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Oracle X9M, HPE GreenLake, Amazon Devices, Facebook Grilling, Amazon Connect, Five9-Zoom Deal – The Six Five Webcast
by Daniel Newman | October 5, 2021

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:

  1. Oracle Announces the Availability of the Oracle X9M Platforms
  2. The HPE GreenLake Event
  3. Announcements out of the Amazon Annual Devices and Services Event
  4. Facebook Grilled on the Hill
  5. AWS Announced Three New Capabilities for Amazon Connect
  6. Five9 and Zoom Deal Hits a Deadend?

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 webcast, 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.

Transcript:

Daniel Newman: Hey, everybody. Welcome back to another episode of The Six Five Podcast. Daniel Newman here, your host driving the show today along with my always esteemed cohost, Mr. Patrick Moorhead, broadcasting live, and on-demand if you’re catching this later, from beautiful Downtown Austin. It’s supposed to rain today but it’s not because this city is not just Austin, but it’s awesome, Pat, right across town, not too far away. We’ve got a great show and, by the way, second time in the same week you get to see us because last week, somebody canceled on me and blew our perfect streak of doing the same time on Friday and, well, we did it again today, but we at least got it in. Great show today, but before I jump in and give you all of the background, Mr. Moorhead, say hello to everybody and tell them how you’re feeling.

Patrick Moorhead: Hi, everybody. I’ve been a little under the weather, a little under the weather. It’s just OG stuff. If you’re young, and you probably are, you just don’t have to worry about this stuff. It’s just a minor infection, that’s all, but we’re all good. We’re all good and I’m looking forward to hearing nonstop music this weekend. ACL should be starting in a few hours, actually, here and it’s here for two weeks with 250,000 of my closest friends.

Daniel Newman: It’s going to be great. Glad to see it’s happening. There was some ups and downs. Will it happen? It’s a good sign. It’s a good bellwether and litmus test for larger scale events, so keeping an eye on that one. I’ve got to figure out how the heck I’m going to get out of Downtown later. That could be a problem for me, but-

Patrick Moorhead: Getting out is going to be a lot easier than getting in.

Daniel Newman: I won’t be coming back, then, but no, we’ve got a great show lined up for you today. We’ve got Oracle, HPE, Amazon twice. We’re going to talk a little bit about Facebook, which we don’t do too often, but we just felt compelled, and then some breaking news on the Five9-Zoom deal coming off the wheels. We’ll get more into that. For those of you that have not listened to The Six Five in the past, six topics, hand curated, five minutes each. Patrick and I are both analysts, so we try to make it analysis-heavy and news light because everybody can read the news. We want you to get between the lines and know what isn’t obvious and always available to you through what’s out there in the media quick, I guess you could say.

We are talking on this show about publicly traded companies, but just know as a disclaimer, this show is for information and entertainment purposes only. Please do not take anything that I or Mr. Moorhead here says as investment advice. Patrick would say do the opposite, I would say just don’t do anything at all. Okay, let’s dive in, pal. We got a busy week, some really kind of product-focused things on the front end of this show, and as we get further to the back, some big thematic things. We’ll end with a big M&A story, but Oracle X9M launch. You, as always, wrote a great piece, as did Ron Westfall from our team, but since you wrote this great piece, why don’t you tell the people what they need to know?

Patrick Moorhead: Well, first off, I need to be honest here. I didn’t write this piece. Steve wrote this piece, but I published it for him and edited it, but no, I am very familiar with this. If you’re not familiar with Exadata, essentially, it’s database appliance. It has processing, it has memory, it has storage, but it is designed to run Oracle’s software the best and, specifically, Oracle Autonomous Database or Oracle Database as fast as you possibly can. This is a follow up as you would expect to the X8M, which already had pretty incredible performance, and this was an update providing substantially more performance.

