 Hi everybody, welcome back to Cisco Live 2023. We're here at the Mandalay Bay Conference Center. It's pretty big, probably about 20,000 people here. I'm Dave Vellante. This is the analyst panel. Myself, John Furrier, Zia's Caravalla is back principal at ZK Research. Zia's and I dropped a breaking analysis last week entitled Cisco Needs to Simplify. Here's how we're going to unpack what Cisco announced today. Zia, good to see you. Thanks for coming on. Yeah, it's great to be here. By the way, this might be the largest expo hall I've seen at a Cisco Live. I've been coming to these since 1998. And I think this is the biggest one. 20,000? I mean, that's a good number. Every seat was packed in the keynote. Definitely. All right, so how'd they do? I mean, we challenged Cisco, dropped it. You and I met Friday, dropped it Saturday. Got some interesting feedback from both sides. And I think it was very fair, but how would you grade them? How'd they do? I thought very well. If I give them, if you want an actual letter grade. Sure. Probably a B, there's a lot of it. Well, I think their vision, you know, is great. That's an A coming from you, man. Yes. All right, the tough professor. But no, explain, defend that. Well, because I think their vision's outstanding, right? They want to create these clouds for security, networking. They have one for WebEx already, full stack observability. I believe they'll probably build one for sustainability sometime down the road. But those are visions, right? And they have to take steps towards them. So I can't give them an A unless they're there, right? And so while it's an aspirational goal of where to get to, it's a multi-year journey to get there. Just like last year at this time, they announced a security cloud, right? They announced it last year. Proof point one was XDR at RSA. Proof point two is SSE this year. And you know, let's see as they continue to get there. They're, you know, the vision statement of it's protected, it's connected, right? There's a lot that has to go into getting there, but it's a step on the way there. One follow-up and then, John, I want to get your take. So to me, they announced, okay, they got a security cloud. I call it the security super cloud. They've got the networking cloud. They kind of got the full stack observability cloud. Do those things have to come together for them to get an A from you? I don't think they have to come together, but there certainly has to be interoperability between them, right? And it has to look like, well, I suppose your term of super cloud actually is the right one. So those are separate clouds and then that would look like one launch of the super cloud to the customer. So if I want to be able to add a new branch, I need networking, I need security, I need observability, those would all get delivered via one cloud delivery platform, even though they're separate clouds. What grade would you give, Cisco? So far, day two here. He's calling balls and strikes. He knows all little bit more of the details on what's shipping and what's not. From my standpoint, I give them an A minus. I'll tell you why. Because for them even to do this is Herclian to come together as a team. So, and I've seen them for 13 years up close and it's always been kind of like a, there's like spiked them some people in the company like, they think I run this. Then when Gettler was here, he's like, oh, service providers and get all these sacred cows. That's just, they grew the business, one of the most valuable company for a long time. So Cisco had that legacy. It was like, it was an aircraft carrier. It was hard to move real quick. And so the fact- And there's a lot of technical debt here. A lot of technical debt. So the fact that they are aligned, okay, is huge. Okay, and plus the presentations were spot on. The strategy was genius. It hung together. I thought the idea of a security cloud and notice how they had network plus security. They didn't say data. No, there was no data conversation. Just security, which is data driven obviously. But network security, those are smart pillars to build on. You embed that into everything else. That might rise up those other divisions. And I think Tom Gillis's group has huge upside right now. You think that's a gap? A blind spot? Or is it just- I don't think they know yet what that means for them, other than data's involved. For example, a lot of their AI successes, I thought was not AI washed at all. In fact, this is probably the only event I've been to, besides an Amazon event where AI wasn't washed. It was actually legit development. They showed use cases where AI could be used for obvious network configuration stuff. That's obvious, we know. And then they had a product that they built. A SOC assistant, whatever they called it. That was something that came out of AI. AI SOC, whatever it was called. And then they had the Defend Multi-Cloud Defender. So you can see them already producing fruit from that AI tree. So that's not bullshit as far as I can see. So I was looking for that, checked it past that test. So we're going to give him a B plus, because I'll take ZS plus John, divide by two, take that. So solid B plus. But the management team is solid. Jonathan Davidson did an amazing job on his keynote. I thought he hit a homerun, because he has the networking piece. And he connected a lot of dots. They didn't talk about silicon, which I hope they would have. I thought Liz laid out a great thing. I