Chambers is having some success with Cerent. The company had US$9.9 million in revenue in the first half of 1999, when Russo arrived at Cisco.
The Cerent Factor
Now that Cerent is part of Cisco, Chambers expects its products to generate US$3 billion in revenue this year. In February, Cisco agreed to sell as much as US$1 billion of Cerent and other equipment to El Paso Corp, a natural-gas-pipeline owner that's building a fiber-optic network.
Chambers has a bigger lock on the corporate market, in which no start-up such as Juniper has emerged to give Cisco the shivers. General Electric, Wal-Mart Stores Inc and other large companies rely on Cisco's gear to run online sites for ordering supplies and selling goods to customers.
Analysts suspect Chambers may find salvation in his original business rather than in telecommunications. Corporations and agencies will be more reliable bets should an economic rebound spur spending on information technology, they say. "There will be blips, but long term, IT spending will continue," says John Ochs, a spokesman for Cisco customer Ford Motor Co.
Craig Johnson, an independent analyst in Portland, Oregon, says Cisco faces hurdles in the corporate market. Cisco's move into the software business -- it offers companies programs that help them run customer service call centers, for example -- hasn't been as successful as Cisco hoped, Johnson says.
"Cisco's going to have to revert back on some level to basically just selling boxes," he says.
Still, Cisco is gaining ground. Sales to companies and agencies at which the Cisco story began contributed about 60 percent of revenue last year -- and probably as much as 70 percent so far this year, analysts say.
"Cisco's advantage with Fortune 500 customers is that it offers a bigger product line and more features," says Stan Schatt, an analyst with Giga Information Group Inc.
James Richardson, senior vice president of the enterprise business, says Cisco is updating its routers and switches for companies. "We're shipping this quarter the biggest, fastest, meanest technology that we've ever delivered," he says, referring to Cisco's switches.
Richardson is also looking at new areas such as moving corporate voice traffic onto an office computer network complete with Cisco-made phones, storage networks and security features. "We just have to buckle down and worry about delivering the technologies and wait for the budgets to come back," he says.
Chambers concurs. "If we execute right, the business will come back," he says.
For investors used to thinking of Cisco as a sure bet, that's a big if.
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