It is really all about raw performance, upgrading. They’re using PCI U4, Rocky, 33% higher memory capacity, and at least according to Oracle, one terabyte per second of throughput. What does that mean? For SQL read IOPS per rack, I know you wanted to know this Daniel, 27.6… 27.6 billion. I had to look down at my notes there. What does that mean? Well, Autonomous Database and Oracle run pretty much faster than anything out there. You compare it to Snowflake, you compare it Azure and it pretty much runs right over it.

By the way, I’m okay to say that. I usually like to not to do competitive comparisons, but it’s what you would expect. I mean, it’s architected for this type of software and a lot of it’s in memory, and that’s a big, freaking deal. Being in memory verus being in storage. With 87% I think of the Fortune 500, I’m sorry, Fortune 100 that already opting Exadata, that’s primarily for mission-critical type of workloads. This is likely going to be an easy drop in. The first way you can get this is through Cloud@Customer, which is their hybrid cloud on-prem, but I’m expecting very shortly that this will be available in their public cloud just like we saw the staggered launch with the X8M. Congratulations, Oracle.

Daniel Newman: Yeah, absolutely. They launch their nomenclature or the product naming reminds me of a vehicle. I’m thinking BMW is going to come out with a bigger truck, the X9M. If anyone knows anything about the BMW and the XM series, these are really fast, powerless trips. Oracle definitely with this launch continues to focus on kind of this three-headed fast OLTP, fast analytics, and consolidation. Partnered with Intel, something worth noting. It’s Ice Lake technology, and the company is really becoming pretty effective when it comes to winning against really big competition in the three areas of latency, throughput, and cost.

Anyone that knows Pat and I and have followed us, you’ve kind of seen us go 180 on Oracle. If you had asked us two years, I called Oracle a cloud for timber. Pat, you and I really were, not fans of Gen 1. We weren’t fans of the things that were being built, and we have been convinced. That has been something that these last two generations have continue do. These X8M was very impressive, and the X9 only continued to the run of form, and as you mentioned, we try to typically focus on the company, not the competition. Right now, in the marketplace as Oracle tries to stand out and differentiate where it’s winning in cloud and hybrid cloud, this has been an area that the company is doing very well.

I’m going to keep moving, but a very successful launch worth noting. Pay attention. Oracle is on a very, very good run of form. Next topic, HPE GreenLake, so had the chance about a week and a half ago to meet in Las Vegas. You should have been there, but I think you were on a horse in a farm looking like President Medvedev of Russia, shirtless on the horse. No, I’m kidding, but you were down in Florida and I was in Vegas and I had the chance to spend some time ahead of this big launchpad. HPE GreenLake, the company if you haven’t really paid attention, is pivoting. They had their everything-as-a-service announcement about three years. The company is really trying to convince the street, it’s trying to convince its customer base that it is going to bring the value of the public cloud to you on-prem.

Early on, a lot of it was about compute and storage. That was kind of what we were hearing about, which, by the way, mirrors pretty closely to where our biggest infrastructure as a service player started. Everyone that knows AWS’ earliest days, as any public-private hybrid cloud offering is going to grow up and become an adult. It’s going to have to be, again, to layer services on. Really, what all of this is about is about data, and so HPE came out basically taking straight-up blows at Snowflake. I think that might be our theme of our first two topics, and is now offering what they’re calling their Unified Analytics Solution.

GreenLake really rolled out three different things that caught my attention, GreenLake for analytics, GreenLake for data protection, and their HPE Edge-to-Cloud framework and automation tools. The analytics basically is an open unified analytics cloud service developed to modernize data applications across prem, Edge, and cloud. Whether it’s public to private, private to public, HPE is addressing all of this.

I think what probably caught me and interested me the most in this, Pat, is that I don’t think anybody thinks this, despite the fact HPE has a really big pedigree in storage and data and analytics, has made some big acquisitions, whether it’s been 3PAR or whether it’s been other acquisitions for HCI or for the whole data layer. BlueData I believe was another acquisition not too long ago. They’ve built a pretty comprehensive mapper set of analytics tools, and that’s what’s starting to roll out as an on-demand, subscription-based analytics service that can compete with Snowflake. Very cool.

