On what crossing this milestone might finally mean. We sat here a few weeks ago. Right. We got within a third of a point. Ill tell you the difference is the way you cross it. I mean, when we got there last time, i think a lot of people felt, wow, all these stocks are so stretched. Its really the banks that are doing it and thats not sustainable because banks have gotten way ahead. You look at the charts. And most of the of the good numbers that were in are more animal spirit driven. This is the biggest week of earnings, big week of earnings last week and were putting together a proctor, an american express, we look at ibm, 3m, which i know some didnt think was that great. It was fine. We look at United Technologies and boeing and say, geez, these are companies doing pretty well. So maybe its not all smoke and mirrors. Maybe its not all animal spirits. Maybe its not all trump inauguration. There was also a tremendous short base put in because people felt like no matter what happened its going to read bad. And somehow as if it was going to read bad would translate to the stock market. The stock market is a very different animal from what is being talked about. The only thing thats being talked about thats at the intersection with the stock market is a president whos bringing in ceos and saying i want you to do better. That is not rhetoric thats going to bring down stocks. So washington is much more benign. And the numbers are better than expected. And thats how you get it to be a little more sustainable. So i care about sustainability. You dont see that intraday upswing yesterday as a simple reflation trade responding to executive orders to pipelines, domestic basic resources . No, i mean, the oil is pretty much reversed at the end of the day. What was strong were some of the commodities and their reversing. Freeport didnt report a great number today. That would have been kind of a Market Leader. If you want to get granular, tech has been great. All that happened in tech was after the close seagate very heavily shorted name reported a true blowout which is going to lift a lot of semis. Texas instruments reported a great number. Lets not forget this morning that cisco, who we will be talking to is making acquisition in a space people really care about which is cloud space. I come back and say theres nothing in the way of it. And were still getting things like a bob evans splitting. Were getting selfhelp. Were still getting bids that are kind of, you know, not huge. Getting lodge tech last night out of europe that was absolutely terrific. The menu is set. And the menu is set by the companies that are reporting provided that the president is not out there saying, you know what, you rich people, you are going to be punished because its time to take your money away. That would mean a lot of the members of the cabinet would be rattled. Thats not happening. No, thats not happening. Thats not part of the plan at this point. No. Individual tax reform certainly seen as favoring the very, very top even though they keep talking about middle class and weve had the secretary of the treasury, at least incoming expected mnuchin said on our air some time back that actually the higher rates will sort of be maintained. But well see. Mnuchin gave you a demugs. People look at multiples and discount those based on a lower tax rate. You have the president saying basically to ford and gm we want you to make money. That is an example of where he really has come down. Lockheed martin hes come down. Greg hayes, United Technology, and theres two cents missing. Where is that from . Well, because they didnt move to mexico for gas furnaces. But in the end you look at boeing chrks got jawboned over the air force one, the air force ones and you see boeing put up a good number with a great backlog and say, look, i see these Companies Roll out and their numbers are good. I see takeovers still happening. I mention the cisco. I see the banks catching a bit again and Interest Rates came back which is important for the thesis. I dont have enough negatives. There are not enough jnjs and verizons to unnerve me. Jnj being an example of a company with a tweet, didnt think the quarter was that bad. I thought alex did a great job. Verizon was worst in show. Kind of textbook worst in show. Yeah, it was not good. It was bad. Very suboptimal. Yeah. The question, i mean, is what that means for the overall industry. At the same time you see freeport down but alcoa is the new steel. We have a lot of positive commentary. Say international paper. That is a classic life cycle stock that really comes into play right now. Say, listen, things are really getting great. Boeing backlog makes you feel good about aerospace. Even ge did not have a great quarter, but aerospace was good. Ge didnt do enough to destroy the thesis and its making a comeback. Ibm being the classic example of a company down five points in the aftermarket but actually did a good job. Gross margins are very good on software and consulting business looking a lot more like accensure. The companies arent screwing it up and the president isnt screwing it up. So what do you do . You say im not going to buy them because theyre at 20,000 . I look at biggest losers since the election, macys, urban, kors, nordstrom, pvh, some not down, just worst performer. Youre saying thats not a consumer statement. No, thats an amazon statement. Thats just a thats also border tax adjustment. Yeah. So those dont work. Restaurants and retail for the most part not participating in this rally. This is a look at the s p. Banks and finance huge really participating. Tech really participating. Industrial really participating. Oil really participating. So youre really looking for outliers. Theres just not enough companies not participating to bring this darn thing down. And were in sectors that are