was not a big fan of the quantum. I would have liked to see cloud native up there instead, instead of that and outtake as the lead there. I think that's more important than quantum, relative to the thing, but. I like quantum because it's an implication of security. I think that's a big impetus. So I want to come back to that, but a couple of standouts that you've talked about. Maraki and ThousandEyes and APTI. APTI, you've always said it's sort of an underperforming asset that could be doing much more with that. Maraki obviously is a key to the networking cloud. And then ThousandEyes is threaded throughout. What's your take on those three assets? Well, I mean Maraki. That may be the, other than Catalyst, the best acquisition this company's ever made. They gave him the cloud platform. I think Maraki's core fundamental belief is easy use. Everything should be easy. In fact, I remember when they rolled out network assurance, they didn't charge for it because their philosophy is, why should we charge our customers to troubleshoot problems that we're having, right? And so Maraki is. My set is awesome. Yeah, I love Maraki that way. ThousandEyes is a great product. And in fact, it was a very well timed acquisition because they bought it right before the SD-WAN wave hit. And so it does internet troubleshooting, but that didn't really matter a decade ago because you didn't use the internet for corporate networks. But today you do because of SD-WAN. So they hit that afflection point nicely. I'd like to see them take ThousandEyes and take those agents and deploy them everywhere. Put them on Juniper routers, put them on Arista switches, right? Make ThousandEyes the de facto troubleshooting tool for the internet. I don't know if they'll do that, but at least. Yeah, give it away. Yeah, yeah. Well, I wouldn't give it away. I'd license it, but I'd certainly make it available. That's interesting. We've talked about sort of Cisco on Cisco and using the Oracle analogy, right? What would Oracle do, right? They probably wouldn't. But Oracle's a lock-in, and I don't think Cisco wants to be a lock-in. Right, right, right. So to your point, they're more likely to do something like that than say in Oracle. Yeah, so. It's harder to do a network traffic as hard. Databases, I mean it's hard too, but it's like, do you optimize? Database is definitely hard. You can engineer that with compute. Well, that's what Oracle was. They were an engineered systems company. If you want everything Oracle have worked well together. Cisco, because they are the network, the reality is people are going to run Zoom on it, teams on it, people are going to run different applications on it, so they have to almost by default be a lot more open to allow other things to run on top of it. And that's really more the true definition of a platform where you can argue Oracle's not really a platform. They're just an engineered systems company. The line by J2 was multi-cloud economics with no cloud lock-in. Yeah, I thought, by the way, I thought shifting gears a little bit. I thought the security announcements were really strong. You said Tom Gillison, super articulate, really understands sort of that business. And, okay, to me, you and I talked about this, the leading security vendor has, I don't know, maybe low single-digit share. Notwithstanding Microsoft, it's just so big, but I mean, it's wide open, and there's no reason Cisco can't be very, very strong in that business. You've made this point, John, about bringing networking and security together, coming at it from a networking posture. That should really give Cisco, you would think, a leg up. Yeah, and I told them, and I think they have a path to a trillion-dollar valuation, if they can lock in their install base with networking security and bring their install base, like Microsoft did with 365, which is basically office they threw in the cloud and called it cloud, and then everyone stayed with Microsoft. And why would you switch? So I think the switching costs of a customer with Cisco is really high, even though they might experience some stuff. So they have a good kind of lock-in, not technical lock-in, but they got a customer switching cost lock-in. The cost to switch is more than the cost of the alternative. It's the operational disconnect, the tearing down the networks. So I would definitely take that over, bulk up security, they collaborate to follow security in terms of like the pecking order, because it can get faster revenue and security than collaborating. What we talked about last week, security is the single biggest needle-moving opportunity for this company, because they're a relative minority shareholder in a massive market, where networking is a massive market, they're the majority shareholder. And so if they can, I'm not saying they're ever going to be able to have security match their market share in networking, but if they can even get a part of the way there. And I think the security multi-cloud opportunity is massive. The thing with the hyperscalers is they do security well, but they only do it within the world. AWS security tools don't work on Azure, and their security tools don't work in GCP. And so somebody's got to act as that abstraction layer that can help you secure a multi-cloud world, and there's no reason to secure it. VMWare's going for it? Yeah, but they're not really, everything's tied to the VMWare, all those different VMWare clouds, right? They're not going to