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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