Cisco Systems, Inc. (NASDAQ:CSCO) is planning on pulling out some of its senior executives from China amid slumping sales. The decision is highly influenced by government worries about the safety of foreign networking facilities and equipment according to sources familiar with the matter.
The recent developments put the Chinese division in an awkward situation that will most likely disrupt the structure of the firm within the region. Cisco’s long-acting Chief Executive, John Chambers announced in May that he will step down from the position of leadership to give way to Chuck Robbins.
Robins has been with the company for a long time, which is why Chambers thinks he is the most suited for the position. Mr. Robbins revealed that he wanted to focus on a structure that will foster faster decision making. He recently resized his core management team to ten members from 13 members.
A few senior executives have also been requested to step down, including the vice president in Greater China, Fredy Cheung, and Cisco China president, Hahn Tu. The company has not revealed whether the now empty positions will be scrapped off or whether Cisco will bring in new replacements. Greater China’s Cisco Chairman Owen Chan will retain his position.
Cisco’s sales in China dropped by 20% within the first quarterly period compared its performance in the same period in 2014. The company registered global revenue gains by 5.1%. The company’s share in the router market dropped from 21.2% in the first quarter of 2014 to 9.4% in the first quarter of the second period. Cisco’s rival, Huawei Technologies Ltd has been taking up the lost market, thus rivaling Cisco with better margins. The statistics were provided by Bernstein Research.
The sales slump in China has been heavily influenced by the efforts of China’s government to pursue the local technology. The aftermath has been more competition from rival firms that have benefited from more market share, making it even more difficult for Cisco Systems, Inc. (NASDAQ:CSCO).