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Salesforce Starts Slacking – The Six Five Webcast
by Daniel Newman | August 25, 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. Salesforce Slack-First Launch
  2. Intel Architecture Day
  3. Latest Earnings Report from Cisco
  4. Intel Architecture Day: All Things Datacenter
  5. NVIDIA Earnings Report
  6. Massive T-Mobile Breach

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. I’m the host today, Daniel Newman, principal analyst, founding partner, Futurum Research, joined by my always esteemed podcast host partner in crime, Mr. Patrick Moorhead, Moor Insights And Strategy. Patrick, good morning.

Patrick Moorhead: How are you doing, buddy? Had a pretty good breakfast this morning, good breakfast chat. Went down nice.

Daniel Newman: I did. It was great. In case anybody’s trying to figure out the cryptic messaging there from Mr. Moorhead, I headed down to the city today so you’ll see my background is a little more sterile than normal when I’m hawking my logo like crazy, if you’re watching this. Of course if you’re listening, you wouldn’t know that. But we had a great breakfast, downtown Austin. A little quiet down here right now, back into some COVID protocols. Very different in the city of Austin and the rest of the state of Texas, but doing what the state has to do, what the city has to do. Mayor Adler, we are watching. With that in mind though, it was good to have a conversation and chat, everything, talking about pipe deals, talking about tech news of the week. And by the way, we’re going to bring all that here today.

On this episode of the Six Five Podcast, we’ve got a great show. We’re going to talk about some Salesforce, Slack news, Intel getting a double dose of Architecture Day. Talk about a couple of big earnings calls that happened this week for Cisco and NVIDIA, and then how could we not talk about that big old T-Mobile hack? Well, no one else was talking about it because everyone was talking about Robinhood and who cares about that terrible company. Anyways, I’ll hold my opinions on that for another show.

A quick recap on the Six Five Podcast, first-time listeners, or if you haven’t listened too many times, you know our whole theme of the show is six topics, approximately five minutes each, diving deep into the analysis and just a little bit of news. Basically, we provide what we think the news of the week means. For everybody out there, quick disclaimer, this show is for information and entertainment purposes only. And while we will be talking about publicly traded companies, we’ll be talking about earnings and other things related to these companies, don’t buy any stock because of anything we say here on this show.

So Patrick Moorhead, I have been talking a lot but I think the way this thing works out is I get to keep talking. So the first topic of the week is Salesforce Slack. So if you’ve been living under a rock for a while or you’re not following the tech industry very well, Salesforce invested, spent, made a purchase of Stewart Butterfield’s Slack, a very well loved collaboration and asynchronous chat tool for something like $27 billion and change. And that happened a while ago, that news cycle passed, but what did happen in more recent weeks was that deal closed. And so now, SlackForce as you so affectionately like to call it, Mr. Moorhead, is official and it moved forward. And this week, the company came out with its first big sort of Slack Salesforce, what does it mean for customers launch.

Now this thing, it was an online events because, well, unfortunately, we are still in the world where everything is online. Oh, by the way, we’ll talk about that later, right? But anyways, so kicked off by Salesforce president COO, Brett Taylor joined by Stewart Butterfield, and essentially, there’s two themes I’d like to spend a few minutes talking about. One is what was actually announced and what it means, and two, what I think it’s going to ultimately mean.

So what they’re doing here is they’re basically creating this series of what they call Slack first offerings, three different silos, right? You’ve got the sales silo, you’ve got the service silo and you got the marketing silo. And what they’re really talking about is how thematically, we take collaboration as this core digital IQ of a company and enable people to, instead of operating out of inboxes and operating out of various different messaging tools and operating out of different video tools, how can you create Slack as the center of the universe or the enterprise’s way of doing business? That could be tying into ERP and CRM, that could be tying into customer experience, that could be tying into big data analytics tools that are used for creating customer experiences and marketing.

And if this sounds a little bit like what you’ve heard Satya Nadella talking about with Teams, that’s because it is very similar to what you’re hearing Microsoft talk about with Teams. And the reason I bring that out is because with the acquisition of Slack, what we essentially have now is a bit of a two horse race for what I’d say a fully vertically integrated stack of collaboration, business applications, synchronous, asynchronous communications, and then this platform idea of being able to tie in all of these different business applications, tools and utilities inside of an organization and make them usable by people in all different parts of an organization, whether it’s a frontline worker, an accounts payable person, sales team member or someone in the marketing team.

