Arista Networks, Inc. (NYSE:ANET) UBS 50th Annual Global TMT Conference December 6, 2022 3:00 PM ET
Company Participants
David Hood – Enterprise Hardware Networking Analyst
Conference Call Participants
John McCool – Chief Platform Officer, SVP of Engineering and Operations
David Hood
Great, good afternoon, everyone. Thanks for joining us at the UBS Global TMT Conference. My name is David Hood, the Enterprise Hardware Networking Analyst here and thanks again for joining in person the 6th Annual TMT Conference and so with me today, we’re excited to have John McCool Arista’s Chief Platform Officer and in the room somewhere is this time from Investor Relations do we need to read it? I don’t think we’re good. We’re all good. Perfect.
Question-and-Answer Session
Q – David Hood
So this is the first one I have today. So why don’t we just jump off. I know I think many of you in this room have probably met John or heard John presented in a different forum but I do know from emails that I’ve gotten over the last couple of weeks that are definitely more familiar with sort of your role in your purview. So maybe I think it would help if you could kind of click the number of you kind of discussing. What falls under your put a title, your role, your purview just for the levels of the conversation?
John McCool
Sure. So Chief Platform Officer in the risk that I have responsibility for our new product hardware developments as well as our manufacturing and supply chain and the latter half has been quite busy this year.
David Hood
Great. So why don’t we start there? So many of the meetings that we’ve had today and yesterday and even over the last week, because the question is floating a backseat more of the normal typicality and macro drivers of the business, but given sort of the success that you’ve had over the last 18 to 24 months, given your position in between with the hyperscalers and enterprise working by vertical and product and a lot of new products are effectively, you can be used in multiple different generations in different customer verticals, but what are you seeing today, maybe relative to six months ago and over 90 days ago?
John McCool
In terms of supply chain fluctuation? Yeah. So I think over the course of COVID, the supply chain situation has evolved from the factories closing. It can’t get workers up to the right occasion. I want to control others who we are focused around semiconductors and the semiconductor this match between supply and demand related to capacity where it’s particularly acute is in power semiconductors. So these tend to be on older processor nodes, which really lack some investment coming into COVID and then the demand for these products is very broad based. Not just networking or even IT, there’s a consumer, etcetera.
That’s really been in the last half of the year, 2022 is a key constraint to go into power supply and in fact, they can be used across multiple of our products. So it’s not necessarily segmented by cloud or enterprise. They’re very generic device across the boards.
David Hood
How does that get resolved? These are modes. There’s no incentive for anyone to make any investments in this technology. I would imagine the same dynamics that have caused besides cognitive that caused a lot of these shortages will persist as we come out of this economic cycle. So as a company, how do you plan for this? I know you’ve been in the broker market buying product at elevated prices and you’ve done some reconfiguration, I think to some of your products, but over the over the end of the year, how do you navigate this potential? I don’t want to see persistent challenge, but it’s definitely going to be something that I think will probably crop up from time to time that may be slight disruption.
John McCool
Yeah, I think there’s been many areas of supply chain during COVID, which showed us that there’s an opportunity for more focus and attention on multi-sourcing or regional areas. We’ve gotten very clear about where things are sourced from, from our suppliers and making bets around that. We have extended purchase commitments largely to deal with these kind of situations as well and I think that that we’re working very closely with these suppliers the way that we have in second half.
David Hood
Should we read anything, get back to purchase that would come down a bit in the most recent years. Does that suggest that maybe supply has got a little bit better, you’ve been managing it a little bit more effective.
John McCool
I think as we went into 2022, we saw the challenges ahead and really we were very focused on placing those bets and I started to see some of them played out. I would read and I am perfecting it really.
David Hood
And then to your point, just maybe just the final point right now, if I look — I think you said publicly and you’ve written about this. They’re like 6,000 parts or 6,000 vendors that you work with. When you look at what’s happening in other parts of maybe the tech industry with lockdowns and potential civil unrest, have you been thinking about maybe ways to further diversify your exposure in parts of the world that may have potential trouble in the future or you know there’s discussions about obviously new tabs being built in the US. I don’t know, it’s not kind of core to what you do right now, but have you kind of thought about maybe diversifying sort of your exposure geographically over the long term?
