CIEN
#In terms of the ---+ <UNK>, in terms of the growth rate for DCI and metro, it's about what we thought.
As we look at the overall market, we think it's in the mid-single digit if you blend all of those.
Some are obviously much higher than others and that's what we're seeing in the mix.
So really our view of the market as we look at for the rest of 2016 really hasn't changed as we look at the blended the balance of growth.
Yes, we said that we believe that we are growing and taking market share in every region except for EMEA and we still believe that to be the case.
On the Cyan question, I assume, <UNK>, that you're talking about the hardware side of Cyan, the Z-Series.
On the Z-Series, it's been doing very well.
We had a total of about $25 million in revenue from Cyan this year, both products and services.
This quarter.
This quarter.
Excuse me.
Thank you, <UNK>.
So it's pretty much performing as to expectation.
And then on the Software side, great traction.
Again, not a lot of revenue this year, but we've proven to ourselves that there is a market and that we have a really, really good product because we're winning.
Thanks <UNK>.
Yes, <UNK>, I think the dynamics that we see playing out for the rest of the year ---+ listen, I think APAC is going to continue to be strong.
I would highlight India specifically as being a standout geography, and also CALA.
But I do think ---+ which I think is to the point of your question that we will see North American growth strengthen in the second half and we think that we can probably see double digits organically growing.
If you take out AT&T from the North American picture, we can see double-digit growth in North America in the second half.
And I think to your point that that's a blend of cable, web-scale environment, utilities, some of even the large enterprise data center pieces as well.
So on the order flow that we saw in Q2 was I think was reflective of that and that gives us visibility and some confidence around that North America market in the second half as well.
I would say, the relationship certainly has had a good contribution to it.
I would think given the size of the numbers that we're seeing there it really is us taking share.
And I think ---+ you look at somewhere like India, we been invested in the India market now for almost 10 years and we're really beginning to see the benefits of that.
We also are pleased to announce that we've just been awarded the defense project in India, which will start to roll out during 2017.
It's the largest network of its type and that's really based on carrier Ethernet transport delivery to all of the various armed forces in India and we've just been selected for that project.
So I think that's an example of the direct activity that has taken a long time to come to fruition but we're really beginning to see those markets move now.
(inaudible)
Thank you.
Okay, <UNK>, on the OpEx question, remember when we started the year, we said that we were going to do $225 million a quarter and that's what we thought.
We actually did quite a bit lower than that in Q1 and slightly lower than that in Q2.
Some of that was because of just management of OpEx and making sure we weren't spending any more money than we had to.
But some of it, particularly in areas like real estate and IT and to some extent in R&D, we are project-based and our spending is not necessarily going to occur in the period that we project and some of it's going to move out in the year.
So we're trying to give ourselves just a little bit of room.
When we said the $225 million with some potential variability due to spending that did not occur earlier in the year in case we run a little hotter than $225 million in Q3.
In terms of the growth for the year, I would say that we expected good order flows in Q2, and now that we've got that and we've secured some of those deals that we thought we were going to get, I think that gives us greater confidence and visibility as we look into that guidance.
Obviously, it's always a risk-adjusted, balanced perspective on it.
I mean, generally speaking, we're reasonably accurate on where we think we're going to come out.
There is a lot of moving parts to it but I think we've got greater confidence and visibility which is why we reaffirmed that number.
Thanks, <UNK>.
Okay, let me take the project base.
We have pretty good visibility into the projects and they tend to be more large project-based with longer cycles to them.
Sometimes takes longer for revenue but it does give us visibility into it.
I think you look at some of the buildouts that are going out on some of these key markets now, I think they are one to two years to three years; they are pretty large build outs.
You're seeing that in India as well publicized around the 4G buildouts that are going on there and also in CALA.
So we have pretty good visibility to them.
Regards to EMEA, I think that market has been challenged from a CapEx point of view for ---+ it's well documented for a little while.
Also, the competitive dynamics there, frankly, in the closing period of Alcatel's existence and also with Huawei have been very, very competitive in Europe.
And also I think as we've said, we think we can do better to be aligned around some of the opportunities for us in EMEA than we have been.
