Cisco Systems, Inc. (CSCO) Earnings Call Transcript & Summary

Hello, everyone. I'm Katie Lindner, facilitator for today's webinar. In a moment, I'm going to turn the session over to our speakers. But before doing so, I have a few housekeeping notes to cover. You can submit your questions in the Q&A panel throughout the session. We'll also have some live questions near the end. [Operator Instructions] Also, please take a moment to fill out the survey. It's going to pop up when your session is closed. So your feedback is really important to us. With that, let's go ahead and get started. Ittai, I'm going to turn the floor over to you.

Hello. And thanks, Katie, for getting us started. And thank you, everyone, for joining us today. My name is Ittai Kidron, and I'm the Senior Analytics, Collaboration and Infrastructure Software Analyst at Oppenheimer, and I will be the host of the conference call today, or I guess the web session today. Today, I have the pleasure of hosting Mr. Jeetu Patel from Cisco. Jeetu is the EVP and GM of Security and Collaboration at Cisco, recently promoted from SVP. Congratulations, Jeetu. And this business includes Webex, a leading provider of cloud-based collaboration solutions, that includes video meetings, calling, messaging, events, customer experience solutions like contact center and purpose-built collaboration devices. The collaboration business is a key part of Cisco's growth strategy. And today, Jeetu and I will discuss collaboration and communications market trends in general and the recent changes and evolution in the Webex platform more specifically. We will also address competitive and technology dynamics in the market. And as Katie mentioned, you can use the Q&A panel to ask questions during the session, and I'll work them in. And you can also ask questions at the end of the session. We will open it up then for your live questions. But before we get started, Marilyn needs to do her magic. So Marilyn, the floor is yours.

Thanks, Ittai. So before we begin, we may be making forward-looking statements. So as always, I'd refer you to our SEC filings, specifically the most recent Forms 10-K and 10-Q and actual results may differ from those statements made today. So with that, I'm going to turn the floor back over to you, Ittai.

Thanks, Marilyn. And with that, Jeetu, I'd like to thank you for joining me today for the call. Can we perhaps get started with a brief introduction? I think your background is very interesting. I've known you for a while, but will love it if you can share and give us a kind of quick snapshot of your career.

Ittai, good to see you again, and thank you for having me on the show. And thanks, everyone, for tuning in. So background-wise, I grew up in India, ran my own business in Chicago for about 17 years and then moved to EMC, where I built the first SaaS business at EMC, which competed with my subsequent employer, Box. And then I joined Box. I was Chief Product Officer there, stayed there for 5 years. And then most recently, about 10, 11 months ago, Chuck charmed me into coming into Cisco, and it's been a great ride so far. So I run the Security and the Collaboration business at Cisco.

That's great. I guess it's time to introduce then the Collaboration group. What can you tell me about the key businesses there? And maybe you can highlight the relative size or recent growth metrics so we can get a better understanding of the magnitude of the businesses.

Yes. I'll tell you as much as we can report. But we are -- Webex is the leading player, as you know, in the collaboration market. We've got about 95 of the Fortune 500. And if you think about the scale that we're operating at, the Webex platform has about 650 million participants every month. And customers like Under Armour, T-Mobile, IBM, tend to be customers of ours and many, many more and across all industries that you can see. And there is a massive opportunity right now to transform the future of work, and we believe the future of work is going to be hybrid. Sometimes, we're going to work from home, sometimes we're going to work in the office, sometimes somewhere in the middle. And we have a tremendous opportunity at Cisco to be able to really be a credible provider in that kind of transition for organizations. And recently, what we've done is a fair amount of kind of -- we made some announcements around the Webex suite, which actually pulls all the different capabilities together. So as you mentioned, calling, messaging, meetings, pulling, Q&A, events, all pulled together in a single license bundle. And we've had massive innovation in the product. So if you think about some of our metrics, collaboration sits within the applications part of Cisco's reported revenue. So in FY '20, it was about $5.6 billion or so in size. Q3, which is the most recent quarter, revenue is up 5%. And we continue to see double-digit growth in the Webex -- in the business. And our product innovation is, I would say, the fastest that I have ever seen in my professional career in any company period. Like this is -- we had 800 features that we added in the product since September. This is the fastest we've actually seen Webex innovate in the 14 years that we've had it. And it's -- and then we also had 5 acquisitions that were made, and those acquisitions got very quickly. A lot of them got very quickly integrated into the product, about 30 to 45 days from close. And it's an exciting time because there's this big transition. There was a big transition when people were working in the office and then decided to work remotely. And now there's a second big transition, which is people are going to be in this mixed mode. And I actually believe that the mixed mode is going to be harder than either all in the office or all at home. And so there's a lot of opportunity for innovation there.

That's great. Maybe we can tie this to an event you had just a few weeks ago related to hybrid work. You can tell me a little bit about that event. And how will it propel your business going forward?

