Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Viavi solutions first quarter 2020 earnings Conference call.
At this time, all participants are any listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone. Please be advised to today's conference is being recorded if you require any further assistance. Please press star zero.
I'd now like to hand, the conference over to your Speaker today Mr. Bill Ong head of Investor Relations. Thank you. Please go ahead Sir.
Thank you Bob welcome to be obviously, <unk> fourth quarter fiscal year 2020 earnings call. When there was belong head of Investor Relations.
Joined on today's call Oleg Khaykin, President CEO and almost killed CFO .
Please note. This call will include forward looking things what the company financial performance. These things are subject to risk and uncertainties that could cause actual results to differ materially from current expectations. An estimation. We encourage you to review our most recent annual report and I see Polys, particularly the risk factors described in those filings the forward looking statements including guidance.
We provide during this call about only as of today.
Yeah I'll be undertakes no obligation to update these statements.
Please also note that unless we state otherwise all results except revenue on non-GAAP reconciled. These non-GAAP results to a preliminary GAAP financials and discuss the usefulness and limitations in todays earnings release <unk>.
At least plus all supplemental earnings flight, which include stock financial tables available on the obvious website <unk>.
Finally, we all click to call, we'll make the recording available by <unk> PM Pacific time. This evening on a website I would now like turn the call with almost.
Thank you Bill Viavi posted a record fiscal first quarter revenue off to 99.8 million, which grew 11.7% year on year and exceeded our upwardly revised revenue guidance ranges to each 2 million to 94 million said after September 12 analyst day event boats and as you know we speak revenue exceeded.
The guidance range to wouldn't buy better performance in wireless in fiber and three D sensing products respectively.
We always operating margin at 17.6% expanded 130 basis points you don't you.
As I said 18 cents increase three cents from a year ago levels.
What metrics exceeded that if we weiss guidance midpoint of 17% and 16 cents respectively.
Now moving to our reported Q1 results by business segment, starting with NFC.
And then see revenue at to 19.8 million grew 15.3% year on year.
We didnt NSC any revenue at 198.9 million increased 20.9% from a year ago level, it's driven by strong performance in wireless lab cable in axis and fiber Proto cross border Friedland lab.
She revenue at 20 point Ninemillion declined 20.2% from a year ago levels due to the expected run off you not mature assurance product as well is weak demand from both good assurance and data center products.
And then see gross margins at 64% increased 40 basis points year on year.
We didn't and let's see any gross margins at 64.4% expanded 180 basis points year on year due to higher revenue volumes and a favorable product mix.
I see gross margins at 60.3% was down 950 basis points from a year ago.
This was primarily driven by lower revenue in both assurance and datacenter products.
We expect assay revenue and gross margins to improve sequentially fiscal second quarter.
And this is operating margins at 10.1% increased 150 basis points from a year ago levels, reflecting the gross margin improvement and a favorable operating leverage you know topic structure.
Now turning to SB oils.
<unk> revenue at 18 million grew 2.8% year on year, driven by demand for a three D sensing product.
He is gross margins at 54.1% increased 350 basis points due to higher absorption of manufacturing ordered from increased three D sensing product volumes and operational efficiency.
Operating margins at 38% expanded 280 basis points, reflecting the improvement in gross margins.
Turning to the balance sheet.
Total cash and short term investments ending balance was 30.3 million operating cash flow for the quarter was 31.3 million.
We announced during the September 12th analyst event, or 200 million common stock repurchase plan effective until September Thirtyth 2021.
Which replaces the prior stock repurchase plan.
Under the prior plan, we repurchased 248.6 million in stock.
Under the new plan to date, we repurchased approximately 10.1 million of Viavi stock at an average cost pieces of $2 million.99, bushehr, including commissions.
We'll continue to repurchase we always talk opportunistically to offset earnings dilution from stock based compensation.
Now onto our guidance.
We expect fiscal second quarter 2020 revenue for Viavi to be approximately 302 million plus or minus 10 million operating margins at 19% plus or minus 1% and it appears to be the range of 18 cents to 20 cents.
We expect NFC revenue to be approximately 224 million plus or minus 8 million with operating margins at 30% plus or minus 1%.
We expect whiskey revenue to be approximately 78 million plus or minus 2 million with operating margins at 36.5% plus or minus 1%.
Our tax expense rate is expected to be approximately 18% to 20%. We expect other income and expenses to reflect net expense of approximately 2.5 million.
Share count is approximately 280 20 38 million shares.
With that I will turn the call or to public.
