Melissa Selcher - Vice President, Chief Communications Officer Charles H. Robbins - Chief Executive Officer & Director Kelly A. Kramer - Executive Vice President and Chief Financial Officer

Vijay K. Bhagavath - Deutsche Bank Securities, Inc. Simona K. Jankowski - Goldman Sachs & Co. Mark Sue - RBC Capital Markets LLC James Dickey Suva - Citigroup Global Markets, Inc. (Broker) Tal Liani - Bank of America Merrill Lynch Pierre C. Ferragu - Sanford C. Bernstein & Co. LLC James E. Faucette - Morgan Stanley & Co. LLC Brent Bracelin - Pacific Crest Jeffrey Kvaal - Nomura Securities International, Inc. Victor W. Chiu - Raymond James & Associates, Inc. Timothy Patrick Long - BMO Capital Markets (United States) Jayson A. Noland - Robert W. Baird & Co., Inc. (Broker) Paul Silverstein - Cowen & Co. LLC George Charles Notter - Jefferies LLC

Welcome to Cisco Systems' first quarter and fiscal year 2016 financial results conference call. At the request of Cisco Systems, today's call is being recorded. If you have any objections, you may disconnect. Now I would like to introduce Melissa Selcher, Vice President of Corporate Communication and Investor Relations. Ma'am, you may begin. Melissa Selcher - Vice President, Chief Communications Officer: Thanks, Kim. Welcome, everyone, to Cisco's first quarter FY 2016 quarterly conference call. This is Melissa Selcher, and I'm joined by Chuck Robbins, our CEO, and Kelly Kramer, our CFO. By now you should have seen our earnings release. A corresponding webcast with slides, including supplemental information, will be available on our website in the Investor Relations section following the call. Income statements, full GAAP to non-GAAP reconciliation information, balance sheets, cash flow statements, and other financial information can also be found on the Financial Information section of our Investor Relations website. Throughout this conference call we'll be referencing both GAAP and non-GAAP financial results. And we'll discuss product results in terms of revenue and geographic and customer results in terms of product orders unless stated otherwise. All comparisons throughout this call will be on a year-over-year basis unless stated otherwise. The matters we'll be discussing today include forward-looking statements, including the guidance that will be provided for the second quarter. They are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically the most recent report on Form 10-K, which identifies important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements. With respect to guidance, please also see the slides and press release that accompany this call for further details. As a reminder, Cisco will not comment on its financial guidance during the quarter unless it's done through an explicit public disclosure. I'll now turn it over to Chuck. Charles H. Robbins - Chief Executive Officer & Director: Thanks, Mel. So Q1 was a very strong quarter across the board. We grew our revenue 4% and delivered non-GAAP earnings per share growth of 9%. We delivered very strong non-GAAP gross margins, and our non-GAAP operating margin was best we've seen in over nine years. I recognize that our Q2 guidance that we just provided is below what the market had expected. In Q1 we saw lower than expected order growth, driven largely by uncertainty from macro and currency impacts, primarily outside the U.S. Despite these headwinds, I believe we are executing incredibly well in a challenging environment. Let me tell you simply how I see it. We had a great quarter, guided to solid growth in Q2, and feel good about our momentum and how we are positioned for the second half of the year. As I look at the big picture, I'm extremely pleased with the speed with which our teams are executing. We have a clear strategy and are confident that we are making the right transitions in our business, investing where we need to for future growth, profitability, and market leadership. Specifically, we are accelerating our ability to deliver on the growth opportunities in front of us. We are driving internal innovation at a record pace. So far in FY 2016 we're seeing a 25% increase in major new product introductions. And three of our internal startups brought solutions to market this quarter working with our key customers. These startups are bringing incredible technology from concept to delivery in under 12 months. Stay tuned next week for announcements around an additional project that we co-developed with one of the world's largest web-scale players. In this quarter alone we closed three acquisitions, recently announced four new acquisitions, and formed three new strategic partnerships. Partners like Apple, Inspur, and Ericsson see Cisco as the market leader they want to work with to move faster and drive greater value to customers and the market. I believe we will see several points of growth from these partnerships over the next few years. We are also aggressively driving our cloud businesses. We've always had a hybrid cloud strategy, and it is increasingly clear that every one of our customers want both public and private cloud capabilities in a hybrid cloud. On the public cloud side, Cisco is a leading provider of infrastructure to web-scale and SP customers as they build out their public cloud infrastructure. As just one data point, our business with the largest web-scale players grew over 20% again this quarter. Within the enterprise, we are winning in private cloud and are focused on automating and driving public cloud economics across our customers' entire infrastructure. We saw this opportunity drive 24% growth in UCS. And our next-generation data center switching portfolio, which is our Nexus 3000, Nexus 9000, and ACI, is now at a $2 billion run rate, with over $500 million in revenue this quarter, growing over 140% year over year with sequential growth of 26%. This performance is much stronger than that of our competitors, who claim they are outpacing and outperforming us. And our own cloud services continue to grow well. WebEx, one of the largest enterprise SaaS applications in the world, grew revenue over 23% this quarter, and we continue to move more of our portfolio to cloud-based delivery models. As we deliver more of our portfolio in software and cloud models, we are driving consistent double-digit growth in deferred revenue. We saw software and subscription product deferred revenue up 36%. Security deferred revenue grew 31%, as we sell next-generation firewall and threat defense software to our over 200,000 firewall customers. Our collaboration deferred revenue grew 18%. And our Meraki cloud networking business, where we deliver networking-as-a-service, grew revenue over 60%. While we still have work to do across our portfolio, I'm incredibly pleased with our continued focus and speed of execution. We will continue to make the necessary strategic moves to drive our success. Over the last quarter, I've spent hundreds of hours with our customers and partners around the world, and they have reaffirmed my confidence in our ability to execute against the opportunity in front of us. While the market continues to move at an accelerated pace, our customers know they must move with speed as they embark on their digital transitions. It's clear to me that they also understand the central and critical role that the network plays in that transition, and they are looking to us be a strategic partner to drive their growth and build their digital organizations, cities, and countries. We are doing the right things to capitalize on this opportunity. And, as I told our teams this past week, I have never been more optimistic. Now I'll turn it over to Kelly to walk through