The Road to 400G Ethernet is Paved with Bechtolsheim’s Intentions
Apology if this was already posted.
I see a rising fear in the articles in my ANET newsfeed regarding the possibility that MSFT may reduce their spending with ANET. The recent downgrade by Cleveland research makes that claim. So I was looking for a little reassurance that the story hasn’t changed. The article linked above is a solid reminder of three core things.
The management is the elite of the elite - Stanford PhDs, professorships; history of investing in the likes of Google, selling their startups to Sun Micro who is still leveraging that tech; and we all know Jayshree Ullal is among the most accomplished and admired CEOs in tech.
They are honest and exist in reality…
“If you asked Ita [Brennan, our CFO] and me whether we would have 50 percent growth increases in 2017, we certainly did not forecast it,” Ullal said. “It came upon us suddenly because the cloud titans suddenly had a use case and an application. So, when we look at the overall year and when we look at how to plan the year, just like we did in 2017, we think a growth rate in the 20 percent to 30 percent range with an average of 25 percent is a very, very good growth rate. It is not cautious. It is realistic. And if something really good happens beyond that, that’s great. Or if something really bad happens, we will let you know. Hope is not a strategy. This is our best effort at predicting what that growth would be.”
Anyone who has ever run a business knows this is the best that you can do. Refreshing to see someone say it.
- They are very confident and playing the long game (bold for emphasis)…
“We saw that 10 Gb/sec had a very long tail for almost ten years, and then many vendors jumped into 40 Gb/sec, as did Arista,” she explained. “But for 100 Gb/sec, we believe first of all that it has an extremely long tail, unlike 40 Gb/sec. So we think the relevant bandwidth point is really going to be 100 Gb/sec for a very long time, with the option to do 10 Gb/sec, 25 Gb/sec, or 50 Gb/sec on the server or storage I/O connections; 400 Gb/sec is going to be very important in certain use cases, and you can expect that Arista is working very hard on it. And we will be as always first or early to market. The mainstream 400 Gb/sec market is going to take multiple years. I believe initial trials will be in 2019, but the mainstream market will be even later. And just because 400 Gb/sec comes, by the way, does not mean 100 Gb/sec goes away. They are really going to be in tandem. The more we do a 400 Gb/sec, the more we will also do 100 Gb/sec. So they are really together – it is not either or.”
So while it seems there could be a short term hit from Microsoft, here you still have the elite of the elite, who are trustworthy and in a space with massive potential for the long haul. I am no expert in the team at Microsoft, but it seems unlikely they are better than Arista.
I will add in one bonus thing. If you read that legal doc recently posted above on this board, you can sense a deep-seated competition, a hard animosity toward Cisco, whom Arista believes fights dirty with lobbyists and is hellbent on eliminating competition, not advancing the best tech. For me, this gives Arista an edge much like the one I like to see in sports teams. Consider how teams really around a cause. The Saints rallied after Katrina to win the Super Bowl. The Astros after Harvey. That extra bit of purpose is big. And likely to attract additional talent. I think techies, like artists, are more inspired by doing great work and working with people they admire for a righteous cause.
Bottom line: ANET my biggest holding and that 9% wallop did not tickle, but this article is balm for my wounded hide.