John McCool
Yeah, I think in terms of direct fulfilment effectively what we buy and make, we’re very cognizant of where our factories are and what products are getting built for the various factories as you go multiple levels down the supply chain, it gets more challenging. In fact, you start to see, you may have two suppliers, but they’re all relying on some resident or chemical that’s coming from the same location. We’re drilling down much further than we ever have in the past
David Hood
And so on those lines, maybe just turning to the big picture, just a ton of discussion and market demand durability by vertical, maybe just starting with your sort of bread and butter over the years to tighten hyperscalers, there’s a lot of discussion that maybe workloads growth is slowing some degree capital intensity kind of grows more or less in line, I guess with workload migration is kind of the way we’re thinking about it.
I know you have reasonably good visibility in the next three, four quarters, how do you think about your relationship though from a visibility perspective post COVID? I guess the question is who you’ve been working, I know very intimately with your customers, sharing roadmaps, sharing designs. Does that change?
John McCool
It’s going forward yeah to revert back, I think there’s two faces. We’ve always had very good insight into technology direction, technology wins and co-design even before COVID. So directionally where things were going, and I think that continues when the supply chain situation starts to resolve or lead times come in with the extension of lead times though, procurement deployment decisions had to be extended right does.
Those go back to normal, I guess one thing I go back to the semiconductor side, well, people say it’s easing. These times on semiconductors worst case most difficult one used to be 24 weeks. Today, the worst case one is 70 weeks. I don’t think we see that snapping back to those 24 weeks, for a long time and especially in the cloud segment, they’re much more cognizant of the semiconductor lead times and plan to pull around that. So, I think we’ll see some easing, but I’m not sure to bring snap back to that.
David Hood
So then, obviously it sounds like it’s a reasonable assumption to assume that given even if these times come in from 70 weeks to 52 weeks or some are a little bit tighter, the predevelopment work plus the lead times should give you reasonable visibility and hyperscales into some planning and directional work quarters.
John McCool
That companies are exactly the same right.
David Hood
It’s a reasonable way to think about it.
John McCool
And I would say that there’s a level of intimacy that’s required to participate in the cloud business. It needs an engineering level engagement that might that will persist.
David Hood
Okay and then maybe on the enterprise side, it’s a little bit of a different market, like different go to sales motion. It’s a newer, not newer, but it’s not the original market that sort of was known for. What are those conversations look like today from an enterprise perspective. Are they — are the conversations changing in terms of where the decisions are being made to talk to a lot of companies that we’ve done calls with that it’s basically a ceased decision at this point. Has it reached that point in terms of your conversation with your customers or agents to sell on a project based by project basis?
John McCool
Yeah I we’re very involved in the project base by project base decisions where we had a strong historical presence in the data center. Five years ago organically we did routing. So the data center built the campus use case, network visibility. So we’ve in the last five years expand that the number of use cases that we can go into an enterprise and truly present ourselves as an alternate end-to-end from the incumbent.
David Hood
So when we go in, we’re very much into a new account. Decisions had been made around the project. They’re looking for another supplier. It’s less about refresh activity, which could be put off essentially because we’re not going to refresh this year because right now in the budget.
So it’s not like you’re going in and you have this just in campus footprint and there’s a refresh opportunity. So you’re basically…
John McCool
We’re looking for those opportunities for everything or anything and yes, time to change.
David Hood
Right, got it. So against that backdrop does that mean from a I know market share does make a lot to a lot of people, but from a company perspective, some of the larger competitors in your space talk about how they are fighting back to keep share in some of the verticals and you’ve taken a lot of share in some key verticals, but given that you are more of a replay story, let’s say enterprise, does that mean in a sort of a challenging economic climate where project base by project base decided that you should be erratically should be able to continue to take market share.
John McCool
That’s our objective before sharing it. We’ve given the sales teams more opportunities to go after projects. Four years ago that for the data center refresh, if that wasn’t optimal refresh, if you talk to another account, now we have a campus opportunity, network visibility story, maybe even a big picture away to the security competence.
