Davos 2023: Cisco CEO details why he’s ‘optimistic’ about U.S.-China relations

Cisco CEO Chuck Robbins joins Yahoo Finance Live anchors Julie Hyman and Brian Sozzi at the 2023 World Economic Forum in Davos, Switzerland, to discuss geopolitical issues, inflation, the possibility of a recession, the cyber space, M&A deal-making, and the economic impact on expenses.

Video transcript

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BRIAN SOZZI: Welcome back to Yahoo Finance's coverage of the World Economic Forum here in Davos, Switzerland. And again, all week, we've been talking to some of the biggest names in business. And one of those big names is Cisco CEO Chuck Robbins. Here's what he told us on tech layoffs and who he's been meeting here on the ground.

CHUCK ROBBINS: I've met with lots of CEOs. I've met with a couple of heads of state. I've met with the first lady of Ukraine. I've met with Vice Premier Liu He. And it's funny because publicly, in the press, everybody wants to talk about whether we're going to a recession or not. When we go into our meetings, we generally don't talk about that. There's a lot of discussions around Ukraine. Obviously, there's a lot of discussion around geopolitical issues. There's a lot of discussions around inflation in general, the energy crisis. And but I think overall, I sense there's still more optimism here than what's sort of being portrayed relative to this fear of a recession.

BRIAN SOZZI: You met-- in the meeting with China's vice premier, what are some of your takeaways there? Is it-- is that relationship between the US and China as fragmented as we all make it out to be?

CHUCK ROBBINS: Well, my takeaway is that after Xi and Biden met at the G20, it feels like both sides are at least going to begin some discussions again on some really important topics. And the vice premier actually talked about that while he was here. So his messaging with us was quite similar to his public messaging here. So I'm optimistic because the uncertainty is what-- is the problem out there.

And I think that, look, we're going to compete. They know we're-- they're going to compete. We're going to compete. But we need to find a way. There's some issues that we need China and the US to agree on and work together on, like climate. But there are areas where we'll obviously compete. But we need to find a way to do it in a way that doesn't destabilize the global economy. And that's what I'm hoping for.

JULIE HYMAN: I'm curious when I hear you talk about that. There, obviously, is the political dealings between China and the US. And then there are the business dealings. How separate are the two? How much are you influenced by if there is tension between the two? Are you still able to get deals done, for example, when things are at a more tense point?

CHUCK ROBBINS: Yeah, the only thing that we-- the only thing that really affects how we think about it is regulation, right? So I mean, there's always going to be noise. And I think we've all-- most of the CEOs here have grown into their executive career and their CEO positions in times of crisis. And there's always something going on. And we're just kind of used to it. And so there's always going to be noise. But you just deal with things once they become reality. Now you can plan for most likely outcomes, which we will do, but none of the rhetoric has really affected how we think about doing business around the world right now.

BRIAN SOZZI: Do you have to get leaner, Chuck, on expenses and employees, given what you are seeing in the economy and what everybody's talking about here?

CHUCK ROBBINS: Well, we're actually going to exit this year, spending more in expenses than we did coming in. If you go back to the beginning of the pandemic, we've been very thoughtful about how we've added expenses through the whole pandemic over the last few years. So we're in a reasonably good position. We are investing heavily in cybersecurity right now. So we are reducing our costs in other areas. But we're pumping it into cyber and a few other areas because, obviously, cyber is one-- that's another one of the big discussions here this week.

JULIE HYMAN: Does it feel to you like most of the cuts in big tech have happened, that we're now moving to a different phase of that cycle, or do you think there are more to come?

CHUCK ROBBINS: It's hard for me to say. I mean, there was some news out today about Microsoft. So I think that-- I haven't seen anything official from them yet, but I think it's pretty difficult to say. I think the next couple of quarters are really going to tell us what's really going to happen in the economy. And I think that will determine the answer to your question.

BRIAN SOZZI: Cisco is an acquisition machine, and there's been some talk about eyeing your next big potential deal. Is anything imminent, and where would you possibly be looking?

CHUCK ROBBINS: Who's talking about that?

BRIAN SOZZI: I hear things, Chuck. I hear things.