Yes. We had an event on June 8. It actually was very successful, probably the highest attended event that we've had in Webex. It exceeded the registration of WebexOne, which was our big coming-out event that we had in December. And at the event, we kind of shared our progress, like I said in the past 6 months, what we've done from an innovation perspective. So we've had a tremendous amount of innovation. Look, if you think about the Webex business in general, a few years ago, we had taken our eye off the ball on innovation and quality. Those were the 2 areas where we had not done as good a job. And we all decided that this is an area that we're going to not just fix those issues but be world-class at. And so that's what we've been working on over the course of the past 10 months or so. So proud of the team on that front. And what we did was we outlined the future of work, and that future of work being hybrid. And there's -- I think there's a brand-new category that's being built right now of hybrid work, where if you look at the statistics, 77% of the employees will embrace a flexible work style moving forward, and 98% of the meetings that will be had will have at least one remote participant. So you can't just optimize for the people that are in the room anymore. You have to optimize for the people that are also not in the room. And everything changes. Your real estate configuration changes. The way in which you allocate space changes. The way in which you make sure that you accommodate people that are not physically there with you change. And there's a lot of technology innovation that needs to happen to make that a reality. And so -- and it's not just about in a location of supporting remote work. It's much harder than that. So imagine if there are 3 people in the conference room, 2 people that are remote, how does everyone feel like they're operating on an equal footing where one party doesn't feel left out? Those are the kind of nuances you have to really think about. And there's a whole kind of slew of capabilities that I think will be needed for organizations as they kind of adopt this hybrid work. And the reality is the majority of the companies will operate a hybrid model and a mixed model. So it's not that you'll have 10% of the company is doing that. We believe that majority of the companies will do that because if you don't, the employees will demand flexibility and will actually go to places where they actually do get the flexibility. So that's at least the way that we're thinking about it. So what we did was a few things. One, we delivered a composite Webex suite. Number two, really started thinking about it, how do you support smart workspaces? So how does the real estate itself get configured? And then number three is what do you do to secure a hybrid workforce? And so it was a fantastic event. We had some external guests that also joined for partnerships that we have done, like the CEO of McLaren was there, who is a customer of ours, and they're doing a lot of work in hybrid sports. We had Arianna Huffington who was there, who had -- who we just recently announced a partnership with on focusing on employee well-being. And all in all, a very good event with great feedback from the customers since.

That's great. You've talked about in your last answer that the business was about $5.6 billion in the last fiscal year, and that Webex was growing double digit. We have a couple of questions on the line here from investors asking about any -- if you could provide a little bit more color about the scale of the business customers, users. And how do you think about expansion of the business going forward?

Yes. We've got a -- I'll just maybe give you a few stats that we hear that might be. So like I mentioned, 95% of the Fortune 500 use us in some way or form, 650 million monthly participants. Now if you look at and break down our businesses in different areas, we have 80 million calling users, and calling is a pretty big part because a lot of the workflows and organizations actually are tied to calling. So 80 million calling users, 6 billion monthly calls that happen. We recently acquired an audience engagement platform called Slido, which is now part of the Webex suite. And that has about 70 million audience engagement participants. There's about 125 million event attendees that actually utilize Webex. And if you think about our contact center business, which is a very, very, fast-growing business for us as well, we've got 3.2 million agents in the contact center side and about 36,000 or so kind of customers on the contact center side of the house. And then if you look at the devices business, which is one of our key differentiators compared to the others in the market, 100 million devices that we've shipped. The most interesting stat that I love about our business and what we've been able to do, the one that I'm most proud of is we've had a 15-point increase since last year on our NPS score. We are now over 50 on NPS. And customers are really loving the kind of innovation that's been had. We've made about $1.5 billion in AI investments over the past few years. Those are now starting to really kind of show up in the product as well. And 41 global data centers, so data compliance and security and privacy are a big deal, especially in this kind of sovereign world. And 13x in a row leader as a Gartner Magic Quadrant for the meeting solution. So that's kind of just few of the stats.

Yes. That's great. My gut tells me, Jeetu, you're going to have to give a little bit more during the Investor Day in September, no?

Stay tuned. We're looking forward to having that.

All right. Well, then let's move to Zoom. Clearly, they've enjoyed great success in the marketplace, but it sounds like you've closed many of their past gaps, as you mentioned, since you joined. If you had to kind of pinpoint, where would you think you have an advantage today relative to Zoom?

