Gary Smith
Appearances
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
We have the technology, the software that actually manages the network as well and looks for predictive issues of challenges and switches automatically. If there are problems on certain fibers, it will detect that and switch it through. So there's a lot of underlying technology and collaboration between us and all the service providers.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And also all of the hyperscalers, you know, pretty much all of the hyperscalers use Ciena to connect their data centers around the world. And we partner with them as well on technology developments that are specific to their networks. Because these networks are now, you know, you look at the hyperscalers, some of the largest networks in the world.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And they're very complicated, you know, multi-continent, metro, long-haul, submarine cables. The biggest players now, the biggest owners of capacity on submarine cables is actually the cloud players. And that used to be the traditional service providers. But now it's the likes of Google and Meta, et cetera, that really own a lot of the global capacity on those submarine cables.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
So that dynamic, I mean, you take the submarine cables as an example. It's a good proxy for what's happened here. From the 1980s right the way through to 2010, this was all funded by the service providers. So it was a way of getting transatlantic, you know, largely to Europe, a little bit to Asia, you know, transatlantic phone conversations.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And so they'd have these cables and they would get together as consortia between companies These companies like British Telecom, AT&T, and they would, as a syndicate, fund these submarine cables. Now, with the advent of cloud, you got these players who wanted to have very high-speed connectivity.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
If they're going to be in the European market, you take for the example of Meta or Google or Microsoft or any of these players. They needed to have very high-speed dedicated capacity. So you began to see in about 2010 the cloud players, A, purchasing the capacity of those submarine cables. And in the last more recent five years or so, you've seen Google
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
actually begin to own many of these cables and meta and others too to it so you know it's evolved from hey you know it's all this service provider and it's just phone calls you know when you want to you know reach your aunt in europe or in india or whatever then you know it's just a phone call which is a very small amount of data
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
The amount of data that's now being required by these cloud players is multiple more times than that. And you've got a lot of graphics going over it as well, which takes a lot of bandwidth. So the need for bandwidth has grown dramatically.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And it sort of makes sense that the cloud players who want to connect their data centers, if they're putting a data center in India and they want to connect it to North America... they want to own the connectivity for that, and it's a much higher speed. So they're not just buying the capacity nearly, they're actually taking control and owning the cables. So there's been a sort of a...
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
You know, an evolution of that over the last five years, first 10 years was, hey, we'll take the capacity. Now they want to actually own, you know, now their networks are made up of a hybrid of typically where they own the cable or they own some more, you know, they rent it from, you know, the service providers. But you've now got, I think, 600 plus cables around the world, submarine cables.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
You know, he got about one and a half million kilometers of fiber at the bottom of the sea facilitating this and the cloud players are really driving that marketplace now.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
The evolution has been such that the first appreciators for that kind of technology was obviously the service providers.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And as the internet began to gain traction in sort of 2003, 2004, this whole sort of model, you began to see the cloud players get more interested in the network because if they're going to basically monetize and get to the eyeballs that they wanted, the network becomes actually important to them. And so there's been, I think, a steady increase in appreciation of that even prior to the AI piece.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And so they've become much more active. I mean, some simple ways of saying it, we really didn't sell to the cloud players until about 10 years ago. And we had zero market share in there. Now we've got the main market share with a leading player in connecting data centers and cloud players around the world. Submarine cables, same kind of thing.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
I mean, our technology, we really didn't focus on the submarine cables because it wasn't that much capacity being required. We've now got number one share in submarine cable connectivity around the world because they value very high speed capacity.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And so, you know, the cloud players have gone from being, you know, very small percentage of our business to now both directly and indirectly over 50% of our business is now basically cloud and hyperscalers. So it's a very significant shift in the business. And that's really accelerated in the last five years.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
It's been easier for us in some ways because we've always been a leading technology company. So, you know, it's really about who appreciates that technology and collaborates. So, you know, this shift to, you know, the submarine markets and to the cloud players generally, you know, has been a good fit for Sienna because we move very quickly. We're at cutting edge technology.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
You know, the latest technology we have is actually on three nanometer chips. We were the first company in the world to have a three nanometer chip actually be used in the telecom space. And we're actually now working on our second. You know, we've got that out. It's carrying traffic around the world. And we're now working on our second version of that.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
