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Talking Lattice Avant, Marvell, MongoDB and Broadcom Earnings, Slack, and Microsoft – The Six Five Webcast
by Daniel Newman | December 13, 2022

On this week’s episode of The Six Five, hosts Daniel Newman and Patrick Moorhead get together to discuss:

  1. Lattice Avant Announcement
  2. MongoDB Earnings
  3. FTC Files Suit to Block Microsoft Activision Deal
  4. Broadcom Earnings & VMware
  5. Slack Founder Departs Salesforce

For a deeper look 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:

Patrick Moorhead: Hi, this is Pat Moorhead with Moor Insights & Strategy, and we are here for another incredible action packed, fun-filled Six Five Podcast. It’s Friday. I’m with Daniel Newman. There’s nobody else I’d rather be with, just ask my family. Here we are.

Daniel Newman: Hey, morning Pat. I love it. You’re feeling this spunk on a Friday morning. This is my favorite time of the week. It is coming to the end of the year and the pods may not be coming as fast and furious over the next couple weeks as we take some downtime, but God, what a year. Episode 149. Can you believe it?

Patrick Moorhead: I can’t believe it. We should consider doing an end of year roundup. We should see if we can dig up some bloopers. Everybody loves bloopers. If this is your first time of the Six Five, we cover six topics, five minutes each, all the time more. We do a little bit of news just to get the context. We’re all about the tech analysis. We do talk some earnings, and don’t take anything that we say about earnings as investment advice. Seek an expert.

We have a great show for you today. It has been fast and furious. I think we had to cut out four or five topics that we wanted to. The Ten Five is not in our future plans, but every once in a while we do talk about that many. We’re talking about Lattice Avant announcement, MongoDB earnings, Marvell Industry Analyst Event, FTC file suit to block Microsoft, ouch, Activision Deal, Broadcom earnings, and another senior executive Slack founder and CEO, Stewart Butterfield, is leaving Salesforce. What are the implications? What’s going on over there? I’m going to dive in and call my own number on Lattice Avant, Dan, you and I were there.

Daniel Newman: I love it.

Patrick Moorhead: You and I were there, live in our analyst capacity and of course we flew in early to do our Six Five thing. Did multiple videos. We met with senior management. Little backstory, the company is on an absolute run. CEO Jim Anderson has 10X the stock since his arrival, and I think that’s pretty awesome. They announced their 40th anniversary. Who would’ve thunk? Wow. The company’s all about low power, all about performance, small form factor, and even 40 years later they’re sticking to their guns. But highlight of this was the announcement of Avant and that is an FPGA that doubles the market size that the company can go back for. Maybe they’re being a little bit conservative about that doubling, but that’s what I love about Jim Anderson and his team and they’re conservative and they hit their numbers. So Avant, 30X more performance, they did competitive dive bombs on AMD Xilinx, Intel Altera, 2.5X on power, 2X higher bandwidth and 6X smaller.

You know what Dan, when it comes to semiconductors, performance, power and area is pretty much everything. But we are a little bit more mature as a semiconductor industry now and it’s about 50%+ software. That’s where the company has done a fine job with its STKs going across AI, going across vision, going against cyber resiliency. They have an automation stack and they have an O-RAN stack to make it easier for customers to go in and implement their technology because bag of parts just doesn’t work anymore. Fine job by the team. Great dinner afterwards. Pretty incredible.

Daniel Newman: Yeah, Pat, absolutely Mar… Sorry Marvell, we’ll talk about them later. But yeah, we came in for the big Lattice Avant launch, you and I have been working closely as advisors to the company giving feedback along the way. The company’s specialized itself at the low end of the market, but there is this white space with Altera and Xilinx really focusing in the premium tier. There is this mid-market and this need for these agile, flexible FPGA offerings that can meet both power in terms of lower power and at the same time delivering performance. The company really focused on those three things. One, the power and being able to deliver lower power. They showed some really wonderful demos. Pat, we’ve got a great Six Five video that everybody can check out that digs into this a little bit more.

