So far this year, John Chambers, chief executive of Cisco Systems Inc and onetime hero of the Internet age, has fired 8,500 people, reported Cisco's first quarterly loss as a public company, posted a revenue decline of 4.2 percent and seen his company's stock plunge by half.
For all that, Chambers remains so upbeat that he promises to more than double Cisco's revenue by 2005.
A year ago, investors would have taken Chambers's sales goal as gospel. "Chambers was god in technology; Chambers could do no wrong," says Bill Schaff, manager of the US$100 million Berger Information Technology Fund in San Francisco.
Not anymore. "People will look at them a little more rationally," Schaff says.
Even a Cisco fan like Martin Pyykkonen, an analyst at CE Unterberg, who's got a "buy" on the stock, is skeptical when Chambers says revenue will once again rise 30 to 50 percent as the economy recovers. "Nobody believes it," he says. Pyykkonen expects 20 to 30 percent growth.
Chambers gets about a third of Cisco's revenue from sales of Internet equipment to telecommunications companies, a market he began targeting in the mid-1990s.
The trouble is, big phone companies are trimming spending.
WorldCom Inc, the No. 2 US long-distance company and a Cisco customer, plans to cut spending by as much as 19 percent this year. ICG Communications Inc and other upstart Internet service providers are bankrupt or have shut down.
Some of the potential customers that are still around, such as Yipes Communications Inc, which counts Golden Gate University among its more than 400 clients, have looked at Cisco's products and decided to go with its rivals.
Until Chambers, 51, came crashing to earth, he had been lionized by analysts, investors and financial journalists as an Internet-era executive whose company consistently -- and predictably -- made money.
"He's been one of the best corporate managers over the last five years, but we're talking about human beings here," says Mark Herskovitz, who manages US$2 billion in technology stocks in Mellon Financial Corp's Dreyfus Corp unit.
Herskovitz sold his entire stake in Cisco before February, when Cisco missed profit forecasts and reported a slim, 3.5 percent revenue increase from the previous quarter. Lately, he's started buying the stock again.
Internet Evangelist
The blond-haired and blue-eyed Chambers, who speaks with a West Virginia twang, managed for almost six years to convince investors that with Cisco, they could put money into the Internet and not get burned.
The company's profit beat analyst predictions by exactly a penny a share for 13 quarters starting in October 1997. Sales growth rose for 11 straight quarters, helping Cisco briefly pass Microsoft Corp and General Electric Co as the world's most valuable company on March 27, 2000, when its market capitalization topped US$555 billion.
An investor who'd put US$10,000 into Cisco stock on Jan. 30, 1995, the day before Chambers's promotion to CEO, would have amassed US$442,572 at the US$80.06-a-share peak in March 2000.
Today, that stake would be worth only US$106,466, based on the stock's closing price of US$19.26 Thursday. Still, 32 analysts rate Cisco shares a "buy," 10 rate them a "hold" and three recommend selling.
Cisco lost US$2.69 billion, including charges and acquisition costs, or US$0.37 a share, in the fiscal third quarter that ended April 28 compared with net income of US$641 million, or US$0.08, a year earlier. Revenue dropped to US$4.73 billion. As Chambers fired 18 percent of the workforce, he also took a US$2.25 billion pretax charge for inventory that had built up after he misjudged demand.
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