We've always been at the leading edge of technology, so it really is a natural fit with these Cloud players. We're organized very simply. We have a large service provider team around the world. And then we have a dedicated team for the hyperscalers and cloud and an engineering team that works with them on the co-development and stuff of that kind of technology.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
So actually, I'm a great believer in simplicity of organizational design. So we have a very simple organizational structure that's evolved to address that. And that's how we're able to scale as quickly as we have.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
It's interesting. There's a lot of commonality about what they want. So if you think about it from an engineering point of view and the latest wave logic technology that we've just developed, we actually take that same technology and we deploy it in slightly different variants to them, actually to both markets. So, you know, we get better scale of development over that.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Obviously, you know, you're developing a single chip and then we do variants of it for specific applications that they want. But essentially that same technology is, you know, consumed across the service provider world because they all want the same thing, you know, basically better economics across the fiber that they've got and increased bandwidth. Now,
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
The particular sensitivity, I would say, what's really the difference between the two markets is the cloud players are much more focused on power, which we all hear about from a data center point of view. It manifests itself exactly the same way in the telecom networks. And so we do do variants that are power optimized for the cloud players, but that's the predominant difference.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
But that's really... just taking the same core technology and just, you know, doing a different variant of it that's prioritized around power. So that enables us to scale the development and the rest of it. So we have a single global engineering team, you know, focused on this core technology. And, you know, Ciena, You know, it was always been a very focused player.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
You know, we've been very focused on just high speed connectivity and this is, you know, enabled us when most of our competitors are trying to do mobile or, you know, other kinds of things, you know, for the past three decades. We just want to be the best in the world at moving optical bits at a high speed.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And the opportunity we have now as well is increasingly into the campus and potentially even inside the data center as well with that same core technology. And that's all in front of us. We get zero revenues from there right now, but it's the same customers that we have an opportunity with. So that's an exciting opportunity for us in the future.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Yeah. So, you know, that same mindset, they have the same, you know, it manifests itself differently, obviously, but, and everybody talks about the data centers and the power and the rest of it. That's, you know, everybody sort of, you know, is very focused on that for obvious reasons. But that same issue deploys when they come out onto the network too.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Because you're looking at basically you amplify, you put amplifiers on the fiber to do that. And these amplification sites, they want super low power because they're constrained around power and space.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Exactly. They don't want to spend it on the communications part of that, or they want to spend as little as possible on that. They want it optimized. And so we're able to do that for them. So both in terms of the footprint of the technology, I mean, we can now get down on a single plug, what used to be a rack of cards.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
you know, quite literally a rack of, you know, a six foot high, you know, wide rack, we can now get on a single plug, that same capacity. And that's what we've evolved over the last two decades with. And so, you know, we're well-placed with these guys to continue to drive down the usage of power on the network, not just in the data center.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
We're close to about 10,000 people worldwide. We're very distributed. You know, this year's consensus revenues is about 4.4 billion, something like that. And we're profitable and we have a strong balance sheet. We very much invest directly into this technology.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And, you know, because we've been such a focused player at it, you know, we felt that eventually that would be appreciated, this high-speed connectivity technology. And it's really coming into its own now because, you know, you have to make these investments for the long term. Some of our technologies take, you know, five years plus to evolve.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And so, you know, we're fortunate in this time right now. It's a good intersect point where that high-speed technology is super appreciated.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
No, it's basically predominantly engineering. As you can imagine, this kind of technology is more about the engineering side. So more than half of our team are engineering talent, as you'd kind of expect. And then we've got applications engineers at the front end that help make sure that we understand the applications and work with the customers on that. But more than half is engineering.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
As I said to you earlier, it's a very simple structure.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
No, I mean, it's basically the journey that we're on and, you know, we've made multiple acquisitions, you know, but really it's all been about, you know, the core mission, which is really high speed connectivity. And, you know, what are the things that we need around that? A lot of the acquisitions have been around vertical integration of that. So we have more control over it.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
It's not just the core technology, but it's the things around it that you need to do. Most of those things were where we could focus and we think provide competitive advantage by doing something to it, the surrounding technologies. And so over the years, we've worked very carefully at acquisitions and organic developments that make us vertically integrated so we can control that. And it's not...
