Speaker 1: From the heart of where innovation, money and power COLLI
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Emily Chain. I'm Emily Check in San Francisco and this
Speaker 1: is Bloomberg Technology coming up in the next hour. Stocks
Speaker 1: are set for the longest losing streaks since January over
Speaker 1: concerns the feds aggressive policy to combat high inflation will
Speaker 1: throw the US into a recession. Plus, it is another
Speaker 1: sign of a worsening crypto downturn, coin Based announcing it'll
Speaker 1: layoff of its workforce, following other crypto companies that are
Speaker 1: also cutting staff. And my excloulsive interview with Cisco CEO
Speaker 1: Chuck Robbins on where he sees the economy headed and
Speaker 1: how the company is navigating the downturn and supply chain
Speaker 1: an He'll join me in an exclusive interview later this hour.
Speaker 1: I do want to dive deeper now into the markets
Speaker 1: as we wait for the Fed's decision Wednesday. Leo Kelly,
Speaker 1: CEO of Verden's Capital Advisors, joining us now to discuss. So,
Speaker 1: what are you expecting from the FED tomorrow, Leo, and
Speaker 1: how is that impacting your strategy? Well, the FED has
Speaker 1: to be aggressive there's no question about it. They are
Speaker 1: well behind the curve. They have been for some time.
Speaker 1: We never really brought into the transitory inflation nonsense, and
Speaker 1: this has gotten far beyond anyone's expectations. So our expectation
Speaker 1: is they act aggressively for the first time. While I
Speaker 1: think we all want them to take it carefully and slowly,
Speaker 1: the reality is they will do more damage if they're
Speaker 1: not aggressive then if they don't. So um, we think
Speaker 1: the FED is aggressive. We think the market expects that.
Speaker 1: I don't know that tomorrow is going to impact our
Speaker 1: long term strategy regardless. It's really about the trend, the
Speaker 1: trend of inflation and prices, the trend of interest rates,
Speaker 1: which we think are breaking a secular forty year bowl
Speaker 1: market and starting to turn into a secular long term
Speaker 1: bear market for bonds. So there's a lot happening right now,
Speaker 1: and the FED is just one piece of that puzzle.
Speaker 1: Why don't see the biggest risks in tech specifically, Well,
Speaker 1: it's like specifically. The problem is is there's still a
Speaker 1: lot of speculation um to wear out speculation in any market,
Speaker 1: in any bubble type market, and when we look around
Speaker 1: at things like crypto or we look at stay at
Speaker 1: home stocks. Back in the uh COVID years, there was
Speaker 1: tremendous speculation. There's tremendous stories, and it takes time and
Speaker 1: it takes multiple um let's just say shots at that
Speaker 1: speculation before you wind it completely out. So more than
Speaker 1: likely what you see is you see these massive downturns.
Speaker 1: You probably get some over sold recoveries, but then you
Speaker 1: return back and until you get the last bit of
Speaker 1: hope out of the market, you don't see actual bottoms. Um.
Speaker 1: There was a great there was a great statistic. I
Speaker 1: just heard uh in the in the introduction that these
Speaker 1: companies have cash flow, and so this may be a
Speaker 1: little different. I would say, back in the dot com bubble,
Speaker 1: Microsoft had cash flow, Cisco had cash flow. If you
Speaker 1: look at something like Cisco, um, it was at about
Speaker 1: ninety dollars at the top of the dot com bubble,
Speaker 1: got to nine, which was well below what its fair
Speaker 1: value was, and it took decades for it to come
Speaker 1: back before we started see reasonable prices. So interesting, I
Speaker 1: think tech you have to be careful with interesting that
Speaker 1: you use Cisco as an example, because I'm going to
Speaker 1: speak to Chuck Robins, the CEO of Cisco later this hour.
Speaker 1: I also spoke to Amazon CEO Andy Jassey last week
Speaker 1: we spoke about the economy, his thoughts on rising inflation.
Speaker 1: Take a listen to what he had to say. I
Speaker 1: think the real challenge for us there is on the
Speaker 1: cost side. And there have been several things that have happened, um,
Speaker 1: some of which are more controllable than others. You know,
Speaker 1: I think the part that's less controllable is really around inflation.
Speaker 1: And I think we thought that inflation would start to
Speaker 1: attenuate in two and with the war in Ukraine, it
Speaker 1: just went the other way and has significantly accelerated. You've
Speaker 1: got these massive companies like Amazon that have no control
Speaker 1: over where these numbers are going. You know, what do
Speaker 1: you think the long term impact is going to be
Speaker 1: on a company like Amazon and other companies that you know,
Speaker 1: rely on the health of the consumer. So history shows
Speaker 1: us that when the cost of capital exceeds the return
Speaker 1: on invested capital, we go into a recession. And the
Speaker 1: cost of capital is rising rapidly, and so we're going
Speaker 1: to see a significant profit recession in the marketplace from
Speaker 1: companies like an Amazon and many others. And so if
Speaker 1: you're not inflation sensitive. This is going to be serious
Speaker 1: pressure on earning. So some of these reliable growth companies
Speaker 1: that have steadied growth patterns are going to start to
Speaker 1: see those patterns get disrupted and that's going to affect
Speaker 1: PE multiples. The reality is with inflation that um, we
Speaker 1: have it. It's accelerating and one of the reasons is
Speaker 1: we're not addressing the problem. We have to go to
Speaker 1: the core of the problem of inflation, and until we
Speaker 1: do that, inflation will continue to surprise us. We cannot
Speaker 1: answer a supply side inflation event with more demand, and
Speaker 1: so far that has been the method of replacing and
Speaker 1: repairing inflation. So the Fed has to get aggressive and
Speaker 1: we cannot afford policy hours coming out of Washington that
Speaker 1: stimulate more demand. I mean, that's the bottom line for inflation.
