Ciena Corporation (CIEN) Earnings Call Transcript & Summary

This is the first presentation for the day. I hear some noise behind us, but that's okay. The first presentation of the day and today, we're going to talk about networking and the network. Thank you. It's okay. Today, I'm pleased to host Ciena. I'm hosting Scott McFeely, SVP of Global Products and Services; and Patti Trautwein -- I pronounced it properly?

Yes.

Director of Investor Relations, is also joining us.

And I want to start, the first thing you want to discuss is basically the current environment. That's the one question. The funny thing was I sent my questions to the companies. And I -- the most common edit I got back was, can you ask me a question about the environment? Can you ask me a question about the spending environment. So I'll ask you proactively. How do you see the current environment, the sensitivity of spending to what's happening to the economy?

Okay, well first of all, Tal, let me start by just thanking you for hosting us, and it's great to do these things in-person again. It's great for my own personal employee satisfaction to be able to get to see people again, as opposed to -- Zoom is great, but it's nice to see people in 3 dimensions. Yes, the environment for us is, people can probably tell by the gray hair and the bags in my eyes, I've been at this industry for a long time. And from a demand perspective, from the demand side to drive -- unprecedented is the word that comes to mind. It's driven by a couple of key dynamics in the industry. One is, as we are all living our lives and working more movement of data and processing to the cloud. And for what we do, the fundamental underpinning of our business is bandwidth. So if there's more bandwidth, that's fantastic for our business. So that's the number one driver, that's been consistent over the years, but it certainly has accelerated based on how we all have adopted to living our lives. The second one is, as we look at these applications that are living in the cloud, people trying to unlock access and performance to those applications, whether it be capacity or latency. The answer to that, as an industry as you push more fiber out deeper into the network, as fiber is the most effective way to carry that traffic. Somebody -- a number of people have said 5G network is basically just a fiber network with antennas on the end of it. So again, that drives demand on the access part of the network or what we call the access part of the network for us. So the demand drivers have been unprecedented. And then maybe underneath your question was what do we see going on from a macroeconomic perspective and the impact on that? I guess, there's still a better way to see there. But our perspective on it is, those demand drivers I just mentioned are less exposed, I'd say to recessionary times than some of the other industries that you may be interested and follow. I think, that's been true historically, but I think it will be especially true this time just given, again, the critical nature of that underlying infrastructure for how we live our lives.

So I'm sure that we're all going to use Netflix the same way, whether there is a recession or not and maybe even more, because we don't go out. We don't spend money on going out perhaps. But the question is, can the carriers milk their infrastructure more or the cloud companies increase the utilization of their infrastructure more, because I think that's what we've seen in previous cycles that the demand was there, but demand from a -- the underlying demand was there, but then the utilization of the networks became --

Hotter?

Hotter.

Yes, it's a good question. I think for a period of time, the answer to that is yes, and we've proven that, as you said, over a period of time. But if you look back over the last 2 decades and you just look at cross-sectional bandwidth growth in a service provider network or a cable network. And you can draw a pretty consistent line where that bandwidth growth is growing 25% to 30% a year, regardless of what's going on in the world around us. I think you'll take separations of that curve at a given point in time. But basically, the curve is a pretty straight line of 25% to 30% a year. We saw that dynamic, by the way, when we first went into recession. So people became -- 2 things happened I think people became conservative on their CapEx spend, not knowing where this was going in the world. But also if you were running a network at that time, the number one priority for you was just keep the lights on. Make sure the network is still up and running as opposed to doing a bunch of new projects that may have driven new architectures, et cetera. So we saw that running the network hot for, call it, the first 12 to 15 months when we were in the pandemic. But, ultimately, when your demand coming at you is growing at 25% to 30% a year, ultimately, you've got to open up the tap.

Got it. So in the first quarter revenues grew 12% year-over-year. Very solid growth. What drives the growth? What are the projects -- or can you take us through kind of an overview of sectors and verticals and projects and products, kind of what drives the growth?

Sure yes. Quarter 1, as you said up 12%; quarter 2, up 14%, so a good first half. The growth is actually limited by supply chain, which I'm sure we'll get to eventually as well.

You will.