CHUCK ROBBINS: [LAUGHS] Look, we-- the M&A world has been pretty quiet for about a year, as evidenced by some of the investment banking numbers that we've heard from the banks. I think the-- look, a lot of the possible targets for us in M&A had very high valuations. And we all know that those valuations came down pretty significantly 12, 14 months ago, it began. And I'm hopeful that now that some of those great companies out there with incredible technology, I think a lot of them are coming to grips with the fact that these may be more real valuations than they had hoped.

And as they look ahead to the next 12 months, I think it also could indicate they look ahead, they don't see necessarily a definitive bright light ahead. So maybe they'll be more open to reasonable conversations, but we'll have to see.

JULIE HYMAN: Are there particular places-- places in the business where you want to add on?

CHUCK ROBBINS: Yes.

JULIE HYMAN: Do you want to tell us what they are?

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CHUCK ROBBINS: Look, we talk about cybersecurity. We're doing a lot of organic work. There's always opportunities for inorganic there. There's an emerging area called full stack observability in this world of new application architectures. There's a lot of opportunity there, where we have incredible organic capabilities, as well as possibility for inorganic. There's IoT. There's all sorts of options out there.

JULIE HYMAN: We were at a party that you held the other night. And you were talking about--

CHUCK ROBBINS: I held a party?

JULIE HYMAN: You-- the company held a party, anyway. So I'll say it's you. And I got a sense of you as the not-- like, as a human, not just as a CEO. But what you were talking about, some of your philanthropic work, et cetera, also illustrates the-- what Davos sort of straddles, right? The business side of things, the geopolitical side of things, and then the philanthropic side of things and trying to make the world a better place. Like, how do you think about that duality and how you spend your time and what you want to be spending your time on?

CHUCK ROBBINS: Well, I think it's important that wherever we operate, that our communities are healthy. And so we've embarked on this years ago. We were doing a lot of this stuff before, the whole notion of stakeholder capitalism. But I do think we live in a world today where our employees want to know us as humans. Our employees really care about culture. They care about your purpose.

In fact, if you look at some of the latest surveys, I mean, employees will tell you that salary is not number one anymore. It's important. It has to be reasonable, and it has to be great, but the culture and what you stand for as an organization really matters. You had the Edelman Trust come out again that actually said the CEOs and the business community are more trusted than government leaders again, so that we have-- our employees are asking us to be responsible.

And so it's an interesting set of dynamics that we have to navigate that when I took the job, I wasn't aware we were going to have to navigate all of them. But I think the philanthropic side and giving back to our communities is just, we need healthy communities. We need housing, affordable housing. We need firefighters who can afford to live and raise their families. We need teachers to be able to afford and live in the areas. And that's why we got involved in housing and homelessness in San Jose. And I just think it's an important part of what companies need to do.

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JULIE HYMAN: You know, and that last answer is so interesting to me because, again, it kind of encapsulates Davos, right? There is all this criticism. All these guys are controlling the world. The CEOs think that they're trying to do good. And whether they're trying to do good because it looks good or because it creates a culture that is attractive to workers, if the effect is that they're helping homelessness in San Jose or whatever it is, does it matter? I don't know. It's sort of a philosophical question, I guess.

BRIAN SOZZI: No, I'm glad you asked it, Julie, because we've been trying to humanize a lot of these executives here at Yahoo Finance this week. And we've had some really interesting conversations. And I'll also just add on what Chuck said about acquisitions. This is a different vibe in the Congress Center. Usually, the Congress Center is when a lot of the executives, they float around. They get their coffee. They get their danish, get some other various snacks.

We didn't really see a lot of executives in there. And I'm told-- and you've been hearing it as well-- a lot of these executives, this is the first time they were able to get face time with key leaders in their own industry and around the world, a lot of more meetings this time around. I do think the top five deals this year will, in some form, trace back to this World Economic Forum.

JULIE HYMAN: Oh, interesting theory.

BRIAN SOZZI: That's my big call.

JULIE HYMAN: We're going to hold you to that as we do--

BRIAN SOZZI: Please do.

JULIE HYMAN: --to everything you say, Brian Sozzi.

BRIAN SOZZI: Thank you.