Speaker 1: All right, Lots to continue to watch Leo Kelly Verdon's
Speaker 1: Capital Advisers, thank you for giving us your input there. Well.
Speaker 1: For the first time since agreeing to buy Twitter, Elon
Speaker 1: Musk will address Twitter employees on Thursday. He'll speak virtually
Speaker 1: at a company wide meeting and to take questions. Twitter
Speaker 1: has been in a chaotic state since the deal came
Speaker 1: together in April. While Musk has a passionate contingent of
Speaker 1: employees who support to take over, another contingent is openly critical.
Speaker 1: Some employees frustrated by Musk's ongoing questions about spam bots
Speaker 1: and I think it's Musk's attempt to renegotiate his forty
Speaker 1: four billion dollar deal. Twitter executives, however, have told employees
Speaker 1: they plan to enforce the agreement. Coming up is the
Speaker 1: future of streaming sports. We're gonna talk Apple, Disney, Netflix,
Speaker 1: and the future of streaming with Rich Greenfield. Up next,
Speaker 1: this is Bloomberg. As Netflix looks to turn around an
Speaker 1: already rough year, it is hoping Squid Game will be
Speaker 1: its savior. Just days after announcing the second season of
Speaker 1: its most popular series of all times, Netflix is now
Speaker 1: turning it into a reality competition. It is called Old
Speaker 1: squid Game. The Challenge and the streaming service boasts that
Speaker 1: will have not only the largest cast in reality TV history,
Speaker 1: but also the biggest lumpsome cash prize four dred fifties.
Speaker 1: Six real players will hope to win four point five
Speaker 1: six million dollars. If you've seen the show, you know
Speaker 1: the significance of that number. But unlike the original series.
Speaker 1: There won't be any gore, they say. With the worst fate,
Speaker 1: anyone will face going home empty handed. While Apple is
Speaker 1: betting big on sports, the company just signed a ten
Speaker 1: year deal to exclusively stream Major League Soccer on Apple
Speaker 1: TV beginning Back in March, Apple reach a deal with
Speaker 1: Major League Baseball to air Friday night games also on
Speaker 1: Apple TV. This deal coming just one day after Disney
Speaker 1: lost out on a bidding war for the streaming rights
Speaker 1: to the popular Indian Premier League. Rich Greenfield of Light
Speaker 1: Shed partners with us now to discuss it all. And
Speaker 1: if you're a baseball fan, you know having those Friday
Speaker 1: sports rights are pretty important. Sport's gonna be the next
Speaker 1: big streaming differentiator or z big streaming differentiator now. I
Speaker 1: think the reality is all of these streaming platforms are
Speaker 1: realizing just how difficult it is not just to attract subscribers,
Speaker 1: but to re engage them and to make sure they
Speaker 1: don't turn emily. And it's it's hard, right. There's a
Speaker 1: reason why Netflix spends seventeen billion dollars a year on content.
Speaker 1: It's not like they do it because they want to
Speaker 1: spend too much money and they just toss and burn capital.
Speaker 1: The reality is the difference between the old cable days
Speaker 1: that you and I grew up on. Remember you wanted
Speaker 1: to cancel your cable service like you had a literally
Speaker 1: call up Comcast or back in the daytime winner cable,
Speaker 1: you probably spent the better part of your day on
Speaker 1: hold being transferred around to departments. If you actually got
Speaker 1: through the retention department and tried to quit or cancel,
Speaker 1: then you had to go return your equipment and stand
Speaker 1: in line like it was being tortured. Now, if you
Speaker 1: want to cancel a service, it's point and click and cancel,
Speaker 1: and you can sign right back up a few days later.
Speaker 1: So I think in many way, sports is being used
Speaker 1: as a tool that all of these companies are looking
Speaker 1: at to bring in new subscribers and to retain existing subscribers.
Speaker 1: And I don't think any of these will be all sports.
Speaker 1: I think that's a very hard business model, and I
Speaker 1: think it's one of the reasons ESPN hasn't converted to
Speaker 1: over the top yet. But I do think that they're
Speaker 1: all looking at sports as yet another tool to drive
Speaker 1: subscribers and retain existing ones. How big a deal is
Speaker 1: Apple picking up Major League Soccer or Disney losing out
Speaker 1: on cricket. Do you see these wins and losses as
Speaker 1: you know more um you know, you know, not necessarily
Speaker 1: big deals. I think Apple is a huge deal. I
Speaker 1: think every single person that invests in looks at the
Speaker 1: media space or runs a media company should be thinking
Speaker 1: about what Apple is doing. Because you know, the only
Speaker 1: thing holding the traditional media bundle, big video bundles, cable
Speaker 1: and broadcast networks. The only thing holding these bundles together, Emily,
Speaker 1: is sports. All the best entertainment programming. Think about it.
Speaker 1: Name one big own new show that's aired on linear
Speaker 1: TV in years. Like everything is now starting its life
Speaker 1: on streaming. I don't care whether we're talking about squid Games,
Speaker 1: which you just talked about, or Mandalorian on Disney or
Speaker 1: Murderers in the Building on Who. Like, everything is happening
Speaker 1: on streaming. So the only thing sort of left has
Speaker 1: been sports. And yet look what's just happened. Amazon has
Speaker 1: just taken the number two TV series on linear TV
Speaker 1: broadcast TV in Thursday Night Football this fall only on
Speaker 1: Amazon Crime. And then you see this deal with MLS today,
Speaker 1: like you're just every day the last pieces that are
Speaker 1: holding together the TV bundle are being stripped away, and
Speaker 1: that means two things. One more and more chord cutting,
Speaker 1: less and less viewership for these TV programs. And all
Speaker 1: of that means, you know, the bottom line is that
Speaker 1: these legacy media companies are facing more and more pressure
Speaker 1: because most of them are built around broadcasting cable networks.
