Cisco CEO Chuck Robbins, seen in Toronto on Oct. 12, is a 6-foot-4 former college basketball player and 20-year veteran of the company. He steps into what no one would describe as a dream job: a lengthy slog to direct a one-time Silicon Valley star through its challenging next chapter.Christopher Katsarov/The Globe and Mail
Chuck Robbins grew up on a farm in Georgia, and his parents were convinced he’d grow up to be a Southern Baptist preacher like his grandfather. He answered a different calling: Two years ago, he succeeded John Chambers, the high priest of the internet age, as chief executive of Silicon Valley giant Cisco Systems Inc.
A fellow Southerner, the messianic, hyperkinetic Mr. Chambers inspired awe as the world got wired to the internet in the 1990s, thanks to Cisco's routers and switches. Hopped up on a dozen Diet Cokes a day, Mr. Chambers zealously sold his vision of a connected world, telling investors Cisco could continue to boost revenues 30 per cent to 50 per cent annually.
Cisco’s stock exploded, and at the peak of the dot-com bubble in March, 2000, it was the world’s most valuable company, with a stock market value of $555-billion (U.S.). Some thought it would be the world’s first trillion-dollar company. That spring, a Fortune cover asked, “Is John Chambers the best CEO on earth?” and, “Is it too late to buy his stock?”
Mr. Robbins remembers watching Mr. Chambers in those days at Cisco events "from the 200th row of the arena. … He was a rock star." Mr. Robbins never imagined he would be Cisco's next rock-star-in-chief.
He was surprised when the board told him he was under consideration for the top job three years ago, when he was senior vice-president of worldwide field operations, he told The Globe and Mail during a recent sit-down interview at a Cisco customer conference in Toronto.
"I had never asked to be considered for a job in my life," said the affable 52-year-old, a new grandfather. "It's not who I am [or] how I was raised. My belief was that in every role I did, that my performance should lead the leadership team above me to the conclusion that I was the right person for the next job."
Ask most people who the CEO of Cisco is these days and many either think it's still Mr. Chambers or don't know the name of the new guy. The reality is Mr. Chambers's iconic status had faded long before he relinquished the CEO title in July, 2015. His impending departure as executive chairman this month after 26 years with the company is hardly news in an era when the technology stars are Google, Amazon and Alibaba, companies that created their fortunes on the internet infrastructure that Cisco built.
By the time Mr. Robbins took over, Cisco had become a slow-growing behemoth whose stock was dead money – even as annual revenues approached $50-billion. With a lock on its lucrative core business of selling routers and switches to large customers in the 2000s, it threw off enough cash to finance expensive acquisitions and forays into areas such as consumer electronics, video-conferencing and virtual health care. Some were costly duds, and Cisco at times seemed adrift, prompting Mr. Chambers to warn in a 2011 memo that the company had lost credibility, hampered by lapses in accountability, slow decision-making and execution woes.
For many observers, the buck stopped with Mr. Chambers. "It was time for somebody to come in with a fresh approach," said Glenn O'Donnell, vice-president and research director with Forrester Research.
Enter Mr. Robbins, a 6-foot-4 former college basketball player and 20-year Cisco veteran. If he is indeed the right person for the job, it is not what anyone would describe as a dream job: a multiyear slog to direct a one-time Silicon Valley star through its challenging third chapter.
Cisco is in a fight to redefine its relevance in the era of cloud computing. Competition is tougher in the growing market for the giant data centres that power the cloud. The market includes not just hardware manufacturers but software firms such as Dell Technologies subsidiary VMware Inc. and upstart Arista Networks Inc., the latter created and led by Cisco veterans who left the company in the 2000s to make equipment that was faster, cheaper, more flexible and more software-driven than their former employer's offerings. (Microsoft and Facebook are among Arista's customers.)
As a result, sales of Cisco's routers and switches – which account for a majority of revenues – have been declining, dragging down overall sales for the past eight quarters. "The key challenge is to reduce our dependence on routers as a revenue stream, to get us into some of the newer markets, be stronger in software and cloud computing," said Cisco's lead independent director, Carol Bartz, the former CEO of Yahoo Inc. and Autodesk Inc. "And obviously as a board we would like to see top-line growth."
Mr. Robbins has started to give investors something to believe in. Last month he promised the revenue slide was over, promising a top-line increase in the current quarter of between 1 per cent and 3 per cent. The stock jumped, hitting its highest level since the dot-com meltdown.
The new CEO started with an overhaul of the management team he inherited, laying off thousands of employees, divesting the company of non-core businesses and making a string of well-received acquisitions generally geared to provide more analytical and security capabilities for Cisco's networking customers.
