46. Cohesity & Veritas exclusive, Sam Altman & Meta go for trillions, AI Chip wars
everyone welcome to the Cod I'm John F Dave elante this is episode 46 this is Super Bowl weekend Super Bowl 58 Dave I know exactly the number because every time the Super Bowl happens it's my my age 58 years old so oh that's awesome I've seen every Super Bowl actually every Super Bowl since Super Bowl 2 I've seen I can't claim the same so I don't I might have but I don't remember I don't think Super Bowl one was on TV was it I don't know maybe I'm not sure but to get the Niners obviously Bay are in silin Valley huge push people are pumped uh again um they haven't won since 1994 so they're hoping to bring back the glory um Jim Harbaugh was there um Kyle Shanahan I think was at one I think Jim Harbaugh was was KY Shan and then Jim Harbaugh made it to him but um it should be good how are you guys feeling out there in Silicon Valley about the Niners chances well you know I'm a turn coat so Patriots fan given the NFC and AFC don't compete Pete I love the Patriots first Niners second um but people are jazzed up I think they think it's the better team but they're always worried about momes and Kelsey if they show up that changes the Dynamics and I think you know their line and their defense played well last week so you know anything's possible but I think last year I was in Philly with Paul Martino uh for the Eagles and you know eagles look good and they just it was a last minute ending weird ending and they lost so anything's possible with the Chiefs and that's the feeling generally here but people are pumped yeah know it's Super Bowl and there and there's two types of pump right there's the the fans who actually want to watch the game and then there's people who have parties who happen to have a game on and so I tend to be hardcore on these Super Bowls when I like the team so I don't want to go to the parties that that where people like want to talk to hey how's it going with silk and angle like that stay away I want to watch the game I hear hey what's going on what's new what hot stars have you seen oh sit I don't want to talk can I just get another beer and watch football thank you I like the ners um I think they're going to win but I bet a whopping $50 straight up on Kansas City because it was just better odds um and Mahomes but I'm I'm going with the home team even if but I I kind of rooting for the ners you know because you know why it's weird we people around New England we have this weird thing we don't want Mahomes to catch up to Brady so we kind of always root against them but you gota you gotta be I know it's weird isn't it but well we got a great pot here Dave I was like last week we couldn't make it because I was at Pebble be with golf and opportunistic BISD and and content acquisition some great stuff down there with SAS Cisco a bunch of companies down there so um but we got Sanjay punin coming on this podcast so he'll come on um at uh in a few in a few minutes as we get why what's he been up to yeah you he left the mware he was doing all those m&a deals he air wash remember his career we've been following him since sap good friends you yeah um took over cohesity I think at a time where he thought he had more Med in the bone but as the market changed cohesity I think in my my opinion you have probably more data um I know you do but I I've been seeing some of the results the Market's shifting right so cohesity you know was doing okay but not super great from what I was hearing and again the pr guy who was over there before was kind of went cold silent on us and and I think he then moved on but the point is that they weren't really talking to us and I felt they were kind of bunkering down Sanjay was beavering away my guess was he was organically trying to figure out the growth and then looking at m& and or sale options I've heard that there was you know looking for Partnerships I wrote in my post and then retracted it because I said that they were trying to sell it yeah and why'd you retract it I mean there was there was strong rumors that they were trying to sell to IBM I heard they talked to Cisco I heard they even talked to ruber yeah so that's true I couldn't prove that they were in a selling process so I re wrote they're looking for a strategic partnership which is you know you float the trial Balloon by as everyone knows how it works code is if you're you're in a sales process you're like we're selling the company and that's what they're not they're not doing that um but they were definitely floating in do we sell or do we merge they were looking for strategic Alternatives right I mean they gotta get to to to get to escape velosophy you gotta have got be a billion dollars plus I think that's what this is about but I we'll ask no I I don't think I think it's about the fact that they couldn't find a dance partner that was better than Veritas so I think with Veritas Veritas you have the data I talk to Rob stretche about this and the KE research team about the spending velocity their spending momentum wasn't that strong so that's an understatement their spending velocity at Veritas was was really crap so they got this they got so but they got a huge install base so sanj is a consumate dealmaker so he goes okay they have Hardware's got Hardware veritos doesn't they got combined combined together it's a brilliant play and you know it's all about they can pull it up Zeus's post was good but he also he's skeptical he zus is skeptical of all deals and we know that but his analysis was good can they pull it off but sanj's done this before we've seen it hit VMware air watch so you know when he comes on we're going to Pepper him with questions let's ask him the questions if they were selling or not we all know how it works in Sil I'm not for sale you're selling but I just think they were I think they were looking for options and then and they ended up you know with the one that got them to be a bigger company I think they and what is it it's a$7 billion valuation but a lot of debt they're taking on right picking on a couple billion dollars in debt well the the combination it's an instant company if you look at cohesively how big they're going to be overnight Dave this is a serious deal I like the deal I mean I'm one of the I maybe the only ones that likes the deal but no no wait they're going to Triple in size right that's a I think that's a good thing now they got to manage that they got to figure out what to do with the various road maps and the the Veritas andall base which is pretty entrenched are they going to give net backup customers a path what does that look like we'll ask them Cisco announced uh layoffs thousands of workers are being laid off um we talked to some folks at spunk this morning they're going to be part of that probably layoff as well but they didn't tell me that but I'm guessing it they're nervous uh in general so we're going to see how Cisco evolves with Cisco live coming up in