Cisco Systems Inc at Bank of America Merrill Lynch Defense Outlook Forum Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tal Liani - BofA Merrill Lynch - Analyst : Before we start by the way, just a question, how much time do we have? Do we have one hour for the presentation? 40 minutes, okay. Okay. I have 10 questions that will take us about 40 hours not 40 minutes. I want to start with a high level question, Dave. We have seen budgets going up for the past two years on security, tremendous amount of money was invested, old corporates are nominating security officers that report directly to the CEO and still we have had some of the biggest breaches in the space in the last three years. And why is all this money, why isn't impacting our ability to defend the networks or what is wrong with the way companies invest?

Question: Tal Liani - BofA Merrill Lynch - Analyst : Right. So when you talk to Board members and C-level executives or corporates, how do they instruct you to deal with the risk, what are the kind of milestones or building blocks of a security defense mechanism for corporate? And I'm trying to understand is when they considered the risks three years ago, five years ago and they consider the risks today, do they view the risks differently given what is happening in the industry for the past few years?

Question: Tal Liani - BofA Merrill Lynch - Analyst : What surprised you the most last year in terms of risk factors in the market or change in the way companies invest, what surprised you the most when you consider the space you are active in?

Question: Tal Liani - BofA Merrill Lynch - Analyst : Before I go into questions that are specific to Cisco, maybe there is any questions from the audience? Unidentified Audience Member So that growth rate of 8% or 9% is high relative to a lot of things but relative to how fast just cyber in general is growing, that feels like kind of growing in line with the industry. I mean when I think about electronic commerce and it seems like it is kind of growing in line with the industry. I would have thought that security would be growing at some multiple of the industry. Am I thinking about that wrong, are people spending enough on security? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 07, 2016 / 2:30PM, CSCO.OQ - Cisco Systems Inc at Bank of America Merrill Lynch Defense Outlook Forum

Question: Tal Liani - BofA Merrill Lynch - Analyst : Let me sharpen maybe a little bit just a question to ask around the same thing. A few years ago Cisco lost share, then they stabilized it. How can you accelerate the growth and what have you done in order to stop losing share and start growing share and how can you further accelerate the growth going forward?

Question: Tal Liani - BofA Merrill Lynch - Analyst : We have another question but maybe before we go there I want to ask the question in a different way. Can you discuss the difference between revenue growth and deferred revenue growth, what is the underlying change in the business that creates the difference between the recognized revenues right now and what is deferred to next year's?

Question: Tal Liani - BofA Merrill Lynch - Analyst : I know we had another question somewhere. Unidentified Audience Member Of the 19 billion threats per day, how many would be foreign or domestic? And what type, not what type of countermeasures -- but the countermeasures that are used to attack the threats rather than just be defensive all the time, is that a public-private partnership?

Question: Tal Liani - BofA Merrill Lynch - Analyst : We have maybe one minute left so I will ask just one last question. Cisco traditionally has been selling boxes, hardware business model. (inaudible) boxes, one-time sale and then you upgrade and you maintain but really you have to start every quarter from zero and generate revenue. Security is turning into software sales, turning into a service rather than a software or a software module where it is a subscription rather than hardware model. So did you change or I will ask it as a question not a statement -- what are the changes that you have made to your sales force to train them and to make it possible so they know how to sell the software rather than selling hardware?

Question: Tal Liani - BofA Merrill Lynch - Analyst : Great. I think we ran out of time or a question. Unidentified Audience Member We took a break before. So we have some time now. David, you talked about the 30-year relationship that you have had with the US government. Can you just give us a little bit of history and perhaps bring us to where you are today and the evolution of what kind of products and services you offer to the US government? And then the follow on to that would be cyber security is clearly a priority for the US government and Defense Secretary Ash Carter has presented at RSA and can you discuss maybe the market opportunity there for you to expand the scope of your work in providing services there?

Question: Tal Liani - BofA Merrill Lynch - Analyst : Just to put it in perspective, I don't know if Cisco ever disclosed how much of their security business was government. But generally speaking in the security space, those that sell to the government talk about 20% to 25% of their business is with the government. Cisco acquired a company before called Sourcefire where they had a very big proportion of business from the government but generally speaking companies that do so, there are companies that don't deal with the government but those who have dealings with the government say that it is about 20% to 25% of their business. Great, okay. Thank you.