The Hilary Clarke interview: I'd like to teach the world to surf
To John Chambers the internet is more than a money machine, it's a social and business 'equaliser'; Focus on Silicon Valley: as the chief of Cisco presides over staggering growth, Microsoft is feeling the heat
Sunday 22 November 1998
John Chambers, the fast-talking president and chief executive of Cisco Systems, makes several attempts to call his secretary at the company's headquarters in San Jose, California before getting through. "Will you confirm that Clinton meeting on E-commerce?" he says in his Southern drawl when he finally makes a connection. He then makes a quick call to the hotel switchboard to inform them of his telephony problems, while beckoning me to sit down. It was the kind of fix-it-now approach you would expect from the head of the fastest-growing computer company in history.
Casually dressed in a pale yellow shirt, navy trousers and navy tasselled brogues, Chambers is to routers and data networking what Bill Gates of Microsoft is to computer software. Last year, Cisco's sales rose by a staggering 40 per cent. The company, started by Stanford University professors 12 years ago, has performed even more spectacularly on the Nasdaq stock market.
When Chambers joined Cisco in 1991, the company's sales were worth $70m (pounds 42m) and it had a market capitalisation of $600m. Today Cisco's turnover worldwide is worth over $10bn and the stock market has valued it at $102bn. That means, had you invested $10,000 in Cisco Systems in 1991 your investment would now be worth nearly $1.7m. No wonder Chambers, 48 years old with wispy, sand-coloured hair, has such a hearty laugh.
He chuckles again when I suggest Cisco must be the ultimate "gorilla" stock, the term used by investors in Silicon Valley for computer companies that make them rich quick. "We want to be the teddy bear that people take home and trust, not a gorilla."
As the key company behind the internet drive, Cisco is a teddy bear that even government leaders seem to want to take to bed. Last Tuesday Chambers paid a "courtesy" visit to Prime Minister Tony Blair. His next appointment after his interview with me was with Trade and Industry Secretary Peter Mandelson, who visited Cisco's Silicon Valley headquarters last month.
"The internet creates an opportunity where both business and government have to reach out, and that can be difficult to do," says the internet evangelist switching into preacher mode. "Learning how to partner together is a new experience and like any experience it will be challenging."
Challenging, but necessary, Chambers believes. "The goals of business and the goals of government are surprisingly in line - the economic health of the country and of the businesses within that country. This took me a while to learn," he says in his Gone with the Wind accent. "For many American companies, especially in Silicon Valley, it was a question of the less to do with government the better. Then we realised the hard way that governments don't only hurt you, they can help you."
President Bill Clinton and Vice President Al Gore are regular visitors to Cisco. All the candidates for the upcoming US presidential elections, both Republican and Democrat, have paid a visit. Even Secretary of State Madeline Allbright went down to Cisco. "She was there to understand hi-tech's direction," says Chambers, "and how important it was in terms of foreign policy."
When Mandelson visited Cisco last month Chambers was in China, preaching the internet gospel to the Chinese leader, Jiang Zemin. "He cancelled his next two meetings and stayed with us for an hour and a half." He also met with the prime ministers of Malaysia and Singapore during his trip to Asia. "The reason is that government leaders are beginning to understand - just as business leaders did 10 to 12 months ago - the impact the internet is going to have on their country.''
Much of Cisco's extraordinary expansion has been through acquisitions, mainly of small start-up technology companies. The strategy is to snap them up and absorb the brainpower. Last month the company announced it was buying a stake in Oxford-based Bookham Technologies. When I met Chambers it was only 8.30 and he had already "got called on one" (an acquisition). He says Cisco is also planning "to make more in terms of continued expansion here in the UK".
Besides preaching the benefits of computer networking for business and job creation, Chambers' other passion is the value of education. That is not surprising given the global skills shortage in the IT sector. The company has set up its own Cisco Academy working directly in schools, including some here in the UK. "It's easy for business to criticise and not participate in fixing the problem. We aren't educators but we are very good at knowing how to train people and get them on the support networks," he says.