They also focused on the fact that while being lower power is delivering that higher performance. Then of course there are so many AI at the edge applications that are going to be usable. They showed some really interesting utilization potential in the automotive space and object detection. These are all going to be areas that are going to be growing and scaling. The best thing Pat about what they’re doing is that 90% of their current customers are the potential customers for the Avant line. So a lot of times when a company diversifies its portfolio, people say, oh no, are they going to be able to break in? Well in this particular business, the break in is 90% of the battle. So they’re already in front of these customers. There’s already an interest in working with Lattice. Lattice has been able to show resiliency, growth and demand throughout this pandemic.

Even during this period where semis have been a little out of vogue, Lattice has been able to continue to show growth. There’s a little bit of a theme of that, we’ll talk about that actually today when we talk about MongoDB as well. But other companies, they’re market takers, they’re creating markets, but they’re really taking market in an area where they’re not getting a lot of competition, Pat. You and I both said this, I think we both even tweeted it. Very interesting to see how incumbents like Intel and AMD react as Lattice comes upmarket and starts playing a little bit more in their sandbox. So if they react, it’s a legitimizer for what Lattice is doing. If they don’t react, is it free market to be had? I’m not saying it is, but I’m also not saying it isn’t.

We had the chance also to get on stage with the CEO Jim Anderson and a few of his senior executives and we talked to them further. Another Six Five pod, Pat, am I calling our number enough here? Another Six Five pod you’ll have to check out. It’s a nice deep dive both from an investor and from a customer experience lens. You better understand what the company’s doing and why we tend to believe they’re in a really good position long term with this investment. So, I’ll leave it there. A lot more to come Pat, but good stuff from Lattice.

Patrick Moorhead: Now, let’s move on to MongoDB and earnings. Absolutely an incredible run here. Dan, why don’t you keep the love coming?

Daniel Newman: All right, buddy. We love to give you the ground truth and earnings are always that ground truth moment. I learned that from you, Pat. I call it the ground truth now, when people ask why do you always talk about earnings? I always say, well, it’s the actual moment to see if everything these companies are telling us is actually true. People want their products and are using them. Mongo, a little different than some of the transactional databases and the insights that we think about, it is really all about the developer. So this is the company that’s built the developer data platform. If you think about apps that you use on your mobile device for transportation or for streaming or for content, Mongo is the database that a lot of these companies are using to build upon.

Now, this company now has over 39,000 customers in 100 countries and their platform has been downloaded over 325 million times. Just a few stats because Mongo’s not a company we talk about as frequently as some of these other. Great news this quarter, so while a lot of SaaS and software companies have been getting routed this quarter, Mongo had a wonderful performance. Ended up driving double digit after hour market reaction because they beat, they actually showed a profit while everyone was expecting a loss, which by the way makes the street very happy in this current market. They delivered 10% above on what was expected for their revenue, which was a 47% growth on a year-over-year basis. This also means the adoption and the spend of the platform is growing. Then finally they actually pushed that margins path. They pushed margins up, which means they’re able to drive higher pricing or they have price elasticity and they’re able to keep their costs under control. Really important during this current market condition that we’re dealing with.

Finally, Pat, and I just want to say, 63% of their Q3 revenue came from the cloud. This is a really big thing is we’re seeing the ability for companies to build apps on a cloud-based data platform like MongoDB. This is going to be a big driver of margin, big driver of recurring revenue, and it’s a big driver of growth for the company long term because it’s sticky. As the apps grow, the use grows, the spend grows and Mongo benefits from that consumption model. Atlas revenue, their cloud offering of the MongoDB platform is 61% up year-over-year. So, the company’s been very actively working with AWS, so that companies that are building an AWS can burn credits through the AWS platform. They work with Azure and they’re seeing their customers that are spending money grow. Finally, Pat, they actually push up guidance, which again, a beat on [inaudible] and arrays is pretty much the exception, not the rule during this current market condition that we’re dealing with. You got to feel good about that, good quarter from MongoDB.

Patrick Moorhead: Yeah, and a beat in arrays when you beat by 236% on EPS and nearly a 10% beat on revenue, truly outstanding. I see this as an inflection point for the company in that it was one thing to do certain, I would say, non-strategic things in the public cloud, but I think what we’re seeing with Atlas, and then you look at MongoDB’s sweet spot, which is an operational database, as opposed to let’s say a less strategic database. This means that companies are moving the most important things to the public cloud and they’re using MongoDB as a vehicle to do that. The other cool thing is I think MongoDB has a lot of room to grow.

