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Tech Industry

Will the real John Chambers stand up?

Author Robert Slater takes the measure of Cisco's charismatic chief executive after the company rides one the steepest roller-coaster rides in the history of the tech industry.

    I began researching for my book "Eye of the Storm" soon after Cisco Systems had reached the pinnacle of its glory as the most important supplier of Internet equipment. That came on March 27, 2000, when Cisco became the United States' most valuable company with a market capitalization of $531 billion.

    With 40 percent annual growth rates the norm, Cisco was sailing along, and the media had no trouble in pronouncing John Chambers one of the greatest CEOs of the era. I had every reason to believe that I was right on the mark in writing a book that celebrated Chambers and Cisco.

    Then, in January 2001, the good times ended. Orders for the routers and switches that Cisco supplied to direct Internet traffic simply stopped coming in. The seemingly infallible Chambers was forced to order widespread layoffs, to suspend his vaunted acquisitions program, to redirect the networking giant's priorities from growth to cost cutting, and to put a new emphasis on profits.

    What had gone wrong at Cisco--and who or what was to blame? Some ex-Cisco executives cynically pointed out to me that Chambers had not truly been tested when things were going well. Anyone, they insisted, could have ridden the Internet bubble to stardom. If they were right, Chambers now was likely to face great trouble in steering the San Jose, Calif., company through adversity.

    It struck me as extremely significant that the Cisco board of directors never wavered in its support for Chambers. They loved him when the stock was the darling of Wall Street, and they retained him as chairman and CEO even after Cisco's market cap plummeted to $130 billion or so. They, in effect, gave him the opportunity to test himself during adversity.

    At first, Chambers could not bring himself to acknowledge that he might have played some role in Cisco's troubles. He blamed outside factors, specifically a "100-year flood"--the term he used to describe the sudden economic downturn that had badly weakened Cisco and hundreds of other major companies during that troubling winter of 2000 and 2001.

    Yet while Chambers was publicly blaming everyone but himself for what had gone wrong at Cisco, he very quickly put in place a recovery plan that essentially froze many of Cisco's efforts, and realigned the company's priorities. He also reorganized the company to enable it to produce products more efficiently and to tackle markets more carefully. It was as if he were saying, 'I won't admit to making mistakes--but I made them, and now I'm going to try to fix them.'

    Chambers eventually began to feel more comfortable acknowledging that, indeed, he and Cisco had taken their eyes off the ball, as he put it.
    During Cisco's heyday, Chambers had reluctantly agreed to cooperate with my project--confident, I suppose, that I would write a book exalting Cisco. His confidence was not misplaced, at least in the early stages of the research. But then, when Cisco's roof collapsed, I felt compelled to examine what exactly had gone wrong. Knowing that I would be forced to produce a more critical book of Cisco than originally intended, Chambers might well have thought it no longer made sense for him to cooperate with the project as enthusiastically as before. But, to his credit, he continued to talk with me.

    These were more difficult interviews because I was asking much tougher questions. Chambers eventually began to feel more comfortable acknowledging that, indeed, he and Cisco had taken their eyes off the ball, as he put it. When we conducted our final interview in the spring of 2002, Chambers was more candid than ever, more willing to admit personal errors.

    Drawing conclusions about Chambers and about Cisco was made more difficult because I had witnessed the man and the company at their high and low points, all within the short space of a year. It was not easy to decide which was the real Chambers and which the real Cisco.

    Nonetheless, I found it difficult to buy into Chambers' notion that Cisco was blameless. It seemed much too simple to blame the company's problems on a "100-year flood." That kind of denial did not seem healthy. But once Chambers acknowledged that he had made some errors, I decided that he had a decent chance of steering Cisco through the technology collapse. So far, that assessment is holding up.