Cisco Systems, Inc., Deutsche Bank AG - Special Call - SEHK:4333

SEHK:4333

Bret Hartman, the CTO of Security at Cisco, discussed several key points during the Deutsche Bank Tech Talk:

1. Strategic Focus: His role as CTO is focused on the strategic direction of Cisco's security business, specifically on developing an integrated threat defense architecture.

2. Integrated Threat Defense Architecture: This architecture leverages Cisco's best-of-breed products and integrates them across the network, cloud, and endpoint sides. This includes broader integration on the network side, pervasive deployments, and integration on the cloud side, such as through OpenDNS.

3. Sophisticated Analytics Techniques: Bret mentioned that driving more sophisticated analytics techniques is a constant focus, including pulling in massive amounts of telemetry data across a large sensor base. He also noted that the company is continuously looking for the next great analytics innovation, whether internally or through strategic investments in startups.

4. Simplification and Consolidation: Bret emphasized the need for simplification and consolidation in the security space, both on-premises and in the cloud. He highlighted Cisco's natural role in providing a platform for simplification and consolidation due to its footprint and visibility across the global network traffic.

5. Visibility Platform: Bret underscored the importance of having a strong visibility platform that ties network, cloud, and endpoint together, enabling automated responses to threats.

6. Complexity and Active Adversary: He acknowledged the complexity of the cybersecurity landscape, driven by the active adversary that keeps changing tactics. Bret mentioned that customers are looking to Cisco to help consolidate and simplify the security landscape.

7. Analytics Innovations: Bret stated that the area around analytics, particularly big data analytics, continues to see a lot of innovation and is a fantastic area for investment.

8. Internal Startup Model: He mentioned that Cisco uses an internal startup model called Alpha projects to incentivize rapid innovation and build projects as quickly as possible.

9. IoT Security: Bret discussed the security implications of the Internet of Things (IoT), emphasizing the importance of securing devices through network segmentation and analytics, given the challenges of securing individual IoT devices.

10. Quarterly Dynamics: In response to a question about the quarterly dynamics in Cisco's security business, Bret mentioned that the company is driving toward a software-based model with an increased pace, leading to a shift in the business model toward a software and recurring revenue model.

During the special call transcript on October 1, 2015, Carol Ann Bartz, identified as the Former Lead Independent Director, made the following statements:

1. Introduction and Disclosure:
   • "Great. Thank you very much for having us, both Brian and Vijay. So I have to just say David Goeckeler is our Senior Vice President and General Manager of the Security business group. And we also are joined by Bret Hartman, who is the Vice President and Chief Technology Officer of Cisco."
   • She provided a disclaimer stating that the call would pertain strictly to Cisco's Security business and no new financial information regarding Cisco's overall performance is intended or implied.
   • She reminded the audience that the call may include forward-looking statements subject to risks and uncertainties, and actual results may differ from statements made during the call.

These remarks were made in the context of a presentation and discussion between executives from Cisco Systems and Deutsche Bank analysts, focusing on Cisco's security business and its strategies, products, and market trends.

** Key Points by David V. Goeckeler**

• Security Strategy:

  • Focus on visibility-driven security solutions to identify and block threats.
  • Emphasis on threat-centric products that are highly effective in blocking known and emerging threats.
  • Building an integrated threat defense architecture to cover the entire attack continuum (before, during, and after an attack).

• Portfolio Highlights:

  • Broad portfolio including network security, next-gen IPS, next-gen firewall, advanced threat protection, web security, email security, identity services, and UTM (Meraki).
  • Integration of FirePOWER services and Sourcefire technology across existing infrastructure through software upgrades.
  • Advanced Malware Protection (AMP) technology deployed across multiple platforms.

• Competitive Advantage:

  • Products tested as the most effective in the industry against threats.
  • Architectural approach reduces complexity and enhances deployment ease.
  • Software upgrades on existing infrastructure reduce the need for new hardware.

• Customer Feedback:

  • Customers appreciate the effectiveness and ease of deployment of Cisco's security solutions.
  • Significant traction with 2,700 new customers added in one quarter for the advanced malware architecture.

• Business Model:

  • Transition to a software-based, recurring revenue model.
  • Increasing adoption of Enterprise License Agreements (ELAs) for comprehensive software portfolios.
  • Strong growth projections of 10% to 15% in the security business.

• IoT Security:

  • Importance of cloud-based solutions like OpenDNS for securing IoT devices.
  • Network segmentation and behavior analytics to monitor and secure IoT devices.

• DDoS Mitigation:

  • Partnership with Radware to provide DDoS capabilities on the FirePOWER 9300 platform.
  • Extending value to customers through third-party integrations without additional hardware.

• Market Dynamics:

  • Fluctuations in revenue and deferred revenue due to the transition to a software model.

  • Long-term growth rate of 10% to 15% remains stable despite quarterly variations.