more details on our financials. Kelly A. Kramer - Executive Vice President and Chief Financial Officer: Thanks, Chuck. I am pleased with our execution on our financial strategy of delivering profitable growth, managing our portfolio and strategic investments, and delivering shareholder value. Starting with our first pillar of delivering profitable growth, we saw good top line growth in Q1 with $12.7 billion in total revenue, up 4%. Product revenue grew 4%, with solid growth in switching, data center, wireless, security, and collaboration. More specifically in Q1, switching grew 5%. In addition to the Nexus 3000, Nexus 9000, and ACI momentum of over 140%, we continue to see strength in the Catalyst business. Data center grew 24%, demonstrating our continued market leadership. Wireless grew 7%, driven by the Meraki business. Security was up 7%, with deferred revenue growth of 31%. And collaboration grew 17%, with deferred revenue up 18%. In total, deferred revenue had solid double-digit growth of 10%, with product deferred revenue up 16% and services up 7%. Product deferred revenue, driven by our subscription and software businesses, grew 36%. We do see the transition to subscription revenue accelerating, as I mentioned in the last earnings call. We did see routing decline 8%. We do expect routing revenue to return to growth due to timing of large deals we saw in Q1. Services revenue grew 1%, largely driven by weakness in service provider. Product orders grew 3%, with a book-to-bill below one, which is in line with our typical Q1 but slightly lighter than we had expected. Looking at our geographies, which is the primary way we run our business, Americas grew 1%, EMEA grew 3%, and APJC was up 9%. Total emerging markets grew a very solid 11%, with the BRICs plus Mexico accelerating to 21% growth. In terms of customer segments, service provider grew 6%. Enterprise declined 3% based on the uncertainty from macro challenges, consistent with what others are seeing. Commercial grew 7%, which signals to us the broad strength of our portfolio. Public sector was flat. From a profitability perspective, we delivered record non-GAAP EPS of $0.59, up 9%. GAAP EPS was $0.48. Q1 non-GAAP net income was a record $3 billion, up 8%. GAAP net income was $2.4 billion. We drove the strong profitability with discipline and rigor on gross margins and operating expense. Non-GAAP gross margin was 63.2%, with non-GAAP product gross margin of 62.3% and non-GAAP service gross margin of 66.2%. Non-GAAP operating expenses were well controlled at 32.7% of revenue, and non-GAAP operating margin expanded to 30.5%. We are ensuring we make the right investment and divestment decisions through disciplined portfolio management. Moving on to the second pillar of our financial strategy, which is the work we are doing to manage our portfolio and strategic investments to fuel our key long-term growth areas such as cloud, data center, software, services, and security, we've been very active from an M&A perspective, aligning our investments to key growth areas. We closed three acquisitions in Q1 with OpenDNS and Pawaa in software and security and MaintenanceNet in services. We also announced the acquisitions of Portcullis and Lancope in security, ParStream in data analytics, and 1 Mainstream in cloud-based video. These moves are consistent with our strategy of increasing the investments of our innovation and R&D efforts to our growth areas. Moving on to our third pillar, delivering shareholder value, in Q1 we increased operating cash flow 11% to $2.8 billion. Total cash, cash equivalents, and investments at the end of Q1 were $59.1 billion, with $5 billion available in the U.S. And we returned $2.3 billion to shareholders, comprised of $1.2 billion of share repurchases and $1.1 billion of dividends. The total return to shareholders represents a return of 91% of our free cash flow, more than consistent with our commitment to shareholders of returning a minimum of 50% of our free cash flow annually. Overall, Q1 was a strong quarter. As you review the financials, you see good top line growth, record profitability and operating leverage, a very strong balance sheet with growth in deferred revenue, and strong cash generation. We executed well, consistent with our business and financial strategies. Now let me reiterate the guidance we provided in the press release for the second quarter of fiscal year 2016. This guidance includes the type of forward-looking information that Mel referred to earlier. As a reminder, in Q4 we announced an agreement to sell the Client Premises Equipment portion of our SP Video Connected Devices business to Technicolor. The transaction is currently going through regulatory approval, and we are working to close it during the second quarter. In order to provide a clearer view of our continuing expected financial performance, we have normalized our second quarter guidance to exclude the CPE business for both Q2 fiscal year 2016 and Q2 fiscal year 2015. We have provided historical financial information for the CPE business in the slides that accompany this call. So now on to our Q2 guidance, we are executing very well in a challenging global environment, but did see the macro challenges driving uncertainty that impacted our Q1 order growth. As a result, the guidance for Q2, excluding the CPE businesses, is as follows. We expect revenue to be in the range of zero to 2% year over year. We anticipate non-GAAP gross margin rate to be in the range of 62% to 63%. The non-GAAP operating margin rate is expected to be in the range of 28.5% to 29.5%. And the non-GAAP tax provision rate is expected to be 23%. The tax rate does not include any impact of the reinstatement of the federal R&D tax credit. If the R&D tax credit is reinstated, we would reflect that benefit in our effective tax rate. Non-GAAP earnings per share is expected to range from $0.53 to $0.55. We anticipate our GAAP EPS to be lower than non-GAAP EPS by $0.10 to $0.14. Further details related to this range are included in the slides and press that accompany this call. I'll now turn it back to Chuck to summarize the call. Charles H. Robbins - Chief Executive Officer & Director: Thanks, Kelly. So, as I look back at the last 90 days and my first quarter, I am more optimistic than ever about Cisco's future. Yes, the guidance we just gave for Q2 is lower than what the market had expected, and I don't take that lightly. But for me, nothing has changed in how I feel about the business. We are moving incredibly fast and doing all the right things to drive our growth and strategic relevance. We expect the results of these moves will start showing up in the coming quarters. Every one of our customers, established industry leaders, and disruptive challengers is focused on how they manage, automate, and secure the explosion of connections and data across their digital organization. Our portfolio has never been stronger, more relevant, and more strategic, and we're hearing this directly from our customers and our partners. The opportunity is ours to capitalize on. We have a clear vision and strategy and are executing very well. We are driving internal innovation at a record pace, acquiring strategic assets, co-developing with our customers, and building a new set of strategic partnerships. I believe our speed and execution are truly differentiating us in the market, and we've just begun to scratch the surface of what's possible. Mel, I'll turn it back to you for questions. Melissa Selcher - Vice President, Chief Communications Officer: Great, thanks. Kim, let's open the line for questions. I'd like to remind all analysts to please ask one question.

