Hello, and welcome to the 27th Annual Needham Growth Conference. I'm Ryan Koontz. I cover the networking sectors here at Needham. I'm really thrilled to be joined by Ciena and their president, Gary Smith. Welcome, Gary. How are you?
I'm very well. Thank you for having me.
Excellent. If any of you have questions you'd like to suggest, you can email me at rkoontz@needhamco.com or submit them via the conference portal platform. So, Gary, just start with congrats on a nice quarter and a superb outlook. Can you maybe walk us through kind of what led you to your strong guidance there and strong outlook?
Yeah, no, we're seeing very good visibility and strength in the business, you know, in a number of facets. You know, number one, the service provider business, as you know, has been a little chaotic the last few years, and I think that's getting into balance from supply and demand, and, you know, we were seeing a strong few quarters in terms of orders outstripping revenue, so we're getting back to a more normalized trajectory on that, so that's all good, and then on the cloud side, you know, which directly and indirectly is more than 50% of our business now, you know, we're seeing super growth opportunities there, both in, you know, just continuing to connect into the data centers and connect them all together around the world, and then also some opportunities into the campus and eventually into the data centers.
So, you know, we feel pretty good around the next one to three years.
Excellent. Really exciting stuff. We'll unpack all those things. Maybe just starting with, you know, the bandwidth demand in general, a lot of questions about AI these days and the tremendous investment going into building out that infrastructure for the cloud providers and eventually the enterprises. Can you maybe quantify the impact of AI on bandwidth demand as it relates to traditional drivers you've seen in your business?
I mean, if you go through sort of bandwidth demand, typically the growth of bandwidth around the world is typically, you know, 20%-30%. It has been for, frankly, the last two decades. Yeah, and you know, and that's largely, as we know, through service providers and through, you know, this advent of the internet, et cetera. What we're beginning to see is potentially that growth rate increasing, you know, with this overlay of AI traffic. And we're seeing that manifest in a couple of ways already. Just overall, the cloud traffic and our business directly into the cloud continues to increase. So I think we're seeing some of that in there. It's, you know, you can't discern exactly how much is, you know, AI and how much is just cloud growth, but, you know, definitely an uptick.
We're seeing some dedicated builds as well, particularly around, you know, machine to machine, where they, you know, obviously with all the GPU investments, you can't get them all in one place because of power and space. So they're having to, you know, get high-speed connections between data centers for learning and training. We are seeing dedicated capacity come out for that, which we haven't seen, obviously, before. Then I think there's this opportunity from a traffic point of view for all the inference, and that's really in front of us. No one really knows how to model that, except as much to say that if they're going to realize all of their investments in this enormous, you know, investment in compute and data centers, to monetize it, you've got to get it out into the network.
That's all kind of in front of us. We're seeing an uptick now already.
It's mostly driven by training then, initially.
Largely, you know, we're seeing some dedicated builds right now, Ryan, where they're, you know, they're only using it for direct interconnect between data centers. Yeah, and that really is for training and learning.
Incredible. That's great. Lots still ahead of us then. On the geo side, can you maybe elaborate on some of the things you've seen in terms of geographic trends? Where are you seeing, you know, most of the explosive growth here or, you know, uptick and reacceleration in growth?
I mean, I think your North America obviously strong. I mean, you know, you're seeing that from a cloud point of view. You're also seeing it from a service provider point of view. We had, you know, for the first time in about two years, orders outstripped revenue for our North Americans. And they were, you know, the ones that really had the, you know, supply chain absorption challenges. And that, I think, has cleared out. So we're seeing strength in the North America. We're seeing a gradual uptick internationally, you know, places like India, Europe, from a service provider point of view. And then from a cloud point of view, you're seeing, you know, significant growth in markets like India, where they're building, you know, these MOFN, these managed optical fiber networks dedicated to the cloud players. So we're seeing that.
I would also, you know, pick out the submarine cable space.
Oh, yeah.
You know, it's got some challenges, obviously, around some of the geopolitical stuff, and you know, as we know, in places like the Red Sea, which is strategically, you know, important, but notwithstanding that, you know, that really is a sort of critical artery for all of the web scale folks, so you're continuing to see, you know, investment in that, and so you know, I think that's from a geographical point of view, you know, it's fairly broad, led by the U.S., would be my summary.