"When you look at the job openings you have in your country in the IT sector, the number of vacancies has doubled since 1994. The companies just can't find the skills they need." The idea behind the Academy is to train students to maintain the networks themselves. It has proved popular. According to Chambers, the average IT job pays 50 per cent more than the average private sector job, "and with a Cisco degree there would probably be a 20 per cent premium on that," he says. "I have in my staff a 19-year- old and he's paid $67,000." I met that student on a trip to Cisco earlier this year. Chambers laughs when I say I have heard the story before. "President Clinton was the one who told me 'John, you have got to tell war stories.' You have to use specific examples to drive home your point." Point taken.
Cisco's pedagogy is, of course, largely business-oriented. Yet Chambers, the son of two doctors, says he has always believed in education as the "great social equaliser".
"I believe in choice in education and I am surprisingly, for a conservative person, very aggressive in making sure choice exists regardless of income. "In this new world the great equalisers will be the internet and education that will allow individuals and big companies to compete on a global basis in a way they never have before."
I say he doesn't strike me as being particularly conservative. "I'm a businessman so I have to be. My aim is to make Cisco the most predictable, boring company on Wall Street," he says, laughing again. Chambers likes to joke that his wife Elaine is a speech therapist, yet she has never been able to correct his thick, Southern accent.
He is also a great believer in workers' financial participation in their company. He says Cisco is "the most generous company in history about giving stock options to employees". Cisco shareholders recently voted to give 4.75 per cent of outstanding stock to staff every year for the next four years. "Our parking lots are surprisingly full at 7 o'clock every night, not because we ask people to work late, they just do."
Even when you're the fastest- growing computer company in the world, you need to be on your toes all the time. "Our best rival can often be a million-dollar start-up, and in Silicon Valley alone they are putting in almost $4bn a year. Then you've got our traditional competitors like Lucent, Nortel, Alacatel and Siemens coming at us, with some of them saying they are going to bury us."
Chambers, who holds an MBA in management and finance from Indiana University, started his career with IBM and worked his way up to executive vice president. Before joining Cisco he spent eight years at Wang, the last two as senior vice president of US operations.
When he went for the interview at Cisco for the position of senior vice president, he asked the then chief executive and now chairman, John Morgridge, what he was looking for in the number two position. "He said 'eventually, my replacement'. So I said we were 'gonna get along fine'. So I joined thinking that if I didn't mess it up, I would become president in a couple of years."
Chambers says he learnt "the very hard way at IBM and Wang what happens when you don't have competition. When you don't you get soft and also a new company comes in and displaces you. So not only is it ethically wrong to eliminate your competition, it's just bad business judgement. I will have more market share five years from now because I have good competitors now, than I will if I don't have any."
Even so, the Federal Trade Commission, the American anti-trust regulator, recently opened an inquiry into Cisco over concerns that it may have tried, illegally, to divide up the market with its competitors. The investigation focuses on discussions held by Cisco with Lucent Technologies of New Jersey and Nortel of Canada, both of which make telephone networking equipment.
Chambers vigorously denies any wrong-doing, pointing out that in data voice and video combined, Cisco has less than 10 per cent of the US market. "The second thing is, no one has ever accused Cisco of predatory pricing or giving away anything. I don't give away anything except for charity. We don't have the barriers to entry that other companies have. I don't have an operating system which people write huge applications on, like IBM did for mainframes. I don't have a $2bn 'fab' [fabrication] plant either. Anyone can compete with us." Most of Cisco's manufacturing is outsourced.
"We've spent a lot of time educating government on what we are doing, but I didn't spend enough time with the FTC. Shame on me."
Chambers, who has two grown-up children, lives like many Silicon Valley bosses in the hills of Los Altos. His home is not especially hi-tech, he says, although he has a network of PCs all hooked up to the net. He says he spends around three hours a day surfing the net at home. He still has one battle to win: to persuade his wife to allow him to connect his piano to the net: "Wouldn't it be great to play any song with someone almost anywhere in the world?"
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