The data protection, more of what I would consider a core service, something they would need to be offering, and then, of course, their overall framework as it comes to being able to de-risk the experience that companies are going through right now and moving to cloud. I think sometimes in the tech industry, Pat, we take a little bit for granted the fact that just moving to cloud for a large enterprise with huge legacy data sets is something we can just do. “Let’s just go to cloud.”

Well, you can ask any major ERP, CRM company, apps company, and, of course, infrastructure, that it isn’t a lift-and-shift that’s just done overnight. Building these core services and frameworks that allow companies to move faster to cloud and to what I would consider that right mix of cloud and prem services to be able to deliver applications at scale is the key.

Last though on this one is that GreenLake as a whole is really focused on letting the market know what they’ve got going on. It’s 1200-customer business at this point and they have about $5.2 billion in contracts. They’re continuing to grow. Their annual recurring revenue 33% up year over year. Their order volumes are growing significantly year over year. They continue to be able to announce some really good customer wins. I’ll stop there because it’s kind of like you did on X9M. I gave a lot of the context here, but I’m sure you track HPE really closely. Maybe add a few nuggets of brilliance here, Pat.

Patrick Moorhead: Listen, this is the continued march of everything as a service, and as oppose to buying it and shipping it and paying for it or releasing it, this is a consumption model and it’s GreenLake. What I do like is that HPE has been maturing GreenLake from I’ll call it standard infrastructure as a service and then moving upleveling all the way up to certain analytics services. I think that’s smart. The other thing that I’ve liked about their strategy is they also simplified infrastructure where instead of having the full library that you could pick from, coming up with a limited pick approach to even the infrastructure.

That’s smart because, quite frankly, it was way too complex and their channel partners were, I think, stumbling, tripping over themselves trying to execute it where the whole notion or part of the whole notion of GreenLake is simplicity. If it’s hard to buy and hard to get pulled through the channel, then in a way it’s defeating a part of the purpose.

The other thing that we can expect, too, and we saw a little bit of this in their last announcement, is more full solutions where actually the application sits on top of, let’s say, the middleware and the OS and all of the control and data plane goodies that they put underneath that. I love to see the march to more customers. What HPE needs to be doing to make more believers out there, including believers on the street, is to show that they are taking share away from not only their peers, the classic on-prem folks, but also from the cloud folks.

I want HPE’s customers to say, “Hey, we evaluated AWS and we went HPE instead on this.” That will really… We hear about these enterprises pulling some applications back. By the way, they’re pulling back some, but they’re putting more in the public cloud, so there is a net loss of applications there, and I want to see big numbers, too. If Azure and AWS are operating at around 40 to 50% growth per quarter, I want to start seeing some of that growth with some of these on-prem as a service movements as well.

Daniel Newman: Absolutely, so a lot more there. Going to be one to follow and watch. I think it’s going to end up being a mix and match, prem and cloud. We’re going to see more and more of that as time goes on. Pat, big story of the week. There’s a robot at my feet. Amazon had their big devices launch. You and I both covered this closely. Tons of stuff to cover here. I’m going to let you take the first stab here because there’s no way you can suck all of the oxygen out on this one, but come on, what do you think there? Are we getting robots? Is that going to be part of our life? What else?

Patrick Moorhead: Yeah, so I think what I’m going to do is I’m going to hit everything but the robot and leave the robot for you. I know you had some fun things to talk about there and there’s a little bit of controversy about the way that that was positioned. First of all, I just want to say overall, this once again reiterated Amazon’s lead in the home. If you ever had a question about the smart home, you probably shouldn’t anymore because not only does Amazon keep doing the brilliant basics, and it’s funny that a voice-enabled speaker is a brilliant basic, but the big companies can crank those out. Apple, Google, and Amazon, Microsoft exited that business, so it wasn’t easy for them, but then again, their center of the world is not the consumer, so strategically I understood that.