So quickly back to the three silos, Slack for sales, which is all about developing and designing faster sales cycles. So the company did a bunch of research, came up with the fact that using Slack to drive the sales process forward, you’re seeing something like 15% faster sales cycles. Again, I don’t think it’s specific to Slack, it’s more specific to using that asynchronous real-time communication, but building that in and integrating it into the CRM pipeline. That’s where your magic sauce is created. Then you have the service vehicle, similar because service and sales to me, very similar in the identities but one is about gaining customers and the other is about keeping customers. And what they looked at is how does Slack and integration into this service Cloud with Salesforce actually speed up resolution. And that same research found that there was about an 11% reduction in the time to resolution if you use the Slack first approach.

And then finally, it was the Slack first marketing, and that’s essentially all about decision-making, so that one’s a little more ephemeral. But the survey didn’t come out to say something like 76% of the marketers that are using Slack as part of their decision processing for making marketing campaign decisions did find that using Slack in combination with their traditional marketing tools did help them move faster.

We were going to give a sneak preview to our Intel architecture, a topic which will be coming up in a moment after you react to all of the things I just said, but here’s the last skinny analysis piece here. Early days, kind of cool stuff. I get the idea of Slack first, want to see more, want to hear more case studies. They did have IBM come out and talk, Arvind Krishna showed up and was there, so they did have some real examples of customers that showed up to talk about how this technology is helping these individual companies. I think Sonos also showed up, so that was good as well. But it’s still early days, want to see a lot more integration with the platform, want to hear more from customers that are integrating it. And like I said, big two horse race and of course, you can’t count out Zoom, you can’t count on Cisco, but they have a huge advantage that they’re now tying to collaboration to the business tools in such a seamless, ubiquitous way.

Patrick Moorhead: Wow, Daniel, that was a whole lot.

Daniel Newman: I know.

Patrick Moorhead: I pretty much agree with almost everything that you talked about, but the one thing that I’m constantly looking for here is what did Salesforce do that they couldn’t do without buying them? Or in other words, is there anything that they announced that they could not have done with the current API based relationship? And I’m not seeing it yet, and I’m also not seeing some incredible top-line that Slack brings to the table. But I’m open to all of it. Maybe next week, we’ll be talking about how the Salesforce Plus integration with Slack is creating some new business opportunity as well. I didn’t get briefed on this so I really can’t comment other than what I read from you and from other folks, but hey, up to getting briefed, Salesforce, if you ever want to do that.

Daniel Newman: We’ve got some big topics though that you have been briefed on deeply and I’m going to dive into those. Next week, Salesforce does do earnings Wednesday so I expect to hear more. Maybe they follow up on your exact comments. You made a great point, and we don’t have time to dig into that point and we’ll come back to it about whether acquisition or strategic partnership makes more sense? And we have to answer that question all the time.

Pat, Intel had a big day, spent four hours on with their Architecture Day. I watched it all day long between the calls, you. Dove in deep. By the way, great Twitter stream, Pat. You sort of almost live blogged it using Twitter, really enjoyed that. So if you’re out there listening to the show, check out Pat’s Twitter stream on Architecture Day. I’m sure he’ll have a Forbes piece to come soon thereafter, but big day, and we’re going to actually break this into two parts. We’re going to talk right now about the client core strategy that was announced at Architecture Day. Later in the show, we’re going to come back and talk about data center, but Pat, I’ll hand the mic to you.

Patrick Moorhead: Yeah. So first off, there’s a lot of content here. We’re going to break it into two. And there was so much content, I haven’t even done a write-up. I decided to take the easy way out and just tweet, which was essentially my notes plus some other stuff. But break this into, they discussed their cores and they discussed their client product, which was Alder Lake and then some graphic stuff. So to me, I’m not going to do this in the order that Intel did this but I think first and foremost, I am more convinced than ever that Intel will gain graphics market share versus AMD and NVIDIA. I can’t even come up with a worst case scenario that doesn’t put them at the very high end of the mid range, even if AMD and NVIDIA increased performance 50%, but who knows what could happen?