David Hood
So there’s many more touch points in an enterprise that we can play against. Where are you seeing more of these touch points being successful, Campuses have been successful recently, enterprise data centers are very successful.
John McCool
The core pain point that we touch is my network is hard to operate. It’s difficult. I can’t upgrade security. It’s difficult for me to patch. It’s just difficult, that’s where our team is focused and that may present itself a campus opportunity or a business opportunity and we’re fairly agnostic about that, just looking for a way to continue to either grow wallet share within the company we’re in or bring in a new customer.
David Hood
That was one of my next questions. You mentioned wallet share. Is there a way to look at sort of your relationships with your customers from a tax point perspective. So for example, this company historically was an enterprise data center customer. Now it’s a campus and enterprise data center customer, right? Think about your business that way and does that decrease or increase the stickiness and decrease the cost of maintaining and or maintenance of that account and drive better profitability.
John McCool
Absolutely. I know our sales team look at opportunities of wallet share within the accounts and big bets that they placed. I don’t think we correlate it as stickiness. We’re just trying to gain share either by grabbing another customer or increasing the wallet share. Some of the large customers still have significant footprint of the switches and routers that are an opportunity for us to move forward.
David Hood
And then and then maybe just finally on enterprise, it certainly sounded as if maybe at your Analyst Day there was a little bit of a hesitation in terms of maybe demand for campus on the enterprise side. Is that a reflection of maybe a lot of the initial widths were legacy sort of touch points for Arista customers that knew the product well, knew what you bring to the table and now maybe the next leg of growth is a little bit, I don’t have some tougher but maybe it’s a little bit slower in terms of onboarding effect.
John McCool
Actually we felt like we were pretty far on target with the demand. It was the ability on the supplies chain up to really drive that revenue perspective.
David Hood
Got it. So does that mean backlog has been building incentives?
John McCool
Interest is done. We’ve got to have a backlog, but interest in general and I think the opportunity we see pretty strong.
David Hood
Got it. Okay. Sticking to campus, over the last couple of years and there’s a small market for you, but some of the bigger competitors have been aggressively raising price. Has that been an umbrella that you can price under or using that is a leverage point in addition to your technological position to gain share or…
John McCool
Yeah, and I think we get questions about your pricing or supply as a leverage point. We’re very focused on the operational simplicity as the key win and the sticky win in the in the long term. So not so much for the cost of ownership, right. Operational complexity, reducing cost of service calls, automation that all those components.
David Hood
So total cost of ownership matters then sort of that initial price. So conversely, if pricing kind of softens as we go through ’23 and let’s say calendar ’24 less of an issue for you. Could you not spell your computing directly on price?
John McCool
Yeah, we’re focused as a solution of that that is better.
David Hood
Got it. Okay. And so when you think about the 800 pound gorilla in the room in campus for data that I’ve seen eight, ten quarters really haven’t seen much in the way of growth in that market. Now there’s some debate on growth because the backlog drawdown and other sort of metrics, but absent the backlog drawdown, it seems that their position is relatively stable and share as the market grows. How do you think about their competitive position vis-à-vis you in terms of, you’re small now, but as you get bigger, is there a risk that this competitor becomes a little bit more aggressive right.
We’ve seen it in the past where companies have gotten, a couple of points of market share in campus or three points of market share and maybe Cisco has been a little bit more aggressive on price with those customers to retain and win back. How do you think about that a little long term? Yeah, I know you’re selling on solution.
John McCool
I think we have seen that first time — we’re up against in the incumbent extremely competitive and very focused on. maintaining their share. We see the data center piece, you see filed where they at one point had dominant share. So I think we’re used to that dynamic. I feel like we would see or expect any changes from their very competitive position that we’ve seen in the past.
David Hood
And you mentioned cloud. Have you seen them — have you seen them aggressive on enterprise data center recently? Looks like they’re losing share, at least on the data that we’ve checked, it looks like in a relatively difficult quarter. We just had an incredibly strong quarter just about to get your perspective.
