Chambers led supplier of network equipment for over two decades;
CEO to fill the position
By Rachael King and Cara Lombardo
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 19, 2017).
Cisco Systems Inc. Executive Chairman John Chambers is stepping
down in December, ending a run of more than two decades in which he
steered the network-equipment maker through two U.S. recessions and
grappled with upstart rivals trying to reimagine the market he
pioneered.
Mr. Chambers became chairman in 2006 and executive chairman in
July 2015, when he gave up the chief executive role to Chuck
Robbins, a 17-year company veteran. Still, the 68-year-old remained
a presence on the executive floor at Cisco's San Jose, Calif.,
headquarters.
The board had elected to keep Mr. Chambers as executive chairman
to provide a smooth transition, said Carol Bartz, the lead
independent board director, in an interview Monday. The two
executives worked well together, she said, and the board
appreciated the times when they had differences of opinion.
"A couple of times, John said he would do something one way, and
we said we'd support what Chuck wanted to do," she said, declining
to elaborate. "We are not trying to find a Mini-Me."
The board knew it needed a balance between relying on Mr.
Chambers's knowledge and reputation, and giving Mr. Robbins
authority, said Ms. Bartz, former CEO at Autodesk and Yahoo, which
is now a part of Verizon Communications Inc.
Larger-than-life CEOs like Mr. Chambers, though, can cast a
large shadow, said Peter Crist, chairman for executive recruiter
Crist|Kolder Associates. "As long as that previous CEO is in the
room in any capacity, they have a voice and everybody listens to
that voice," he said.
Mr. Chambers joined Cisco in 1991, the year following its
initial public offering, as a senior vice president in charge of
sales. The company grew rapidly during the dot-com era, selling
hardware that sends data quickly over the internet and through
corporate networks.
During his tenure as CEO, Mr. Chambers built Cisco into the
networking leader with a market value at one point exceeding $500
billion. He delivered a return 17 times over to shareholders,
including dividends, while at the helm. Based mostly on shareholder
return, Harvard Business Review in 2015 named Mr. Chambers the
second-best performing CEO in the world out of 907 executives.
Mr. Chambers was particularly good at communicating clearly with
his team and getting them to understand what customers needed, said
John Doerr, chairman of venture-capital firm Kleiner Perkins
Caufield & Byers.
"He's visionary and plain-speaking and irrepressibly
optimistic," Mr. Doerr said.
Cisco was hit hard when the dot-com bubble burst in 2000. Mr.
Chambers managed through the turmoil, shedding 18% of Cisco's staff
in March 2001. He leaned on those lessons in the years that
followed, being among the first CEOs to warn of impending economic
problems in late 2007 and steering Cisco through the 2008
recession.
In recent years, Cisco has faced stiff competition from the
likes of Arista Networks Inc. and Juniper Networks Inc., which
offer less-expensive switching gear that can be upgraded through
software. That kind of flexibility is crucial to large web
companies trying to keep up with huge increases in traffic to their
sites.
Although Cisco has responded with competing products, it was
slow to do so. While the market for switching hardware (Cisco's
bread and butter) has risen about 16% to $24.4 billion between 2010
and 2016, Cisco's annual sales in that department were flat at
about $13.9 billion. Cisco's market value currently sits at $160.6
billion.
By the time Mr. Chambers handed the CEO role to Mr. Robbins in
2015, Cisco had been through its fifth consecutive year of layoffs.
The Wall Street Journal reported last month that people close to
Mr. Chambers said he had been shaken by Cisco losing sales to
Arista, a startup founded by a former star executive and
friend.
Mr. Chambers began discussing a transition with Cisco's board
the past few months, and notified members of his decision in an
email Wednesday. Cisco plans to appoint Mr. Robbins, 51, chairman
when Mr. Chambers's term expires at the annual shareholders meeting
Dec. 11.
Mr. Robbins has sought to move Cisco beyond legacy hardware into
software and services. The company bumped up
research-and-development spending by $400 million to $6.3 billion
after he took over as CEO, expanding the company's reach in
security, analytics and automation.
In his email to Cisco's board, Mr. Chambers said it was time for
Cisco to move on to new leadership, and for him to move on to
something new. He is expected to spend more time coaching startups
and investing in new technologies. Earlier this year he co-led a
$15 million funding round in drone-security startup Dedrone
Inc.
Ms. Bartz sees his new chapter as a perfect fit. "John has a
need to be in the midst of things," she said.
Corrections & Amplifications Cisco Systems Inc. Executive
Chairman John Chambers won't stand for re-election later this year.
An earlier version of this article misspelled the company's name as
Cisco System. (Sept. 18, 2017)
Write to Rachael King at rachael.king@wsj.com and Cara Lombardo
at cara.lombardo@wsj.com
(END) Dow Jones Newswires
September 19, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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