North America they just had Cisco live in Europe you know um just recently obviously we're we're been covering them like a blanket we'll see how how that shakes out but you know people are cutting the fat your storage had a huge earn a layoff about 250 to 270 people in Pure Storage were laid off and uh from my sources what I'm hearing is that that layoff was to really real good people some solutions people field people um um flashblade AI group people so and and the story there is interesting and and the Rumor I got some validation but I don't have three sources but pretty much solid that it's the classic case of in order to get budget you got to cut someone and you see this in companies all the time Dave you know we talk about it all the time for companies that are bootstrapping hey if I want to get that extra head or fund that project I got to get that money from somewhere so I got to cut something so that's what's going on at Pure Storage they got the moonshot they want to be the SSD player you know them very well um well can I comment let me comment on the um on the layoffs if I may yeah please it actually is working for earnings look at Amazon jasse cut right and boom look at what the earnings were last week look at meta it was like last year was the year of austerity meta is out kicking ass their their valuations now back up over a trillion the only one that really hasn't Microsoft hasn't had to as much but Google really hasn't gone on an austerity program I wonder what you make of that John it's like you know the street probably the street loves when people do layoffs because it drops right to the bottom line and you got Ai and you're you're doing all this productivity Google hasn't done it so they continue to just like ignore the the the cat calls from the street and double down in technology you wonder is long term is is that like a really good play or do they maybe pull the trigger down the road um and then there's like a huge upside to Google they just keep Google head the sand no I I think Google doesn't operate that way Google has natural churn they kind of force people out and shut down projects so it's not like what do you mean by that explain that it's not like a layoff so what do they do they have a lot of moonshots they have a lot of stuff that go on so give an example let's say they have a project they're you know making self-driving sa flying saucers or drones to FL packages they'll have like hundreds of people working on that and they're like okay that's over okay so they and then they just cut it and when they cut it those people are gone and they have to find jobs within the company so it's not like a mass layoff like we're cutting like like a Cisco's announcing that's broad stroke and so that's that and then people leave Google if they're not happy so Google's one of these places where if you want to sit there and and and twiddle your thumbs you probably can get away with it and most the people don't do that so that's kind of how how they are but Google's Rich they got great cash flow their earnings they got alphabet they got Google Cloud so um Google's just a different animal I think so this a different culture it's interesting so anyway the U speaking of Google News um Dave you know the big story is their new their their rebranding of Bard okay so that that's a great pivot to to Google's Gemini uh project so basically Bard was took duet so they got duet ber do at AI infrastructure products are branded as Gemini now so and they're going to charge for that right they're GNA they're going to yeah pay for that now right you gotta pay for Bard or Gemini right well and it's also The Branding integrating and everything so first of all the Bard thing is gone that's that they're rename right so so what are we paying for now we're paying for chat GPT if you want 4.0 you're paying for perplex we pay per perplexity right you got to pay for that no I don't I don't pay I use the free version is there a paid version though what there is a paid version I haven't used it or tested it so I don't I don't know and then I and then you could pay you could pay for Google now so there's like three of them like and maybe there's more I don't know yeah I mean they got their own llms and we'll see how it goes so that's that's big news there that's going to dominate my opinion Google next which is coming up in April um so Google's working on that so I expect that to be a big big story what else is going on this week Sam Alman news we're going to get into that huge news huge news let's let's get into it so so and by the way there's a lot of stuff going on open AI Meta Meta spel their 20th birthday saw some great photos on my Facebook feed from people that were there when they 30 employees so all all good let's get into Sam ultman and the chip so there's a couple stories here let's talk about the chipping away at the future here um you have you got Sam Alman in the news you get you did a just did a breaking analysis on on Intel Nvidia is forming a unit designing custom chips it's funny da we we talked about this at invent it's a Chip War okay and and everyone wants their own chips um and and and the Nvidia is targeting very interesting thing and and we put a post up actually Zas wrote a post Z caral wrote a post about equinex and um and Nvidia so Nvidia is getting traction with their DX cloud and and and rumor has it that Amazon and and Nvidia are at odds a little bit there so look at look at Nvidia making their moves so that's Nvidia forming their own chip unit you talked about Intel their own Foundry and then the Wall Street Journal has an exclusive where they had quote sources colon Sam ultman talking to investors such as the UAE governments to raise five trillion five to seven trillion for a project that would boost the world's AI chip building capacity okay I have never seen a headline with a T in it ever in my life is that unbelievable that is the first time I have ever seen the te in a freaking headline I woke up this morning for that I had to like rub my eyes go what is that five to seven you say trillion is that a ter is that ter supposed to be 50 to 70 billion but wow and you know I just I just had been uh Baran barah is that how you say his name Ben it's spelled barin Baran Ben Baran on and he's like knows the space and I was asking him about chip manufacturing capacity he said they're they're maxed out it's absolutely like totally maxed out which is good news for Intel because that could help save them but but to the point so I've been saying this the chips Act is 50 billion it's just like a little tinkle in the pond right and so so Sam Tink five to seven trillion and that to so Intel's building like six new Fabs and Pat kelinger said a new Advanced Fab cost 30 billion to build that's $180 billion do so he's gonna get what 10 billion from the US he's going to get 10 billion from the EU so he's got 20 billion where's he going to get the other 100 to 120 billion it's not going