smaller weight of the overall index. Yeah. In the meantime i got valet i know thats a foreign company, but you see well use alcoa. Alcoa this is alcoas First Quarter the good since alcoa cant wait with harry callus, remember voice of the phillies . Yes. Its been a long time. Its when alcoa was when u. S. Steel was when the family was bigger than u. S. Steel. Right. You know what im talking about. I do. Its been a long time since the Industrial America has done well. And now some of this is because we have to believe that trump is going to help china. I mean help curb in china with aluminum. Claus ceo of ar c by the way registered. Before you buy aa, remember theres a huge slug of alcoa for sell out there. We have a takeover with Chuck Robbins, thats a big takeover. One thing here i think is worth mentioning is the fed and Interest Rates. And inflation. We get our first fomc decision i think february 1st. I believe thats 21, january jobs report we get on the third of february. You know let the debate over the Unemployment Rate begin. Right. But weve got inflationary trends that are in place right now to a certain extent. Wages are starting to move higher. Yeah, im waiting for something negative. Go ahead give me something negati negative. Something negative is rates are going to keep going up, if we go up say 75, 100 basis points over the next year. Lets play that game, mr. Watson, mr. Jeopardy. D. R. Horton yesterday home builder, business strong as theyve seen. It has not deterred. Now you can say wait a second theres going to be three more rate hikes. It has not deterred. Credits coming back in the system. What can i say . I cant dave, there are no alternative facts to hortons Conference Call. Also Housing Inventory a lot of that is regulation and red tape. Guess whats going to happen there . Its all true. And 2. 5 is still pretty low. Yeah, numbers were numbers. 3. A , 4 if we were to get there over the next 12 to 18 months. Did you see numbers about d. R. Horton that were smaller than the d. R. Horton numbers . D. R. Horton, david, it was popularly elected to be the strongest home builder. You want to contest that . Well have an investigation into that. Thats right. And ill tell you, the fbi will be all over you. Because nobodys immune, my friend. Just what i need. When we come back, ciscos Chuck Robbins on this companys deal to buy Software Startup app dynamics before the ipo. Well talk about a big day in national security, the president with more executive orders, comments from china on trade and well keep our eye on 20k. Back in a minute. Whats the value of capital . Whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom . Whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley a down to the wire deal. App dynamics was supposed to be the first big tech ipo of the year, going public tomorrow, until cisco said it was buying it last night for 3. 7 billion, which is well in excess of where it would be if it were going to start trading tomorrow. Joining us now the ceo of cisco, Chuck Robbins. Chuck, welcome back to the show. Why did you need to do this deal . And why did you pay so much more than the public probably would have paid if we waited for tomorrow . Well, jim, first of all, thanks for having me today. You know, i just like to call out, yesterday was a great day for us. We talk about two key lovers of innovation in our portfolio and one is our own ability to drive internal r d. And yesterday morning we launched a product called a spark board which was called the coolest product that ciscos ever launched. And then later in the day we made the acquisition of app dynamics. And i think if you look at app dynamics and number one they are the absolute Market Leader in their space in this cloud based application performance management. Secondly, they are growing faster almost twice as fast as their next nearest competitor. Theyre growing faster than any publicly traded Software Company today. And the synergies between the application analytics that they can drive and the infrastructure analystics that we can drive across both private and public clouds create Business Insights for our customers that no one else can deliver. So were pretty excited about the opportunity to go forward with app dynamics. Chuck, what does the Company Look Like now . I mean, i know one of the things you and i have talked about endlessly is if youre just going to be routers and switches, thats old technology, its a big legacy business, its a Good Business but it doesnt grow. Is there a percentage of cisco now that is going to be growing much faster that allows us to pay more for the stock of cisco because of acquisitions like this . Well, jim, what you see is that the core routing and switching portfolio is still Core Foundation of what everything is built on. As billions of new devices come on, the core connectivity layer is going to be the Mission Critical first step. But above that we want to continue to create value. Whether thats through our security portfolio, our collaboration portfolio or moving up the business relevance stack like were doing with app dynamics and being able to really help our customers understand whats going on in their environments these environments are more complicated than ever and being able to help them understand whats happening in my environment and what does that mean for my business performance. We think thats a unique capability. Moouing up, adding more value, helping customers transition to this cyber cloud and focused on the security marketplace which is going well for us as well. Chuck, weve also talked about repatriation, are you encouraged with some of the talk that President Trump has been saying which is that this is a major issue for him . And if you got the money back, would it be more appdynamics, putting more people to work, raising the dividend, buying