Execution-wise, I feel pretty good on the graphics side because they’re partnering, at least on the consumer side, they’re partnering with TSMC on an N6 node, and they’ve got a multi year roadmap. The second thing that I’ll jump into is the cores themselves. You may be familiar with ARM’s big.LITTLE configuration. It’s a big core to do big work in a small core to do little work. This is very similar to that. You have an E core for efficiency and you have a P core for performance, and then whether it’s a server part or a client part, they’re putting P cores in E core, and then the threads and the workloads are being managed by a thing called Thread Director.

There were some early issues with big.LITTLE that had to do with thread management, but I heard enough from Intel that with Windows 11, it’s going to operate well. I feel like Intel learned a lot from what ARM had done. And also, Intel had done symmetric multi-threading for years so it’s not like they don’t know how to do threads. They actually do know how to do threats. So basically, Intel said that an E-Core, 40% better energy or performance or same performance at 40% lower power as Skylake and in a one threaded. And then in a four thread configuration in a one threaded, and then in a four-thread configuration, 80% better energy or performance, or 80% less power, which is pretty impressive, but again, we have to see the product that comes out to see what it really is. The P-Core, bigger performance, they’re claiming a 19% advantage, Daniel, over an array of different benchmarks from spec to SYSmark, Crossmark, PCMark, Webb Expert and Geek Bench. I don’t know the mixture of GPU or AI that’s in there so it’s a big TBD for me. Probably the biggest thing that they added on there, and this is for data center only, is this new inference and training engine called EMX and they’re claiming 8X improvement on it, eight, and that’s pretty big.

And we’ll get into it when we talk about Sapphire Rapids, the actual product that integrates that, and let me finalize here on the actual client product that takes P-Cores, takes E-Cores, and then takes a bunch of fixed function engines, adds DDR5, PCI E 5, Wifi 6, Thunderbolt 4 in a product called Alder Lake, and this is a chip that scales from ultra portables at nine watts to a 125 watt desktops on three packages. It is a monolithic design, but it is going to be a smaller die than let’s say the server part that’s a distributed piece.

So net, this wasn’t a product launch. I do feel like if I am a betting man, that this will be very competitive in notebook and desktops that are lower core count, or let’s say desktops with an overall core count between eight and 16. I think AMD will still win the core battle. I do think it’s probably likely that on a core to core basis on single threaded perspective, that Intel will probably retake the crown until AMD comes out with their next architecture. So this is going to be on, what’s called Intel 7, which is very similar to TSMC’s. They call it seven nanometer, but it’s not really seven nanometers. So there’s where we are, two cores and Alder Lake.

Daniel Newman: Yeah, there’s a lot of updates there, Pat, and you went in deep and my responsibility as host today is keep things moving, but if I can add a couple of just quick thoughts on this one. Pat Gelsinger said, bringing the geek back, and this is what Intel has been doing with its recent communications, whether that’s been the recent IDM announcements, whether it was architecture day. The company is really trying to provide some guidance in terms of how it intends to reclaim or maintain leadership in various areas of the business, giving a lot of transparency, execution remained to say, and every time I talk about Intel execution, execution, execution, that is going to be the litmus test for the company.

It’s not about what they’re saying they’re going to do. It’s been about over the past several years, what they’re saying they’re going to do and then what’s actually been done. Pat Gelsinger is the say-do guy. He came in from the beginning, said I’m going to say, I’m going to do, I’m going to execute. If the company can execute, there are opportunities to recapture, regain some market leadership, and certainly some market share in different areas. That is TBD, but we’re watching and we’ll be talking about it. You can count on that here on The Six Five Podcast. Pat, let’s move to some earnings. How about that?

Patrick Moorhead: Let’s do that.

Daniel Newman: Yeah. Is everybody’s head still attached after Pat’s deep dive there? That was some good stuff there, Pat, by the way. I look forward to that article. Get that published, man, because everybody needs the Moorhead synthesis.

Patrick Moorhead: Oh, here is the hard part, Daniel, is that these weren’t product launches. These were technology announcements and I can guess all day long, but unless frequency and core count and pricing, you’re almost guessing. I mean, I can extrapolate from some of the stuff that they said about their core performance, but I don’t know really the performance of AMX. I don’t know the performance of the… By the way, they pulled off AVX 512 off their client, which was doing most of the heavy lifting for machine learning on clients. So a lot of questions, they definitely tee themselves up, but have a lot of content available for the Alder Lake launch.

Daniel Newman: Hey, I didn’t say you couldn’t talk anymore.

Patrick Moorhead: I’m sorry. Did I do another loop back?

