John Chambers, CEO of Cisco Systems

This is a partial transcript from Your World with Neil Cavuto, November 7, 2002, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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NEIL CAVUTO, HOST: The Cisco kid was not a friend to this market. Disturbing warnings out of the company yesterday, knocking the markets for a major loop on Thursday. Earlier I spoke with Cisco CEO John Chambers and I ask him why he's still so cautious.


JOHN CHAMBERS, CEO, CISCO SYSTEMS (CSCO): Well, Neil, we were not cautious in terms of our own execution. Things that we can control were influenced such as market share gains, cash generation, profitability, net income after tax are at actually the best levels we've been at maybe ever in many of those categories. But we were.

CAVUTO: So why did the Street seize on it and say, oh, he's down and out, down and out?

CHAMBERS: Well, our stock's gone up about 40 percent in the last couple of weeks. But what the Street seized on was what will be the revenue growth numbers in the short term? And I'm very optimistic about the long term because our technology (UNINTELLIGIBLE) the productivity and standard of living. So in the long term, I've never been more optimistic about our industry or our segment or our ability to compete in that industry. But in the short term, the Street kind of reads into a little bit, were we a little bit cautious in terms of the external factors, the economy? Yes. Were we more optimistic than normal about factors we can control? Yes, we were in that as well.

CAVUTO: The productivity boom that of course you've been championing and talking about when it wasn't chic to champion it, should be helping your company more, but is this a longer term phenomenon or what?

CHAMBERS: Well, it actual has helped us a great deal. Our top 10 competitors actually shrunk over the last year in their revenues by 48 percent. We grew by 9. That's 57 points difference. That's the biggest I've ever seen in my leadership in any industry. The customers get it. The CEOs get it. And more importantly, the government leaders get it, Democrats and Republicans. And so people understand the standard of living implications here. So it will absolutely help our industry. But it's a show-me economy right now, people, until they see their own revenues and profits turn up are going to be hesitant to spend. But Neil, you hit it right.

CAVUTO: Now those apply to your customers as well then, right? They don't see people.

CHAMBERS: Oh, no, the customers do believe. When you talk to CEOs and CIOs they believe very much in the productivity. And using Cisco as an example, half of our earnings last year were through e-based applications. Whether you talk to Mr. Greenspan or the president or the Democratic leadership or the Republican leadership, they also understand that.

CAVUTO: Let me ask but the midterm elections. Is it better for your business now having Republicans in control of Congress?

CHAMBERS: This answer may surprise you, almost regardless of form of government, technology and the network tend to be neutral. If you look at it both the Democrats and Republicans understand the productivity and the standard of living implications for Americans by using this type of technology. So we're kind of agnostic in terms of various government groups around the world and within our own country as well. I'm a Republican, so from a personal point of view, I was glad to see the Republican progress. At the same time, it really doesn't matter. Democrats and Republicans support the technology and support many of high tech's key objectives.

CAVUTO: Nevertheless, by the Federal Reserve cutting rates a half a point as they did John, there's a fear here that maybe they see something that the rest of us do not, that things are really much worse than we thought.

CHAMBERS: Well, I know that's one approach on it. I really think the reason the Fed did that was to make a statement and give us an opportunity and to give us a nudge. They understand productivity and that's one of the reasons they were able to do it comfortably, because you're talking about doing this without worry about inflation, and technology plays a huge role in that, particularly network technology, Neil.


CAVUTO: All right, John Chambers of Cisco.

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