So the -- let's first talk about how we got here. So the way we got here was we were actually poor on quality for a while, and we had not innovated very aggressively in a long time. We are now squarely both better on quality as well as way fast for innovation than Zoom is today. So that's at the very start. But the big structural differentiator is if you think about them and us and what we want to have, firstly, at the top level, the way that you should think about this is we want to be a true strategic partner for the future of hybrid work. And hybrid work is going to be around solutions that you need to have around networking, security and collaboration tied together. So that's something that -- the kind of solutions we can provide are going to be very different from what Zoom can provide because it will be at a much more strategic level. But very specifically, if you think about our business, we are hardware plus software. And so the capabilities that you typically get with us fuse very seamlessly with the devices both in the conference rooms as well as at home. And so I'm talking to you on this beautiful 27-inch kind of Desk Pro device, which is fully integrated with Webex. And that's a key kind of differentiator. The experience is seamless. And eventually, experience really, really matters. And the fatigue factor goes down because the camera can track you. Because I've got a bad back, if I want to stand up for a while, the camera will track you. Those kind of things are very important. So first one is hardware and software. The second one is -- and this is just not in their ethos. They've tried a few times, unfortunately, but it's not in their ethos. We are secured by design. And privacy, we believe, is a basic human right and private by default. Every capability that we build, we actually make sure that we're very, very focused on security, privacy and compliance. We haven't seen the same philosophy from them, and maybe a different business model and all that. And then the third one is just the breadth of capabilities. So if you think about our set of capability, we've got calling. They just started in calling, but we've actually got one of the most comprehensive solutions in calling. We've got meetings. We've got messaging -- persistent messaging. That's something that Zoom is just dabbling in right now. We've had it for a while. We've got polling and Q&A for audience engagement so that people -- even if you have a large meeting, it can feel like a conversation. I'll -- Ittai, I'll tell you this. We've got about 12,000 people on my team. When I do an all-hands meeting, how do you make sure that people feel like they're connecting with you? The first thing I do is I start out with a Slido poll and ask people how they're feeling. And every single time, you'll get responses back. I'm feeling excited, happy, sad, tired, fatigued. Whatever the sentiment is. And you get a pulse of how people are feeling right then and there. And then there's events. And that's kind of the breadth of capability that we have in a single license. You don't have all -- these are categories of products. These are not just kind of features. They don't even have some of the categories. So that's the other one. So breadth of capability. And then the fourth one is our integration approach. So the way that we've actually -- we're very, very focused on integrating with third parties in an ecosystem, right? So we will have our platform that is open now so that third parties can integrate into the Webex experience. But more importantly, we will also allow that with our APIs, we can embed Webex into third-party experiences. So if you happen to be in Salesforce looking at an opportunity record, and you want to see what -- you want to initiate a meeting right from within Salesforce, we will be able to embed Webex into Salesforce itself. You don't have to leave Salesforce so that you don't break your workflow. So that seamless bidirectional kind of investment we're making is another big area. So hardware/software, security and privacy, breadth of capability and then the openness of the integration approach are big kind of areas of structural differentiation. And then we actually made a huge amount of investment in AI that's now starting to show up, whether it be noise removal or gesture recognition and all of those kind of capabilities that are just hard computer size problems to solve.

Got it. So very interesting. It sounds like the technology from your perspective is in the right place. So at this point, is this -- is the challenge here more of a go-to-market challenge or marketing challenge?

Yes. I think if you look at our brand, we -- Cisco continues to be a very trusted brand that is strategic to our customers. And we've done a massive amount of innovation over the course of the past 9 months or so, I'd say, is when we really kind of put it in high gear. And it's like I mentioned, the most I've seen in at least in my professional career. So I think the product is great, in my opinion, and customers agree. Our Net Promoter Score has gone up. The brand is trusted. There's a focus on -- at this point in time, there's a focus on, can we get more visibility for the brand? You will now start -- if you're an NBA fan, you're looking at that. You're watching basketball game, you're going to see Webex commercials over there. You're going to see Webex -- there's an amping up that we've done on the marketing side, whether it be Formula One, whether it be golf, whether it be basketball, so that we're actually going out on those venues. We're doing a fair amount of advertising from a TV perspective as well so that people recognize the brand. And then we've invested a lot in go-to-market resources as well so that we could make sure that we could cover the opportunities in the market. So yes, that's the focus while we continue to keep investing in the product and keep making it better and better and better.

Got it. In what inning are you do you think in getting the go-to-market right from your perspective?

I'll tell you the inning that we are in as far as this -- the evolution of this industry, I think we are in the third inning in the evolution of the industry. The first inning was the creation of this category itself. The second inning was when COVID happened and everyone switched to remote work. And now we're in the third inning of hybrid work. And so that's the way that I at least see it. And in my mind, there's a massive kind of shift that's going to occur just the way in which people work in this mixed mode. And the beauty about this, when it happens in the right way, is it's not just about the fact that sometimes you work from home, sometimes you work in the office. It's that your access to talent will be global. You can hire someone from anywhere. And that people who are looking for jobs will now be able to participate in the global economy. So the way we think about it is there's 3 billion digital workers on the planet: 1 billion of them are knowledge workers, 2 billion are frontline. And if we can actually enable a world where all of them can participate in the global economy regardless of where they are, I think you fundamentally shifted how people operate and how they spend 10 to 12-hour a day. And there's literally not too many kind of technologies that can provide more impact to global GDP than that. If you think about what Cisco can do over there, we can help with Internet connectivity, we can help with security, and we can help with people connecting and collaborating effectively together and pulling it all together in a single kind of cohesive solution.

Got it. That's super interesting. Maybe if I'll dig in into that a little bit, how does your product need to evolve from here to better address that new hybrid world?

