They call him the internet's No. 1 salesman. For good reason. Six years ago, when the 50-year-old John Chambers moved up as the President and CEO of Cisco Systems, the networking company's topline was a modest $70 million. At the end of 2000, the figure had soared to $12.93 billion, fuelled as much by the boom in connectivity as Cisco's manic pace of acquisitions (23 last year alone). But is the best over for Cisco? Its market cap is down, dotcoms are dying by the dozens, and there's bitter competition in the market. Chambers, as he explained to BT's R. Sukumar and Suveen K. Sinha, thinks that's far from the case. Excerpts:

Q. You have talked about a life-time partnership with India. What exactly are your India plans?

A. India offers a huge marketplace for the world and everything else. It is positioned for explosion if you provide the infrastructure. You already have the education system. When I look at India, it's very similar to where China was positioned five-six years ago, or Japan a decade ago, in terms of internet infrastructure. We invested in China about six years ago, when about one-half to one per cent of our business came from China. It's now up to about five per cent. Today, less than one-half or one per cent of our business comes from India. I think it's going to be five or 10 per cent.

Cisco has traditionally grown by acquiring companies. How do you successfully manage to integrate them?

About 70 per cent of our products come from internal development. About 30 per cent come from partnership and acquisitions. The first thing is that acquisitions are very difficult. You've got to understand what we are acquiring. Unlike a bank, we don't acquire geography or marketshare. We acquire people and next-generation products. In terms of the integration, it's now a process, it's almost automatic. Forty per cent of our senior management team came to us through acquisitions. So, we have a culture that accepts new ideas and new people and we thrive on that.

Our acquisition and integration strategy is probably the most effective in the world, and it's one that we will continue to employ to grow at 20 per cent-20-25 a year. It's actually easier to do it now than it was several years ago. We've just built it into our genes, our DNA. I'd probably do five acquisitions a month without slowing down.

You have no problem hiring employees. But perhaps there is a questionmark over retaining them. Some high-profile executives have left recently. Perhaps there is a bigger issue with engineers, since Cisco traditionally has had a bias towards buying, rather than inventing technology.

We invent a lot of technologies. Second, our attrition rate is five-to-seven per cent voluntary in a segment where the industry average is about 20 per cent. Among our top rated employees, about top 10 per cent, our voluntary attrition is about 2.4 per cent. Many people don't realise that among our senior management group, we are in the fourth, fifth, or sixth-generation of leadership. My CFO is the fourth CFO of Cisco. My head of manufacturing is the third manufacturing leader of Cisco. My head of sales is the fifth head of sales of Cisco. We see it throughout the organisation. So we are a company very proud and very deep in terms of our leadership. It's also a very intense and very hard working culture. If business changes, a part of my leadership also changes.

Given that a lot of acquisitions are dependent on how the market perceives you, any change in perception because of threat of competition can undermine your ability to buy. So how do you tackle competition from traditional rivals as well as start-ups?

It's easier for us to acquire in downmarkets than in a rapidly growing market. While our stock is off its traditional high, its market cap is still well over $300 billion. It's because of this consistent growth that acquisitions, which may have cost us one share of stock a year ago, may not cost us one share of stock today, but may cost just half. My acquisition targets have fallen far faster than Cisco has. Secondly, when you are in 45 product areas, as we are, and number one or number two in every product area almost without exception, you always have some good traditional competitors like Nortel or Lucent, or a number of start-ups. So if you think that a new start-up is going to bury Cisco, and there have been many such start-ups in the past, it's amazing how often we have been very successful. We see what is it that they do that the customers like, and we have been able to maintain our number one position. Having said that, customers are moving towards fewer vendors and buying networks rather than individual components. When they have to integrate them (components), it costs more, is slow to market, and often does not have the reliability. By definition, we are better in providing the entire infrastructure. Fourth, networks are merging. What we call the network of networks is the future.

Talking of networks, what is the progress in the IP network business?

You are going to find that there will be no separate networks for voice, data and video. It was controversial when we said that three-to-four years ago. It's very much a given now. We have continued to grow extremely well over the last four years, with 51 per cent of the total global marketshare. Lucent and Nortel, perhaps our two toughest competitors, both have nearly 10 per cent marketshare. We are very well-positioned in terms of where the industry is going.

There's the perception that a company as large as Cisco can't be developing cool technologies...

...(laughs) or continue to grow at this pace. A couple of facts. First, how large a company can get depends upon several factors. The first is the size of the market. If the market isn't growing rapidly, no matter what you're doing, you're limited. Our market is the reverse of that. With or without Cisco, the market will grow at between 30 and 50 per cent per year, over the next five, probably, the next 10 years. Secondly, it comes to how customers make decisions. If customers made decisions by individual products, and across these 45 product areas and the decisions were completely independent, then growth might be really challenging. But customers do not make decisions that way. They're making decisions on fewer vendors, and most of them preferred. About 70 per cent of the Fortune 500 are standardising on preferred vendors-most of them (on) Cisco. Systems integration companies like EDS, KPMG, and IBM are all standardising on Cisco. So, we're winning the battle. And if you want to talk about cool technologies, how you tie that together and how you become the number 1 player in each area is what engineers want to see. They want to see cool technology, but they want to see it in terms of implementation. So, we've had no problem hiring. We do very, very well. We receive 25,000 resumes a month. We only hire about a 1,000. So we're able to attract talent and we retain it extremely well.

Cisco is sort of missing from the wireless arena. As telecom companies move towards next-generation technologies, alliances like the one between Juniper and Nokia develop, doesn't Cisco get sidelined?

First, in all segments of wireless, Cisco is often the leader. To use your example, part of the relationship Juniper developed, not with Nokia, but with Ericsson, was because we won 13 out of the last 15 bids in Europe. So, we are the leader in 2.5 and 3G in terms of the IP infrastructure. We partner with Motorola and Nokia to provide the base station; so we do very well in mobile wireless. Fixed wireless-to-home, we invented with one of our acquisitions and so that's looking good. Wireless within the home, and wireless within a building.... So we're playing in almost every segment of wireless, but doing it in a way that allows a company or an individual to use whatever combination of wireless, cable, copper, or optical they want to. So we combine technologies the way no other company does.

Cisco has also traditionally outsourced most of its manufacturing to companies like Solectron fairly successfully. How would you be able to ramp up as you grow and the number of your products increase?

It's extremely easy to ramp up; it's very difficult to implement. But it's really about what the manufacturing company of the future or the company of the future would do. We only keep (those processes) in Cisco where we add sustainable competitive advantage. Everything else, we outsource. In our manufacturing arena we have over 35 plants; only a handful of them are owned.

It's half the reason why our margins are 15 points higher than our competitors'; our inventories, 45 per cent lower; our time-to-market, 25 per cent faster; and our reworks have fallen from 15 per cent to 2 per cent. So we really did the model for future manufacturing.

What do you think sets Cisco apart as an organisation?

I think there are four cornerstones to Cisco's success. The first is almost a fanatical approach to customer satisfaction. I look at every critical account in the world myself every night. The CEO pays attention to it; everybody else does. The second is how we use our own technology. We save $1.4 billion a year on those applications. We are the most advanced users of the internet in the world. And that's on an expense base of a little bit over $6 billion. Companies who don't do that will never be competitive in this world.

The third element is our ability to attract and retain talent. And the fourth is our culture with a stretch goal mentality. Whether it is the ability to successfully acquire companies when almost every other company in our industry fails in its acquisitions-we've done 70 of them. That's the answer.

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