Since he took the reins of Cisco Systems Inc. as chief executive in 2015, Chuck Robbins has steered the network-equipment company toward cloud computing and software-subscription revenue, a new direction for the networking giant.
After some early bumps, Cisco has settled into a groove the past six quarters, culminating in better-than-expected earnings of 78 cents per share in its third fiscal quarter on revenue of $13.1 billion and strong guidance for the current quarter. It added up to a pop in Cisco shares, which are up more than 25% in 2019 and flirting with a 52-week high.
Don’t miss: Chuck Robbins decided to ‘change everything’ at Cisco, and it’s working
Robbins, who succeeded Silicon Valley legend John Chambers, sat down for an hour-long interview this month to reflect on his transformation plan. The interview is edited for clarity, length and brevity.
MarketWatch: Why such dramatic changes in mid-2015?
Chuck Robbins: Things were changing fast. We needed to match the business narrative of companies going to the cloud and a shift by them toward more paid software subscriptions as a percentage of total software sales. It was a pretty obvious choice.
MW: You outlined an ambitious turnaround plan when you took over. Were there any concerns it overreached?
Robbins: John [Chambers] and I agreed on the strategy, but he was concerned over too many changes, too fast, especially aligning the executive team at a predominantly hardware company. John wanted a more measured approach, though he agreed on the plan in principle. The fear was if you change seven things at once and something breaks, the question is, What did we break? But John supported me throughout the process.
MW: How did the transition affect your product line?
Robbins: Well, we used to sell Ethernet switches to customers who would replace them after five to seven years. Now we can sell various versions of our switches to the same customers, who have the option of upgrading them with additional features as often as they like.
MW: What business philosophy did you bring as CEO?
Robbins: You need a healthy discussion, a debate. I am quite open to feedback and welcome honest, transparent communication. The real trick was figuring out what parts of your ingrained culture to retain. We’ve always said we’re a family of accountability, and that has led to us working on CSR [which stands for corporate social responsibility] causes around disaster relief, homelessness, mental-health care and sexual harassment. Corporate reputation is so important to investors, customers, employees. The cycle of goodness leads to better press coverage, more-engaged employees and better productivity. It’s just the right thing to do.
MW: Did your stint as a JV basketball player at the University of North Carolina in the early 1980s influence your approach to teamwork?
Robbins: Well, I didn’t play much, so, so much for that [laughs]. I grew up in rural Georgia in a small town called Grayson (current population: 4,195). My grandfather was a preacher who had 250 acres of pasture land with cows, and my family lived nearby. That experience taught me to work with others as a team; no one person has the answer. I don’t have all the answers. We all learn from one another.