So first off, where’s the Azure? Where’s the Google Cloud? Where is the true hybrid capability? They do have on-prem capability, but I wouldn’t necessarily call it hybrid because it’s not a tissue, a sinew, that you can let’s say run the same databases in two places. You can do backup and stuff like that, but it’s not by definition hybrid. It’s very much a multi-cloud type of opportunity here. So an outstanding showing, particularly in this economy. Again, I think it’s a milestone that we need to be looking at, that more strategic workloads are moving to the public cloud.

Daniel Newman: I’m optimistic about it, Pat. I think that these successful pivots, not to boomerang, we can keep moving, but the successful pivots you see with companies like this, Splunk had a similar result this quarter where they turned the tide after moving to these consumption and cloud models. These are good inflection points. We always like to point out the bad ones. So, it’s also worthwhile to note when something good like this is happening.

Patrick Moorhead: Yeah. So, let’s move to the next topic here. The Marvell Industry Analyst event. This was, let me just say, the best industry analyst only event that I’ve been to this year, it’s like the Academy Awards, for the 12 people who still watch that, where they get some of the best movies at the very end. It’s what makes a good industry analyst event. Well, it’s one day. You get access to the most senior executives, including the CEO and the COO, and maybe they sit at your table at dinner, incredible food. It’s not just about the CEO and the COO or the presidents, all the GMs show up. It’s educational, summaries at the end that are consistent across all of the slides, getting customers up there that you can ask uncomfortable questions to if you want.

So first of all, hats off on a great event. This was not about news. This wasn’t about the big news. Dan, you and I follow the company so closely, we understand where they’ve come from. I think this was more getting all the analysts up to speed, but also putting out some here’s what we’re looking at. So I see strength in the custom ASIC market in a lot of areas like smart NICs, cloud partnerships on AI accelerators. They set it without saying it. In fact, they put up some slides that clearly indicated they have design wins, but they also have designs in manufacturing. That was a huge deal.

We saw also, we had their CTO got up on stage and talked about the future of AI in high performance computing and the value add that Marvell technologies could bring to the table, particularly related to CXL and moving data across accelerators, but also the required memory footprint that it takes to pull off these applications in the most successful way possible. I was very impressed with the way that they showed just how far they are ahead in working with TSMC on three and five nanometer. They literally are the vehicle for big semis, and that’s not including Apple or Qualcomm on this. What do you get when you’re first to market with a new node? Well, you get typically lower cost per transistor, even though it does cost a boatload to get out there first. Also, by having a smaller wafer or a wafer you can pack 30% more transistors in the same size, you get higher capability. So, higher capability at lower cost and lower power are not bad things in semiconductors, the last time that I checked.

Daniel Newman: Oh no, they’re not a bad thing at all. Pat, you called out a lot of things I think are really great. Over the last year, we’ve both been on the record, we’re not Marvell fan boys. But you can’t argue with some of the data. First of all, I just want to give a shout, you talked about the food and I think it’s worth pointing out. When you’re going to lock us in a room for 12 hours and pound data across the screen, make it good. I think Marvell did a really nice job of that quick action packed TED talk style interactions with more than a dozen of their executive VPs and senior execs, and also customers, which I thought was great. We saw customers, we saw partners, which I always like to see that it’s not just about them tooting their own horn, but actually hearing customers like Nokia and others that showed up there and actually told stories about why they’re partnering so closely with Marvell.

The second thing, the dinner was great. The CEO, Matt Murphy, did come home from being with Joe Biden earlier that morning to hang out with us. So, we really did appreciate that, and Matt’s been really gracious and he has always been gracious with his time and he was one of our keynotes here on the Six Five summit last year. Hopefully he’ll be back next year. Chris Koopmans came on stage, and I just want to do a little macro dive real quickly. I’ve been thematically and almost obsessively talking publicly on the record and on TV about how important it is for companies to be at lower exposure to consumer if they want to be able to wade through this next couple years of market volatility. Well, he came up with a slide that basically showed their 2017 versus their 2022 performance and then how their revenue is transformed from what it was to what it is. In ’17, Pat, 62% of Marvell’s revenue was consumer. Do you remember what it is today?

Patrick Moorhead: Yeah, like 12%.

