tv Maria Bartiromos Wall Street FOX Business May 27, 2018 7:00am-7:30am EDT
inheritance story you'd like to share with us? we'd love to hear it! send me an e-mail, or go to our website, strangeinheritance.com. great memorial day weekend, goodnight. maria: happy weekend, welcome to the program that analyzes the week that was and how its positioned you for the week ahead i'm maria bartiromo coming up in just a few moments cisco chairman and ceo chuck robbins, my special guest, we will talk about the economy and tech today but first, adam shapiro is standing by right now in the fox business news room with the big headlines impacting everything from wall street to main street. adam? adam: thanks, maria. it looks as if the looming trade war between the u.s. and china has been put on hold. the chinese announced plans to buy more farm and agricultural products from the united states while the u.s. is working to lift sanctions on chinese
telecom giant zte in fact president trump says there is a tentative deal in place already, but he adds a different structure is needed to craft a total trade deal with china. despite a huge oil sell-off this week and news of the cancellation of the u.s. north korea summit the three major indices still managed to finish in the green thanks to a strong week in the utility, telcom and industrial sectors. in other trade news the white house is investigating whether to impose huge new tariffs on imported cars and parts. the trump adminitration is seeking a 25% tariff on national security grounds, nearly 1 million american jobs are tied to autos and auto parts manufacturing. more bad news for general electric the stock dropped 7% this week after its ceo, john flannery, said that the already watered down dividend wasn't safe. it was the biggest drop for ge in nine years. for a brief moment this week netflix became the largest
entertainment company in the world. the online streaming giant passed disney in market cap briefly thursday, netflix shares are up 71% just this year, and as we enter the holiday weekend u.s. drivers are looking at the highest gas prices seen in four years. the national average is nearly $ 3 a gallon, about $0.60 higher than last year analysts say the price could actually settle over $3 a gallon for the summer. maria back to you. maria: thank you, adam it was a volatile week for stocks investors reacting to worries over trade deals the federal reserve, rising oil prices, and of course earnings news as well. how should you plan to navigate the week ahead? the founder and chief investment officer of the bon ton group is with me, joining me right now david great to see you. >> great to be with you. maria: thank you for joining us so they basically signaled we are going to see another interest rate hike in june in the june meeting and then of course all the worries about trade, how are you positioned right now? >> well we have been somewhat defensive in kind of a moderate
balance positioning most of the year so we are probably early getting defensive and then right now you could say okay well it's a good place to be but the problem is bonds are not really diversifying from equities very well. i think that people have to understand that if the market is vulnerable because of rising rates, then you're bonds and stocks are heavily correlated together so it's affected the way you want to think about asset allocation overall fear about the market on the stock side we're very heavy in energy which has helped us quite a bit. maria: that's great. and heavy in more defensive-type stocks which has helped except for with names like consumer staples and telecom. those have lagged. maria: energy, the price of oil all the way up to what? 72. >> 72 on wti. that's right and yet a lot of the energy stocks had really kind of held back, chevron and exxon just started to rally more this last month, but we think there's a huge disconnect to where the whole energy sector not just commodity price- sensitive ones. maria: we have the jobs number
out a week from today a week from this weekend. the economy has been doing better. almost full employment. you have the federal reserve earlier this week say yeah, we are signaling that we will see another interest rate increase in june. good move? >> well it's kind of inevitable we watch the fed futures market quite a bit. the june one has been pretty well priced in so what's interesting now is december now the fed futures market point about 50% chance of that happening it would be much lower so that fourth rate hike on the year is the one that could be more material. i'm suspect if they'll really do it but it's so far in advance anything can happen, but one thing i'd really encourage viewers is when we talk about the economic data, we are so centered on the consumer and center of that appointment number but i really think that it's the capex, it's what's happening in business investment that matters. if the business tax reform works as well as i believe it's going to and early indications show you're going to see it in business investment which takes a little while. the unemployment number comes
every month it's a big headline issue but really, it's not moving stocks. it hasn't for a long time. i think if you start seeing industrial production, capital goods orders, these are the things that we're so lacking to the entire obama administration years, right now if you see that's will represent the next leg. maria: and it doesn't matter to you if we see a consumer that's iffy this week lowe's fell apart others as well. tiffany did really well. >> yeah and of course that's the thing about the consumer space is that you have -- maria: bifurcated. >> and then with lowe's you have ceo changes. maria: that's true. >> the high end of the market functions different than low end so i think the consumer and the retailer are two different things and people often put them together. maria: david great to see you. thank you so much, the author of crisis of responsibility. don't go anywhere cisco chairman and ceo chuck robbins is next on wall street. the sun is shining