But the key drivers, for the growth, again, back fundamental is the bandwidth demand. Now how does that hit us from a Ciena perspective? We divide our business largely into 3 categories. One is we call it sort of core transport. So this is connecting national backbones, regional backbones, city-to-city type transport networks or on the extreme case, submarine networks. Those are largely driven by large optical build-outs and there the fundamental bandwidth and the core is being driven by connecting data centers around the world. So we do quite a bit of business, as you know, [ channel ] direct with the global web scalers, the big ones, it's 35% to 40% of our business now where 10 years ago, we didn't do any business with them. But even -- and even bigger proportion of the business is impacted by them because they're still buying managed services in those core networks from other operators in the world. So that's one piece, core network. So we've been historically very strong there, and we continue to show strength there. The second big category is what we call metro and edge. So a lot of, the spend and a lot of the architecture changes and decisions that are being made in networks around the world are around this metro and edge piece. And as you think about -- again, how we're living our lives and more compute, more data, that data and compute needs to get pushed out to the edge of these networks in order to get the performance that we need and that's driving a lot of change in those networks and great opportunities. So that comes at us, again, from building out the metro infrastructure and the service provider network, from building out what we would call access networks, but other people would call it infrastructure. But basically connecting from say, a wireless cell tower back into that metro infrastructure or connecting from an enterprise business back into metro infrastructure. Or even more recently, we've had some good success on connecting all fiber, all next-generation fiber-based residential builds back into that infrastructure. So that's 2. The third one I had mentioned there was 3. There was a little bit more embryonic correction from us, which is automation software play, largely focused on the service providers around those dynamics.

Got it. You expect also a strong second half. We would get to supply chain in a second. But why do you expect a recovery in growth or not a recovery acceleration of growth in the second half?

Yes, the same -- I mean, the same dynamics are continuing, and we think there's secular demand there that's going to last for some time. And one evidence of that is the backlog in our order book. So just to put it in perspective, last year, we were about a USD 3.6 billion a year company. We entered this year with about $2 billion of backlog and our calendar year start in November. So we just finished our second quarter. At the end of our second quarter, that backlog had grown to over $4 billion. Even though we -- as you said, we had grown the business first half-to-first half 13% a year. So you can see that accelerating demand play itself out in our backlog. So that gives us -- I run the supply chain for the company, so that's -- on one hand, it's the supply chain dream because you have perfect visibility, on the other hand of course its challenges from a supply chain perspective. So that's what gives us confidence in the second half as we've got great visibility on the demand.

And what happens to margins in the second half? I'm just asking, because in initial project, there's always like a lot of basic chassis and lower margin solutions. I think you also said that margins will be lower now versus what we have seen before. Hope you can elaborate?

Yes. So in our business, those of you that aren't as close to it, typically as you say, when we're early in life cycle on a project, we will fill that out with photonic infrastructure, a lot of common equipment, a lot of costs around integration into a network. And then over time, with that network, you grow your margins, because the channel builds at a much higher margin rate. There's also a couple of other dynamics in terms of mix as our business is getting more diverse, but that's the fundamental driver. If you go back in time, we said the normalized run rate for the margins in our business -- the gross margin level was 45%. There's price erosion and there's cost reduction, but that's sort of where -- that's where we were sitting, call it, 2 years ago. When we went into the pandemic, as I said, a lot of people stopped building those new infrastructure networks. They just were keeping the lights on. So that had an inflationary effect on a percentage basis on our margin, because we were doing more channel and build the new projects. So you saw our margins rise up to the high 40s in some cases. What we said coming back into this year, we expected that mix to more normalize, the new projects in infill and you'd see our margins come back into the 43% to 46% range more normal for our business. What we've been hit with is exceptional costs on 2 fronts. One is logistics -- logistics cost of freight and logistics around the world, it's not unknown to you folks. And the second one, though, is we've given the supply chain environment, the cost of actually getting your hands on semiconductors and other components to satisfy your customers has gone up substantially as well. So that's put some pressure on our margins. And last quarter, we reported just over 43%. Second half of the year is going to be in that low 40s as well.

Got it. So we touched on supply chain. And I want to ask every company sees supply chain constraints a little bit different. What does it mean for Ciena?