Daniel Newman: God, you’re good. Actually, 12%. This is why Pat’s number one, everybody. Today, they’re 88% infrastructure, 12% consumer. That move by Matt, Chris and the team was, no bones about it, the most important move that was made that has made the company so successful over this last period of time. While the stock has cut in half from where it was at its highs, company’s actually doubled its revenue in just the past two years. It was $3 billion in revenue in FY21, and its annualized revenue for its fiscal year 2023, they expect $6 billion. So that’s just a reflection on how crazy the market is. Double your revenue, make your company more resilient and then get your stock price halved. So, thanks Jerome Powell and terrible policy made by our congress over the last few years. Joke, kind of, no, you have to interpret. Listen to my history, you’ll see where I stand on all this stuff.

Pat, the other thing is just really strong performance across all the categories. The company is really categorized and been very transparent. I remember the first time I was reviewing its earnings, it had these two categories. It was very hard to read through. Now they’ve broken it into four very clear categories and they’re reporting the revenue on it, which I love that transparency. Data center, carrier, automotive, enterprise networking. All of them, Pat, in the last two years period of time are close to or more than doubling. Data center up 2.4 times, automotive, 2.9 times, enterprise networking, 2.1. Carrier is the only one that hasn’t doubled at 1.8. But performance across the portfolio, hard to be upset about that. There’s a reason that Matt and Chris were smiling at dinner and there was a reason we were smiling. They were smiling because of this, we were smiling because dinner was delicious. Good day at Marvell.

Patrick Moorhead: Wow, man, you just crushed that. You really did.

Daniel Newman: Thanks.

Patrick Moorhead: But let’s move to the next one. Let’s see if Dan can crush FTC filing suit against Microsoft about its Activision deal.

Daniel Newman: All right, Pat. Well, let’s do a little bit more of a story and a little bit less news here. We do say that we’re less news and we’re more analysis. So, over the last few years there’s been a bit of a market narrative that Microsoft is somehow able to always escape scrutiny when it comes to antitrust. Well, never more. The company has made this deal, and I want to be transparent about my position. I came out early when this deal was announced and I said, “I think it will go through.” I was about 95% positive on it. After the FTC block, I’m now sitting at more like 70% positive.

Now to some extent, I think the FTC is responding to this broad criticism that is received for not actually challenging Microsoft. Part of the reason it hasn’t challenged Microsoft has had to do with the fact that a lot of Microsoft’s deals are enterprise focused and enterprise just doesn’t get above the radar nearly as much as consumer stuff does. So if it’s impacting consumers directly, the FTC tends to take a bigger stance than when things are more of a business to business solution, which is still the largest part of the Microsoft portfolio.

There are a lot of gaming companies, and by the way, there’s a lot of options for how people game. So why would the FTC really take note of this? On the console side, you’ve got Microsoft, you’ve got Sony, you’ve got Nintendo, but of course console gaming is only a part of the business. You’ve got console gaming, you’ve got PC and desktop gaming, and then of course you have mobile gaming. So, people have a lot of choice. It’s not like one of these situations where you have two choices. However, Microsoft is in a situation where if they start to control a lot of the content, that can become a problem beyond the console, it starts to become a problem on the desktop, it starts to become a problem on the mobile devices.

I think a lot of the worry here is with Activision being one of the big game slayers that has some of the biggest titles, is that Microsoft could use this to control some of the pricing or availability of games they do. So games like Call of Duty, which are now available on any console and there are different versions of the gaming available on mobile and on pc, they could suddenly say it’s only available on this. Or they give pricing advantages or feature advantages that might go to certain users that are using Microsoft hardware or Microsoft gaming services and they wouldn’t pass those on to the rest of their community. There has already been some concern, I believe due to past acquisitions. Pat, I don’t remember which game it was, but there was a game where they basically told Europe that this wouldn’t be an issue and now they’re starting to have some exclusive titles. So there was a little bit of this did they go back on their word? I’m going to try to find which one that was. I was reading about it yesterday.