The cloud builders mostly driving that uptick globally.
Yeah. Yeah, you know, even when you talk about submarine cables, it's largely they're the largest consumers and, you know, probably Meta would be the largest, some of the largest owners now of submarine cable. And certainly the stuff that's planned, you know, they've all announced, you know, you saw Meta's announcement, you know, I think it was billions of dollars investments in cables, but you've obviously heard Google.
Yeah. And these cables have really, the subsea cables have kind of come to the forefront, even in terms of some of the geopolitical tensions, right? We've got talk about sabotage, subsea sabotage, maybe in space coming. I mean, it's a new world.
Yeah, no, it is, and these are, you know, very critical arteries for the whole sort of global infrastructure, and they are strategically important, you know, both to trade and economics, but also to, you know, countries.
Right on. So maybe in terms of like, you know, risks and risk management as it relates to the current demand environment, how do you think about managing those risks, you know, whether geopolitical or whether they're, you know, other just macroeconomic risks? How do you manage those as a leader?
I mean, I think, you know, we've got to be mindful around all of that stuff that goes on, the geopolitical stuff, some of which I just talked about as it relates to, you know, submarine cable issues. You've got things like tariffs, you know, which is like now, who knows how that will play out? I mean, we've got various scenarios, you know, which we're working, we'll see what happens. You know, we've got a very diversified supply chain, you know, that's robust. We'll figure out how to manage that. You know, so those are the kind of things that you know, you try and get out ahead of as much as you can, but until they manifest in whatever form they will, you know, it's tough to know what problem you're trying to solve.
So I think we're all trying to figure out, you know, what'll happen there for sure. But, you know, listen, overall, from a demand dynamics and thinking about the risk mitigation, you know, I think, you know, we're in a reasonable place from that point of view. I think the economy is going very strong, certainly in the U.S. You know, and the amount of investment that's going on in compute, that if they're going to monetize it, you know, it's got to get out on the network.
That's right.
So, you know, feel pretty good around all of those dynamics.
Excellent. Yeah. And your leadership is, I think, unchallenged to some degree in terms of your leadership. And on that note, in terms of your competitive advantages relative to bandwidth growth, I mean, where do you really flex your muscles there on Ciena's strengths relative to your peers?
Well, I mean, I think as it relates to supply chain, Ryan, or just the technology?
Yeah, supply chain and beyond in kind of the overall, you know.
Yeah, the overall competitive, but, well, I mean.
R&D as well.
I think, you know, you think about the company now and where we're at. I mean, we're clearly the best in the world at high-speed optics, you know, as it relates to outside the data center. I think strategically the opportunity for us is to continue to grow, you know, the space that we're in based on that core technology leadership. But then also, you know, the opportunity to get in places where we have zero revenue right now, which is campus-type markets, and then eventually inside the data center with the high-speed core technology, because that's what we're good at. And, you know, if you think about the business, we've got number one market share in all these strategic markets, cloud, data center interconnect, submarine cables, et cetera. Because of our core technology, you know, we're able to put bits faster and longer than anybody else.
We've just brought out WaveLogic 6, which continues to expand our competitive advantage even further. And we've just actually right now working on the shorter reach variant of that, which will be the 800 gig pluggable. And then a variant of that, which will be out towards the end of this year, which will, you know, which will basically be our first product into the data center. That will be a variant of that at 1.6T, you know, coherent into the data center. So, you know, we're excited about that.
That's a derivative of the 6 Nano, huh?
Yes, exactly. Yeah, exactly, so you know, we're at the point where we're able to do these different, you know, trains of development on like WaveLogic 6, where we do different variants to it, and we're able to do them fairly quickly. You know, and these have been in the planning for years, and so you know, frankly, it just compounds our competitive advantage in all these various markets.
Your company's got such a great reputation for innovation and leadership, and I'm sure your customers start by measuring you on like price performance, just the basic innovation and showing up for the best price, lowest cost per bit. Is that the main?
