In less than twenty years it grew to be the most valuable company in the world. Then the dotcom bubble burst.

The man who built the company has spent the past two years getting the company back into shape.

He's given a rare interview to our business correspondent, Paul Mason, who was keen to know whether anybody on America's west coast still believes all that dotcom hype.

Watch the interview

PAUL MASON:
In the dotcom boom, no company boomed like Cisco. Cisco Systems makes the computers that direct traffic on the internet. As the internet expanded, so did it. The hope, the hype and an aggressive programme to buy up other Silicon Valley start-ups made it the biggest company on the US Stock Exchange. And for one dizzying day in 2000, when it was worth half-a-trillion dollars, the most valuable company on Earth.

JOHN CHAMBERS:
CEO, CISCO SYSTEMS:
We had a dream that the internet would change nearly every aspect of our lives. Change the way the world works, lives, plays and learns. That kind of shaped what we were trying to accomplish from productivity to standard of living. Silicon Valley tends to have dreams. Lots of times they come true. We hoped we'd be part of that.

PAUL MASON:
Then, suddenly, the dream was over. The dotcom bubble burst and the real economy followed. Companies didn't need any more of Cisco's boxes to cope with the projected growth. By spring 2001, it had acres of unsold stockpiled up in its warehouses forcing a $2 billion write-off. What did this rollercoaster ride look like to the man in the front seat?

JOHN CHAMBERS:
For a decade, we said growth would be at 30 to 50%, and when for nine quarters in a row it was above 50%, in the 50- 75%, we were hesitant about would that be sustainable. But we never modelled for it to go from 70% growth in the first week of December to the middle of January, being minus 30% growth. I'm good at maths. I thought it was mathematically impossible.

PAUL MASON:
Silicon Valley appears to be a slightly more subdued place now. Do you think the great days of technology innovation are over and it's become a more subdued place than it was?

JOHN CHAMBERS:
The last several years have been humbling for us all, and that builds character. The Valley has been through multiple ups and downs before, from the semiconductor industry to the networking industry to PCs, et cetera, so this is nothing new. If you look at the unique ingredients that Silicon Valley has, this is why I am the optimist about Silicon Valley in the long run, they had the venture capital, the great universities, the role models of companies you could learn from and steal people from, and I believe you'll see the best start-ups, founded not three or four years ago during the boom, but founded now, when people have learned from it and positioned themselves for the future.

PAUL MASON:
With the worst over, Cisco is now making operating profits of over 60%, way above the average. The secret is dominance. If Microsoft dominates in PC software, Cisco dominates the wiring. That's great for Cisco, not so great for the companies that buy the technology. Did Chambers ever set out to build such a large and dominant company?

JOHN CHAMBERS:
I don't use the word "dominant". I use the word "large". We thought Cisco could be a major player, but our definition of a major player was a couple of billion-dollar company. We've been fortunate to be at the right spot at the right time. I wish I could say it was brilliant leadership, but there's no substitute in technology for being in the right industry, with the right company, at the right point in time. We've been very fortunate.

PAUL MASON:
The dotcom crash was bad, but then came worse - the scandals at Enron and WorldCom. All across corporate America, there were question marks about the accuracy of company accounts. Cisco emerged unscathed, but did it change the mind-set of people at the top?

JOHN CHAMBERS:
The hit to confidence was not just from investors and the public, it was also of other business leaders. It was extremely disappointing for what people did that was clearly illegal, and of equal disappointment was the corporate cultures did not exist, as in many of these companies a large number of people had to know. It isn't an issue that one or two people did something inappropriate, it was the fact that a large number of people knew and tolerated it. That was a surprise to me.

PAUL MASON:
Cisco itself is seen as a very lean, mean, selling machine. It didn't make you think that you wanted to turn it into a more kinder, gentler kind of capitalism?

JOHN CHAMBERS:
We have been a gentler, kinder type of capitalism. When you look at our options, which by the way have resulted in the stock going up 200,000% since we went public, our shareholders have won, we had the highest customer satisfaction in the industry and our employees have won. So the softer, gentler capitalism which I believe in, and in MBA school I would have called it socialism, but caring about your employees, caring about your customers, shareholders and partners, and those being the four cornerstones of your future, is how we built this company.

PAUL MASON:
Cisco is famous for its family atmosphere and near Calvinist frugality. Nobody travels business class, everybody works in the same kind of cubicle. But the whole thing is driven by stock options, the right to buy Cisco shares at a knockdown price. Share options have become tainted after the dotcom boom and because companies get billion-dollar tax breaks for using them. While others are scaling them back, Chambers remains a true believer.

JOHN CHAMBERS:
When you think about ownership of companies, there has not been a successful high-cat company built or reinvented in the last two decades that haven't shared ownership with their employees. That's how you get the return, where our shareholders at Cisco in the last seven years have a return of 1,500%, when the Nasdaq has only 150% return. Our global competition from Europe and the US will be Asia. They are going to use stock options.

PAUL MASON:
The economic future of America and the world is still uncertain, but if there's one company that will see an upturn before the rest, it's Cisco, because its products have become building blocks for the rest of the economy. Chambers legendarily has real-time access to the company accounts, so what's his best guess at what happens next?

JOHN CHAMBERS:
The question is not when we will see an upturn, because we already have. The question is what kind of strength and how long will it last. It's still fragile. We've tried to share with our shareholders and others that the upturn is starting, that we are cautiously optimistic about the future, and then share what the caveats are of the things that could trip it up. We are seeing this from our customer base, not in terms of necessary orders at all, but in terms of the cautious optimisms of CEOs around the world and Government leaders. That isn't true just in the US or the UK. We're seeing it in China, Japan, Australia, Russia, and the Middle East.

PAUL MASON:
The internet was supposed to herald a new economy, rapid productivity gains and inflation-free growth. Some now think that's old hat, but not John Chambers.

JOHN CHAMBERS:
It's fair to say people got under-excited about the internet for many years, and it was well upon us before they understood the power. Too excited, too pessimistic, too excited, very excited, too pessimistic. But the trend is clearly up and to the right. You're going to find that almost all of the concepts that were said about the internet, in terms of changing productivity, standard of living, improving healthcare and education, will happen, and if you look back at many of the predictions made, most of those have and will come true. Interestingly enough, most business and government leaders around the world, clearly understand that the internet will change productivity, and the standard of living, in ways that people dreamed about and are starting to see.

PAUL MASON:
If he is right, the global economy will rise again accompanied by the quiet hum of Cisco's little boxes, generating high productivity for us, giant profits for him. If he's wrong, it's more than just Cisco that stands to lose.

This transcript was produced from the teletext subtitles that are generated live for Newsnight. It has been checked against the programme as broadcast, however Newsnight can accept no responsibility for any factual inaccuracies. We will be happy to correct serious errors.