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pww.comCisco Systems, Inc. Presents at J.P. Morgan’s 50th Annual Global Technology, Media and Communications Conference 2022, May-23-2022 03:10 PM - NasdaqGS:CSCO

NasdaqGS:CSCO

Todd Nightingale [Former Executive VP and GM of Enterprise Networking & Cloud] 💬

Todd Nightingale, an executive at Cisco Systems, Inc., presented at J.P. Morgan’s 50th Annual Global Technology, Media and Communications Conference on May 23, 2022. Below is a detailed summary of his statements:

  1. Business Focus and Demand Outlook:

    • Cisco's business is highly focused on cloud transformation and hybrid work transformation.
    • Demand for Cisco's products remains strong, and there is a record level of backlog, with a low cancellation rate.
    • Supply chain pressures and constraints are real, impacting the ability to fulfill orders, particularly due to citywide shutdowns that prevent finished goods from being shipped.

  2. Supply Chain Challenges:

    • Supply chain constraints are expected to persist, with no substantial improvement anticipated in the current quarter.
    • Improvement may start by the end of the calendar year, but it could take more than a full calendar year to return to a more normal supply chain environment.
    • The citywide shutdowns, such as those experienced in Shanghai, have had a significant impact on Cisco's operations.

  3. Demand Dynamics:

    • During the pandemic, there was a weakening of demand followed by a surge as organizations planned for returning to the office and accelerating cloud transformation.
    • Both the initial weakening and subsequent surge in demand were commercial-led, with commercial teams reacting faster due to shorter planning cycles.
    • Enterprise customers, with longer planning cycles, have placed orders that are currently in the backlog.

  4. Impact of Economic Conditions:

    • Trends driving Cisco's growth and demand include a return to the office and a focus on building infrastructure for hybrid work environments.
    • The need for a new way of thinking about wireless in the workplace is emphasized, as offices become more dynamic and mobile.
    • An explosion of IoT devices, including video units, building monitoring, and air quality monitoring, is driving the need for more networking and PoE capabilities.
    • Cisco is investing in building automation systems and connectivity solutions for these systems.

  5. Hybrid Work Transformation:

    • There is a significant opportunity in the space as organizations rethink hybrid work.
    • The scope of IT is expanding to support the best possible experience for remote workers, requiring robust teleworker networking equipment and software solutions.
    • There is a need to radically improve tools and infrastructure in employees' homes to ensure an enterprise-grade experience.

  6. Software and Hardware Balance:

    • Cisco is undergoing a corporate transformation towards a SaaS recurring revenue model.
    • Physical hardware is necessary for certain functionalities, such as cellular backup, but software solutions are preferred where possible.
    • Software solutions like ThousandEyes enable IT monitoring in the home without the need for additional hardware.
    • Cisco is leaning into software and cloud solutions to reduce friction for adoption.

  7. Multi-Cloud Solutions:

    • Enterprises are focused on multi-cloud solutions to avoid lock-in with a single IaaS provider and to optimize costs.
    • Cisco focuses on multi-cloud tooling, such as its Intersight portfolio and ThousandEyes app dynamics, designed to work across multiple clouds.

  8. Cloud Infrastructure and Customer Experience:

    • Cisco sees value in selling more cloud software and multi-cloud infrastructure support, even if it means less private cloud data center hardware sales.
    • The market for cloud infrastructure is rapidly growing, and capturing market share in multi-cloud solutions is driving significant dividends.
    • Cisco aims to simplify the complexity for customers by providing a seamless solution for managing workloads across multiple IaaS offerings and SaaS applications.

  9. Core Business Strength:

    • The core business of deploying enterprise infrastructure remains strong, driven by the need for perfect mobility and IoT device support.
    • There is a change in the market as organizations recognize the importance of IoT devices and the need for infrastructure to support them.

  10. Expansion Opportunities:

    • IoT is a significant expansion opportunity, with building automation and monitoring becoming more prevalent.
    • Cisco has launched a smart camera portfolio and expanded into IoT and building sensors.
    • Cisco is investing in technologies like DNA Spaces, which integrates telemetry from various sources to provide an intelligent view of the environment.

  11. Hardware as a Service (HaaS):

    • There is strong demand for HaaS, and Cisco is focused on consumption-based billing models.
    • Subscription-based models are popular, allowing customers to manage network spending as an operational expense (OpEx) rather than a capital expense (CapEx).

  12. Customer Experience with HaaS:

    • HaaS provides a better customer experience for lifecycle management, enabling graceful upgrades and bundled services.
    • Customers can avoid large upfront expenses and share risks with Cisco, paying a reliable monthly fee.

  13. Product Success:

    • The Catalyst 9000 series has been highly successful, with a focus on expanding the value of software licenses and driving deep adoption of critical features.
    • Cisco is embedding hybrid work platforms and security licenses into software licenses to add value and drive renewals.

  14. License Tiers and Renewals:

    • Cisco is standardizing license tiers across its portfolio, adding value over time.
    • Enterprise Agreements (EAs) are gaining popularity, taking a holistic approach to licensing and simplifying the renewal process.

  15. Wireless and SD-WAN:

    • Upgrades to WiFi 6 and 6E are driving demand for higher-bandwidth switching infrastructure.

    • Mission-critical WiFi is becoming essential in various settings, driving densification and higher density of WiFi devices.

    • SD-WAN is seen as the future of routing, particularly as organizations move towards cloud-first strategies.

    • Cisco is leveraging the synergy between its security and networking technologies to offer powerful solutions for SASE architectures.