Cisco Systems, Inc. Presents at Morgan Stanley’s Technology, Media & Telecom Conference 2024, Mar-04-2024 09:30 AM - SEHK:4333

SEHK:4333

Greg Dorai, the Senior Vice President and General Manager of Cisco Networking Experiences - Campus Connectivity, discussed several key topics during his presentation at Morgan Stanley’s Technology, Media & Telecom Conference 2024:

Role at Cisco

• Position: Greg runs the Campus Switching business at Cisco, overseeing the Cat9k switching portfolio and associated management tools.
• Past Roles: He previously managed the Wireless portfolio.

Demand Trends

• Recent History: Over the past four years, there was a surge in demand due to supply chain constraints. Cisco has since fulfilled most of this backlog.
• Current Situation: There is a softness in demand relative to the long-term trend line. Enterprises are digesting the excess supply, and activations are not yet at expected levels.
• Geographic Impact: There is some global softness, with specific regions like APJC and Europe experiencing more pronounced softness compared to the Americas.
• Future Outlook: Greg expects the long-term trend line for the Campus business to remain stable, with potential upsides. Hybrid work is no longer seen as a headwind, and the return to work is driving increased technology density.

Inventory Digestion vs. Macro Headwinds

• Refresh Cycle: Historically, the refresh cycle for networking equipment is 4-6 years (4 years for Wireless, 6 years for Switching).
• Activation Data: Meraki, which represents about 15-20% of the Campus business, provides insights into activation and digestion. However, this data is not fully representative.

Office Technology Density

• Multiplier Effect: Upgrading an office to a state-of-the-art, technology-dense environment can require up to three times the number of ports compared to a standard office setup.
• Implementation: Not all buildings will be fully outfitted this way due to cost considerations, but key collaboration centers and customer-facing areas are likely to be upgraded.

Employee Experience and Productivity

• Themes: Forward-thinking organizations focus on enhancing the employee experience (e.g., indoor navigation, quality sensors) and improving productivity (e.g., facility utilization, energy efficiency).

Competitive Landscape

• Market Share: Cisco gained market share in the last 3-4 quarters, suggesting a recapture of market share lost during the pandemic.
• DNA Center Strategy: The adoption of DNA Center (now called Catalyst Center) is growing, and renewal rates are trending positively.

Subscription Offering

• Adoption: Customers are more focused on the value provided by subscriptions rather than the price or model.
• Meraki Integration: Cisco is pushing the Meraki line to address the lower end of the market and improve adoption and renewal rates.

Campus Portfolio and Solutions

• Solution Selling: Cisco is moving toward selling solutions that span the entire customer experience, addressing issues like downtime and operational costs.
• Channel Readiness: Partners are enthusiastic about the vision, but product shifts toward solutions are still in the early stages.

Margins and Market Position

• Margin Profile: Cisco maintains higher margins due to a focus on value rather than price competition, especially in the upmarket segment.
• Value Proposition: The focus is on delivering value through software that reduces operational costs, rather than solely on pricing.

Smarter Manufacturing Floors and IoT

• Positioning: Cisco is well-positioned in the industrial IoT space, leveraging its expertise in high-speed connectivity and partnerships with OT vendors.

AI in Campus Portfolio

• AI for Infra: Cisco participates in AI infrastructure through high-speed, low-latency switching and a partnership with NVIDIA for compute.
• Campus Portfolio: AI is utilized for AIOps (Artificial Intelligence Operations), security, and network operations, including anomaly detection and troubleshooting.

Recovery Staging

• Geographic Recovery: Americas is recovering faster than Europe or APJC.
• Domain Recovery: Wireless is likely leading the recovery, followed by switching.

SASE Architectures

• Integration: Cisco is closely integrating its secure networking and security portfolios, focusing on common policy, data sharing, and service models.

Closing Remarks

• Outlook: Greg expressed confidence in Cisco's ability to navigate current challenges and capitalize on long-term trends.