Thank you Omar.
Fiscal year 2020 is off to a good start and I'm pleased with our strong performance in Q1.
In NFC demand was strong in both lab and field instruments Fiveg wireless slap demand continues to be a robust up significantly year on year fiber demand is also has also remained strong in both lab and field driven by 400 gigabit upgrade cycle.
Cable demand was up year on year helped by spends recovery North American cable providers for DOCSIS three dot one along with some modest demand from Europe .
We expect this higher cable demand to continue into Q2.
Demands from North American Telecom service providers continues to be sporadic with limited visibility.
S E revenue came in at $20.9 million, then was weaker than we expected in both our growth assurance and enterprise and data center products.
The data center enterprise market has been challenging in calendar year 2019, with many deals being pushed out as customers Revaluate I T spending.
The demand weakness in North American Telecom service provider also has impacted the assurance business, resulting in lower lower revenue.
You know SB three D sensing revenue increased significantly year on year, driven by a broadening of customer base a for optical filters and continued adoption of our engineered Diffusers My Android based.
Smartphone customers, we expect three D sensing revenue to continue to grow year on year in Q2.
Anti counterfeiting demand a was as expected was down year on year, relying mostly on the banknote reprint volume and we expect this trend to continue into Q2. This reflects a change from a year ago were always p. benefited from bank banknote redesign demand in the fiscal first half of a 29.
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Based on redesign pipeline remains robust. However, there is limited visibility for majority currency redesigns demand in the next several quarters.
In mid September we held our analyst day, where we updated our strategy and provided the outlook for the next sort of fiscal years.
The next phase in the obvious evolution puts greater focus on growth, both organic and inorganic we've updated our financial profitability targets based on our growth strategy is in Fiveg wireless fiber in three D sensing.
In conclusion, I would like to think my Viavi team for another outstanding quarter, Oh solid performance and express my appreciation to our customers in our shareholders for their support I'll now turn the call over to Bill.
Thank you all like well, let's begin the question answer session you have to happen to limit the especially one question one follow up.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question in your press the pound key and your first question comes from a line of Alphacat, Alex Henderson from Needham Your line is open.
Great. Thank you very much so clearly there's some.
Tension and service providers spending.
The American but broadly are you seeing.
Macro conditions, starting to creep into conditions.
The U.S. in Europe .
Priority of spending type issue, how how would you characterize see the broader macro environment persists.
The focus.
He spends.
Hi, Alex.
So actually me corrected.
The North American service provider spend environment is no better or worse than it was all for the last 12 months.
What I do we still got very good revenue from it obviously, it's not as big as it used to be several years back but.
Yeah, you know, we're getting our fair share of whatever is being spent.
It's just no longer as good as it used to be and it's nowhere near as good as what we see in Europe and other parts of the world. The difference I would say when I say sporadic. It's just that's parati I mean, one day, you could get a big Whopper open order and they'll be not the end there'd be no for warning and there's really.
Nothing leading up to it it's just it seems to me, it's more a reactionary add to demand the rather than planning a for demand. So that's really.
I'd say it wouldn't be my commentary in terms of the macro I don't think there is really that's a presence he had but we should we see we see healthy demand in some of the growth segments. Clearly everybody is now gearing up for Fiveg I, even though they may not be spending a lot of it now, but they all thinking where they're going to get them.
Money and as you can imagine if a you know in the current environment My bad would be that a lot of dominy will come at the expense off a investing in the two genes and threeg and fourg infrastructure to keeping up to date. So I think some of the pairing of.
Spending that we've seen.
I mean, I don't have much statistical data to make up from conclusion, but I think we are seeing some.
Hesitancy to spend money out ahead of the a big upside you wave.
Great quarter. Thanks.
Your next question comes from the line of Cemig Chatterjee from JP Morgan Your line is open.
Okay.
Oh, we can't hear you we cannot hearing could just pick up move closer to the speaker.
Hi, guys, sorry can you hear me now well much better.
Yes, I apologies on that so one question for me I'm relatively to your topline performance in the quarter. It came in above the high end of your guidance how should we think about the beat in the context that that momentum continuing as we progress through the year and relative to your full year guidance you provided at the analyst day, what's holding you back what are like some of the factors that are holding you back from raising your follow your guide.
Once again.
Yes. So this is summer here. Thanks for the question slightly when you look at the beat beat to the analyst day. The guidance that we provided Justin on September 12, It was again driven by.