Thank you. And our first question comes from Vijay Bhagavath with Deutsche Bank Securities. Your line is open. Vijay K. Bhagavath - Deutsche Bank Securities, Inc.: Thanks. Hi, Chuck. I took over the practice from Brian Modoff. So I'm looking forward to working with you and your team. Charles H. Robbins - Chief Executive Officer & Director: Great. Vijay K. Bhagavath - Deutsche Bank Securities, Inc.: Can you guys hear me okay? Yes, hi. Charles H. Robbins - Chief Executive Officer & Director: Yes, thank you, Vijay. We can hear you. Vijay K. Bhagavath - Deutsche Bank Securities, Inc.: Perfect. So, Chuck, my question is around we had done independent checks and had noted near-term weakness in U.S. enterprise. I'd like to get your qualitative color. And I know you work very closely with the sales teams and also with some of your bigger customers. Melissa Selcher - Vice President, Chief Communications Officer: Vijay, we are having a hard time hearing you. Could you speak a little louder? Vijay K. Bhagavath - Deutsche Bank Securities, Inc.: Yes, can you hear me okay? Melissa Selcher - Vice President, Chief Communications Officer: Yes. Vijay K. Bhagavath - Deutsche Bank Securities, Inc.: Okay, perfect. I think my question was around we did independent checks with the channel, who had noted near-term order weakness, U.S. enterprise in particular. Could you give us qualitative color from your end? Is it just endemic weakness, customers just pushing out because their own near-term fundamentals are weak like the U.S. industrials, or is it relating to any indecision around migration to public clouds? I'd like to get your commentary on the weakness you noted in enterprise. Thanks. Charles H. Robbins - Chief Executive Officer & Director: Thanks, Vijay, and tell Brian hello when you see him. So relative to the enterprise, we actually are very comfortable with the situation in the U.S. We did see weakness particularly outside the United States and particularly in Asia-Pacific. We saw weakness in Canada as well as Latin America. And we didn't see any impact that was different this quarter from public cloud. We think our customers are moving to a hybrid cloud environment, which I think is indicative of the $0.5 billion that we did in our next-generation data center switching portfolio this quarter. And so we're actually very comfortable with our portfolio. If you think about our U.S. commercial business and then our global commercial business, our U.S. commercial business was up 12%, and it is a good proxy of how our portfolio is playing in that space. And we firmly believe that if there was a significant difference in the transition of workloads to public cloud, we would see it there first. So we're very comfortable with our enterprise strategy right now. Melissa Selcher - Vice President, Chief Communications Officer: Great. Thanks, Vijay. Operator, next question?

