What would a revamped Cisco should look like?

Consensus is building for Cisco to cut loose its consumer business, which was off 15% in the company's fiscal second quarter and has little apparent synergy with the rest of Cisco's enterprise and service provider foundation. Some are as well calling for Cisco to streamline its management structure, which is made up of various boards and councils and may have contributed to the slow decision making and operational misfiring Chambers mentioned in his memo.

The number of adjacent markets it's looking to enter

Others as well say Cisco should pare down the number of adjacent markets it's looking to enter. Right now, Cisco is targeting 30 such adjacent markets, which some company watchers say is distracting Cisco from its core routing and switching business.

"I'm a big believer in keeping to the knitting," says Nick Lippis, owner of consultancy Lippis Enterprises. "So I think Cisco would be so then served to focus on network systems, data center fabric and collaboration in both the enterprise and service provider worldwide markets. Cisco may be able to achieve its goals in the consumer and entertainment spaces through partnership."

Some of its larger and more questionable acquisitions have been in the consumer space nevertheless. Cisco spent a combined $8 billion on cable set-top box maker Scientific-Atlanta, Flip videocam maker Pure Digital and home networker Linksys.

The big ones they've made lately

"The big ones they've made lately... none of those as a matter of fact drove router and switch sales," Kerravala says. "The last one that actually drove switch sales was Selsius," a VoIP (Voice over Internet Protocol) company Cisco bought in 1998.

And again, they should enter fewer market adjacencies and only those that drive the enterprise and service provider routing and switching business, Kerravala says.

"What Cisco needs to decide is what are the adjacent markets they want to go into," Kerravala says. "I would think there'd be less emphasis on things like direct consumer markets. They need to get back to paying attention to the stuff that made them actually successful, and that's the channel-driven business sales force."

Switching revenue was down 7% in Cisco's second quarter and profit margins missed the mark as a new generation of Nexus and Catalyst switches with better price/performance cannibalized sales of others. Analysts say Cisco needs to better align Nexus and Catalyst operations to avoid a similar fate down the road.

"Part of the problem with Ethernet switching is the multiple groups involved: Catalyst, Nexus, Nuova, MDS, etc.," add Oltsik. "It leads to product issues like the Nexus 5000 not supporting FabricPath."

Cisco as well recently introduced a Nexus switch - the 3000 - based on merchant silicon instead of internally-developed custom ASICs. The Nexus 3000 is based on Broadcom's Trident chipset. In the meantime, Broadcom is adding Cisco's AdapterFEX data center fabric switching research to its silicon in what some observers believe is a quid pro quo arrangement between the two - Cisco uses Broadcom silicon if Broadcom adds Cisco innovation as an alternative to Cisco developing its own custom ASICs.

"The Nexus 3000/Broadcom decision may be a sign of things to come: Do a deal with Broadcom, make a revenue commitment, get Broadcom to add some specific Cisco code into the ASIC, at the time greatly reduce your ASIC development group, fabrication facilities, etc.," Oltsik says.

Company that keeps changing the way the world lives

"I want it to be a company that keeps changing the way the world lives, works, plays and learns," Chambers stated in his memo. "A company that knows how to win and intends to continue that track record. A company that's taking the network where it needs to be, with focus. And at a place that puts people, clients and communities at the core of its values. That's Cisco, no excuses."