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:
- The Recent Surface Event
- Oracle Announces the New Platform Oracle Fusion Marketing
- The Amazon Climate Pledge 2 Years Later
- Salesforce’s Dreamforce 2021
- Dell Technologies Investor Day
- The Chip Shortage Rages On
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.
Patrick Moorhead: Hi, this is Pat Moorhead with Moor Insights and Strategy. And we are here for a slightly delayed Six Five podcast here with my incredible and traveling all over the country all the time cohost, Daniel Newman. How are you? I’ve missed you my friend. I know I was traveling by the way. I will take the heat for us not doing it at Friday, but I was driving to an airport and I don’t think our guests would have liked that.
Daniel Newman: No, it would have been terrible. The sound wouldn’t have been good. Wouldn’t have looked this good, everyone out there can see I’m in my new fancy pants studio with my new, really high resolution Canon mirrorless camera. Little shout out. Not like I got it for free, paid a boatload for it, but you got to give quality credit and it was a long weekend and we were both traveling and it’s great to have you back, Pat. And do you mind if I just do like a 30 second diatribe to start the show off? Just for a little fun.
Patrick Moorhead: Sure. You’re scaring me, but yeah, sure. Go ahead.
Daniel Newman: Yeah, no, I just want to talk about Tesla for a minute. So this week I decided to Turo a Tesla for a soccer trip with my daughter to Dallas. And I got like an S model 75 D with the, I guess the small battery. And all I got to say is infrastructure has a long way to go between Austin, Texas, and Dallas one supercharger. I feel like I spent four hours trying to get the car charged so I could actually drive it. Cool, but for all the talk we have, we’ve got a long way to go because I think I added like two, two and a half hours round trip and drive time, just trying to keep the car charged, Pat. And so while I probably won’t write about it, I’m not going to do an op-ed about it. There was a lot of cool stuff.
I liked the big touch panel. All that stuff in the car was fun, but we really need to do something about this infrastructure if we want to be able to catch up on all this, everybody driving EVs all the time, because plugging in and these trickle chargers that are available everywhere, they take like two days to charge the car. So the only ones you can use are the superchargers. And like I said, there was one between Austin and Dallas and it was in Waco. And by the way, what’s up with Waco? I know you got like three kids in school there, Pat, but the traffic in that city, you’d think I was driving through New York. It takes like an hour every time I come through. All right. End of diatribe. We’ve got a great show today. I’ll give it back to you, Mr. Host.
Patrick Moorhead: No, I appreciate that. And we should dedicate some special time to talking about it because there are pros and cons or some things about EVs that just add up for me and there are things that just don’t add up for me, like putting lithium batteries, where are we going to put all those? Anyway, so if you haven’t listened to a Six Five Podcast yet, let me let you know what it’s all about. Basically we do six topics, five minutes each, sometimes up to nine minutes each and we typically don’t hit the news because we know you can read that yourself.
We usually like to get underneath the news and look for the meaning of it, not as in the meaning of life, but meaning from a business and a tech standpoint. Also today we will talk about publicly traded companies. And sometimes we even talk about startups that aren’t publicly traded. Please don’t take what we say as investment advice. This show is for information and educational purposes only, but let’s dive in.
I’m going to call my own number on this one. Microsoft had its big, big Surface event. A little background. Microsoft has around 3% of the global PC market. So it’s not huge, but it is very respectable. And Microsoft really uses Surface as a way to show the best of Windows and also show the best of things like Office 365. And I’ll admit, when the Surfaces first came out, it was an absolute disaster over 10 years ago. But now probably two or three years after that, I’m just incredibly impressed with the level of innovation that these folks bring out Panos Panay and his team are really awesome and I’m fortunate enough to spend time with him and his team.
They take feedback, which I really appreciate, but let’s get to the meat of this. They brought out a bunch of different products. They upgraded some products, but the two that I’d like to focus on is the Surface laptop studio. Essentially it’s a convertible and convertibles aren’t necessarily new. They were very in vogue probably seven or eight years ago. And then kind of fell out of vogue with detachable, but their system essentially allows you to collapse the display, cover the keyboard and use a pen that’s charging and connected magnetically right at the front bottom of the unit. This replaces the Surface Book, which Daniel, I think you have one, and unlike a Surface Book, it’s not a detachable where it turns into where you have a tablet and then you click it back in and it becomes a notebook. I personally like this design better.
