Paul Silverstein: I appreciate it. Thank you.
Marilyn Mora: Next question, please.
Operator: George Notter with Jefferies. You may go ahead.
George Notter: Hi, guys. Thanks very much. I wanted to ask about the impact of foreign exchange. Obviously, US dollar at 20-year highs. Maybe you can talk about how you’re approaching that conversation with customers internationally? Are you seeing any diminishment of demand? What’s the picture? Thanks a lot.
Scott Herren: Yes. I’ll start with the numbers on that, George. And I’m sure you know this, we sell about 90% of our revenue denominated in USD. So there’s not a big translation impact to us for the strength of the dollar. It’s not insignificant, but it’s offset by the benefit we get on the OpEx line. So FX to us, from a translation standpoint, really hasn’t had a material impact. As we look at the — now you’re selling in USD with an elevated exchange rate to the dollar, there’s no question that is having a bit of an impact. Certainly, one of the things contributing to what Chuck talked about earlier that we’re seeing in Europe. Not only are they battling high inflation in their own markets, but that increased cost in local currency to transact has been a bit of a headwind. But we’ve dealt with this. We’ve sold in USD through the entire history of the company. Not expecting it to be something that has a lasting impact on us.
George Notter: Great. Thank you.
Marilyn Mora: Let’s go ahead and take our next question please.
Operator: Amit Daryanani from Evercore. You may go ahead sir.
Amit Daryanani: Thanks for taking my question. Yeah. I guess, maybe the first one, I was hoping you could touch on the service provider market. I think you said orders were down 23%. That seems a bit more severe than the rest of the portfolio. Can you just touch on what’s happening there and anything newly service provider versus web scale would be helpful?
Chuck Robbins: I couldn’t understand the question.
Marilyn Mora: Can you repeat the question?
Amit Daryanani: Yeah. Sorry. So I was hoping you could talk a bit about the service provider order decline of 23% seems a bit more severe than the rest of the business. And then anything over there between web scale and kind of the traditional service providers would be helpful?
Chuck Robbins: Yeah. Amit, thank you for that. And I think the reality around that one is simply if you go back a year ago, that segment grew 65%. I think that’s the fundamental issue. I don’t think there’s anything else going on.
Amit Daryanani: Got it. And I guess maybe if I could just ask you just about the full year guide. Maybe you folks have lined it, right? And you just did 6% growth against a very difficult compare, and I guess the ways to your guide, but you obviously assuming much of an explanation for the rest of the year despite compares to getting easier. So I guess, Chuck, is that just being conservative or are you seeing signs in your backlog or your orders that give you a pause on that business. Given how its easy to compare, I would imagine it’s going to accelerate a bit for the year.
Chuck Robbins: No, there’s nothing that’s giving us pause in that. I mean we guided up the full year in revenue from what had been a guide of 4% to 6% growth of 4.5% to 6.5%. That effectively rolls forward the outperformance that we had in Q1 into the full year. There’s no change in the way we’re looking at the second half of the year, either plus or minus. But it’s a prudent view of what we expect in the next three quarters.
Amit Daryanani: Fair enough. Thank you.
Marilyn Mora: Next question please.
Operator: Simon Leopold with Raymond James. You may go ahead, sir.
Simon Leopold: Thank you for taking the question. I wanted to see if there was some way you could characterize your own lead time. So if you had customers placing orders today from Meraki products or campus switches or data center gear, what are the lead times for getting the product for your customers? And how does that compare to the prior quarter and prior year? Thank you.
Chuck Robbins: Yeah, I’ll make some comments, and then Scott, if you want to add some color, feel free. The range on the products is very wide right now. We still have a couple of product areas that we have component issues that we’re doing some work, and I think we’ve got probably one more quarter before we start improving those. We’ve got other products like we have certain firewalls that are down to three-week lead times. We have some of the products we’ve redesigned that I’ve talked about before. It went from 40 weeks to 12 weeks and will continue to improve. I think we made improvements in roughly half of the portfolio. Half of the product families improved during the last quarter, and we would expect to continue that progress as we move forward.
Simon Leopold: And just as a quick follow-up. As you’re showing improvement, do you see that affecting your ability to maintain or take market share where perhaps you were more vulnerable when the lead-times were more extended?
Chuck Robbins: Yes, I think the whole market share discussion is reflected in our backlog. I mean, that’s the issue. And as we ship it, you will see us — I think you’ll see us over the next 12 months gain market share as we have an outsized backlog that we’ll be delivering. So, I would expect that to have a positive impact.
Simon Leopold: Thank you very much.
Chuck Robbins: Thanks.
Marilyn Mora: Thanks Simon. Next question.
Operator: James Fish with Piper Sandler, you may go ahead sir.
James Fish: Yes, thanks for the question. On the restructuring plan, I know these things are never easy, and we had picked up that the collaboration side we’re seeing some layoffs. But what product areas are being most hit? How should we think about the reduction of headcount here overall? What’s the strategy to change the direction of some of these growth businesses around that have been kind of struggling to growth? And by that, I really mean the collaboration side. And how much are you guys factoring this kind of impact into the topline here on guide? Thanks.
Chuck Robbins: Yes. So, we’re actually speaking to our employees tomorrow about this. So, I’d be reluctant to go into a lot of detail here until we’re able to talk to them. I would say that what we’re doing is rightsizing certain businesses. We’re really focused on resource moving into like in the enterprise networking space, accelerating our platform strategy. We will be making significant investments in security and beefing up our team there and the capacity to continue to innovate there. Those are important areas. And so if you would understand, I’d prefer to wait and talk to our employees tomorrow about it. But you can just assume that we’re going to — we’re not actually — there’s nothing that’s a lower priority, but we are rightsizing certain businesses.
And since you asked about collab, I’ll tell you a little bit about what — we see incredible strength right now in our Calling business, our Cloud Calling business. We see great strength in our Cloud Contact Center business. And the compares on the meeting side are going to start to make that — give us the ability for that to be a much more favorable component. So, we’re — I actually am optimistic over the next 12 months about our collaboration portfolio. The team has done an amazing job. I truly believe that they built the best platform in the business. And when you look at our devices and the interoperability that the team has been driving with the Microsoft interoperability, that is a huge, huge thing when you — from a customer perspective for us to give them that flexibility.
So, I think they’ve done a good job, and I feel pretty good about that business as we go forward. We just need to right-size some of the OpEx