Thank you. Your next question comes from Simona Jankowski with Goldman Sachs. Simona K. Jankowski - Goldman Sachs & Co.: Yes, hi. Can you hear me? Charles H. Robbins - Chief Executive Officer & Director: We can, Simona. Simona K. Jankowski - Goldman Sachs & Co.: I wanted to ask you a couple questions on margins. So first, they came in pretty strong in the quarter even though routing was weaker, and that tends to be a higher margin product line. So I was just curious what drove that upside. And a bit of a question related to that, Chuck, is that you've had margins exceeding expectations for a few quarters now, and in the meantime your growth is decelerating quite a bit here. Some of that is driven by FX and international issues. Do you feel like you're dialing that equation sufficiently in the direction of revenue growth versus margin preservation? Charles H. Robbins - Chief Executive Officer & Director: Simona, it's a very good question. Thank you. I'm going to give a couple comments, and then I'm going to ask Kelly to chime in. First of all, I think that we talked about and I think it's well documented that there are some currency issues around the world, and I think our teams have done an incredible job of managing that. And we did see our gross margins, non-GAAP gross margins very strong this quarter. So we constantly look at the balance of investments in areas, and we're actively investing in those areas that are providing growth for us like security and in certain countries and in our Meraki portfolio. But it's something that we'll continue to look at. Kelly, comments on gross margins? Kelly A. Kramer - Executive Vice President and Chief Financial Officer: Yes, I'd say just to add to that, Simona, this is a big focus for us and all of our business units. But if you look at when you'll see in our 10-Q, we have our typical range. Our pricing has been holding in our typical range, which is a good sign. Where we saw the upside from a year-over-year perspective here is we just had really, really strong productivity this quarter in gross margins on the product side. That drove a lot of the benefit. Again, it's what the engineering teams are working on. It's what supply chain is driving. So it's part of what we're driving to offset the competitive pressures that we have naturally in the tech space. So I'd say it's definitely good execution by the team. The way that we make sure also that we're not doing a tradeoff like you mentioned because we are driving for growth and profits is we look at things like win rates. We look at things like obviously market share. So we're making sure we're making the right tradeoffs to get the wins that we want, and balancing that because it is all about growth as well as profits. Melissa Selcher - Vice President, Chief Communications Officer: Great. Thanks, Simona. Operator, next question.

Thank you. Your next question comes from Mark Sue with RBC Capital Markets. Melissa Selcher - Vice President, Chief Communications Officer: Hey, Mark. Mark Sue - RBC Capital Markets LLC: Thank you. Charles H. Robbins - Chief Executive Officer & Director: Hey, Mark. Mark Sue - RBC Capital Markets LLC: Looking at it at a high level – hi. How are you? If I look at it at a high level, the company has gone through many rounds of layoffs and reorgs, and we've seen this impact other tech companies such as IBM and HP. So having said that, do you feel that we should see some accelerated innovation coming out of Cisco over the next – as we look towards the back half? Product Catalyst, for example, pipeline of innovation, if you could, give us those positive things to look for in the second half. Thank you. Charles H. Robbins - Chief Executive Officer & Director: Mark, that's a great question, and I actually thank you very much for asking it. As I said in my opening comments, we have in our engineering organization, we've really focused on smaller agile teams that are moving more quickly. You're going to see some innovation, as I said, that's going to come out next week. You're going to see a nice steady stream of new products in the market. In fact, one of the comments I made was that I feel like we are very well positioned for the second half, and that's one of the key reasons, is that we have a good new product pipeline. So I think you will be very pleased with the innovation that comes out over the next few months. Melissa Selcher - Vice President, Chief Communications Officer: Thanks, Mark. Kim, next question.

Thank you. The next question comes from Jim Suva with Citigroup Global Markets. James Dickey Suva - Citigroup Global Markets, Inc. (Broker): Thank you very much and congratulations to you and your team. My question is that I believe, unless my memory is wrong, that you had a long-term organic sales growth rate of about 3% to 6%. I think that might have been the case. And the outlook now is zero to 2%. Can you help us understand or quantify it? Is some of this due to FX, and how much? And it looks like probably service provider is also driving that down. So maybe Ericsson new partnership you have can help out at some point. Just help us bridge the gap of the zero to 2% outlook for the next quarter versus your long-term goal of 3% to 6%. Thank you. Kelly A. Kramer - Executive Vice President and Chief Financial Officer: So I'll start addressing that question, and I'll hand it over to Chuck on the Ericsson question. So from an FX perspective, us like every other multinational are feeling the impact of the strength of the U.S. dollar. For us it's a little more difficult to quantify because we sell 90% of our products in U.S. dollars. But I can tell you when I look at the countries that we do sell in local currency, which for us is Australia, Canada, and parts of Japan, for those countries alone where I can quantify it, it was almost two points of just pure translation on our top line growth. So for the rest of our business that's sold outside the U.S., there is certainly an impact. It's just hard for us to quantify it directly. So again, we try to see if we're getting less – if the demand is under pressure by the number of deals that we have in the pipeline or things along those lines, as well as if we see pressure from our sales teams to discount heavily. So what I'd say is yes, us like every other multinational is feeling the impact of the strength of the U.S. dollar, but I think our sales teams are executing extremely well through that and being able to sell the value of our solutions despite that. So for sure, identified two points on just the few countries that we have, and there's I'm sure more – three to four points or more even besides that that we can't put our finger on. Charles H. Robbins - Chief Executive Officer & Director: And, Jim, just a couple comments. You mentioned the zero to 2%. That's our guidance for Q2, and I think the 3% to 6% you mentioned is what Kelly presented as a long-term model at the last financial analyst conference. On the SP side, I'll just make a couple of comments that we're very pleased with our performance there. We've had the second quarter in a row of growth. The teams are executing very well. And you're right, the partnership that we announced with Ericsson really leverages their strength in radio, in OSS, BSS, and network management inside ESP as well as their real scale from a services perspective around the world. And when you combine that with our strength in IP and data center and networking and security, we think that it's a good combination. Our customers believe that they're actually quite pleased with the partnership that we put together. Melissa Selcher - Vice President, Chief Communications Officer: Great. Kim, next question.