back more stock or all of this. Tax reform we believe is good for business. When you look at the overall move to lower Corporate Tax rates as well as repatriation, we think it actually creates an opportunity to do all of those things. Dividends, m a, buybacks as well as create jobs here in the united states. So were pretty excited and were looking forward to seeing how this plays out over the next few months. Mr. Robbins, david faber. You know, to jims first question, id love to get a more specific answer from you in terms of the multiple you paid here. I think enterprise value to sales something around 10 times, thats on at least what were looking for. It grows very quickly, 54 revenue growth, but thats a really high multiple. Why as a cisco shareholder should i feel like youre paying a fair price . Well, david, let me take you back a few years and look at some of the other acquisitions weve made in this Software Space that in security and cloud, networking security like open dns or Jasper Acquisition we made, but the one i point out is if you go back four years ago we paid 1. 2 billion for a company that was 100 million in bookings and today thats a billion dollar business four years later. We believe the synergies we can drive through our Technology Synergies and more importantly even is to go to market synergies. Look at an appdynamics, they havent been able to take advantage so far of the Partner Ecosystem we have on a global basis. Our Sales Organization that touches every account around the world almost every day. You know, appdynamics is sold at 275 of the fortune 2,000. We can bring our teams together and penetrate them more effectively. If you look at what we did with that company, we think thats the same play we can run here. Right. Given that there seems to be at least an expectation that you guys are making a greater software play, or focus certainly, can we expect more deals of this type from you . Youre going to see us continue to drive. Weve built great partnerships with Companies Like apple and we will continue to leverage our company to do m a where it makes sense. Ill take you back to our last Earnings Call where our deferred revenue from Software Subscription and our sass business was up almost 4 billion on our balance sheet. Weve been making that transition and you can assume well continue to leverage every capability we have to continue that transition. All right, chuck, i got to tell you, i know you talked about the nearest competitor. Here were speaking about new relic. I sat down with lew, the ceo of relic, i think he would disagree. He says we have this covered, we are the Ecommerce Company able to monitor traffic. And that companys 1. 7 billion. Its going to open up substantially, why not just buy new relic . Didnt they have the nice public cloud exposure you would want . Well, if you look at where appdynamics has really played, theyve played in the upper end of the enterprise space. And as ive listened to my customers over the last few months, its been clear that appdynamics has not only the footprint demonstrated through growth as we need. I believe as we got to know them, we are a customer and have been for a couple years, so were very familiar with their technology, we were going down the path of a partnership with them and frankly as we got in and really understood what they were capable of and really understood how those synergies between the two Companies Come together, it just became very clear to us that being a part of cisco was a right answer. Chuck, you were in that meeting with the president a few days ago at trump tower. Anything that was telegraphed or talked about in that meeting now being put into practice from where you sit . Well, david, the key things we talked about were, you know, their commitment to tax reform. There was a great deal of dialogue about the different issues that matter to the Tech Community like immigration, trade. And i think that everything that we heard was constructive. We feel like theyre moving in the right direction from a business perspective. But i would say that the moves were making are moves we would make independent of anything thats going on there. We like this asset we bought yesterday. We love the Product Launch we had yesterday morning. I said to you guys over the last year that 2017 was going to be a year of tremendous innovation for us. And we had the first major launch yesterday. And youll see more of that coming from us this year. So were operating just as we would have been independent of that, david. Well, this is david. That was carl. But, chuck, you know, when you think about this year particularly as it relates to tax reform, how are you guys going about planning . Are you making any assumptions in given jims earlier question about repatriation on a lower tax rate, on the ability to write off Capital Investment in year one, on the nondeductibility of interest, is that something part of your plan or are you waiting to see what actually comes . First off, carl, i apologize for calling you david. [ laughter ] you can assume, david, one of the things cisco has shown for years is we run our business very responsibly. I think its safe to assume that we have done several scenarios. And weve done the appropriate planning based on how things play out. And were ready to move forward with whatever comes through tax reform and through the different policy changes as we always have been. So i think you should assume that we are prepared for that. Chuck, jim. Some people felt that after that last quarter the stock dipped down and maybe there was a level that even yourself you thought maybe some disappointment. Now, i know youre in quiet period, but do you sense that the customers are feeling some of the optimism that say were feeling in the stock market . Has the tone changed since we spoke last . Well, i