Speaker 1: It's gonna be very hard. How much M and A
Speaker 1: do you think we're gonna see? I know you you
Speaker 1: don't think good in the Netflix Roku deal is going
Speaker 1: to happen? Do you say there's a zero percent chance? Look,
Speaker 1: I hate zeros um. You know I've learned never to
Speaker 1: I've learned never to say never. I mean, I think
Speaker 1: if we had been on here six or you know,
Speaker 1: if you said eight weeks ago, is Netflix gonna do advertising?
Speaker 1: I would have said there's no chance. So you should
Speaker 1: never say never. Everything is up for debate. I think
Speaker 1: the odds of Netflix buying roke wu are very hard
Speaker 1: to imagine. Why would you want to be in the
Speaker 1: device business? I think, you know, Netflix benefits from being
Speaker 1: a voweble on every device and not competing. Buying Roku
Speaker 1: would put them into you know, battling against companies like
Speaker 1: Samsung in video and that's just very hard for me
Speaker 1: to believe. And I think Netflix is very focused on
Speaker 1: sort of an asset light approach, initially advertising outsourcing. There
Speaker 1: was a story out today that they may be doing
Speaker 1: this as the information reported they may be looking at
Speaker 1: using comcasts freewheel product. We think that makes a tremendous
Speaker 1: amount of sense. And look, they're going to connect into
Speaker 1: lots of platforms and use lots of players. They'll work
Speaker 1: with Roku's, they'll work with trade desks. But I'd be
Speaker 1: very surprised if Netflix was going to go out and
Speaker 1: make a very significant acquisition. That's just not their style
Speaker 1: at all. They are turning this squid game success into
Speaker 1: a reality competition. What are your thoughts on that? I
Speaker 1: mean is right now the cultural is now, culturally the
Speaker 1: right time for a competition like this, with the world
Speaker 1: melting down. If you if you watch sweed games, the
Speaker 1: sort of the depressive nature of the world, it sort
Speaker 1: of feels like the right time for a squid game
Speaker 1: reality series, to be honest. But but leave that aside,
Speaker 1: I think you're bringing up a greater issue. Netflix isn't broken.
Speaker 1: None of the streaming services are broken, per se. That
Speaker 1: the reality is it's all about content. Consumers are going
Speaker 1: to gravitate to the services where they spend the most
Speaker 1: time and where they have the most content that keeps
Speaker 1: them entertained. And you know, the reality is Netflix still
Speaker 1: is by far and away the biggest service of all
Speaker 1: time spent on connected TVs is on Netflix. But I
Speaker 1: do think they need more iconic shows, and Stranger Things
Speaker 1: has been huge coming back. All four seasons were the
Speaker 1: top four most watch shows on Netflix a couple of
Speaker 1: weeks ago, So there's no doubt that franchise zeitgeist content
Speaker 1: is critical, and I think that's why you're seeing Netflix
Speaker 1: lean into doing more, not just a second season of
Speaker 1: Squid Games, but how can they build this franchise even broader.
Speaker 1: I think that makes a lot of sense, and I
Speaker 1: think you're gonna see Netflix pivot from having instead of
Speaker 1: just volume of series, really making sure that they have
Speaker 1: a good number of series that really are zeitgeist and
Speaker 1: really water cooler conversation that create the buzz that they need.
Speaker 1: I think they haven't had enough of that, and that's
Speaker 1: part of the reason why they've suffered over the course
Speaker 1: of the last couple of quarters. We've seen a few
Speaker 1: Disney stories over the last week, you know, more sort
Speaker 1: of Game of Thrones, Chapec firing Peter Rice has head
Speaker 1: of Content. Apparently it only took seven minutes. How optimistic
Speaker 1: right now are you about SPEX leadership and the culture
Speaker 1: he is trying to create given the channel in is
Speaker 1: that he's faced. Look, Shape came in at a very
Speaker 1: hard time, right right right in the middle of the pandemic.
Speaker 1: Was no easy task. The theme park business was just
Speaker 1: you know, sort of he was very much behind before
Speaker 1: he became CEO. Is obviously having an incredible resurgence. They
Speaker 1: literally can't keep up with demand and they're raising price.
Speaker 1: But I think the real question for for Schapeck is
Speaker 1: what is his plan? You know, is ESPN and sports
Speaker 1: the future. Clearly they just bowed out of sports on
Speaker 1: streaming in India as you brought up the I p
Speaker 1: L rights went to Viacom, a team which is owned
Speaker 1: by Reliance Geo and James Murdoch and others. But you know,
Speaker 1: certainly bowing out of digital or streaming in India is
Speaker 1: a big deal, and it sort of points at this
Speaker 1: larger existential question for Shape of like what is the
Speaker 1: future of Disney is it about Disney Studios, the meaning
Speaker 1: the film studio and the TV studio, the theme parks
Speaker 1: and Sumer product which all really worked well together. Do
Speaker 1: they need to be in the ABC broadcast TV business?