Thank you. The next question comes from Tal Liani with Bank of America Securities. Tal Liani - Bank of America Merrill Lynch: Yes, hi. I have two questions and I'll ask them. Hopefully, you can answer at least a part of the second one. Switching was very weak the past few quarters on a sequential basis. It was sub-seasonal last quarter also, but this quarter was very strong. And I'm wondering if you can give a little bit of color on what's going right and what's going wrong and how sustainable is the strength in switching. And the second question which is related but not related, your service growth is below your product growth if I sum up the last four quarters. And you mentioned it a little bit at the beginning of your opening comments. So if you can just clarify, why is it happening? Thanks. Charles H. Robbins - Chief Executive Officer & Director: So, Tal, let me take the first one and then I'll let Kelly go into some of the numbers. The switching, I think the biggest thing that I've talked about over the last few months is that we've been going through this transition in the next-generation data center. If you think about what happens in the data center is you've got the traditional data center switching architecture, and then you've got our compute platforms that we sell, and then we have the next-generation data center switching architecture. And the historical architecture we know has been declining as customers transition. Our UCS business was up 24% this quarter, so we're very pleased with those results. And then if you look at the next-generation data center, that's the business that we said eclipsed $0.5 billion this quarter, growing at 140%. So what I've said about our switching business is that in the second half of the year, we expect the inflection point between the next-generation volume and the historical generation to hit – we expect to hit that inflection point. So I think you're seeing that next-generation switching in the data center continued to contribute to some of the improvement that you saw. And frankly, we've also had some reasonable performance in the campus. On the services – or any other comments on switching and then the services, Kelly? Kelly A. Kramer - Executive Vice President and Chief Financial Officer: I think you hit it right on, on switching. And on services, yes, it was up 1%, which is obviously on the lower end of what we were looking for. And it's driven by a couple things, and we've talked about this before. It is isolated largely within service revenue, the service provider segment within there. So the service providers have been a headwind for us up until the last quarter or so. So the model typically it takes longer for services to feel the impact when the product side goes down, the same way it takes a little bit longer, a few quarters, before they start to see it when the section, the product side comes up. So we're seeing some of that as well as just the service provider segment in general. They're going through a lot of transition as well. So that's a tough segment for us. But it's largely isolated to that. The only other piece I'll add to that is we are feeling very good about the outlook in services. If you look at our services deferred revenue, that went up 7% year over year this quarter, which is $600 million-plus, almost $700 million, and that's the strongest growth we've seen on that metric for a while. So we feel good about more multiyear deals coming in and future revenue coming from that. But, clearly, this quarter at 1%, it's on the low end and isolated to the service provider section. Melissa Selcher - Vice President, Chief Communications Officer: Great. Thanks, Tal. Kim, next question.

Thank you. Your next question comes from Pierre Ferragu with Sanford C. Bernstein & Company. Charles H. Robbins - Chief Executive Officer & Director: Hey, Pierre. Pierre C. Ferragu - Sanford C. Bernstein & Co. LLC: Hey, Chuck. Thank you for taking my question. I'd like to come back on your gross margin. So you're up more than one point sequentially, one point above what you had guided for. And at the same time, so you have subscription and licensing deferred revenue up very significantly, I think 36%. So my first question would be could you give us a bit of a break-up of what are the important drivers of the positive surprise in gross margin? And then my second question is, when I look at your guidance for next quarter, so you guide 63%, 62% to 63%. I guess you are going to be exiting the set-top box business. So from like you said, 63% level this quarter, it almost feels like not very challenging guidance. So am I missing maybe some kind of sequential headwinds on that number? Thank you. Kelly A. Kramer - Executive Vice President and Chief Financial Officer: Right, okay. Thanks, Pierre. That's a great question. So, first, to your last point, we definitely have seasonality in our gross margins, if you look back. Typically, Q2s and Q4s have lower gross margins, driven by our mix. Those are very, very big quarters for us on the UCS side, on our data center business. So that's a big part of what's driving it. And conversely, Q2s and Q4s (sic) [Q1s and Q3s] are typically higher. Now I would say again, we had very, very good execution across the board on gross margins, and again, driven by the performance by the teams on the productivity side. So, again, that will continue to help. When I go to Q2 guidance, you picked right up on it. Q1 still had the set-top box business in it. In my guidance for Q2, I completely removed the set-top box business, which is why it's up a full point of our typical guidance of 61% to 62%. We're now up to 62% to 63% for that benefit. So just to remind you, when we get rid of that business, which we are working to close this quarter, we'll see a benefit of approximately a point on gross margin, about 0.5 point on operating margin rate, and very negligible at the EPS level of things flowing through. So we're baking that in the guidance since my guidance excludes that altogether. But overall, again I just attribute it to the disciplined work on VCP on the productivity side as well as the sales teams being very disciplined on pricing. Melissa Selcher - Vice President, Chief Communications Officer: Great. Thanks, Pierre. Kim, next question, please.

