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WHEN: Today, Friday, November 17, 2017
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Cisco CEO Chuck Robbins on CNBC's "Squawk on the Street" (M-F 9AM-11AM) today, Friday, November 17th. Following is a link to video from the interview on CNBC.com: https://www.cnbc.com/video/2017/11/17/cisco-ceo-our-strategy-is-working.html.
All references must be sourced to CNBC.
JIM CRAMER: NETWORKING GIANT CISCO IS OUT WITH ITS RESULTS THIS WEEK AND THEY'RE A BLOW AWAY. THEY'RE SEEING SOME REVENUE GROWTH IN THE COMING QUARTER, FIRST TIME IN A LITTLE WHILE. JOINING US HERE AT POST NINE, AS OPPOSED TO JUST ON SATELLITE, THANK YOU, IS CISCO CEO CHUCK ROBBINS. CHUCK, A LOT OF THINGS CAME TOGETHER THIS QUARTER, CLEARLY. YOUR CATALYST 9000 HAS 11,000 CUSTOMERS IN THREE MONTHS. RATHER AMAZING. OBVIOUSLY NOW YOU HAVE A FABULOUS SUBSCRIPTION BUSINESS. YOU'VE DOUBLED IT SINCE YOU COME IN. ARE ALL THESE PAYING A ROLE OR IS THERE JUST ALSO SOMETHING BIGGER GOING ON—YOU'RE GOING FROM HARDWARE TO SOFTWARE AND THAT'S WHAT PEOPLE WANT?
CHUCK ROBBINS: JIM, FIRST, THANKS FOR HAVING ME, IT'S GOOD TO SEE YOU LIVE AS OPPOSED TO STANDING IN A STUDIO STARING AT A CAMERA. BUT, YOU KNOW, LOOK, OUR STRATEGY IS WORKING. WE'VE BEEN HARD AT IT FOR THE LAST NINE QUARTERS AND WHEN YOU THINK ABOUT THE FACT THAT WE'RE FUNDAMENTALLY REINVENT THE NETWORKING INDUSTRY FOR THE FUTURE, WE'RE REALLY HELPING OUR CUSTOMERS NAVIGATE THIS MULTICLOUD ENVIRONMENT THAT THEY OPERATE IN, WHICH IS EVIDENCE BY THE GOOGLE ANNOUNCEMENT, SECURITY IS OBVIOUSLY FRONT AND CENTER FOR EVERY CUSTOMER WE HAVE, AND WE'RE BEGINNING TO SEE THE RESULTS IN THE BUSINESS MODEL TRANSITION THAT YOU TALKED ABOUT WITH SOME OF THE SOFTWARE MOVES WE'VE BEEN MAKING.
CRAMER: WELL CHUCK, WHAT SURPRISED ME, YOU IN THE PREVIOUS QUARTER, TALKED ABOUT, LOOK, IT COULD BE -- BE PATIENT, IT MAY BE KELLY KRAMER, YOUR FABULOUS CFO, NO RELATION, KRA, DID SAY, LOOK, IT MAY NOT UNTIL 2020. BUT IT LOOKS LIKE THAT YOUR NEW PRODUCTS KIND OF TOOK THE WORLD BY STORM. SECURITY UP 8% YOURE CLEARLY TAKING SHARE FROM SOMEONE. COULD YOU EXPLAIN TO ME THE DYNAMIC AND HOW VERY QUICKLY YOUR COMPETITORS ALMOST SEEMED TO FOLD, YOU'VE ALWAYS HAD A GREAT SALES FORCE, SOMETHING ALONG THE LAST THREE MONTHS THAT MADE YOU GO FAR, FAR AHEAD OF EVERYBODY ELSE.