As <UNK> said, I'm encouraged by the profile that we're seeing in Europe; it's early days.
I continue to think that we can expand in Europe and grow that business and I think we're on a reasonable trajectory over the next 18 months or so to do that, but we've got a lot more work to do.
Well, as I said, we gave $225 million per quarter at the beginning of the year and we've done better than that.
We think we're in that range now.
So we're not going to be trending down OpEx as we move through the rest of this year.
Yes, on FX, remember we had a long exposition about the effects of FX early on and although some of the currencies have strengthened against the dollar slightly, we don't see a lot of change in FX as we sit here today from the description that we gave at the end of the first quarter.
The Canadian dollar has strengthened a little bit; that is affecting our OpEx.
But not a new story, significantly new story with respect to FX for the year.
On tax, as we've said, our tax line is really just driven by profitability in non-US countries.
We do expect it to be slightly higher in the second half than it's been in the first half, but it still going to be a relatively small number.
Okay, <UNK>, why don't I take the AT&T first.
I think we're delighted with the progress that we're seeing in AT&T.
We're continuing to diversify our role as a strategic supplier and I think their approach to the architecture is giving us a real opportunity to add a lot more value across a much broader range of engagements with them.
We expect the profile of the account to evolve to reflect this as they go towards next-generation architecture and more software orientation.
So I think we expect from a revenue point of view that it is going to be ---+ that we don't think it will grow this year.
I think we've talked about that so you know very clearly.
But I think we continue to expand our market share within the account and manifest our relationship in different ways, primarily with next gen and software.
So as a percentage of our overall revenue, I think ---+ the rest of the business grows, it will decrease and I think that's a positive element around the diversification of our business.
Just to clarify the question, you said linearity of revenue from AT&T in the US.
Were you talking about through the year or inside of a quarter.
What were you asking there, Stan.
Inside the quarter.
Okay.
Well, as we've said, our business generally is back-end loaded.
We do have a fair amount of activity in the latter part of the quarter.
For larger customers, it is probably a little more linear.
We tend to have a little more steady quarters from larger customers, but still we're just going to always have a third month of the quarter, which is going to be heavier than either of the first two.
That's just the way our business works.
We'd love it to be very linear; it's just not going to be.
Thanks, Stan.
Yes.
I would say, <UNK>, at this stage I think it's too early to tell.
This thing takes a while for it to filter through into the front-end engagements, but we're not particularly seeing much change frankly.
Hi, <UNK>; it's <UNK>.
So on the metro, I think your question initially was specifically about Verizon.
I think as we said, it's going to ramp in the second half of the year.
We don't expect a lot of revenues this year, but we will take some revenues.
In terms of the delta between the time we install the systems and the time we take revenue, that shouldn't be ---+ there shouldn't be a long lag or a long time difference there.
It will be pretty straightforward in this case.
Remember, we're also doing deployments in other Tier 1s in the metro in the US with AT&T and [Centrelink] and that's already on the way and that's the time between install and revenue there is also pretty straightforward.
Yes, we think that around $30 million per quarter is the right kind of range for now.
It was a little lower in Q2.
It was around $25 million in total, products and services, and so it's on plan.
What I would say is that over time, some of those customers are going to transition to 6500 and so the delineation between Cyan revenue and 6500 revenue is going to get increasingly blurred.
But overall, we're very, very happy with both sides of that deal, both hardware and software.
Yes, so a couple of ---+ let me start with your first question around current quarter.
Yes, we did see an uptick on Software and Software-Related Services quarter-on-quarter and year-on-year and the contributions come from three areas.
One is, yes, we are starting to see some contribution from Blue Planet in the revenue line there.
But we're also seeing increasing contribution from our Software Subscription services, which as you know is a more predictable stream of revenues on Software, and generally our network management systems are doing well.
As <UNK> mentioned earlier, the consumption models are evolving and that's allowing us to sell more of this [off box] software.
So there's really three contributions giving us this uptick on Software.
I don't think at this stage we are ready to comment on Blue Planet for next year.
That being said, we are seeing traction with Blue Planet across the board.
