On this episode of The Six Five Webcast hosts Patrick Moorhead and Daniel Newman discuss the tech news stories that made headlines this week. The six handpicked topics for this week are:
- IBM Think 2021 Focused on Hybrid Cloud, AI and Ecosystem Growth
- Announcements from Lattice Semiconductor’s Investor Day 2021
- Apple Moving Away from Qualcomm Modems is Old News
- Plus is Going Public via SPAC Merger with Hennessy Capital Investment Corp.
- Cisco Announces Their Intent to Acquire Socio
- Latest Earnings Report from Poly
For a deeper diver into each topic, please click on the links above. Be sure to subscribe to The Six Five Webcast so you never miss an episode.
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Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this podcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.
Patrick Moorhead: Hi, this is Pat Moorhead with Moor Insights & Strategy, and it is Friday morning. And you know what that means. This is a new Six Five Podcast. Thank you so much for joining us. And I am here with my esteemed cohost, Daniel Newman, co-founder of Futurum Research. How you doing, buddy?
Daniel Newman: Pat. Love it. Getting up early, podding for the people. We pod for the people, the community, and because there’s so much good stuff in tech. I think that’s why I called this episode So Much Tech to Think About on the heels of IBM Think.
Patrick Moorhead: You know, I’m pretty good at stuff and you’re pretty good at stuff, but in the end, I have to take your headlines, dude. They’re pretty good, but we do have a lot of tech. I mean, it’s crazy. How many overlapping events have you had the past six weeks? It’s insane. And being an industry analyst is a great thing. Pandemonium means we are busy because customers, enterprises, markets, they need our help to figure out what the heck is going on. And if this is your first time at The Six Five Podcast, we do a little bit of news, but we cover six topics, five minutes each, and five minutes at the front, five minutes at the end, kind of clowning around, but it’s mostly analysis. But we geek out a little news cause we have to explain what the heck is going on. So why don’t we dive in and make this happen?
One final caveat here is we do not give investment advice. Please do not take any of this information as investment advice. It’s for educational and informational and hopefully entertainment purposes only. So let’s dive in. Topic number one, IBM Think 2021. Daniel, it looked like it was all about hybrid cloud and AI.
Daniel Newman: Yeah. It was another big event circling the wagons, buddy. And you mentioned this right. I think there was somewhere along the lines of five to six concurrent events in one week last week. This week wasn’t quite that bad, but IBM Think has been on the radar. And I was really eager to hear what Arvind Krishna CEO had to say coming out of the keynote. And you were absolutely right. The company had several announcements, new sequel announcements. It had some AIML updates. It had some big ecosystem updates, but I really was trying to look at it more holistically and put it all together. And what I basically came to is the company is working really hard to take its capabilities and bring data and AI closer together and be the enterprise hybrid cloud company.
Now having said that, there is no shortage of challengers in this market space. The company is going to be facing fierce competition. AWS and Azure, Google always are going to be a serious set of players. But here’s the thing. This is less about announcements, more about the vision that the company brought together. The company just a few weeks ago had Red Hat Summit. And for many of you that don’t know that, IBM owns Red Hat. Paid $34 billion for it. And this was the basic technology building block that allowed the company to connect everything it’s done as a public cloud and a prem company and bring it all together.
What I really heard was this is going to be the path forward. Now, many of you know, they have the managed IT services company Kyndryl is what they’re calling it now, that will be spun off in the next quarter. IBM’s growth has been somewhat stunted in terms of quarter over quarter, year on year. And as a cloud company growing in the single digit or small single digit, loss percentages isn’t going to be sufficient. So when I was listening to Arvind, I was kind of listening to what the themes are. And there was a couple of themes that basically caught my mind.
One, they’re going to be an ecosystem company. There will be no boundaries within IBM in terms of how the cloud provides accessibility. For instance, building Cloud Paks, which you may have heard about. IBM builds these Cloud Paks. Some of their first Cloud Pak data services aren’t being built for IBM’s cloud. They’re actually being built for AWS. There is a for instance. The company recognizes that to be hybrid, it has to be open. It has to understand that companies are going to be working on various different clouds. The company’s fully recognized multicloud is going to be a critical path for. That’s one thing.