Yes. I think we -- there's going to be a fair amount of -- there's like key areas of focus you have to have in the product, which is one is there's multiple different work styles, and we have to make sure that the product is accommodating to all the work styles. So we have to be flexible. But I'll give you some very concrete examples of how this works. So the example I was talking about earlier. Let's say that there's 3 people in the conference room, 2 people that are remote. The way that you would typically see a conference room is there will be a zoomed-out view of the conference room. 3 people are sitting in the conference room. The 2 people are remote. 2 people that are remote might not be able to see everyone's body language in a conference room. They might not be able to see everyone's facial expressions. What we have is a technology that we've built called Camera Intelligence. And with that, you can now zoom in to every single individual in a conference room, and with facial recognition also make sure that you could show up their name. And so rather than seeing 3 boxes, you will see 5 boxes. So everyone feels like they're in a level playing field. And that's just magical, because now, the people that are in the conference room don't feel like they can't be seen or heard effectively. And people that are not in the conference room don't feel like they're being left out because they are not only in [ cloud ]. And so this whole notion of inclusivity, everyone having an equal seat at the table, is going to be a pretty important area. This is just the beginning of it. A couple of other examples on this is how do you make sure that if you look at the way that offices and physical spaces get reconfigured, surveillance cameras so that you know how many -- how people -- what the occupancy rate is of a floor or kind of active wireless access points, sensors in devices so that you know what the temperature or the ambient noise or the humidity levels in a conference room are or what the sound quality is, all of those things are sensors that we now have in our devices that allow an IT organization to manage their facility in a more effective way than what has ever been done before. You go into a conference room, and you want to make sure that you're maintaining social distancing and COVID guidelines. The conference room has capacity for 4 people, but you actually have 7 people in a conference room. And you feel uncomfortable telling your boss that, "Hey, boss, there's like 7 people in the room." The system will recognize there's 7 people, make an announcement, say, "Hey, this conference room is designed for 4. You have 7 people in a room. There's another conference room available that can accommodate 7 people. Do you want me to book that room? And here is a map to the conference room." Fully automated. Those are the kind of things that you'll see much, much more of as you start to see a return to the office, but also make sure that you accommodate for the people that are not in the office.

Got it. That's super interesting. So let's go back to the go-to-market. Clearly, you're making changes over there. But let me ask you about price. How price-aggressive do you plan to be in the market to protect your footprint and grow it from here and gain share from here?

Yes. So if you think about the way that we've gone out and structured this is you have a single suite that you can buy. And when you purchase that single suite, we give you close to 40%. It's actually 40% cheaper than buying the pieces individually. So we have -- we are pricing it for scale and volume. We're not pricing it for a niche market. And that's where we feel is the right way to go at it. We're -- this is a very unique time in the market. We need to make sure that we can actually not have pricing be an issue for customers. And we want to make sure that as new capabilities come up, they are made available in the Webex suite as well. And so we're pricing it to -- we're very competitive from a price standpoint.

Got it. Do you expect the price competitiveness to be something that pretty much is the normal environment for us for the foreseeable future? That's how it's going to be?

Yes. This is -- look, this is a high-volume game. And you want -- you've got billions of users in the world, and you want to make sure that you could get to them. So I personally feel like this will be a competitive market price point. I mean, you've got -- who are our competitors? Microsoft and Zoom and us, and those 3-horse race. And so it's going to be competitive. We are looking forward, and may the best product win.

Very good. We talked a lot about video, and needless to say, you did mention from time to time the voice business. I do want to get into that a little bit more. How big is your cloud voice business, number of subscribers? What do you think -- and by the way, what do you think is more sticky? Voice? Video? How should I think about that?

Yes. As -- we have about 80 million users on the voice side. And it's a very, very interesting business. Because if you think about most companies and a lot of their workflows, they're actually very tied to the voice systems, right? And so think of a hospital and a calling system in a hospital when you call into a hospital and how do you go out and set hunt route and how do you make sure that you've got the right kind of transfer capabilities and calling systems. And how do you make sure that you can do a round robin call. So if one nurse is not at service, there's a -- it automatically transfers to the other one. There's a lot of workflows that have been built in calling. And so the beauty that what we've done is we are reimagining calling from just hearing to seeing and doing. What do I mean by that? So let's say, you start a conversation on a phone call. You can actually upgrade the conversation from a phone call to a video meeting. And that's the beauty of it, is you can now have continuity in how you're going to go from one medium to the other. And that truly creates like this delightful experience. I mean think of a car mechanic that you're trying to go out to work with. And the car mechanic -- you call the car mechanic, say, "Hey, are you going to be able to fix my car? What's wrong with it?" The car mechanics says, "Well, when I took the car, I thought it was going to be x problem, but we've discovered something else." And that's one of the most frustrating experiences that people have that all of us have gone through in a car dealership. Wouldn't it be nice if you said, "Okay. Let's make sure that we can actually drill down a little bit. I'm a mechanic. I'm on the phone. But I'm going to send you a link for a video, and I'm going to show you exactly what's wrong with the engine." right, when you're talking on the phone. And that's something that's very fluidly transitions from a call to a video call, and it just seamlessly gets the level of customer support, customer service. And so those are the kind of things we're doing. And the non-calling infrastructure is also utilized in our contact center agents. And so when you start thinking about the way that we've built our technology, it is a platform where all of our innovation gets used in other areas. So we started with noise removal in an area like BabbleLabs. In an area like by acquiring BabbleLabs, we said, "Okay. Let's take out background noise from this entire piece." And we actually added that to meetings first. Now you also have that in calling. And because you have it in calling, you also have the contacts. So when you get a capability in the platform, the platform actually can provide benefits to all the other parties. And it -- I wasn't planning on doing this, Ittai. But can I show you something that actually would -- rather than just talk about it because I think it would...

Absolutely. Marilyn is waiting, but let's go ahead and do it.

