Cisco profits sag amid price war, reorg

Chamber pledged the company will make hard decisions to gain market share in the coming year. "We will be a very focused, agile and lean company next year," he said.

It will need to be. In its core markets, Cisco saw its revenues in switching and routing decline four and two percent respectively in the last quarter, despite rising orders.

The average price per port of switches declined. So did sales to the public sector, slipping four percent globally, seven percent in the U.S. and a whopping 18 percent in federal U.S. business. Given the shaky global economy, "we expect continued challenges in this sector for the next several quarters," Chambers said.

Far from asleep at the wheel, the company's reorg continues. "This is an ongoing process, not lasting several quarters but several years," said Chambers in a pledge of vigilance.

Cisco cut its engineering leadership to two executives, down from seven. Multiple switching, routing and optical network engineering groups have now been combined in to one unit. Similarly, four software groups have now been united into one. In addition, separate video groups in consumer set-top boxes and business video are getting merged into one under a leader yet to be named.

"The positive impact of this new engineering structure will reduce complexity for sales and services and save time resolving service issues," said Gary Moore, Cisco's newly named chief operating officer who is leading the reorg.

A total of 23,000 people are being affected in some way by the reorg. The cuts included 17 percent of managers at the vice president level or above. In addition, about 1,200 contractors will be discharged in the next quarter.

Moore said Cisco has completed a strategic review of its product portfolio. It currently does not have any areas material to its corporate results it plans to exit, he said.