Watson, automation, AI, and data, making processes more streamlined. That’s another big play. The company is going to use all of the tools to be able to… What I would say is it was one of the most prolific early AI players, and then it kind of got quiet, Watson got a little bit quiet. Understanding the path forward with Watson got a little bit quiet. The company showed some strong direction there through what it presented this week.
And then the third thing was partnerships, Pat. So Arvind spent a lot of time on partnerships in his keynote. A couple of the more notable ones to me… While CVS was kind of the one that everyone was really interested in because the conversation was about COVID and technology to enable the deployment of the vaccine. That’s a human interest story. But the other two was the Siemens conversation with Siemens Digital’s CEO, Tony Hemmelgarn.
And then, the other one was with Brett Taylor from Salesforce. And the focus, Pat, on those two really caught my attention because one, most people would never think of IBM and Salesforce working closely together. But the bottom line is the two companies worked very closely together through the global services business. And it is something that IBM is making itself known that, “Hey, we can do this. We can do Salesforce. We can do SAP. We can do Splunk.” There’s lots of services. No boundaries.
And then the last thing, and before I leave you, because there’s plenty of other topics. I don’t know what you heard. But the IOT, the partnership with Samsung and IBM… or Samsung… Siemens and IBM is a great example of that true IT OT convergence. And in Arvind’s presentation, he really emphasized the fact that the company is building the cloud to be able to scale, not just what’s going on in the data center and with traditional IT, but really at the edge with things like manufacturing and OT, which has been something we’ve talked about for years, but still has a really long way to go.
Patrick Moorhead: Daniel, that was a great take at the high level stuff. So what I’m going to do is just dive a little bit into some of the announcements. So first off, the company had some announcements before IBM Think. So for instance, a two nanometer nano sheet test chip, the first on the planet, which really led to me looking at IBM as a tech company, and a premier tech company. I think that’s what some people miss.
So first off, IBM introduced Cloud Pak, auto SQL integration that essentially is what they’re showing up with a data lake. They’re claiming getting AI to get answers to queries eight times faster, in theme of AI and hybrid cloud. There was also Watson Orchestrate which, it’s funny, I think I might be the only person who looked at this as a low code tool to pull together workflows, essentially using AI to pull together information from all the IBM applications, but also from Slack, Salesforce, SAP, and Workday. Every cloud company, every solutions company who’s serious has to have something like this.
There was also an announcement called Maximo mobile, and this is a mobile asset management solution. And essentially what they’ve done is they took that application and made it mobile. Picture a technician around like gas or electrical transmission lines, offshore wind turbines, scaffolding, all the dangerous stuff. And I thought that was pretty cool. There was also a Project CodeNet, and man, I love this. I did a webinar on this, essentially think of AI being able to go in and inspect an application code, so source code and look at what’s junk, what’s old. And you need a tool like this to turn an application into, let’s say, a modern application. Let’s say it’s 20 years old. What code isn’t being used and then cut off? You don’t have to touch that code. So we’re kind of going from science fiction to reality with CodeNet.
And then finally, in quantum computing, IBM is a leader in quantum computing. There’s only a handful of companies up there that are leaders, and IBM is one of them. IBM brought out what’s called a Qiskit runtime software, which essentially they’re a development environment. And they’re claiming 120x increase in quantum circuit processing speed and works with IBM’s hybrid cloud solutions.
So getting back to Daniel, kind of what you talked about, the strategic framework, it was all about hybrid cloud and it’s all about AI. I, for one, am looking forward to… I love hardware, I love software and I love the cloud. I’m looking forward to seeing some accelerated AI hardware from IBM. That is kind of the next step. I know they’ve got a couple of designs that they’ve talked about, but they are a full scale house and I want to see more of that. I love the cloud and I love the software. I want to see the hardware, too.
