No. of Recommendations: 15
It was interesting. One of the two executives, when asked on multiple occasions on multiple different topics if he had anything else to add to what his partner executive had just said, simply said, "no."

There was some material new information. Back in 2015 there was an analyst report that not only gave ANET a strong buy but a Very, Very, very, strong buy report. It was genuine, and the likes of such a report, done objectively, I have never seen done before.

In that report the analyst put forward SAMs and TAMs, and excluded the service provider market because ANET was not at that time addressing the service provider market (these are firms like AT&T, Verizon, and the like). The analyst said that the service provider market was even larger than the cloud titans that ANET was focusing on. ANET is now selling to the more conservative service providers.

What I found interesting was (1) 5G rolling out. ANET did not make this commentary, but I will, 5G is going to change a lot of things. It will be faster than current wired bandwidth and typical WiFi, and it will travel extensively through the service providers like Verizon and AT&T and Sprint and what not. These data centers are going to be modernized just like the cloud titans are doing. ANET wins a bigger proportion of business at 100GB and probably even more so at 400GB. 100GB is said to virtually make extinct 40gb within the next year or two.

Routers. ANET only started rolling out its switch/router product last year. 100 customers. As we have discussed $3k product replaces $100k router socket. TBD how big this will be. It is an add on software license, and so far only licensed for 200,000 routes, not the 2 million the product is capable of.

Enterprise is a market ANET is just starting to address. They are doing it using only half the strategy that Nutanix is taking, in that they are partnering. Their partner is HPE, but also (although not named as such) VMWare who is in the EOS stack. ANEt is always thinking ahead and is patient. Their new CloudVision software control product is designed for the enterprise. ANEt explained that the cloud titans often create their own control software (like NTNX does but for the switches and routers) so they may or may not want to use Cloud Vision, but enterprise customers are less likely to build their own and Cloud Vision allows them to manage all their Arista network through this one interface. Always putting together the whole product.

In regard to the HPE collaboration, they specified that it takes 12-18 months to get the partnership up to speed, to get a price book, etc., to enable HPE to actually sell their product. We are just about at the point where we should start seeing results as they are nearly 12 months to the partnership.

As for cEOS, not discussed much, but it has been observed that Arista knows their customer's needs like nobody else. cEOS is something that Facebook and Microsoft will probably be very interested in using to meet their particular needs that differ from the needs of most other types of customers. Cisco cannot match it, and although it may somewhat cannibalize Arista, it also may not, TBD, will remain to be seen if serving the customer, rather than telling the customer what they need to buy that is in the seller's interest, will create net demand.

Another market mentioned in the 2015 report referred to above was the campus market. This market is upgrading as well. But they are upgrading to 2 and 5 gb. ANET said that they are going to focus on their current customers, which is the high end customers in multiple verticals. That they do not have a 2 or 5 gb product, and that it would require further software engineering to properly service the campus market. Thus, for now, Cisco can have it is their attitude. They will not service a market that they can to produce the best of breed product doing it the "Arista" way (hmmm, wonder where Veeva got their phrase from?).

They also mentioned competitors. Cisco of course, but Cisco cannot provide best of breed products as it is not open sources, and therefore customers have to be Cisco, all of Cisco, and cannot instead buy Arista with EOS and combine it with VMWare or with Palo Alto for security, to get the best of breed product.

Juniper is a competitor, but mostly in routing, and ANET is barely getting started in routing. Huaweii is a competitor that they rarely, if ever, see in North America, but they do see them in Europe and Asia, but primarily in mainland China.

There was no discussing that I recall in regard to white boxes, or brite boxes.

Litigation, as specified Nutanix won the copyright, the two patents at issue with the ITC have been invalidated at the Patent office, but the ITC rulings will remain in effect pending the appeals process reaching conclusion. The civil patent suit in California is on hold pending the ITC and patent office results. In the end, it has been a pain in the neck, Cisco timed the lawsuit to coincide with the end of the stock sale lock up period, post IPO, and Cisco did a PR on it a week prior to actually filing the suit.

In the end, has no effect on international sales (that are 25% of total sales, but make up 50% of new customers in the last year), they have worked around the two patents anyways, and one of the two patents expires in June of 2018 anyways.

Another note is that they mentioned that 30% their sales this past quarter was from new product introduced within the last year (the inference being that these new products are just getting started in their roll out and already make up 30%). But what was also added is that this 30% does not include the 7500 series switch/routers that have just launched with Jericho chip, which is now, from my opinion, their flagship products. One would think this bodes very well for future growth.

"Do you have anything further to add?" "No." That is pretty much my recall of the primary issues.

I also read Nutanix, which was more garbled. Perhaps the accents of the presenters made the translation program to text less accurate. You actually have to know the products and their context to fully understand the transcripts, which are hardly perfect, but Nutanix's transcript was more error filled and more difficult to fully comprehend. But I may report on that later if the whim hits me.

The big thing about Nutanix, and this was not in the transcript, is that there does not appear to be a competitive software product that can truly compete with Nutanix. Not even VMWare. However, as discussed at the conference somewhat, the issue of can Nutanix scale and be profitable. The speakers of course said yes, and that will happen when growth slows down to "market rate" growth, but why slow down to market rate growth now on a lower base when you can do so in the future at a much higher level of sales. Besides, there is still a ton of growth left. Either your believe or you don't. Either you think the world will go hybrid and not disappear to the public cloud or you don't.

But for future report when the whimsy hits me.

Tinker
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