Daniel Newman: All right. So we’re going to just skip the… No, I’m kidding. Let’s talk about Cisco. Another big week of earnings on, was it Wednesday? It was Tuesday. It was a Wednesday, it was a Wednesday. On Wednesday, NVIDIA and Cisco both reported. We’ll talk about both on this show. Unfortunately, Robinhood reported, which have I mentioned, terrible company. Anyway, I’ll explain that later someday, but not here, not now. So you just have to know terrible company, but Cisco, not a terrible company. As anybody that kind of followed the show and followed our analysis on earnings again, why we do this? Not because we’re equities guys, not setting price targets.

What we’d like to do is how does this moment of truth that comes out on a quarterly basis really connect to the strategy that these companies are putting in market? How are they doing? Are they interesting? Are they staying innovative? Are they on the front edge? IT OEMs are large, IT infrastructure, especially problem-based actually were some of the slowest recovery names in the tech recovery that happened during COVID, and that was because people stopped implementing big data centers on prem and moved a lot of things to SaaS and public cloud. So chip SaaS, public cloud, all roared, names like HPE, Cisco, Dell, IBM, all with big on-prem infrastructure among others were slower to come back.

Great news about this quarter and the end of the year here for Cisco, which it was the end of their fiscal year 21, was that the growth is coming back. Now, when I say growth is coming back, this isn’t a zoom boom. This is a high single digit, which by the way, if you find the tweet, Pat, out a few hours before I actually said expect mid double, mid single digit growth with an upside of high single digit growth. So I called it. I just wanted to put that out. I like to call that kind of stuff, and then I like to brag about it when I do.

Patrick Moorhead: It’s the victory lap, baby. We all need victory laps.

Daniel Newman: So beat on earnings, beat on revenue, but let’s just talk about a couple of things that stood out about the beat. One, really great growth in their infrastructure platform. We know how Cisco’s revenue breaks down. They break it down into like five buckets. Okay, you got infrastructure, application security, other, which is always fun, and then services. Where did growth come from? Well, infrastructure platforms represents more than half of its revenue. So basically, when they’re big infrastructure, this is UCS, this is core data center networking. When that part of the business doesn’t grow, Cisco doesn’t grow. Well, this quarter, it’s up 13% growth year over year.

It saw strong growth from various regions, including 8% domestic growth after only almost being flat on constant currency last quarter. Also, really strong growth coming out of the Asia-Pac geo for the company. Interestingly, the applications group didn’t grow. Now, this is an interesting one to unpack because applications, of course, you’re looking at everything from monitoring, observability, things like Gap, you’ve got things like Webex. what’s going on there because with Webex, you would expect massive growth because of all the adoption of video and collaboration. However, with Cisco, it’s a one plus billion dollar a quarter business and there are a number of parts and pieces in that applications business, but it was basically flat.

It was down a 1% number. I think a lot of people want to know a little more about how Webex individually is doing because when you see Zoom going in double and triple digits, and you see Microsoft at 250 million Teams users, what’s going on there, but we’re watching it, but maybe Pat, the most interesting number, and I’ll let you elaborate a little bit on this and I think we keep talking about this is the $4 billion number claimed in the company’s software revenue to 81% subscription revenue, 90% perpetual, 4 billion.

And there are now proclaiming to be among the biggest software companies in the world, which my only thought, and then I’m going to let you go from here, is that this is something that outsiders, investors, and customers should feel very bullish about because this is the pivot that an infrastructure company needs to make to stay relevant in the longterm and it appears based on the percentage of subscription and the size of that business, that the company is in very good shape and it’s growing at a good clip, about 15% on subscription.

Patrick Moorhead: Wow. You did leave me something. I appreciate that. So yeah. Perfect segue. Cisco for years was an infrastructure, a networking infrastructure company, and then they moved into a full service infrastructure with networking, compute, and storage, and then they moved along and then almost overnight, and maybe that’s just overnight because I’m old and can’t keep track of my years, they turned into a software and services company and this quarter was almost a quarter of me talking out of both sides of my mouth. Equipment order growth was 31% product orders. That’s product. That’s infrastructure. That’s the best that they’ve done in a decade, and then out of the other side of our mouths, we’re talking about it being one of the biggest software companies out there with a $16 billion run rate.