I would say the pipeline has significantly increased from the time of the acquisition of Cyan.
We're seeing a number of applications for Blue Planet orchestrating resources in the data center and we're also seeing applications for solving key pain points in wide area networks for carriers operating multivendor networks.
And really this ability that we bring to the table to manage resources both in the data center and in the wide area network is pretty unique in the market and that's why we're seeing the traction that we're seeing across the board.
Very good.
So on Packet Networking, so first of all, yes, it is growing faster than the transport segment.
It has grown so far in the first half of the year faster than the transport segment, and we expect it to be to have even a stronger half ---+ stronger second half on Packets than we did in the first half.
So overall for the year, we do expect it to grow and to grow faster.
It's growing higher than double-digit from the numbers, as you will see.
If you look at the trends and the reasons for that, there are a couple of important ones.
One, and <UNK> touched on it in his remarks.
Overall, the Ethernet services market for carriers delivering services to the enterprise is one of the fastest-growing segments of the enterprise market for services and we are very well positioned with the relationship we have with carriers really helping them sell these new services.
And our carriers and our technology and increasingly the help that Blue Planet brings to evolving these services is an accelerating factor on the Ethernet business.
The other factor that you'll see is both carriers and utilities moving to Ethernet as a ubiquitous layer of connectivity to the edge of the network, and we're seeing that in migrations from part of the world in emerging markets ---+ we talked about that ---+ are still migrating from 2G to 3G or going straight from 2G to 4G so we're seeing significant opportunities in the mobile backhaul space and that's part of what's helping our diversification and our growth in our international business.
And then we're also seeing utilities migrate from legacy systems to Ethernet-based connectivity and that's an accelerating factor as well.
So overall, our Packet Networking business is growing rapidly and we expect that to continue for the foreseeable future.
We would expect it to be fairly balanced in terms of the growth rate.
But as you know, the Packet Networking business originally was ---+ had a high concentration in North America and what you are seeing now flow through in the numbers is higher contribution from international customers.
So, <UNK>, we're making a lot of progress.
We have over 30 customers now that are deploying 200 gig systems from us and we're really quite unique in this capability still in the marketplace in terms of the competitive environment.
That number is growing rapidly, as we have roughly about 200 customers now that deploy 100 gig and a lot of these customers are starting to adopt 200 gig and 16QAM technology.
We're seeing that ---+ initial applications for that are in the metro, but that's starting to move to more metro regional applications.
And as it migrates to metro regional, then we're seeing more customers adopt that.
All of that, <UNK>, is driven by ---+ we see a lot of need for increasing capacity effectively across the globe and a lot of our customers don't have a lot of fiber and so spectral efficiency is very important for them and our 16QAM technology is really leading the market with spectral efficiency.
Can you expand a bit, <UNK>, on the question.
What part of the financial model.
Gross margins.
He's asking gross margins which we don't see a huge difference in gross margin.
It is kind of a unique product right now, so we might get a bit of a premium in some markets.
But it's not right now moving the needle in terms of our gross margin picture.
On the FX side, the biggest effect from FX has been in ---+ from Brazil.
We've had an effect in Argentina, although that has tended to be in our other income line.
The Brazilian effect is the biggest effect in terms of revenue.
And as far as use cases, you're talking about product use cases or applications use cases, <UNK>.
Hey, <UNK>; it's <UNK> here.
Yes, so the use case are actually buried in CALA.
We do indeed have subsea opportunities.
They are both on private cable and on Consortia cables.
We're seeing more traffic from the US to CALA and back driven by the web-scale players.
So that's a growing application for us.
We're also seeing growing application in the Packet Networking space in CALA, which we are fulfilling both with our 8700 platform and our (inaudible) products and that's really driven by continued migration in the mobile backhaul space to 3G and to 4G.
And the other thing we're seeing in CALA is bespoke built.
In part driven by web-scale players asking local carriers to build in country capacity for them and that's all 100 gig or in some cases 200 gig.
All right, well with that, we appreciate everybody's taking the time.
We're approaching the bottom of the hour.
Thanks for listening.
We look forward to catching up with everyone over the next following weeks.
Thanks.