Daniel Newman: Well, I knew you always want to talk about, let’s add, those little nanometers, Pat. And then IBM’s down to two. I mean, what’s the scale at the end of this thing now that we’re getting so close to zero?
Patrick Moorhead: I’ll give you an answer. I think we’ve proven we can get to a half. But there’s also photonics that we’re looking at. So instead of copper being the connector, actually light being the connector. So stay tuned-
Daniel Newman: I knew you’d have an answer for that.
Patrick Moorhead: It’s ridiculous. Okay. Great talk here. We’re actually on time here. Five minutes up front, five minutes a topic. But let’s move on to the Lattice Semiconductor Investor Day. Wow. I just love what they’re doing there. I mean, if you look at the stock price, it’s pretty ridiculous. I don’t know if it’s four or 5x appreciation since new CEO Jim got in there. Jim Anderson has done a great job at the company. And the reason that I’ll reinforce, I’m an industry analyst, but I show up to investor days is because it’s the source of truth for all companies. You cannot stretch the truth too far, or you might get sued by your investors, you might get investigated by the SEC. Generally, bad things you don’t want to happen.
Jim took an opportunity to do a victory lap. I covered this in 2019 and Jim had a list of 10 things they said they were going to do in 2019. And then they had a list of what they did with all blue check marks. That is classic Jim Anderson. And they’re doing great. Most interestingly, the company brought out a… essentially expanded their Sam. So not only is it a target market, but it’s an addressable, a serviceable market of the mid-range FPGA with a new product called Avant. Now today, the mid-range, it’s about a third, a third, a third in the FPGA market. Entry-level, mid-range and high performance. And essentially, that’s measured in terms of lots, which is the compute function for FPGAs. And brand new, they’ve been working on it for years. They have customers for it.
This is squarely in the backyard of Intel and Xilinx. And they entered this market with a unique way to do it. So Intel and Xilinx are all focused on the premium FPGA market and SoCs with premium FPGA. So they really are innovating much the mid-range and the entry level. And not only are the designs older, but they’re using older manufacturing for that as well. So you’ve got Lattice who comes in, new designs and new manufacturing. I feel like they’re going to go and do really, really well.
Now, the design cycle is long, right? When you look at the markets they address… I mean, it’s a year, year and a half design cycle. Finally, from a product point of view… I’m not leaving any oxygen in the room, Daniel, I’m sorry… were some new packs. One of those were for 5G O-RAN. And the other one was for industrial robotics. FPGAs are good, they’re low power, but on the other side, they’re harder than, let’s say, a CPU to program. They’re easier than an ASIC, but they’re harder than, let’s say, a CPU. So these packs essentially allow them to shorten the time to market, which is a great thing.
Finally, and here is the mic drop, the financial updates. They’re raising their gross margin target to 65%, maintaining OPEX at 35%, raising operating profit at 30% and above. So it’s hard for me to find huge faults here. I think the biggest challenge that Lattice is going to have is being a market maker, as opposed to… I think they’ve got the market taker thing down. But the market maker, going after and converting people from ASICs or controllers to FPGAs is probably their biggest challenge.
Daniel Newman: Yeah, anything else you want to throw in there? Just in case I wanted to say something.
Look, Lattice is an exciting company. I’ve put them in my MarketWatch piece last week as part of four semiconductor companies that I think people need to put their eyes on that aren’t named Intel, NVIDIA, AMD and Qualcomm, just as a for instance. And I did it for all the reasons that Pat mentioned. There was a pre-investor day, but I had a pretty good sense that we were going to see some impressive data come out of the company and the entire leadership team.
Jim’s a disciplined leader. It’s very clear. If you look at some of the foundational in terms of things like cash creation, the company has really improved. And perhaps the thing I liked the most is, and we’d take a line out of Pat Gelsinger’s SEDU, that he could legitimately get in front of the financial analysts and say everything I’ve said we would do we’ve done, we’ve executed.