Our next question comes from James Faucette with Morgan Stanley Investment Research. James E. Faucette - Morgan Stanley & Co. LLC: Thanks very much, just a couple of questions. First, Chuck, I'm just wondering if you can give a little more color on routing. If I'm understanding you correctly, it sounds like there may just be some timing issues that made the first quarter, the October quarter look a little bit weaker, but you expect that to bounce back strongly. And maybe you can give a little color on outlook how we should think about routing developing as we go through calendar 2016. And then my second question is somewhat related. I'm just trying to get a sense for how we should think about security. I know that's been a sector or segment that's been growing slower than the market. It's clearly a point of emphasis for Cisco. I was just wondering how we should think about that and your efforts there starting to manifest themselves. Thank you. Charles H. Robbins - Chief Executive Officer & Director: All right, James, thanks. I hope you all noticed that we're actually accepting two questions now. I think that – so good questions. On the routing side, James, you nailed it. It's a timing issue. We had good order growth. Our new routing platforms, the new platforms that we've introduced were up in triple-digits again from an orders' perspective. So we do expect that that will bounce back. And we also have some – as I said in the earlier comments, we also have some new introductions that will be coming out in the next week or so, so you'll see that. So we feel pretty reasonably well about our routing performance over the coming quarters. From a security perspective, I think that the team has done a great job. They've integrated the Sourcefire malware capabilities into it, into our firewalls and into some of our routing platforms. So they've done the hard integration work. Last quarter, we added over 2,000 new AMP customers, which is the advanced malware solution. We now have over 8,000 customers there. The revenue grew 7% but our deferred grew 31% as they continue to transition the business to more of a software and subscription. And the team is pretty confident that in the second half of the year we can be back in the mid to high teens from a revenue growth in security. Melissa Selcher - Vice President, Chief Communications Officer: Great, thanks. Operator, next question.

Your next question comes from Brent Bracelin with Pacific Crest. Charles H. Robbins - Chief Executive Officer & Director: Hey, Brent. Brent Bracelin - Pacific Crest: Hey, how are you? I'll squeeze in two and we'll go from there. Chuck, for you real quickly, APAC growth 3%, that's the best growth rate you've seen in two years. So what's driving the reversal on APAC relative to orders this quarter? And then, Kelly, if you could talk a little bit more about this shift to software subscriptions accelerating. Obviously, what does that mean from a revenue growth standpoint per your guide? And obviously, your op margins at the highest in what, nine years, what does that mean from an op margin perspective? Charles H. Robbins - Chief Executive Officer & Director: You take it, Kelly, on the numbers, and then I'll give some color around Asia. Kelly A. Kramer - Executive Vice President and Chief Financial Officer: Absolutely. So, yes, I'll hit the software subscription one. So this is a big focus of us both from the acquisitions that we're doing. As you see, most of those have been SaaS businesses or software businesses, as well as internal development. So we've really been focused on driving our software and enterprise agreements across the board, and I think you're seeing that translate onto our balance sheet that we will benefit from. When I look at the amount of our revenue coming off the balance sheet on the product side, it continues to increase, and that's how we're driving all our business units to continue to find those and build those solutions. I'd say Meraki is a good example in our Cloud Networking group, where basically a third of their business gets deferred the way they sell their solution. So we're going to see more and more of that as we go forward, and we'll see the benefit of that not only on more predictable revenue but also strong margins. I'd say on the operating margin, to address that, again we had – it was a great quarter for operating margin. I would say again where we talked about the benefit we're seeing on gross margins, we are being disciplined to make the right tradeoffs. We're going to fluctuate always between quarters, but we are again driving for that profitable growth. And we are looking relentlessly for efficiencies so we can fund the investment into the internal R&D and go to market. Charles H. Robbins - Chief Executive Officer & Director: Brent, you indirectly asked, so I'm going to give a little color on what we see going on in Asia. It's really a mixed story from just a performance perspective. China, we have been working and investing in for years, and we've been very focused there over the last few years. And we actually had a very strong quarter in China from an orders perspective, growing over 40% this quarter. Likewise in India, where we've been focused on a lot of country digitization efforts there with the Prime Minister and many of the ministries, and they really see the value of technology and what it can do for their country, it too was up over 40%. Then when you look at the rest of Asia, it was a real challenge. I believe it was negative 8% for the rest. And we did see some uncertainty creep in relative to those countries, particularly who had trading relationships with China, and also we saw the ripple-through effect of the China currency devaluation. And predominantly – or let me say, we saw it in some of the Asia countries in particular because they have such trading relationships. Melissa Selcher - Vice President, Chief Communications Officer: Great. Thanks, Brent. Kim, next question.

Your next question comes from Jeff Kvaal with Nomura Securities International. Jeffrey Kvaal - Nomura Securities International, Inc.: Yes, thanks very much. I wanted to throw my two in as well. Chuck, maybe this is less of a question than giving you an opportunity to talk about the second half. It sounds like you have a few irons in the fire that you're excited about. I'm cognizant that new product introductions usually take two-plus quarters to get going, so I imagine there's something else up your sleeve there a little bit. And then Kelly, I was wondering. Could you help us perhaps understand a little bit in more detail the impact of the mix shift to subscription billing, how much that is costing you in terms of revenue growth, and when you think that it may normalize so that the revenue growth matches the deferred revenue growth? Thanks. Charles H. Robbins - Chief Executive Officer & Director: Hey, Jeff. So on the second half, my position right now is that I feel like we're incredibly well positioned, particularly relative to the things we control in our portfolio. I've stated that I think that that inflection point in our data center switching, which has been a challenge for us for many quarters, we believe that will happen in the second half of the year. We've got new product introductions coming out across security, data center, as well as routing and others, so there's probably more innovation pipeline than we've seen in quite a while. I mentioned earlier that our team is pretty confident that our security business from a revenue perspective will get back into the mid-teens in the second half of the year. And frankly, we believe that some of the acquisition activity as well as the strategic partnerships could show up and begin to contribute positively perhaps sometime in the second half of the year. So I am cautiously optimistic, and I think I just feel like we're well positioned relative to our portfolio and what we control. Kelly A. Kramer - Executive Vice President and Chief Financial Officer: And to the second part there on how to think about the subscription and software part of the business, I would say you're going to see it a couple ways. I think the amount that we see translate onto our income statement or amortize off on the product side is just going to continue to accelerate. It's been growing in the 15% to 20% every quarter, and that's just going to continue as we look forward because we are growing our SaaS businesses. We are adding to our SaaS businesses with acquisitions. And I'd say on the other parts of our business that haven't traditionally been monetizing through software or licenses, we're coming up with all kinds of different offers that our customers are interested in. So I'd say we're going to see both the balance sheet deferred side grow. It will continue to be a larger part of our product revenue, growing double digits, but it's still in the 5% to 6% range as of right now on our product revenue. But that will grow in double digits going forward for many quarters. Melissa Selcher - Vice President, Chief Communications Officer: Great, thanks. Kim, next question.