Overall though, Pat, here’s what my takeaway on it is, of all the things that our FTC needs to be focused on, this to me does not. You remember when Chamath said on the All-in pod, “This is below my line,” and he was talking about something actually really important? This is not that important. Of all the things, you look at the app store on Apple and you say we’re not regulating that, but we’re worried about how a gaming company might use competitive content that they own to create monopolies. I just say, is this a wag the dog moment? Is this really the most important thing that our FTC could be using to litigate is whether or not Activision and Call of Duty is unfairly being distributed to Microsoft gamers versus people who use Sony?

I don’t know Pat. Long story short, the gaming industry’s huge. People have tons of choices, there’s tons of titles. If you don’t want to play Call of Duty, there’s other shooter games that you can play on other consoles. It seems to me like this is a little bit of a let’s do something to Microsoft to make everyone happy. Meanwhile, Tim Apple is going to just continue to charge 30% and make everybody’s life miserable that doesn’t want to use the Apple Store. So, sorry, I know I’m diatribe, but off I go.

Patrick Moorhead: So everybody knew it was going to be trouble when Lina Kahn came in to head up the FTC. She’s pretty active on Twitter and she’s been pretty active in her beliefs. So, we knew what would happen when we came in. Now when she first came in, there was some instant scrutiny on even past deals, for instance, between Instagram and Facebook. Then that went to scrutiny of now Meta trying to buy an MR or an XR company. So that people knew, it was a bigger company buying a smaller company. Make no mistake, Activision and Microsoft are very much large companies out there. Activision is not a startup. In fact, if you go back and look at the titles, it’s over 30 years old. So, we’re not talking about a bigger company buying a big company, not a huge company buying a small company, that’s different.

What also continued across the Obama administration was also this view of not what the numbers are today, but what could happen in the future. That’s a big challenge. Heck, we saw that in the Qualcomm lawsuits, which it’s not about consumer harm, it’s not about what they did, because the lawsuit was about 4G. But somehow it was here’s what Qualcomm could do on 5G. Thankfully, cooler heads prevailed, and IP protection was in the end decided upon. So, Microsoft already has come out and said for Sony I’m going to make certain titles available for a decade, I think it was Call of Duty that they said.

I don’t think this is an indication that the deal gets killed. I think this is an indication that there will be some official ring fencing on how the company operates and goes forward. Microsoft is digging in on this one and they’re not just going to go away. I do think it’s ironic that Microsoft and its employees actively help the administration that is about to block this. But hey, that’s more of an editorial than anything else. There are implications, folks, on the people that you give money to as employees and companies to get into office. You are looking at one of these right now. Dan, did you want to do a follow-up on that one?

Daniel Newman: No, I actually just thought that was great analysis. They’re going to dig in. To your point though, I think everybody out there, this isn’t over. This is not over. I still weigh it 70/30 it gets done. What’s your weight? Give me a guess.

Patrick Moorhead: I’m probably at 75/25.

Daniel Newman: All right. So we’re both driving the camp though that they’re going to fight through this and it’s still going to happen, which means there’s a lot of arbitrage out there for people that have some gall. Although it’s not advice, just want to make that clear.

Patrick Moorhead: Exactly. Speaking of not advice, let’s dive into Broadcom earnings. Dan, man, this company is just an absolute machine in the amount of goodness that it brings to the table in terms of earnings. They pretty much knocked it out of the park. They met on top line, and I don’t know why some publications said that they beat it. It was 8.93 on an 8.9 expectation, but they beat on profits, $10.45 versus $10.29. Then they paid a $4.60 cent dividend. Think about that. Then they did a much-

Daniel Newman: Like $800 a share.

Patrick Moorhead: They did a better than expected Q1. I am unaware of anybody, but I think maybe Lattice, that did a heavy-duty guide into the future. Now, the company is 79% semiconductors and 21% in software across CA, Brocade and their security offerings. Semiconductors grew an astonishing 26%. We’ve seen Intel, we’ve seen AMD, we’ve seen just a multitude of companies come out there. That’s astonishing growth.

Why is that? Well, first of all, they are a supplier to Apple in terms of RF and Wi-Fi and Bluetooth, even though that might be a little bit at risk given the chaos in Apple’s factories in North China. But it’s because they’re heavy duty into hyperscalers and data centers. It appears, and we saw this with HPE, we saw this with Dell, and we’re seeing this with IBM, the enterprise continues to load up for some, it’s clearing out the backlogs. For others, there’s going to be continued demand. So for instance, with HPE, Antonio talked about we cleared a lot of backlog, but guess what? Our size of our backlog is basically the same. That just means there’s net new orders that are coming in.