I’m not a huge pen person, but when I am a pen person, I’m using it in slate mode when the display is collapsed on itself, does what I need it to do. And one, I would say, competitive note is Microsoft just keeps one step ahead of Apple related to pen. And it just seems like it’s kind of funny. I know exactly what Apple is going to do with pen because they’re about a year behind on what the Surface is doing. And the cool part again, here is it wasn’t a nook like the Surface Pro X, where you pull back the keyboard and has a nice little place, it’s even simpler. It magnetically connects and not one of these magnetically connecting fall off in your bag, pen things, which I’m sure you’ve experienced before, but, once again, they’ve nailed it.
And the other big feature they added with the second generation of pen is haptic feedback. So when you write on the display, it feels like what it would, more like what it would be if you had a pencil and you were going on paper, you feel the back and the forth, you feel the tension coming off from that. And I think that’s going to be a big deal in getting some people who just don’t want to be near pen, which I think that was probably me for many years. My handwriting is terrible. So I just, I type most of my notes on things like One Note.
Let me move on to the next innovation. And I’m actually giving you a lot of oxygen in the room here, Daniel. The next version of their smartphone. And as you know, the Duo actually folded out and into an 8.3 inch tablet. And aside from being cool, the concept is pretty simple. You can run multiple Android applications in the windows and also for many applications, you can actually span it. So for instance, let’s say you have Outlook. You can have your messages over on the left and then the right, you actually have the message that you want in focus. Microsoft has optimized all their apps and also even apps like Instagram and some of the social media apps that are out there.
So the biggest improvement they made was the camera, right? The camera was nothing to write home about. And this is a triple lens camera.
I know that Qualcomm had a lot to do with this design, which gives me confidence that the experience will be better, but net net moving innovation forward, doing things that many of the PC makers won’t necessarily lean into, ironically, a lot of the non Surface PC makers are bringing back tablets. I mean, we saw HP bring, bring one back where a super innovative, full down a camera, so innovation is alive and well.
Daniel Newman: Yeah, Pat, I think overall it was a great set of slate of announcements. It was diverse. It kind of spanned different chip makers, different platforms, right? We had Snapdragon, we had Intel Evo, we had Android addressed. You had higher power notebooks like in the Studio with sort of multi-format and then you had, of course your more utilitarian type of devices that people are going to use more every day. As I looked through this slate, I continue to be impressed. The 3% market share that you mentioned, obviously shows kind of … I kind of liken it to like what Google has with Pixel. It’s still pretty nascent in terms of the overall market, but people that use it tend to really like it. I use a Surface every day.
As you mentioned, I actually have the Book 2, I believe it is, because I do have the detachable. I never detach it. I thought that was super cool. I bought it because of it. Never use it. I give credit to like the Lenovos of the air with the Yogas. I think what all these companies are trying to do is they’re trying to address the fact that people, the PC is essential as our good friend Enrique Lores says at HP, but we all sort of use it a little differently. And I think people are fond of having the ability to make the changes, but I also think there’s a marketecture to it. So the point is people are fond of the idea of having multiple ways to use a device, but in the end, we tend to use the device in less ways than we anticipate. That’s a very honest assessment of sort of the human condition.
And I think that, you know I never give Apple credit they don’t deserve, I never give Apple credit even when they do deserve it. But in fairness, I think that’s why they’ve gotten away with not having touch for so long. I think that’s why they’ve gotten away with having a laptop and a tablet and being able to sell them discreetly is because people don’t actually use them as interchangeably as needed. Now, as the software gets better and as the applications get better and the battery life gets more friendly and the OS becomes more intuitive. I think what will happen is these multi-format devices will gain momentum and people will start to really enjoy them. I, of all the announcements, Pat, I like the Studio, but I’m telling you if I, honestly, what I would use it for is I’d probably use it like a regular laptop, 90% of the time. And then 10% of the time I would watch Netflix in studio mode and that’s how I would actually use it.