And by the way, that is maybe the most important thing for building a steady foundational company and being investible. You know, the company’s only got six billion in TAM and that’s by the way doubled. So when we’re talking to Intel, we’re talking 300 billion in TAM. We’re talking about a company that’s disciplined, that’s focused, that’s not going to be doing comparable revenues anytime soon, but that has identified opportunities in the market and is executing very efficiently and effectively in those particular markets, and sees opportunities to co-exist with those big semi names. And I see a lot more success in the future for Lattice.
Patrick Moorhead: See, you made something happen there. I did suck a lot of oxygen out of that one, but-
Daniel Newman: I always make something happen.
Patrick Moorhead: Let’s go into our next topic. Apple takes its 5G modem building in-house. Gosh, what a surprise. We never heard this before, have we Daniel?
Daniel Newman: Yeah. This is one of those topic I couldn’t wait to talk about. It was a total nothing burger, but it warrants discussion. So a lot of people realize that in 2019, Apple and Qualcomm reached a settlement after a long feud, that was both a direct feud that existed between the two companies, and also, a sort of Apple-led view that drove the FTC to try to essentially break up Qualcomm’s licensing business model to make it, let’s just say less successful, to kind of weaken the innovation ecosystem of our national connectivity technology business.
And so the other day, once again, I think the analysts, he’s an Apple insider article decided, TF International Security analyst, Ming-Chi Kuo. And if I said the name wrong, I apologize. But they cited him. And he’s kind of been known as a rumor breaker. He has done this in the past. Came out with a story and said the company is moving away from Qualcomm. We heard a similar story, by the way, a few years ago about Intel and it did happen.
So I want to kind of just quickly say, “What’s going to happen?” Apple is very likely going to get this done. I want to be very clear when I say this. The idea that it’s going to be done by 2023, however, is speculative, unlikely and puts a whole lot of pressure on Qualcomm because the market’s going to believe this kind of statement, but concurrently it’s going to put a lot of pressure on Apple because the complexities of building a 5G system are rich.
My take, Pat, this is a competitive move that is being done to push negotiation between the two companies, because right now Apple needs Qualcomm very much for its iPhones, which by the way grew astronomically in the last quarter. And in order to offer a 5G iPhone, Qualcomm is the epicenter of the Apple product. But there is ongoing negotiations that the contract, I believe it was five or six years in 2019. And I’m sure Apple would like to get a better deal for continuing to use Qualcomm through the process. A part of this, I think, is a negotiating tactic.
The second thing though is, is everybody gets all freaked out about this, is taking a little bit of a look at the business model and what Apple represents for Qualcomm. So while we don’t have the numbers. JP Morgan has put out what they speculatively say are the numbers. And they believe it’s something around as much as almost 20% of all of Qualcomm’s revenue comes from Apple. That’s on the high side, but that is the number. That’s 14% from the QCT business, 5% from the QTL business. That’s the chip side versus the licensing side.
But there’s a couple of things no one’s talking about. One is Qualcomm is building a series of new multi-billion dollar a quarter business that are part of their QCT. That’s RF front end, that’s IOT, that’s automotive. Those were not historically nearly as large. Now they represent one third of the business. So within two years, or as I’m suggesting, maybe as many as four to five years, that will not be even close to 14% of the business. The second thing is most people don’t understand, and by the way I’m totally getting you back on this one. I’m leaving you nothing-
Patrick Moorhead: I know, I am, but- Our script is ticking away here.
Daniel Newman: It’s the QTL revenue. I’m going to make this part a little simpler, but Qualcomm makes money when any device maker sells a device with 5G in it. And so people look at it like, “Oh, Apple is moving away.” Look, Apple can build its own 5G modem. It’s still going to have a licensing agreement that will be held by its contract manufacturers overseas that will have to pay a royalty to Qualcomm on every 5G device it builds, even if it builds its own modem.