to come out of cash flow so that's why this really caught my attention I mean five trillion and that's that's what this needs to to actually solve the problem I mean it's G to be it's gonna it's not 50 billion is not going to do it yeah and and you know I would never i' never thought about this before and in in saying and saying it out loud I thought about it in my head but never thought I would utter it in in public never mind on on a podcast or on on the cube is that you know you're talking about scarce resource at this point you know water chips you know there's a real threat to the economy and the world you know we don't if we don't have enough chips and there's so much momentum think about the pressure that put going to put on society if if the appetite and the and the drive to drive more computing power um water electricity power chips man it's unbelievable if you just this puts things into perspective and for you know as as K schwier calls the Silicon Valley the Backwater of tech you know only these conversations were happening in the backwaters of the of the of the elite when people were talking about building Fabs and and building chip centers around five trillion dollars to to have it out in the open like this really mainstream points to the societal change Dave and this is like why I think AI is so exciting on the one hand and um you know scary on the other where does this go does it slow things down and what does the entrepreneurial equation look like what's the future entrepreneur look like what does the next you know um you know Bob noise look like what does Gordon Moore the future look like these are the pioneers of semicond well of seems like he wants to be one and then the other angle there with with he gets dinged all the time he's not a techie they say he's more of a well he's a Visionary he's a Visionary but but he's tapping the UAE which is really interesting to me because you know the Oil Kings they want in on AI you know we know that from our sources who spend time over there and you know they they're looking you 100 years out and saying okay you know and they know semiconductors are the it's like the the mainspring right that's like oil you own semiconductors you can control things and so now the speculation was well maybe the US won't let them but the US 50 50 billion I mean that's not going to do it so I like the idea of the US kind of bellying up to the UAE figuring out how to fund this thing getting manufacturing you know it's it's you know 80 90% now is Asia 90 plus percent of the Leading Edge manufacturing is in in you know southeast Asia get that back to 5050 50% outside of southeast Asia that's what gelsinger wants to do and I think I think it's going to take trillions to do it maybe not five to seven but you know one two three trillion that's the way to think about this so I threw a little troll or like a hay maker on Twitter recycling a clip from the cube where we pontificated an idea and put a question mark out there and I think remember the conversation of will Intel go bankrupt um I got a lot of great respon are you kidding me so again the point I mean we talked about this in the pot a bunch of why do people say you're kidding me where are they gonna get $1 1880 billion dollars to build six factories so I wanted to bring I wanted to bring that's not inconceivable I want I wanted to bring that back up because Dave we talked about this as a riff and we were speculating and talking connecting dots on this point what do you think is that still even possible or is that just still over the top Ben who knows this space he's actually optimistic about their Foundry chances and what he said was number one they created separation between the the manufacturing and then Intel's own design so they created a Chinese wall to allow The Foundry customers to have confidence that they wouldn't be taking their secrets and giving them over to Intel chip designers the second thing is he said look they they're on their way you know four nodes in five years that whole thing that Pat always talks about and they seem to be getting there they're they're using this ribbon fet technology and trying to Lea frog what you know uh TSM is doing they're finally using euv but they're six to seven years behind so anyway he feels like they got a shot at being you know a reasonable number to but my question to him was still like okay but how do they throw off enough cash to fund all the foundaries and he didn't really have a his answer was they can't do it alone but my point is the government 50 billion and they're only going to get a piece of that and maybe 10 billion from the EU there's no way that's going to fund and they're not going to throw enough cash off out of their their core x86 business and Foundry is is not profitable and The Foundry is really hard business to make money at even TSM I mean they they make money I mean I got in front of me TSM is like a68 billion company you know their growth rate is flat because they can't make anymore they got a 57% gross margin which is good their free cash flow margins like you know you know 10% on on on 70 billion I mean it's not like the greatest business in the world and so how's that going to throw off enough cash for Intel to fund six new factories I I don't know where the money comes from other than massive debt and our subsidy government what US taxpayers I mean three trillion in debt already well talk about trillion so let's get back to the the trillion dollar baby here with with open Ai and Sam ultman so7 trillion doll okay that's like what Apple Microsoft Amazon uh combined in terms of market cap maybe what 20% of the GDP I mean Dave this is incredible you know I know it's insane but but but but it's it's telling though right it underscores what this is going to take so there's no way the government could subsidize that again and by the way he calls it networks a network of Fab factories not just one so it's like a series of ways to build chips we'll dig into it more but this is just a sign of the times and again back to the resource piece you know to me you know there's like energy involves of course you know people trying to get out of the oil business are trying to get into the if you're in the oil business what's the next Oil it ain't J it's AI but it's also chips John the the the department of the US Department of Defense def's budget is less than a trillion okay think about that for a second so the military can't fund what's necessary right the US government's got $33 trillion do in debt well maybe the dod should shift their focus to chips because it's it is a national um security Challenge and hey look what comes out of funding the whole Cold War funding pretty much funded DARPA you know all that our research grants um helps funds Innovation so you know maybe shift it a little bit over okay so maybe they can kick in I don't know 100 billion it's still it's mice nuts in terms of that's what that's what alman's Gambit here