Microsoft has deep pockets so they can hammer away forever with Lync. How do you evaluate Lync over time as a threat?
Microsoft and frankly Cisco are very strong companies. Both are headed down a very proprietary path. We're trying to run down a road less traveled. We're declaring our space to be open and very bandwidth efficient. Being one of three is a great thing. In some sense that's organizing for an industry and as I further stated it will not be a single-vendor or a single-application, winner-take-all type of environment. As long as we continue to innovate and offer a proposition that is fundamentally different there will be a healthy place for us. In many cases with many customers we will end up being a complement to Microsoft and Lync. They are a strong company and when I was in a prior life they were in the business of trying to commoditize Cisco out of the business in software routers that was an experiment that lasted from 1996 to 2000. It's the ability to be attentive to what the enterprise market wants and in some cases they've been strong and in some cases time was their enemy.
Cisco and Microsoft have their fingers in a lot of other pies - more pies than you do. Is that an advantage at all?
Time will tell us. For us there's no doubt that staying focused is the right thing to do. Having a high level of differentiation is a critical thing to do. I would say that one of the interesting observations when you look at a Microsoft and say others that have gone very, very broad if you look at their market multiples their market multiples are far less than those who have stayed very focused. I look at Oracle as a company that has gone into the apps world with the value of the stack underneath, and it trades at a multiple that is probably 50% or better than some of the companies that have gone horizontally. I don't think you can ever underestimate a big company, but there's always an advantage to being focused.
Earlier we talked some about Nortel. How does being able to offer infrastructure play into your attractiveness to customers?
We're beginning to see a new wave of import with Nortel. No.1 we are emerging to be the last expert standing in the voice world. We have resources that can debug networks that other people do not have. Where we're seeing a further benefit from is that as we talk about these managed services environment where people have multiple networks one of which might be a Nortel environment and they basically say I'd like to outsource the evolution of that network to its next generation and we'll have you do it and you manage the SLAs as we do that. It turns out a very significant percentage of these managed services deals do indeed involve a Nortel base. That's a recurring revenue stream that we probably did not have before that we begin to pick up for the first time. That's an enterprise customer with a Nortel infrastructure. We're taking over the management of their infrastructure directly. That's a recurring revenue stream that becomes new to us as we take those contracts.
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