So I think that the software growth is incredible. The services progress is incredible. I’m going to do the double click on that 4 billion. I asked Cisco for an explanation of that. What’s their list? They couldn’t provide me one. So I’m thinking about creating my own. It’s not that I don’t believe them. It’s just, I don’t want to throw down that one of the largest software plays out there without being more precise. Their CFO said it was they were in the top 10. It does include SaaS, but it’s going to be hard to figure that out, but I guess that’s why we get paid to do what we do, Daniel.

Daniel Newman: That’s a great point and a fairly important point that we labor on is we get encouraged by numbers like that, but we want to unpack it and we want to unpack it for you out there because big claim. Obviously, when you think of big software companies, I said this in our briefing, but most people don’t think about Cisco, but if this accomplishment puts them in that category of top 10 global software vendors, it almost needs to be reconsidered a little bit how the company is marked. We say things like IT OEM or big infrastructure players, but are they?

Patrick Moorhead: Yeah, by the way, this claim, and by the way, you just doubled back there so I’m going to double back. This top 10 software claim reminds me of the Webex claim. What was it, improving the experience by a 100X or something, and I was like, okay, what’s the calculation that went into 100X, and I learned in my experience in dotcom, 1.0 dot-bomb that you can put a number to anything and spreadsheets don’t lie, but come on, man, give us some detail on this top 10 software thing.

Daniel Newman: Let’s keep pressing, Pat. Let’s keep asking. And eventually I think we’ll get it. It’s a good organization. Chuck Robbins is doing a good job. He fought a very hard fight over the last several months with supply chain, with having a large part of the business dependent on this on-prem infrastructure, that core business and returning to growth. And by the way, the guidance was encouraging to mid high single digit guidance for next year.

So another solid year ahead for Cisco, but you know what? You can stick with us here because we’ll keep talking about it next quarter. You can be sure it will be coming back and double clicking, triple clicking, quadruple clicking on what’s going on with Cisco. But you know what, Pat? We had been talking about doubling, today was a double Intel day. You know we love chips, we love SAS. We started with SAS, we’re talking about chips. We’re going to talk a little more about chips now. And then, hey, guess what? The next segment is going to be about chips, but a different company. Plenty about that. Pat, take us through Intel data center on architecture day.

Patrick Moorhead: Yeah, so I took everybody through the cores, and the cores can go client and data center. And then I hit Alder Lake, which was the client product. And now I’m going to hit all things data center, which was as equally as impressive. And from a data center point of view, you’re looking at AMX, you’re looking at XCHPC, which is an architecture for graphics for HPC, AI, and ML. You’ve got Mount Evans, which is an IPU also known as the DPU in regards to Marvell, and the vernacular that NVIDIA does.

But let me jump in here. So first off, if anything, Intel’s going straight after NVIDIA’s A100 with a product called Ponte Vecchio. And Ponte Vecchio is just a … it’s the most beastly product that I’ve seen after the NVIDIA A100, over a hundred billion transistors. Essentially what it’s doing is it’s accelerating AI, HPC workloads, and that’s exactly what the A100 does.

And Intel’s doing it, gosh, with a ton of technology. They’re 3D stacking this thing, then they’re connecting the 3D stacks via EMIB. TSMC is doing part of it with N5 process, which is the real name for the fake five nanometer. And then the base tile is an Intel seven. This thing is a work of art. And quite frankly, this thing is either going to go down in flames as the second biggest bust in Intel history. I would say the first was the many core architecture that they were trying to put together years back, or this is going to be an absolute stunning success. But I believe just based on some of the commitments that some of the national labs have made, they are going to sell many of of these things.

Let me go to Sapphire Rapids. Sapphire Rapids is essentially the code name for the next Xeon, but essentially it’s not a monolithic die, it’s a distributed die that’s more similar to AMD’s Epic architecture. And then it’s put together via EMIB technology. And that’s really good. Intel’s issue is not necessarily design, it’s execution. And what we know from a distributor architecture is that your compute tiles are really the only things that have to be in leading edge. So compute tiles are on Intel seven. I don’t know what the rest of the chip is. My guess is that’s probably a 14 nanometer, but essentially lowers risk for manufacturing. I know that’s not sexy for everybody to hear, but it’s reality of where Intel is.