ROBBINS: WELL, YOU KNOW, FIRST OF ALL, THIS IS ONE QUARTER AND WE'RE VERY HAPPY ABOUT OUR PROGRESS. WE HAVE -- THIS NETWORK INTUITIVE THAT WE LAUNCHED THIS SUMMER, AND DAVID AND I SPENT SOME TIME TALKING ABOUT IT, IS REALLY ABOUT HELPING OUR CUSTOMERS DEAL WITH THE PACE AT WHICH THEY'RE TRYING TO MOVE IN THE FUTURE. BRINGING AUTOMATION, ANALYSTICS SECURITY, DEEP INTO THE NETWORK. NOW WE ANNOUNCED NEW CAPABILITIES THIS SUMMER IN SECURITY WHERE WE CAN NOW DETERMINE WHEN THERE IS MALWARE INSIDE ENCRYPTED TRAFFIC WITHOUT DECRYPTING IT, WHICH IS – PREVIOUSLY WAS DEEMED AN UNSOLVABLE PROBLEM. AND YOU KNOW, IT IS ONLY HAPPENING IN THE NETWORK THROUGH A COMBINATION OF DEEP HARDWARE AND SOFTWARE. SO – BUT AT THE SAME TIME, WE HAVE BEEN SHIFTING HARD TO OUR SOFTWARE MODEL AND THE RECURRING MODEL. COUPLE OF STATS FOR YOU THAT YOU KNOW, WE'RE NOW 32% OF OUR BUSINESS COMING FROM RECURRING AND NINE QUARTERS AGO IT WAS 26. AND WE WENT FROM 2.5 BILLION IN DEFERRED SOFTWARE REVENUE TO 5.2 BILLION IN NINE QUARTERS. SO I THINK OUR TEAMS HAVE DONE A GOOD JOB. WE'RE MAKING GOOD PROGRESS.
CARL QUINTANILLA: SOME OF THE SALES SIDE HAS BEEN I DON'T KNOW – ANNOYED OR IRKED WHEN SEGMENTS ARE CHANGED, THE WAY THEY'RE REPORTED. SOME OF THEM ARGUE DISCLOSURE TOOK A HIT. DO YOU AGREE? IS THAT PART OF THE STREET GETTING USED TO NEW REVENUE MODELS, NEW PRODUCT MODELS?
ROBBINS: WELL, WE SHIFTED BECAUSE OUR CUSTOMERS ARE LOOKING AT WHOLISTIC INFRASTRUCTURE. AS WE INTRODUCE PROGRAMMABILITY AND THE WHOLE NOTION OF TECHNOLOGY THAT IS GOING TO BECOME MORE INTUITIVE AS IT LEARNS, IT REALLY IS GOING TO HAPPEN ACROSS ALL OF THE PLATFORMS THAT WE HAVE BUILT. SO WHETHER IT IS WIRELESS, ROUTING, SWITCHING OUR COMPUTE PLATFORMS, OUR DATA CENTER SWITCHING PLATFORMS, SO WE PUT ALL THAT INTO AN INFRASTRUCTURE PLATFORM GROUP, WE GAVE COLOR AROUND HOW SOME OF THE SUBELEMENTS WERE ACTUALLY -- THIS PAST QUARTER, WE TALKED ABOUT THE FACT WE DID HAVE STRENGTH IN OUR CAMPUS SWITCHING BUSINESS, WHICH WAS PART OF THE LAUNCH WE DID THIS SUMMER. SO WE CONTINUE TO BE, I THINK, VERY TRANSPARENT ABOUT WHAT IS GOING ON IN OUR BUSINESS.
CRAMER: ONE THING THAT REALLY STRUCK ME, CHUCK, THAT WAS INTERESTING, YOU'VE MADE A LOT OF ACQUISITIONS. YOU HAVE BOUGHT BACK A LOT OF STOCK. YOU PAY A BIG DIVIDEND. AND YET YOUR CASH FLOW IS SO VOLUMINOUS THAT YOUR CASH BALANCE NEVER SEEMS TO GO DOWN AND VERY LITTLE OF IT IS DOMESTIC. IF YOU GOT TAX REFORM, CHUCK, WOULD YOUR COMPANY NOT BE THE SINGLE BIGGEST BENEFICIARY OF REPATRIATION?