So I think everybody out there really needs to look, Microsoft’s lineup is powerful, it’s diverse, it’s got options galore. The devices are beautiful. They’re well crafted. The packaging and presentation that Microsoft has been able to put out there is best of breed from the moment you opened the box. It feels, I’m not going to say Apple-esque, but it just feels like that same sort of unboxing quality that the industry had often lagged. So overall, a good slate of announcements. I know we were both invited to be there for it. Neither of us made it because I was busy trying to charge my Tesla. I couldn’t get to New York. I was stuck in a parking lot. I’m just kidding. I couldn’t make it for other reasons. And you were in Florida, so at an undisclosed location in the mountains of Florida, but no, it was good announcement, buddy.
Patrick Moorhead: No, this is good. Those were some great adders, Daniel. Let’s do a complete 180 and get into some SAS marketing. Oracle had it’s what, I think is along the lines of a monthly Oracle live, which is their platform. They rolled out Larry for this and anytime they roll out Larry Ellison, you know it’s got to be big or maybe just because it was right in front of Salesforce’s Dreamforce.
Daniel Newman: Yeah. We’ll come back to that, won’t we. So yeah, last week, early in the week, right ahead of basically the beginning of Dreamforce, Oracle announced some updates to its Oracle fusion marketing. And as you said, Pat, the company has become extremely disciplined in regular cadence of announcements. And I think that’s important when you’re addressing a market of SAS, the agility, the fluidity of the updates. That’s what it’s all about. When a company is going to make the investment in a platform, they want to make the investment in a platform that they know is going to continuously be updated, changed, modified, and usable. So this update to fusion marketing, which is part of their advertising and CX platform was really all about improving the ability for companies to generate leads and move deals, which if you’re an enterprise, this is important.
I mean, selling, right? So as you said, it’s a little different than a consumer launch, it was important. And Larry did show up. What I take away from this is essentially the company is really upping its game. It’s upping its consistency. It’s delivering a more comprehensive slate of tools and solutions to address the complexity of marketing stack. You and I had the chance to get pre-briefed. I think we had a very interesting interaction with the product team. We were pressing. We pressed because obviously if you’ve ever looked at a diagram of the marketing stack, it feels like infinite number of tools across every part, whether that’s social integration, data, data visualization. Of course, you’ve got the lead generation component of it. You’ve got AI and ML, you’ve got real-time experience capturing and data. And then of course you have CRM and legacy systems of record data.
And then you have a choice, are you building full stack, which is really, are you going with one company and you’re kind of doing a top to bottom marketing offering or are you looking at bringing together best of breed? And so we were sort of challenging all those different things. What I really took away, Pat, is that Oracle’s new launch is about having a solution that marketing in any organization, enterprise B2B, B2C, B2B2C, different go-to-market approaches can utilize the top to bottom Oracle stack to deliver its marketing needs. Concurrently though, we pressed on the other end is what about companies that have investments in other platforms? Is Oracle being built and designed to be able to be integrated with those other platforms? And it turns out that the company is really doing a good job of kind of walking that line of being able to address both things.
The updates for this really focused on automation, the ability to create campaigns, streamline the execution, working really across marketing, advertising and sales, which by the way, these three groups have to work together symbiotically, but tools and technologies don’t always actually enable that. The other thing is AI. We want to and need to hear more. And so this is something that is being baked in, is more AI intelligence, improvements in the integration with CRM platforms. And by the way, that’s could be Oracle CRM platform. And that could be other CRM platform. But my take on the whole thing was it was a step forward. It wasn’t what I would call a blow your mind set of announcements. It was an improvement that is meeting real needs of companies’ everyday business, which is generating more business, more leads, more opportunities, and implementing the technology required to do that.
Like I said, the only other thing I mentioned, Pat, and I’d mentioned it one more time is I believe it’s genuinely important that companies are building stacks that can be horizontal, vertical, and that are open-minded to the technical debt that companies have in terms of investments in other stacks, tools, data, to be able to integrate it and get the most use out of it possible. Like I said, I think we’ll probably have this as a Six Five topic once every couple of months, because it seems like that’s the fluid nature of how Oracle is making announcements, but they’re making little improvements each and every month to the platform. This time, it was about CX and advertising. And like I said, a good set of announcements to help companies deliver better, generate more leads and hopefully more sales.
