Fools,
Warning this is a long post. The too-long-don’t-read version of this is that I looked into the CEO Jayshree Ullal to see why so many fawn over her and call her a star. I find the devotion and hype around her justified. She has some qualities that remind me of the massively successful San Antonio Spurs coach, Gregg Popovich, and is truly an inspired, elite leader. So I doubled my ANET position. I also make a short case for expanding our definition of the “fundamentals.”
I have been thinking a lot about the intangibles of investing, the things that can’t be modeled on a spreadsheet, the things most investors would not consider “fundamentals” but are absolutely fundamentals, or maybe even more important than fundamentals as the fundamentals flow from great people, not the other way around.
Recently with the big stock drop in ANET there was an unusual degree of excitement. I would argue there’s an X factor at play here. And it’s the CEO, Jayshree Ullal. Much is made of what a “star” she is, so I wanted to dig into this a little deeper for myself.
I find her to be truly enlightened, a leader who talks about empathy, work-life balance, her culture, gender, family, Indian heritage, and success, with great depth, intelligence, introspection and humility. Though she’s often asked in interviews about being a successful female tech exec - a loaded subject if ever there was one - she always navigates that terrain in a way that elevates the conversation.
Here’s her Wikipedia page, get a load of all her honors listed on the bottom…
Jayshree Ullal Wikipedia
https://en.wikipedia.org/wiki/Jayshree_Ullal
And if you watch the way she handles Jim Cramer in this 2014 interview…
Arista CEO Fires Back at Cisco
https://www.cnbc.com/2014/12/11/arista-ceo-fires-back-at-cis…
… You see that she is extremely composed, mature, tough and eloquent. I read in another interview with her that competition to get into the best schools was so fierce in India that if she got a 98 on a test her dad would ask what happened to the other two points. She notes that her dad was not being too hard on her, and she doesn’t whine or complain about it, she appreciates what he did as the reality of competing in overcrowded market places is you need to be the very best of the best.
If you watch this Cramer interview closely you can see that she is really a corporate black belt - she takes the high road but with some edge. Cramer puts her on the hot seat by playing a clip of Cisco’s John Chambers talking about the lawsuit and essentially calling Ullal/Arista thieves. She does the following:
- She asserts her disapproval of the lawsuit
- She doesn’t resort to insults or cheap cracks
- She says they can share the market place and slips in - with some cold blood - that Cisco is losing market share (from 80 to 70) while Arista has gone from 0-8.
- She personalizes it - says Chambers should have called her, not leaked it to the press, making Chambers seem like a bad guy.
This woman is ultra badass. She is truly great figure. What I love so much about following the markets is they are living stories. At the heart of great stories are figures who become metaphorical, who stand for something bigger than themselves. Here we have a successful female tech exec who inspires both men and women; an Indian who is very devoted to her the rigors of Indian culture while praising the creativity of American entrepreneurship; she has climbed a large corporate ladder within Cisco but also has the heart of an entrepreneur, who appreciates the value of making quick decisions. She also points out that Arista (pronounced Uh-riss-ta) is Greek for “to be the best.” This is in her DNA. I’m no expert in networking but it seems many feel that Cisco is a large, bloated giant whose best days of innovation are behind it. There’s a David and Goliath battle going on in which the stakes - better, faster, safer computing/Internet - are gigantic.
For Arista’s insurrection to occur, for the best talent to join Arista’s side, there has to be a leader like Ullal at the heart of the story.
She reminds me of the San Antonio Spurs’ Gregg Popovich. Popovich has lead the Spurs to FIVE NBA titles, which is not easy in a smaller market. He values his players as people and he is that rare guy who can inhabit both the world of the more conservative white man (he was in the Air Force) and show great empathy for the African American experience, which is obviously a necessary skill when you coach in the NBA. (NOTE: I know Pop has criticized Trump - that is not relevant to this post, so please let it go. thx.)
Here’s a valuable bit from Businessweek, where they note Popovich’s ability to relate to his players on a more fully human level than other coaches…
Businessweek - The Five Pillars of Gregg Popovich
https://www.bloomberg.com/news/features/2018-01-10/the-five-…
Seven years ago, at the MIT Sloan Sports Analytics Conference in Boston, I saw Jeff Van Gundy, an ESPN analyst and former coach of the New York Knicks and Houston Rockets, speak on a panel about what makes a great athlete. Van Gundy said that when he was a coach, he looked for players who, if you put a copy of USA Today in front of them, would pick up the sports page and ignore the rest. He wanted his players to be interested in two things: “Chasing women and basketball.” His words startled me. They seemed to degrade NBA players (not to mention women) and make their lives sound dreary. But Van Gundy was just expressing, in especially blunt fashion, what was once locker-room orthodoxy. The message from many coaches, Robinson says, was “Be an animal. Focus on the game.”
Popovich has flipped that idea on its head. He wants his players to be fully human. And he’s genuinely curious about them. “I was kind of amazed by how much he wanted to know about you as an individual,” Perdue says. Other coaches, he says, stopped short of where Popovich was willing to go. “They cared about you, but they didn’t really want to overextend themselves in case you got cut or got traded.?… I don’t think Pop ever even considered that. He saw you as a human being first and a basketball player second.” As Popovich’s former players and assistants—including Steve Kerr at Golden State, Mike Budenholzer of the Atlanta Hawks, and Brett Brown of the Philadelphia 76ers—have taken head coaching jobs around the league, his approach has become the new orthodoxy.
The bottom line - I am very grateful to Fools who work their behinds off to build spreadsheets, analyze numbers and present valid scenarios to help us all invest more intelligently. These fundamental elements are key. But we need to expand our definition of what is fundamental, though it can’t be definitively, objectively proven. I just wanted to put a good word in for us Foolish investors who do not have the skill set, inclination or time to analyze numbers.
Generally speaking, the market seems to be saying ANET is pretty fairly valued. Maybe the value investor linked above is right, the stock can go below 200. Maybe it was fine where it was just a short time ago at 311. No matter how detailed your spreadsheet is, it can’t detail, with precision, exactly what price a gigantic, complex market should land on. It’s the X factors that ultimately will determine if ANET will be a major player in 5, 10, 15 years. For this Fool, I just doubled my position, based on what I consider the most fundamental factor, the leader at the helm. And I will sleep fine assuming that over the long haul, Arista will steal more share from Cisco and increase their relevance.
Fool On,
BroadwayDan
But sometimes he’s right, just like a stopped clock.