Yes there's a couple of things, I think. Number one is, and this is not news, it's not unique to Ciena. But the lead-times, obviously, on the scarcer components have extended out, and that's been the case probably now for call it 18 months -- 15 to 18 months. We used to be able to pick up components on a lead-time basis, anywhere from 14 weeks to 26 weeks. Now that's upwards of 70-72 weeks in some cases so that's extended. For us, the dynamic that, that means is, if you think about the shape of our business 2 years ago, we would go into any given quarter with half of our business in backlog that we were going to build and half of our business in what we call book-to-bill. And it was fast flow kind of stuff. So we had lead-times on products that were 4 to 8 weeks, and we could -- we had inventory so we could react. Fast forward to today, obviously, the lead-times for the components are much longer. Our backlog is basically a -- almost a [indiscernible] of our backlog there. So the shape of our business is quite different. So that's one of the impacts. The second thing is we've had to make significant bets on the balance sheet to play by these new rules in terms of lead-times. So back actually a little bit more than a year ago, we started making very, very significant bets at the component level on what our year was going to look like. And now we're carrying commitments that stretch out 18-plus months in order to have it built now. The good news is, I think that's going to be a competitive differentiator because folks that we compete with, some of them, you would say don't have the balance sheet that we have. So that's a little bit more riskier play. And we're mostly driving our revenue off of next-generation advanced technology, which has got long legs to it. So the risk of it being stale inventory is very, very low.

Got it. Any light at the end of the tunnel or are you in the same kind of darkness today as you were a year ago?

I don't see -- again, on the lead-time dimension, I don't think -- I don't see any changes in the immediate future, nor have we planned for any changes in the immediate future. As I said, we're making those bets a long way out. What we need to see as a first step to improvement is just stability. So people meeting their commitments, but they've made against those lead-times as opposed to getting surprises after surprise. We track that very, very carefully in terms of inbound components. And last quarter, I would have said 3 quarters ago that it was getting more stable. Last quarter was probably the worst performance that we've seen in time on inbound -- reliability of components showing up, when they were committed to show up. Now we do all kinds of things to mitigate that. But that's the first step of improvement is just stability. It is like we start to see things show up when they were promised and you can depend on that to build out your commitments to all the downstream people that depend on you. Now, obviously, not a surprise to people last quarter, we were sitting in the middle of a China COVID lockdown. So that was the primary driver of that spike in instability last quarter.

Yes. When you look at the core problem of supply chain constraints, demand is elevated, supply is limited. Do you see any actions taken by your providers to add capacity to improve production? What are, the -- the demand is going to be there, it's going to be high, as you noted, because we have new projects on the market, but what about the supply side?

Yes. Maybe talk about it, Tal in 3 layers of the supply. What are we doing?

Yes.

2 is we have a number of partners in our industry that largely on the optical side or component side deliver finished goods or semi-finished goods to us, and then we have component suppliers. So I think -- and the story is a little bit different in each of those 3 layers. First of all, what are we doing? I mentioned again, making early and making big bets on commitments to purchases. That's one. Two is -- I should make this point, we are absolutely not capacity constrained from a manufacturing perspective. I could do a quarter that's 50% bigger than what we posted right now from a straight capacity perspective. It's simply about a matter of how much component input we can get into that machine. So we've made those investments to be able to get up the curve very quickly from a manufacturing capacity perspective, once the components are there. Then the third thing is, we've actually taken quite a bit of our design capability of the field, if you want to call it that, and pointed them at opening up the aperture in terms of supply choices for us, so kind of making sure that we've got multiple sources in the constrained areas so that the best possible outcome could be there. So that's what we're doing in our layer. On the optical side, absolutely, every one of our key optical providers is adding capacity as we speak. And we can go to their public earnings announcement and they talked about it there. So they see this demand that's coming out from us or to them as a durable demand and they're making the capital investments to make sure that they can get up that curve. On the components side, there are better people in the world. I just can repeat what they tell me, and you probably heard it from them. But a number of them are making significant -- and these are very significant investments in terms of fab and the ecosystems around the fab capacity to diversify the portfolio. If you look at the likes of Intel or Texas Instruments have been very public in terms of those investments that they're making. Now those are long lead-time investments and they start to come on board, some of them in '23, but most of them in '24. So that's kind of the capacity piece of that. It's interesting, like people when they hear this, they go -- they immediately go to the really leading edge technology like the 7-nanometer CMOS or something that. That's not where -- for us, that's not where the constraint is. It's actually more in the -- you want to call it, legacy technologies, but the 16-nanometer and above technologies, which is where the likes of some Intel and TI are making their investments mostly domestically in the U.S. to add that kind of capacity. It's not just the fabs, it's all the ecosystems around the fabs that have to come with it, but that's coming online as well. And then the crystal ball is, as an industry if you think of the telecom piece, all of those constraints at the component level are shared with other industries. And what happens to those other industries, if we have a bit of a recessionary period. I think the consumer electronics industry probably takes a bit of hit, maybe the automotive business takes a hit. And does that alleviate some capacity for the likes of telecom? That's hypothesis that some people are starting to build.