take their VMWare security tools and have them work if you're not using VMWare cloud foundation. No, but they got a half a million customers, and that's what their advantage is. But I want to go back to something you said, so the trillion dollar baby question, John, I've been sort of, it's kind of pie, it's kind of- You're a stock analyst now? Well, it's kind of pie in this guy, but you think about the two companies that are poster children for complete turnarounds is Apple and Microsoft, right? And so Cisco's a $200 billion market cap company, so we're talking about a 5X. What are the levers? You're talking about security. I think there's something under the covers with AI that somebody's going to invent something. Why not Cisco? Why, they got the resources, they've got the, but it's going to take a visionary to say, here's where we're going. I'll let you- Or a Steve Jobs like, and maybe Chuck's ready, I don't know. Here's the problem, then I'll let you answer. I think that the abstraction layer, I'll say this very carefully. It's going to be difficult for an incumbent who owns a lot of the gear underneath it to own the abstraction layer, unless they move very quickly and take it fast and protect it. Why, networking super cloud? Why couldn't Cisco create the next gen cloud out to the edge? Well, then that's just their thing. That's not an independent abstraction layer for data who does the data version. I'll point out before, you've got to have that on top of it. Are there special layers, just one for data, one for network, one for security? Or is it one third-party new company that emerges as, whoa, Cisco, you can't have it, VMware, you can't have it, whoever else, incumbent, it's got to be something new and de facto. That's the one scenario. Well, I do think it's going to fall into, security's going to be a big part of them growing their valuation. And I think there's a legitimacy to what Cisco's trying to do. The whole tagline, if it's connected, it's secured. Isn't just a tagline. I mean, it's a real thing. We're connecting everything in this world. I mean, cars are connected, everything in our house is connected. To enable anything. Yeah, and Cisco owns connectivity and security is becoming a game of analytics now. Security is no longer, can I spin signatures out as soon as malware hits? It's, can I, as soon as I find a threat, can I do I have the network data and the network telemetry to understand where the breach came from, how it emanated and how do I fight against it and who's got more network data than Cisco? Yeah, and fast by the way too. Yeah, and so I think their AI game actually is in automated remediation, both in network troubleshooting and more importantly in security because that's going to give customers the confidence that I can deploy Cisco technology faster and not worry about the security breaches because even if I am breached, I'm going to have the right tools in place to fight it and I'm going to have the zero trust architecture in place to make sure that a customer who's breached a user that's breached isn't going to create a larger blast radius than it should and if you use, and their goal is if it's all Cisco, that it's got to create that one plus one equals five effect, right? And so everything's there for them, they just got to put it together. My take on this is the vision of connected everything to enable anything. I mean, that's a trillion dollar vision. And that says to me, okay, no lack of TAM, right? There's certainly no lack of resources. I mean, you go back 2000, when was the cloud? 2006? 2007? 2008, yeah. Okay, when was S3 announced? Oh, six, I think, but whatever. But you look at IBM, they had, they spent more on R&D and had more resources than Amazon. Than a book company. Microsoft, right, exactly. So a company like Cisco, if it puts its mind to it, could create the next big thing. And that vision is a massive, total available market that could support a trillion dollar business. But I mean, I don't know what that thing is. What could be, this outtake is an interesting proposition. We're going to see if it's real or not. We had them on earlier. We had VJoy on it. You mean outshift? Out, what's it called? Outshift, outshift, outshift, outtake, redshift. Whatever, you know. Outshift. Blue pill. I think I took the blue pill. Open shift, everything's shifting, the cube shift. So, but they're putting all the, I won't say misfit toys in the island. Well, but that's what we thought early on, was really misfit toys. But I think it is kind of a good job of actually making sense of it. It is kind of the island of misfit toys because they have pure play focus. I mean, look at the management team. It's focused. Jonathan, J2, Liz, all the people in their team, they're focused like a laser for these clouds. And I think it's a great idea to put everything, but it's funded properly and can they develop anything? That's the question I want to see because they're at CubeCon, they're at these events, they're doing quantum. Can that thing get new businesses going? If they can use that vehicle as a test kitchen. Are you under NDA for tomorrow's announcement? Yeah, probably. It's LLM, all right, so we shouldn't talk about that. I don't know what's coming. But there's something in LLM that's coming tomorrow. But I do think though that we are closer than you think to a world where literally everything's connected. And I think if you look at all the works, this goes under the