tells me is that that's the kind of thinking and so he's looking ahead saying wow we just don't have enough chips to power the AI era to get to AGI of course he's got a Jones to get to AGI I'm not sure I want to get there that fast the chatbot Market's maybe more valuable than we thought Dave to run chatbots well I mean I'm only kidding honestly I I get well no I was going to say well M Microsoft's valuation went up a trillion dollars last 12 months and uh their revenue grew 23 billion you know they they trade at 10 times Revenue so that's 200 billion I'm the rough numbers so that's $800 billion dollar of value associated with AI I mean I think I think the Innovation this is crazy times and and what I when I look at this I brought up earlier the entrepreneurial equation because the entrepreneurs are the ones going to solve these problems I'll give you an example remember back in the day when memory was like 8K 16k um you that had to swap the disc I think there's a lot aging and yeah remember so so I think the constraints always shift and here the constraints are power um certainly for the power the and the chips themselves on the supply of the chips so what you're seeing in open source right now with the llms and the foundation mods is a great usea use case all the big guys with their proprietary mods open AI anthropic and everyone else they were proprietary dedicated llms open source is now almost caught up to that and that's why I think the the Llama what meta is doing is interesting so the question is is this real and can that be solved so I think the entrepreneurs out there will invent something that will solve this and I think that's where the the Geeks are going to work on because the Market's too big the fact that they even thrown on the numbers means that uh the t is pretty strong to to go after this and if you look at the data I mean I'm seeing an article here that just hit from Financial Times uh open ai's annual revenue hit two billion in December up from 1.3 in October and they're looking at aiming to double that figure in 2025 so you know in one year it's A2 billion doll business cash dude talk about offthe shelf spending I mean off the chart spending data open AI hit the scene out of nowhere and it's it's it had it blew past anything I'd ever seen even snowflake which it when it came out it was off the charts and it sustaining its lead is so far ahead all those other names when you see the spending data coher anthropic you know llama 2os coming in but open AI has just got this huge lead which of course I said was not sustainable that prediction is not looking too good I'm really happy I'm looking good on my prediction on that one I got that one right I get a lot of pred wrong folks don't don't go to don't go to the bank on my predictions okay I mean they get a lot right too but I definely I definitely get most of mine right so whatever I say what probably will happen so I would Bank on those and put all your life savings on oh what's the disclosure don't this is a show not a financial advice right be careful listening to us we we we we make no we're being humble we're pretty good we make pretty good predictions let's face it we're not we like to we like to Pat ourselves in the back pretty much better than anyone else out there on that front um oh relatively speaking John I mean I was just talking about you know trying to be yeah honest on B binary actually I did okay on my I get a consistent B+ on my predictions uh I can't I can't crack the a r well well you you well you go narrow I mean the thing about the predictions is if you try to specifically predict something to happen specifically which you do it's hard to get those right and the to me what we we've been focused on you and I since 13 years working against looking Ang on the cube is we get the trends right because the waves all about to me it's about the waves and then how you ride those waves I was joking with the founder of uh Kong came in the studio and he's like yeah you we were in the right way but we didn't have the we had the wrong surfboard was his analogy and he said once our team realized we're on the right wave that was a success for the startup then they just realized they had to get a bigger board and they they manufactured that they did that it's called the API um proxy um API server and so that's what this is where what we do and I think a lot of companies and startups they get caught into the mechanisms what they're building they don't realize am I in the right Market the right wave and is it a good wave and what do I need to ride the wave to survive and then keep getting the board better and adjusting so the AI wave is massive um the infrastructure side's massive we're covering it seeing all the data point to it from the changing landscape of media the layoffs um I think last podcast we were on you and I talked about John Chambers who was famous quote about Transitions and I think you know it's guys like Sanjay punin for example we're gonna have on shortly who is an m&a King he's so strong at m&a because he can see product holes and he can make decisions around organic versus um U non-organic growth and knows how to fill that void so he's an impressive guy I'm psyched that we're getting them on I love Sanjay but such energy and clarity a media Hound too he likes to come on camera totally that's why we love him Cube we are too so yeah earning earnings are out there what's your general consensus what do you I know you had a big um Amazon analysis we had arm came in this week Cisco's coming next week um what are you seeing for earnings you know what what's happening I'd love Amazon right now I think you know jasse people were calling for Jesse's head several quarters ago and of course you and I laughed at that I mean we knew knew he was going to get his arms around this thing so he's got you know he's got a pumping on a couple of cylinders obviously the retail business is going really well he's got that advertising is starting to to crank up have you um have you been hit up for your Amazon Prime ad free yeah I you no I didn't click on it yet will you do it you think I'm not sure I kind of I'm off put by that to be honest with you I think but but but I bet you we end up doing if the ads get too annoy you're going to do it I bet the streaming the streaming services in my opinion generally suck okay compared to broadcast television there all kinds of buffer loading errors it's just like bad PC management it's like but you know it's streaming you know it is what it is I'm not a big fan of the tech I think the guides could be better there's a lot of cross API credential sharing that's different different plans um so I'm not a big fan of the streaming as a cohesive user experience I love the direction don't get me wrong but not a big fan so Amazon I'm I'm I'm excited about I think they're they're back and a couple things Jesse said that cloud optimization has attenuated I love that word and I tweeted