Patrick Moorhead: Those are great insights, my friend, as usual. So I’m going to go a little bit of a different direction on how I looked at this. And that was a strategical way. What I think Oracle did. And you know, when you’re a big SAS company and you have end to end offerings, it’s going to be very hard to claim best of breed. And there’s two different ways you can do this. You can stitch together a bunch of sales, CX, advertising, marketing, and you can stitch them together, or you can go with the full package. And as I’ve seen, as you’ve seen over the past 25 years, it’s like an accordion, right? The industry goes from best-in-breed to packages and it goes back and forth. And I think strategically Oracle’s strategy is spot on, right? They’re not going to be able to say, “Hey, we’re best in breed on this.”
What they’re going for is simplification, right? Let’s just say there’s 10 different packages that you would have to stitch together to call best-in-breed, to be able to do what Oracle marketing is doing here. And a lot of times, and listen, I manage a very large marketing budget and that was top of the funnel all the way down to the bottom of the funnel, and marketing likes to have fiefdoms, and marketing folks in a certain, let’s say it’s the demand gen folks, they find a vendor that they love. They fall in love with them. They get kudos for bringing in a new vendor, but what they don’t fully look at is that they’re causing, potentially causing chaos, and even potentially lack of security because the data is floating all over the place.
And I think the organization that picks Oracle marketing is first of all, it’s going to be the CMO. It’s not going to be the person, the marketing person at the bottom of the funnel or the marketing person at the top of the funnel, it’s going to be a, listen. It is too complex. You’re using 10% of the features that from these, quote unquote, best in breed stitched together. And I think Oracle has a chance to win off of it. Right?
And let’s just be clear, they’re going up against the beast who’s been doing, started off with CRM back in 1999. So, they have a lot of seats. They’ve got a lot of history. They’ve got a lot of folks out there. We’re going to hit them later. But that was my biggest takeaway is just the strategic nailing the strategy. And given the reason to believe why customers would want to pick Oracle over stitching together some best of breed. And I didn’t even get into the whole front office, back office thing, but obviously another advantage when you go Oracle.
Let’s shift gears here into the Amazon Climate Pledge, a little background here, Amazon set up the Climate Pledge, which is not just Amazon, but Amazon plus other companies to be 10 years ahead of the Paris Accord, which it’s hard enough to hit the Paris Accord, but to be 10 years earlier than that seems really, really hard. And some of the big announcements here, I had the chance to talk with Sally Fouts, director of the Climate Pledge at Amazon. And I asked her some really tough questions. It was good to hear her explain why she’s doing certain things, why she’s not doing certain things. The big news was they got the 200 signatories.
And I always say, and Danny, we’ve said on this show to do anything related to climate change, it’s one thing to be in competition, which by the way, I think is good because it keeps competition’s always good and keeps people innovating. But in the end to really get off of center, it takes a village, right? It’s going to take multiple companies sharing best practices. And that’s exactly what the Climate Pledge is. And I asked Sally, I said, “Hey, why is it hard to get maybe information that crosses all of the signatories?” And she was very clear, “We want our folks to be focusing on, on execution as opposed to filling out forms.” And I was like, “Okay, I can go along with that.” And also, doesn’t put Amazon in this onerous position to be managing the whole thing. And I asked her about how realistic that they hit in 2040. One thing I appreciated about Dell and what they’re doing with climate is they don’t actually know exactly how they’re going to get there, which means they’ve made some commitments that are going to require some innovation to actually get there.
And I got a similar type of response from Sally, which I appreciated, but she seemed very confident that Amazon and the signatories can get there 10 years early. My final question I had for her, which she appreciated, and again, we’re not journalists we’re analysts, but you have to ask the hard questions. I asked her, “Hey, what about claims that Amazon is greenwashing or using the pledge as a marketing tool?” And she was very clear. She doesn’t have time to respond to things like this. She has to focus on executing. She likened any time that she applies to playing defense on stuff like this, Daniel, you and I have talked about how some of the press out there is really out there to make Amazon look bad. Why that’s a smart move for her, not to just jump in and defend every single thing that people are picking at her.
