Denial, being upset, and then acceptance are the necessary sequence of emotions people experience before moving on toward a recovery.
It's no different for companies and Cisco (NASDAQ:CSCO) is acknowledging that it's made some missteps and is working to move forward and address its organizational complexity, lack of competitive products, focus, and time to market.
The company's shares have declined more than 30 percent from last year.
In an internal memo to its employees, CEO John Chambers talked about the company's execution issues, loss of credibility and making bold changes. For a full text of the CEO's message, click here
Meanwhile, RBC Capital Markets analyst Mark Sue lists out five things that Cisco could do on its way to recovery.
1. Cisco may re-examine its key business segments and narrow its focus to key markets and divest some businesses. Some have varying margin profiles and may help boost overall margins, which have steadily decreased from 70% in its peak to 62%, RBC Capital Markets analyst Mark Sue wrote in a note to clients.
2. Cisco, in addressing its slow decision-making process, will streamline operations while increasing accountability, a key attribute the company was known for in the past.
3. Cleaning out the family basement is tough, especially if it's filled with memories and mementos. But, the analyst said change is necessary if Cisco wants to convince investors that it can grow again.
Sometimes putting things into piles of keep, eBay, and throw out makes it easier to part with some, Sue wrote in a note to clients.
4. Investors will pay little premium for a big tech holding company. Putting things into categories of strategic, architectural, and non-core may make the decision-making process easier for Cisco.
Optical, application delivery, Linksys, set-top boxes, Flip, and Umi are some segments that we think should be cut. Incidentally, most of these products have gross margins below the corporate average, the analyst said.
5. The other thing Cisco really needs to do is make its products more competitive. An architectural approach or best of breed? With a plan toward recovery and a sharpened focus, there's no reason Cisco can't do both.