Mainly by those three growth drivers that you've been pointing out as a cyclical trends we saw a beat in wireless lab, a fiber Bolton lab as well as in field came in strong and also the three D sensing primarily on the Android sorry also came in stronger than what we would expect.
That doesn't mean that yes was.
Given line at least on the on the iOS site.
We also saw some trend in cable in specifically in North America as Willis some in Europe as Willis like Latin America, and then as Oleg mentioned not Americans Bend is sporadic so when you think about.
Looking forward for fiscal 20, we want to maintain the guidance we provided.
The range is still valid and you know again, we are assuming those three growth trends wireless.
Fiber and three D. Sensing will continue we do expect our base business to be flattish two to two group and our S. E business, which we were hoping would be say flattish to slight growth given the enterprise pinned to being weak and starting off on a week or not at least.
Fiscal Q1, what we are assuming now that that particular enterprise spend a weakness will continue and so as he should be sort of flattish to slight decline. So we will continue to see strength and like any business and and that's trend will offset some of the weakness that you're seeing and they see so all we will.
We maintained the guidance that we provided.
And I would Oh, sorry, I didn't you know remember the second half of fiscal year, especially the March quarter. I mean, it's seasonally you see I'm a mobile phone providers are pulling back on their demand and that traditionally that yeah service providers, probably take till the end of February to them.
Figure out what their budgets are going to be for next year. As a result March quarter is traditionally weaker with a lot more uncertainty so for us to really get more bullish on the fiscal year, we need to see how strong is a momentum exiting Q2 before we have a better picture to.
Revised guidance in for the rest of the fiscal year.
Thanks, guys appreciate the question.
Your next question comes from a line of genres shedding from Stifel. Your line is open.
Thanks, very much I was hoping you could just spend a minute on the fairly impressive sequential growth in the pack business in the quarter. It looks like that grew almost 20% sequentially curious if that's primarily on the three D. Sensing side, just given your comments there amer about somebody Android strikes a but just if you could spend a minute there.
In terms of a that bounce back in and maybe where you're seeing growth in that region.
In this most recent quarter.
Yes, so when you look at the sequential crude John you're absolutely right that is mainly driven by three D. Sensing as you see we sequentially cool in three D. Sensing business from our you know June quarter to the September quarter. So that's a lot of it is you know they put it out of Asia and so that's.
That's the that's the growth youre seeing but generally speaking if you look and on a year on year basis, I think all regions actually grew this year on a year on year basis, and so it was a very broad based revenue coach truly a at we all before for fiscal Q1, and hence it was a record revenue.
Before we obviously you know clearly fiveg wireless in fiber is a big element on networking site absolutely.
In the APAC region as well Oh like.
Exactly.
Well.
Yes.
No.
Go ahead I apologize.
No I think those secular trends remain.
Same across all the regions.
And then maybe just a quick follow up on that I'm not three D sensing side.
Last quarter and also at the Analyst day. He made some comments about the potential maybe of looking at you know a licensing model or some different ways to you know both protect the IP and and grow that.
Three D sensing business, particularly in the in the Asia Pac reason just curious if there's been any movement there or how maybe we should think about the Android ecosystem in particular in its reliance on some of the China.
Mobile handset operators as we're looking out over the remainder of the calendar year. Thank you.
So I think at this point is preliminary too premature to give any update from.
Just a for four or five weeks ago as I mentioned, we have a number of legal actions percolating.
Across multiple jurisdictions and as they develop.
Our strategy between licensing of versus enforcement well modulating the depending on the outcomes of various challenges.
Thank you.
Your next question comes from a line of Tim Savageaux from Northland Capital markets. Your line is open.
Hi, good afternoon, congrats on the results.
First question is on the Fiveg your wireless kind of side I'd imagine that was the.
The primary driver pretty impressive 21% growth rate.
My question is given what we've seen a with Nokia of late.
And arguably needing to refresh the whole product line.
Seems like that could be a positive things for you guys thing for you guys I Wonder if you sort of started to see some of that already in terms of contributing.
To the growth Confide, you base station test and then I'll follow up.
Sure I mean, clearly I mean, we are engaged with all the major players in Fiveg and its still very early innings of the Fiveg deployment Theres a lot of revamping reengineering and.
Adding of new features to the products that all the various vendors are bringing out and that's obviously drives their need for I'm more features more test systems. Both in I would say scope of attached to end the quantity of test and.
You know as I said, our view is where there always are ready.
To sell the more when they need it so.
You know, it's not a I don't think we have any constraints on our ability to deliver new features.