Daniel Newman: I think you bring up a good point there. Look, it’s okay, we live in a society that embraces capitalism and it’s okay when good and profit are, there’s some interdependence companies need to make money. They need to be profitable in order to function, in order to hire people, in order to innovate, investments in R&D. And so I think sometimes we get a little bit confused societally about the fact that the two things need to coexist in order to continue to push the boundaries on how the fact that a company like Amazon can help drive 200 global companies to become signatories is because it has resources to deploy globally, to focus on this. We need enterprise. We need enterprise to solve a lot of our most complex challenges. People want to pick on the billionaires doing space travel. And yeah, there’s something sometimes ironic about some of this stuff.
But if you look at our next wave of space travel, it’s going to be driven by innovative thinking companies and billionaires that have the time to put into this. It’s not just about getting to space first. That’s the smallest thing. It’s about leaving a legacy, leaving the world better than we came into it. And I think that’s part of what a lot of this is about. So we want to accuse of greenwashing and posturing. I love that you asked that question, Pat. I think that’s a great topic. I think if companies can do good for the world and for society and concurrently, make the profits required to be able to continue to invest and do more good for society. I am all for it. This particular announcement, Pat, by the way had some really, really impressive names behind it. Companies, by the way that you and I talk about here. HP joined. One of my favorite, by the way, coffee, little machines, Nespresso joined, we saw Proctor and Gamble.
If you don’t know who Procter and Gamble are, you probably use some of their products because, you use Gillette razorblades because … I actually think I need to right now. But yeah, so I mean, it’s a great announcement. I have been very bullish on the large enterprises investments in sustainability and ESG. I’m glad to see they’re doing it. I’m glad to see they’re putting their dollars behind something positive. And I hope that the world can grow to appreciate these investments because largely we need these corporate and government partnerships to be able to take us into the future. By the way, Pat, as a segue to the next topic, another name that found its way onto the sheet as part of the Climate Pledge was Salesforce.
Patrick Moorhead: Yeah. So let’s dive in there. So Salesforce had its annual meeting called Dreamforce and Daniel, I know you were hot to trot and get out there, but they had canceled their analyst program. But I think they had about a thousand real live people and in San Francisco, but for most people it was a virtual conference. So Daniel, what were the highlights? Did we hear anything about any new products or was it just kind of a Benioff love fest?
Daniel Newman: It was a really interesting week for Salesforce. I’m going to touch on Dreamforce. I’m going to touch on some things that happened around Salesforce Dreamforce. Salesforce has been sort of amping up to Salesforce for the better part of a month. So over the last, from September 1st to September 16th, the company put out five different sets of announcements around new products and innovations.
Now, of course, as we heard with Oracle, SAS is just a little different than hardware. You know, when you’re launching hardware, the way it gets launched seems to be so much different. But when you have a platform like a CRM and you launch some new services and availabilities and products, it doesn’t tend to quite land the same way as like, “Hey, we got a new line of Surface Books” or, “Hey, we’ve got this new mountain of servers and then we’re going to show everybody.”
So, they basically made updates to their sales cloud. They completely relaunched the Tableau platform for enterprise use. They had a series of new automation and AI advancements for the service cloud. They announced some new corporate partnerships, a big one with FedEx. You had an AI based engagement scoring tool that they’d announced for marketing cloud, which is similar to some of the stuff we talked about with the Oracle fusion updates. And then they had new RPA announcements and some updates to Einstein, which I got sort of to the point where I was like, “What happened Einstein?” Because it was such a big thing, and then it went quiet. It felt like Einstein and Watson had left the ship somewhere and they were swimming in the Atlantic and we’re waiting for them to come back to shore. Well, Einstein seems to be coming back.
