CNBC Transcript: Cisco CEO Chuck Robbins Speaks With SQUAWK ON THE STREET

Following is the unofficial transcript of a FIRST ON CNBC interview with Cisco CEO Chuck Robbins and CNBC's David Faber and Jim Cramer on CNBC's "Squawk on the Street" (M-F 9AM-11AM) today, Thursday, February 15, 2018. Following is a link to video from the interview on CNBC.com here!

JIM CRAMER: LAST NIGHT CISCO WAS OUT WITH STRONG EARNINGS, STRONG REVENUE GROWTH, ACTUALLY HUGE REVENUE GROWTH, ANNOUNCING PLANS FOR ITS OVERSEAS CASH AND ALSO, I WOULD SAY, JUST KIND OF BECOMING WHAT WE USED TO REMEMBER ABOUT CISCO, A GREAT GROWTH ENGINE. SO LET'S BRING IN CISCO CEO CHUCK ROBBINS. CHUCK, CONGRATULATIONS ON A GREAT QUARTER, LIKE THE ANALYSTS SAID ON IT. AND I'M TRYING TO FIGURE OUT THE BEST STORY, WHETHER IT'S THE ACCELERATED REVENUE GROWTH, WHETHER IT'S THE $67 BILLION REPATRIATION, WHETHER IT'S THE ACQUISITIONS REALLY COMING IN, BUT I WANT TO SETTLE ON THE FACT YOU HAVE RECURRING REVENUE THAT IS DRAMATICALLY UP IN TEN QUARTERS BECAUSE I THINK THAT IS THE STORY, SOME OF JOURNALISTS ARE MISSING IT, BUT ISN'T THAT THE GOAL TO HAVE THAT HUGE RECURRING REVENUE TO BE LIKE ADOBE AND NOT LIKE A HARDWARE COMPANY?

CHUCK ROBBINS: FIRST OF ALL, JIM AND DAVID, THANK YOU FOR HAVING ME. IT'S GREAT TO BE HERE AGAIN, AND WE'RE REALLY PROUD OF WHAT OUR TEAMS HAVE ACCOMPLISHED. WE HAD A GREAT QUARTER AS YOU SAID. YOU KNOW, WE'RE AT A POINT WHERE WE HAVE A PHENOMENAL INNOVATION PIPELINE, WE HAVE, YOU KNOW, THE STRENGTH AND THE FLEXIBILITY OF OUR BALANCE SHEET AND WE HAVE A VERY EXCITED TEAM WHO'S EXECUTING REALLY WELL. YOU KNOW, WHEN I TOOK THIS JOB TEN QUARTERS AGO, THERE WERE TWO BIG THINGS WE WANTED TO DO, JIM. ONE WAS WE WANTED TO REACCELERATE THE INNOVATION IN OUR CORE FRANCHISES AND WE WANTED TO BEGIN TO EXECUTE ON THIS TRANSITION TO MORE SOFTWARE, HIGHER DEGREES OF RECURRING REVENUE. AND IF YOU LOOK AT WHAT HAPPENED IN THIS QUARTER, OUR NEW CATALYST 9,000 PRODUCT, WHICH IS PART OF OUR INTENT-BASED NETWORKING PORTFOLIO, WE REACHED TO 3,100 CUSTOMERS IN JUST A SECOND FULL QUARTER OF SHIPMENTS AND IT'S THE FASTEST RAMPING PRODUCT IN THE HISTORY OF THE COMPANY, SO THAT'S THE FIRST PIECE IN OUR CORE. AND THEN THE SECOND, RELATIVE TO THIS SOFTWARE TRANSITION, YOU KNOW, 33% OF OUR BUSINESS IS NOW RECURRING. WE HAD - WE HAVE 5.5 BILLION NOW ON OUR BALANCE SHEET IN DEFERRED SOFTWARE AND SUBSCRIPTION REVENUE, UP 36%. AND IF YOU LOOK AT JUST OUR PRODUCT REVENUE, TEN QUARTER AGO, 6% WAS FROM RECURRING OFFERS AND THIS PAST QUARTER IT WAS AT 13% AND THAT GREW 34% AS WELL. SO WE'RE VERY PLEASED WITH WHAT WE DID. VERY HAPPY WITH THE EXECUTION AS THE TEAM DELIVERED AND WE'RE OPTIMISTIC ABOUT WHERE WE ARE RIGHT NOW.

