One on One with Cisco Chairman and CEO John Chambers
Wednesday, August 05, 2009
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SUSIE GHARIB: Cisco's CEO gave today an upbeat outlook for technology spending, even though the tech titan reported a big drop in quarterly revenues and profits. The stock initially surged as much as 3 percent in after hours trading, but has since fallen about 2 percent. Excluding charges, Cisco earned $0.31 a share in its fiscal fourth quarter. That was $0.02 ahead of analysts' estimates. Revenues fell 18 percent to $8.5 billion, but still in line with estimates. Now looking ahead, Cisco expects revenues to fall as much as 17 percent in the current quarter, even though orders are picking up. Joining us now, Cisco Chairman and CEO John Chambers. Hi, John. JOHN CHAMBERS, CHAIRMAN & CEO, CISCO SYSTEMS: Hey, good to see you again. Please call me John if you will.
GHARIB: John, you sounded pretty positive and upbeat on the call with analysts this afternoon. You were talking about a tipping point for tech spending and you said that orders are beginning to take on more of a normal pattern. So is this the beginning of an upturn in tech spending?
CHAMBERS: I think there's a good chance it is Susie. During our Q3 one quarter ago, our orders for the first time began to level out. They were still down sequentially from the prior quarter 10 percent or so. During this last quarter, it was our normal quarter in terms of the run rates. It was up about 10 percent in terms of orders versus Q3, so it's very likely we'll look back two to three quarters from now and say this was the tipping point on the upturn, not the bottom, but already starting out . But I'd like to see the data for one to two more quarters before I would say that Susie.
GHARIB: So what are your customers and CEOs telling you about how much they want to commit to tech spending? How robust is the pickup so far?
CHAMBERS: I think the pickup will be very gradual. It will be leading next customers by industry. But we saw the balance surprisingly across four of our five theaters, the U.S., Asia Pacific, Latin America, emerging markets. The only section that was a little bit more challenging was Europe. In Europe we saw the sequential growth from the prior quarter only up about 5 percent. In the rest of the world, it was up in double digits in every theater. So it's a good start, but it was just that. It would be irresponsible to call it a definite tipping point yet. But it's very very positive Susie and we had a great quarter .
GHARIB: John, do you have a sense of overall tech spending outside of Cisco? What is your take on the mood from what you're hearing of tech spending across the board over the next 12 months let's say?
CHAMBERS: Well, I think what you're seeing is customers beginning to take their foot off the brake and starting to spend gradually. The opinion of my peers is actually pretty diverse from various companies in terms of what they're seeing. I tend to be a little bit more optimistic based on the customers that I talk with and part of it can be the network is playing a different role in tech spending. It plays a role in everything from the data center to the homes. So at the same time we're not growing off of our traditional products, we're growing in areas like a flip camera into the home, all the way through security and a data center or new server technology.
GHARIB: Let me ask you this, many people, I'm sure you've heard this, are saying the recession is over and that the recovery has begun. Is that what you're saying? Is that what you're seeing?
CHAMBERS: Well Susie, I think it's too early to call it for sure. But if you watch what occurred going back a quarter ago, it felt like it leveled out. This quarter in terms of our trend sequentially from one quarter to another was the first normal quarter we've seen. So if we see one to two more quarters of this, I think that data will not only be accurate, that's what we'll call it and it's very likely we will look back going into this next calendar year and say this was the tipping point on the up trend, not the bottom, but already turning up.
GHARIB: During this recession, you've got a lot of jobs, as have so many other American companies. Do you see doing more job cuts or are you going to begin hiring?
CHAMBERS: Well Susie, we're going to begin to hire as our business continues to grow. We did very little restructuring or job layoffs and the last economic challenge, we've only done one broad layoff in our history in 2001. It had impacted 25 percent of our Cisco family. This time it was relatively small, in the 15 to 2,000 range and that was mainly through restructuring in key organizations. I'm proud to be an American around the world and our goal is to grow our head count as our business grows. And I'm cautiously optimistic. We said in the call that we were through with major expense reductions and we were through with restructuring issues, barring a surprise and now our focus is to carry on Susie.
GHARIB: We just have 30 seconds. Cisco has a big financial cushion, $33 billion in cash. What are you going to do with it?
CHAMBERS: Well it's actually $35 billion. You use that aggressively, about $6 billion of it is in the U.S., $29 billion outside the U.S. We'll use it in everything from investments to financing capability, to acquisitions and you will see us do that over the next 12 to 18 months.
GHARIB: All right, John, we'll leave it there. Thank you so much for coming on the program, a pleasure as always.
CHAMBERS: Susie, my pleasure as well.
GHARIB: My guest tonight, John chambers, chairman and CEO of Cisco.