And I think what we’re learning really about AI is it’s not really a product itself. It’s a service that needs to be layered into all the other products and services in a way that adds meaning, improves outcomes, and is leveraged to let us do more with all this data. I read a really interesting quote earlier, Pat, from it was, I think the CEO of data analytics at Cap Gemini, but he was kind of talking about data’s not oil because the difference between data is that data is infinite. So it’s different, whereas oil is a, obviously a limited resource. Data is not, but AI and ML are the requirement to make that unlimited resource be able to extract the greatest amount of value. So that was the announcement.
I think a couple of things I want to just touch on is you mentioned the thousand people. They canceled the analyst summit, but from a safety reason standpoint, what I did like was they did push on with doing any element of a live event, Pat, because I think you and I both agree no matter what your stance is on Salesforce, you and I both agree that getting back to live is important. So pushing that boundary, getting people in person, even if it’s a small group is still a nice sign to society that, hey, we need to keep moving forward.
The company used its health cloud. I think he talked about 10,000 Q-tips, which were the self-taken COVID tests to be able to allow people to get on-site or 10,000 tests to get 1,000 people on site. But it also meant 199,000 normal attendees because it’s normally almost 200,000 people, huge event, were not able to attend live.
Now, Pat, we talked about Salesforce Plus here on the show, as you noted Salesforce Plus was kind of kicked into full gear for Dreamforce. Timely to be able to basically have these on-demand channels. Right? So if you recall, Salesforce Plus is kind of the Apple Plus of Salesforce’s content engine. We were debating, will this work, will this not work? Well, in this particular case, it worked in terms of a way to get content to all these people. Now, the question is between Dreamforces, between large events, will people use these channels to capture and engage with content? That’s going to be something to keep our eyes on.
Last two notes of the week, the show, the big tech topic, Pat, was all about Slack first. So I believe Benioff is calling it a digital headquarters. I’ve been calling this with Teams and with Slack, I’ve been talking about it being the operating system for work in the future in a hybrid environment. This was so in focus all week. So many meetings, so many briefings, so many conversations, all about Slack and how it’s going to integrate to make work different. And the last thing by the way, is the company did quietly come out, not that quietly, and basically did raise its guidance for both of the next two years.
And the stock went up 7% in one day, which for Salesforce is pretty crazy. This is not a stock that tends to move that way, but during its Dreamforce week, Benioff and the team came out, raised its guidance, both of the next two years, basically pushing optimism, the goals that Benioff had set to double the revenue, they will be pushing 32 billion in revenue by the end of 2023, if they hit their goal. And this optimism was met with a very positive response from the street. So it wasn’t a launch event by any means. It was a very interesting, sort of tame event amidst this chaotic period of hybrid. My biggest and most positive thing, Pat, it was good to get back in person, even if I wasn’t there.
Patrick Moorhead: Yeah. I was pretty surprised that, I mean, Benioff and Salesforce are a pretty woke company. And for them to actually in San Francisco do a live event was really shocking for me. And I give them credit for that. I might be hard on Salesforce, but I will always give a company credit where credit is due and listen, their financial architecture, you can’t question the result. And I might debate on organic versus acquisition, but the fact is they just keep driving the revenue. There is something special that’s there from an integration standpoint and I’ll stick to my guns. They do have some strategic challenges that continue the plus side with what they’re doing on Slack is that they get access to the core data. And that’s really what all of this is about.
You look at Microsoft, you look at Google, you look at Slack, Slack Force plus Chime. I mean, it’s all about the data and some base capabilities that at some point something that is a product like Zoom and video over time likely turns into a non-differentiated feature. And that’s actually good for Salesforce, when chat actually becomes non-differentiated and becomes a feature and they bought the high flying company that was in chat and it is a core glue that goes across everything. Now they’re going to have to find a solution for productivity. I mean, Quip is not it. I don’t think I’ve ever met a single person who ever used Quip that didn’t work at Salesforce and look at how look at how many years Google has tried with basic personal productivity. And the only time they started seeing super rapid success in the enterprise is when they did full front and back file efficacy with Microsoft, right?
