,'" Giancarlo said. "I feel young, but you do the math: I don't know what my decision process will be in five years, but I know what it is today."

Shares of Cisco closed Thursday at $28.28. After Giancarlo's resignation announcement, which came after the end of the regular trading day, they gained 9 cents in extended trading.

Menlo Park-based Silver Lake is a private-equity firm that invests in technology companies. Giancarlo, who will begin there Jan. 2, will work at the most senior levels in its portfolio companies, he said.

Both men were clearly sad about parting ways.

"Buddy, you're my friend, I love ya, and you're one of the very few who got away," Chambers said to Giancarlo during the conference call, which was meant to alert journalists of the resignation but at times felt like an intimate male bonding session. "You can still reconsider."

Giancarlo -- who oversees 17,000 employees and has dozens of direct reports -- chuckled and then turned serious.

"We'll see what life brings," he said.


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