Thank you. Your next question comes from Simon Leopold with Raymond James & Associates. Victor W. Chiu - Raymond James & Associates, Inc.: Hi, this is Victor Chiu in for Simon Leopold. I'd like to ask about trends in public cloud migrations. Some of the networking names that we follow have recently begun to flag the migration of applications from enterprise data centers to the public cloud as a secular headwind for their core business. So can you speak to the trends that you've observed and how that's impacting Cisco or how you envision that impacts your results going forward? Charles H. Robbins - Chief Executive Officer & Director: Hey, Victor. Thank you. That's a great question. So the way we see it is that our customers we believe are really committed to a hybrid cloud model. They see workloads that make tremendous sense to be in the public cloud, and then their mission-critical high-performance applications that they will continue to run in a private cloud. And we believe that we can provide the bridge for those customers. And I think if you look at our UCS growth and you look at our next-gen data center growth, that would suggest that customers are still building out data centers and still building out private cloud to take advantage of the requirements they have in high-performance applications, security, mission-critical nature. So we think it's going be both, and we have a strategy that not only is focused on providing the best infrastructure that we can to those public and service providers who are providing web and cloud services as well as a private cloud as well as the elements of our portfolio where it makes sense to be delivered as a cloud service, we'll continue to make those moves like we have with Meraki as well as security as well as collaboration. Melissa Selcher - Vice President, Chief Communications Officer: Great. Thanks, Simon. Kim, next question.

Your next question comes from Tim Long with BMO Capital Markets. Timothy Patrick Long - BMO Capital Markets (United States): Thank you. Just to head back to switching for a minute, a two-parter. On the campus side, it sounds like that was pretty strong in the quarter as well. What are you seeing? Is it Wi-Fi? What are you seeing drive that, and how sustainable do you think it is? Then on the data center side, it sounds like regaining some market share there. What do you think is helping with the greater than industry growth rate that you're seeing currently from the likes of the Nexus 3000, the Nexus 9000, and the ACI? Is it platform? Is it performance? What do you think is driving that? Thank you. Charles H. Robbins - Chief Executive Officer & Director: Hey, Tim. Thanks for the questions. So in the campus environment, we've seen several drivers over the last few quarters. This whole move to the Internet of Things and the connectivity of more and more devices, some of which are connected hard-wired, others which are just increasing the wireless spectrum and the bandwidth required, the transition into wireless access to higher speeds like 802.11ac, as well as the strength we've seen in our video endpoint business also translates through to, in many cases, refreshes of the networking infrastructure. And then finally, I think we see customers who are trying to beef up their security and are looking at some of the features that we can build into our campus platforms to increase their security. So those are some of the drivers that we see there. Looking at data center, I think frankly, the teams have just built an incredible architecture. And it is built to really lower the operating costs and increase our customers' ability to implement policy in the data center in an automated way. I think they've also built incredible high-performance platforms and have given the customer the choice of both merchant as well as high-performance ASICs, and I think that the customers are seeing it. In the Nexus 9000 we added another 900 customers in the quarter. And we're now over 5,000 customers with our Nexus 9000, and it's the fastest ramping data center product that we've ever had. So I think it's a testament to what the teams have built. Melissa Selcher - Vice President, Chief Communications Officer: Great. Kim, next question.

The next question comes from Jayson Noland with Robert W. Baird. Jayson A. Noland - Robert W. Baird & Co., Inc. (Broker): Okay, great. Thank you. Chuck, I wanted to ask you to comment on the storage market given the acquisition of EMC or planned acquisition of EMC. Do you need to own storage IP? Or maybe the better question is does it make sense for Cisco to own some storage IP given the pace of innovation in storage and your success with UCS, or is status quo the best plan forward from here? Charles H. Robbins - Chief Executive Officer & Director: Jayson, thanks for the question. So as we look at the future and we look across our entire portfolio candidly, we are assessing what our customers need from us and what solutions they'd like to see from us. And then we will leverage R&D. We'll leverage M&A. We'll leverage co-development. We'll leverage strategic partnerships, and we'll move on any one of those fronts across any area that we need to fulfill the solutions that our customers are looking for. Specifically, the area you asked about, to date, a partnering strategy has been sufficient for what we need. But you can assume that we are constantly looking at that and other areas and what we need to add to our portfolio. And then we determine whether we're going to do it via acquisition or partnership. But our partnerships so far with IBM, Hitachi, EMC, NetApp, et cetera, have been very positive for us, as you can see through our UCS ramp over the years. Melissa Selcher - Vice President, Chief Communications Officer: Great. Thanks, Jayson. Kim, next question.