Speaker 1: Do they need to be in the ESPN and f
Speaker 1: X business? Like, I think there's some very big decisions
Speaker 1: for Shaping, and I think we're all waiting. I mean,
Speaker 1: the reality is is there a future for Hulu or
Speaker 1: do they just put more and more of that content
Speaker 1: onto Disney Plus. Like there are some really big structural decisions.
Speaker 1: Maybe that's what the board is waiting for, to sort
Speaker 1: of see what the ultimate what Disney ultimately looks like.
Speaker 1: I will say I was surprised the board came out
Speaker 1: with a comment sort of endorsing um Shaping, but didn't
Speaker 1: just renew his contracts. His contract expires in February. I'm
Speaker 1: not sure what they're waiting for, like either renewest contract
Speaker 1: or tell us they're bringing in a new CEO. It
Speaker 1: does seem strange that we're sort of sitting here waiting
Speaker 1: to figure out what happens next. The stocks obviously suffered,
Speaker 1: but the whole group is down substantially. I think investors
Speaker 1: really want to know what is the structural future of Disney,
Speaker 1: what are the assets that are they keeping, what assets
Speaker 1: are they getting rid of? And we really haven't gotten
Speaker 1: that sense from Disney over the last six months. Yeah,
Speaker 1: it was certainly interesting to hear from the board, but
Speaker 1: you make a very good point, like rich Greenfield always
Speaker 1: going to have your rich thank you stopping by Investor
Speaker 1: without Coast. Leve believes we will have a techno economic
Speaker 1: war over the next twenty years, most likely between the
Speaker 1: US and China. He talked about tech valuations and what
Speaker 1: it takes to be a VC on this week's episode
Speaker 1: of Bloomberg Wealth with David Rubenstein. Well, we high look
Speaker 1: at it is what is the underlying innovation that's going on,
Speaker 1: and how large a market is it addressing. If it's large,
Speaker 1: then the valuations will look large. If you look at
Speaker 1: it Google, it's it's a great valuation. I'm I would
Speaker 1: think it'd come back, but it's a twenty some percent
Speaker 1: growth company, not a fifty percent growth company. The early
Speaker 1: stages of much most venture would be considered low growth.
Speaker 1: When you in that world and you're addressing large markets,
Speaker 1: you have a proprietary advantage, then the valuation metrics are very,
Speaker 1: very different and traditional valuation approaches don't really work, but
Speaker 1: continuing to apply them as companies mature is a mistake
Speaker 1: and is the deal valuation so high that it's gonna
Speaker 1: be hard for people to get the returns that they
Speaker 1: want at a venture investing. So I do think given
Speaker 1: the hype we've seen the last five years, we will
Speaker 1: see a decline and returns. Uh not for everybody. The
Speaker 1: good firms continue to be disciplined about valuations, but I
Speaker 1: do think in general for the industry will see a decline.
Speaker 1: The best firms will still do well. So coastal ventures
Speaker 1: will do okay, I hope. So we have to earn
Speaker 1: our keep the coastala there. With David Rubinstein, Welcomeack to
Speaker 1: Bloomberg Technology and Emily changing San Francisco stocks, Folly even
Speaker 1: further on fears that the FEDS aggressive policies to fight
Speaker 1: inflation will throw the US into a recession. Is this
Speaker 1: rightful cause for alarm? Where are we headed for the
Speaker 1: next half of the year. I want to get into
Speaker 1: all of this and more with Chuck Robin, CEO of Cisco,
Speaker 1: who is joining us now from Cisco Live two in
Speaker 1: Las Vegas, the company's first in person conference in two years. Chuck,
Speaker 1: it's great to have you back here on the show.
Speaker 1: How's it going bring us the atmosphere from the floor.
Speaker 1: How does it feel to be back in person? Well, Emily,
Speaker 1: thanks for having me. And you know, we we're saying
Speaker 1: this week we're putting the live back in Cisco Live.
Speaker 1: We've got sixteen thousand of our closest friends here, we
Speaker 1: have a lot of our partners back here that are demonstrating.
Speaker 1: There's lots of education going on. We had a slew
Speaker 1: of great product announcements this week, and so I think
Speaker 1: everybody is just as you would expect, excited to be
Speaker 1: together in person. I think everybody's been longing for it.
Speaker 1: And a joke today that we're so glad that we're
Speaker 1: not doing this over video and it's still room somewhere
Speaker 1: where we're getting no feedback. So it's a lot of energy. Now.
Speaker 1: Cisco has always been considered a bell weather for the economy,
Speaker 1: and I have to wonder what your customers are telling
Speaker 1: you and how inflation and what's happening in the markets
Speaker 1: is impacting how they're spending. You know, we talked today
Speaker 1: with our customers and partners here about the fact that
Speaker 1: over the last five or six years, we've dealt with
Speaker 1: a global trade war and terrorists, We've dealt with a pandemic,
Speaker 1: We've dealt with social justice issues, We've dealt with supply
Speaker 1: chain issues, we have a war in Ukraine, we have inflation.
Speaker 1: So our our customers, while it's not the new normal,
Speaker 1: I think they're dealing with the reality that there's always
Speaker 1: something going on in the world, and technology has proven
Speaker 1: to be so effective during the pandemic at keeping the
Speaker 1: global economy and the global productivity at a great level
Speaker 1: that I think technology is going to remain strategic for
Speaker 1: our customers. And to them say they're they're powering ahead.
