Jim Moylan: We set a couple of hundred basis points this year, 200 or 300, and it will get back next year.
Alex Henderson: And the last question, OpEx. I assume this is a managerial decision. So, can you give us some sense of what your psychology is relative to spending on OpEx as we progress through the end of the year and into next year, just conceptually? Thanks.
Jim Moylan: As we’ve said over many quarters, Alex, we intend to invest through this cycle. We have the leading position in optical technology, and we will continue to invest there. But we are a challenger in the Routing and Switching space, and it’s important that we increase our investment in that space. That’s where our increase in R&D has come, in Routing and Switching. And we expect to continue to have a very active R&D program in both optical and in Routing and Switching going forward.
Operator: Our next question today will come from Meta Marshall of Morgan Stanley. Please go ahead.
Meta Marshall: Great. Thanks. Maybe just on kind of your commentary about believing service providers will improve kind of in the coming quarters. I guess, is that — just trying to get how important that is by just having a greater sense of what their inventory levels are versus kind of what new projects are actually taking place. And just I guess, the impetus of that question is, can you guys grow into next year just by virtue of them working through inventory this year? And then, the second question is, on the clouds and kind of that improving cloud commentary, is that pretty uniform across the cloud, or are there still kind of some puts and takes between various cloud vendors? Thanks.
Gary Smith: Meta, let me take the first part of that. In terms of the service providers, again, I want to qualify this, we’re talking North American Tier 1 service providers here when I answer this through the lens of this question. It’s a confluence of elements. It’s visibility into their activity and pipeline and projects. And obviously, we’re very close to these folks. We have strategic relationships with all of them. We now have a good handle on their inventory and what their absorption rates are and the various elements of manpower and things that have got to be deployed to do that. So, we have pretty good visibility to that. And obviously, we still have large backlog with them as well. So, it’s all of those elements.
I think it will be another couple of quarters, before that sort of gets broadly into alignment. But I think they’re continuing to see strong demand there from a capacity point of view, I would stress that. This is really about the rate of absorption in its broadest sense. So, I think we have a pretty good view to those folks. And obviously, we can continue to grow even during that period. I mean, we’ve just demonstrated as we’re coming through the height of that period as it will, we’re putting up 22% revenue growth, and even with the carriers, the service providers globally just at 9% of that. So you can see the balance of our business around subsea, high-growth areas such as India and the cloud players gives us a much more balanced business that we can withstand those kinds of shorter term challenges.
I would say the cloud providers, to your question about how widespread, I think, we’re seeing that with two to three of the large players. So, we have evidence, it’s not just one. Now they’re all very different in terms of their dynamics, I would say that. We talk about them homogeneously, but their networks are very different and business models are very different. But we are encouragingly seeing it across a number of them, Meta.
Operator: Our next question today will come from Greg Mesniaeff of WestPark Capital. Please go ahead.
Greg Mesniaeff: You mentioned that orders are clearly picking up at this point. And the DSO number for the quarter was pretty on the high side at 96. I was wondering if you can give us some view on the linearity of the quarter and how you see linearity progressing in the next quarter and beyond. Thanks.
Jim Moylan: It’s just fact that our quarters tend to be backend loaded. That’s just the way the business works. And as a result, we end up with big shipments in the last month of the quarter, and DSOs reflect that. We don’t collect those shipments in that same — sort of in that month. So that’s why our DSOs are high. They’re actually down slightly from the previous quarter. And it’s the linearity of the quarter, frankly, which drives that number more than anything else.
Greg Mesniaeff: Got it. And just as a quick follow-up, as you draw down your backlog and continue to do so, can you give us any indication or metrics or data points regarding any cancellations? I’m assuming there haven’t been many, but if you could just give us some indications of that. Thanks.
Jim Moylan: Early on, as the supply chain started to improve, the companies that had put big advanced orders on us looked at the new lead times and they looked at the amount of orders that they had put on us. And at first, as Gary said, starting with the cloud players, they started to push some amounts of orders out that was followed by the service providers who pushed them out. They held on to the orders, but they pushed the delivery dates. We did also have a small number of cancellations from a very few customers, was not material to our backlog. Our backlog is — has high integrity. They just have sort of changed the way they view the delivery dates.
Gary Smith: But I would add that, Greg, we have not seen that dynamic for — that has ameliorated that dynamic over the last few quarters, both in terms of cancel — any small cancellations, absolutely, we have not — that’s been de minimis, absolutely. What we’re having is even the rate of change of pushing stuff out has slowed considerably. So we have pretty good visibility into what they want and when.
Operator: Our next question will come from Dave Kang of B. Riley FBR. Please go ahead.
Dave Kang: My question is on India. What inning are we in? Is it mainly Jio? What about your position with the other two major service providers there?
Gary Smith: I think to use a cricket — sparkling cricket analogy, I would say that we’re — if you’re into test cricket, we’re just on the first day of the five-day sparkling cricket match. So, it’s got a long way to go. I mean, basically it’s the fastest-growing internet market in the world. You’re talking about where they’re consuming it from a mobile perspective, most of the internet. And there’s still a very, very long way to go with that. And I would also say, Dave, that it’s broadly based now. I think the structure from an industry point of view has settled down. You’ve got three major players, and we’re seeing growth across all three major telcos, plus all of the cloud activity there, both directly and indirectly, you’re also — I think it’s the fastest growing connectivity from a subsea system point of view landing in India as well, which we obviously got number one market share in there.
And then you’re also seeing our position. We’ve been there for a long time. So, things like the government, Ministry of Defense networks based on Ciena. So, we’re seeing very strong activity, orders and shipments across the whole of that spectrum. I think it’s very broad-based. And I think we’re in a multiyear growth opportunity with these folks.
Operator: [Operator Instructions] And our next question will come from Tim Savageaux of Northland Capital Markets. Please go ahead.