The enhancements and the what specific customers meet demand and we don't have any limitations on volume of production that we can ship. So I think I would say pretty much where riding the five you wave as it happens.
Okay, great and to follow up.
A little back and forth on this at the Analyst day, where I think if I recall properly you said you know we might see another upgrade cycle.
Cable might recover in say two to three years.
Maybe I misheard and you met two to three weeks, but people seem to have recovered.
Pretty quickly in unexpectedly and according to your commentary about Q2 sustainably I Wonder if you could kind of dig into that deeper in terms of what you.
So on cable and then.
You are in surprises I am.
Thanks, well I mean look I wouldn't say surprised I mean I think.
People may take it to a linear literally when we say a the DOCSIS 3.1 upgrade its not a like a spike signaling and it goes flat right. It's a you know like initial wave everybody buys in North America and does a big upgrade then they have to digested. So you have a drop then I'd say digested and say Oh, we need a bit more here.
Sure then you have a kind of secondary but but lower kind a bump up and then of course the rest of the world started deploying it as well so you have.
Like a bunch of small little a bumps right. So nothing that a reality is you know when you were deploying DOCSIS.
Threed out one or any other technology. There's obviously initial spend and then you do a more fine tuning you know a a re sizing you know every figuring out what else more you need and remember we also have a lot or other products that go into cable like fiber.
Monitoring and things like that it's not the only meters. It's a lot of other test equipment that we sell into a cable operators and then now we obviously see some cable operators are starting to look at the wireless space, while it opens up an opportunity for us to sell them. Some wireless products. So I would say I I would.
Say that we are in for another big uptick, but I I, just think I was out of questioning everybody not to think that cable goes to zero. It continues to.
Common go and the next a thing is it's not that far off maybe couple of years for the a fully symmetric DOCSIS 3001, where you can send and receive data at equal a rates and then of course it theres whole.
The remote Phy architecture conversion, that's gonna be happening in the coming years, which obviously drives a lot of other tests requirements actually not that far off from the fiveg infrastructure because in a way to look good remote or mode. Five architecture and you look at the Fiveg architecture. They look very similar in many ways.
So lot of the similar type products with play into that space.
Hey, thanks.
And your next question comes from the line of Michael Genovese from MKM Partners. Your line is open.
I think held like it seems like we've seen upside and.
Fiveg ever since you've done the acquisition so for at least five quarters here, we've seen lab driven fiveg upside can you just talk a little bit more about why that's doing so well and is it somehow is there something about fiveg and it makes it better opportunities in Fourg or is it you know roughly equal to where we weren't afford you cycle.
Well I think the I mean, a you know as much as I'd like to take credit for this a brilliant inside when we bought that business. It's truly is there has been an upside surprise to us as well as the the management team that's running it but as we dig into it.
I tell you there is a fundamentally something different about fourg and fiveg in threeg for that matter.
Number one I was saying earlier in the earlier calls when we look at two GE to Threeg Threeg to Fourg. It was really just marginal improvements. It was kind of the evolutionary Oh were asked Fiveg is much more revolutionary it's it's completely new technology, new equals a new <unk> and you architecture and a different.
College of deployment I such is.
The comes with a very steep learning curve and a lot of uncertainty and that requires fundamentally a lot more testing a lot more.
Monitoring to figure out what's going on over their network. So as a result, I think we do feel the fiveg.
We'll be up more in line with a one gn to GE a in terms of the test and measurement and.
Skills required to do pull this these networks than what we've seen with Threeg and Fourg and I mean part of it you see is the some of the primary early Deployers of Fiveg networks are now because nobody wants to take the risk of network working as advertised.
You know deploying something so a different as a result, I see service providers relying more on nams to ensure that the you know they have one nexus triangle, if something goes wrong. So I think you know in that respect a I do believe a we will see more need across the board and not just viavi.
Pretty much anybody who is selling into fiveg ecosystem.
Just to repeat didn't mention that during the analyst day, Michael We basically you know given the you got the but a more test requirement will use cases.
I'm not in D to go capture a those you know the other use cases that all debt plus you know spend in our market position, which is as is very strong yeah. It's actually I'm on bring up very good point I mean, the all led revenue is not coming in for free I mean, we actually saw these opportunities and selectively up the funding about a three four.
Our quarters ago, and that's obviously, what's driving it so it's a very good I mean, I wish you all the R&D projects or like this very tight very close correlation between these incremental spend and the incremental revenue bump up.
And it could take so really but what's the fixed cost so that when you guys know that it'll that's right. It's something that we can scale down.
