Transcripts For CSPAN Wall Street Journal Viewpoints Breakfa

CSPAN Wall Street Journal Viewpoints Breakfast With John Chambers January 4, 2015

Have pulled out. 1015 years ago, it was much bigger than that. Ericsson, etc. We are the size of market cap and growth and people were read about us with juniper and others and yet will pulled away from them as well. It isnt that cisco i am talking about is how fast his industry is changing. Out of the big six ip players three of us will not be relevant to our customers. You can say that as the Silicon Valley stuff where you move fast. If you look in this role, only 1 3 of you will be relevant in 20 years. When you look at uber and what they did to the taxi industry and amazon with the challenges of walmart. You will see those types of transformation coming everywhere in the world. The nice thing about cisco, if we lead the transformation, we will be in the center of it. Connecting what would be 500 billion devices. People get excited and they feel threatened about it. By some equipment. Buy some equipment. Some businesses today, our technology businesses. The decisions about what the business is is largely the coming technology decisions. We have a lot of ceos, tell us about that. Technology and Business Decisions are merging into one. How do you see it . All of hightech industry has for decades, i. T. Should enable your business. In some ways, we did and in some ways do not achieve many of the business objectives. In the last 18 months, you have seen the attitude change. If you were to talk to the new ceo of walmart and describe some stuff as a Technology Company first and then retail. You are beginning to see American Express suddenly thinking entirely different in terms of the image and how technology will get a different interface and allow to move. But it is not just in this country. You are seeing countries around the world change at tremendous speed. Angela merkel talks about her country being a digital country. As with the key leaders in germany this past week and in france and that the Prime Minister of france and looking at how to digitize the country to make a competitive for the future. Israel is probably the top hightech country in the world with a digital first, gdp growth, job creation, inclusion of minorities, healthcare, education, movement of other cities. What it says is tied this together and these number of devices connected to the internet to 500 billion, you will be in a good spot. How does a business person make decisions on when aims are moving at that pace and in that way . Traditionally, you turn to the cio and say educate me on this and make the decisions. That is not an option anymore. If i talk to cios around the world, most believe they have to understand that technology is self. A key advisers a Business Leader to understand the technology opposed to the cio. If we and he or her does not make the transition, this is one where the cio has to change in the Business Leaders but the cio. The ceo will be irrelevant in five years . Is that important . There you go. If the ceo doesnt change he or she will take the company down with him. The people hiring in this room today, should they be left hiring for technological proficiency . First our Education Group does not do a good job of repairing the skills we need. Go on. You have to think about how the newly young people in . If you cannot communicate with the social capabilities and do not understand collaboration you will not get the talent you need. What do i tried to do . I try to get people who understand the business we are after in understand the implications for it. Lets talk about the sales culture. Traditionally, cisco seems to be changing quite a bit. Can you give me an example or two of how you reach your customers . How Technology Quest technology . One of the hardest transitions we have to transform our organization, service and sales. We are a tough sales team. We can sell routers well. I get excited. Most of you go [yawn] we have 18 product families where we are number one. Producing solutions and outcomes. Easy to say, hard to do. How to sit across the table from a leader of a Large Company and say your gdp can grow 1 3 . Do they say they do not believe it . I will bet you money on it. In no productivity from you can say productivity grew quite rapidly because i see and the missing productivity quotient. All of the spending from 19962014, we have not seen the productivity close to 1 3 , why should we believe it now . That it will really change . You have to catch the market transition is true. During the 1990s, you moved in connectivity and the internet came, directly and indirectly and went from 1000 devices connected to 6 billion. We did very good on collaboration at the top. We changed the supply chain. What you are back to see, youll connect the devices and think about right hundred billion devices squared where this will go. The challenge is how do you get the right information at the right point in time to the right device to the right person to make the right decision . That is about architecture and transform your business prospects. You will have to change, education, the same thing. How countries are run is about to change. When you see the Industry Leaders and wanting as a ceo and government leader, you have to have the instincts of was something fundamentally changes. Probably unfair because she is an engineer and talk in mexico and how does he achieve socially quality and the roles nextgeneration of the internet of everything, how does it transform the business . You do the same thing in germany and france and you ok and the u. K. And they get it, these are smart people. Can we fill a void where we can get people excited . Theres been a lot of money spent and people in this room have spent billions of dollars and maybe that will be the case they can get those sorts of results. A good way to sell stuff, people are looking at specific examples of why that should be the case. Lets go to a city transformation, barcelona. It is the top innovation city in europe. Basically, the mayor and vice mayor, interfacing the city. They outlined the goal of transforming their city. They are the only balanced budget in southern europe. They operate with a surplus and have 3 billion in savings over 10 years and networking. That would change how public transfer patient transportation works and while Smart Buildings and will do paid parking. How long does it take . Another three years. And in terms of implementation. [indiscernible] lets go from there to hamburg. 