car manufacturers. People joke, why are you putting WebEx in a car? No one's going to use that. Oh, that's an awesome idea. Yeah, it is. In fact, if you go down over there, they got the Ford pickup truck with WebEx in it. And there's a lot of use cases from military to field service, you know, things like that. But more importantly, it's the connectedness that's important, right? And so if you remember last year, Ford CEO was here. And he said, for the first time ever in the history of Ford, they can drive new features and innovation into a finished product. They've never been able to do that before. It's the connectedness that's allowing that. And so literally everything's being connected. And that creates all these different entry points. So that's why I think the security opportunity for Cisco, in a lot of ways, if they had had the strategy five years ago, 10 years ago, I don't know if it works because it was a Game of Point products, but the markets moved to where businesses are now network-centric. And so, you know, their only challenge, I think, is legacy mine, mine, mine, mine. Mine's, and some problems. Yeah, but simplicity solves some of that. It's a mandate. Well, there's some technical issues. Like, we put up last night, Wi-Fi versus 5G, you asked a question in the analyst Q&A the day before about Wi-Fi and 5G, okay? Last night at the hockey game, we were at the Vegas Nights game, Wi-Fi was worse than the 5G. So now that's a technical issue of, if I'm in a car, or I'm in a moving device, I should be able to, that's the case though, you're turning it off Wi-Fi to get to... But I shouldn't have to. Yes, right? That's the case where the device should do it automatically. And I was thinking more like, if we go talk to a lot of large enterprise, security teams and network teams are still separate, right? And so can Cisco serve both sides of that and then bring everything in when they can? And that's why there's a lot of legacy mindset in the customer base that, I think it'll eventually fall. I mean, it happens with every industry, but I do think Cisco can serve the needs of now but also pivot when they need to. Well, especially in the networking business, right? Because I mean, you think about, you know, storage is different, right? Nobody's provisioning loans anymore, but network's different. Yeah. Well, maybe somebody's, if you are, you got to get a new job. Yeah, yeah. If there's a blind spot in Cisco, besides the legacy of the customers and the dogma or mindset internally dogma, is that they got to be more thinking about the applications that are coming. And I think what the AI is showing us is that there's going to be new developers coming on board, writing apps faster to your point earlier, that they're going to sit on top of the network and that the connectedness is going to be, they're going to have a huge value to provide an app developer. So I think one thing that I think their blind spot might be is the impact of the developer surge in cloud native open source right now. And the stuff that we're looking at right now, it's faster than I've ever seen. And they're moving to market. They're moving trends. So they could have a product coming out of the going to market that could be completely stunted at birth if they're not lined up with the developer community because at the top of the stack, if they're not enabling the right features, that's what I think I'm sensing that I don't think they're aware of that feature enough. Well, I'm starting to really buy into this notion of real-time data apps. In other words, where you've got data-centric apps where the business logic is embedded in the data, not the reverse. So the analogy we like to use is a digital twin of your business like an Uber for your enterprise. People, places, things, ETAs, destinations, those are all data elements from which you're going to build apps. Uber built an app in real-time. Everything's coherent. That's the future. And that's going to be over a distributed network which is going to, you presumably drive a ton of demand for the plumbing. Everything in this world is going to be more dynamic and more distributed and that favors Cisco disproportionately, right? Yeah, but so it's a John's point. Will they, and do they even have to move up the stack to get to that trillion dollar baby? They're not talking about a trillion dollar baby, but that's sort of my pie in the sky. But a company like Cisco, you should see them return to the sort of prominence of, remember, they used to be the most valuable company on the planet. Because of the network, the dot-com boom, and there's no reason they can't get back there just like Apple got back there and just like Microsoft got back there. I think Jesus' argument about the connectivity is that I think the most glaring, obvious thing that Cisco should be like. I mean, what's more important than network today? Nothing, right? If you don't have connectivity, I don't care how good your iPhone is, it's a brick, right? So, you know, and they're the connectivity company. You know, it's funny, you said Warren Buffet, I was listening to him, he loves Apple because if you had two cars, you'd give up your car, your second car before you give up your iPhone. But if that iPhone's not connected, like you said, you'd throw it away. Yeah, yeah. And pretty soon you won't give, your car's going to be connected all the time, right? Yeah, it's Metcalf's law. Yeah, yeah, yeah. All right, anything