Got it. I want to go back to cloud. You spoke about cloud, and I want to talk about your position in the cloud. And if you can give us -- there's a historical perspective, you didn't have a dedicated platform for the cloud. Then you launched it. But at the same time, we're seeing Cisco making investments in their platform for the cloud? We're seeing companies who are more routing and switching companies trying to embed optics. And so talk about more holistically, talk about kind of top down on what do you bring to the cloud that makes Ciena unique? And how do you see it playing out? What are the areas where you're going to see more competition in the cloud and areas where you think you can win easily?

Yes, so the differentiated aspects for our relationship with the cloud providers is all around our ability to bend the cost of power of our bid per transported chunk of data. And that's the economic aspect of it. The incumbency aspect of it is, about a decade now of learning and how to do business with them in terms of their operational environment, and what does it mean to be part of their ecosystem. I don't trivialize that in terms of getting into it, because they are unique. And we had more time I want to share some anecdotes with you. But -- our relationship with them goes back to the days when they first really started participating in building out when -- inter data center connectivity networks -- we don't play today inside the data center at all. Our play is when you leave the 4 walls of the data center you've got to get to another data center that's where we play. And we started that relationship with them historically, as you say, with the classic service provider transport platform, and it was largely in submarine networks. So if you go back a decade ago now, established the play. We still participate very much with them in submarine networks. In fact, our market share there is, I'd rather say dominant, but if there is a lot to say I'd probably use that word. The next backing off from that, a large number of the North American big names that you would all know, started to build out their domestic national backbone networks. And that was a natural evolution for us from that submarine networks, because optical performance is really important there. Optical performance is really important in the national backbone networks to move the relationship there. As they grow over time, we started not only selling them boxes, if you like, but started selling them services and getting ingrained in that relationship. Some place in that transition, Tal, we started to build optimized products for how they think about building out their network. So the product went from looking like a service provider product to looking like a data center, IT product with both physically and the software programming interfaces that we're on it. And then as time went on, we then started to build out there and they would have campus networks basically in a metro or in a certain geography. We started to build out their metro campus data center as well. So that's where we kind of are up till the beginning of this year. We're in all of top 6 web scalers around the world, 5 of them be in North America, one of them being China with our latest technology. All driven by, where the most cost-effective roundtable optical transport solution for them once they leave their data center and get the next data center. The dynamic that you referred to as possibly being a change in how they use optical technology. We really focused on that last use case that tap us metro into data center. And the reason why it's unique is there's no sophisticated network between the buildings. It's just fiber, less than 80 kilometers straight shot. From an optical perspective it's a relatively easy - application to do. The challenge is to do it in a power footprint that's acceptable to them. That's what people started to talk about using plugs, ZR topic on then. And when you get to that form factor and the possibility of eliminating a separate transport platform just for that application and plugging it right into the router that sits on the edge of that building becomes a -- kind of becomes a viable deployment scenario. And I think that will be the deployment scenario that most similarly use for that application. Now it's important to know, though, that application for us is the smallest of the relationships that we have with those web scalers. So for us, it's actually more of an opportunity than a cannibalization. Got it. Long answer.

No, that's actually what I wanted to discuss. And you also play -- talk about your participation in the pluggable area, in this small plug that you talked about that you can put inside a router?

Yes. So the -- we introduced our next-generation platform of optics, we call WaveLogic 5. And we intentionally built 2 branches at WaveLogic 5, the one that we call extreme, which is for the long optically challenged type networking, where you're not willing necessarily to sacrifice power in the optics because the cost of the fiber and the performance you need to get on that fiber rules the day. So that WaveLogic Extreme was introduced, I think, 2 years ago now -- more than 2 years now. I've not cannibalized but -- 2 years ago now. The second branch of that technology we introduced was called WaveLogic 5 Nano, which was sharing some of the same technology, but really optimized around power and footprint. So it literally fits 400 gig in the size of my one of my figures and a plug format and really critical that it gets down to a power footprint because if it doesn't you can't fully fill a router. So that technology has been available now from us, generally available since early this year, I guess -- earlier last year, earlier this year and time flies, we're having fun. And we do believe that from a power footprint perspective and from an optical performance perspective, it's best-in-class in that form factor. And we fully expect to participate over time in that market for that metro campus data center piece.

Are you concerned about white box phenomenon. We see it in routers. We see it in switches first, then we see it in routers. In optical we haven't seen it. But is there a risk that cloud companies will embrace a white box solution for optic?

