Recently a client asked me to lend them a hand with a Cisco IP Phone 7940 that was haning during the boot process.
After some quick research online, I determined that a reset on the device was needed, and the process is really simple.
Begin by unplugging the phone and then reconnecting the power. As soon as the headset key illuminates you need to press and hold the # key. After a few seconds you should see Reset sequence detected. Once that is displayed you have 60 seconds to enter in the following key sequence: 123456789*0#. You will be asked whether to keep the network config or not, press 2 and you should see: Factory reset initiated. You can watch process from beginning to end here.