John Chambers isn't just a fearless captain of industry. No, the events of this week show that the

Cisco

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CEO is a shrewd investor to boot.

Chambers pocketed $38.3 million Thursday selling Cisco shares as the stock hovered near 52-week highs. The move comes just days after the executive voiced his strongest prediction yet of an emerging tech-spending recovery.

Adding to the brilliant timing, the networking chief is selling at a time when his San Jose-based tech juggernaut just happens to be buying back shares at a record clip.

Investors certainly haven't been taking a cue from the chief in recent weeks. Cisco shares, flat at $22.70 Friday, have surged 14% since late October and are nearly double their year-ago level.

The Bold and the Beautiful

To his credit, Chambers made his boldest personal finance decision two years ago, when networking gear demand had all but vanished. Back then, he opted for stock options in lieu of salary, a risky move that has now turned into a windfall. The 16 million shares he's added to his option pile since 2001 are worth $363 million by today's prices, marking a significant improvement over the paltry seven-figure annual salary and bonus he otherwise would have collected.

According to federal filings, Chambers sold 2 million shares Thursday at prices between $22.50 and $22.74. That gives him a total take of about $45.2 million. The strike price on those shares was $3.45 and the options were due to expire in August 2004. So Chambers netted roughly $38 million on the sale.

With that kind of walking-around money available, it's easy to see why Chambers has remained a staunch defender of options-based compensation. Cisco has continued to dole out options even as rivals like

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have bowed to pressure and curbed their option programs. Likewise, Cisco has refused to get on board with accounting reforms that treat options as expenses. That means the cost of issuing options still doesn't count against the company's quarterly earnings.

"They pile on the stock options because it doesn't look like it costs them any money," says compensation gadfly Paul Hodgson of the Corporate Library.

Timing Is Everything

Though deft as an investment move, Chambers' stock sale may not look as keen from a public relations standpoint. Increasingly, more people are focusing on the company's runaway stock compensation practices and the

fat cats at Cisco who benefit the most.

Indeed, Chambers' selling in the wake of his newfound bullishness, and the company's rampant stock repurchasing efforts, may leave him open to questions of conflict and timing.

A Cisco rep said timing of the sale was related to the expiration of the options that Chambers received in 1995. "John Chambers could have exercised this option any time over the past four years, and the only reason he's doing it now is that it will soon expire."

Critics charge that the stock buyback effort has effectively been

funneling billions of dollars of cash from Cisco's operational juggernaut into insiders' pockets -- at the expense of public investors.

Cisco spent $2 billion last quarter on stock buybacks, doubling its $1 billion in cash flow for the period. And executives on the earnings call last week told analysts that "we intend to be active in the market," as the company has $10.2 billion in buyback funding remaining.

To some observers, it looks like the strong demand for shares from Cisco's treasury tends to bolster the stock price. Cisco defends the practice, saying it helps offset dilution from acquisitions and employee stock payment programs.

Cisco watchers say Chambers could rightly claim he's in line for some reward, since the company finally turned a corner of sorts in the first quarter when it ended two years of sales stagnation. But some people wonder if astronomical options are the right carrot.

"Once you get your accumulated options up to a certain level, it starts to beg the question: What purpose do additional options serve?" asks Corporate Library's Hodgson. "He's already got all this stock.

"What would be much better is if they gave him a sensible salary and cash bonus to hit specific financial targets," he adds.