Cisco's Emerging-Markets Gambit

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Mountford's emerging-markets team has boosted Cisco's sales STEVEN E. FRISCHLING/WPN

"It's about raising standards of living... " says CEO Chambers ETHAN MILLER/GETTY IMAGES

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The question is how much these countries will pay for vision, especially in tough economic times. Despite Cisco's efforts, it lost out on the first major contract from King Abdullah Economic City. The developer of the city gave the $84 million deal for a citywide phone and Internet system to Ericsson (ERIC) after the Swedish equipment maker submitted a bid more than 20% lower than Cisco's, sources say. "I was shocked," says Ahmad Al-Yamani, the top technology officer for the Saudi Arabian General Investment Authority, a government group that worked closely with Cisco on the blueprint for the new city. "But sometimes dollars talk."

As governments struggle with the current financial turmoil and scale back on their grand plans, Mountford faces the sales challenge of his life. For years he's been a fair-haired boy at Cisco, delivering annual sales growth of more than 30% and building his group to $4.5 billion in revenue. Cisco needs that growth more than ever. The company's stock has stalled in recent years, largely because investors doubt an outfit with $39 billion in sales can maintain the double-digit annual growth Chambers has promised. Those fears were fanned on Nov. 5 when Cisco said revenues in the current quarter could fall 5% to 10% because of the economic slowdown.

If Mountford can keep delivering strong growth, Cisco will have a shot at hitting Chambers' target. But analysts are skeptical given the global tumult. Richard Dean of Pyramid Research just slashed his forecast for Mountford's group by more than half, to an average of 15% over the next three years. Overall, Dean thinks Cisco will increase revenues by an average of 5% through fiscal 2011, far short of the double-digit goal. "Mountford can influence Cisco's fortunes over the next few years like no other business leader in the company," says Dean.

All of this has Mountford, a convivial, six-foot-three Brit, squarely on the hot seat. He's the son of a World War II vet who fought the Germans from Dunkirk to El Alamein in Egypt. Mountford the son was determined to escape his working-class town in the British Midlands, so he skipped college to work as a salesman for a garden-tools company. He later joined Cisco and boosted its sales in Britain from $165 million to $1.2 billion in three years. When the dot-com boom turned to bust, Chambers brought Mountford to Silicon Valley to tackle one of the company's most pressing problems—a potential mutiny by the tech resellers, or middlemen, that bring in more than 90% of Cisco's sales. He developed new programs that boosted their profits for helping Cisco move into key markets, such as office phones and network security.

A CHANGE OF PLANS

In 2005, Mountford started looking for a fresh challenge and began to focus on the nascent rise of emerging markets. Countries such as Saudi Arabia and Chile were thriving with the surge in commodity prices, while Turkey and Poland were developing broader economic strength. Yet Cisco approached these markets in the same simplistic way as most Western companies: It had a few sales offices and distributors but no specialized effort. Chambers tells the story of how Jordanian King Abdullah II promised him Cisco would make money in his country after convincing Chambers that the company should work with the government to create the Jordan Education Initiative in 2003. "I said, 'With all respect, Your Majesty, I'll never make money in Jordan and I probably never will in the Middle East, either,' " Chambers says.