John T. Chambers rose from the ranks of computer salesmen at IBM to lead Cisco Systems, one of the most innovative and aggressive companies of the technological age. Serving as CEO since 1995, Chambers’s tenaciousness and ambition were a major reason why Cisco owned the infrastructure through which over 75 percent of the world’s data traveled in 2004.
Raised in Charleston, West Virginia, in the 1950s, he suffered from the learning disorder dyslexia. With the determination for which he would later be famous, Chambers applied himself all the more diligently in school in response to his disability, eventually earning both an undergraduate and a law degree from West Virginia University. He married his high-school sweetheart and headed for Indiana University in Bloomington, where he earned a business degree and lost interest in practicing law.
Chambers accepted a sales job offer from IBM, which in 1976 was the giant of the computer industry, and known as Big Blue. Chambers later said he was aware of IBM’s shortcomings, such as its focus on business computers and typewriters while more adventurous start-ups such as Apple led the way into the personal-computer era. “I learned an awful lot about what not to do. You could see management getting further and further from the customer, telling the customer that they knew what he needed better than the customer did.”
In 1983, he decided to move to Wang Laboratories. Chambers had a great deal of respect for his boss, Chinese American founder, An Wang. In Jeffrey Young’s book, Cisco Unauthorized: Inside the High-Stakes Race to Own the Future , Chambers remarked, “The most impressive man I’ve ever known, other than my father, was An Wang. It was the trust he put in me, that he gave me, the belief he had in me, that I’ll never forget.” When Wang died of cancer in 1990, the company’s prospects nose-dived. Wang Labs was producing expensive office workstations while other manufacturers were moving toward PCs. As executive vice president at the time of Wang’s death Chambers was forced to lay off 5,000 employees just before the Christmas holidays. He then resigned and started looking for another job.
Chambers sent dozens of letters out in search of an executive position; only one company responded: Cisco Systems. Founded in 1983 by the married couple of Len Bosack and Sandy Lerner,
They built their new company around the router, which had been created by Bill Yeager, who worked at the Stanford Department of Medicine. The device was built around a microcomputer, which made it possible for the medical-department system to “talk” to the business-school system and the computer-science system in one language: Internet Protocol (IP).
By 1986 the company was pulling in $10 million a year. When venture capitalist Don Valentine came aboard with $2.5 million, he was given one-third of the company, and Cisco was taken public on February 16, 1990. After six months of butting heads with Valentine and then president John Morgridge, Bosack and Lerner quit Cisco and sold their shares back to the company for $170 million.
Morgridge asked John Chambers to be Cisco’s senior vice president of Worldwide Operations in the fall of 1990. In his conservative suits and his dedication to customer service, Chambers did not easily fit into an environment where “geeks” in jeans and T-shirts laid sleeping bags next to their desks so that they could work around the clock. Yet Morgridge apparently believed that Chamber’s more traditional approach could curb an industry that was moving at blinding speed.
Neither believed that routers alone could power Cisco’s future. In 1993 Cisco made its first acquisition — switching company, Cresendo Communications for $95 million. Switches gave power users and power devices better access to servers and made for easier networking. Cisco went on to aquire other small switching companies such as Kalpana, Lightstream, and Grand Junction, chipping away at the switching competition piece by piece.
Morgridge retired in 1995 and ensured that John Chambers succeeded him as CEO.
Chambers as CEO
Chambers was determined to provide Cisco’s customers with a full array of data solutions to ensure their loyalty. Chambers wasted no time in acquiring StrataCom, a company that catered to the wide-area telecommunications transportation market, for $4.5 billion. As he had done in the Cresendo deal, Chambers offered StrataCom’s president far more than the company’s market value, guaranteeing a smooth takeover.
Under Chambers, Cisco began aggressively recruiting the best talent in the technology. For example, they set up a Web page that matched each job seeker with a “friend” at Cisco. This not only gave the job hunters an “insider’s” look at Cisco, it provided a way for Cisco employees to earn referral fees and perks. Over 1,000 employees took advantage of the program.
Chambers’ biggest challenge came in 2000 with the dot com bust. Telecom and network companies had been overvalued and the market finally turned against them. Chambers responded by firing 15 percent of his workforce and cutting his own salary to $1 a year. He also continued with what had worked for him in the past: acquisitions. Cisco acquired Linskys in 2003 for $500 million worth of stock; in 2004 it acquired Latitude Communications, a company that specialized in conferencing systems, for $80 million in cash. Chambers was able to lead Cisco to a stronger position than ever.
Chambers The Man
He has served two American presidents. As Vice Chairman of the President George Bush National Infrastructure Advisory Council (NIAC), he provided industry experience and leadership to help protect the critical infrastructure of the United States. He also served on President Bill Clinton’s Trade Policy Committee.
In 2002, the National Investor Relations Institute recognized Chambers with the prestigious “Best Investor Relations by a CEO” award.
When asked by the San Francisco Chronicle in 2004 if his wealth and fame would make him a different person, Chambers replied, “I hope that it does not. Most of my friends would say it does not. My friends that I had when I moved here to Silicon Valley are still my best friends. It didn’t change dramatically. The most important thing to me in my life is my family. Money’s never been a primary motivator in my life.”
Phil Robertson, Editor