Okay. So here's the thing. This is the first time in an investor call that you will have someone bust out a massager in an investor call. This has never happened before in history, so this is the first time, okay? So here's what we're going to do. I'm going to turn this on. It's going to be pretty loud. And then you will see what happens with our noise removal technology. So I'm going to turn it on. It's pretty loud. You can see it vibrating. And then I'm going to turn on noise removal. When I turn on noise removal, you could still hear me speaking, but that sound has gone away. So this is without noise removal, and this is with noise removal, right? That's an example of how you can take AI technology, and you can actually segment background noise from human speech, amplify the speech and remove the noise. And so think about this in an inclusive environment that you want to create, where people might be of different socioeconomic level. I don't have a dedicated office. There's someone -- my roommate is vacuuming the carpet. There's -- my lawnmower is going on next door with my neighbor. The dog is parking. The kid is crying. All of those sounds can be taken out, and your speech is amplified so that you come across more professional. Now think of what that means. We're creating opportunity for people that might not be able to work from home because they fear that they won't come across as professional. You now have actually taken out that barrier for them.

Cool. That's great. Super interesting. Can you give us a little statistics on the cloud voice business, magnitude, size or how fast your seat expansion is happening over there?

Yes. We actually had a great last quarter. We added like over 1 million seats just last quarter. In fact, if you look at the number of seats we added last quarter, they were actually -- the entirety of what Zoom has added in the time that they've been in calling. And this wasn't just a cloud calling business. And so we're seeing a tremendous amount of uptick over there on that side. And the beauty about this is, the 39 million cloud calling users across our cloud platforms, there's an installed base of 40 million on-premise users and kind of -- we will have -- we have a lot of workflows that have been built with people that are already using our on-prem calling, and we are now able to move them to the cloud. But the beauty about that is when you move them to the cloud, you have -- our administration can happen across both systems. So you've got this ability to make sure that the transition happens in a pretty easy way for customers as well as they're moving to the cloud. And it's not a jarring effect as well. And we've got massive, massive levels of innovation going on, on that side of the house on the cloud side of the business. And all of the enhancements you're making on the platform, the cloud calling business automatically kind of benefits from. And so that's just super exciting to see. It's one of our fastest-growing businesses. It's growing at triple digit year-over-year, and 1 million seats were just added in Q3.

Wow. That's impressive. Is this the old BroadSoft acquisition you made a while back? Is that the foundation of this? Did I get that right?

Yes. But then we also did a cloud-native -- a full cloud-native kind of innovation. So we built everything from the ground up. By the way, same on the contact center side. We've had a contact center business, but we built from the ground up a cloud-native contact center business, which is fully modular, modern in design. And if you look at our user experience in any of our products right now, it's just delightful and it looks like it's -- the company that we aspire the most to be like on that dimension is Apple, and I think they've done a fantastic job. And you will see a lot of kind of similarities in the user experiences that are being built. And it's -- and we're just getting started, by the way. So just keep waiting, and you'll see us keep blowing you away on that front.

That's great. Is there a significant overlap between your video customers and phone business? Do they usually -- is there a big kind of overlap between the 2 installed bases?

Yes. I mean there is, and there is actually -- one is bringing the other along as well right now. So what you might see is someone who is just on the meeting side is now saying, "Oh, I also want calling," and you get calling as part of the suite or vice versa. And so there were a set of customers who are just dedicated on the calling side, but now they're starting to see that, hey, I want to make sure that I'm reimagining calling and I can start on the call, but then I can go to a video call. Let me also have meetings, and then those things start to come together.

Got it. Okay. So we talked a lot about Zoom, but I mean let's talk about Microsoft a little bit and their presence in the market. What can you tell us about them? And are they easier or harder to compete with relative to Zoom?

Well, if you think about our -- the true competition that we have, I think Microsoft is one of the biggest competitors that we have. I mean Zoom is good at the lower end of the market, but they don't fully understand security. There's like a lot of things that are structurally kind of wrong with Zoom. But they've done a great job in being the -- from a branding perspective. But if you think about Microsoft, what our goal with Microsoft is, is we want to make sure that we can coexist side-by-side with Microsoft because customers will actually use Microsoft for certain workloads. And we want to make sure that we can sit side-by-side with Microsoft. And so one of the things that we need to have, one is -- there's 3 ways you compete with Microsoft, right? One is you make sure that you have a much broader set of offerings than what Microsoft has, and we do have that now. If you think about our entire Webex suite, it's very, very broad. The second thing, though, is we have built very specialized experiences for certain personas as well. So if you think about our contact center business, if you think of our events business, customers are spending dedicated amounts of money in those areas that we can do a cost takeout of. And actually -- so if they were to go off and buy the Webex suite, they would not need to go buy ON24 for events, or they wouldn't have to go out and buy some of those other pieces because you can just get that as part of Webex suite, and it's a completely seamless integrated experience. So that's a pretty big area. And then the third one is we also have a partner ecosystem as well as overall where we will have vertical kind of experiences built. So a partner might build a telehealth experience. Or we recently acquired a company called Involvio, where we have classroom capability for scheduling and all of that with the education space. And so when you think about it, we will sit side-by-side with Microsoft in certain areas. And we are way better at things like large meetings, like external collaboration, like making sure that you have -- calling is much more of a networking problem than it is a software program. And so the fact that we are a networking company, that's going to be a huge area of differentiation for us. We've got devices. They don't really have devices as a great business. So that's an area that we've actually got devices in each one of the categories. And then what we are doing on the devices side is creating a good, better, best strategy. So each one of our devices -- we had Desk Pro for the desks for senior executives, and that was kind of this high-end device. And then what we did was not only did we provide incentives for people to go out and have that device. If they buy Webex, then they get close to 40% of that device. But then we also introduced a little bit of a more mass-market device called Webex Desk, which can now be available for like $1,250 rather than $2,500 for this one. And then we -- so there will be a good, better, best approach that you can expect in devices for the rooms, for devices at home. We've actually got devices for hot desking so that people don't have to have dedicated cubicles or offices. They can just have desk that they walk up to. They put their phone in there. And before you know it, you've been able to start utilizing that as a round robin desk, or you could actually figure out the occupancy rate so that you can have more of your real estate be transferred to conference rooms. So our hardware, our ability to have a broader set of capabilities and being able to take out costs from an organization when they're spending money on things like contact center, when they're spending money on things like events is going to be a huge area for us for growth and expansion even if customers got Microsoft. And a lot of -- I'd say 99% of our customers will have Microsoft in there, and we will coexist with them. We will partner them as we move forward.