A couple of products that I wanted to point out, first of all, the Echo Show 15, which is essentially a show that you mount on the wall or on a stand. You and I both had the opportunity to take that for a spin for a week or 10 days, and a really interesting device that I could see it using more when my family was in the home. If nothing else, a joint message board, but also, how many times do you go and wonder what the weather is going to be like? Sometimes we look at the phone. Other people prefer to get on their PCs, maybe even ask your smart speaker that, but that’s what I found myself doing a bunch. When I wanted to look at YouTube stuff together or even doing cooking with Paula, it seemed to help me a lot. I consider this a new category product for them, which I thought is still a big deal here.

One little adder on that is that Amazon disclosed that they have a new neural network accelerator called the AZ2. Not a whole lot of the bits and the bites across that, but then again, this was a consumer show, but the nice thing is that we’re going to see more inference at the Edge. I would say Google probably that they had made the earliest announcement of how they were going to do this with their end devices. Nice to see Amazon on their second- generation shift. What does it do? It makes things like face log-in a lot easier on the Echo Show 15, and lessens the need to phone home to do some core type of voice matching or face matching. I thought overall that was a good thing.

The second thing was a product called Amazon Glow, and Amazon Glow is for kids and it’s actually a communications and activity device where you’ve got a parent on one end or a grandparent and a kid on the other. Literally, I’m thinking I should have had some pictures of this, but essentially it projects an image on the floor for the kid and then there’s a camera in it, and then the parent can work through it through any Amazon device that has a display. You can read books together, you can color with them, you can do certain activities. The way that I looked at it, it kind of reminded me if you remember the HP Sprout that was a similar concept that was more for B2B and it was about 10% of the price of Sprout as well.

The last thing I’m going to talk about, actually not the last thing I’m going to talk about. They added a display to Halo, which is you might not even know that Amazon had an exercise wearable on the wrist, but didn’t have a display. What they did is they added a display. Now, they’re going to go really head to head with Google’s Fitbit, so things are going to get pretty darn interesting. Looks like they’re putting most of the cost into the service. You get one year of service with it, but it’s really inexpensive at $79.

The last thing I will cover before I’ll give Astro the Robot to you is the maturation of its security. First off, there was a vertical solution through Home Depot for rent that came out which was for construction job sites. It came with different levels of weatherized… It’s orange, of course, it’s Home Depot, but I like this play because the more vertical you go, the higher the profits and the more you can reach. Amazon is starting to get into I’ll call it a very small business or small business capabilities as opposed to limiting this to a consumer solution.

The final thing in I would say in accordance with that strategy is they brought out a Ring Virtual Security Guard. Essentially, instead of you watching a camera when it comes out and a cat jumps on the camera outside and wakes you up, they’re actually contracting with a third party to where they will be watching what comes on the camera. “What was that alert? Was it a positive? Was it a false positive?” They can actually talk to a potential intruder or your mother-in-law surprising you when you are out. They understand deescalation and the important things of that. That kind of rounds it out. The maturation of their security offerings.

Daniel Newman: Yeah, you hit a lot of things, Pat, on the head, and so kind of leaves us at Astro. I will say there is a bigger story under the surface that is blooming within the Amazon devices group that everybody needs to take into consideration. I’ll dive into this more on another segment here at a later time. They brought Astro out on stage. I don’t necessarily want to run through the product itself too much because there’s a ton of videos out there. You can see what it is. It’s a large touchscreen. It can do videos, so it can roll around with your kid and your kid can FaceTime or do video with Grandma and it’s rolling around with you.

This device is really a paradigm shift. Astro, a $1,000 personal robot that can basically learn an entire floor of your home. That’s, by the way, something I’ll talk about more in a minute because there’s some debate about that. It has sort of a telescoping camera that can look at things and report back. It’s got security functionality where it can make noise. It’s got a little bit of ambient technology where it’s got a personality, although it doesn’t speak yet, but it is really a first of its kind. I think what we have here is a really interesting inflection point in society where the idea of a robot for every family or human, this is very Jetson-esque, and Amazon being the company that’s trying to break through here.

