This post was originally published on this site
John Chambers warns any economic uptick from coronavirus won’t occur until at least late fall, and a full recovery would likely happen until early 2021.
Silicon Valley sage John Chambers is usually a sunny sort. But COVID-19 has him expecting the worst over the next nine months to year.
The legendary tech executive-turned-venture capitalist predicts the health and economic crisis will take three to five quarters to run its course, and any economic uptick won’t occur until at least late fall. A full recovery would likely happen until early 2021, Chambers warned.
“Companies are running out of cash,” Chambers told MarketWatch in a phone interview Tuesday. “The next quarter is going to be ugly.” He cautions many companies will see revenue decline by half and, “only the strongest startups will survive.”
A self-described “realistic optimist,” Chambers is looking at the crisis through the lens as a businessman who has navigated through several financial downturns and as the son of two doctors. He sees the pandemic as a three-axis disrupter to the economy, health-care system, and global supply chain, with the travel and airline industries recovering much more slowly than retail and financial institutions.
But Chambers, who led Cisco Systems Inc. CSCO, -1.90% as chief executive for 20 years until 2015 and is now a venture capitalist and adviser to 18 startups, also believes the crisis is an opening for innovative, bold companies. “For many, it will be like a second chance to do an IPO,” he says, citing pivots by Cisco in 2001, 2005, and 2008-9 to strengthen its business. He built the company from $1.2 billion in revenue, when he became CEO in 1995, to $47 billion in 2015 before sliding into the role of Cisco executive chairman for two years.
The bird flu pandemic of 2005, he said, led Cisco to develop TelePresence, one of the first videoconferencing products for remote meetings in 2006.
“Companies will either be destroyed or break away if they follow their North Star,” said Chambers, a leading proponent of the adoption of big data, artificial intelligence, 5G, and edge computing by all companies. “It’s time to reinvent or be left behind. And remember, great tech companies have emerged during economic crisis.”
During the course of the interview, Chambers mentioned Shake Shack Inc. SHAK, +2.07% , Zoom Video Communications Inc. ZM, -7.47% , and Delta Air Lines Inc. DAL, -0.35% as examples of large businesses that have taken the necessary steps to transform operations in the digital age.
See also: CES 2020: Delta promises free Wi-Fi, looks to succeed where other airlines failed
Of course, the 2005 pandemic is a relative blip compared to the spread of COVID-19, which Chambers said will force many “companies to use this moment to make the transition to digital.” For more than a year, he has harped on the importance of Fortune 500 companies to remake themselves as digital operations or face extinction. The advent of COVID-19, he said, has only heightened the urgency and accelerated damage to many companies.
“Things will get worse before they get better — that is the realistic optimist in me speaking,” says Chambers, who has predicted up to 40% of the Fortune 500 and 70% of startups will no longer be around a decade if they don’t make the digital transition.
See also: Normally Sunny John Chambers is scared about the economy
His unease is echoed by nearly 40% of all venture capitalists, who believe the U.S. economy won’t be back to normal until April 2021-April 2022, based on a survey of 286 seed Series A founders and 114 venture capitalists by VC firm NFX this month.
The disproportionate loss of jobs will weigh heavily on the economy until the fall, when Chambers expects some signs of life in the economy. “There is no magical rebound,” he said. “I think the federal government, the Fed, central bank, and Treasury [Department] did an amazing job in reacting as quickly as they did.”
That, and the indomitable American spirit during trying times, give Chambers hope that the country will eventually emerge from COVID-19 stronger.
“There will be terrible pain and loss from all this, but we need to believe that in the darkest moment there is light yet to come,” he said.