I mean, you know, you think about what's going on in the cloud space and how we've been able to take such market share there, and you think about what they're trying to do. They're building these global super complex networks. They want absolute high speed, you know, the fastest they can, and power is super important to them. And so, from a technology point of view, those are the things that are important to the cloud players, and we're able to do variants that play to that. You know, and we've also collaborated with them. You know, so you think about all of the line systems we're now deploying. Our new RLS, which is our intelligent automated line systems, they've basically been adopted by all of the major cloud players, and they're rolling out our line systems around the world on all of their network interconnect.
And that was a collaboration with a couple of them in the design of it, and we're continuing to work collaboratively with them on a whole bunch of stuff from a, you know, from a technology point of view. And we also, you know, and this may not be that well known, we actually provide a bunch of services to them as well in terms of installation and planning and all that kind of stuff, because these networks are massive and have global reach. And so, you know, we're able to add value to them, not just from a technology point of view, but also from a, you know, a support perspective as well.
Planning any sorts of kind of strategic functions, as well as installs and tactical and strategic?
Yeah, and maintenance, and that's around the world. You know, you think about all these submarine cables, where they are and the rest of it. We're, you know, we're resourced. We're a very global company, always have been. We've got support tech resources, you know, where they want them. We're able to support, you know, the cloud players. The other thing I would say about the cloud players as well, Ryan, is that group is expanding. You know, you've got a lot. It used to be the sort of four of them. Now, you know, you've got these other large players that are actually building out their network. We're expanding our market opportunity just with those folks building out networks where they weren't before.
Yeah. Incredible. That's great, so some of those kind of tier two late arrivals on cloud are bringing more in-house than they used to kind of outsource some of those.
Exactly, and you know, we struggle with what they're called. I mean, you know, they're very, very large companies, and calling them, you know, calling them tier twos feels a bit odd, you know, given the size and scale and market cap of these folks, but yeah, they're sort of newer entrants into the network, but you know, you've seen a lot more of those players over the last few months.
Excellent. Great to hear that. Maybe shifting back to, you mentioned MOFN. I know that's been a real key initiative for the cloud operators over, I'm sure, several years here. Can you walk through the consumption model there to you and how that differs from a traditional direct sale to SP or cloud?
Yeah, it's some different types of. They call managed optical fiber networks. And, you know, at its simplest form, what it is, is, you know, customized capacity and networks for the cloud players. Typically, it's been in certain countries, whatever, for example, in India, you know, they don't want to get a telecom license for all of the, you know, issues that go with that, for example. And so they partner with us and with a local service provider there to build a network customized for them. And it's, you know, rolled out and supported with us and the service provider of choice. So they provide a service level agreement to them. Now, there's lots of different, you know, variants on this. Yeah, but it's something that's been around for a little while, but the last couple of years, it accelerates basically time to market for these folks.
It keeps the architecture the same. So they basically, you know, manifest that they want the Ciena architecture so it fits in with their global footprint and they can manage it. And, you know, it gives them flexibility locally as well. And we've seen that particularly in some of these markets where they're expanding internationally. We've also seen it in North America. And you saw the, you know, a variation on this with Lumen, you know, the announcement that they had a few months ago. You know, so you've seen some fairly sophisticated models here from the service providers helping support, you know, the cloud folks' ambitions and what they need, because there's a massive amount of networking required. That's the good news. You know.
And these typically existing Ciena SP customers?
Yeah, I mean, you know, the thing that we bring to the table there is, you know, we're in all the major service providers pretty much around the world. And so, you know, we're able to work with them on providing the right kind of architecture. And when we partner, obviously deeply with the cloud players, so we're able to, you know, customize that architecture for them that's consistent with what they're doing elsewhere in the world. And so we're kind of uniquely positioned to do that, you know, having the relationships with both the global service providers and also with the cloud players as well.
Yeah. And so the cloud players have network visibility then when the local SPs build it for them.
Yes. Yeah, and we're increasingly seeing that model, and in some countries, it's a hybrid. You know, they'll do some of that. They'll build their own. You know, they'll do a mix of it, you know, so there's no one size fits all, but it gives them a nice option, and it's also, you know, an opportunity for the service providers to take some value from this too, you know, a la the Lumen approach to it.