out the data shows that in January 2023 19% of the customers that we surveyed with ETR said that cloud optimization was the primary way in which they were going to moderate costs and that's down to 7% a year later so that's clear evidence that it's it's waning it's still there but it's but it's it's lessened and so now and the other thing we see is when when Bedrock went GA um in September is time frame October we're seeing an up you know a Tailwind from that and so Amazon's got I think look I mean you can say what you want about Titan you know maybe it's not like the Leading Edge large language model so what doesn't have to be Amazon can offer a lot of different language models and the surrounding tools and capabilities are going to give them a lift so I really like Amazon right now Microsoft's Microsoft you know they kind of came in where everybody expected which was awesome and they did that I Google was a little somewhat not disappointing and then it's just like okay you're the AI leader you know where's the AI boost and everybody's freaking out you you you listen I listened to the call the other day I wasn't on it but I listened to it in replay all the analysts cared about all they wanted to talk about was how advertising was going to get impacted by the perplexities and the chat gbts I mean that was their focus I mean they were just pounding Sundar you know with those questions they didn't even they didn't even hardly talk about gcp and gcps growth is it's me they're they're like a distant third still so it's hard to get too excited about Google but if they cut costs like we're saying before that could be pretty interesting and then arm this week arm absolutely crushed it you know arm's a company with nearly 100% gross margins because they don't they don't make anything they just they create an architecture and license it and so arms uh valuation shot up I got I got it right here I was I was shocked when I looked at it I was like holy cow their their valuation is now as of midday today it was 115 billion 38 times their $3 billion Revenue I mean they're they're closing in on I mean Intel's got $183 billion valuation TSM 690 Nvidia 1.8 trillion amd's got a$ 278 billion doll valuation you know way higher than Intel's and and and they're like half the revenue less than half the revenue yeah so pretty interesting what's going on there yeah and and and meta had a big announcement there their earnings were all through the roof theyth point they're now one $1.2 trillion doll valuation Zuckerberg's wealth reached 165 billion personal record due to the stocks rise at 22% every time meta gets crushed I look at it and say two billion active users right how do you compete with that they all they'll always find a way and it' be interesting to see with a metaverse you all the Apple Vision Pro talk this past week was was was hot but you know meta's there too I don't know I'm not a big Vision Pro guy I kind of not into the Meta Meta is a money machine I remember a friend asked me I won't say his name but should I buy metastock was bottoming I said definitely buy it and I said well he goes why they're getting killed oh yeah yeah it's a money machine to get Instagram they got connect it all together he did he's happy now do you remember do you remember we were at or on open world years ago in the little mini Q Logic Cube remember that we used to sit like this in a 10x10 space and Facebook got crushed um and we interviewed Benny off you did it was amazing and then we we went back and forth from the studio well the the Q Logic Studio on the floor and I remember Facebook stock got crushed that week and you and I were talking about it and you were like it's a screaming buy yeah um that was 2011 2012 yeah if you bought that stock you're rich now but the thing that's even more impressive about this earnings is they had their first ever dividend so now can to have dividends Dave so this is going to be a great stock to have for people if they want to have that blue chip dividend so um smart move by meta you know just you know you want to win you want to win Wall Street over the spread the wealth that's the other thing Google doesn't pay a dividend and they got more cash than anybody you know who pays a dividend a really nice dividend and does really aggressive stock BuyBacks is Dell do you see Dell stock I mean Del stock does Amazon pay a dividend no I think no I don't think so no they don't they don't they don't they don't they don't they they prioritize expansion over distribution profit well it's not only that it's not only that they haven't had the liquidity to pay a dividend but they do now so it's going to be interesting to see whether or not they do in March of 2023 Dell stock was at 36 and today it's at 86 and and the reason why is I mean wow his market cap is now 60 billion so they they're getting close to 1x Revenue it's like they're getting there but um but they basically said hey you buy our stock we're gonna we're gonna pay you a fat dividend and we're going to do aggressive BuyBacks and of course Michael Dell is the biggest owner so people say well you're that benefits you and he's like yeah and I'm GNA give a lot of dough to charity so that I think is pretty awesome so that's turned out well for yeah you know Michael Dell's like the scene and Godfather you know I make my investors my partners make money that's true play hard and play clean as he says makes money play to win and play play hard but play to win what's the slogan play clean play nice play nice but win play nice but win yeah I like that play hard and play clean is my that's what people with Integrity do John they they play fair play nice and they win the Michael Dell culture of play nice and win or as we say you know Play Hard Play clean is really a great philosophy and I think Dale executives should look at their suppliers and and and take that people who play dirty um and other people who do that and any executive should look at that and say Hey you know who's playing clean who's playing dirty and that's that's a direct you know mandate I think for all businesses especially now when communities and word of mouth is so so efficient um can't fake it till you make it and I think that's important but you want to get back to this dividend thing because you you look up your point about the sign of the times Amazon doesn't pay dividends they they give give priority of expansion over over sharing profits with shareholders meanwhile Apple Microsoft do give dividends now you got meta so you know back to not to bring up the old Monopoly game but utilities right you know everyone wants to have a utility so question is if you look at what's happening in the market today the big conversation is what are these big whales doing the big hyperscalers that they produces so much cash U and what do they give back now related to this is a Trend going on in the VC Market we reported on the QQ pod what four or five pods ago that um app the combination