Yes, there's -- I mean, if I look at the cloud companies, without naming names, a number of them have actually launched in dry white boxes historically. One that was public, I can talk about that was Facebook's championing of a TIP and they had TIP as multidimensional and a number of the activities had a lot of take up. They had one that was an optical chapter of TIP, if you like, which never really got off the ground. And there were a couple of other examples where people were doing internal white box development again that never really took off. And I have my own hypothesis of why that's the case. Its buried in a couple of things. Number one is, the stuff is hard. It's not a digital experience where you're dealing with a box that's in a single location. This is an analog network at the end of the day that is spread out over many kilometers, in some cases, many thousands of kilometers. And having the expertise in all of the dimensions that you have to have to be able to put that together, is really hard, so not everybody can do it. Two, is this one is a double-edged sword. But if you look at the margin profile and the people that play in the optical space, it's not about the same margin profile of people that have historically played in the running switch base unfortunately. But the straight economics of can I get enough scale in the required R&D investment in order to justify the white box and the economics I'm going to get back out of it. And the answer is, well if you look at it, honestly, for most people, the answer is no. And even if you could do it and release 1, guess what, as soon as you're done release 1, the next technology is coming and there's release 2, release 3 and that's not as much fun. So that's why I think they've failed in the past. And you got scale really matters in the optical space, and it's mattering more and more as each generation goes on, because it's more and more expensive to get to that step function in cost per bit -- power of bit drop as you have to move to new more expensive technologies to do it. So if you don't have the scale, it's really difficult.

Got it. We talk about cloud. I want to talk about service providers and also cable. So let's start with service providers. And just in general, is 5G a big opportunity for you?

Yes, in 2 fronts, one is on the demand side. Around the world, and U.S. is a good example, number of people move into 5G infrastructure. With that 5G infrastructure, they're putting more fiber to the towers, more fiber, more bandwidth in general, is good for folks that do things like we do, that's dimension number one. And you can see it around the world in various different stages. Dimension number 2, is if you think about when the world built out 3G or LTE and you think about Ciena, or maybe you don't know the history. But we had a product portfolio that was very focused on, obviously, optics and -- optical transmission, but also layer 2 networking. And that played very well in the case of wireless, where there was a wholesale network and the wholesaler wanted to have a demarcation between their network and whoever was the MNO at the tower. So the way these architectures get built out, layer 2 network by the wholesale provider and then the wireless provider would have a sell-side routers sitting right there. Our portfolio played very, very well to that layer 2 piece. We had nothing to address the layer 3, and I'm going back historically 7, 8, 9, 10 years. And you can see how that played out well. Half the towers in the U.S. has carried over Ciena layer 2 transport division -- the layer 2 transport products in more of a wholesale type of approach and same thing in India, by the way. But where it was a converged layer 3 solution around the world, and there was really no wholesale network. We had no play in wireless. Fast forward the day, we've been investing in an IP portfolio for quite a number of seasons now, and it's actually quite matured on the access and aggregation parts of those networks. And we're having really great early success in terms of the 5G wireless architecture decisions and build-outs that you've seen. So 2 biggest 5G providers or 2 of the 4 for sure, biggest 5G providers in the U.S. there are sell-side routers now or Ciena based.

Got it.

So new opportunity for us around the world.

We see Juniper, for example, they have new access routers, Cisco has in position. What is your value proposition in the space versus the existing routing company?

Twofold really is, number one is, as you look at the build materials of these access routers, bandwidth is going -- when I say bandwidth is going up and fiber is becoming more dominant, well, that means that high-performance optics are now a more and more important part of the overall build of materials for these routers. And guess who happens to have the bias, but the best high-performance, optics in the world. That's one. Number 2 is, we've put a lot of emphasis in -- when you bring those optics and that brings an operational paradigm with around optical networking, we put a lot of emphasis in the operational aspects, both on the network elements themselves but off-box software applications that allow people to deploy these IP-routed solutions.

Got it.

On optics, sorry.

Yes, so that takes me to the cable market. Cable are -- these are big customers for you. What are they doing right now? And what are the trends in the cable industry?