And I think the last thing is, I think is just the overall complexity and time. When I say it’s going to take time, here’s why it’s going to take time. In order to actually use a 5G modem in another market… Remember, in the US, you got the FCC. There is an equivalent of the FCC in every country in the world. So if Apple wants to sell its phones, it’s going to be needing to get government regulator equivalent approval from the FCC. And also by the way, you need operator approval and assurance and quality and testing within the entire ecosystem.
So overall, long and short, Pat… and by the way, I had more, but I’m going to stop here… this deal will happen, but it’s going to be like ’25, ’26 before I think Apple can do its own modem. And then it has to actually put it in a system, which by the way, isn’t a single step process.
Patrick Moorhead: Wow. Got a whole lot of oxygen-
Daniel Newman: Gotcha.
Patrick Moorhead: … preach out. So one, a few adders there. So first off, also is what will that 5G modem go into? Will it actually go into the iPhone, which is monumentally more complex and a smaller device, because you have voice on it and it is more complex, or will it go into iPad and Mac, which are substantially almost 10x smaller businesses than the iPhone?
And the other element here is, is its lead lag. I would still expect Apple to lead. Let’s say we go to the next generation of 5G or, God forbid, I use the word 6G here. What are they going to do? Take a pass for a couple of years? Maybe. I mean, Apple was laggard with 5G in iPhone and it didn’t seem to hurt them much. I think they were a full year and a half after Samsung led the market there. So that’s all I got. That’s all I got here.
Daniel Newman: Hey, man. Now we’re even, so let’s split the rest of the way. I’m just kidding. You know what though, sometimes you and I could catch fire. You wrote an amazing Forbes piece on that Lattice Semiconductor. And you know what, there was a lot to cover. And I think you did a great job. So everybody out there, don’t hold it. Between the two of us, we get there. And that’s why we do it this way. Sometimes, it’s more Pat. Sometimes, it’s more Dan, but it’s always going to be the analysis that you should be looking for.
Patrick Moorhead: Yeah. And by the way, in complete transparency, Daniel and I do pick kind of lead lag topics. So yeah, it’s not a secret here. Otherwise, I think this would be an hour and a half long. So speaking of that, let’s dive into the next one.
So Plus announces a huge SPAC deal to go public. And it’s super exciting here. I’m not going to hit the financial piece. I just want to talk about the company and kind of why they’re differentiated, and yeah, they happen to be going direct listing via SPAC. Oh, and they did a pipe as well. Just if we want to get another terminology in here.
So Plus is the world leading autonomous technology company for trucks. You may not have heard of them before. In fact, their prior name was Plus AI and they are extremely differentiated.
So first off, I believe that their technology is differentiated. When you look at the software and the hardware in the data, they’ve got a full stack level four software and they can do full autonomous. Their hardware is ready for mass production and they have orders for thousands of trucks already and their data, they are so far ahead of the competition in real miles, driven by an order of magnitude. They’ve got global partnerships with the largest trucking company in China called FAW, Iveco in Europe and some of the largest fleet operators in the US, which I know their name, but I can’t say it because it’s NDA. Darn it. But you would be impressed. And I think they’ve got a roadmap for commercialization with maybe some of these other companies like TuSimple, kind of, hanging out and not really having a plan here.
The company plans to mass produce of driver in autonomous trucking in 2021 with FAW and full autonomy by the end of 2024. And it’s not that they couldn’t do full autonomy. It’s also the combination of those countries that actually have to let you take the driver out. And I would say, from a revenue point of view, going from revenue in the seven figures this year to over a billion dollars in a couple of years, and this is what the company is talking about, is first off, they have more than 7,000 orders and pre-orders in the US and China. And they’ve already started delivering the initial batch of a thousand trucks to a pilot customer that I can’t give the name this quarter. And if they just ship those, you’re looking at $600 million in revenue.
FAW produces over 300,000 trucks a year. And you can imagine if even retrofitting 25% of those trucks would generate $6 billion a year. So to me, when I line up the competition again, TuSimple is the biggest one, it’s not even close. And I do have an analysis coming up. I want it to be good, Daniel, but it’s still kind of in draft mode.