ROBBINS: WELL WE'RE ONE OF THE TOP FIVE. I THINK THAT CLEARLY WE'RE OPTIMISTIC ABOUT WHAT IS HAPPENING RIGHT NOW WITH TAX REFORM. WE BELIEVE THAT THE HOUSE AND THE SENATE WILL COME TOGETHER AND SETTLE THEIR DIFFERENCES AND GET SOMETHING THROUGH. WE'RE HOPEFUL. AND CLEARLY WE WOULD LOVE TO HAVE ACCESS TO THAT CASH AND IT WOULD GIVE US THE ABILITY TO DO LOTS OF DIFFERENT THINGS FROM A CAPITAL INVESTMENT PERSPECTIVE. SO.
DAVID FABER: LIKE WHAT? I THINK THAT'S THE KEY HERE. YOU ARE THE KEY TO THIS BILL IN TERMS OF WHAT YOU'RE GONNA DO WITH THAT MONEY.
CRAMER: YEAH. DON'T THINK THAT -- PRESSURE ON YOU BUT YOU'RE THE KEY.
FABER: YOU'RE THE KEY.
CRAMER: YOU'RE THE KEY.
FABER: NO. YOU ARE. THE POINT BEING, OF COURSE, WHAT YOU JUST SAID IS SUPPOSED TO BE THE CAT— WHY WE'RE DOING ALL OF THIS, RIGHT IT IS NOT JUST GOING TO BE DIVIDENDS, NOT JUST GOING TO BE BUYBACKS, YOU DO SEE INCREASING CAPBACKS AND INVESTMENT HERE IN THE U.S. IF IT PASSES?
ROBBINS: YES WE DO. WE SEE, LOOK, IT IS A COMBINATION, THERE ARE LOTS OF BUSINESSES THAT ARE CAPITAL INTENSIVE BUSINESSES THAT WILL PUT THAT CASH TO WORK. WE SEE INCREASED M&A, WE SEE INVESTMENT IN INNOVATION AND INNOVATION CENTERS, WE SEE THE ABILITY TO DO OBVIOUSLY DIVIDENDS AND BUYBACKS AS WELL. SO WE'LL LEVERAGE THE CASH ACROSS ALL ASPECTS OF OUR CAPITAL STRATEGY.
FABER: BUT THEN OTHERS SAY, WELL, WHY, YOU PRODUCE AN ENORMOUS AMOUNT OF CASH FLOW NOW AND MEETING THE NEEDS YOU FEEL YOU HAVE, WHY WOULD THAT CHANGE?
ROBBINS: WELL, IT WOULDN'T CHANGE ANYTHING RELATIVE TO OUR M&A STRATEGY. WE HAVE –
FABER: NO BUT I MEAN, IN YOUR CAPITAL INVESTMENT STRATEGY, WHY WOULD IT CHANGE THAT?
ROBBINS: -- DEBT, RIGHT? WE'RE LEVERED AND WELL CONTINUE TO BE LEVERED IT WILL GIVE US AN INCREMENTAL CAPACITY BUT THE TERRITORIAL TAX SYSTEM JUST GIVES US MORE FLEXIBILITY TO MOVE CASH AROUND AS WE NEED IT DEPENDING WHERE WE NEED TO PUT IT TO USE. AND THE PLACE WE WOULD LIKE TO PUT IT TO USE IS IN THE UNITED STATES.
FABER: BUT YOU HAVEN'T DONE IT PREVIOUSLY BECAUSE OF THE TAX SYSTEM NOW?
ROBBINS: WELL, WE HAVE BEEN TAKING OUT DEBT TO A CERTAIN POINT.
FABER: YEP. SO YOU'VE BEEN SPENDING MONEY, YOU'VE JUST BEEN BORROWING AGAINST WHAT IS OVERSEAS?
ROBBINS: BUT WE WOULD HAVE ACCESS TO THE CAPITAL AND THE ABILITY TO RAISE DEBT SO IT INCREASES A TOTAL CAPACITY WE HAVE AS A COMPANY.
QUINTANILLA: RIGHT, BUT I THINK -- THE ARGUMENT THAT WE HEAR A LOT IS PEOPLE HAVE THE SENSE THERE WILL BE A WAVE OF MONEY COMING BACK IN, BUT IN TRUTH, SOME OF THAT MONEY IS ALREADY HERE IN THE FORM OF DEBT, RIGHT?