Speaker 1: So we'll see. Elon Musk says he has a super
Speaker 1: bad feeling about the economy. Jamie Diamond said he's preparing
Speaker 1: for an economic hurricane. How does Chuck Robbins feel, Well,
Speaker 1: I remain optimistic, but I'm thinking specifically about the importance
Speaker 1: of technology to our customers and how looks like we
Speaker 1: lost Chuck Robbins. They're joining us from Cisco Live two
Speaker 1: will work to get his shot back up. We're seeing
Speaker 1: sentiment at pretty much an all time low. I don't
Speaker 1: think I've ever seen people, uh, you know, feeling this
Speaker 1: negative about the industry. All of that said, there are
Speaker 1: still plenty of crypto firms that are hiring. Um you
Speaker 1: know that we're seeing layoffs for sure, but the sort
Speaker 1: of or ideology that powers this movement is intact. That
Speaker 1: was Nick Carter, founding partner at Castle Line Adventures earlier
Speaker 1: on Bloomberg. Now, the dual crisis of Terra and Celsius
Speaker 1: shaking up defy in ways that may have very serious
Speaker 1: repercussions for the crypto markets. I want to talk about
Speaker 1: all that and more with our crypto contributor Shinali Bossic
Speaker 1: and with Sheila Lawren, CEO of the Crypto Council for Innovation. Sheila,
Speaker 1: great to have you here in person. So, look, there's
Speaker 1: chaos in crypto markets, in markets more broadly, but especially
Speaker 1: in the crypto markets. Just how how low are we
Speaker 1: going to go here? Where's the bottom? Well, it's it's
Speaker 1: hard to know, it's impossible to know. But we are
Speaker 1: seeing real world consequences. We're seeing real job loss affecting
Speaker 1: real people. We're seeing real people losing real money. And
Speaker 1: that's in the context, of course of record high inflation,
Speaker 1: erosion of purchasing power for families. So all at all,
Speaker 1: it's it's it's not a great picture. That being said,
Speaker 1: as you noted, it's hardly were hardly immune. It's hardly
Speaker 1: just the crypto market being affected here. It's really a
Speaker 1: much broader global economy melt down. So we you see
Speaker 1: coin based first to hiring, freeze, now slashing of its workforce.
Speaker 1: This on the back of the stock plummeting. What's your reaction,
Speaker 1: our reactions that were in a contraction phase. There are
Speaker 1: other firms who are hiring. There's a lot going on
Speaker 1: in the market that's adjacent to crypto as well, And
Speaker 1: I think what we're seeing is a pivot towards core
Speaker 1: principles and ideologies. Building a brand new financial and technology
Speaker 1: ecosystem is not easy. It takes stamina, and I think
Speaker 1: if I were new to this industry, I would be nervous.
Speaker 1: But over the six and seven years i've been here,
Speaker 1: I've seen a bunch of these cycles come and go,
Speaker 1: and so I think that what we're just seeing is
Speaker 1: again and refocusing on street priorities. And my hope is
Speaker 1: that we're going to come out of this the way
Speaker 1: we have before. You know, you had mentioned real people
Speaker 1: losing real money, and I want to steal your former
Speaker 1: lawyer hat for a second. I mean, how does the
Speaker 1: SEC look at something like this and want to protect
Speaker 1: investors after so much money has already been lost. Well, Frank,
Speaker 1: that's source of frustration I think for the industry is
Speaker 1: that we really have been looking to agencies. The industry
Speaker 1: has been been calling this for this for quite some time,
Speaker 1: to say, we do need the ability to distinguish some
Speaker 1: of the scams that do exist us in this space
Speaker 1: from the very legitimate projects that also exist. And instead,
Speaker 1: what we're seeing is intense litigation enforcement actions against legitimate
Speaker 1: actors for relatively minor kinds of infractions rather than some
Speaker 1: sort of clarity, which is what the industry really needs.
Speaker 1: So I have to say, wearing a lawyer hat, I'm
Speaker 1: not super thrilled about what what the engagement we're getting
Speaker 1: from the agencies that are here to really support and
Speaker 1: help all of us. We needed that lack of clarity.
Speaker 1: How much of a hangover does that give the ecosystem
Speaker 1: when you don't know what you can build? How do
Speaker 1: you then invest in projects when when you don't know
Speaker 1: what's possible. Well, I think that's exactly right. And what
Speaker 1: we're kind of seeing a response to you right now
Speaker 1: is where there is this high degree of uncertainty on
Speaker 1: what is going to eventually be kosher, you know, to
Speaker 1: have built and to have engaged with with people aren't
Speaker 1: sure what to do. And we've been again, we've been
Speaker 1: asking for many years for guard rails, for guidelines on
Speaker 1: how to engage. We want to work collaborately with regulation
Speaker 1: and with policymakers, and you know, in some cases that's happening.
Speaker 1: We are seeing a lot of support from the legislative
Speaker 1: side of the house. We are seeing an approach a
Speaker 1: center to run and Lumus had their recent bill that
Speaker 1: kind of trying to clarify c FCC SEC jurisdiction. A
Speaker 1: lot of engagement abroad from the Europeans, from from APAC
Speaker 1: countries seeing this, but here, you know, the SEC maybe
Speaker 1: not taking quite the same approach. Well, I'm sure there's
Speaker 1: lawmakers who are looking at what's happened with Tera and
Speaker 1: looking at what's happened with Celsius and are like, I
Speaker 1: don't know about any of this anymore. I mean, you know,
Speaker 1: these are companies that and and and you know, um,
Speaker 1: you know, structures that seem to be very legitimate but
Speaker 1: are having major issues. What do you say to reassure them? Well,
Speaker 1: I think it's not actually not that hard to differentiate
Speaker 1: some of these things from other things. Right, there's a
Speaker 1: reason Celsius has a particular lending platform they were engaged
Speaker 1: with unclear to me and maybe to others. Maybe others
Speaker 1: know whether they are what kind of insolvency we're seeing
Speaker 1: here is this cash flow insolvency is and balance sheet insolvency.