That makes sense. When you think about big picture, it sounds like calling voice, video, messaging, right, all those things are coming together into a single platform, this consolidation...

Single platform and a single app. So we have a single app, which can have all of those pieces.

Different vendors are approaching this from different starting points. From your perspective, is there a natural starting point that's better to start from in order to drive this consolidation lead in it?

I think there's -- depending on the customer and where their initiation of the workload is, we tend to start from there. So if there's a customer who's a calling customer, we talk to them about reimagining calling and also make sure that as part of the reimagination of calling, video and messaging can get it. One of the things we didn't talk about, Ittai, is this notion of the combination of synchronous and asynchronous communication coming together. So today, most of the limit -- most of the physical limits you have in communication are because of what, time zone and availability in your schedule, right? And if you think about being in a global team, you don't have 8 hours a day to pick from with someone else. You have probably like 1.5 hours today to pick from with someone else in Europe. And that's if you're working like a 14-hour day. And so the challenge is, what do you do to make sure that people don't have to always be synchronously communication -- communicating with each other. So what we've done is we've built a technology stack that allows you to do a fusion of sync and async. And so I can start something with an asynchronous meeting for preparation, like I can send out a video where we want for 10 minutes and say, "Let me just make sure that you folks watch this before you get into the meeting." Then we can have a meeting, which could be a discussion. And then you might have follow-ups that happen asynchronously on messaging. And that fusion of sync-async happening fluidly in the same platform is just completely magical. And that's what we want to make sure that we do more of. And so the starting point, to your question, is you might start from calling if calling is the workload of choice. You might start from meetings. Sometimes you will actually start from some other areas. Like one of the beauties of having a product like Slido is, let's say that the customer has initially standardized on Zoom, we will have Slido integrate with Zoom, and you will still have a way to get into that customer because you've actually got Slido that can actually be sold into a Zoom account or sold into a Google account, sold into a Microsoft account. And so these use cases are so powerful and so necessary for this future of work that you could get in with multiple on-ramps and entry points with the core being all available on a single platform that can be provided to the market.

Got it. That makes sense. I have more questions, but maybe I'll ask you one more before I open it up for others to participate as well. As we look at your business over the next couple of years, what would be the best way to benchmark your progress and success or lack thereof? Like what kind of metrics should we, from the outside looking in, should pay attention to in trying to figure out whether you're on track versus not?

Well, I think the metric that we think about the most -- so firstly, we know the world has changed and people are moving hybrid, and hybrid is the category that's going to fuel our growth in the business. And so we want to make sure our focus is on inclusive experiences, where everyone can participate in the global economy. So I would say the metrics would be around what the movement has been to the cloud of a lot of our businesses. So are you moving our contact center business to the cloud? Are you moving our calling business to the cloud? We've largely moved most of our meeting business to the cloud already. Those would be kind of very strong metrics. And of course, there's going to be the obvious ones. Is there good revenue? Are you seeing good traction from customers? But the most important one I pay attention to is how our customers liking our product and how is our NPS being impacted with the customers using our product. Do they love the product? Because if they love the product, they will talk to their friends and family about it. There's a virality of marketing that happens when that happens. And so the Net Promoter Score is pretty important. That measures the loyalty of the company. And we just need to make sure that, that's being looked at very closely as we go at it. If you think about the use of video and the increase of video, we've actually had a massive increase in the volume of video as well. And then one metric that we don't think is the right one to use is we don't want to use the metrics saying how many minutes are people on our platform. We actually want to invert that metrics in how few minutes can people be on our platform and get the job done because the fatigue factor is getting to be super high. And so what you want to have is when you use Webex, you don't feel as tired because you can actually have this combination of sync and async. And you can free up time for people rather than just maximizing the minutes.

Got it. Very good. There are a couple of more questions here in the Q&A tab, but let's try the live Q&A as well. Katie, if there's anyone who's interested, this will be the time.

[Operator Instructions] So we do have one from [ Vision ].

Can you hear me?

Yes.

Yes.

Jeetu, I just wanted to hear your take on where incremental growth in the market is coming from. Coming out of 2020, it feels like everyone who needs kind of a meetings product should already have one. And so when you're thinking about kind of the growth in the market and growth in users, like where is that coming from?

