Cisco Systems Inc at JPMorgan Global Technology, Media and Communications Conference (Virtual) Transcript

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

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : I'll get you kicked off your with 1 question and for the audience, obviously, you have the option of sending in your questions through the ask a question queue on the website. So please feel free to do that as well. Jonathan, good timing, you just reported results last week. Significant acceleration in service provider order trends. Fiscal third quarter up 17% versus 5% the quarter before that. Maybe let's just start off there. What drove the acceleration? What are the trends you're seeing? And then we can get into some of the more broader topics.

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Great. John, thanks for that background in terms of kind of your responsibilities. I know a lot of investors don't really associate the title immediately with what the responsibilities are. Let's go through some of these important kind of portfolio changes one by one. Did want to start with Silicon One. Obviously, it's been in discussion for routers. You recently announced that the Silicon One is now adopted on switches as well. So where are we in terms of the road map of adopting Silicon One across the portfolio that you wanted to kind of go across? How crucial can it be? Because you mentioned web scale growth as well and kind of 1 of the drivers, how crucial can it be, particularly when it comes to like web scale customers and your leverage to growth there?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Got it. So digging into the numbers there of it, when we think about the web scale order trends, you reported 25% order growth in the last quarter, 50%, I think, on the trailing 12-month basis. Firstly, there's been some discussion that some portion of it is being driven by campus equipment rather than data center sales to those web scale customers. Can you break that down it any further? Like how broad-based is that trend versus being driven by campus equipment?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Got it. The other discussion point regarding web scalers is we've moved to the upgrade to 400-gig. And there's an upgrade cycle both in WAN and then kind of inside the data center as well. When we look at your order trends, how much that is a reflection of the 400-gig upgrade cycle versus continued momentum, for example, in something like 100-gig, which is the previous generation in that sense?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Got it. Got it. Let me remind investors, if you have any questions, please feel free to send them in. It's the ask a question button on the website, so you can use that. Jonathan, probably I'll stick to that overall 400-gig for a bit more here. The recent order trends, you've obviously highlighted the strength in 8-K outdoors, which I would assume is a lot of the WAN use cases, correct me if I'm wrong. Now when you think about the switching upgrade and the 400-gig switching upgrade inside the data center, is that also part of the order book today? Or is that largely still in front of us in terms of the web scale customers and their inside data center switching upgrades? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 24, 2021 / 5:15PM, CSCO.OQ - Cisco Systems Inc at JPMorgan Global Technology, Media and Communications Conference (Virtual)

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Got it. So let's talk about disaggregation a bit. That's obviously been one of the, I would say, like themes as you kind of move towards Silicon One. So when you're looking at the demand drivers here, how much of the momentum is coming from like selling a full solution, hardware, software,

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Got it. Maybe if I can just follow-up on that point. You said the customers are opting for 2 of those kind of alternatives or business models. Is the monetization of the software here on a stand-alone basis, fairly similar to hardware stand-alone monetization? Or does the subscription really lead to a much lower monetization on an annual basis?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. So when you did launch the development or announced the development of Silicon One, a large part of the investment community really perceived it as a move to participate in the growth that white box solutions were seeing in the industry. Is that kind of the right way to think about it? Is that the strategic direction that like Cisco was really intending? Or like how should investors really think about that development of Silicon One, particularly when it comes to the threat of white box?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. Got it. Reminder again, if anyone has any questions, I don't see any yet, but if anyone has any questions, please feel free to send them in. Jonathan, wanted to change gears here a bit. Talk about Optics, which you now have the responsibility as well for Acacia, and I think there are probably 2 parts to this, but let's talk about Acacia and how critical it is to Cisco's optical framework before we move to how critical it is to switching and routing as a product solution as well?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : So when we talk about the Optical segment, traditional Cisco business has been well adopted in the metro, particularly in North America. (technical difficulty) REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 24, 2021 / 5:15PM, CSCO.OQ - Cisco Systems Inc at JPMorgan Global Technology, Media and Communications Conference (Virtual)

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : So following up on that, Jonathan, there have been significant challenges or hurdles in getting the ZR and the ZR+ to the commercial market as well. Can you just talk about what those challenges have been? And particularly now that you have ownership of Acacia, how much of a clear road map do you have to getting into commercial production and then kind of adoption, particularly with the ZR+, where most industry forecast seem to assume that, that's where the bigger opportunity lies?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. And final one on Acacia. How should I think about synergies when I take like a pluggable product and that Cisco also has the switches and the routers? How does it enable kind of selling a full solution to a customer, which might be a more high-performance system than some of your competitors can develop? How synergistic is this combination?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Great. That's helpful. Let me just again, just take a pause here and see if anyone has any questions, please send them in. We'll definitely go ahead and ask it on your behalf here. Jonathan, let's again switch gears here to talking about 5G. And there's been increase in, I would say, excitement around 5G just given all the North American service providers recently talked about their CapEx plans. So on a broader level, how is Cisco's portfolio going to benefit from that? What are the different levers in the portfolio to really then capitalize on the spend coming through from the service providers, particularly if I focus on North America first?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Yes. No, that's helpful. I mean, do understand some of the opportunity here is on the routing portfolio. So I wanted to also get your thoughts around 2 competitive threats that have increasingly being discussed. Firstly, white box. I think some of the domestic telecom operators have, at least sounded out that they could potentially use white box routers, not that we've picked up anything in terms of deployment. The other one that I did also want to check on that front was increasingly some of the optical system companies talking about having packet optical pollutions that start to imitate or look essentially substitute somewhat what Cisco does on the routing front in an IP optical network. So I wanted to get -- go through both of those and kind of see how you're thinking about those competitive threats?

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Okay. That's helpful. And I don't see any questions here, but I know I have like almost 5 more here. Let me get to the last one that I did want to get your thoughts on. A lot of discussion around virtualizing the RAN or even doing open RAN implementation. How does it -- how should we think about Cisco -- the impact to Cisco here like Cisco is one of the incumbents in the service provider networks, not necessarily in the RAN segment itself, but a lot of the kind of software, packet core as well. So how should I think about impact to Cisco? Does it increase somewhat the value just if we virtualize the RAN? Just help me think through that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 24, 2021 / 5:15PM, CSCO.OQ - Cisco Systems Inc at JPMorgan Global Technology, Media and Communications Conference (Virtual)

Question: Samik Chatterjee - JPMorgan Chase & Co, Research Division - Analyst : Got it. It looks like we're almost up on time, Jonathan. So I do want to take the opportunity to thank you for participating at the conference. And thank you to everyone who dialed in as well.