Sure. Yeah. Excellent. Maybe another quick topic here that comes up with investors a lot is around, you know, pricing and competitive environment. How would you characterize, you know, broadly the competitive environment and how it affects your own approach to pricing?
You know, I think the pricing model, you know, has been pretty solid for us given our competitive advantage from a technology point of view. You know, we're not the lowest cost player and have no intent on being. But, you know, given what we deliver from the total cost of ownership, you know, we can shift bits further and more of them than anybody else. So, you know, the economics of it are all compelling. So, you know, we see a pretty stable environment from that point of view, notwithstanding anything that may or may not happen with the tariff thing. But, you know, that's been a fairly stable environment. You know, we have some margin pressures in the first half of our year, but that's not really competitive. That's more to do with mix.
You know, we've got a lot of new products that are ramping up, you know, not least of which is WaveLogic 6. So, you know, the costs on that tend to be higher until we get to scale, which we will in the second half. Then also, Ryan, we've got a lot of the line systems I talked about, RLS. There's an amazing amount of line systems being deployed by all these, you know, the cloud players. Yeah. And so that tends to be lower, you know, tends to be lower margin. So that's a bit of a weight on us for the first half. But we think as we get to the second half and pluggables, as we ramp up our pluggable business. But, you know, those margins improve as we, you know, as we get to the second half and we get more volume on that.
But that's really not an artifact of competitive pricing. It's just, you know, mix right now.
So you're building footprint and your attach rate to that footprint. It's an open line systems, I understand, right? But the attach rate and advantages of deploying.
Why wouldn't you put our modems on it when you get, you know, you got the best technology and the most effective use of it? You know, you'd put our modem technology on it, which typically they do.
Yeah. That's great. You know, on the demand side, you guys had some pretty impressive book to bill run here. You know, what factors do you attribute to this, you know, this run here on strong bookings that you guys reported?
I mean, I think there's two or three things that play here. You know, one is if you look at that service provider business, which has gone through, you know, quite a tumultuous whiplash. Yeah. First of all, they had COVID, you know, when they didn't want to invest in the network and just wanted egress and ingress points on Zoom and don't mess with the network. Then you had this whole supply chain chaos and now absorption, which they're largely through. And so I think, you know, it's an artifact really of that that we're now seeing that get into balance. And they're beginning to, you know, invest in a normal way again from a, you know, the service provider. And I'm just sort of generalizing that. And, you know, we had our first positive book to revenue ratios on that last quarter. And that looks like continuing.
So I think that's got back into balance, as I would say it, Ryan. The other thing that's coming on top of that, of course, is the growth of cloud. And, you know, as we talked, it's just, you know, continuing to grow. Some of that is fueled by the AI traffic. Some of it's fueled by machine to machine AI traffic. And, you know, we're seeing that expansion. And we're also, you know, beginning to get into new markets that we don't really have revenue from, like the campus. You know, we're beginning to get pluggables into the campus. And that's not an area that we'd got revenue from before. So, you know, you put all of those things together. And that's why, you know, from an order point of view, you know, we're beginning to get some very strong order quotas together.
Our backlog actually grew last quarter, you know, even though we had a good, good, good revenue. So, you know, I think, you know, I think we're in for a fairly strong, you know, dynamic around the market here for the foreseeable future.
Yeah. Super exciting. Are there any specific, you know, initiatives? We've talked about AI. But anything else you'd point to in terms of programs that are driving, you know, your outlook?
Yeah. I mean, yeah, you know, Ryan, you talked about the campus. I mean, we really get no revenues from the campus. And these campuses are now getting, you know, very large, as we know. The speeds that are required and the amount of capacity that's required now is getting to a point where, you know, some of our technology, our coherent technology is a good fit. And we're beginning to see that. And then I think the piece that we're heavily invested in is the opportunity to intersect that same dynamic inside the data center, you know, which has really been a direct connect market kind of technology, you know, forever. But it's get the physics to get into a point where, you know, these GPU clusters is so much traffic coming out from them.
The architecture requires that they put some, you know, in some cases, some optical switches in there, and once you start to do that, you're introducing noise, and so you then need to manage that, you know, transportation in a way, and coherent is the perfect technology for that, so, you know, we're super excited about that. We're in market with product at the end of the year, at the end of this year in, you know, inside the data center. I think it'll take a while. You know, we think the next one to three years, there will be an intersect point where, you know, that technology hones in into that space.
