Cisco investors seek to axe consumer unit in company shake-up


Cisco investors seek to axe consumer unit in company shake-up

Warwick Ashford

Investors have called for Cisco Systems to axe its low-margin consumer division after chief executive John Chambers announced plans for a company shake-up.

The Cisco chief has told staff the organisation needs to refocus the business in the light of poor financial performance across the group that has knocked investor confidence.

While the Nasdaq Composite has risen 15% in the past year, Cisco's share price has fallen 35% as the company missed sales targets and profits declined.

Analysts say the consumer division that includes the Flip video camera and Lynksys home networking products does not fit well with Cisco's core business.

Cisco's gross margin, a measure of profitability, narrowed to 64% in the last fiscal year from 70% in 2003, which is in part a reflection of the push into consumer products, according to Bloomberg.

Analysts and investors say a sale or spinoff of the consumer division would help Chambers achieve his goal of refocusing on areas where Cisco is a leader, such as the high-margin networking equipment that makes up about half of its revenue.

Cisco should also pull out of the roughly 30 new businesses entered in recent years, say analysts, because these include niche products in areas that are dominated by companies such as Riverbed Technology, F5 Networks and Aruba Networks.

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