25 need out a year to do that. 25 billion a year. Not a bad. Everything will get connected. You only pick up your garbage when it needs to be picked up. You cannot do these in silos. You combine all of the functions which is where people make mistakes and they try to get excited about one area. The way you get people comfortable is say you have references. You go to hamburg in germany. It has 83 different train stations coming into it and 1200 ships a year and tens of thousands of trucks adams completely traffic jams. They took technology and change the system on its head and has a 75 improvement in productivity and they will double their capacity in the next 510 years without increase in revenue at all in terms of implementation. In their Transportation Company and you think, thats a railroad company. You talk to the ceo and he says he is an internet of everything company. They are going to move into bicycles and cars and transportation and different customer experience. You see a country like germany and the Industrial Revolution where the government leaders say i will transform myself. You see in a france, the president of france is in a tough situation. He is thinking about what he can change. If he watches what he is doing and he has an unbelievably good Prime Minister with him and it was a pleasant surprise. He understands have to transform his company. And willing to say how do we do these with companies and how do we partner with the chamber of commerce . 700,000 members and how do they put technology in each of the companies and how to the companies and how to the companys guaranty a million jobs and growth . At cisco this concept back to sales. You are ahead of state level at this point. Tell us what this is. Mrs. Merkel, you have a few things on your plate and i will like to sell you a connected port. And then what happens . Where do i cut the check . What is that sell like . Lets use israel because we made the sale. You identify the country you want. Second thing they want is jobs. They have to include 2 million arabs in israel and the working force which they do not do at the present time. You have to include coming back into the workforce. And economic and defense and connectivity and education and health care. You line up with all three critical partners. There you are bringing political unity to israel, is that what you are saying . Know, the key leaders understand how to work on a common goal. If you speak to Prime Minister netanyahu, he will say cisco is my partner. You talk to cisco is my partner. You talk to a Third Political party, head of finance and they say cisco is our partner. You make it known. You are talk to republicans and that support democrats sometimes. It does not matter which party it is. People grasp what can occur. Once you get the references, it gets exciting. You are able to say this was General Motors does or what was done in israel or the or israel. And then you have trusted we have a lot of witnesses. And then you have trust. Web a lot of weaknesses. Lets talk about the weaknesses. Everything sounds exciting. The world is changing probably for the better. Cisco and the s p at the large trades at 17. The market has spoken. It is given a referendum on the vision for ciscos sake of what you want to do with the country company. Why is there so little multiple happiness for the company . I will address it that way. [laughter] lets go with it. We outperformed the market dramatically this year. Were up about 10 and as dramatically better than the dow. Secondly if you watch our earnings they are up threefold over the last decade. Our revenue is up to hundred 50 . Our ratio has gone from 205. Not are we a great company, not do we have the number one market share of almost every private area. We out execute our partners. Can we grow . There are a lot of new challenges, concepts like cloud and Software Design network. We have the same challenges a decade ago. Our ability to produce results against the growth in earnings. We are close to where we are. If we grow in the midsingle digits ibm is about 12. That is you of the channels. All of the new change. The challenge is do we get the markets right and what the markets are were read about, we are good on transition. The question is, can we get Revenue Growth in this area . A Small Company of 20 people can come right at us. On the other hand, every time we get a 40 market share and combine these products together and take expenses out and moved. If we do it right, we will have good software. Everybody has seen the ad and the hype about the cloud. Tell us three things that are b. S. About the cloud and three things that are real. I will get in trouble. Quickly go for it. The i. T. Is waiting. Sweating. B. S. On the cloud is it is secure. It is not there yet and it has to be with Certain Applications on it. How easy it is to get some work load balances. [indiscernible] the positives it will be the future. We would use a for 20 5 of consumption of i. T. Or 50 . 