Yes so just looking in the rearview mirror, where have we played. We've done exceptionally well in again, national backbone networks with cable operators, because of the optics performance that we talked about. One of the things that you may or may not know about the cable operators, but if you look at their backbone, they're reasonably fiber starved. So any advantage they can get from the performance optics giving them more bandwidth on that fiber, they're going to jump at. So that's why we've done exceptionally well from that. From there, we pushed out into the metro network. So this is basically connecting there various different CMTSs at Ciena metro on optical backbone network. And we've done well with them on business services, again, layer 2 business services historically, now moving to layer 3 business services. So that's where we've historically played. Those historical applications still exist and will continue to grow, I believe. But what's new opportunities for us is as they start to look at their fiber access plant, it starts to look an awful lot like -- just like a caustic telco service provider, fiber access plant and that whole IP optical access portfolio that we talked about is getting a lot of traction there. The second one is we've got some really great footprint there. Again, this is early days for us in terms of the investments there, but the whole back office automation. Software, we've got some really great relationships in there with our Blue Planet portfolio as well.

Got it. Is there -- by the way, we have about 4 or 5 minutes left. I just want to make sure that I leave enough time for questions from the audience. Is there any question from the audience? Anyone wants to ask a question? No. Okay. At any point, you have a question, just raise your hand. I'll make sure that you get the microphone. But so I want to continue and ask about Blue Planet. What is the software play of Ciena? And how important is this business to your overall -- on 2 levels. Number one, in a standalone business, contributing revenues and profits. And number two, as an add-on to the other businesses that you have?

Yes, so first of all, the more general question, you said, what is the software play for Ciena. So I think of the software and the intelligence that we deliver in 3 kind of layers, if you like, one is a lot of software that's actually buried into the network itself with intelligence around layer 0, layer 2, layer 3 control planes and that continues. One thing that drives me nuts is when people refer to that part of our business is the hardware business because actually, it's probably about 75% of the investment is actually in software and intelligence that goes on in the network, but that's a different conversation. So that's one layer. That basically, when you see it from a financial results perspective, just gets reported and there are optional software components in there, but it gets reported in the systems business.

But you don't -- I understand it. But on the other hand your margins are not resembling software companies, so?

At that level, that's fair.

Right, even if it's majority software, you still get paid as "hardware"?

Yes, on that level.

Yes.

Second level is off-box software and domain controller that is so largely in conjunction with our network solutions. And we made a lot of investments in the next-generation capability there we call OneControl, runs across all of our solutions. It's a cloud-based architecture. It has optimize around programmable infrastructure for people that want to have an automated software stack on top of it. It has done exceptionally well in the last couple of years, both as sort of the ubiquitous platform that people put on top of our systems to integrate into their broader software ecosystem. But also, we've rolled out a bunch of value-added software applications specific to how we offer network solutions in the network. So that's the second layer. And the third layer is, where you jumped into the question on is our Blue Planet portfolio. Our Blue Planet portfolio intentionally multivendor, so it's not biased towards any Ciena networking solution. Although I'd like to think it works better with Ciena networking solution, but it's not unnecessarily biased towards that. And that's all around helping our customers automate the flow of services in a network that has become much more dynamic underneath them. Like if you look back in the network 10 years ago, very static. Now they're virtual, in many cases, on the services side, all layers of the network have significant program building and flexibility with them. But the back office systems of our particular service provider customers of 10 or 20 years ago just can't deal with that. So there's a great opportunity there to help our customers, to have a more sticky relationship with our customers. And we think it's a good business opportunity over time to drive incremental software revenue and should help the margins over time at all.

Got it. We have less than a minute left. And I'll ask you just a simple question. Are you worried about Acacia from Cisco? Is this something that should change the competitive landscape?

I got the question back when the acquisition was announced, and I don't think my perspective has changed that much. Look, we competed with Acacia. We competed in Cisco before the acquisition, and they were partners and they had joint solutions in the marketplace. The solutions hasn't changed that much, by the way, and there are a number of folks that I would say in the optics space that you could question whether or not they have a track record delivering. I'd say - I had respect for the Acacia folks where they've tried to focus their attention. They largely delivered. So it's not a comment on that. I think we have different religions out there. Our view of the world is the best network for our customers, especially when you get beyond just a couple of kilometers down the road into a large infrastructure network, you got to take advantage of all the tricks from the optical domain and an IP capability and you have to have the software operations around that. I think Cisco's view of the world is, while you just stick these plugs in a router and connect them point to point all over the world. Those are 2 different views. We have been obviously believe ours. So I think you'll see that play out over the years. We believe in our view. What can I say?

Excellent. Thank you, Scott. And thanks, Patti, for the presentation today. We ran out of time. If there is any question from the audience direct it to me, and I'll try to get you answered. If I don't know it, Patti will help me.

Thanks, everybody, for your interest.

Thank you.