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medical or dental procedures. eliquis, the number one cardiologist-prescribed blood thinner. ask your doctor if eliquis is what's next for you. maria: welcome back. cisco, the worldwide leader in i t networking and security the company last week reported an impressive beat on both earnings and revenues 2.6 billion in earnings on revenue of $12.5 billion, it failed to wow investors though with the growth outlook the stock actually traded down initially, cisco also disclosing its using repatriated funds to pay down debt. making some analysts wonder if it will have less cash for acquisitions. what does cisco business tell us about the broader spending and state of the economy joining me to help answer that is the chairman and ceo of cisco chuck robbins good to see you. thanks for joining us. >> thanks for having me. maria: what are you seeing based on your vantage point in terms of growth in the economy today? >> first of all we were very
pleased with the quarter. we obviously grew 4%, 12.5 billion we had a record quarter from an eps perspective we had a record quarter relative to our capital return to shareholders. weontinueo see the celeration o t product we launched last summer in our core franchises which is the fastest ramping product in the history of the company. maria: wow. >> and we continued to see success in our business model transition, so we announced that we have now 5-point # billion dollars in deferred software and subscription business on our balance sheet up 29% and a third of our business is now coming from recurring and we just made a lot of progress so i was very confident in the outlook for next quarter shows continued strength and increasing top line revenues, so overall we're very pleased. maria: i want to talk to you more about the shift that you talked a lot about on the call toward recurring revenue but first when you look at the overall quarter, and business spend right now, corporations
have to spend on security, on it , we know that but for a lot of years businesses were sitting on cash, because of regulations, because of the broader economic outlook. what are your thoughts in terms of businessman agers right now. are they increasing their budgets toward this kind of spend? >> yeah, maria i think the big difference is that for the last two or three decades, it and technology has been seen as, you know, the responsibility of it was to enable the strategy that the company rallied around, so the company would build a strategy, and the it organization built a technology to enable that and today, things are completely different now. technology is actually at the heart of every strategy of every company, every city every country around the world, and so technology is no longer something that i spend when it's convenient. it is at the heart of everything everybody is doing. i think you'll see a much more
consistent it spending environment from our customers and then when you also look at the importance of cybersecurity as we connect billions and billions of new devices the entire focus on security continues to increase which is another area our customers continue to spend on. maria: so what's the outlook then for the rest of the year and into next year? >> well it feels like right now notwithstanding major macro geo political issue that we're operating in an environment as you and i talked about in davos where there's probably the most consistent optimism around the world when you look at customer segments you look at geographies , you look at emerging countries this past quarter were positive and we also have the rising dollar which has impact on emerging countries and they tend to be more volatile but i think with the importance of technology, the increase in cyber spending and the current strength of the global economy it feels pretty good right now.
maria: you repatriated money from overseas to the u.s.. >> we did. maria: tell us about that and what you're expecting to use this money for of course you've got to work out buybacks and stock dividend increases is that right? >> well so we repatriated $67 billion and we've now completed that so it's back in the u.s. and what we announced is is that our capital allocation strategy wouldn't change but we accelerated it so you saw us last quarter we announced a dividend increase now that happened to be the quarter where we typically do that on an annual basis but we had a pretty aggressive dividend increase and we la nounsed we're going to increase our share buybacks and obviously we continue our m & a strategy that we've deployed for many years and our m & a strategy wasn't impacted really by the dollars being overseas because of the debt markets and the access to debt so we have not, there hasn't been a single deal that we wanted to do that we weren't
able to do because of our cash being overseas but it certainly gives us more flexibility. maria: what kind of deals would you look at in the coming year for example? is it more towards cybersecurity is it toward networking? i mean, where are the areas in the business that you'd like to grow from acquisitions? >> we would look at anyone that makes sense and really the way we think about acquisitions is that we want those that are complementary, they either make our existing franchises stronger or they help us extend our franchises or they move us into an adjacency that's very connected to so if you look at the areas that are really important it's across across the portfolio but i'll call out security and we can talk more about this architecture that we've built but obviously security is a very important priority for our customers and it would be a high priority for us from an m & a perspective. our customers are dealing with ironically a more complicated it
world today than they had five years ago and i say ironically because the whole notion of public cloud was going to simplify all of technology and the reality is between public cloud and the explosion of iot and the continued investments in private data centers the network actually has to play a more important role than it ever has so policy and helping our customers navigate this multi-cloud world is another area for us. maria: i want to talk more about security so important for our viewers and for your business of course but let's take a break. before we take a break how long have you been in china? >> oh, we've been there for almost 25 years. maria: i want to ask you about china that seems to be the conversation of the moment, more with chuck robbins when we come right back we'll talk china as well as m & a. stay with us.