It’s all a bunch of P cores. There’s no E cores in this. We have no idea how many P cores. We have a little bit of idea as to the performance, but in the server world, quite frankly, it’s about delivered performance, not some benchmarked performance. Interestingly enough, even though it’s a radically different architecture, Daniel, the messages between this and Ice Lake are very similar. You’ve got a ton of acceleration. You’ve got acceleration for data streaming, crypto, compression, decompression, AI, which we had before, but there’s an adder which really hits some of the issues with some of the major CSPs out there. And those are things like data streaming and microservices.

So with microservices is there’s this start-up penalty and there’s this wind down penalty for microservices, and Intel is going to be accelerating that. Now, with acceleration some of it is you have to directly write to an API, which takes heavy lifting. And some is just inherent in the design itself. Obviously the ones that aren’t going to take acceleration are things like microservices acceleration. But again, this wasn’t a product launch. I have no idea how this compares to AMD. My guess is if you had to put a gun to my head is that AMD is still going to win on multiple things and Intel is going to win on everything that’s accelerated that’s out there. Because quite frankly, AMD doesn’t accelerate anything with their last three generations, it’s just hardcore integer and floating point and just a ton of cores down there.

My final thing I’m going to talk about is, as you know, one of the hot topics out there is acceleration at the edge. So offloading the main server to run apps and everything else is offloaded, networking functions, crypto security, even accelerating storage. Intel came out with its first ASIC based design called Mount Evans. And that’s ASIC versus an FPGA. That means it’s hardened. That’s mean it’s going to be lower power. It’s going to mean it’s higher performance in the same die space, but this is flying primarily in the face of Marvell and a little bit in the face of NVIDIA. NVIDIA is really focused right now on data center networking, offload, and Marvell is primarily focused on and seeing success in CSP and carrier networking offload. That’s it. That’s the tweet.

Daniel Newman: That’s it? That’s the tweet. Oh my gosh. Yeah. Follow Pat, tweet, stream. Pat, write an article for crying out loud. Jeez, Louise, you’ve got this covered. But no, lots of things here. I’m going to spend just a few minutes, not even, because you spent all my minutes talking. You ever sense that out there? All of our listeners, that sometimes he and I get a little jelly of each other when one of us takes all the oxygen out of the topic.

But look, when it comes to the data center Intel’s got a few major opportunities and constraints. The opportunities and constraints are one, I talked about the core. It’s returning on process leadership. It’s execution. Delays have been its biggest thorn in its side, our recent Sapphire Rapids delay. Even though it was a very brief one, was looked upon very negatively.

You’ve got a lot going on with both DPUs and acceleration. You saw on the client side, some announcements about Intel and discreet GPUs, but the space NVIDIA plays in, the company has been very successful. It has migrated from training to inference. Cisco has some things, Ponte Vecchio and One API that it’s trying to build to become more the center of an AI acceleration GPU existence, but that’s a huge market space. And these architectures are going to be key to the company participating and competing in those spaces.

I like what you talked about with the edge. I like everything DPU. It’s coming in a number of different fashions though right now. And it’s going to be very competitive. Marvell executed very well in the DPU space. So Intel is going to definitely have to work very hard to compete there. And I have no doubt that it is capable of doing so.

And then of course you have to compete with what cloud providers are doing on their own. You look at things like AWS Nitro and what has been created in the public cloud to be able to do these things. But of course that’s for public cloud workloads. Intel is great not only in the public cloud and being a cloud partner, but also obviously to all of those prime data centers that are going to require compute power and all those OEMs that are going to build hardware to support that investment.

So good coverage, Pat. Write an article. If you don’t write an article, everybody just follow his tweets. I’m sure it’s in our show notes. He likes to share tweets. I don’t do that. So you’ll have to read my articles.

All right, let’s move on. We got two more topics. We have gone a little bit long, but I don’t think anybody ever complains about too much value from our podcast. Pat, I’m going to hand the mic to you. You’re going to talk about NVIDIA earnings and NVIDIA gaming growth. And I’m going to talk about some other NVIDIA stuff when you’re done. So just leave a little bit of air for me to breathe.

Patrick Moorhead: I feel like we’re repeating ourselves every quarter on NVIDIA. They kicked butt on top line, gross margin, net income, and EPS. Revenue was up 68%, but I want to focus on gaming. Gaming was up 85%, which is just insane. And the meme for a long time, and I totally get the meme because it was deserved because when we went through the cryptocurrency bust, NVIDIA had been saying very similar stuff that, Hey, we believe that most of this is gaming. But one factoid that came out that impressed me was that 80% of Ampere, and Ampere is the latest and greatest with ray tracing architecture, is the low hash rate. And essentially, NVIDIA came out with low hash rate, essentially crippled it for doing Ethereum mining.