Daniel, I always used the, “Hey, your board of director’s presentation editing. Is it going to be in PowerPoint or is it going to be in something else?” And literally 99 times out of 100, and I’m only saying 99 and not 100, is PowerPoint. And again, that’s just more data to be able to get access to and understand that is an advantage that Microsoft and Google has. And I think as long as Microsoft and Google are building up their enterprise SaaS products to get in competition with, with Salesforce, it’s going to be one of these long-term challenges for the company.
But listen, Salesforce is doing great. Their financial architecture is, who can complain, right? They keep knocking out of the park.
But anyways, let’s move to the next topic here. Thank you, Daniel. Dell Technologies had their investor day and it’s so funny when I followed Dell so closely that a lot of this is super, just review for me. So I really focused on what were some of the new things that came out, but let me first say Dell post VM-ware spin, and Michael was very clear on this is all about the hybrid cloud and, Daniel, ever since our businesses have formed, we have both been talking about the hybrid cloud. My talk track has always that, hey, I nailed the hybrid cloud 10 years ago. I just picked the first wrong horse to ride, which was OpenStack. But the fact is that we have a trillion dollar spend out there in enterprise IT, 90 plus percent of it is on-prem and that includes PCs. But when you look at infrastructure versus IAS, a super interesting chart, they put out was just how small of a market now IAS is, but Amazon, AWS is getting the most of that, which just shows how big you can be by dominating up and coming markets. So that was a big takeaway for me.
And finally, on the PC side, the big takeaway for me was this slide that Sam Bird had that says, not all PCs are created equal. Not too many people know this, but Dell might be number two or number three in terms of PC units. But they’re number one in PC revenue. And very few people talk about it, why? They don’t make up their losses in volume. Sure. They’re still hitting Chrome, which financially, I don’t think has has paid off for anybody, but they hit a premium consumer PCs and they dominate in commercial PCs. 47% of their revenue is in commercial PCs. And hopefully that’s an eye-opener to the, oh, why Dell can’t beat Lenovo in terms of unit market share. They go where the money is. They go where the profit is.
Daniel Newman: Yeah, Michael is a brilliant financial engineer, people tend to not ever give enough credit, but I think he’s doing well. And he’s probably feeling okay. By the way, I’m looking forward to reading his new book. I don’t know if you saw that, but I like it’s about winning and still being nice. And I got to say, being one of the first people that reached out to me to welcome me to Austin, I’m always impressed. I always see him like posting on like a new entry-level person starts at Dell and they post on LinkedIn and Michael will actually comment on it. I’m like, who does that? How many CEOs actually take the time to do that? Now, again, that’s not about security’s day, but this all ties together to why Dell’s performance is what Dell’s performance is.
The spinoff of VMware is both a great opportunity, financially it’s brilliant. Technologically, I think it leaves a number of question marks, but I think they’ll answer them. I think in time they will answer them. They’re going to have to fill this gap for hybrid cloud. They’re looking, Apex will be part of that solution. They do have a big stack of products in their infrastructure solutions group. They’ll need to highlight more because VMware has been kind of a beacon of consistency in its infrastructure business, growing 8, 9, 10, 11%, every single quarter. And over the last two years with COVID, the ISG business, hasn’t grown as quickly. That to say, it’s still, what? A $33 billion business and the client business for it. You’re talking about $80 billion in revenue, in fiscal year ’21. You’re talking about a company that over the last five years has gained market in commercial PCs, in servers, in hyper-converged infrastructure, a very diverse portfolio.
And Pat, only because we only have a few minutes, I’ll just say the other thing that was real interesting on security’s day was the company one, it’s going to reinvest profits from this spinoff. It’s talking about spending about five billion in share repurchases. And that’s because it doesn’t believe its stock is valued appropriately. If you look at the market cap, I don’t think it is.
The second thing is they planned, they announced that they’re going to instill a dividend, which will create more value for investors, which, and by the way, I believe this deal puts them back into investment grade, which is something that Michael has been trying to do ever since the EMC deal, which obviously created a lot of debt for the company. And that seems to be something that will be in the rear view. So it ends up being a very brilliant deal. The company is doing well, it’s in the right spaces. And I look forward to kind of continuing to have this conversation, Pat, but I know we got one more topic and only a few minutes before we’ve got to get on with our day.
