June 14, 2019
After his keynote speech at Cisco Live in San Diego this week, Cisco chairman and CEO Chuck Robbins met with journalists to talk about a broad array of topics, from geopolitics and finances to 5G and investments in other regions of the world. Here are some of the highlights of what Robbins had to say.
The United States, China and Huawei
The CEO said that while Cisco to this point hasn’t seen any benefit from the Trump Administration’s ban on products from rival Huawei, it has felt some impact from the country’s ongoing trade war with China.
The Trump Administration last month imposed restrictions on U.S. companies using telecommunications products from Huawei and other companies it says pose national security threats. Some tech vendors, such as chip maker Broadcom, have been hurt by the ban.
However, Robbins said that Cisco hasn’t “seen a material shift,” adding that his company instead is “taking the higher road,” staying focused on innovation and keeping its customers’ trust. At the same time, he said he doesn’t want his company trying to use Huawei’s situation in sales calls on customers.
CEO Chuck Robbins at Cisco Live 2019 in San Diego.
“We’ve told our team, point blank, this is not a sales strategy [for] you,” he said. “I don’t want our teams going in and leveraging the geopolitical situation to try to advantage us.”
Regarding the Trump Administration’s tariffs on Chinese goods, Cisco has felt some impact. The administration last month raised tariffs from 10% to 25% on $200 billion in Chinese goods and has threatened tariffs on another $300 billion in goods from the country, a move that compelled more than 600 companies and industry trade groups – including Walmart, Target, Costco and Gap – to send a letter this week to the administration urging an end to the trade war.
In response to the United States’ aggressive tariffs, China has threatened to levy tariffs on U.S. companies. The ongoing trade war will impact Cisco, but Robbins didn’t elaborate.
“Our business in China obviously could be impacted if the Chinese government decides to do things differently in regard to U.S. interests,” he said. “We just have to keep operating and see how that plays out. But our job is to primarily focus on things we can control and do the best we can with the other issues.”
That includes moving more of its manufacturing out of China. Robbins also said the trade tensions with China or the ban on Huawei – a key developer of 5G technologies – will slow down the evolution of the next-generation broadband technology.
“There’s a high degree of ignorance about 5G around the world,” he said. “It’s not like there’s one vendor that can build 5G networks. That is a fallacy. The reality is that Ericsson, Nokia and Samsung have great 5G micro-radio technology today, and beyond that we have virtually everything you need to build 5G networks. I haven’t seen any slowdown [in development] and I think there’s a huge misconception that this China-U.S. trade war could have that effect. If you’re solely focused on one vendor and that’s the only way you plan on building it out, then it might slow you down. But as an industry it doesn’t slow us down.”
The move to 5G will be a multiyear transition and it will co-exist with WiFi – including Wi-Fi 6 – for a long time, he said. Robbins said the talk that with 5G there won’t be any need for Wi-Fi echoed what he heard when Wi-Fi became popular in the 1990s and people said it meant …
… the end of switch ports.
“We were never going to sell another Ethernet switch because of wireless,” he said the industry experts were telling him. “A couple of quarters back, we had the largest quarter for switching revenue in the history of the company.”
There also won’t be a problem delivering security over 5G.
“With security, 5G is going to be incredibly important, just like it is today,” he said. “We’re delivering security across the global internet. It’s been built, so I’m not sure there’s this big new secret about delivering security over 5G. I think there [are] different technologies that we use for different issues, but we’ve been dealing with this evolving landscape forever. 5G may introduce more IoT connectivity and continue to increase the threat landscape.”
He noted that Cisco this month announced its intention to buy Sentryo, which will bolster its IoT security capabilities.
Service Providers and White Boxes
The CEO also pushed back at the notion that the rise of white-box networking gear was the driving force behind the recent revenue decline in Cisco’s service provider business. Revenue in the third quarter dropped 13%, and Robbins noted that larger providers had cut back their capital expenditures by as much as 20%.
White boxes had no impact on Cisco’s service provider situation, he said. The problem more had to do with markets in the U.S. and the Americas.
“These are customers who are evolving their business models,” he said of the larger service providers cutting back on capital spending. “They’re all contemplating 5G, what it all means and what is the business case for their investment. These are also very large customers ,and when you have two or three falls in the same quarter, just like some of our competitors had, then that’s where the [numbers drop off]. I don’t think any of it had to do with white boxes.”
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