And again, you know, this is about growing our addressable market, basically taking the same technology, let's just call it WaveLogic, and taking essentially the same technology into the systems market, the optical system market that we're known for in the various applications. And then taking that same technology generally in component or pluggable form into, you know, the campus and the data center, which is a whole new market for us.
Yeah. And those distances are kind of in this 10 km reach for these massive campuses, massive data centers, that you're talking about, those kind of distances?
Yeah. You know, when I was talking to somebody the other day on the fiber side, they're saying they're shipping more fiber into the data centers than they are outside of the data centers, which kind of gives you, I don't know how true that is, but it does give you a, you know, it's a shocking perspective. You know, the amount of fiber that's going into these data centers, when you think about the compute ramp that they're having, you know, and they're getting massive, both in terms of distance and, you know, the wrap around of the fibers around there, the distance is, again, quite long.
Yeah. As they scale, they have nowhere to go but out, right?
That's it, you know, or up, you know. Some of them are actually building, you know. We were dealing with one the other day that was, you know, three stories. They're just building on top, you know. But the constraint is, as you and everybody knows, is on this call, it's power. And, you know, I was talking with one of the executives from one of the big cloud players the other day. He said, you know, the constraint is not capital. It is absolutely power. We would be building more if we could. It's power and being able to get the right kind of, you know, location. But even the location, if they can get the power and the cooling and the rest of it, they can figure the network out. It's easier to figure the networking out than it is the power, which, you know, which makes sense.
We hear all this stuff about nuclear, you know, micronuclear and, you know, they've been building data centers next to power plants for like the last decade, I think.
Yeah. Yeah. Yeah. No, I mean, the good news is that, you know, all that investment in GPUs and compute and the rest of it and all the data centers that are coming online and, you know, towards the end of this year, if they're going to monetize all of this investment, it's got to be on the network. You know, how do you get to, you know, inference and the users if you got to put it on the network? So no one knows how, you know, that will model out. But logic says it's going to be a pretty big uptick in traffic.
Yeah. The power needs of the new Blackwell chip and everything. I mean, it's only going up.
Yeah. No, that's the good news. It's a good place to be in.
Yeah. Power goes up, puts more demand on the network as they have to move to new grids. Right. Maybe shifting back to the income statement a little bit. You've set a target of 15%-16% by 2027 for gross margin. What are your strategies to achieve that, you know, a mix of growth and, you know, some OPEX expansion? Walk us through that.
You know, it's more about, you know, growth and operating leverage because, you know, some of the markets we've been, or, you know, another way of putting it is kind of growing into our body. We've been investing during all the chaos in the last three, four years. We've continued to invest, for example, in WaveLogic, you know, into the data center, into the pluggables, et cetera, because, you know, we felt passionately that that market would open up for us. You know, we've been investing and we do not need another massive step function in investment to, you know, to get where we think we want to go. You know, we'll continue to make sure we're investing at the right levels for sure. Basically, it's a matter of then getting the growth.
You know, you saw our growth span between 8%-11%, you know, so it's higher than we would normally be. It should be because that's what we've been, you know, we've been spending into that and investing into it. So, you know, we grow into our body. We'll expand our OpEx, but, you know, it won't be a big step function expansion. We'll get operating leverage as we go forward on our OpEx because of the investments that, you know, we've already made. Sort of 15%-16% we think is a reasonable approach that we think we can get to. I would kind of remind folks that, you know, pre-COVID, you know, in the decade prior to that, we expanded our operating margin pretty, you know, successfully.
We were, I think, at 18% by the time, you know, COVID came along. So, you know, it's not without precedent. Now, you know, I think we'll see how far we can get to, but 15-16 should be a reasonable target for us that we can get through, you know, basically operating leverage.
Sure. And the gross margin line, you said you've got some mix issues going on in the front half, maybe normalized in the second half, and you see opportunity to continue to tweak that up with new fulfillment models. How should you invest?