ROBBINS: SOME OF IT IS. BUT I'M NOT SURE IN TODAY'S INTEREST RATE ENVIRONMENT YOU'RE GOING TO SEE DELIVERY EITHER.
CRAMER: NOW LET'S TALK ABOUT THE GOOGLE DEAL. I THINK A LOT OF PEOPLE FELT CISCO IS A BIT OF AN ISLAND, CHUCK. YOU'VE COME IN, YOU'RE MAKING DEALS ACTUALLY WITH A LOT OF THE DIFFERENT CLOUD PROVIDERS. WHAT IS A DEAL WITH GOOGLE BRING TO YOU THAT YOU SEEM SO UPBEAT ABOUT?
ROBBINS: I THINK THE -- WHAT WE SEE HAPPENING TODAY IS THAT OUR CUSTOMERS, THEY BEGAN THIS JOURNEY TO THE CLOUD AND THE REALITY IS THIS -- IT IS NOT A DESTINATION, IT IS ACTUALLY A METHOD OF CONSUMING TECHNOLOGY SERVICES. AND NOW THEY FIND THEMSELVES WITH MULTIPLE CLOUD SERVICES WITH MULTIPLE SASS PROVIDER LIKE SALESFORCE AND OTHERS THAT THEY'RE BUYING, YOU KNOW, SERVICES FROM.
CRAMER: SOFTWARE AS A SERVICE.
ROBBINS: THEY STILL HAVE THEIR PRIVATE DATA CENTERS AND NOW THE EXPLOSION AT THE EDGE WITH IOT AND ALL THE DATA BEING CREATED, THE SINGLE PERVASIVE COMMON DENOMINATORS ACROSS ALL OF THAT IS THE NETWORK. SO AS YOU – AS A CUSTOMER TRIES TO ACTUALLY IMPLEMENT A CONSISTENT POLICY, CONSISTENT SECURITY ACROSS THAT COMPLEX ENVIRONMENT, THE NETWORK IS WHERE THAT HYBRID CLOUD ENABLEMENT HAS TO OCCUR. THAT'S WHAT GOOGLE REALIZED AND THAT'S WHAT DROVE US TO THE PARTNERSHIP.
CRAMER: OK, THEN WHY ONLY 3% THE LEGACY BUSINESS CONTINUES TO DROP? BECAUSE I FELT THAT WAS A PRESCRIPTION ON THE CALL TO THINK YOU GUYS COULD DO MIDSINGLE DIGIT GROWTH IN THE NEXT COUPLE OF YEARS.
ROBBINS: WELL WE BELIEVE -- WE HAVE GIVEN LONG-TERM GUIDANCE IN FACT THIS PAST SUMMER. AND WE'RE ONE QUARTER INTO THIS CAMPUS REFRESH. WE MADE AN ACQUISITION THIS SUMMER WITH VITELLA, WHICH IS A SOFTWARE DEFINED WAN PROVIDER.AND WE THINK THAT BETWEEN THE NEW INNOVATION WE BUILT INTERNALLY, THE ACQUISITION WE MADE WITH VITELLA AND THEN SOME OF THE CLARITY WE'RE PROVIDING AROUND THE MULTICLOUD POLICY MANAGEMENT THAT WE CAN BEGIN TO HELP OUR CUSTOMERS EVOLVE TO THE NEXT GENERATION ENTERPRISE ARCHITECTURE. BUT WE'RE JUST A QUARTER OR TWO IN SO WE'LL SEE.
CRAMER: I HAVE APPLIED MATERTIALS ON TONIGHT ON "MAD MONEY." THEY'RE WILDLY BULLISH ABOUT INTERNET OF THINGS, YOU MENTIONED IOT. ARE WE IN SOME SORT OF CUSP OF JUST A GIGANTIC CORPORATE SPEND AND WE'RE BEING TOO NEGATIVE BY SAYING WHEN IS IT GOING TO END? IS IT POSSIBLY AT THE BEGINNING?
ROBBINS: WELL I THINK, IBC, AS, YOU KNOW, BASICALLY PREDICTED THAT IN 2020 ON A GLOBAL BASIS WE'LL BE ADDING 1 BILLION NEW DEVICES TO THE NETWORK LIKE EVERY MONTH OR SO.