of Facebook Nvidia and Amazon are combined more in um percentage of investing in startups than V all the VC Market combined okay so this idea of doing that is interesting and then you pointed out right rightfully so that that's a credits mostly credits not cash so here you got the big clouds like Amazon and Nvidia giving e taking Equity Stakes because the costs for startups to run on the cloud are so high when they cross over and become successful with product Market fit they become customers so it's like here the first hit of crack is free here shoot this heroin up take it and then they come to the cloud so this points that's a business model strategy but this points to the fact that they're like utilities Dave hypers scales and large Tech firms are investing using credits not cash in startups for in exchange for Equity that is a dynamic that's going on so this is an interesting thing now is that considered cost of goods sold or customer acquisition costs because if you're a startup you know you got you want to be relying on one platform so that's why you see coherence proba all with these deals and that's the that's what's happening the credit investment is it a credit investment or CAC so this is interesting this is a very interesting power Dynamic so you got these big whales Apple meta providing dividends there are are they utilities Dave that's the question are they U you know they're they're they're more than utilities they have that utility like Dynamic but they're still like Innovative tech companies I mean meta is innovating U certainly Google's innovating Amazon's innovating Apple everybody says you know was waiting for them to come up with their next Innovation you know I don't know Vision Pro is is is kind of innovative I mean I would say Apple's still innovating so they're there because utilities don't innovate they just extract rent so these guys are utility like in that they just consistently throw off cash they're like cash flow machines ATMs but they innovate so that's why their evaluations are so high well when you have utilities they're usually regulated right well that's that's probably coming for Tech and that'll screw up everything just get let Lena KH get in on it I listened to a uh if can I do this quick side rant yes definitely I I listened to a uh interview that she was doing I don't know with sorcin or somebody a couple weeks ago and she was just doing the same old same old you know talking about extolling how in the past they have been so successful the the FTC and um and and the doj at moderating these big monopolies and it she yet again she rewrites history she uses AT&T as the example I mean we were there we saw the AT&T breakup and they went into all these little baby bells and these little baby bells were they went from big fat regulated slow AT&T Monopoly to little smaller fat slow monopolies that were largely unsuccessful got scooped up by all these big cable companies Comcast and and Etc and what happened to the a jewel of American innovation Bell labs when that all got broken apart and and and regulated well what happened was that it ended up at Nokia Nokia now owns Bell Labs so Z so it was like zero Park Bell Labs just went away and so her point was well we created so much competition the US don't you remember how bad the US telecommunication system was after the AT&T breakup how non-competitive it was essentially until iPhone came out I mean that was what changed the game anyway there you go there's my rant for the day well if you're listening to this podcast and you want to send in a a note we'll read it on the cube pod so send me or Dave a direct message you want to comment on the Dave's Rand You Believe It Believe it or you want to disagree with it or your Dave send us a note Dave we'll read it on we'll read it on the on the couod I got I got an email from someone I'll read here today um they wanted their name to be anonymous but they said love what you guys are doing what do you think about IBM John I heard your rant with Dave about IBM I think IBM is a winning hand but I think they're light on Tech more Professional Services what do you think and what does Dave think yes no what's the question again tell me the question again the question was I heard your um loved your um debate between you and Dave on IBM remember when we talked about the IBM earnings yeah and uh and I said well you know I wasn't as bullish on Watson as you were Watson X I haven't seen it and I said and I said the and and then this so the reader says I saw your rant with with um your debate with with you and Dave loved your takes on each side of that I think IBN is around for the long term with AI a Tailwind but not sure about the tech but more but I like the Professional Services angle what do you thinking what is yeah so I definitely I mean Regal Services their Consulting division is a is a is a Mainstay it's a foundational division for IBM and it gets them into so many highlevel conversations and solving difficult problems I happen to think that they've got it right with Watson X when I look at what IBM is doing in shipping relative to some of the other leaders in the marketplace in analytics and data whether it's data bricks or snowflake or some of the uh the other companies that are doing governance some of the smaller companies like in Elian or calbra uh I see IBM as in a much much stronger position than they were with Watson 1.0 I think the tech is matured I think it's real uh I think 've got a full stack and I think they're going to be embedding that into a lot of different places um in in software ecosystems I think they're way more partner friendly IBM Embraces open source I think Red Hat was actually turning out to be a really good acquisition I think arvin's got them really focused I think their hybrid Cloud strategy is working and that is is a much more balanced equation now it's not like everything's going into the cloud every day as it used to be uh so I I think IBM's in a really good position with some significant upside in my opinion yeah I mean I I take the position of I like this uh comment um it was from an IB Hammer by the way so um I like the question because one I'm not really sold yet on the tech because IBM has a lot of tech but okay that's a whole different conversation but I think the big Trend that I see going on with this whole hybrid cloud and on premise momentum is not so much to do with the fact that the old guards catching up it's the fact that company like IBM even some of the bigger companies even like Amazon's got a lot of cash IBM's been around all these Legacy companies that are still around are if they pivot properly they have a lot of built-in DNA and they serve customers that have been working with them to transform their Computing architectures now it's just happening a lot faster right now and a lot of companies have this administrative overhead that's that's been growing faster than probably some of their lean meat so so there's