Thanks. The way I would think about this is there was a rapid decision that companies had to make when they were right -- when they were getting into COVID because they just had to make sure that they picked a platform. And now what you're starting to see customers think about it as much more strategically, hey, we believe the future is going to be hybrid. This mixed mode is going to require a complete reimagination of facilities, of the way in which people work, and of the stack of technology that you need to have to make sure that people can work seamlessly and inclusively together. And so it's -- the way we think about it is it's not just about meeting, it's about the entire composite workload: calling, messaging, meeting, polling, Q&A events and what people are going to do to augment that with devices and hardware around both -- around security, networking as well as collaboration. And so that's where you're going to start to see an expansion of TAM because it is a completely different way to operate how you configure your offices. How many branch offices do you have? What do you do with people working from home? How do you equip people working from home so they don't feel the distance? How do you make sure that everyone feels engaged in a conversation even if it's a large meeting? All of these things require very different kinds of technology rather than just -- and these are not just features. These are distinct product categories that you need to make sure that you pool together into a single platform. And that's where we see most of the growth that will come in the future from.

Got it. And is there -- I guess how do you think about growth in the core kind of Meetings business to the component that obviously got a huge benefit during COVID?

Yes. I think there's going to be continued growth in the Meetings business. But the way to think about that is -- the way that we will measure it is what is the growth of the suite rather than just the Meetings business, right? Like what -- how are people going out and using the composite suite, and that's what people will get moving forward. So if there is a time when people want to start off with a call and then move to a meeting, that's okay. If they're time they want to start with the meeting and then transfer the call because they have to leave to go pick up their kid, that's okay. If they want to make sure that during that time, they have asynchronous communication where they've done a recording and sent it to people so they can view it, that's okay. So there's going to be this combination of workloads where -- I don't think we are thinking about it as okay, what's going to be there for each one of the individual pieces but more what the component is going to look like.

Got it. I guess are there new users, though? Or is it kind of a share shift in the core Meetings business, is more so what I meant to ask?

I see. Well, there's, on the frontline with the field workers, there will be more users because you will have -- it's not just the knowledge workers in an organization. If you have a wall-to-wall account with knowledge workers, then there's no more users to be added on that. But we will actually have a lot of users if they're not wall-to-wall, and people who want to go wall-to-wall for all these capabilities. So there will be new users, but there'll also be new users and new categories of users like the frontline workers. So it'll be a combination of both. But the new users might not be equally distributed. So you might have everyone who is a Meetings user already, and then we might also be able to get them to calling, and then that actually becomes a new user base to calling. But it's something that we already have the meetings workload or vice versa. And that will be another kind of equation that has to be kind of factored in.

Jeetu, maybe to follow up on this question. Are there going to be -- some of the features that you mentioned, are any of them are going to be priced separately? Are they all going to be -- like, for example, the noise cancellation, is that going to be part of my video license? Or I'm going to have to pay for these things separately?

Yes. We're trying not to go up a nickel and dime on those things and trying to make sure that people have those. Now there's, in some cases, for a short amount of time, you might have different kind of tiers and tariffs of bundling where you might have, okay, for this particular feature, which might have a more significant COGS implication, you might actually only provide it in an enterprise version. But in general, 99% of our features are just going to be available in the suite as you start with. Because what you want to do is not have that be something that you have to keep nickeling and diming and saying, "Okay. I don't have this feature because I didn't do this because we're moving so fast." We want to make sure that people are knocked in the features.

Got it. That makes sense. One question I had was on what's your perspective on the work collaboration in automation markets. We see companies like Asana and Monday and Smartsheet kind of do very well in the marketplace, all about work collaboration. Somewhat of a parallel universe to yours, but there is some touching and crossing over. And we've seen Zoom make a big investment in Monday recently as part of their IPO. Where -- what's your position on that market? How does Cisco interact with it? Is there a potential for an expansion activity there?

Yes, I think the way that we see this is in the space of productivity, there's a lot of different categories. And if a customer or a user who wants to use the product, that product should be seamlessly integrated into Webex. And that's kind of our starting position and goal. Whether it's Sonoma or whether it's Monday or whether it's Miro or MURAL or Box or Dropbox or Salesforce or ServiceNow, we will make sure that we integrated those. And our goal is to make sure that we are seamlessly integrating into those. And then in some areas, we might also have capabilities on our side. But just because we have that capability in our side doesn't mean that we don't integrate with the best-of-breed vendors as well. And so for example, we have whiteboarding capability, but we will also integrate with Miro and MURAL. And those will be things that you'll actually start to see. So we want to give users choice, and we will make sure that we provide the best experience ourselves, but we want to make sure that the others are also getting integrated. So I would anticipate that over the course of the next few quarters and -- in the next 12 to 18 months, expect a lot of integration with these third parties that you see within the Webex platform. Think of us as truly a platform that people integrate into. And then our API is also embedding into their application. So if you want to be in that application, we don't require you to come into our application. We will also make sure that we work with them.

Got it. So it doesn't sound like you feel like you need to own things. You need to just make sure the integrations are very seamless and smooth in the way they're being executed.

Yes. I think there will be time when it makes sense for us to have something in the category, but that should not stop the integration. A classic example of that is just because -- we like polling and Q&A so much because it's such a part of our workflow. We said, "Let's make sure that we own Slido, but Slido should then also integrate into third parties." And if there's another tool that needs to be there, we will integrate with them because there'll be an open API, and anyone can integrate. So like that's the beauty of it, is you need to make sure that you're open and not creating walled gardens. But you have to make sure that there are certain capabilities where there's not just an economic advantage but also a technical seamlessness advantage from a product perspective.