As a whole, I think the technology will go through some hurdles to becoming mainstream adopted. The price at under a thousand is going to limit its audience in the early days to a slightly more affluent group of people, but in terms of what it can do, gaining experience in the world and people seeing robots in the home, its ability to potentially have some security value in the home are all very interesting. The market came out with a number of challenging articles through the media about it. The two biggest challenges were its market readiness and safety and its privacy and surveillance.

I’m going to talk about the latter first very quickly. Any article that talks about privacy and surveillance with an Echo device is a potshot at best, and here’s the reason I say that. We carry a device around in our pocket that we willingly allow to surveil our every move and activity, our every like, lust, and thought, and we share it willingly with these devices and they have cameras, they have microphones, and we knowingly do it with the device, but we do it with numbers of different applications where we agree to privacy terms that we don’t even read. If we’re worried about a robot that can roll around and follow you and surveil you in your own home, this robot’s not changing anything until you throw your phone away.

Okay, so now that we’ve got the privacy and surveillance discussion out of the way, the safety discussion. This one’s more nuanced. There was speculation that this device was going to come out, and then there was other speculation that this device was not going to come out. The reason it wasn’t going to come out was because this is really hard. Okay, anybody that’s ever used a robot vacuum cleaner knows that while it’s supposed to work one way, it doesn’t always work exactly the way you expect. The learning, the ability to do the job well, and this is a device that has exponentially more technology packed into it in terms of capabilities, the way these devices are going to create interactions with pets and animals, the way it’s able to truly learn the mapping of a home.

There were some articles in The Verge that talked about how it throws itself down staircases. The thing is a physical harm risk within homes and families. All of that stuff will be sorted out when these devices go out in the wild, but these were all… I want to note this very importantly. These were undisclosed sources. You would hope there’s a lot of integrity in the journalism, but in the spirit of sensationalism, I really do sort of wonder are the people who came out and helped build this product that supposedly trashed it to the media, I hope they were talking about the latest software, the latest version because how the device might have acted even two or three weeks ago, that could be five or 10 software iterations later ahead of a launch.

I do want to see all of its intelligence, the chip technology that went in it, the training and education and inference of this device. The maturation of this device will be something to watch, but as a whole, I think this is very exciting. It’s breakthrough. While Elon Musk was in spandex on stage somewhere or had a person dressed in black spandex on stage pretending to be a robot, Amazon actually delivered a robot.

I want to say that this is breakthrough. This is paradigm shift. This is a new thing that the world has to get used to. I’m also going to say that I could talk for another 20 minutes, but we have three topics in about 13 minutes to finish out this show, so I am going to move on to the next one. Let’s talk about Facebook being grilled on The Hill. This one is-

Patrick Moorhead: Oh yeah.

Daniel Newman: … one that we can talk about somewhat quickly, but also I’m just going to throw it out there, Pat. The Wall Street Journal a week or two ago, I don’t have the exact day, came out with a report that basically said that Instagram, to a significant percentage of teenage girls, was causing serious ire, it was causing distress, it was causing depression and anxiety, and in some cases in England and the U.S., it actually created an increased risk of suicide or thoughts of suicide.

Now, this was research that was done by Facebook about their Instagram platform that was leaked in The Wall Street Journal and the story came out and effectively has caused a lot of turmoil, a lot of publicity, a lot of media. This, Pat, by the way, is an example that I consider regulation on big tech to be a real discussion and conversation that needed to be had. Now, once again, I believe Zuckerberg and Sheryl Sandberg are not going on the stand and they sent all of their representatives to be part of this discussion. That continues to bother me that the people that are the most accountable for this aren’t fully stepping up and actually being the ones testifying.

The research itself is damning. It’s as damning as it comes, and we’re at this really interesting inflection in society right now where social media is almost needing to be scrutinized the way cigarettes were scrutinized 20 or 30 years before we finally discovered just how bad they were. I’m not saying for a moment that adults with fully developed brains can’t make decisions for themselves the way we choose to drink, smoke, or engage in other behaviors that we know have health risks. The challenge is is that these children are being engaged at an earlier and earlier age into these devices, into these social platforms where their view of what the world is, of what health is, of what politics are, of what gainful employment, family looks like are being shaped by algorithms that are out of their control and is basically dictating without them having the ability to discern what is real, what is not.