Yeah. And I mean, I think, you know, it's really for us about mix, you know, as we go through. We should see an improvement in the second half. And as we start to talk about, you know, year two and year three, I think, you know, you get to that 15% operating, 16% operating margin, you know, you've got to get to a gross margin in the mid-40s% for that to really, you know, kick in. And that's, you know, certainly absolutely doable. We think we can get there. You know, we've got some ramping to do on the pluggables to get that scale. We've got some ramping to do on WaveLogic 6, but, you know, we know how to do that. So I think we can get the margin, you know, into the mid-40s%, you know, as we go forward.
And then we'll see where we go, you know, we see where we go from there. You know, we're entering the opportunities into these new markets in the campus and in the data center with our components. So, you know, that'll help scale when you think about, you know, you're taking the component, you're putting it into the data center and you're shipping it to systems. You know, the velocity of that should, you know, yield some pretty interesting economic benefits for us.
Yeah. Great scale. Great, great, great scaling opportunity. In terms of your kind of technology suite there, you know, WaveLogic Extreme really set the bar. Seems like you've got a pretty big lead there. Can you kind of walk us through your competitive position specifically? Where you guys feel like you are at the high end?
You know, we probably think we're about 18 months to two years ahead of everyone else, you know, and we're continuing. As we talk here, we've actually got the nano in-house and we're working on that, you know, the variant of that, which will be the 800 gig plug. And then the inside the data center piece. So we're continuing to invest. You know, we're not standing still on any of that. We have a very aggressive program on all the WaveLogic stuff, you know, to further compound our competitive advantage. So lots of different variants of it that are optimized around power and space and distance, you know, submarine cables variant for it, you know. So, you know, we feel very, very confident around our technology leader.
And, you know, people always talk about us in terms of the modem technology leadership, but also you look at things like line systems, which are, you know, have become critical in that they're, you know, the densification of fiber around all of these huts, et cetera, and being able to do that. And the intelligence that's going to be required in these line systems, we probably have about a two-year lead on that too. And pretty much all of the major hyperscalers have adopted RLS. And that gives us a tremendous advantage. So you think about that. And then in addition to that, you've got, you know, our Navigator software, which is the only microservices-based platform to manage and the whole domain around that. That was a massive investment for us that took us more years than we care to mention and more cost than we care to mention.
It was a painful journey, but, you know, we're finally at a point now where we compile basically all different kinds of applications on top of it and a microservices platform. It's the only one of its kind out there by any kind of systems player, and so, you know, you think about the optical situation to answer your question. We've got the technology leadership on the modems, the line systems, and on all the, you know, the management software enabling around all the domain management of that as well, so, you know, we're in a super strong position. There's no doubt about it, and we're leveraging that both in the service provider world and obviously in the cloud.
Yeah, and you talked about several variants on ZR. Are you starting to see interest in using ZR in the ZR Plus model where you mentioned subsea and different applications where you might see use of pluggables in other applications?
The answer to your question is yes. I think, you know, the main deployment of these is going to be in the shorter reach interfaces because, you know, you start talking about the submarine cables or even the long distance, they don't want to mess with pluggables. You know, they really don't. They just want to lock into the system piece, and, you know, now on the Metro side, where we didn't have a large market share, I absolutely think that the pluggable piece is, and we are seeing it, it's playing, and it makes a lot of sense. You know, and then as you get into 800, you know, I think we had the first win of anybody on the 800ZR. Yeah, so, you know, I think that's a fantastic market for us.
I don't see it really, apart from a couple of corner cases, really extending into the long haul space. You know, I don't. There are a couple of applications that I think make sense to it, but you know, the great news for us is it really gives us the opportunity in the shorter reach on the Metro side where we didn't have a large market share.
Yeah,
so you know, that's working out well for us. Yeah.
Yeah. It's been a great win, great progress. I think we talked about you guys approaching near 15% market share in ZR exiting the year. It's real impressive.
You know, from where we were, you know, it doesn't sound like a big number. We certainly have aspirations a lot higher than that. But, you know, from where we were, because we kind of deliberately did not go through the first phase of this, you know, when they first started out. And so we were, you know, late entrants to it. And that was a trade-off that we consciously, you know, made on WaveLogic. But we thought the intercept point would always be, you know, round about now on the 400 where it really starts to ramp up. And, you know, I think we got fortunate or whatever the expression is that that, you know, timing seems to be about right. Yeah.