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
you know, there's advantages to control and scale, but what really drove us was the fact that we think we can, you know, put competitive advantage in each of those technologies that we gather around the core technology, if that makes sense.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
No. I mean, basically, it's this technology, the actual variant that we focus on is the coherent technology, and that's what has enabled this DWDM to scale so much. But there are other technologies around it as well that we've developed, like the SERDES, which is the serializer, deserializer, and those kinds of things, which is the analog conversion. which is incredibly difficult to do.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And we've got some of the best technology in the world around that. So it's the moat that you put around that. But it's not the next thing. We think this has a lot of headroom. And particularly, this technology is all deployed right now. Think about it outside the data center. So as soon as it presents to want to come outside the data center, that's Siena.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
The opportunity with the same kind of technology that we've got is now becoming apparent in the campus, which is these campuses are getting super big now. And then eventually inside the data center, because you think about the GPU and the compute investment that's going on, that requires higher and higher speed over longer and longer distances. Even in some of these data centers,
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
First of all, they're enormous and you've got fiber going around them sometimes, you know, multiple kilometers, even within a single data center, because that fiber gets wrapped around.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And so we think there's an intersect point, you know, nearly for our technology there because the technology there right now, which is called direct connect, which is what's required to connect all of the, you know, the racks within the data center and the intro data center. The physics of that is getting very challenged as these GPUs require higher and higher speed.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And so we think there's a real opportunity for us to intersect that, you know, to your point, with exactly the same kind of core technology requires some variations on it over the next, you know, one to three years.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Depends on what kind of decision it is, right? I mean, not all decisions are equal. I very much feel it's a team game. So, you know, when we make strategic decisions, which I think is what you're really sort of alluding to around how we invest and, you know, what are the long-term things that we're focused on, you know, we're very strategically aligned around what we want to go do.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
We're a very focused company, back to the point I was making earlier. I think people appreciate best of breed. And we want to be the best in the world at what we do here. So, you know, the North Star is very clear to us. And then it's about what are the things that we need to do to get out into the future on that. So from that point of view,
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Decision-making is somewhat easier because we've framed or we've chalked the field so we know where we're playing on. There's not some great conversation about some adjacencies and things that we might want to get into. So it's all based on our core technology. So to answer your question, if it's something strategic around those investments, it's always a team game.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And, you know, we're super collaborative is how we work and getting cross-functional input into all of those things. So it's a process. But I would say as well that, you know, I think the role of a CEO sometimes is to say, okay, we've had the debate. This is the overall perspective of what we want to do. Let's go.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
You know, that's part of the role of the CEO is, but it's really to facilitate the best conversations and discussions and then help you know, help drive to a conclusion.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
It's actually much easier for us because, back to the point I was making, it's the same kind of core technology. So the things that we, when we move the ball down the field for the cloud players, we can apply that into the service provider space because it's the same core technology. So in terms of their needs, there's actually a lot of similarity around it.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
So, you know, when we start talking about the data center and the rest of it, another way of thinking about this is we provide optical systems where we do the whole thing for them, you know, the service providers, and we do that pretty much for the, for the cloud players too.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
So we do all of the systems for it, the software, what we call the WDM modem technology, the line systems, we do all of that. And very often we'll install it, support it, maintain it. We do that for service providers and we do that for the cloud players.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And then the point around the opportunity in the data center, it's not necessarily providing those complete systems, but it's taking them and putting them in plugs and then putting them in components. So it's a different kind of play, but it's still the core technology. So anything you do to advance that, also applies to our systems business.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And our systems business is both service provider and in the cloud. So you don't have to make the, you know, which is your favorite children, you know, kind of choice, which is where you're going with that.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And I think that's another benefit of a company staying super focused on its core technology and understanding what value do we bring to the world that is very difficult for anybody else to replicate.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Well, I mean, I think, and that used to be the conversation all the time. You know, when Sienna started, I mean, think about, you know, 20 years ago, I'm not sure some of your viewers here will remember some of these names, you know, Lucent, Alcatel, Nortel, you know, even Nokia. These were, you know, the model was all what I call the generalist model, Nilay, which was