25 of consumption of i. T. Or 50 . If you talk to pass customers, we are the number one player in terms of private cloud. Yorkie is do you see it coming and can you use this market transition to become the number one player . We entered the market in cloud and combine technology with storage with the network and everybody said cisco is not a good server. We are the number one in the u. S. We want to the state market share. In our industry, do you get the market transitions right . Market transitions and then are you able to economically braindead to the bottom line . Some have huge pressures on your earnings. Are you able to economically get to the bottom line . And if you have the courage to go after it. We do acquisitions uniquely. Out of 18 months, all of to have been in the cloud. People have got a lot going on and may not remember much from the conversation but to give one thing they need to know about the cloud. Maybe take off your cisco hacked and as a Technology Advisor to people in the room, one thing about the cloud. I think it allows for destruction of business. Many people have private clouds and other use public clouds and combine with our partners for a cisco cloud image. Understanding were cloud comes together with mobility and social insecurity is going to be a large part of where this industry goes. As a Business Leader, you should not care about clouds you need to know how Technology Enables your goals and how it can enable your goals for connectivity and get it back like we did in the 1990s over the next decade. You want to know how it enables a new set of competitors to come at you. They would not be the same and they will be dramatically different in 510 years and regardless of industry. It is not an end goal in its self. Have people on your team who understand, the implications on it. Lets move from clouds to bubbles. We had a piece of public weight the wall street journal that said these Silicon Valley is in a bubble territory. His line was there are more companies losing more money than ever before. Valley in the bubble . Which segments . Just watch [indiscernible] they do not have thats my point. What you have to watch and john, a wonderful man on my board he would be the first to say and this is not about overconfidence , 75 percent80 of the major transitions in the Technology World today expertise is within 25 mouse miles of Silicon Valley. It is hard to describe how unique it is. People were willing to take the risk, unlimited venture capital. Companies are getting funded way too early and the ceos know it. They say if i can raise 200 million now a gift 10 , i will have it for a long time. There is a real worry. Dr. Wang trained me well and the smartest man i know. He said if you think you will go to countries like china and sell one coke, thats not the case. Cisco is more profitable since day one on one of the most profitable around. So, i personally think a mistake not focusing more on profits. Your numbers are right and you can argue the company is going public today has no earnings. In 2001, we remember 83 . If you get caught in an economic downturn or in a social media segment of that, you will see some type of breakage to occur. However, if these trends continue, growth covers up the mistakes, the companies will figure out how to make profits out of them. If there is not a major industry disruption were economic downturn, you will probably have a gradual landing for part of those companies. Will the majority of my competitors be in existence 10 years from now . No. The majority of the social Networking Companies be in existence 10 years from now . Probably not. If there is not a major disruption, if there is a major disruption do you see race having any impact on Silicon Valley . Do you see that . Absolutely do. If you watch what most of my customers view and concerned about, it is the emerging markets. A data point, the emerging markets are in the midteens. Mexico went for 15 growth to flat and one quarter, year over year and the next year 12 . It was a good forerunner. If rates are raised dramatically , you would choke growth in emerging markets. Theres only one engine going well and that is the u. S. 3 growth, not bad. If rates and get raised, it. The world. Our central breaks have to be concerned. Yes, it really could. China, speaking of emergent. Not so emerging anymore. Describe how you feel about the complicated relationship between the National Government of china and the united states, the privilege of cisco, a representative of the tech industry. Where does that stand and how do you feel and where is it going . Both of my parents were doctors and they taught me to deal with the world the way this and not the way you wish it were. The complexities is the most complex it has ever been and mexicans out of the state department and a great undersecretary of traded their. We are not effectively communicating between our countries. When you do not communicate well whether it is us and russia were us and china, then you have a lot of fallout occur in the process. My view is china ought to be a great economic partner with us and we ought to the able to artistic articulate the winwin to get there. That is what the chinese would like. What is wrong . . We are not communicating effectively. I am not just talking five Years Experience in china, i have been there 30 years. Ive seen it on charts. What the future leaders, the majority before they got appointed. [indiscernible] a market i know well. Cisco and china, it can go either way. I wish i could tell you i control my own destiny there but i do not. The chinese are pretty smart and usually pretty predictable. If our countries were able to work out issues, there has to the rules of the road that we are going to do versus germany or versus china. We have to agree upon it does. It is an industry issue. China could go either way as the wildcard on it. I like india. If you are bidding on emerging markets, modi has the imagination of his country and Business Leaders. He has the equivalent of both the house and senate in his terms with his political party. If i were betting, i would bet bigtime on india. China . A little tougher. You view them as how would you rank them on the scale of free and open trade with cisco right now . It is 30 . Having said that, we achieved one of their top social awards given out in beijing for what we did during the earthquake. 85,000 people died. We change health care and education. The chinese know we have brought transformation and innovation. Foreign market

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