So what do you expect to see.
Field test and let's see the service providers, you know step up that's more of the spending when do you think will start to see upside in the business or yeah.
See that bad driving the business, which occurred yet.
And of the calendar 2020.
And today, it's mostly trials and its have a very much done by nams using a lot of very expensive lab equipment as they fine tune their deployment models and we work with all of them in that scenario and you know right now it's all about.
Putting your products.
As part of the deployment protocols.
For the network. So when they does go mess a roll out.
When you would see the demand.
So I'd say.
You know second half of next calendar year the earliest.
Right.
Appreciate that really well thought out responses and keep up the great work.
Thanks.
Your next question comes from the line of Richard Shannon from Craig Hallum. Your line is open.
Well, thanks, guys for taking my questions as well one to focus on the on August P. in the margin structure that you had in the quarter. Other gross margin operating margins were excellent to say least here. So I guess I wanted to ask a couple of very quick question just to make sure I'm understanding things here is the non three D sensing part of that.
Business or is that was that revenue kind of flat. It was there any change in margin structure.
There or is it all due to three D sensing.
So it's all due to three D sensing and as we had indicated Richard as you Sweeties syncing Walliams school up it leads to higher absorption from manufacturing costs and also the team it'll be up the learning curve here and we've been doing just where the last one and half years. The team is also driving a lot of operational efficiency.
And then manufacturing so it's a combination of higher absorption of manufacturing audit.
James as well as the increased operational efficiency and we also obviously being I'm working on the anti counterfeiting side, we took out some of the older redundant cost capacity out and we continue to improve productivity of those assets. So, but I think you know they as I'm on our said the biggest impact hears our.
Three D sensing volume production of filters and Diffusers is now running at a much bigger industrial scale. So there's elements of economies of scales kicking in and this quarter of in particularly very highly loaded factory with very good absorption now obviously.
You know a when he comes to things like June quarter [laughter] you. A you have the opposite effect I mean, you you have a lot of Underabsorption unless you building inventory and we prefer to bill just in time and take the a dips and lumps when they come a void building up inventories, but well give you.
Well up is a very flexible variable costs every weekend ratchet up and ratchet down as volume comes in.
Okay. So I think historically, you talked about threed sensing being a.
A portrait adding to a poor mix within a wispy.
Sounds like it was actually maybe in line or maybe even better in the quarter is that fair to guess or we're not so I. So I would not comment on that piece of because for obvious reasons, but obviously it is better than what it was last year, yes, as the volumes were lower than we were scaling up the manufacturing.
I I mean listen I'm poor makes as the I guess I I prefer I like I like money. So, let's say this way I mean yesterday, it I would love to half 40, 50% operating profits on some products, but remember even the three D sensing, although it's a trip it's lower margin than a traditional Miller.
Aero Mil Aero products or anti counterfeiting products from that business units, it's still significantly better operating margin then I'm a lot of our other product line. So overall, it's a very positively accretive to viavi overall, yeah. So I think you bring up a good point, Richard if I can just expanded.
A little bit so as already mentioned you know we have seasonality in a margin structure into SP. So the first two quarters of the fiscal year. The September quarter in December quarter, you'd typically see higher margins and then we purposefully Oh boy pre building inventory et cetera.
And those margins typically go down into March into June quarter, right. So all we should be still there we guided about the mid 30% for the fiscal year, but again, we don't want to go. This is this a consumer business, but pretty fast cycle times and be able to city.
Three to four week lead times. So there's no reason for us to go a pre build a lot of inventory and get stuck with that inventory.
In a consumer business. So we have the we have worked this in the last two years and it's worked really well for us and that's how we will also operate going forward, well, then and as a three D sensing penetrates more and more products and vertical markets, you're going to see more of a smoothing out the between the first and second half.
The calendar year, and it's very similar I mean, I remember back from my early days in this industry I. If you look at the gallium arsenide power amplifiers and in a CD may phones. When it all starts right. It was a two week two quarter a year business with a strong demand in first half find an almost nothing in the second half.
As of the TDMA Dabir TDMA and a three Jeep <unk> penetrated it became more and more linear rise then today nobody talks about strong second half and weak first half in the power amplifier space. So I expect Oh, we are the a threed.
Sensing to be marching in that general direction.
Okay, great. Thanks for all the detail and keep up the good work that's all for me.
Thanks Richard.
Your next question comes from a line of matter Marshall from Morgan Stanley . Your line is open.