John McCool
Again, I think it’s more solution based on the people looking at sort of the end value of having cloud version and being able to automate those environments and not having separate network for campus, separate network from routing and separate network to data center that requires three different operating systems. That’s been the selling point.
David Hood
Okay. And then sticking with enterprise data center, obviously it’s been incredibly strong. We have this conversation with investors all the time in terms of what’s the long term investment cycle for this market. For example, I use UBS as an example, one third of our assets are on and one their own data center and one thirds in the cloud, that’s migrating slightly more towards probably public cloud, all those queries out there. We’ve been public about that. In your experience and from your view, how do you see the universities in the market involving these public cloud.
Is this a market that can grow reasonably faster than GDP or can grow faster, public cloud becomes significantly more expensive that we’re hearing a lot of push back up of the cloud is maybe not the right solution for everyone anymore. It’s too expensive, I just love to get your account perspective.
John McCool
No, I think that that’s an interesting point. I do think people are measuring now the expense of the public cloud, but there’s still an advantage of ease of use and deployment and thinking about that balance that we also talk to customers who think about strategic workload that needs to run on prem and if I guess is your one third my fit into that category. which this can never go because this has to be on site for data domain purse or whatever you have.
So, it’s tough to say how that change, but I think we’re at a point where people are thinking in terms of their — they’ve already rationalized their portfolio went to the cloud, right, So I think we’re at that point where people are thinking about the balance of their investments going forward.
David Hood
And do you think — do you think the big delineating factor going forward is cost. and we just because the reason I ask is most companies that we talk to understand the value of the cloud, but what they didn’t understand maybe years ago, we just locked into in a content of cost contingent estimate and now the bigger part of your technically right, you’re running at P&L, and so we have these conversations with the Fortune 500 hundred companies is that I don’t want to move more to answer. I don’t want to move more to AWS because I have a P&L ahead. So does that maybe when some credibility that they be enterprise data center or some of these as a service offerings and maybe some other companies offer, but it may be priced a little bit more aggressively offset the growth.
John McCool
It’s hard to say, just from a cost of deployment, you also have geographical diversity. You have the ease of moving and migrating workload, right? So if you zoom back I think it’s less clear about those cost benefits right off.
David Hood
Okay, because I’m trying to figure out what we’re estimated is a long term investment cycle for public versus enterprise. I know you are well positioned on both sides of the ledger, but we hear from a lot of investors who are very public health centric, right is one or the other where this is a 20% percent capital intensity business. Enterprise is a much lower business.
John McCool
And we’ve tried to bring good kind of the solutions especially as we go forward, focus on solutions in the enterprise for hybrid environment multi-cloud on-prem, multiple off-prem clouds and trying to make that operational model simple to do all of that, but you’re agnostic.
David Hood
I guess maybe just turning to agnostic I don’t know if financials aren’t your focus, not asking models or anything of that nature, but when we look at this, when we look at sort of the different verticals, typically hyper scared are you know a little bit more — it’s a little bit more aggressive on price or worse margin given the nature of the relationship enterprise a little bit better, but when you think about different growth rates going forward, to your point, you’re agnostic about technology platforms. What are you agnostics, who long term where you want your — what your business will look like? Is there — not maybe not financial is not the right way to look at. Is there a risk being overly dependent upon tightness because they tend to be more cyclical in enterprise?
John McCool
Go faster a point, but then there’s a digestion period. I think you have to look at service provider cloud enterprise as their separate markets and they have their own care about their own solutions and architectures that you need to fulfil. I think that on the cloud side, has been just phenomenal growth over multiple years. We do think there’s an element of cyclicality potentially that we never seen a cycle. We’ve seen some flatness in 2019, 2020, but they do tend to follow the technology roles.
So we would have but not being in cloud would be incredibly hard. There is an infrastructure provider today and networking provider because you get scale. They’re really driving the architectures effectively, I think that when Arista started, the premise was, everyone’s going to build my clouds and now we’re seeing enterprise customers building recent spy inspired architectures, driving a level of automation that you wouldn’t have even thought possible five to seven years ago. So there are clearly the thought leaders today around networking.
