Davos 2022: We shouldn’t ‘talk ourselves into a recession,’ Cisco CEO says

Cisco CEO joins Yahoo Finace Live’s Brian Sozzi at the 2022 World Economic Forum (WEF) in Davos, Switzerland, to discuss inflation, supply chain constraints, recessionary risks, digital innovations, and the outlook for growth.

Video transcript

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JULIE HYMAN: Well, our Brian Sozzi got a chance to speak with Cisco CEO Chuck Robbins on the state of tech and the ongoing effects of supply chain constraints. They talked, of course, in Davos, Switzerland at the World Economic Forum.

CHUCK ROBBINS: Well, I mean, clearly, there's a lot of issues in the world right now. And everybody wants to get declarations from every attendee here about whether there's going to be a recession or when does inflation end or all of these kinds of things. And I think that, look, I don't want to see us talk ourselves into a recession, first of all.

And I also think people are a little too pessimistic. I mean, if you think back over the last several years, the challenges that we've all dealt with as a global society, we should have confidence that we're going to deal with whatever comes our way.

And I thought that Carmine was right. Whatever happens, likely, is short-lived. But if we look back on the success we've had over the last few years in a very complicated world, it should give people hope as we look to the future.

BRIAN SOZZI: Yeah, every conversation that I has had this layer of gloom. This is not the same type of Davos I'm used to. Usually there's a lot of optimism here. But what ultimately-- I mean, do you think we're talking ourselves into recession? Are we at that point?

CHUCK ROBBINS: Well, first of all, you can take solace in the fact that in March of 2020 when we were here, we were all super-optimistic. And then we went into a two-year pandemic. So we're never right, OK?

So look, I think the issue-- the consumer clearly will make their own decisions about spending. But I think at a business level, if we all walk around here talking to each other. And we're all talking recession, recession, recession, recession, as CEOs, we actually define capital spending and opex spending in our organizations.

So if we go back and say, we think there's going to be a recession, so slow down spending, then that ultimately could lead to it. So I just think we've got to be cautious about it and just take it a day at a time and see how things go.

BRIAN SOZZI: I had a bunch of other questions planned for you. But I got a chance to sit in on your panel today at the World Economic Forum. It was very interesting. And my question now is, are you getting enough help from governments to get done what you need to get done and drive digital transformation?

CHUCK ROBBINS: That's a really good question. I think the intent is there. I think government is bureaucracy, unfortunately. And so it just takes longer. I mean, I've had lots of discussions in Washington about the need for public-private partnerships. We really need to be coming together quickly to solve some of these supply chain issues.

And it's going to take both, really, if you want to get it done quickly. Talking about investing in technologies that are six, seven, eight years out, we should be thinking about how we do that for the US to remain competitive, for sure, but even on a global basis.

And I think the technology is moving so quickly right now, I think that it's incumbent upon companies to very honestly engage with government to help them understand how they should be thinking about the regulatory requirements, because we live it every day, and it's complicated.

And I feel really bad for these regulators who are trying to regulate technology that's so complicated, that's moving so fast. So I think we just need more and more interaction. I spend so much of my time with government today.

BRIAN SOZZI: Do you think they realize though, that you have to charge a fair price for what you do?

CHUCK ROBBINS: Yeah, I've never had any pushback on our pricing model. But that generally is focused on protecting the consumer more so than it is. We're B2B, so it doesn't come into play as much here.

BRIAN SOZZI: Good to hear. Supply chain challenges, you're coming off your most recent quarter here. Is there an end in sight? When will more products be on the shelves?

CHUCK ROBBINS: I think there is a beginning of a recovery in sight, I think. So here's what I would tell you is, we've got to get through the China lockdown.

BRIAN SOZZI: Is that Shanghai?

CHUCK ROBBINS: Last I saw last week, there were, like, 40-plus cities in lockdown over there, a quarter of the population. Shanghai is the most obvious. And we have components that go into other components that go into our products that are coming out of Shanghai. So that's been one of our big challenges which led to the earnings results.

I think most technology companies over the last nine to 12 months have been taking on redesign issues. So we've been redesigning products where we have serious component issues, replacing them with other components, where we can get those. That stuff, for us, is going to start showing up in August, September.

And I also think some of the non-semiconductor problems in the marketplace, I think this second half of the year, we should start to see that ease a little. And then hopefully, semiconductor capacity starts to increase as we get into 2023.

And if we do see a little demand weakening, then that certainly helps get supply and demand back in check a little sooner.

BRIAN SOZZI: Any easing in inflation?

CHUCK ROBBINS: Not that we've seen as of now.

BRIAN SOZZI: What parts of your business do you see it hitting you the most?

CHUCK ROBBINS: Just on the component side. I mean, all of our input costs for our products-- the semiconductor components industry is a very tight-knit group. And the demand is so overwhelming that they have just complete pricing power.

And so they're doing what they do. And they're taking advantage of the demand to actually increase their revenues. And it's just going to pass through.

BRIAN SOZZI: Last one for you. There's very few executives I have talked to here that have your experience, that seen a lot of different tech cycles. Explain for the average investor out there what is happening in the markets with tech stocks.

CHUCK ROBBINS: I think you just called me old, Brian.

[LAUGHTER]

BRIAN SOZZI: You said that. I didn't say that.

CHUCK ROBBINS: I'm walking around Davos, I told my team, I said, I am officially a senior citizen here I've been here so many times.

Look, I think valuations were-- you could argue that they were extreme, I mean, in many cases relative to how the market has historically been priced. And so we were talking earlier about a lot of the smaller technology companies, whether public or private, a lot of them are run by young entrepreneurs who have never seen a downturn.

So they're struggling now with, was that high priced, my valuation, or is this low priced, my valuation? And they don't really know. And if you look in the private markets right now, late-stage private companies, in general, are cutting back their valuations from the last raise, which is hard for them to deal with.

But I just think it's a correction. And look, it's going to ultimately create a buying opportunity for lots of people. And I think you just got to decide when that's right for you.

BRIAN SOZZI: Did EY CEO Carmine de Scipio give you that advice?

CHUCK ROBBINS: Carmine actually told me that. In fact, he gave me a list of 10 stocks that we should be buying right now. Maybe we publish them on the website for Carmine's picks.

BRIAN SOZZI: We'll plaster it all over the Yahoo Finance home page.

CHUCK ROBBINS: Or we'll set up a Webex, and Carmine can present them over that.

BRIAN SOZZI: Duly noted.

JULIE HYMAN: All right, that was Chuck Robbins with our Brian Sozzi. Coming up--