And judges after determining they had not met standards of competence. It comes after series of complaints and disputed decisions that has drawn global scrutiny. Im mark crumpton. Emily im emily chang and this is bloomberg west. Job cuts at cisco. We dive into the latest Earnings Report and see how the legacy is weathering the changing wind of the networking industry. Plus hes the godfather of the internet. Well talk about who should regulate the web. And my republican lawmakers are putting up a fight. And another blockbuster quarter, will look at whether china is the content king. Cisco shares lead, dipping in after hours on news 7 will cut 5500 jobs, about of the workforce. It underscores the company struggled to adapt as the networking industry shifts toward softwarebased systems and undercuts sales growth. The companys fourthquarter profits Beat Estimates at . 62 a share. Joining me is cory johnson and on the phone, brian white of drexel hamilton. Corey, i will start with you. Cisco has had a lot of job cuts over the years. What do you make of these additional numbers . The worst one of things anyone can ever go through, losing a job. In terms of what it means for ciscos business, theyve cut a couple thousand workers every one of the last three years. This is the way they are doing things right now, sort of bloodletting, which is horrible for the people involved. Its more about focusing on places they want to be focused and not in places where they have been in the past. Emily brian, would you agreed with that . How should we make sense of this . Is exactlywar he right. Cisco has to evolve with the times. More business is shifting into the cloud. They are making a big push into security. If you have workers that are focused on legacy products, theres not much work for them. Ork at their switching routing businesses, they are declining or slightly growing. Theres not much growth there anymore. The newer areas they are investing in, they just got into analytics a couple of months ago. Those are examples. You look at legacy product growth, how fast our sales up there legacy products . Cory overall the revenue numbers are down 2 . If you look at their video business which they got rid of a year ago, sales were up 2 . All the existing product lines on average were up 2 . The switching business is up 3 year over year. The security business was up 16 on a yearoveryear business, so terrific growth insecurity. About inh thinking this time in which the Cutting Edge Technology of switches is a Software Defined network. Choosing one switch or router and using software to do the job of many routers. In an era when Software Defined get moreare letting it out of individual switches and routers, these numbers really are not that bad. A big they gone through leadership change over the last year. I sat down with the new ceo couple of weeks ago who took over for John Chambers. He still the executive chairman. There has been a lot of management turnover at the top of cisco. Happening. Is that listen to what he had to say. Forward and move the thing we dont write articles about are all the people who are still here. Tremendousped a bench and we went through this discussion when i first took the job. Andof those individuals what i asked them for was to commit to three years. Several had aspirations to become ceos, and many have become ceos, which on very happy about. But the bench that was created allowed us to build the nextgeneration Leadership Team that has put us in a position to execute more effectively in the future. Brian, how would you rate the job that Chuck Robbins is doing so far in terms of filling John Chambers legendary shoes . Brian hes done a great job. He is an operations master. If you look at their operating margins is quarter at 31. 4 , it was the highest since the Second Quarter of fiscal 2006. Thats what he is known for. Great margin numbers this quarter. Gross margins for this largely hardware making company or of around 65 . In five of the last seven quarters, Gross Margins have risen on a yearoveryear basis. That shows operational strength and the benefit these layoffs have provided for cisco. Emily do you think these new businesses they are investing in will actually be able to pick up the slack . Brian definitely. If you look at recurring revenue , its up from 25 a year ago. If you look at deferred revenue and software and subscriptions it was up 33 year over year. Over timeould go up for sure. Emily cisco was a bellwether of the Technology Industry and its loss that iconic status, but what do you see as the place for cisco in the broader picture now . Why is cisco still important . Cory its hardware is less important in the era of the. Loud theyre using amazon web services, and yet when you look at what cisco has been able to do, cisco has remained relevant when its competitors have not. Ibm hewlettpackard, dell, are falling apart, i think its worth noting that cisco is selling hardware in addition to software insecurity, its succeeding where its competitors have not. Emily we dont want to harp on the stock price but 19992000 is when cisco really he really ked, and the shares have not moved much in the past decade and a half. Brian the stock can be rerated here. Dividendot this great yield, 3. 4 . People can look at margins and say they are going higher, not lower, which is very strange for web people, its becoming more and more software. This, thisple of company has grown 7 euro the past five years. These look at some of sugar water and detergent companies, theyve grown 2 your for the past five years. They trade at 22 times earnings. Cisco is becoming so important to the i. T. World and has a great dividend now, people are going to give it a better multiple. He is going to be on Bloomberg Radio with carol massar at 10 00 west coast 10 00 east coast. Chuck robbinsiss on bloomberg tomorrow and Bloomberg Radio with cory johnson. Is uber actually worth its monster valuation . One expert says no. Saysunched the numbers and they should be valued at south of 30 billion, less than half of the 62 . 