So if 80% is LHR, you have to assume that at least 80% of Ampere number, which is this gaming number, is real gaming. And that’s the only way that I can look at it. Now, NVIDIA, I think so it doesn’t get sued and it’s conservative is telling people, well, we actually can’t tell you what’s gaming and what’s not. And I appreciate this, but I stand back and I am absolutely amazed. This market, PC gaming market is accelerating, Daniel. And I could originally attach this to COVID, which was, we can’t go outside so we’re going to sit inside and play games, but more people are opening up, yet NVIDIA keeps cranking out record numbers for gaming. So gaming is hot, dude. And it is not a transitory thing. And for what it’s worth, this could also have a positive effect on the overall PC numbers. And while yeah, you can buy a PCI express card and throw it into your gaming rig. A lot of people, to match that up with the right processor and memory should be a boon to every semiconductor space that’s in gaming PC. So kicking butt. And we’re going to have to see what AMD does. I mean, where’s AMD in all this? Where’s their knock it out of the park graphics numbers?

Daniel Newman: Yeah, I don’t think they’re going to have them because NVIDIA is busy taking all the meat off the bone. It’s a very bare chicken out there for everybody else that’s hungry. But good for Jen-Hsun, good quarter, Pat. I’ll stick off the gaming because you covered that pretty well, but just as a whole, 10 straight quarters of outpacing all expectations, just massive growth. A record-breaking revenue, not only for gaming, though, but for data center and for Pro Viz as well, just huge overall revenue.

I mean, you’re talking about a year ago, if we did 3.8 billion in revenue, this year, 6.5 billion. Billion, I’m saying it with a B, because it’s not like a… That is massive revenue growth.

Gaming, as you mentioned, listen, data center though is hot, hot, hot, and this is a situation where NVIDIA finds itself in the exact right position in the markets it’s in. It’s in this gaming market where this expanded TAM just keeps coming, and they’re grabbing such a strong share of that TAM.

But I actually would say, and at risk of putting myself out there a little bit, the data center growth opportunity is just monumental in terms,  it’s nascent at this point. We’re just touching the surface of what AI is going to be doing in the data center and the power of the GPU, whether that’s a subscription-based cloud offering, whether that’s base command.

And here’s the thing is I tweeted out and I got a lot of engagement on my tweet about NVIDIA’s earnings, and a lot of people going, “How does a hardware company have 60-plus percent margins?” It’s not a hardware company. It’s their gaming AI. It’s about software. It’s about frameworks. It’s about hardware. They have put together the whole package, and that is why the company has been so successful.

Just the list of announcements, it’s starting to look like AWS’s quarters with just the things they’re doing, whether it’s launchpad, Tensor RT 8, winning what? 342 of the 500 supercomputers in the top 500 super computing list. It’s the ML [inaudible] result, winning, winning, winning, certified systems. It’s what they’re doing with DPUs and BlueField. It’s the announcements of both Azure and Google making major commitments in their cloud offerings to roll out NVIDIA.

And like I said, the AI opportunity is still in its early days. And that’s what’s most interesting about it is they’re getting a chunk of a market that’s tiny compared to what this market is going to be. The overall growth in AI and the opportunity for AI is going to be massive. So if NVIDIA can continue its momentum, you can expect great things.

And then, of course, it’s suiting other areas. Pro Viz had one of the biggest quarters ever. I mean, automotive, I mean, automotive is this area that over the next 10 years, the disruption we’re going to see is going to be massive. I enjoyed listening to Cathy Wood yesterday as everybody’s beating up her investment thesis at Ark, but she looks at things like AI, and she’s looking at things like 3D, and she’s talking about NVIDIA doesn’t even understand yet how big these changes are going to be and how much this is going to change the future.

Jen-Hsun gets it, gets what he’s building. It’s hard not to be very positive about NVIDIA. It’s hard to not think… And then, of course, last thing, just one comment about this, because we could spend a lot of time, Arm deal, at one point the valuation of NVIDIA I believe was tied to the expectation of Arm. I believe with its growth over the past several quarters, its valuation is not based on the Arm deal anymore. In fact, I think most of the market sees the Arm deal as a coin toss at best.

