A noble ambition, but to succeed he will need to reset expectations for a results-driven corporate culture in which the company stock option was once viewed as a sure ticket to wealth. It remains unclear whether Cisco's rank and file are ready to sublimate dreams of personal gain in pursuit of Chambers' "one for the Gipper" vision of today.

How skillfully Chambers navigates this transition may reveal more about his talent as a manager than did any previous challenge.

"The real mettle of John Chambers is being tested right now," said Hilary Mine, analyst with industry consultants Probe Research. "Now we'll find out if he's a good CEO or not."

Some say Chambers was simply in the right place at the right time during the height of "irrational exuberance." That may be true, but if Cisco's good fortune was driven by market forces, it was certainly pushed in the opposite direction when the economy began to fall apart.

The company's tailspin reflected larger problems affecting the communications industry in general. Other networking rivals, such as Nortel Networks and Lucent Technologies, were suffering sharp reverses as well.

Supporters point out that until last year, Chambers had enjoyed nothing but remarkable success at Cisco. The 52-year-old West Virginia native joined the company in 1991 as its top sales and operations executive after stints at Wang Laboratories and IBM.

Chambers became CEO just four years later, when Cisco posted annual sales of $1.2 billion. He oversaw the company's subsequent transformation into an industry behemoth with yearly revenue in the $20 billion range and a cash hoard of $19 billion, second in the industry only to software giant Microsoft.

A soft-spoken, likable man with boyish looks, Chambers proved to be an exceptional evangelist, telling the world how modern communication would be revolutionized by his company as the primary builder of networks that make up the Internet.

When Chambers talked, people listened--and for good reason: Cisco was raking in quarterly sales gains of 60 percent to 70 percent during its heyday, figures that were unheard of for a company of its size.

"I couldn't explain my own numbers," recalled longtime Cisco executive Jayshree Ullal, 40, who recently returned from a leave of absence.

But the fairy tale lasted only so long. Eventually, the glut of companies created during the Internet's boom years led to what market researcher RHK describes as an "unsustainable" $50 billion spending bubble in the telecommunications industry in 1999 and 2000. It wasn't long before Cisco and its networking rivals found themselves scrambling for a piece of an increasingly smaller business.

With reduced demand from the telephone companies, Cisco was further hurt by a double whammy: Many Internet service providers, which had been customers for the company's Internet routing and switching equipment, began to struggle at the same time that corporate spending on computer gear was taking a nosedive.
 

"The first five months of this year were miserable--painful beyond any description," Chambers recalled. "It was the only time in my life I haven't been excited about going to work."

After the layoffs came a record $2.25 billion inventory charge and a warning that Cisco was pulling back from previous growth predictions because it couldn't accurately gauge the market anymore.

The collapse led some members of a previously laudatory business press to sharpen their knives. In a May 2000 column, for instance, Fortune magazine writer Andy Serwer published a glowing appraisal of Chambers and his company. "No matter how you cut it, you've got to own Cisco," he wrote. A year later, Serwer complained that he'd been had: "I just feel so burned!"

In his defense, Chambers said no one could have predicted the plunge taken by his company and the rest of the industry.

"If you told me (sales) could go down 30 percent after 70 percent growth in 45 days, I'd say that it was mathematically impossible," he said. "And it did."

The sobering experience has forced Chambers to take a hard look at all of Cisco's operations. In addition to being plagued by delivery lapses, Cisco has often had hundreds of products at any one time in inventory--many of which failed to contribute much to the bottom line--as a result of company acquisitions. Chambers has reorganized product development into 11 areas to get better control over that unwieldy system.

On the sales side, Chambers is pressuring his staff to do a better job of pursuing more stable telecommunications customers, such as the four Baby Bell local phone companies. This has long been a company weakness, and Chambers knows that Cisco will need more big-name customers if it is to regain Wall Street's confidence.

Recent studies suggest the company is at least holding its own. Despite a fierce challenge from router maker Juniper Networks, Cisco has maintained its 60 percent share of the market.

Paul Sagawa, an equities analyst for Sanford C. Bernstein, said the company's task is difficult but not impossible. "I actually see them trying to turn the clock back," he said. "They're approaching things like they used to."

When asked for his own assessment, Chambers seems to choose his words more carefully than he might have in more confident years, sipping one of his daily 12 to 15 Diet Cokes while taking a moment to ponder his answer.

"In fairness, we were the poster child of the Internet economy going up, we're going to be the poster child when it hit its dips," he said. "And we're going to probably be the poster child when it goes back up again."
 

Eighth profile: Barry Schuler