Cisco Systems CEO Chuck Robbins joins Yahoo Finance Live to discuss the latest merger agreement with Acacia, the impact of the January 6 siege on the Capitol on the country and the business community, and the state of the company.
BRIAN SOZZI: All right, the most well-known leaders in corporate America continue to speak out against the insurrection last week on Capitol Hill. This fresh political volatility comes as boardrooms around the world try to remain focused on navigating the pandemic. One of those leaders not sitting idly by is Cisco's chairman and CEO Chuck Robbins. He joins us now.
Chuck, good to speak with you again here, lots to talk to you about. But just had a bit of breaking news across the wires on Cisco-- you upped your offer for Acacia to $4.5 billion-- $4.5 billion. My math suggests that that's about double where it was. Why did you raise your bid? And why are you acquiring this company?
CHUCK ROBBINS: Well, Acacia has done a phenomenal job-- Brian, it's great to talk to you. They've really done a phenomenal job of running that business during the 18 months where we've been working on getting approvals. And while we thought we had all approvals done, there was a lack of clarity, and we felt like this was the best route for us to take.
I think if you look at the company's performance, look at their financials, we think the valuation is actually quite appropriate, and we're excited to bring this team in. Last December, we announced that we were building a component strategy where we would disaggregate our systems and actually sell our components to customers should they choose to do so. And this is a very important part of that strategy. So we're pleased that we got it done. We're excited about having the team on board.
BRIAN SOZZI: For those not familiar with this business, does it help you accelerate anything in the infrastructure space, the 5G rollout? How should investors think about it?
CHUCK ROBBINS: High speed connections all require optics. And as the speeds continue to increase, the optics are increasingly important. So this acquisition will bring the optics in-house that we need for all of our networking products that are driving high speed connections. So it's certainly-- they certainly have a huge role to play relative to how the technology evolves, the internet evolves, et cetera.
And then again, we have some customers that would like to buy just components. So now we can sell them silicon, we can sell them optics, et cetera. And so it plays in both of those spaces, but it's very connected to all of the big technology transitions that are occurring.
BRIAN SOZZI: All right, let's switch gears here. I want to read viewers what you wrote on your Twitter account in light of what we saw in the Capitol last week. You wrote, quote, "what's happening in our nation's capital is appalling and saddening." You went on to note, Chuck, "it's time to recognize the legitimate democratic process, ensure a peaceful transition of power, and come back together as one nation"-- very powerful words there.
But how concerned are you as a citizen, as a business leader, a big business leader leading Cisco that we won't see a peaceful transition of power on January 20? And what would that mean to the business community?
CHUCK ROBBINS: Well, first of all, I am saddened by everything that we've seen in this country. We are facing several crises, and we need our representatives in Washington to put the partisanship aside, and come together, and solve some of these problems. And we're hopeful that with the transition next week, that we'll be able to do that.
I think that last week was certainly a wake-up call. And I think that the federal government now is taking the appropriate measures, I think, that I think we'll get through this transition next week. And then, you know, we look forward to working on the recovery.
There's a lot that tech can do, a lot that we can do working with the administration to help with everything from the vaccine distribution, to the inequality issues, to digital infrastructure, to broadband cybersecurity. So there's a lot to be done, and we're looking forward to get through next week so we can really spend time focused on that.
BRIAN SOZZI: Very important there, Chuck-- you said it was a wake-up call, really to the world, but also within boardrooms and inside of corporate America. Has Cisco changed how it donates to politicians? And is that under review?
CHUCK ROBBINS: Brian, we clearly-- we put out an announcement where we have halted all donations to the 147 members of Congress who voted against the electoral process at a time where we believe we had a fair election. And so from here, I think every company will step back and assess their posture relative to political donations.
And you know, the world has changed significantly for all of us. I've talked to my peers over the last few days, and we've talked about how our roles have changed significantly in the last few years. And we're certainly dealing with issues and having to discuss things that are happening in society in ways that perhaps CEOs didn't in the past. But that's the nature of the business. We have a great board that is active in these discussions with us. And we'll do just like everyone else is doing-- we'll assess our future strategy and see where we go.
BRIAN SOZZI: Chuck you're no stranger to talking to world leaders. In fact, the last time I saw you physically was working the room at Davos 2020, which feels like 25 years ago at this point. But you know, as you talk to those world leaders, how scarred is the country after four years of this administration? How scarred is capitalism? How scarred is democracy? And how do we get our position back in the world?