Great. Thanks first question for me just on you know wireless coming in stronger than expected and it may be not being a seasonal as you know that may be talk before or just how do we think about the seasonality of that.
That's or how youre thinking about it now.
And then maybe just kind of more initially like I know short lead times on three something that's can be sure kind of for once ecosystem, but I. Just wanted to know stands or are they have the same kind of short lead times on the Android ecosystem or just timing timing the volumes, how we should think about.
Okay. So I mean wireless I think the you know when you there's a difference between when you sell into the field versus when you sell and allow lab is driven by engineering budgets and they're fairly hsas and they are more or less alenia rise and clearly when you're going into a hot new area like Fiveg yeah.
It is the most strategic spending thing that company can do so you know fundamentally the company wants to get more aggressive you see more budgets come up in Indiana purely just have to line up with their customers engineering roadmap.
And you're right that spend cycle. Okay. So I think at this point in time, Yeah. If there is a seasonality that's not a seasonality. There is that is yeah. What's out whats called calendar based it's really driven more by the a individual nam a roll out and product launch cycle right and you just got to be.
Hi, Jilin role with the punches.
In case of the three D sensing, it's very much a viavi and Amar in my philosophy that we do not get ahead of ourselves and you could always tried to make your gross margins look a little better in the down quarters by running more production, but all you're doing is taking a good cash.
From your bank and putting it into a and inventory and as often happens in the especially consumer electronic space and that inventory turns into nothing if I know a customer doesn't have as much demand does they predicted or they make a design change and no sanya inventories useless. So.
What we chose to do consciously from the very beginning is to run a this business on a very short a product lead lead time basis, and we have a phenomenal manufacturing team that can actually get and turn it on a diamond within two to four weeks at the worst case a trend around the order.
And we plan and build our whole supply chain to be able to respond to that lead time, a which gives us a tremendous flexibility not too.
Pre build inventory or respond to the very early forecast from our customers, but rather wait till the customer has a much better visibility of their true demand and would go just to that so that's very much more of I'm on my philosophy on how we prefer to Ron production for consumer the trying.
And the business.
Great. Thanks, so much.
Your next question comes from the line Mehdi Hosseini from Susquehanna. Your line is open.
Hi, guys. This is Nick filling in for Mehdi just wanted to shift a little bit to talking about four hundredg.
Do you still see like second half of 20 to be the catalyst for that where do we said with a fourg and what should we think about it in terms of how it impacts each business unit.
Well I think you know I would say the 400 gig rollout is now in full swing I mean, it's got quite a ways to go so I I expect a that business to be good for us and our customers I mean, you've seen probably there's been some reports.
Reports like Inphi, just had a very strong a quarter that is a you know it's a it's going to be along deployment cycle and everybody playing in that thing will benefit and where we benefit in it primarily today is in the production because that's supported the volume of shipments that drives the production test at.
And then I'll. That's had you know R&D is now following with a 608 hundred gig so you sell to them.
That equipment for the lab space, but I'd say for production testing, a that's where we see a lot of 400 gig, but it also means as is tied to getting deployed in the next several quarters, we'll see I'm you know probably demand for that kind of thing happening in the field instruments. So it's a it's a it's kind of like a three.
Cycles R&D cycle, followed by production cycle, followed by the deployment cycle and that's pretty much be hoped the same model will repeat itself in the wireless space and the field is quite early and we did launch a 400 get product field yet today a lot of 400 gig goes mostly in the Datacenters.
And which is a whole new market for us and of course once the data centers are running. It then people said upgrading the four to interconnect them off for high speed.
And just a quick follow up on that do you have.
Kind of offensive in terms of when that shift from data centers to kind of broad usage like when should we expect that second half is that next quarter or is it 2021, what should we think.
Well you know it it's it varies I mean, it depends on operators and how much capacity. They haven't there a metro networks, but we also seeing the Hyperscale data center operators actually building out their own interconnect networks and I'm spending a lot of money there, but I would say you know I.
Probably too premature to make sweeping statement as to when the operators are gonna go to 400 gig I've, where it's most likely it's going to be more focused this specific to individual operators and you know they will do it probably only initially in the markets where they have the biggest constrained of capacity.
And probably delayed deployment of 100 gig in areas, where they have a lot of a dark fiber.
Some correlation with Fiveg deployment to Fiveg is another one yeah exactly.
Okay. Thank you.
There are no further questions at this time Mr. Bill Ong I turn the call back over to you.
Thank you Rob This concludes our earnings call for today. Thank you everyone.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.