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
They were actually spin outs from their phone companies, you know, like Marconi, Northern Telecom came out of Canada. So, you know, the model was we had to be end to end. You had to put switches, routers, handsets, mobile infrastructure and this thing called transport.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
We said, you know, when we when we started, no, you know, we're going to just focus on the transport piece because we think it can get to scale. And what's happened over the last two decades is the generalists basically, because they couldn't afford to be at the cutting edge in each of those areas, have all struggled.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And, you know, you trace the genesis of all of those companies now, and basically they're all in Nokia. You know, it's Alcatel and Lucent and all the rest of them are all, the music stopped and that's where they ended up.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
You know, and the point I make about that is the whole sister, you know, the whole end-to-end thing, you know, and being a generalist supplier, the world's too competitive for that now. It just absolutely is. And they used to say to us, well, when are you going to get bought? And we used to say, listen, we're a public company.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
We have all the fiduciary responsibilities that you would expect with a public company, of course. But we think we can get to scale and be a real company just doing what we're doing. Now, these things take a while. And we've been public for 25 years. But we're at a point now where we absolutely have scale. We're very strong financially. We can invest in this kind of technology.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
We've got number one market share in all the key markets that we want to play in. So we've got a good opportunity to drive shareholder value from here.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Because it's people. And, you know, it's the folks that understand the 5, 10% on each of these areas that really make the difference to think when you're when you put it all together and the other things that we've built around it. So it's like any of these things, it's a confluence that make up the competitive advantage. It's when you get down to the real technologies.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
So it's all of those things that provide the moat for us and the fact that we're focused and the fact that we're now so embedded with these key cloud and technology companies that were part of the collaboration process around the evolution of their networks and the relationships that you build up, that trusted relationship and the technology collaboration over time.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And that's why we think we've got an opportunity to take that into essentially a whole new market for us of the campus. eventually inside the data center.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Well, listen, I mean, you know, it's sort of under the headings of things you can control and then things that you can't control but need to be mindful of, right? And so it's definitely in that second list. You know, listen, we've had over the last sort of, you know, I could argue... five, 10 years, you know, quite a lot of geopolitical dynamics going on.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Thank you. Good to be here.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
We are mindful of that, particularly being a, you know, we operate in multiple countries around, you know, pretty much around the world, sort of 80 countries around the world. Our technology is widely deployed. You know, we are mindful of those kinds of dynamics, and I'll give you an example of it. We made a decision in the early 2000s
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
that we would not go in and be a provider to the Chinese market for their major service providers. Now, there was a whole set of thought processes that went into that. Bear in mind, one of our competitors at the time was Huawei, and they were just emerging.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And the first, and I don't think people appreciate this, the first real iteration of technology that Huawei came out with was actually in our space. So way before all the mobile stuff and all the other, you know, omnipotent things that they're now doing.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And so, you know, in about 2003, we said, well, what is, you know, what's this company and what are they doing and how are they achieving price points that are just, you know, lower than our cost? Turns out they were being subsidized by the Chinese government, right? I mean, so, you know.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And so one of the thought processes that we had, just to give you an illustration to it, we said, you know what? We will not compete with them directly in the China market because they obviously want us in there because we've got leading technology and the rest of it. We're actually not going to manufacture in China either.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
So we're going to be the antithesis, if you like, of Huawei in every single way. We're going to be the alternative that's not China manufacture and we don't operate there. That was a very controversial thing. You imagine a young company just gone public.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
and going hang on a minute why are you not going into the largest market in the world the fastest growing telecom market in the world so but we have the strength of our convictions and you know it's taken a while but i think largely you know that was a good decision for us because we didn't get distracted buy that Chinese market.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