Daniel Newman: Well, there you go. A son of a trucker here. I grew up in the business. And frankly, I don’t often get to talk about this particular business, but this is that perfect overlap where AI and autonomous vehicles meets practicality in the marketplace. We’ve got stuff that has to get from place to place. As my father always told me, people will always need trucking.
We also have a couple of market complexities that are going on that are going to accelerate this. Before we touch on that, basically the SPAC deal itself is going to be between Plus and Hennessy Capital Investment Corp. If you haven’t heard of Hennessy, it was the company that brought Canoo public, GOEV. So this seems to be an area of focus, the autonomous vehicle for Hennessy. It is an interesting place where we’re meeting that level four with supervision.
So they’re not planning at this moment in time on putting trucks on the road without drivers. Now, a lot of people are like, “I don’t want trucks on the road without drivers.” But here’s what’s really going on that’s important. One, trucking companies spend inordinate amount of money and operating expense on fuel. We’re all hearing what’s going on with fuel. Well, the difference is when you run out of gas, as long as there’s no colonial pipeline shut down, Pat, you go to the gas station, you fill your tank, you use the gas. If the gas is two bucks today, three bucks next week, it’s got a little bit of elasticity. It might hurt your wallet at home, but it’s not the end of the world.
Well, in a trucking company, it’s like an airline. They use tons. If it’s a big trucking company, thousands, maybe tens or hundreds of thousands of gallons of fuel a year. Well, they hedge fuel. These companies hedge fuel. They buy it. They lock in pricing. And when drivers drive, maybe you’ve heard of the uncle led foot, or you’ve got that kid that you’ve taught to drive that maybe smashes the brakes a little too much. Well, all those different behaviors tend to be a big drain on the economy of the gas.
Well, truck drivers have some of those same issues. They don’t accelerate smoothly, they don’t break smoothly, and that all uses gas. Well, this level four assisted system will allow a driver to sit in the seat in the truck to accelerate, brake, that perfect, and saving 10 to 20% on fuel. That is a massive amount of money in itself, within a couple of years, will allow companies to retrofit trucks here domestically, or to justify the investment in new trucks in China, because in China, there is no retrofitting.
So that was one of the big takeaways for me, is just the whole fuel hedging opportunity. A lot of trucking companies are going to say, or you look at opportunities like FedExs and UPSs and Amazons that are all making bigger commitments to doing this. This gives a big opportunity for Plus to consider and be a partner to those companies. Will they be? We’ll see. Don’t know yet.
The last thing I will say, Pat, is not all SPACs are created equal. And I pointed this out in my piece. Check it out in the show notes. SPACs kind of have a little bit of a rough reputation right now. And I’m someone that’s invested in several SPACs. Some of them are really good companies, but because there were some really not great companies that were taking public via SPAC to create quick money for some people, the whole sector has gotten a bad name, but it’s actually a really great vehicle to take interesting companies public that can’t go through that whole long, arduous process of an IPO road show and don’t necessarily have that kind of brand identity, whether it’s a Airbnb or a… there was a million IPOs, name it, Ubers. I’m just saying those big consumer names that everybody gets excited about. Well, the SPAC is another great way for them to go public. And I do think in the long run, the good ones will eat out success.
So I can talk more about this, but we got to keep moving. Good luck to Plus. We’re excited to track it and follow it. And as the son of a trucker, I love seeing the innovation in this industry.
Patrick Moorhead: I love the son of a trucker piece. That’s beautiful.
Daniel Newman: Thank you. It’s like so human. It’s like so normal.
Patrick Moorhead: I know.
Daniel Newman: We’re geeky tech analyst guys. But you know, I grew up in a house where dad drove a 12 or an 18 speed.
Patrick Moorhead: I love that about you.
Daniel Newman: He didn’t own the company, but that’s a side deal.