David Hood
Since you just mentioned leaf and spine and digestion period, how are you thinking about if you’re planning in terms of your roadmap from a technology perspective, how do you think about the risk of digestion right? It’s a cyclical business, you just mentioned. We can — because Arista continue its investment through the cycle. So if you think let’s say ’23 ’24 ’25 prices, so I guess you have five-year plan out there.
Through ’25, it doesn’t change on — let’s see if there’s a shortfall in demand next year. Does it change how you think about where you’re investing? What your research tower priorities are going forward.
John McCool
Yeah, I think, if you’re in the infrastructure business and networking, the dynamics follow Moore’s Law. Things get better, faster for similar costs and we made a bet on merchandise facility because we saw the economies of scale being in the silicon business. So being able to go faster move that model, be pretty efficient in delivery platform. So we expect a continuation of that going forward. Next generation platforms are continuing. It’s just why you do business in this market.
David Hood
And since you mentioned Virgin Silicon, obviously that’s been advantage I think that you are having a very tight relationship with Broadcom. What are you seeing in terms of new entrants in Silicon and it is something that would interest you and your merchant Silicon company effectively, right all you use. Is there anything down the road that maybe changes that decision new products, new platforms?
John McCool
We step back from that. We’re even happier with that decision and I think we were at the company inception incredibly expensive to build Silicon, many of the basic building blocks are used in other markets besides my working the substrate design, the packaging, thirties all the technologies that go into it and just as a half number of people talk about out of the data center, the networking component being 10% to 15%.
So it’s storage and compute and all consumer electronics really driving these investment that benefit networking. It’s tough to go the other way, right. It’s just not.
David Hood
So, does that — do you think it gives you a competitive advantage, vis-à-vis that I know on your big competitors went down that different route, right? They went down their own silicon route out to some degree. Does that give you sort of in your review a cost advantage going forward, I guess flexibility or I think market.
John McCool
I think it’s flexibility and consistency in the roadmap. It’s definitely has supported us and our competitor in some ways. there’s a different positioning of that silicon, but has always been focused on Silicon internally even back since its conception.
David Hood
Back at the Analyst Day, I think there was some discussion about expanding your addressable market and one of them was the AI Spine? Can you — that was a little bit new for us back then when we — do you guys talk about it. Can you kind of talk about what that market entails and how you think share in that particular new addressable market.
John McCool
Yeah I was thinking more about that. I knew we would talk about that and it’s been a long time since something that wasn’t a computer has connected to the network right. We had servers connecting to desktops and then we had laptops probably. The phone, the first thing that was not a computer that got connected to the network and drove a new market, right.
So in some ways, we’re now connecting dedicated AI devices to the network, those clusters are built out as a separate system. So it almost reminds us of high performance computing where you had a cluster that was dedicated to computing something. It then connected to the broader network. So it’s new tam, it’s a new opportunity. It’s probably not very well sized by the analysts, but we see it happening in the cloud networks today that we’re invested in and we believe also this is back to where the clouds are important that that will start to take place in other segments of the enterprise.
David Hood
I know its early days, but what kind of architecture look like. Obviously, this is new for us. So how would you be positioned from a technology perspective.
John McCool
One thing we see that’s been important in that market is the intelligence seems to scale the size of the network, So having very large fabrics that are single tier if you connect a lot of devices is important. The second thing is the very explicit devices with memory. So any stalling you’re not utilizing. So keeping the AI device fed is a very important metric and typically people didn’t believe you could do that with Ethernet.
So because our suggestion control on somebody else thinks that we put into our products, we believe that we can make easier networks very effectively at 400 gig and it also drives these higher speeds into those devices themselves.
David Hood
Have you seen any sort of used cases right now or trials that give you encouragement that there’s a real commercial opportunity in the intermediate term.
John McCool
With the AI cluster piece that we talked about, we talked about a number of use cases, probably the most near term realizable.
David Hood
And how would you find that?
John McCool
2023.
David Hood
And would it have sort of a similar not getting specific numbers, but when you think about everything that Arista has done, it’s all had similar kind of profitability profiles that how you would think about these types of businesses where…
John McCool
Like our typical network.