The data that was discovered by Facebook shows that there’s some problems with this. I, Pat, will just say this, is this is a great example of where if big tech regulation is going to progress, this is an area I’d like to see it progress is finding very specific areas and identifiers where technologies are creating risks, are creating real monopolies, are creating true harm to consumers. Not looking at big, overarching regulatory activities that are going to look at every platform equally. Facebook has a problem. It has a problem with elections. It’s had a problem with its use of data. It’s had a problem with what it’s telling people about how it operates and why it operates. Does Facebook need to be broken up? Probably not. It would cause more consumer harm than benefit, but does Facebook need to start being held much more accountable for things it can improve and do better? This is a case, Pat, where I hope this grilling makes some sausage.

Patrick Moorhead: Ooh, quotable there. I’m going to play the contrarian here, even though I believe that Facebook is toxic for kids. Okay, I think it’s toxic for adults. It also brings a lot of benefits. Imagine COVID where we couldn’t see pictures of grandkids and parents. I haven’t seen my Dad since COVID came out. He’s old and the only way I can see him is through video calls and stuff he posts on Facebook. If we ban Facebook for kids, shouldn’t we… The biggest killer for kids is obesity. Shouldn’t we force kids to be eating right? Maybe not let them eat at McDonald’s? Or keep them from ordering cheeseburgers? How far do we go? If we’re really saying we’re doing this to protect kids, and I know your argument was bigger than that, but let’s just go after everything while we can.

I think in a sense the pile-on on Facebook is, while I think it’s deserved, I also think it’s convenient to bring the kid thing up. The funny part is, both Democrats and Republicans hate Facebook. The Democrats say-

Daniel Newman: It’s not part of them.

Patrick Moorhead: … if Facebook helped elect Trump and the conservatives hate Facebook because they say they get censored more than Democrats, so it’s like this… I don’t know, Daniel. I think we’re both small government people. I don’t want to speak for you. Most of the growth that we’ve seen in business comes from more deregulation, but how could I support kids being injured? I can’t. Anyways, those are my kind of two cents on that. You know, we need to have more conversations on The Six Five like this. This is fun.

Daniel Newman: Yeah, it is a fun one and it’s nice when there’s a little gap in the week and we can pick something big picture. By the way, there were some great segments on our favorite pod, The All In. They talked about it this week and it as a great debate. We could put a link to it maybe in the show notes if we remember.

We got two more things, hard-hitting, Pat. We’re going to have to keep them to a couple of minutes each. I’m going to play moderator with you here, but let’s go back to Amazon. You wrote a great piece. Some updates to connect. One of the products that we don’t hear a lot about, but something that’s really becoming an important over there at Amazon.

Patrick Moorhead: Yeah, so Amazon, they do IaaS, PaaS, and even have some SaaS products, and Amazon Connect is kind of a cross between a PaaS and a SaaS product. It is a configurable SaaS product that takes a little bit of work, but essentially, Amazon Connect is Seek as a Service for contact centers. If you look at just how bad contact centers are and consumers’ experiences with it, you can see that there’s an opportunity for disruption there. Part of the challenge is that you don’t necessarily know who’s calling in and why they’re calling and how to answer and how to deal with things as that’s going on and even connecting them to different places. Why should it take four steps to get to where you actually want to go?

In true form, Amazon will either take money with IaaS, PaaS, or SaaS. They’re already hosting huge contact centers like, as we’re going to talk next, Five9. They’re also hosting CaaS, which is Zoom. This is them getting… I don’t want to say their pound of flesh, but their amount of business and they have real customers. They brought out Sixt. If you’ve ever rented a car in Western Europe, you know that. UT in Austin uses Amazon Connect to transition to work and learn and teaching from home, which is pretty cool. Morrison’s, if you’ve been in the UK, the largest supermarket chain uses them and they actually said they got everybody working from their home within a day. I think that’s truly awesome.