else you want to lay on us for impressions of this week? No, I just think it's, just probably the management team at your point is outstanding here. And I think it's the first time in a long time, maybe back to the early 2000s, where the management team's actually all in sync and they all understand, you know, because back in the day when Cisco was a young company, everyone has focused on building the internet, right? Yeah, yeah. And I think now, this whole management team understands it's just moving to these super clouds, if you want to call it that. Well, we do. Yeah, we do. You know, and the ability to leverage those, to create more value from the overall Cisco platform. I think everyone is on board with that, where that hasn't really been the case in the past. I think they had a lot of political phyphthomes here for revenue and things like that, but yeah. I mean, we joke about super cloud a lot, but there's meaning to it. Yeah, this show validates super cloud. Yes, absolutely, yeah. This show validates that it's mainstream because Cisco is a canary in the coal mine. They're not the leaders, they're great on messaging. But they're a bellwether, you're right. When they launch, when they launch stuff on stage, it's not because of hype, because their customers are not the most early adopters because they run networks. No networking guy goes first. They're locked in, they're operational. They're not going to take a flyer on some. And one of the themes here too around multi-cloud was, the reality is customers aren't ditching on-prem holistically for cloud. People have asked me, do I see a day where everything's in the public cloud? Maybe, I'll be dead. By the time that happens, it's a long way away. We were a Dell tech world, right? They sell a ton of servers. Cisco sells a ton of servers still. And it's because people need workloads. You put the workloads where it makes the most sense, right? And as long as the world remains that kind of complicated nature where I'm running some things at the edge, some things in the cloud, some things on-prem, right? That favors the more and more connectivity to tie those things together. And then you need to secure it. I think that's their insertion point. I think the multi-cloud security piece could be, it will be massive for them. I think that's really their big opportunity. I mean, they're not alone going after that, obviously. Well, they can build on top of their network. It's hard if you don't own the network, though. That's the thing, right? You nailed it, Z. There's not another network vendor. It's easier if you do own the network, I guess. And there's not another network vendor that's got the security chops. And arguably, there's not a security vendor that's got the network chops, right? Interesting, I mean, Chuck said it's a complicated world to your point. Supply chains, war, data sovereignty, and AI just can make it more complicated and so does edge. Last word, John. Okay, I want to ask you, you wrote the post. We got a lot of flak. On one hand, it was our audience thought we could be more critical. You guys could be more critical of Cisco. On Cisco, it felt it was a little bit critical, although they proved you wrong or right or whatever you want to look at it. I heard an analyst say, I've been covering the cloud for 10 years. I mean, how long have we been covering private cloud? We've been doing private cloud since two, what year? Private cloud, hybrid cloud. Well, ever since they started calling him on private cloud. True private cloud. Hybrid cloud. I mean, what's your take? I mean, we've been there, done that. Your posts, you feel like you got it right? You guys got it right? I do. I think we let the data inform. It's not like we just threw out a bunch of opinions. First of all, Zia says deep expertise in historical knowledge in this business. I've been around a long time. We had ETR data to lean on and we didn't just make this stuff up. I mean, we talked to customers and we got a lot of experience here. So I think, yes, I think that we did get it right. And I think Cisco got it right in what they announced today. It was a very good set of announcements. And the thing I liked about it, it wasn't a lot of shiny new toys. Here's 85 new switches. In fact, there was very little new product. It's a firewall. Yeah, but the other, the announcements were largely around that concept of simplicity and Chuck stood on stage and talked, we need to make things simple for our customers. And that's what a platform company is. I talked to a few people in the hallway and they were talking about your posts and the comments were eight out of 10 were very, very positive. They read it and helped them understand the keynote better, which by the way, that was a great service there. And the other 20% felt neutral. I thought it was just solid, you know? So no negative sentiment at all from people reading the post. That's the kind of content we want. Exactly, I mean, I think that's why I love collaborating with you, C.S., especially when you come to the studio. I hope we can do more. Yeah, well, your two studios are close to where both my places are. All right, guys, thanks. First real problem. Thanks for helping us unpack the day two, I guess, but day one of keynotes. We're back tomorrow. Chief Patel's coming on. Jonathan Davidson got a full lineup. So thank you and thank you for watching. This is theCUBE. We're out day once. Let's go live 2023 from the Mandalay Bay.