David Hood
It’s typical network business, yeah got it. Okay. And then obviously sizing you said its impossible early to the panels can do this. Is it a market that you think has a handful of winners, four or five players that are extracting the economic rents in this market kind of like where we are today in markets where if I look at hyperscale or tightening data centers, it’s only a handful of players that really compete at scale or is this going to be — you’re going to see a ton of smaller players that can proliferate this market because it’s diverse enough right? There’s going to be, I think.
John McCool
That’s a really good question. I think there’ll be some overlay and systems and data centers today that people have large data centers including enterprises, some point will there be specialty AI providers, I don’t know but it will be an interesting yeah, it is the same market. It’s such an early interesting thing to say you can effectives on how it’s going to play.
David Hood
The reason I ask is if you find these infraction points in these markets where yeah, maybe it’s a winter take most in some cases that it’s a hyper-growth market with a fairly big tam, you have a new entrant that comes out or an existing player that has a much smaller presence that you maybe didn’t quite fully comprehend the scales scope of what they bring to the table and it changes the step function, which is academic of their business and that’s what we’re now trying to figure out.
And this may be a little bit different SD WAN. For years it sounded as if you were to be blunt, less interested in the SD WAN market, I think maybe if that’s a fair calculation, it might be great. We talked a lot about it at the Analyst Day. What’s changed, what’s changed in the company’s perspective? How are you thinking about the opportunity whether it’s a go to market or technology perspective kind of expand on that.
John McCool
So maybe I’ll just step back and talk about the applicational and of all things in the network, I think this area has gotten the most names over time. So how will I connect my enterprise to something at the edge. It could be, I’m running a bunch of supermarkets. So I think I got all the stores together or I’m an insurance company have a number of branches, etcetera, etcetera, etcetera and back in the 90s, it was about integrated sentences. I have both the video security all in one box and that was the technology that right.
Then we went into WAN optimization because we needed a ton of bandwidth and T1 was slow and you had to do something cool right and then came SD Wan where a lot of features and functionality about running over multiple networks and getting what really on and doing that kind of thing right. I was paying some cost. So, but we would have been the 15 plus SD.
We also built up some core technologies that connecting the edges important to have like or just our rounding back in the enterprise and POE devices and edge devices are already part of the portfolio. So now can we do something cool that would differentiate us. So I think the teams that’s a really good idea about a solution that would offer some different technologies and applications of that edge connection that they were really excited for.
So it’s a combination of having the technologies as a basis that we feel fundamentally very good about already and seeing some inflection point in the market that we can take advantage of and so to your point of there’s well 15, 16 players to make traditional SD WAN.
David Hood
You have a conversation with a customer potential customer. What solution or what pain point then does this solution directly address that’s maybe not being addressed currently in the marketplace.
John McCool
Yeah. So consistent with Arista, it’s always been in the enterprise network building on those networks in a more consistent fashion with EOS, a single operating image software and the management stack runs across all. I don’t think you’d see any surprises from us in this area. It will be consistent with everything else we’ve done if you’re running the campus, you’ll be able to run this. Not a different operating system, very consistent.
David Hood
Understood. And then we talked about, over time campus was a new opportunity this new SD WAN approach could be a new opportunity. AI Spine can be new opportunity. What else out there, are you looking at today from a roadmap that you think we don’t have the core capabilities or competencies today but if I think out three, five, ten years, the markets moving in this direction and given our position, we can be there, we need to be there.
John McCool
Yeah, I think the one thing that we’ve talked about is we’re excited about what we’ve done in the management stack for cloud vision. We announced the cloud vision as a service and then we’ve announced the data lake. So this is an expansion of our management architecture being able to take information is streamed from all the devices and have a large data repository that we can federate with other folks either trying to consume the data or add information into that database.
So that’s a technology area that nothing that we’re very focused on as a team and with our Lake acquisition being in a way able to make good security decisions around the information that’s going through the networks. Not endpoint security, what’s flowing through the pipes and making some sense of that is very interesting to us. You see that directionally.