5 billion valuation it currently has. The main reason he says is profit. Disruption is easy but making money off disruption is difficult. Ridesharing Company Still have not figured out a way to convert revenues into profit. That other big Public Market players could still jump in as challengers to the company. The googler valuation is higher than 80 of the companys in the s p 500, higher than gm and ford. Coming up, a long simmering but highly controversial question, whose job should it be to govern the internet . We will discuss with one of the webs founding fathers, next. This is bloomberg. Emily who controls the internet . Largelyw the job has belong to the u. S. Government, specifically, the commerce department. The Obama Administration organized a long planned move to shift it to a Stakeholder Market on october 1. Amazon, and microsoft are among the Big Tech Companies supporting the move but others are putting up a fight. I sat down with the socalled godfather of the internet and ask them to explain why this transfer of power is so important. In fact it was planned to do this. In 1998 when we were created to form the function, the plan was to turn over all responsibility to those functions within two or three years. Its now 18 years later. The organization has performed well. The internet has not collapsed. Its functions have taken care of the domain names system, parameters of the internet protocol. Its time to show that the internet does not require government oversight. What it requires is operation by the private sector together with all the other entities. That is why a multistakeholder operation is important. Emily opponents say it could hurt businesses and put National Security at risk. Could hurt u. S. Businesses or google . I dont think so. If anything, this is the right thing to do. Under the current circumstances where the government has a small but visible oversight role, other governments look at that and asked why should the u. S. Government have this special position . Its not necessary anymore, not after all these years. Its reformed itself several times and at this stage of the game is more harmful to persist in the special relationship than to show that a multistakeholder system, including all the governments, not just the united states, is the way forward. Could there bem if the u. S. Government does continue to oversee it as is . Impactas a very severe because other governments that feel the u. S. Should not have this particularly special position are going to work very hard to fragment the internet, to insist that they control more of it than they do today. Governments today have a lot of control on what goes on in the internet inside of their international jurisdictions. What they dont have control of its what happens to everybody elses pieces of the internet. The other governments will feel the need to increase their control one way or another. So i think by stepping away from this finally, we actually remove a lot of that pressure to make it much more egalitarian. Emily assuming this does happen as planned, what will be different . Will individual users even notice the difference . Absolutely not. The current role that the u. S. Government has is to verify that the changes to the root zone of the Domain Name System have been properly catered for in the processes that lead up to those changes. A router needs to be pointed to a different ip address, and the u. S. Governments role is merely its beenhat performed with due diligence, thats all. When they step away from that particular function, all the mechanics are exactly the same, except we wont go through this loop, otherwise it is exactly the same. Emily as one of the fathers of the internet, i know thats what youre considered to be. Had he think oversight of the internet has played out over the last couple of decades and how do you expect it to play out over the next few decades . Watchingose who are and listening, the u. S. Government was the origin of this project. It started in the Defense Department, and im very proud not only of the Defense Department but other parts of the u. S. Government, including the National Science foundation, for persistently stepping away from control over the system and turning it over to a multistakeholder operation. When we were in the Defense Department, we basically made the primary decisions and policy on what happened to the internet that expanded to multiple parts of the u. S. Government, msf as wellsa and as the department of energy. Step by step, the government has withdrawn from its control oversight, and this is the last step. There has been talk that the internet has become too big. Is it possible for the internet to become too big, to run out of ip addresses and domain names . Wont run out of domain names. We have authorized the creation of some 2000 domain names, in addition to the seven we started with act in the mid1980s. Emily that was the Vice President of google and former icann chairman. The Silicon Valley super unicorn is trying to win bell win big at the olympics as well. This is bloomberg. Emily our Online TravelAgency Spending enough to stay alive . Data shows that customers make more and more bookings on smart phones and tablets, but Companies Like expedia and trip advisor overwhelmingly target their ads toward pcs. One region where that is shifting is china. Of bookingsthat 60 will be made the a mobile device. It may require more advertising expense from mobile travel companies, which could put shortterm pressure on firms like priceline and expedia. One startup is on track for gold in rio. Airbnb is investing heavily in brazil, working directly with the Olympic Organizing Committee encouraging residents to open their homes to visitors. So far it is paying off. 66,000 guests originally expected by airbnb. I sat down with the manager of airbnb brazil and ask about the companys Economic Impact on real. The impact where generating for rio, 1. 