New features, Connect Wisdom, which is kind of a real-time agent assistant using AI and also has some automation features in it to automatically do things that you know the customer wants. There is Connect Voice ID where based on voice you know who the customer is coming in the door, not only to say who they are. We just talked about Alexa and how good they are at that stuff.

Daniel Newman: Yeah, Amazon’s playing a real role in this contact center space and quietly is building up quite an impressive product portfolio and a business. Because we only have a minute, I’m just going to say I think we’re going to hear a lot more from Amazon, and given their ability to deliver customer experience service for their own business, they’re probably going to build a heck of a good product considering just the amount of customer service they have to deliver each and every day.

Let’s wrap up with a little bit of news. I don’t want to say it’s good news, I don’t want to say it’s bad news, but let’s just say it’s something we haven’t heard a lot lately is a deal goes off the rail when ISS, Institutional Shareholder Services, came out and basically issued a report to Five9 investors that the $14.7 billion that put about a 12% premium on the Five9 stock at the time of the deal should not be completed.

A lot of people, including us, Pat, operated under the expectation that regulatory was not going to stop this deal because there was no good reason for that. Even some of the investigations into China and their relationships were not thought to have stopped this deal, but what I didn’t expect was that this deal would get stopped because of an external advisor coming out and telling Five9 shareholders not to vote, and then the voters actually didn’t vote for it.

Now, the backdrop on this is I think there was something like a 25% price drop in the Zoom stock, and this was an all-stock deal that took place from the time the deal got announced to the time that the deal was supposed to be moving forward. This was on the back of the fact that Zoom’s growth had fallen to a terrible 54% year over year on a pandemic over pandemic quarter. If you hear my sarcasm, that’s because I’m laying it on pretty thick. The growth rate for Zoom is fine.

Bottom line, here, Pat, and because we’re a little bit at time and you and I both have to wrap this show up here pretty quick, and I think this is a topic that warrants a little more conversation than we’re going to be able to give it right now, is that both of these companies will be fine by themselves because Five9 has a very successful product in a growing category. Zoom has a successful product and a platform in a category where they’ve been very successful.

I do believe together they created a larger TAM and it did make a compelling case for Zoom’s platform and horizontal growth into new areas like the contact center. There’s still a strategic partnership between the two companies. The market will still get a benefit from that partnership, but going forward, I think both companies are going to be okay. I think both companies are going to continue to grow. I’m not a hundred percent this is the end of this deal forever, but it does look like right now there’s not going to be another offer tabled in the immediate future.

Patrick Moorhead: Daniel, I mean, you said it best. I like the combination. It was strategically sound. Note in none of the communications from Five9 did they dispel the strategy. We’re talking about price right now. That’s what this comes down to. I don’t think this deal is dead, Daniel, I don’t. Now, on one side, I know that Zoom has very build-it-yourself type of mentality, but I have to tell you, getting call center customers, I think they can build a decent technology. Zoom hasn’t proven to me that on the audio side it has the machine learning chops and automation to be able to build their own and just show up and be successful on day one. I don’t think this deal is dead because it’s not price. I think we’re looking at a very hard negotiation at this point, so anyways…

Daniel Newman: Something to keep an eye on. Well, we did it, Pat. We finished the show. We covered Oracle, HPE, Amazon a couple of times. We dug into a controversial topic with Facebook and we talked about the Five9-Zoom deal. For everyone out there, hit that subscribe button, join us. Check us out on iTunes, on Spotify, on YouTube, and of course, on Twitter with any complaints, @PatrickMoorhead. For this episode of The Six Five, I want to say… I almost said The Five9. Think about that… of The Six Five, we’ve got to say goodbye. We appreciate all of you for tuning in. We appreciate our fans. See you next week. Bye now.

About the Author

Daniel Newman is the Principal Analyst of Futurum Research and the CEO of Broadsuite Media Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. Read Full Bio