Speaker 1: But I think there's a reason that coin Based, for example,
Speaker 1: scrapped it's lending right kind of said it's not the
Speaker 1: right time. We don't have regulatory clarity that we need
Speaker 1: to see around some of that engagement. As far as Tara,
Speaker 1: it's a pretty highly dif for initiated algorithmic stable coin.
Speaker 1: It does not flect the broader crypto ecosystem in any
Speaker 1: kind of meaningful way. So I do think the thing
Speaker 1: to note is that education is really important here. Crypto
Speaker 1: is not a monolith. Every crypto l one learn one
Speaker 1: platform has a very different approach to what it's thinking
Speaker 1: about doing. Every stable coin is different. The reserves are
Speaker 1: held differently, and all of that nuance is critically important
Speaker 1: for us to understand as we move towards more of
Speaker 1: a regulation and policy environment. So what crypto projects are
Speaker 1: you most excited about? You know, where do you see legitimate,
Speaker 1: high potential. So I'm really excited about the ones that
Speaker 1: are focusing on real problems, solving real problems for real people.
Speaker 1: I think it's not a surprise We've seen crowdfunding of
Speaker 1: a wartime defense of Ukraine right in this environment. We've
Speaker 1: seen massive amounts of outlays to India during COVID relief.
Speaker 1: We've seen examples where this institutions are we're really focusing
Speaker 1: on real problems. We also know that we've got one
Speaker 1: point seven billion people in the world without access to
Speaker 1: basic financial services. It's a massive gap the legacy institutions
Speaker 1: have not solved. So projects that are focusing in those
Speaker 1: places and understand that there's a gianic market there that
Speaker 1: needs to be at these basic baseline checking account kinds
Speaker 1: of services. Those are the projects that I personally think
Speaker 1: you're gonna see longevity and stamina, and you're gonna see
Speaker 1: those emerge from this particular moment that we're in stronger
Speaker 1: than ever. All right, Crypto Council for Innovation CEO Sheila Warren,
Speaker 1: thanks for sharing your view on the landscape we are
Speaker 1: facing our own Chinali Bossi, Shinali, thank you for joining
Speaker 1: us as well. Coming back up, Chuck Robin, Cisco CEO
Speaker 1: once more from Cisco Live for more of that exclusive conversation.
Speaker 1: He'll be with me next. This is Bloomberg. We're back
Speaker 1: now with Chuck Robbins, EO of Cisco and this week's Teconomics. Chuck,
Speaker 1: we were talking about the economy Elon Musk. Of course,
Speaker 1: Hassetti has a super bad feeling about it. Jamie Diamond
Speaker 1: is preparing for an economic hurricane. How do you feel?
Speaker 1: How would you phrase it? Well, I I remain optimistic,
Speaker 1: but I also understand there's a lot of complexity in
Speaker 1: the world. And uh, I think that you know, we're
Speaker 1: focused on delivering the technology to our customers, to focused
Speaker 1: on delivering for our shareholders, and we'll have to see
Speaker 1: how things play out. There's certainly a lot of complexities.
Speaker 1: I think the FED is gonna move tomorrow. The question
Speaker 1: is how far do they move and what does that mean?
Speaker 1: But I think, you know, we're just preparing for what
Speaker 1: we can control, and then we'll respond accordingly to things
Speaker 1: that we can't. So are you preparing for a possible recession?
Speaker 1: I mean you have to be planning for different scenarios.
Speaker 1: We are always planning for different scenarios. But we've been
Speaker 1: around long enough and been through enough downturns that we
Speaker 1: have playbooks and we know how to we know how
Speaker 1: to deal with those appropriately. So we'll see. I'm trying
Speaker 1: not to borrow any trouble right now, even though I
Speaker 1: understand it's a very complex environment that we're operating in.
Speaker 1: So let's talk about the supply chain. What do you
Speaker 1: see that's still being impacted, especially when it comes to
Speaker 1: say SCO, What problems are starting to unwind and how
Speaker 1: long will these problems in general be with us? Yeah,
Speaker 1: I think on the supply chain front right now, we're
Speaker 1: obviously still seeing capacity issues around semiconductors, because every product
Speaker 1: on the planet now seems to have one or more
Speaker 1: semiconductors in it, and that's probably in the time where
Speaker 1: we start to see some capacity come online. We've seen
Speaker 1: obviously the PC demand is kind of slowed, which we
Speaker 1: think is freed up some components in the marketplace, and
Speaker 1: we're starting to see inventories at brokers increase a bit,
Speaker 1: which they build their inventories from oversupply that that suppliers
Speaker 1: have acquired that they don't need. So that's actually a
Speaker 1: positive sign. So starting to see some good signs. But
Speaker 1: I still think we're we're three six, nine months to
Speaker 1: where we really get this thing resolved in a way
Speaker 1: that's acceptable to our customers. Honestly, we're now in a
Speaker 1: period where the big big debate is do you go
Speaker 1: back to work full time or not. WebEx of course,
Speaker 1: one of Cisco top products helps enable remote work. What
Speaker 1: is Cisco's policy at this point on remote work? How
Speaker 1: are you thinking about it? And what it means the
Speaker 1: company and your investors. So there's two things. Number One,
Speaker 1: we've opened our offices and we actually are leaving it
Speaker 1: with the management. The manager and their team to determine
Speaker 1: how many days a week do you need to be
Speaker 1: in the office as a team to drive your productivity.