5 weeks into the game confirmed arrivals have increased to 81,000. That is great news for everyone because that means also its high Economic Impact for the city of rio. Emily so you are saying the numbers are even better than you expected . The numbers are very, very positive. More important is how we are helping not only the real estate economy, but also to attract tourists to the city of rio, and you can see already for the 81,000 guest arrivals that its great experience here with the local community in rio. Emily airbnb is the official alternative, rock accommodations provider for the olympics. How early did you Start Talking with the ioc in brazil about making this happen . 2016e partnership with rio is a consequence of a very important chapter since 2015 during the work up. We receive guests from all over the world and a very positive way. Fornb is a great solution cities that want to increase their capacity. The conversation happened nationally and in 2016 we signed a partnership to ensure that everyone wanting to come to rio for the games has a place to stay. Emily you were up against a couple of other local Accommodation Providers and theres no actual history of there being an official accommodations alternative. What did it take to close that deal with brazil . Rio isink the city of presented an opportunity for alternative accommodations because there are so many people already interested in coming to the game. Without additional capacity, you would not have been able to have those people here for the games. So thats why we signed up for 2016, totion in rio assure that everyone who wanted to come had a place to stay. One year later, here we are with very positive numbers and making history. One of the key legacy is for the first time we are bringing a shared economy to the olympics. Was the manager of airbnb brazil. Uber is suing londons transport regulator overrules it says fingered its business, specifically fighting rules requiring drivers from nonenglish countries to pass in english language exam. Notify oforce them to any changes made to its phone app. Rulinglso waiting for a in an employment dispute with drivers. He helped build dropbox from the inside. Now hes on the other side is a venture investor. He joins us next. Radio and onon the sirius xm in the u. S. A check ofgin with their first word news. President obama has been read by fema on developments in louisiana, where flood relief efforts continue. The president ordered the agency to utilize all Resources Available to assist in the response and recovery. The red cross says more than 1000 disaster volunteers have been mobilized. The cost of the operation is expected to exceed 30 million. Some 40,000 homes have been damaged and at least 11 people have died. The latest quinnipiac swing state poll Shows Hillary clinton doubledigit leads over donald trump in colorado and virginia. The same survey also gives advantagethreepoint in iowa. South Koreas Unification Ministry confirms the second highest ranking official at the north Korean Embassy in london has defected. The man arrived in seoul with his family. He said he had become disillusioned with the kim jongun regime. Japan is developing a new missile that could force a reset of Chinese Military strategy around the disputed East China Sea islands, according to the to the Financial Times reports the missile is designed to complicate in me planning and would have the longest range of any bill by japan. Global news, 24 hours a day in more than 120 countries. I mark crumpton. This is bloomberg. Its just after 6 30 p. M. Wednesday in new york. Im joined by my colleague paul allen with a look at the markets. Paul we are 30 minutes into thursday trading over in new zealand. The index up a little, but things are expected to be flat on the nikkei and the afx later today. Where expecting a lot of earnings out of australia today. Energy andgin treasury among those reporting. Shares in the hang seng will be closely watched in hong kong after announcing a record profit after the 8. 6 billion acquisition. A lot of data out today as well. Australian unemployment is expected to hold steady at 5. 8 . Isans july trade balance expected to pull back a little bit to 1. 8 billion on weaker still exports. China house prices also out as well. Im paul allen in sydney, australia. Emily crossing over from building a startup to investing in them, thats the journey of one venture investor joining me now. Andoined dropbox early on now he is a partner at index ventures, a Venture Capital firm that has backed a range of success stories. Thank you so much for joining us, great to have you back here on the show. First of all, its been a year now at index. What has the transition been like and how has your experience at dropbox impacted your style of investing . Its been an incredible year. Weve had about 10 investment so far, which has been reporting for me across the board. The biggest things i think about are twofold, as an investor the most important thing is identifying great opportunities. Having been at dropbox and seen the problems Companies Like dropbox face, being a network of great in innovators, youre working through a lot of problems. We become customers of slack and ive seen the potential. In the case of intercom, what are the things that w