a lot of fat to cut that's why there's a lot of layoffs so I think companies like IBM that have great Professional Service that know how to do transformational projects will do extremely well with just a good enough tool and that good enough tool gets them in the market and can iterate and grow faster so I'm saying that I like the question because it's actually the Professional Services of IBM combined with the good enough Watson it doesn't have to be open AI now open AI is out there I'm sure every customer will use it for some other alternative of proprietary Plus open source so IBM's in a poll position to use their resources that they're good at to help companies their customers do what they've been selling them for years to try to do and so you have a robust market for I every IBM customer so I can see IBM doing well plus they got red hat so um companies like IBM that have installed base that's why I like this cohesity deal we got with Co with uh with ver Veritas that's why I'm bullish on it because their customers are now in demand help us more faster so IBM's customers and all these Legacy customers are like I got to move faster so so they know how to do that and that's the key and they just need the right tool for the job and it doesn't have to be super great it could be good enough to move the needle and that that's what I think uh the ai's passes the mustard because they have all that DNA and trying to sell the old Watson well so this is what's happening with with IBM so the old Watson is they're they're transitioning out and and churning the the base of old Watson and bringing and moving them to new Watson and they're bringing on new Watson customers if you look at the spending data it's actually quite remarkable you go back you know let's say about a year there were far more customers like huge number of customers 20 35% that were either spending less or churning and then it was a big chunk about 40% of the customers and we're talking you know a decent size you know over a hundred customers in the survey a big chunk in the mid in the fat middle that was just flat spending s of sitting on their hands very very small percentage new new customers and you know decent percentage spending more like 20% and that was probably the new stuff those those numbers have started to do this those that are spending more and coming on new it's now like 2737 it's almost 40% are either new customers are spending more and the churn is going down and the spending less is going down so we measure this by a thing called Net score their Net score a year ago was like minus 7% and today it's up to like 21% so it's it's like a 30% swing in spending momentum and it's just going in the right direction so we'll see if that's a continued Trend it's one two three four quarters now it's done this so they're looking pretty good this is just the the Watson piece and then you know if you look at if you look at red hat that red Hat's always been solid always and so you know outsourced it you know that doesn't look so great great you know it's like a flatter business and that's kind of the Kindel business but the Consulting business it's solid you know again I think I think arvin's got him in the right direction he's not what he's doing is not just aspirational it's very achievable in my opinion and they they made all those cuts so they're dropping a bunch of money to the bottom line so this the first time in a long time I've really been truly excited about IBM's prospects I think they're back well I think there's a lot of action going on one of the things that's I saw on on um on on on Twitter was and Sil angle covered it is that you know there a lot of funding happening right so you got um the founder of pivotal raised a bunch of cash um rob me remember Rob keep alumni raised 24 million to help companies ditch their mainframes for the cloud mechanical Orchard it's called so um pivotal Labs successful company great culture uh that was cool ninja 1 raised 231 million at A2 billion valuation okay that's interesting and of course some uh cucon news um kubernetes automation company uh startup company weave work shut down so you know remember we talked about kubernetes being boring Dave and that there's no linux's standard that no no one really has a conference around it kubernetes is becoming successful and with that it's like it runs so there's no need like so um there's no need for manag service anymore it's just it's like Linux you just install it so I think you're starting to see people pivoting in to that so again this is why I like this is why I like we're in a market transition and we're GNA bring Sanji punan on soon and he's when he comes on okay this is the questions I'm going to ask him we're in a market transition is that people going to be on the wrong side of History what street what side of the street are you on the right side of the wrong side as this wave hits are you are you going to be Driftwood or you going to surf the wave that's going to be the key and I think this is his opportunity um on a on a more personal note I'm going to ask him was there any other alternative is this musical chairs and the music is it stopping and you just grabbed one don't know um these are all questions Dave I mean what are you g what are you gonna ask him you know I want to know sort of what the impetus was for the deal um and how you take you know one plus one and make it more than two um and I want to think about you know sanj is all about Innovation he's not a this is this he's not a consolidator right that's not his play he's about investing and growing so I want to understand how you take a company that's not growing and a company that is growing cohesity is not growing sorry veritos is not growing cohesity is growing you put them together how do you make that grow and what do you do with the road maps on the different products you know like net backup for Veritas I'm also interested you know a lot of lot of veritas software companies run on other people's platforms like they run on Dell like data domain are they going to continue to support that or because they're competitive are they going to cut them off I would imagine they're going to cut them off but we'll see um but maybe not um you know how are they going to migrate them into cohesity and what about the IPO what are what are the IPO prospects I want to understand that as well okay Dave we got s pin who's the CEO of cohesity who announced a groundbreaking merger one company with veritos combination of two great companies one I think cohesively more relevant than bar house in my opinion I wrote that on my on my LinkedIn we get sanj's opinion sanj punin Cube alumni friend of the cube um I got a lot of people saying I was too positive on my post I thought I was kind of critical but optimistic U congratulations um welcome to the cube pod first time on the CBE pod I love this I've not been the qod I've been on the cube I've been on video with you and you