Perfect. Yeah. Yeah. Hats off. That's been great to see. Maybe shifting gears to routing a little bit and your approach to, you know, coherent routing, which I understand it's kind of an IP over WDM type model. Can you walk us through where you're seeing service providers start to embrace that idea?
Yeah. Probably the, you know, the best example of that is probably Verizon, you know, the most public one of it, you know, where they have a converged Metro view. That's where we think the convergence is on the Metro side. Now, people have talked about this for years, right? You know, IP and optical coming together, you know, ever since I've been in the industry. And I think it is sort of finally happening. And there are some examples of that, Verizon being one of them. And it basically leverages, you know, what I would sort of crudely call an IP light type architecture, you know, which basically simplifies the Metro, converges it into a single network, which it isn't right now, converges it and basically simplifies the operation and deployment of it.
You know, and you route when you have to and switch when you can is the old saying. And, you know, that's a bit of a simplification of it. But basically, you know, it's a very optical convergent bias, which suits us. But IP where you need it out at the edge. And then also we've looked at, you know, we do think there will be a sort of, you know, cause for some of the WaveRouter type architectures, which are the bigger switches. You know, now that I think is a bit further out. But you've seen us invest in that. And, you know, players like Verizon and others, you know, will obviously go down that architecture. It's not for everybody around the service providers, but we're increasingly seeing, you know, interest in that kind of coherent routing because it simplifies the operations.
Yeah. Historically, they've always had issues with two organizations and two completely different structures and management systems, and eventually, you know, costs and TCO might win out and we start to see some progress there in that combination.
You know, I think you're seeing that from the service provider world generally now. It's stuff that we've talked about for a while. It's taken way longer than we all would have thought. But they're at a point on a lot of these, you know, architectures and also sort of their automation and back office where they're at a point where they, if they're going to take their costs down and the rest of it and compete, then, you know, that's become an absolute imperative because also a lot of the older software that they're running in their back office is actually becoming obsolete. Yeah. You know, we've seen this on Blue Planet too. You know, it's a very small, in a very small way, but, you know, you've seen the fortunes of Blue Planet, you know, come back very strongly.
That's largely because it's a microservices next-gen architecture. A lot of the stuff that's out there in things like inventory is becoming obsolete.
Wow. Yeah. Absolutely. Back to the competitive landscape, the big combination going on with two major competitors, Nokia and Infinera coming together. Are you seeing impacts there? How do you see that impacting your business over the next couple of years?
You know, we're not seeing anything different. You know, certainly in the last few months, we see them, you know, we've competed with them very well for the last few years. So we feel pretty good around our technology hand and our ability to compete with them. You know, and I would say it's always tough when you put two portfolios together. You have to make some choices. I know we went through it when we did the Nortel one at a big scale. And it's challenging. So, you know, they've yet to make those, I'm sure they've already made them, but they've got to make some choices around what they're going to discontinue and the rest of it. And frankly, that's sort of an opportunity for us while they're going through that transition.
Yeah. Definitely. Well, we're just about out of time, Gary. I could talk to you for hours, but anything you want to say in closing up that you think investors are missing about the Ciena story? It's, you know, great to see the support in the stock price certainly moving in a great trajectory here. But anything you'd say to kind of wrap up to summarize your opportunity ahead?
Yeah. I mean, I think, you know, the company where it sits right now as an enormous opportunity. It's, you know, known as an optical systems company. And it clearly won that market. You know, it's the number one player in all the things we just talked about. The opportunity is now to go into a whole new market for us, of which we already have relationships with the customers. So it's really then taking that same technology and increasing the velocity of it in its component or pluggable form into the data center and into the campus. And we're already seeing, you know, as a proxy for that, the orders for the campus, you know, pluggables. So this is an opportunity to, you know, I think rethink about the company. We're the best in the world at high-speed optics outside the data center.
The opportunity is to take that technology and leadership inside the campus and the data center. That's the opportunity for us.
Incredible. I'm excited to see it happen, Gary.
Thank you, Ryan. Appreciate it. Good to chat as always.
Thanks for joining. Thanks.