CRAMER: ALRIGHT SO CHUCK, LET'S SAY I'M A SALES PERSON FOR CISCO AND HAD SWITCHES AND ROUTERS TO SELL 11 QUARTERS AGO. YOU'RE GIVING PEOPLE EVERYTHING FROM A TIE INTO MICROSOFT, A TIE IN TO GOOGLE CLOUD, BUT I WAS STRUCK BY THE 20 MILLION STRONG USER BASE OF BROADSOFT. I MEAN, ARE PEOPLE SELLING THAT TOO? AND CYBER SECURITY? AND THE AMAZING ALLIANCE HERE WITH ALLIANCE, AEON AND APPLE FOR RISK MANAGEMENT. IS THAT ALL IN THEIR TOOL BOX AND THAT'S ONE OF THE REASONS YOU'RE HAVING SUCH ELECTRIC SUBSCRIPTION GROWTH?

ROBBINS: WELL, YOU KNOW, JIM, IF YOU LOOK FIRST OF ALL ON THE CORE PLATFORMS WE LAUNCHED OUR SUBSCRIPTION ON A NETWORK SWITCH WHICH PEOPLE DIDN'T THINK WE COULD DO AND WE'VE HAD AN INCREDIBLE UPTAKE ON ADVANCED VERSION OF THAT. WE HAVE CUSTOMERS IN THAT SPACE WHO, YOU KNOW, THEY SPEND $5 ON OPERATING THE NETWORK FOR EVERY ONE DOLLAR THEY SPEND ON THE EQUIPMENT. SO IF WE CAN HELP THEM LOWER THE OPERATIONAL COSTS, WHICH IS WHAT WE'RE DOING THROUGH THE AUTOMATION PLATFORM, IN THE SECURITY BUSINESS, OUR RECURRING SUBSCRIPTION BUSINESS DEFERRED GREW BY I THINK IT WAS 34% AGAIN THIS QUARTER, SO WE SAW CONTINUED MOVE THERE. YOU TALK ABOUT BROADSOFTWARE, WE JUST CLOSE THAT ACQUISITION AND THEY HAVE 20 MILLION USERS WHERE WE CAN EXPAND OUR CLOUDS BASED SUBSCRIPTION BUSINESS AND COLLABORATION. WE HAVE A LOT OF AREAS AND THEN ALSO, THE WORK WE'VE DONE WITH APPLE ON THE SECURE CONNECTOR FOR IOS, YOU MENTIONED THE CYBER SECURITY ALLIANCE THAT WE BUILT AND ALSO WORK WITH GOOGLE AND MICROSOFT ON HELPING CUSTOMERS NAVIGATE THIS COMPLICATED MULTICLOUD WORLD THEY LIVE IN. SO, WE HAVE -- WE HAVE A LOT OF AREAS THAT OUR TEAMS CAN HAVE REAL RICH CONVERSATIONS WITH OUR CUSTOMERS.

DAVID FABER: CHUCK, I'D LIKE YOU TO TAKE ME THROUGH THE CAPITAL ALLOCATION DECISIONS YOU'VE MADE, IN PART OF COURSE, GIVEN THE DECISION TO BRING BACK $67 BILLION IN CASH FROM OVERSEAS. YOU INCREASED THE BUY BACK TO $31 BILLION, A $25 BILLION INCREASE, YOU INCREASED THE DIVIDEND. WHY ARE THESE THE RIGHT MOVES, AND JUST TAKE ME THROUGH YOUR THINKING HERE IN TERMS OF HOW YOU'RE ALLOCATING CAPITAL GIVEN THE BENEFITS FROM TAX REFORM.

ROBBINS: YEAH, WELL, DAVID, THANKS FOR THE QUESTION. AND WE TALKED ABOUT THIS IN THE PAST. WE'RE NOT AN INCREDIBLY CAPITAL INTENSIVE BUSINESS IF YOU LOOK AT OUR TOTAL CAPEX WE SPEND ON AN ANNUAL BASIS. SO THERE'S SEVERAL OPTIONS WE HAVE. WE'VE ALWAYS TALKED ABOUT THE FACT THAT WE WOULD LEVERAGE THIS CAPITAL FOR -- TO REDUCE OUR SHARE COUNT WHICH WE ANNOUNCED YESTERDAY, OBVIOUSLY TO CONTINUE OUR CAPITAL STRATEGY OF RETURNING CASH TO OUR SHAREHOLDERS AND WE INCREASED OUR DIVIDEND YET AGAIN YESTERDAY. AND THEN WE ALSO THINK WE HAVE LEFT PLENTY OF CAPACITY TO DELIVER M & A THAT ALIGNS WITH OUR STRATEGY THAT WE'VE LAID OUT OVER THE LAST TWO AND A HALF YEARS. FROM A -- FROM THE STRENGTH OF OUR OPERATING MODEL RIGHT NOW, GIVES US THE OPPORTUNITY TO ALSO DO THE THINGS WE'RE DOING RELATIVE TO COMPENSATION FOR OUR EMPLOYEES, WHICH WE LAUNCHED YESTERDAY. WE'RE ALSO WORKING ON LOTS OF EFFORTS AROUND MAJOR ISSUES IN OUR COUNTRY AND AROUND THE WORLD, SOME OF THE SOCIAL ISSUES, WHETHER IT'S HOMELESSNESS OR HUNGER. WE'RE WORKING ON A GLOBAL BASIS, WE'RE EDUCATING REFUGEES IN GERMANY, WE'RE EDUCATING PRISONERS IN ITALY. SO WE'RE SPENDING A LOT OF TIME, NOT ONLY EVOLVING OUR EMPLOYEE PROGRAMS AND EMPLOYEE COMPENSATION, BUT ALSO ENSURING WE'RE GIVING BACK TO THE COMMUNITY, WORKING ON SKILLS GAPS AROUND THE WORLD. SO I THINK IT'S A COMBINATION OF RETURNING OUR CAPITAL BUT ALSO LEVERAGING THE STRENGTH OF OUR BUSINESS TO MAKE SURE WE'RE ALSO GIVING BACK.