Patrick Moorhead: A love it. Let’s move to the next topic. So Cisco, who seems to acquire a company every two weeks, and that’s a good thing, and if you look at historically, has done a really good job at acquiring companies and keeping their founders. And Cisco acquired Socio to… I hope I said that correctly, Socio, Socio… to improve WebEx events.
Daniel Newman: Hey, we’re going to get briefed today. So we’ll double, triple, quadruple check whether or not we just said that right. Not a name, not a household name. Cisco, it has this really solid reputation of acquiring these pieces. They’re not necessarily companies that are everyday vernacular. They’re not always really large or kind of well-known, but they are important pieces to the puzzle.
So WebEx has quietly had a really great year, for obvious reasons, right? I mean, as sad as everything that happened in 2020 with the pandemic was, it really did accelerate digital transformation. And it did scale rapidly collaboration platforms, Zoom, Microsoft Teams and WebEx Teams was the one that got less public credit but was actually a very big foundational technology that kept a lot of companies humming. You and I do WebEx calls every day with some of our clients.
And so Socio though is more about the event side. So as we go back to travel, Pat… And by the way, you and I are going to be traveling next week, huh, to do something. That’s crazy. We’re going to be a recording a really interesting interview for a really big event that you’ll hear more about really soon.
But the challenge is WebEx events has always been a somewhat limited platform. And the company, you’re seeing more and more these full scale events that are being delivered, whether it was Think. We talked about last week’s Dell Tech World, they’re all being delivered online.
And I think what’s going to happen, Pat, going forward is we’re going to see these hybrid events where people are going to be able to still attend the event completely remote, but expect to have that good experience. And companies need to be able to build and operate on a robust platform that can give that full event experience, whether you’re there, whether you’re using the platform while you’re there, or whether you are completely remote from the event. And WebEx events just didn’t meet that in its current state.
So Socio is basically designed to give Cisco some of the capabilities it needs to be able to give a full inclusive experience in-person and to virtual attendees for any kind of event, any sized event, in any format. And this is something that the company does. It’s a robust stack. It’s a full stack that Cisco is going to be able to layer in and basically incorporate into its WebEx events platform to enable monetization and greater growth and scale of that part of the WebEx platform. Most of us think about it as a meeting platform or maybe even a webinar platform, but now we got to get to the point where we have full large-scale events.
So it was a nice little piece for the arsenal, kind of like Slido adding that live integration of interaction in real time. Well, this is going to be a big piece to incorporate, to make WebEx events a full-scale event platform for the post-pandemic playbook.
Patrick Moorhead: Great analysis, Daniel. And to me, this is just yet another reinforcement that Cisco is all in, right? Cisco has a lot of different irons in the fire. They’re still the leader in data center, networking. They have strength at the edge networking. They are the second largest security company to Microsoft. They have a ton of as a service offerings, and they do even offer full scale compute. And they were one of the first companies to go multicloud in their announcement with Google and Anthos.
So I think people were wondering, “Hey, how serious is Cisco about this, about the collaboration space?” Because when Cisco got into the, quote unquote, video market, it was driving network traffic, which meant you had to have better networking in your infrastructure. And that drove networking, which was their core business, even inside the data center.
So now with how good these compression techniques are, H.265, VPX, it doesn’t drive traffic. In fact, we can do it over our home internet right now, literally real time with no latency. So them adding to this reinforces to me that they’re all in, should make their customers and potential customers feel good about them wanting to literally go toe to toe with people like Google and Microsoft.
You know, they still have to integrate with Google and Microsoft and Slack, but they’re all in. And that’s great to see. So Daniel, let’s move to our final topic here, Plantronics earnings, AKA poly.
Daniel Newman: Hey, by the way, Plantronics, Pat, is changing its ticker.
Patrick Moorhead: You know, I was going to get to that. Thank goodness.
Daniel Newman: Okay.
Patrick Moorhead: No, no, no, no. Every time I look up Poly, I go to Poly materials and it would just drive me completely insane, but Plantronics, that’s the official name of the company, but known as Poly is moving their ticker to P-O-L-Y. So thank goodness.