They'll give you 10% of that market, but they'll make sure you won't get anything else. And you'll partner with a local partner. And I was fortunate enough to, I spent a lot of time in Asia. I lived in Asia for a number of years before I came to Siena. And I saw that movie, to your point, play out in so many different ways. And I was super sensitive to that, as was the team.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And so that is an instance of us doing something because of the geopolitical you know, dynamics at the time and us making a decision. And, you know, you don't know how that's going to play out because, you know, things can change and the rest of it. You've just got to, I think, be smart around, you know, what you think is the best thing for the shareholders and your company and stick to it.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
We're actually, you know, pretty fortunate that we don't have to make some of those tough decisions because it's not our cable. Right. You know, so to your point.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Basically, Ciena is the leading technology company in the world for providing high-speed connectivity. So you think about all the networks that have been enabled around the internet, et cetera, around the world, submarine cables, as you alluded to. Ciena is really the driving force behind that high-speed technology, even mobile connectivity, terrestrial connectivity, submarine cable connectivity.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Yeah, that's what we're doing. But even that technology is owned by, you know, the customer. So, you know, we've sold that to the customer and what they do with it is, you know, entirely up to them. We don't have control over that. It's their network, you know, is another way of saying it's their property. So, you know, you think about these submarine cables. So someone owns the cable.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
We put the technology on the end of it. It's their technology. It's they own that and they run it as well. We don't run it. So they run those networks. So, you know, we're fortunate in that we've always been able to, you know, sort of stay one step behind, you know, some of those dilemma questions to your point. So it's not something we have to...
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
I think it's about 10,000 kilometers. And some of these, you know, cables around the Pacific where you really get the, you know, the big distances. So they are very, very long cables. Now, what a lot of them do is stop off in different islands and different places and spur off, you know, some of the new cables going in, you know, spurring off in different places. So they're able to do that.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
We've also developed a technology that overlays that, which provides for resilience. So if you get a cut on a particular cable, then we can reroute it, depending on the architecture. It's called GeoMesh, and it's software and technology that's embedded into our core offerings that enable us to provide resilience across some of those submarine cable links as well. Because you get...
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
You know, just in the normal run of things, I think it's something like 100 plus, you know, faults a year, you know, mainly trawlers, you know, dragging their anchors on fiber cables. Because they're buried at the bottom of the sea until they're not, right? So, I mean, they've got to come up somewhere. So, you know, typically it's in the…
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
shallower waters where, you know, you'll get some fishing vessel come across it.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Actually, you know, I know that's, that's a sort of common sort of question I get asked around it. I, I, you know, and there is a section around fish attacks and the rest of it. I think it's zero. I think it's just a bit of a, you know, I'm sure there are some examples of it that someone can point to over the last three decades. But I mean, I've never heard of it personally.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
You know, a shark attack actually being, I think they've got other things to worry about than these little tiny, because it's about the... About the size of a big hose pipe. So I don't think it would be particularly interesting to them.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And we're basically the best in the world at moving optical bits.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
I totally understand the notion. And I think, you know, what you've got is a disproportionate amount, whether you want to, you know, sort of. English understatement, so understand for its context. A disproportionate amount of the innovation and development of all of this has been done in the US. I mean, almost all these technology companies, for sure.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And now you've got a point where now a lot of the network is, to your point, the big cloud players are investing in that network because that's their business model. And the network is becoming more and more important. Now, you know, to your point, when we talk about the network, it's not really, you know, we talk about it in this homogeneous sort of form.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
But if you think about this and you think about it in the context of sort of some large markets that the US cloud players are trying to get into, you know, take places like India. Now, you know, when they enter the Indian market, they are dependent on connectivity from the local carriers. So, yep, they can tip up, you know, with the submarine cables and the landing stations and the rest of it.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
But then it's, you know, how do I get connected to all the people I need to get connected to in India, enterprise and consumer? They are then dependent on the local carriers for that. be it Barti or Jio or Vodafone Idea or some of the wholesale carriers that are also there as well and Fiber.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