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maria: welcome back we are back with the chairman and ceo of cisco chuck robbins with me this weekend and chuck just a moment ago you said you've been in china for 25 years. can you talk to us about your experience there because it seem s like right now, this is the topic that the u.s. and china having debates, arguments about trade. how have you been treated in china? >> well i'm shocked that we're actually going to talk about this maria. maria: [laughter] >> we've actually been treated i think reasonably fairly in china over the years. when we go into countries we actually want to obviously drive our business strategy in china but we also focus on being a responsible citizen in the
countries in which we operate so we've also had corporate social responsibility issues we've driven education initiatives in china to help educate students and technology areas but overall , we have experienced a reasonable atmosphere there for a lot of years. there have been ups and downs and complications usually driven by geopolitical dynamics but overall, we're doing great work with smart cities going on there we are working with telco community there, we're working with cities and small and medium and large enterprise customers, so overall it's a reasonable environment for us. maria: was it the right move for china and the u.s. to coming together to come up with some kind of a plan for zte? i mean, the issue of a national security is real and it feels like this deal of china buying more stuff from the united states whether it's agricultural products or natural gas doesn't address the real issue for american business and that is the best of intellectual
property and the forced transfer of technology. you know, for us in china, i've not experienced any demands for forced technology transfers we have a joint venture there where we're providing our technology that's being integrated into broader solutions. maria: so you didn't have to give up your technology? >> we have not and we wouldn't and so i think that when you look at the overall trade environment right now, i think it is critically important for our two countries to coming together because getting this resolved is good for china and good for the u.s. and good for the global economy and relative to zte when you look at what's going on there i'm not privy to any of the issues that they have been accused of, i'm not aware of any of the facts, but i think that to the extent that our government believes there's a reasonable outcome there and it helps solve the broader trade issues then it's a reasonable discussion to have. maria: where are you seeing growth how is the growth for cisco in china?
what about the growth across the world? you mentioned emerging markets earlier. obviously the u.s. is most important for cisco but tell me about the growth where you're seeing it in the world. >> when we think about growth we look at it across our customer segments our technology areas and then geographies as well so we saw growth across most of our technology platforms and we saw it across the world across most all regions. we saw again the emerging countries they grew 7% this past quarter which is good but as we said earlier you've got the ris ing dollar that tends to make the emerging markets a little tougher so we'll see how that evolves in china in particular, we had good business in our core switching politician and our core networking portfolio so it was a very unique quarter where we saw consistent growth across customer segments with the exception of our telco segment which has been slow for probably seven or eight quarters in a row now the rest of our business was pretty consistent.
maria: cybersecurity is obviously quite important. >> it's huge. maria: really one of the important spends for ceo's today what are you seeing in terms of the security part of the business. >> for us it grew double-digits this past quarter and we are the largest cybersecurity company in the world although it's a very fragmented market, and just to give you some data, we actually blocked 20 billion threats every day on be half of our customers, so we see a huge number of threats that come through to our customers and we see that in a very unique way because we take in threat intelligence from endpoint devices from e-mail from the network itself, and from the cloud, so we have a unique view of the threat landscape. maria: this is pretty incredible what you just said 20 billion threats a day that you are see ing and that you're blocking. where are these threats coming from? is this malware what are the threats, chuck? >> yeah, a lot of it's malware. that still is the predominant
threat vector that we see. we examine 125 billion pieces of e-mail on a daily basis and there's a very high content of that that is spam but there's, that's where the malware comes in and obviously, when you think about how these threats become real inside of organizations a lot of time it's simple things. first of all people click on links or attachments that they should not and also you just have simple password management, just a lot of basic things and sometimes you have real inside threats that are problems but overall we think the customers need to really think about a holistic architecture because in the old days the way we did security is we defended a perimeter and in this new world there is no perimeter to defend so the network has to play a really incredible role in actually providing that defense going forward. maria: there is a feeling out there a narrative that some people are saying that by the end of 19 going into 2020 we
will likely start seeing beginnings of a recession thins will slow down quite a bit. is that on your horizon? do you see that? >> i think if you listen to the economists you can find them on this side of that argument and this side and both of those people are probably more expert in this area than even i am so we're going to continue to execute on the things we execute on. we would certainly not hope to see that happen, and we'll see how things play out. maria: and it feels pretty good some people say that we're seeing policies out of washington that have helped very much. was that one of the reasons that you repatriated money back? are you seeing your customers benefit from the tax cuts and the roll rollback in regs? >> yeah our customers can spend more time when they don't spend it on regulatory issues when they look at how they are implement more technology create competitive advantages certainly the tax rates have given our customers a higher degree of
confidence the repatriation the only reason we repatriated the funds was because of the tax changes, so i think all of that has been favorable for business and has helped create the environment that we're in right now. maria: construction great to have you on the program. thank you so much. chuck robbins is the chairman and ceo of cisco. don't go anywhere march wall street right after this. hey ron! they're finally taking down that schwab billboard. oh, not so fast, carl. ♪ oh no. schwab, again? index investing for that low? that's three times less than fidelity... ...and four times less than vanguard. what's next, no minimums? ...no minimums. schwab has lowered the cost of investing again. introducing the lowest cost index funds in the industry with no minimums. i bet they're calling about the schwab news. schwab.
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