Speaker 1: And then if you say that's two days, then which
Speaker 1: days do you want to come in as a team.
Speaker 1: We don't think in our case, we don't think it
Speaker 1: makes sense to mandate days where people are come in
Speaker 1: the office before the pandemic. We have almost fifteen percent
Speaker 1: of our employees work from home full time anyway, and
Speaker 1: a great majority of our teams have distributed team members,
Speaker 1: so they're gonna be interacting over video anyway, and so
Speaker 1: we're leaving it up to the teams. But we're also
Speaker 1: building a whole set of products and a solution portfolio
Speaker 1: for our customers who are trying to solve this hybrid
Speaker 1: work issue, because every customer has a different approach that
Speaker 1: they're taking, and we believe we have a lot of
Speaker 1: technology that can help them. So do you think Elon
Speaker 1: Musk calling workers back to the office, is he going
Speaker 1: to be on the wrong side of history. Well, every company,
Speaker 1: I think is different in what they need, and they're
Speaker 1: like groups within our company that have decided they need
Speaker 1: to be in the office more often. So our engineering
Speaker 1: teams that want to collaborate in whiteboard and build products together,
Speaker 1: they're spending more time in the office than perhaps some
Speaker 1: of our other teams. So it would be very difficult
Speaker 1: for me to critique another CEO's decision about what they
Speaker 1: believe they need their employees to do. But for us,
Speaker 1: we think this strategy is working. So far, and we've
Speaker 1: seen the innovation continue to to pour out of the organization.
Speaker 1: The teams are doing a phenomenal job, so we're quite
Speaker 1: comfortable with where we are. If the future of work
Speaker 1: is hybrid, you know, security is even more important. I
Speaker 1: know that's one of the focuses of Cisco Live. You know,
Speaker 1: talk to us about the threat landscape you see out
Speaker 1: there for businesses and the vulnerabilities they still face in
Speaker 1: terms of shoring up their defensions, getting their systems ready
Speaker 1: and able to enable this kind of work for the
Speaker 1: long term future. Well, the complexity that's been created over
Speaker 1: the last few years. Every customer we have now is
Speaker 1: dealing with employees that are massively distributed. Their applications are
Speaker 1: running in multiple places public clouds, private cloud sas applications
Speaker 1: as well as data is now being distributed. And now
Speaker 1: we have IoT really becoming real sort of bringing new
Speaker 1: devices onto the network, and so it really creates a
Speaker 1: new paradigm around how our customers need to defend in security,
Speaker 1: which is why we announced our strategy around Cisco Security
Speaker 1: Cloud this week, continued Trusted Access, Secure Connect Plus. So
Speaker 1: we're bringing out technologies that help for this new environment
Speaker 1: and at the same time, I think it's just imperative
Speaker 1: for all of us that we have to stay focused
Speaker 1: on employee hygiene because the people and the passwords and
Speaker 1: all those things that we count on everyone to do
Speaker 1: properly every day continues to be one of the biggest
Speaker 1: risks in the system. What's your view on M and
Speaker 1: A right now? With valuations coming down, are there any
Speaker 1: areas you're interested in potential targets you could share? Well?
Speaker 1: We have. Uh. I've been asked a few times if
Speaker 1: our M and A strategy has changed because of the valuations,
Speaker 1: and I've said, our strategy hasn't changed. The openness to
Speaker 1: talking to us might have changed on the other side,
Speaker 1: but uh, you know, we remain interested in the same
Speaker 1: area as we have been interested. Uh you know, we're
Speaker 1: always on the lookout for security. They're emerging areas around
Speaker 1: observe ability. But uh, you know, we we start with
Speaker 1: is it a strategic fit for our technology portfolio? Is
Speaker 1: it a cultural fit? And is it good for our
Speaker 1: shareholders long term? And as long as those three work,
Speaker 1: the valuations certainly make a lot more assets actually fit
Speaker 1: in that criteria, a lot more so than perhaps six
Speaker 1: months ago. Any chance Cisco would make a competing bid
Speaker 1: for vm Ware. I'm not going to comment on that,
Speaker 1: but I think we're we we we we're constantly looking
Speaker 1: at all of our our potential targets out there. And uh,
Speaker 1: you know, we've had we build partnerships with companies we acquire,
Speaker 1: and we do lots of our own innovation and internal
Speaker 1: research and development. We're gonna continue to focus on all
Speaker 1: of those. So look, check you've been in this industry
Speaker 1: for a long time. You've been working at Cisco for
Speaker 1: a long time. One of our guests earlier in the
Speaker 1: show pointed to Cisco stock and what happened in the
Speaker 1: dot com bust and how it's taken decades to get
Speaker 1: back to where it was from a historical perspective. How
Speaker 1: do you see this downturn fitting into the you know,
Speaker 1: longer term picture. I'm just so curious how you're evaluating it.
Speaker 1: It's funny you say I've been around for a long time.
Speaker 1: You actually were one of my first interviews when I
Speaker 1: became CEO. Uh, and um, I think, look, what's happened
Speaker 1: is there's now a higher value put on being profitable.
Speaker 1: Clearly there's there's there's a lot of similarities in some
Speaker 1: of the companies that had great ideas, uh, you know,
Speaker 1: similarities with the dot um bus. And I think i've
Speaker 1: heard people talk about it today and over the last
Speaker 1: few days, is that there were certainly quality companies that emerge.
Speaker 1: And I think what what will be realized out of
Speaker 1: this is that what are the real, valid business models
Speaker 1: that are going to emerge that have the ability to
Speaker 1: make money over the short term and over the long term.