There's always going to be an interrelationship because as omnipotent as all of these Cloud players are, they're not going to be able to connect to everybody's home across the planet. And so you've always got this interplay between service providers and the cloud players.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And, you know, what often happens there, Neelay, is that they will end up in some of these countries, the service provider will provide a specific network for the cloud player. And they call it managed optical fiber network. So MUFN is the acronym for it. And we help facilitate that. So it's our technology. So it matches all of their global network.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
But it's owned and operated by, you know, the local service provider to support, you know, Meta or Google or Microsoft, et cetera. And so increasingly, you know, I'd sort of argue you're seeing that interdependency work. So it's sort of, you know, I wouldn't say counter-argument to this.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
We're all splitting up because at the end of the day, to get to the consumers around the world, you've got to have, and that's not going to change. These service providers are not going away in that regard. They are the only ones that can provide that connectivity to it, ultimately, be enterprise or into the consumer.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
You know, that's a great question. And having lived through, you know, the previous period of the telecom nuclear winter where we built out all this capacity and sort of, as it turned out, no one came, It did facilitate, you know, all these business models, you know, that wouldn't have accelerated, you know, without that glut of capacity, you know, as it were.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
I get asked the question around, you know, all of these data centers, are we in another bubble around all of that and the rest of it? I mean, you know, listen, I think specifically around the data center piece, I think there's an insatiable demand for compute to build out compute power. Now, you know, These things always take longer than we all think to monetize and the rest of it.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
So we're probably going to go through some iterations onto that. But to answer your real question, I'm actually of the opposite view this time around. I think we're underestimating the amount of traffic and bandwidth that will be required. to go do this because we're already seeing a clip up in cloud traffic and we're pretty well placed to see that.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Now, how much of that could I attribute to AI and the rest of it? Yeah, for sure. Some of it is, but I've got no way of really discerning which bit is which and it's not our network. But there's a definite uptick in cloud traffic just to connect to all of these data centers.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
We are absolutely seeing that and I think that's going to continue because you've got a lot more data centers coming online in the next 18 months to two years around the world. But if they're going to, you know, monetize any of that, they've got to be all be connected for, you know, learning and training and the rest of it.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And that's before, you know, I'd argue you've even really seeing, you know, the applications in there for like medical use or, you know, the verticalization. I mean, we're using, you know, your chat GPTs and the rest of it. That's generating traffic. Sure. But yeah. you start to get to any of that medical usage, for example, and the amount of graphics that are required in there.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
You know, we consume most of the internet now, you know, in a mobile form, you know, on your iPads or iPhones, whatever, you know, we still have some desktops, but, you know, it's all laptops. The first point of connectivity there is mobile. So, you know, it's available to us all the time. But what we don't think about is it's only mobile until it's not.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Graphics are about 10 to 20 times more bandwidth consuming than normal data. And so if you start to get to the monetization of that through these kind of vertical applications and the rest of it, I think we're underestimating the amount of the amount of traffic that's gonna be there.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
I think about it like this. Don't confuse compute capacity with the network. You know, the network is always the afterthought to all of this. It's, oh, my gosh, yeah, I do actually need to connect these data centers. And yes, I do need. They're thinking about, so what's the hierarchy of their thought process? It's, you know, I need the compute. I need the power. I need the space.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
You know, those are the things that are driving their decision. And then, by the way, oh, my gosh. I need to connect these waves right now. I'm being flippant, but, you know, it's down there. I'd like to tell you it was right up there, but it isn't. And that actually, in the answer to this question, is, I think, a good thing in that, you know, we kind of only get there when they need it.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
They're not building out these enormous capacities because we see it. We're putting capacity out there and they're putting traffic down it. I take real comfort from that having lived through 2002 and 2003 where, you know, our revenues went down from something like 1.6 to about 300 million in one year. So, you know, I've still got the scars for that. So I'm particularly sensitive to this.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