David Hood
So does that mean that mean that you need to pursue incremental security asset purchases, acquisitions. How does the week, so a week has a dedicated sort of — it solves a dedicated problem, right. It’s not a complete security solution per se doesn’t have endpoint but from a security perspective, where are you today in terms of what you need right at the point where you want to be at.
John McCool
I would just given the TAM that we laid out at the Analyst Day is very sizable, right, So how do we get more of that and what functionality right is differentiate and bring that about.
So Lake [ph] wasn’t really about being a security player about getting the most insight from my network from the network but we’re in a unique position to be able to extract that right. So I don’t think we think we have to go into other tangential market segments or different buying centers and only focused on that network buying center, but differentiating the product and extending it and like we’ve done with these other use cases.
Five to ten years, maybe there will be other used cases that we see where the network can be adapted to connect. I don’t think if you five years ago, we would have dreamed up the AI use case. I knew it was out there maybe that would have and I think people look at the product that is starting.
David Hood
Obviously you got to be very focus on smaller technologies right capability. Can you kind of walk through how you think about adding on your technology capability. You just talked about all these different use cases to make a driver of when you look at an asset or you look at a technology that drives the decision primarily and obviously there’s some economic financial considerations. Is there anything that maybe would create sort of a deviation from that if it was a larger asset? Everything to date in the last several years has been the acknowledged very small now sitting in yeah.
John McCool
It is just difficult to find something that would be complimentary, not that that they will take model. It has such a thing. I don’t think we would be necessary against it. It’s difficult and…
David Hood
Can I ask maybe in a different way. So I think back in 2020, 2021, seems like there was a plethora of small deals done across the industry, not just you but Cisco and Juniper people weren’t really aggressive and it seems to at least from the data that we track moderated. I’ll be great. Is that a reflection of you cannot decline it. Maybe private companies have unrealistic expectations in terms of what they want or is it a question of that maybe there’s just assets that make sense for your use case work. Seems like the M&A market has been much more subdued use of the availability.
John McCool
It will tough for me to stay outside the risk, but we’ve been very focused on the assets we’ve acquired, how would it stay and how we use the cultural fit is important and if you also think about our value proposition around EOS and the software stack has to be consistent. So they weren’t necessarily switching and routing. We’ve been able to go to the bottom from where different operating system is not really connected to the network.
David Hood
So what we did with wireless big switch, we already had the visibility to go with the network, but being able to make that more usable and consumable was an important thing to add to the solution. How do you mind me and how it sold to customer now?
John McCool
They had kind of two aspects. They had one that was more of a fabric base kind of software defined networking, but they had pivoted to more of a network visibility and we built that into our operating system to extend that to switch which is a full solution for network visibility. So it’s a full solution with any US but it can be used by a third party as well, but it works.
David Hood
Understand. Do you have much off box off Arista software sales.
John McCool
We do have some, it’s not the phones. So basically you get the full complement of solutions and you get the full functionality in the best use case. It puts customers to use, where’s the software.
David Hood
And then maybe one final point along those lines. We’ve heard from of our customers that that sort of solution has helped me to swing up away from my box to an Arista granted vendor in the data center. Is there any treatment that are you seeing that sort of customer decision.
John McCool
I think again, it would kind of parses by cloud and enterprise. On the enterprise side, it really isn’t a viable third party operating system that makes it consumable. I don’t [indiscernible] component is also a supply chain and be able to aggressively invest as helped in this environment in the OAM side.
David Hood
So it still sounds like you don’t think let’s say it like meta without getting well I want to talk about specific customer, but that your solution is not a good reason why maybe it’s still a little bit better than say like Facebook’s of an operator with my box.
John McCool
I would say the situation on the cloud side is pretty static. I think and the people who have chosen to use white box to be vertically integrated still remain that some that are 100%, some are mixed changes, but there’s still an opportunity for you to take care of some of these hyperscalers nominally white box over the years. We continue to focus white box as a competitor.
David Hood
Got it. All right. I think we’re out of time. John, thank you for your time extra time for joining. Thank you for joining and if anyone has any questions, please reach out and we’re happy to help.
John McCool
Thank you.
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