Got it. That makes sense. Cool. Well, I mean, Katie, are there any other questions before we sign off?

No one else has raised their hand. Oh, it does look like we just got -- James raised his hand. But James, you're not on the line for me to unmute you, so I'm not able to unmute you. So no, there are no other raised hands at this time.

Very good. Jeetu, this was great...

Oh, wait. I'm sorry. I spoke too soon. Dylan, raised his hand. Dylan, go ahead with your question.

Go ahead, Dylan.

Jeetu, very great to meet you. I'm actually with NVIDIA. And as you know, we're one of the leaders in the AI space for hardware and software. It's very fascinating for us to see how COVID essentially propelled a lot of competitors in your space into innovating very, very rapidly ahead of essentially necessity. So with your recent investment, how do you see you leveraging AI-powered capabilities? And how do you see you innovating in that space compared to your competitors?

Yes. In fact, this is one of our -- so thank you for that question. And if you think about AI, it's one of our kind of areas where we've been investing quietly in that area for a while. And you're now starting to see the true fruits of labor in a pretty meaningful way. I'll give you a couple of examples, right? So first one is if you look at the ability to be inclusive regardless of geography or language preference, one of the things we've done is this. So what do we do for people that might be hearing impaired? Well, we need to make sure that they have closed captioning. So you now have real-time transcription that can be done right in the product itself. And so essentially, you can turn on assistant, and you will actually see real-time transcription. The beauty about that was we then said, "Let's take that to the next level." And we now translate that in 108 different languages in real-time. So I can be speaking in English and you want -- you don't -- you're not -- English isn't your first language and I'm speaking too fast, and you would actually see a translation in Mandarin. And so that is an example of AI. So one of the things we're doing with NVIDIA, for example, is our devices are equipped with the GPUs from NVIDIA because you have a lot of kind of AI capability, in-camera intelligence and all of that that you're able to do in the product through a GPU. And so AI will be one of our -- we have a 6-part strategy basically: build an app suite; make sure that those capabilities of the app suite are available on a platform; make sure the platform can be used to integrate with others as well as create specialized experiences for the functional areas, like contact center agents or marketing or HR or IT or whatever or vertical applications; that will then be experiences that will be manifested through the devices with an underlying fabric of AI and wrapped around with security and privacy and compliance. So AI is a core part of our strategy. And if you just put us head-to-head with any of our competitors, we just smoked them on that side. We have way better AI than what we have. And we are continuing to invest in that area. One of the big areas that we're investing in right now is in employee wellbeing. So what do you do with our Webex graft technology with AI? And then on our devices, we've got a lot of sensors. And that's actually huge for artificial intelligence as well, what you can do once you have all of that telemetry and data. So NVIDIA is a great partner of ours, by the way. We work with them very closely. And we have their technology in our devices, and we will continue to make sure that we partner on the AI front with -- as we move forward. Expect to see a lot of innovation that you see in capabilities and features being things which are almost effortless for the user because you don't have to do anything. You raise your hand, and you'll actually recognize a gesture. And you speak and you don't have to take notes because the notes are automatically being captured for you. When you walk into a room, the camera will automatically zoom in on you because of where you are and what you're speaking. Your AI will take out the background noise because of what I showed you at the demo. Those are all the kind of things that we want to make sure that we continue to keep enhancing. So AI will be a pretty big part of investment for us moving forward.

Maybe Jeetu, I can -- I'll expand on that, the noise cancellation demo that you did. Do I need to activate something here on the session to make that happen? How automatically is that applied versus needs to be user-initiated?

We've actually now got about 16 billion minutes that have actually benefited from noise removal, and it is -- an organization can choose to have it on by default. And so you don't have to worry about it. So you don't even have to do anything as a user. That's the beauty of this, is that the organization has the choice on how they want to do it. But if they keep it on by default, then you will all just benefit from it. And you can always toggle the setting because it'll just be right in front of you. So it's not super hard to go out and just turn it on or off.

Got it. That's great. Katie, maybe we could take one last question?

Yes. So Roman has a question.

Regarding the past experience with M&A, your collaboration portfolio as an illustrative example, could you talk about BroadSoft and your traction with service providers using their product or your road map for this product to service providers?

Yes. It's a great question. So as you know, Cisco is very partner-friendly in our approach, and service providers are a huge segment for us. And we've got great relationships with service providers. And -- like for example, last quarter, we had a massive deal that we announced with AT&T, and that was extremely exciting for us on the calling side of the house. And we will continue to make sure that we work closely with service providers as we move forward. And that is a -- one of the big advantages that I was so amazed to see Cisco have is our partner ecosystem. It is a fantastic partner ecosystem, and we want to make sure that we continue to kind of leverage that as we move forward. So we're very committed to service providers. We're very committed to VARs and value-added distributors and our entire partner ecosystem. And we think about our partners in every single thing that we're building.

Jeetu, thank you so much. Really appreciate it. Marilyn and Katie, thanks for helping us host the event today. Good luck, and looking forward to hear more at the upcoming Investor Day in September. And of course, Jeetu, as every investor will say, we'll be watching. Let's see what you can do.

Looking forward to it. And I hope we can do you folks proud. Thank you again, Ittai, and it's always great to see you.

Appreciate that. Have a good one. Thank you.

Take care.