CRAMER: EVERY MONTH.
ROBBINS: A MILLION PER HOUR. ONE MILLION PER HOUR.
QUINTANILLA: THOSE ARE CARS, HOUSES, INDUSTRIAL EQUIPMENT.
ROBBINS: THAT'S RIGHT. OUR JASPER ACQUISITION WE MADE TWO YEARS AGO IS THE LARGEST COMMERCIALLY AVAILABLE MACHINE TO MACHINE CONNECTIVITY PLATFORM IN THE WORLD. WE HAVE ABOUT 56 MILLION CONNECTED THINGS TO IT TODAY. IT'S CARS, ELEVATORS, VENDING MACHINES, SO WE'RE – EVERYTHING IS BEING CONNECTED. AND WE'RE AT THE VERY BEGINNING OF IT RIGHT NOW.
CRAMER: OK, IF THAT'S THE CASE, CHUCK, EVERY DAY I HEAR THAT THESE TECHNOLOGY COMPANIES ARE BEING OVERVALUED. WHEN I HEAR THAT, CHUCK, I THINK THAT WE'RE NOT BEING SMART ENOUGH. I'M TALKING WALL STREET. BECAUSE WHAT YOU JUST SAID IS THE RECIPE FOR A COMPANY GROWING FOR DOUBLE DIGIT GROWTH FOR MUCH LONGER THAN WHAT WALL STREET THINKS.
ROBBINS: YEAH. I THINK WHAT WE'RE SEEING HAPPEN IS TECHNOLOGY IS NOT RESTRICTED TO IT ANYMORE.
CRAMER: RIGHT. THAT'S THE BIG CHANGE.
ROBBINS: TECHNOLOGY IS INFILTRATING EVERY INDUSTRY. IT IS NO LONGER ENABLING THE STRATEGY OF A COMPANY, IT IS FUNDAMENTALLY REDEFINING THE STRATEGY OF A COMPANY. AND SO IT IS AT THE HEART OF EVERYTHING THIS IS WHY EVERY JOB WILL CHANGE. IT IS GOING TO BE EVERYWHERE,
QUINTANILLA: BEFORE WE LET YOU GO, WE HAD A DISCUSSION ABOUT ANTITRUST AND THE DEGREE TO WHICH IT IS BEING DRIVEN BY TWEETS. DO YOU FEEL IT IS A CONFUSING POLICY WHERE THE U.S. STANDS RIGHT NOW ON MERGERS AND ANTITRUST?
ROBBINS: I DON'T KNOW. YOU KNOW, WHAT I THINK IS THAT THE DEPARTMENT OF JUSTICE NEEDS TO DO THEIR JOB AND THAT'S WHEN THESE ACQUISITIONS COME UP, I THINK THEY HAVE TO LOOK AT THEM RATIONALLY, AND I MADE A COUPLE OF COMMENTS YESTERDAY ON A LOT OF ISSUES RELATIVE TO IMMIGRATION, NET NEUTRALITY, DEPARTMENT OF JUSTICE. YOU KNOW, I'M A FAN OF COMMON SENSE. AND SO I THINK THAT –
ROBBINS: THAT MAKES YOU AN OUTLIER.
ROBBINS: MAYBE, I DON'T KNOW. BUT I THINK GENERALLY THEY DO A GOOD JOB.
CRAMER: WELL, CHUCK, IT IS GREAT TO SEE YOU IN PERSON AND CONGRATULATIONS ON, I THINK, THE BREAKOUT WORK. I MEAN, IT REALLY IS, AND EVERYBODY SHOULD KNOW THAT STOCK IS STILL VERY CHEAP, EVEN – PARTICULARLY IF YOU CAN GET THE MONEY BACK, THEN I KNOW YOU WILL COMMIT TO RAISING THE DIVIDEND. YOU WENT FROM VALUE TO GROWTH, CHUCK. IN ONE QUARTER.
ROBBINS: THANK YOU, GUYS GOOD TO SEE YOU. THANK YOU.
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