keep innovating new forms of media it's always a pleasure to talk to two of the smartest people I know in Enterprise Tech Dave and John always good great to talk to you hey thank you great to have you on just to set this up uh you announced a merger with veritos both comes we follow closely data and Security Storage you know the full transformational Journey um you took over cohesively I think you told me privately you're G to dig in look for some organic growth but you're no stranger to inorganic you did this at VMware you had a stellar track record sap and VMware where you brought in a lot of action air watch we covered those all that news here this is a smashing asset combination and it's almost like it really is good good fit I mean I commented on I'm like okay you know what's going on this Market we're in a market transition AI is coming everyone's building out infrastructure it's not just storage it's security it's data uh you have great founder over there with moh he's been on the cube um why this merger explain what happened how did this come about what was the history of it and how did you get here and what is it uh thank you John uh yeah listen I you know I guess the way I'm built um you know my I only one gear which is to go fast and to swing for the fences we only want Life to Live and we have to work hard and um you know I think Think Bold I think you know I think leaders As Leaders it's imperative on us to set a vision that's bold uh it's creative I've always said there's sort of two vectors that should drive any company product Innovation and customer Obsession and we have the most Innovative product in this category is very clear Mo and the founders who created this company had a Google L style they were the first to invent hypercon convert scaleout architectures many others good companies some of whom you talk to copied our architecture but we were the first to do it no no doubt and I give Mo to the team enormous credit and he took that idea from what he did at nanic which was bringing that hyper Converse scad architecture primary data so when I got here I had tremendous respect for the tech who was the best tech um we were Al a growing go to market the fastest but we kind of gone from number 25 in the space to number 15 in the space uh I'm quoting IDC um market share numbers to number eight and we' probably crawled our way you know number one um and um just because we're growing faster but it takes a while to kind of there are some very sticky um solutions that are good products Veritas is a good product uh dell has a set of Technologies data demand is a good product IBM had a product slightly ordered tily does its job especially in main frames so you know I went around and I talked to you know I come in peace to all CEOs even competitors of mine um and I talked to the entire industry and asked them many of these folks I've known from sap ormr they worked with me in those contexts they're good CEOs I respect them I want to get a sense as to where the industry is going and uh John Chambers told me something when he was at Cisco he would talk regularly to all his competitors and he felt it was really good to get a sense of where the industry is going and I respect him people like Bill mcdermit John Thompson these are people who are Statesmen they're diplomats and I that's why I view this industry so as I talked to everybody in this space and to advisers of mine probably one of the most interesting conversations was with Greg Hughes and with Patrick mcarter his chair this was about I don't know 16 months ago probably two or three months after I started just to get a sense it had no agenda where's your vision where's our vision where do you see it going there's there was respect for each other I mean partly because I'd worked at baritas 18 years ago and um I respected Greg he's been a friend of mine for 20 years I'd known Patrick for a little less they respected our Tech and I said you know are there ways we could think more together um they said well you know give me some specifics and the first proposal I had fell flat in his face which was how about you OEM our product and you took this was a car live and they didn't have Hardware either I don't think Veritas has Hardware do they have that backup Appliance a little bit everybody has an appliance you got the idea I came up was why don't you owe him a product and you take a stake in us you know meaning we veras OEM our product and Carlile take us taken us and you know Patrick said why would we do this that when the moment we announced that no one's going to buy net backup so that fell flat I went left with my tail between their legs and then the advisers to us the bankers came up with this structure which is very creative and that's where we are today it's a very creative structure of a carve out a debt exchange a Equity stake a minority Equity stake in us uh and a combination that puts us together in a a number one spot they're number three with number eight um it's a very creative deal the both boards asked me to lead the company which I'm very honored and humble to do and we're going to create an iconic company I've talked about this this is the this is the way you need to think about it we're going to create a snowflake meets poala type of company it's data and security so who's the one of the best modern data companies snowflake maybe data bricks to but snowflake is the best public company today in that space uh what's the best security company today paloalto and this combination will create a leader that's going to use Ai and security to revolutionize check this out hundreds of exobytes many of our competitors deal in the single digits of exobytes this is hundreds of exobytes of secondary data and then eventually primary data the things we're doing in Ai and security and a very strong uh position in the Fortune 100 96% of the Fortune 100 after 10 years we'd gone to about 44% of the Fortune 100 very small fraction much smaller fraction of the global 500 most companies of our size including other peers of us we struggle getting relevance internationally it's hard to get relevance in Japan and Australia you know in Singapore and Germany and France and UK where the who's who in those countries use you um so so so it's a combination so it's a company so it's it's a merger okay with with an elaborate back end I got that so so I get merges I get that so but but talk about the install base of veritas because one of the things that jumped out at me was and we know they have a lot of Ip Dave's got some momentum data that he can share but to me what jumped out of me Sanji was was the momentum you you have okay and then you kind of crawling a along I said the Market's weird right now but with Veritas your installed base just you just become huge I mean it's like it changes cohesity from I won't say small startup but small growing startup to massive like literally overnight well I think we have the order Bas a
2024-02-15 21:45