Your next question comes from Paul Silverstein with Cowen & Company. Paul Silverstein - Cowen & Co. LLC: Thanks. Chuck, you mentioned that your largest web-scale customers were up by over 20% again this quarter. It implies that's been the historical trend, but that's the question. What has been the historical trend? Is that the right number? If you can give us insight on that. And then I've got a question about OpEx as a percentage of revenue going forward for Kelly. What we should expect? Is there more you could do in terms of further improvement? And finally, just quickly employee turnover, both desirable and not desirable, can you update us on that? Thank you. Charles H. Robbins - Chief Executive Officer & Director: All right, Paul. Now you're getting carried away. I'm just kidding. So let me take the first one on the web-scale side. I think I've talked about it in various forums that we really in the last 12 to 15 months I think really began to embark on building products and working with the web-scale players in a very unique way to make sure that our products really reflected the things that were important to them. So we've only talked about our growth there for the last couple of quarters. We haven't really focused on it for a while, but I'll tell you that it's really in last year and a half when we really got I think serious with them about building the solutions that they really are looking for. And I think that the growth that we're seeing right now as well as some of the co-development that you're going to see coming out is reflective of that focus. Kelly, on the OpEx? Kelly A. Kramer - Executive Vice President and Chief Financial Officer: On the OpEx, so on the OpEx, Paul, we are obviously driving that hard and managing it well. I will say though and just in full disclosure, as you would expect, much of the FX headwinds we're feeling on the top line, we are benefiting from on the OpEx side as well. So we're balancing both of those things. And for this quarter it was a couple hundred million dollars. So I'd say that we will make the tradeoff on OpEx to balance what the business is facing on margins and top line and everything else because we are being very focused on where we're putting those investment dollars to make sure we are putting the R&D dollars in where the innovation is. So I think what you can take away is that OpEx as a percentage might change as currency changes, but we will manage within there very tightly and disciplined in terms of balancing it with the rest of the business. Melissa Selcher - Vice President, Chief Communications Officer: Great, thanks. Kim, next question.

Your next question comes from George Notter with Jefferies. George Charles Notter - Jefferies LLC: Hi, thanks very much, guys. Earlier you gave a customer count number on the Nexus 9000. I guess I was just curious about the ACI version of that product. It's a number I think you've given in the past. And then also, I wanted to dig down into currency a little bit more. Kelly, I think you gave a nice comment on the translation impact on currency, and I think there were some comments about Asia and some of the transactional impacts as well. But I guess just digging into your numbers historically, particularly on the BRIC countries, I get the sense that the BRIC countries, some of them like Brazil, Russia, where you've had a real severe impact, you've seen big down comparisons for a period of time now. I guess I'm wondering. Have you hit a bottom in some of those areas of the world and the foreign exchange currency impacts starts to come off over time. So how big is the impact and when does it come off is the question. Kelly A. Kramer - Executive Vice President and Chief Financial Officer: So what I was referencing – again, I think for sure the impact that we can see in the countries where we sell in local currency, which is only a few countries, is about two points. So for all the other countries, including the emerging markets and Europe, it's hard for us because we sell in dollars to really quantify the impact, but there's certainly impact on demand. You're right about Brazil and Russia. They have been challenged for some time. I think the growth in our emerging being up 11% is largely driven by the strength of India and Mexico, which have been very strong for the last five quarters, and now adding onto that China with having broad-based strength is really driving that back up. If I back out the BRICM countries, the rest of the emerging markets are I would say not really growing. They're flattish to up to 3% when I exclude the BRICM countries because they are feeling that impact I would say of currency. And I think there's still the uncertainty if the U.S. raises interest rates what that will further do to U.S. dollar strength. So it's tough to have the full-view quantification of it, but we do think if the rates stayed where they are today, it might get a little easier of a headwind as we move forward through the year. And now it's just I think the uncertainty enterprises are feeling as well as interest rate uncertainty going forward. Charles H. Robbins - Chief Executive Officer & Director: And, George, let me circle back to the first question you asked on the ACI. I think you asked the ACI version of the Nexus 9000. I think where we're focused right now is actually looking at customers who are deploying ACI in general, so let me give you that data point. We added 200 more APIC customers, which are those customers that are deploying the policy engine that takes advantage of ACI, and we're over 1,100 customers now that have the APIC. So that's the number that I think you were looking for. Melissa Selcher - Vice President, Chief Communications Officer: All right, Chuck, I think that was our last question. Do you want to close? Charles H. Robbins - Chief Executive Officer & Director: Yes, first of all, I want to thank everyone for spending time with us today. And I would close by highlighting three things. The first, I really believe that we are executing incredibly well in a somewhat challenging market. The second is we had very strong execution in our results in Q1. We have solid growth for Q2, and we feel like we're very well positioned again for the second half of the year. The third is we will continue to move very fast in positioning ourselves for future growth opportunities, and I feel very good about how we're positioned in general. So thank you for spending time with us today and I look forward to talking to many of you soon. Melissa Selcher - Vice President, Chief Communications Officer: Great, thanks. Cisco's next quarterly call, which will reflect our FY 2016 second quarter results, will be on Wednesday, February 10, 2016, at 1:30 PM Pacific, 4:30 PM Eastern. Again, I'd like to remind you that in light of Regulation FD, Cisco's policy is to not comment on its financial guidance during the quarter unless it's done through an explicit public disclosure. We will now close the call. If you have any further questions, please contact the Cisco IR department. Thank you for joining us today.

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