CRAMER: ALRIGHT CHUCK, THERE HAD BEEN A BIG THESIS GOING ON THAT KEPT CISCO BACK FOR AWHILE, WHICH IS THE SO CALLED WHITE-BOX THESIS, THAT CUSTOMERS WOULD SAY, "YOU KNOW WHAT, I TAKE OFF THE SHELF STUFF. I DON'T NEED CISCO, I CAN PUT IT TOGETHER." AND YOU KNOW ARISTA HAS BENEFITED FROM THAT AND THEY'VE DONE A GREAT JOB AND YOU'VE ALWAYS BEEN COMPLIMENTARY OF WHAT THEY DO. BUT THE WHITEBOX THESIS SEEMS TO HAVE DEMINISHED. IT'S ALMOST AS IF THINGS HAVE GOTTEN TOO COMPLICATED AND THERE'S ONLY A COUPLE OF CLIENTS THAT CAN DO WHITE BOX. IS THAT THE STORY? THE COMPLEXITY AND HOW YOU NEED CISCO BECAUSE YOU CAN'T DO IT YOURSELF ANYMORE?

ROBBINS: WELL, THERE'S REALLY TWO PLACES WHERE THIS DISCUSSION IS RELEVANT, JIM. FIRST IN THE MAJOR WEB SKILL COMMUNITY, WHERE THEY FRANKLY WANTED WHITE BOX SOLUTIONS BECAUSE THEY BUILT AUTOMATION PLATFORMS THAT THEY NEEDED TECHNOLOGY THAT FITS WITHIN THAT. SO TO THE EXTENT WE CAN TAKE OUR TECHNOLOGY AND HAVE IT OPERATE WITHIN THEIR AUTOMATION ENVIRONMENTS AND AT A VERY COST EFFECTIVE PRICE POINT, THEN THEY'RE QUITE HAPPY TO OPERATE WITH US, SO THAT'S ONE PLACE. IN THE ENTERPRISE, THE ISSUES ARE MUCH DIFFERENT. IF YOU LOOK AT WHAT OUR CUSTOMERS DEALING WITH, AGAIN, IT'S $5 PER YEAR ON - I'M SORRY, $3 PER YEAR ON OPERATING THESE NETWORKS VERSUS THE DOLLAR THEY SPEND. SO, IF A PRODUCT HAS A FIVE-YEAR LIFESCYCLE, THEY'RE GOING TO SPEND A DOLLAR FOR IT AND THEY'RE GONNA SPEND $15 MANAGING IT. THE ISSUE IS NOT ABOUT HOW DO I SAVE 10 CENTS ON THE DOLLAR, THE ISSUE IS HOW DO WE LOWER THE COST OF OPERATING IT AND THAT'S A BIG PART OF WHAT WE LAUNCHED WITH A NETWORK INTUITIVE, WHERE WE DELIVER A LAYER OF AUTOMATION.

CRAMER: OKAY, CHUCK, WELL WE - I JUST WANT TO THANK YOU SO MUCH FOR COMING ON OUR SHOW AND ALSO WANT TO SAY THAT I THINK THAT THE TAR HEELS ARE PEAKING AT THE RIGHT TIME. I THINK THAT'S IMPORTANT FOR YOU.

ROBBINS: CONGRATULATIONS ON THE EAGLES.

CRAMER: THANK YOU VERY MUCH. CONGRATULATIONS TO YOU.

ROBBINS: THANKS. GREAT TO BE HERE.

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