Speaker 1: But it's clear right now the market is going to
Speaker 1: reward real companies that build real things and make real earnings.
Speaker 1: And our current quarter, the low end of our guide
Speaker 1: we gave it the last earnings call is a record
Speaker 1: EPs year for Cisco, So we're pretty happy with where
Speaker 1: we are. So look, you know, if as you're mapping
Speaker 1: out your plans, what's your own what's your sort of
Speaker 1: strategic advice to yourself in terms of how you get
Speaker 1: how you get from you know this point to the
Speaker 1: end of the year dealing with all of these unpredictable forces. Well,
Speaker 1: my advice is look back at what you've done over
Speaker 1: the last two and a half years, because they've just
Speaker 1: been different crises and we're just dealing with it yet
Speaker 1: another one now. And you know, we focus a lot
Speaker 1: of it sounds clichetic, but we focus a tunnelness stuff
Speaker 1: we really can control. And I've been at way almost
Speaker 1: all my life. The things that I can control our
Speaker 1: monitor and we plan for, but we don't worry about them.
Speaker 1: And so we're going to continue to do what we
Speaker 1: can do, continue to execute, and continue to deliver technology
Speaker 1: that we think our customers really need right now as
Speaker 1: everybody's trying to modernize and really build their architectures for
Speaker 1: the new world, and candidly to deal with the next
Speaker 1: crisis and be ready because so many of our customers
Speaker 1: were not ready when we went into the pandemic. All right,
Speaker 1: Cisco CEO, Chuck Robbins, I remember that first interview you
Speaker 1: did with me as CEO. Appreciated the time then, and
Speaker 1: now thank you for joining us. We'll let you get
Speaker 1: back to Cisco Live, all right. I want to get
Speaker 1: now to another big enterprise company, and that is Oracle.
Speaker 1: After it's sank to a sixteen months low in Monday
Speaker 1: markets fall, but now having the best day in six
Speaker 1: months after fourth quarter cloud sales topped estimates. Our ed
Speaker 1: letlow has been taken a deep dive on that at
Speaker 1: what do you see how quickly things change? I mean,
Speaker 1: Oracle is interesting because they set their stool out right there,
Speaker 1: like we want to move into cloud and cloud is
Speaker 1: less than a quarter of revenue, and they performed, you know,
Speaker 1: cloud grew in the quarter. They're giving a really bullish
Speaker 1: outlook about growth in the current quarter of the year
Speaker 1: at a time where everyone's worried about recession. It's kind
Speaker 1: of similar to Cisco. You know, they're not the sexiest
Speaker 1: companies with respect to if he's just listening and he's
Speaker 1: still listening, But they're really important as a read on
Speaker 1: the economy because this is where businesses also also has
Speaker 1: to spend their money. Well, so you read what Chuck
Speaker 1: Robin said there. He's optimistic, but it's complicated. There are
Speaker 1: a lot of things that they can't control. What is
Speaker 1: Oracle saying about the economy. There are macroeconomic headwinds. But
Speaker 1: I think what's really interesting for them is that they,
Speaker 1: just like Cisco did, they're kind of maintaining the idea
Speaker 1: that the demand is there that even smaller businesses are
Speaker 1: willing to spend on moving to cloud infrastructure. Why because
Speaker 1: over the course of the pandemic. They learned that investing
Speaker 1: in moving to cloud is cost efficient. You know, it
Speaker 1: might be an upfront cost, or it might be a
Speaker 1: brave decision, but when the world is changing, you're not
Speaker 1: labored with a lot of hardware or a lot of
Speaker 1: servers that there will be obviously in a few years time,
Speaker 1: So it seems like the smart choice. You still need
Speaker 1: technology to keep remote workforce is connected. For the example,
Speaker 1: as Chuck was pointing out, you know Larry Allison. Of course,
Speaker 1: you know we we don't talk about him enough. Last
Speaker 1: we were talking about his plans for when I, um,
Speaker 1: you know, to talk to us about the significance here
Speaker 1: of you know, a guy and a company that we
Speaker 1: don't actually talk about very much. But it's still a
Speaker 1: giant industry. You know, it's interesting we talk about him more.
Speaker 1: Is a is a Silicon Valley kind of name than
Speaker 1: we do. Is the CEO of a really big company,
Speaker 1: and he owns a really big chunk of Oracle, which
Speaker 1: is worth remembering. He has a vested interest in its success.
Speaker 1: But you know he is participating in these earnings calls.
Speaker 1: He's stepped down from the board of Tesla, which is
Speaker 1: a news item of the last week is an ally
Speaker 1: Elon Masque. He's a reported backer of Mosques bid to
Speaker 1: buy Twitter. He's on his island in Hawaii, but he's
Speaker 1: also running a really critically important tech company in Oracle. Yeah.
Speaker 1: Interesting to see how his career has involved at Bloodlow.
Speaker 1: Thank you, thanks for that quick update, and that does
Speaker 1: it for this edition of Bloomberg Technology. We're gonna continue
Speaker 1: to stay on top of all of this market mayhem.
Speaker 1: Full coverage right here on Wednesday of the FED meeting,
Speaker 1: we are expecting those rates to rise seventy five basis points.
Speaker 1: Coverage starts live one thirty pm Eastern time, ten thirty
Speaker 1: am Pacific. Also, we're gonna be joined by Victoria Green
Speaker 1: of g squared for market reaction tomorrow and Melton two Mirrors,
Speaker 1: chief strategy officer of coin Shares talking crypto. That's all
Speaker 1: coming up tomorrow. I'm Emily Changed in San Francisco. This
Speaker 1: is Bloomberg