Under Mr. Robbins's watch, Cisco has shifted its focus to provide more software and features, such as automation and network traffic analytics to its core products, to help customers manage their networks and to sell more on a subscription basis, following broader industry trends.
"One of the biggest things I believed we had to do was to move in the direction that our customers wanted us to move relative to how they consume our technology," Mr. Robbins said.
So-called "recurring revenue" has increased to 32 per cent of the total, and the share of subscription revenues in product sales has more than doubled to 12 per cent. Another move could be in store: Like Microsoft, Cisco's stock could be due for a "re-rating" if it continues to drive more subscription revenue. Analyst Pierre Ferragu of investment research firm Sanford C. Bernstein & Co. said in a recent note that, if that happens, the multiple investors apply to Cisco's forward earnings could increase to 20 times from 14, representing "material upside potential" for the stock.
An ability to connect
Speaking to hundreds of customers and employees at the Toronto Congress Centre in mid-October, Mr. Robbins is a confident, charismatic presence – more like a cool-headed salesman laying out a pitch than his predecessor, a fast-talking sermonizer who often walked the aisles as he spoke, gesticulating in precise motions like a mime pretending to rearrange a closet.
Mr. Robbins warms up the crowd by listing the Canadian things he loves: Trivial Pursuit, instant mashed potatoes, basketball and, "most importantly," bloody Caesars. It's corny, but he delivers the lines slyly enough to bring everyone in on the joke.
"They both have that innate ability to connect," Ms. Bartz said of the past and present CEOs.
As a manager, Mr. Robbins is more detail-oriented – Mr. Chambers has described him as an "execution machine." But "there's a lot of ways we're similar," Mr. Robbins said. "We're both very Southern, we care about people … [and] we love speaking on stage."
Mr. Robbins was a teenage programmer who went to university thinking he’d become a doctor. Instead, he switched out of chemistry to study math at the University of North Carolina at Chapel Hill and ended up as a programmer at the forerunner to Bank of America, working on its nascent local area network.
He switched careers in 1992, joining Wellfleet Communications, the bank's networking equipment supplier, as a sales representative. He turned down two offers from Cisco before joining in 1997 as a sales account manager.
As Cisco expanded, he rose quickly through the ranks. It was a heady time: He remembers turning on his TV at the end of a day visiting customers to learn the stock had appreciated by $42 since the morning. "It created an environment many of us thought would never end," he said.
As Cisco retrenched in the 2000s – a period that saw rival Nortel Networks falter and fail – then expanded through a stream of acquisitions, Mr. Robbins continued his rise and became head of its global sales organization.
When he became CEO, he identified three main priorities: accelerate the pace of innovation, increase the value of the network to customers and provide them better options to buy and use Cisco's products and services. More recently, he has struck deals with cloud providers Microsoft, Google and Alibaba to help customers manage the different environments within their networks, while shifting away from previous efforts to have Cisco operate its own cloud service.
"Chuck is doing well," said Forrester's Mr. O'Donnell. "He's making a lot of the right decisions. [But] this is a humongous ship. Turning it around takes time."
Zeus Kerravala, an analyst with ZK Research, said: "I think what's happened is the world in some ways has come full circle" in a way that will benefit Cisco. "For the first time in a long time, the network matters again."
Moving on from his canned Canadiana intro in Toronto, Mr. Robbins lays out a dire view of the world his customers face, including geopolitical instability, digital disruption, cybersecurity threats and a multidimensional networking mosaic. Not everything is moving to the cloud, so network operators must manage their own servers as well as connections to third-party data centres, mobile devices and connected sensors on machines that deliver data to corporations.
He calls it "an era of intelligence," but it's also one of increasing complexity.
"We're generating tons of data, [but] we don't know what to do" with it, he said.
The cacophony will worsen, as market research firm IDC forecasts that, by 2020, one million new connections will be added to the internet every hour.
Mr. Robbins is leading to the payoff: Anxious network operators need help simplifying things in this "multicloud world" to securely track and analyze all that data, and Cisco is the company to keep doing that for them. "For 20 years we said the network sees everything," he said. "Well, we're going to show it to you. It's your data.
"This will come with some challenges … but my view is that the opportunity far outweighs the challenges."
The same could be said of Cisco. As Mr. Ferragu said, “the ‘move to the cloud’ is not the death of Cisco, but rather a great opportunity for the company.”
Editor’s note: A previous version of this story incorrectly stated that Cisco’s stock market value as of March 2000 was US$555-million. The correct value is US$555-billion. This version has been corrected.