But whether they own Arm or they continue to license Arm, NVIDIA is going to roll forward either way, if they get the deal, though. I actually see it as an exponential accelerator towards that trillion dollar market cap valuation. So very interesting run for NVIDIA. Could talk more about it, but we’re going for a record long show today, Pat, so I’m going to have to get us on to the next topic.

And this one will be a little bit quicker, but it doesn’t make it any less important. T-Mobile, Pat, both of us are T-Mobile users. So I will put that out upfront. T-Mobile this week, there’s been details emerging, but very little comment from the company, about a hack, which they believe could impact more than 100 million T-Mobile USA customers.

It was first reported in VICE that there was a dark web basically post that said something that they were using Bitcoin, a subset of data that was available from this hack. Now, a little bit more on the hack is that it’s interesting because a hundred million personal records, a lot of our records are already out there. If you’ve been breached, you probably found out in one of these breaches, you’re in them. 36 million, now they’re saying, unique personal records.

What’s in this hack? You have phone numbers, physical addresses, IMEI numbers, which means they can identify your device, driver’s license information, and social security numbers. Why is this crazy, and why am I just stunned that T-Mobile hasn’t said more and isn’t doing more in terms of the PR on this side of things?

Well, when you have this kind of data, look, you can probably aggregate all those different pieces of data about somebody across the web if you just search because of what’s out there and available. But having that set of data together basically gives the ability for things like spoofing, a text message from T-Mobile to think, “Hey, I want a phone upgrade.” You get a link in your thing that’s a phone upgrade. Suddenly, you’ve been hacked because they know your device information. They know your driver’s license information. They know your name. They can create really authentic looking spoofing messages out of this, and things like that are really, really scary.

My feeling on this, Pat, is that these hacks are going to happen. Big companies are going to continue to be vulnerable. T-Mobile may or may not be at any major fault of how this actually happened. Of course, there’s going to be some fault identified of how this would happen, but every company is vulnerable.

What I’m worried about, and what I’ll say to the market right now, is T-Mobile needs to come out and address this in a very proactive manner. We’ve said that after SolarWinds. We said this after the Microsoft hack. We’ve been saying this here. I’m worried that T-Mobile isn’t saying more with such a big data breach at play and such an opportunity for hackers to take advantage of this data.

Patrick Moorhead: T-Mobile is, I would say, one of the most consumer savvy companies out there in terms of their relationship with them. And while the company hasn’t told me this, I’ve interacted with them enough just to know that if they knew what was wrong and if they knew what would happen and they knew the full ramifications of it, they would be talking about it.

My belief is that they just don’t know, they don’t have all the details. And it’s those types of details that don’t say something unless you actually know it’s true. It’s kind of like the Taliban won’t take over Kabul because they have 300,000 troops, and they have 300,000 and the Afghanis have, sorry, the other way around, have 7,500, and it’s just like, don’t say something unless you’ve got your facts straight.

So I’m kind of thinking it’s one of those types of things. But over time, if you don’t have your facts together, it engenders a lack of trust because you’re not talking and you can’t figure out what happened.

Daniel Newman: Yeah, absolutely, Pat. I mean, like I said, it’s [inaudible]. You made a good point. They get consumers, but I feel like they’re missing something here. We’ll see. I’m sure there’s meetings going on all day long. I’m sure they’re talking about it. It’s not like they’re just business as usual.

Stunningly, I watched the stock price barely move. I remember when SolarWinds and some of these other hacks happened. But T-Mobile is a big, established company. It’s very conservative. It moves at a much more telecom than a tech rate, and it tends to be a little less affected by this kind of news, both on the up and the downside.

Pat, this was a great show, great commentary. Thanks for unpacking all of Intel architecture today. Because, my gosh, anybody that was listening realized that was a ton of insights there.

But we did it, Pat. Back to the beginning, we covered Slack. We covered Salesforce. We covered Intel. We covered Cisco, NVIDIA, T-Mobile, and so much more. Always here on the Six Five. Hit that subscribe button, join us, be part of our community. Good comments to me, bad comments to Pat. We appreciate all your support and listenership. Get us on Spotify. Get us on Apple. Watch us on YouTube. But just be sure you’re checking us out and sharing us with your friends.

For this episode, we got to go. We got to say goodbye because it’s time for us to get on with our day. We appreciate you. We’ll see you soon. Bye now.

Patrick Moorhead: Have a great weekend.

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