Now, Poly… There we go again. Poly absolutely beat the street. But the reason that its stock is getting hammered right now was because of its forecast, which the company attributed to things getting better during COVID, but also having trouble getting chips. And I get this, but I’m going to look at the glass half full, which is, let’s take the long view of this.
So we came from a world of proprietary video systems and audio systems. And what Poly has done is it’s come up with a new product line that first of all works with all of the major service providers out there. Let’s say like a Teams, like a Zoom, for instance. And then what they did is they gave IT the ability to manage that, to literally cut off service, to look at the quality of service, to do firmware upgrades.
And then this year, they came out with what, based on my analysis and my review, is the best hybrid workplace solution. I’m broadcasting to you from Poly P15. Check out my review on Forbes. And it was easy to set up like a consumer, but I can manage it like a big company. And I think that’s kind of the best of both worlds.
And one of the things that Poly brought out in the earnings was they showed the crawl chart of these new products going from basically zero in the FY fourth quarter 2019 to nearly $90 million in the current quarter. It’s an absolute rocket ship of a trend there.
So the other thing to look at is look at Poly’s stock over the last year. If I look at the year chart, started off at 12.50. And yeah, it’s down this morning at 30. But going from 12.50 to 30 is pretty darn good. Now investors, I’m sure liked it up at 42, but we are where we are.
I think the company is being conservative in this. I like their product line. I haven’t seen the competitors come in and provide something that… whose mouse trap was necessarily better. It was different. But I feel pretty good about this company.
Daniel Newman: Yeah. It’s a good switch, first of all, because Poly is the brand. Plantronics was the brand for the headset business, but it’s becoming this fully integrated collaboration suite. You made a great point about the trying to sell through. I was hitting up their former CEO about this, needing to show more momentum for these video products. The company’s got a really tremendous ecosystem, if you look… and by the way, one of the better slide presentations of all the tech companies for their earnings, which makes our job a little easier, but their partners, Pat, Microsoft, Zoom RingCentral, 8×8, Comcast, AWS, Google, Five9, these are big names, Twilio. They’re working alongside some of the most renowned, well-known companies in collaboration on the planet.
So the appliance is not dead. And the technology that is required to make this whole experience of doing collaboration is important. It’s consistently rolling out new products. It’s got some great new headsets. Pat, you and I got an early Voyager Focus 2 headset. Been using it. Really like it. It’s shipped its 30 million phone this month. The company’s getting smashed today, by the way, on [Guidance]. So we can talk about that for a minute, but sometimes your own success becomes… What they say? The halo around your head becomes the noose around your neck.
The company’s had some really, really good quarters. Earlier in the year, it was triple digits, then double digits. And now it’s basically saying, “Well, we’re only going to do a…” I think its Guidance was like 410 million to 430 and that’s less than this quarter. And when you show sequential or year over year pullback, sometimes the street likes to really hammer you for it.
But again, at the same time, it’s almost quadrupled. So now it’s only tripled from where it was sitting. The company’s on the right trajectory. A little consolidation, a little pullback is not an indicator that the company is not on a good track. Company is on a good track. It’s doing the right things. It’s actually picked this partner route and it’s doing very well. It’s been very successful at it. And I do believe that this collaboration thing is not going anywhere. COVID is not going to end it. We will be doing more of it and we will want the experience to be better. Poly is one to watch for the future.
Patrick Moorhead: Good analysis, Daniel. And you know what time it is. It’s time we wrap this episode. Daniel, we have some pretty big news coming out about The Six Five Summit and expect something on Monday. The site is live, if you can’t wait and check that out. But we’re pretty, pretty stoked.
I think we have 50 speaking slots that are completely filled with the leading companies in the industry of tech. And I am super stoked about it. We just want to thank you for listening to us, listening to us talk, listen to our analysis. We love feedback, good and bad. Probably the best way is to hit Daniel and I up on Twitter.
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