CHUCK ROBBINS: You know, Brian, look, this country is resilient, right? Every time we've had a major crisis, we've bounced back. And this time is going to be no different.
We will get through this. We'll get through the pandemic. We'll get through the crisis in Washington. We'll get through the inauguration. And we'll be stronger because of it.
I think it was a great statement what the House of Representatives did last week, and the Senate when they went back and validated the electoral college and refused to be-- you know, to let fear overtake them completing their job within our democratic process. And so I think going forward, this country is going to be stronger, we will come together, we have great leadership. And I really believe that, you know, we're always better after a crisis. And I think this will be no different.
BRIAN SOZZI: What's more important to Cisco's business as you think about it, Chuck-- is it President Biden getting an infrastructure bill passed, or is it him turning down the temperature as it pertains to trade relations with China?
CHUCK ROBBINS: Well, I think both of those are very important. I think that the infrastructure bill is important to our economy. It's important to job creation. It's important to positioning our country for the future with digital broadband and access to opportunity for every individual, attacking the inequality issue that exists in this country.
But I also believe that, you know, there are clearly-- we need multilateral work on global trade. And I think on many issues-- we need to come together with our allies on trade issues, we need to come together with our allies on issues of data privacy, cross-border data flows. We need to make sure that we have a consistent set of standards and policies that we're working under so that this technology can be leveraged for good around the world and in a way that's scalable.
And so I think there's a lot of opportunity, and both of the areas that you referenced are important. But I think it really is important for us to come together with our allies and tackle some of these tough issues.
BRIAN SOZZI: I do want to highlight the work you and Cisco has done to help fight the pandemic. $500 million to address poverty in Silicon Valley and help the COVID-19 relief effort-- how is that money being spent? And any plans to increase that investment this year and moving forward?
CHUCK ROBBINS: We've been at it so long, I have to think back to what all we were doing early on in this thing--
BRIAN SOZZI: We have all the time in the world, Chuck. Fire away.
CHUCK ROBBINS: Our first efforts were really in our community, where the most vulnerable are those who were just, you know, most significantly impacted by this pandemic. And so we were trying to help people with short term financial issues. And we brought together a lot of our peers, and we put a lot of money into the local community to help those who couldn't pay their rent, to work with those who were in homeless camps that actually were most at risk to try to figure out how we could get them into safe spaces.
We worked with our employees. We worked with our customers and extended, you know, credit facilities to those who were hit hardest early on by the pandemic. We subsequently-- when we had the racial inequality situation arise in the country, we worked in that space and made donations to try to help alleviate some of that stress. And so I think our teams have been active on a lot of fronts. And it's just core to who we are.
Ironically in 2019, we launched our new purpose as a company, and it was to power an inclusive future for all. And 2020 certainly validated that that was something that is needed. And you know, we think of that through our technology that connects everyone around the world and really gives them opportunity, as well as our culture, and our beliefs, and our social responsibility efforts, which is really around inclusion all around the world.
So you know, the teams have been great. I'm so proud of our employees for everything they've done. They've been so active in their communities. It's just been great to watch.
BRIAN SOZZI: Lastly, Chuck, you really-- you've been in the process of cutting close to a billion in costs out of Cisco's business, just given everything we've seen in the pandemic. Where are those costs coming from? And is $1 billion the mark that investors should still use? Or given where we are in the recovery, and economic recovery globally, you might have more opportunity to pull out more costs?
CHUCK ROBBINS: Well, we're constantly looking at our portfolio. We're constantly looking at our P&L. And you know, the work that we talked about last year is behind us now. And we've been working on our-- sort of the evolution of our strategy in light of how our customers are changing because of the pandemic. You know, we've talked a lot about our need to deliver more of our technology as a service.
We're clearly accelerating our capabilities in 5G and the next generation, high speed, 400-gig connections and data centers, et cetera, the work the teams have been doing with the Webex platform in collaboration. So you know, we're now focused on driving growth, we're focused on this evolving strategy that we have put together, and we're quite optimistic.
BRIAN SOZZI: Chuck, we just need sports coming back. I know you're a big sports buff-- we just need them back. We need a mental break.
CHUCK ROBBINS: We need them back, and we need to be able to go to the games. And we're all looking forward to that.
BRIAN SOZZI: Yeah, hopefully using our 5G. We'll leave it there. Cisco chairman and CEO Chuck Robbins. Good to speak with you again, don't be a stranger, and we'll talk to you soon.
CHUCK ROBBINS: Thanks, Brian. Good talking to you.