Patrick Moorhead: Yeah. Let’s move into the final topic. And that is the chip shortage rages on or does it? I mean, I think Elon Musk said, “Hey, we’re going to be out of this thing based on the new fabs that are being built.” I’m wondering if he knows that it takes two years to get a new foundry or a fab online .
Daniel Newman: Well, we start and finish with Musk. Started talking about my Tesla experience. I’m going to finish by saying, I think he’s guessing. I actually think sometimes the guy’s an oracle, not the company, he is. I mean, people listen to what he says. Sometimes I don’t know if he’s just testing the resolve of people to actually think for themselves, but the math doesn’t really work. The reason I bring this back up is I think it was Thursday last week, the headlines were raging, but there was some new data that came out that something like $210 billion in revenue has been lost by the automotive industry because of this chip shortage. If you’ve tried to buy a new car or you’re trying to buy a used car, you’ve realized how overpriced everything is right now, or how hard it is to get a new car right now.
There’s still issues getting PCs. There’s still issues getting new phones and devices. You’re still seeing lag time. I saw another chart on Bloomberg that the average time to procure a chip has doubled from the beginning of the pandemic to today. With all this in place. I just figured, you know, you and I being chips to SAS guys, we owe it to our audience, all you beautiful listeners out there, to just give a little bit of an opinion on what’s going on out, out there. So Biden and the administration did their 100 day review last week, they got back together and they reiterated the importance of solving this. But I would say to date, mostly we’ve been given mostly lip service about what is actually being done. Now, what we are starting to hear from is real companies. We’re hearing Pat Gelsinger at Intel talking about multiple multi-billion dollar investments to build new fabs.
But anyone that knows about this, Pat you better than me, knows that this is not a, “Oh, we’re going to have a fab spun up next year.” This is going to take many, many years to complete these fabs, to start getting to a point where we’re going to have a real expansion in capacity. We also have the China Taiwan issue still going on. So even at this current juncture where there is no real specific issue because of the China Taiwan conflict yet on the actual availability of chips, we don’t know what might happen there. We’ve seen what happened with China and Hong Kong, and certainly with Taiwan in such close proximity, and I believe we’re down to, I think it’s like 9% of chip production is here in the US Pat. Someone can check my fact there, but I think we’re down from, it was like 30 in 1990, percent of our manufacturing of chips was here. So we were always offshoring a lot, but we’ve offshored tons at this point. And now we’re basically in a situation where if something was to happen in Taiwan and with all these fabs, we would have a huge problem, a huge backup. I’d love to get you two minutes to weigh in, because we got to wrap this baby up.
Patrick Moorhead: Yeah. It’s interesting how naïve some people are on this topic. And it’s a little frustrating because I think if you, if you don’t understand the problem, it’s going to be really hard for you to solve the problem. And here I’ll just leave one thing. People say, “Hey, just redesign this one part to go into a different process.” What people don’t understand is that takes millions of dollars and multiple people. You can’t just take a part that was targeted for 28 nanometer and target it for 14 or target it for 10. It takes time to quote unquote, shrink a design. And based on my chip experience, you always break something. So this is the latest misnomer and misunderstanding piece where it says, “Hey, we’re not going to buy,” I mean, a 28 nanometer part for a break sensor can just be magically put into 10 nanometer. It just doesn’t work like that.
So I’m optimistic. I’ll tell you what I’m afraid of the most. And that’s China making a play on Taiwan that just doesn’t get enough play. And I think that’s the biggest risk that we have here. And let’s not forget, the stimulus checks drove demand. COVID drove demand for these products. And in a way we created this problem, the auto folks exacerbated it by obviously pulling back their forecast and not having direct relationships as fabs or chip makers, but we created this and we’re sleeping in it. So with that, Daniel, uplifting comments and, and editorial, I just want to thank you, Daniel. It’s great to see you, buddy. I hope we could see each other face-to-face this week, making up from last week. I worked maybe 45% and I got sick last week. So I’m trying to get over this, but it’s great to see you. And I just want to thank all our listeners, all of our viewers out there. So with that, you all, thanks for tuning in, have a great week.