This is not the same dynamic to it. You know, they are actually putting capacity out and they, as fast as we put it out there, traffic is coming through it. So, you know, I think to your point and what a lot of other folks are saying is, is it going to get overheated in terms of the GPU stuff and the data centers and the rest of it? My own personal opinion, absolutely.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Will there be a bit of a, you know, tail off and all of that? Absolutely. You know, will it take longer for applications in the AI world to truly, you know, generate the economic suspect? Absolutely. But we're not banking on that. We're just seeing this nice steady growth in bandwidth, which I think will, you know, pervade throughout that. Another way of answering your question.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Bandwidth growth in the last two decades grows about 20%, 30% a year and has done and is not cyclical. And when you think about it, it shouldn't be cyclical, should it? I mean, it's just we're putting more and more applications. We're using our phones for more stuff. More people are getting phones, and all these devices are now connected. So that has been very steady and consistent throughout.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And basically, you know, it needs to get terrestrialized to the nearest, basically, area where it comes down into the... terrestrial, typically fiber. To get really high speed, you need to use fiber. Wireless has some limitations around that. So basically, until it gets to any mobile application, it's really objective is to get terrestrial into that cell tower as quickly as possible.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Even when you get an economic downturn, it continues at about that pace. What we're talking about here is the advent of AI really on top of that. And so exactly what is it going to be? No one really knows. I mean, there's all kinds of models, but no one really knows. But it's reasonable to assume that it's going to come on top of that and could push us to 30%, 40% bandwidth growth per year.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And I think that's going to be pretty sustainable. when you think about all the things of, you know, the promise of AI and the real trick to it is you start putting any graphics down it,
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
We're planning our business basically on what we see, and we've taken our growth rates up. Typically, this business has grown. We've grown about seven or eight percent. We're now saying it's going to grow eight to 11 percent over the next three years. And that's really without any massive entry into the data center or anything else. It's just what we see from a cloud growth point of view.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
The barriers to entry there is you've got a technology called Direct Connect, which has been well ensconced there really since the start of the communication in data centers. And you've got an ecosystem there that is going to be designed to elongate that for as long as possible, and the customers want to keep it for as long as possible.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
The analytics that we've done on it and working with them, you know, they think that there's going to be an intersect point here where the physics of that basically, you know, get to the point where it's not sustainable. And we think, you know, we've got to the point with power and space where there's a good intersect to that.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
So it's the analytics around that and working with two or three of these players who are, you know, already our customers, but, you know, outside the data center.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
You know, a little bit of both. We have strong relationships with them. So, you know, that collaboration has sort of been there. You know, we're realistic about it. The existing way of working and that direct connector, that's not going away. That's probably still the majority of applications for it.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
So you're looking at, you know, what are the subset of corner case applications for this kind of high speed connectivity? But, you know, even a small part of that is, you know, massive for us and, you know, massive from a scale point of view, given the amount of spend that's gone on in that space. So, you know, it's always about taking risk when that market isn't there right now.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
But if you wait until that market appears, it's too late, right? You know, if you're waiting for, oh, what's the market share of this and what's the growth rate and the rest of it? at the end of the day, you've just got to go with what your intuition is and what you're hearing and seeing from the customers and the rest of it.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
So we've got our first iteration of technology for this coming out at the end of the year. And that's a bet that we placed you know, two or three years ago. And, you know, as you know, in some of these chip designs and stuff, the timing, you know, it takes a while and you've got to kind of guess where the market's going to go, not where it is right now. So there's always an element of risk to it.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And you, listen, you know, Having gone through some of these before, you know, you're never going to get it completely right. You just got to be in the right vector and then, you know, pay attention and tweak along the way, you know, around it. And so we're listening intently.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
I could talk to you about this for hours on end. No, I enjoyed it. No, I enjoyed it nearly. No, good questions. Good stuff. No, I enjoyed it.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Well, we're certainly in for some entertainment, aren't we? I know what we're writing about for the next four years.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And then from the bottom of the cell tower basically is when all the magic starts of the physical fiber cables and the networks that go around the world for that. And if you have an inquiry, depending on what it is that requires a different continent, that goes down through the cell tower and out across the sea and back to you. But, you know, that's all invisible to us all.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And we're able to do it at such high speeds now that it's transparent to, you know, the applications that you're using.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Well, because it's the piece that connects all of this stuff. Everybody focuses on things like, you know, AI right now or, you know, be it the Netflix or whatever. And it's just how do you get those things to manifest itself to, you know, the consumer and to enterprise?
