Immigration Crackdown Bad for Business?

This is a partial transcript from "Your World with Neil Cavuto," March 7, 2006, that was edited for clarity.

NEIL CAVUTO, HOST: Well, is getting tough on immigration bad for business? It depends on who you talk to. My next guest says that, by shutting our borders, America could be shutting itself off from top talent and could force a lot of high-tech jobs to move overseas.

Joining me now is Scott McNealy. Scott is the chairman and CEO of Worldwide Education and Research Conference, where, apparently, a tie was a not a required...


CAVUTO: Good to see you.



MCNEALY: ... can`t afford to have a tie on.

CAVUTO: You know ties are for...


CAVUTO: Let`s talk a little bit about the immigration issue. It`s a hot — everyone is getting hot and bothered about it. The technology industry needs this talent. Where is the middle ground?

MCNEALY: Well, the issue here is the H-1B visa thing. It`s not about illegal immigration. I don`t believe in anything illegal.

But the opportunity here to allow the smart folks from around the world to come to the Silicon Valley, to come to New York, to come to the United States, and go to school, set up shop, and even start families, and stay here is a wonderful thing.

I have got personal experience. Vinod Khosla came from India, and Andreas von Bechtolsheimcame from Germany, and were two of the four founders who helped start Sun. It has created an enormous amount of jobs, an enormous amount of tax paid.

CAVUTO: But you can`t find Americans to do that?

MCNEALY: Let me tell you, you just can`t find an Andy Bechtolsheim, or a Vinod Khosla anywhere. These are the best and the brightest. And they can come here, work, set up shop. If we shut down, like we have, the number of H-1B visas, which, by the way...


CAVUTO: We haven`t shut them down.

MCNEALY: We — it gets fulfilled, the quota gets filled within hours of a new year with a new quota.

CAVUTO: How many of these do we give a year, 40-some-odd thousand?

MCNEALY: Well, you know what is happening now? They are all going back to their countries and doing...


CAVUTO: So, all that talent from India and...


MCNEALY: I think...

CAVUTO: ... Pakistan, I mean, now it`s...

MCNEALY: Not all of it. I mean, we can`t over-exaggerate. But there is just an enormous amount of folks who want to come here, and live the American dream, and be part of the American economy. If they can`t get in, they are going to — they`re still smart, and they are still going to set up shop somewhere else.

CAVUTO: We are going to have a guest later on, on this whole Dubai port deal. And it doesn`t relate to you, Scott, or your company, but it does raise this issue of American concerns about foreigners having a direct, or even indirect, influence in our business. What do you make of that?

MCNEALY: You know, I think that`s a different topic and certainly far afield from the immigration issue.

When I look at Andy Bechtolsheim, who is, you know, employee number one at Sun, and wrote the original check to found Google, I don`t look at him and think, Andy, you are a foreigner. I look at him and I say, you are one of the greatest contributions to American commerce and the American way of life of anybody I see.

CAVUTO: But you know what a lot of Americans fear, Scott, that, for every Andy, there is a sneaky terrorist.

MCNEALY: You know, and we can live our lives in that world of absolute paranoia and, I think, get ourselves paralyzed and isolate. And that is not a good thing.

CAVUTO: Where is the whole technology world going right now? They say that America has this brain drain, and that it`s going to hurt companies like Sun. It`s going to hurt companies like Apple and Microsoft and on and on.

MCNEALY: Well, the first thing we are doing is, we are investing heavily, and we are growing R&D here in the U.S., as well as abroad. And we are spending about $2.2 billion a year in R&D. And whether...

CAVUTO: How much of that is abroad?

MCNEALY: You know, the bulk of it is in California...


MCNEALY: ... and Massachusetts and Colorado and Texas. Those are our major R&D spots.

And I would say probably — I am guessing around 80 percent of it is U.S.-based. We do far more R&D here than our sales. We do about half of our sales outside.


MCNEALY: So, we are actually over-leveraged in R&D, relative to sales here in the U.S.

CAVUTO: Real quickly, your stock has been storming back. Your company has been storming back. A lot of people are saying the old names are coming back. Are they?

MCNEALY: Well, we never went away. You know, like I said, we kept investing. We kept...


CAVUTO: You were floundering a while.

MCNEALY: We certainly had a post-bubble hangover, as, you know, we hired too many people and put too many expenses on and made a couple strategic mistakes. We fixed those. But we always had a cash position that was very large.

CAVUTO: Absolutely.

MCNEALY: And we are 17 straight years cash-flow positive from operations. A little problem with gap earnings and cash...

CAVUTO: Right.

MCNEALY: ... tend to diverge more and more every day. And now, with — speaking of competitiveness, this FAS 123, which forces us to expense stock options, I now have write-offs that are cash-flow positive, as, you know, cash comes into the treasury while we...


CAVUTO: ... those guys just money.


MCNEALY: I guess that`s the...


CAVUTO: Scott McNealy.

Still doing the hockey thing, right?

MCNEALY: Still playing hockey.

CAVUTO: So, the four boys are loving it, right?

MCNEALY: Yes, absolutely.

CAVUTO: They must be going ca-ching with dad`s, like — right?

MCNEALY: No, they`re having a great — yes.


MCNEALY: I try not to let them check me.


CAVUTO: All right, Scott McNealy, thank you very much. Good seeing you again.

MCNEALY: Thank you.

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