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
You know, the reality of that is it requires a massive build out over the last two decades for, you know, that fiber infrastructure, basically, that connects all these data centers together, that connects them through submarine cables, connects them, you know, across countries. when it's got the intelligence on it to be able to know where to go get that information.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And that has evolved over the last two decades and continues to be evolved because you think about some of the business models that we now take for granted, like Uber. That wouldn't be available if you couldn't get instant response to it. Now, 20 years ago, that would not have been possible as a business model.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And, you know, there's an interesting point in time here, Nilay, where there was this massive overbuild of fiber capacity in the early 2000s. And it was sort of a telecom, you know, nuclear winter then where we had more capacity than apparently we'd need for the next two decades. And, you know, people built out all of these large fiber networks and sort of no one came.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
but they did really because that enabled business models to take large amounts of bandwidth at low cost and that created business models like Amazon. which weren't able to get stimulated and to be sustainable until they had large amounts of dependable connectivity. And so it's constantly evolving where you've got applications that are demanding much higher bandwidth.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
We're into an era of that now with AI, for sure. And then the networks have to kind of catch up and facilitate that.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
We basically don't run the network. Those are the service provider carriers. And they can be, if you take North America as an example, there's hundreds of carriers that do the local last mile. out in the rural areas, and then there's obviously the Verizons, Comcasts, AT&Ts of this world, you know, that then facilitate all of that connectivity to the consumer.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And to most of the enterprises, we provide the technology that powers their networks, basically. And so for them to get that high-speed connectivity... You know, it's Siena's technology that goes on the ends of those fiber cables that allow the speed and throughput and continue to drive the capacity. And what we basically do, on a single piece of fiber, we virtualize that fiber, Eli.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
So instead of having that little thread, you know, which is about, you know, a hair thread in... weight and distance, basically we can multiply that many, many times. So hundreds of virtual fibers because of the technology that we use around it. And that's enabled the whole scaling of the internet. It's enabled the scaling of this global connectivity phenomenon that we have.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And it's at the center of scaling for AI connectivity, you know, now and into the future as well.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
It is the virtualization. So where you've got one piece of fiber, it makes it look like multiple fibers, you know, and we can, you know, depending on the distance and what you're putting down it, it can be, you know, hundreds of fibers, which is actually physically manifested as a single fiber. And so, you know, you don't need to put more fibers into the ground, et cetera.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
You can just, you know, with the technology we have either end of it, scale it up. So it's the virtualization of fiber, which has really enabled this, you know, almost seamless work. marriage between the applications to your point, the driving of all the network traffic with the actual network.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And, you know, we've grown through our technology development, the ability to go do that faster than Moore's law. So, you know, we now have a new piece of technology, call it WaveLogic technology. that can do 1.6 terabits of data down a single piece of fiber.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Yeah, absolutely. Now, you know, there are technology developments within the fiber, you know, for sure, you know, that help and assist that. And there's been a lot of that development from companies like Corning, you know, in the fiber world. But it's basically the magic is the technology that goes on the end of those fibers, because when you think about it.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
If we had to scale, you know, by digging up the place every time we wanted to put more fibers in, then, you know, it's just not practicable. But, you know, even on old fibers, you know, we can get a tremendous amount of expansion and virtual capacity by just putting, you know, our technology on the end of it.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
Yeah, it's our ability to continue to drive that. When we first started, we could multiplex, keep it very simple. It was a single piece of fiber. We thought we could put four virtual fibers down there. And that was revolutionary at the time. And many of the carriers we went to with that said, oh, that's fantastic. We'll never need more than that.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And then we figured out how to do eight, then 16, then 32, then 64. And then, you know, we're way, way beyond that now. So what that means is, you know, you have that single piece of fiber that looks like 64 fibers. And that's enabled this massive scaling of the architecture around the world.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
And then we deploy that technology nearly not just in the local connectivity, but in the long distance, you know, cross country, then across whole continents, you know, 8,000, 10,000 mile submarine cables. We can support that kind of capacity across the submarine cables.
Decoder with Nilay Patel
How Ciena keeps the internet online, with CEO Gary Smith
No, it's a very integrated partnership. You know, most of the major carriers, like 96% of the major carriers around the world are, you know, Sienna customers. So it's a collaboration that we've worked on for, you know, multiple decades. And we help manage the networks. We do a lot of the installation work for them. We do the planning.