It appears, because the company did point out hyperscalers, that the hyperscalers are in another consuming mode. What they do is they buy for about three quarters and they trail it off for two. You’re asking, why is that? All the SaaS stuff is going down. Well, guess what? They’re also the backbone for all consumer services. While the consumer hardware market is in the toilet, I don’t see any lack of demand in consumer services on online, whether it be Gmail for consumers, any flavor of TikTok that’s out there, that’s all riding on the back in a giant data center. VMware deal looks like it’s on track without any expected surprises. I think Broadcom CEO Hock Tan is doing an exceptional job communicating to the customers, the channel and the ecosystem partners. Hock hasn’t communicated a lot historically, and you can be a lot more insular when you’re just doing semiconductors. But customers brought up issues and he’s been on planes, trains, and automobiles-

Daniel Newman: To Austin, right?

Patrick Moorhead: He did. He came to Austin and we had a nice breakfast together and had a wonderful discussion. He’s a very direct guy. He’s very honest. I love the conversation. So I think that they could have done a little bit earlier, but hats off to them for really stepping it up. I don’t think there’s a week that goes that there’s not a blog from Hock Tan.

Daniel Newman: Or you about Hock Tan. Have you checked out Pat’s Forbes column? Because if you haven’t, you should, he’s had some really good insights there. It’s our job sometimes to take a position. The market, the popular sentiment among industry analysts has been one-sided on this particular topic. I know we’re talking about earnings, but I just want to be very specific, when it comes to the VMware deal, the industry side has been incredibly jaded about the potential that Broadcom has.

I think you and I are outsiders a little bit, but we see it differently and we see the fact that there’s been some real success with CA. There’s been some growth in Symantec. You’ve got a business that knows how to operate, knows how to be efficient, knows how to put off cash. I tweeted after the earnings came out yesterday. I said, part of the reason I feel optimistic about VMware is this is a company that knows how to perform in any market, meaning good market, bad market, and knows how to perform.

Is he shrewd in his business decisions? Yes. Are most great companies run by people that are pretty shrewd in their business decisions? Yes. Is a business’s purpose to be profitable? Yes. If your business isn’t designed to make a profit, then you’re doing something wrong. If your business doesn’t figure out how to run better during different economic cycles, then you’re not leading the company the way you should. These are things that Hock is very good at. This is why, the way, the investor community love Hock Tan and love Broadcom.

On the industry side though, we tend to be a little more ephemeral about things. It’s a little more about the touchy-feely. Well, to his credit, the touchy-feely here has been the most touchy-feely I’ve ever seen from Hock in terms of, let me tell you what I’m thinking about. Let me tell you about what we’re doing about pricing. Let me tell you what we’re going to do about innovation. So, while you’re certainly entitled out there to your opinion that the company is going to run VMware into the ground or is going to screw up the market for it, I would actually argue VMware was already in a bit of a stagnant path and it actually has a chance right now to use this moment as an opportunity to reverse course, regain momentum, and really take advantage of this multi-cloud era.

Now again, is it different than the company’s current DNA? Sure. Does it mean a company can’t change? No. I think that’s what you and I are both really saying is that it seems to us based upon what we’re hearing from CEO Hock Tan, what we’re hearing from the leaders of their software groups that we work with, like [inaudible] and Mainframe, who have been there, who have been other places, love the company by the way, that this is moving in the right direction. So I say keep your eyes on this company, but while that deal is being closed, clearly the growth and infrastructure, the demand for enterprise, is very robust. The only thing that maybe left a question mark was they didn’t give full year guidance due to some lacking visibility, something they typically do. Going forward, I think they will. All right, onward Patrick. Broadcom, good quarter. Wow, that was a lot, buddy. I didn’t think I had anything to add there.

Patrick Moorhead: Well, you certainly did, buddy. You made up for it.

Daniel Newman: Thanks. Should we boomerang? You want to boomerang?

Patrick Moorhead: I thought that was a good thing. Listen, I wasn’t positive on the deal. Hock Tan literally said publicly and wrote, he’s not going to raise prices. So we can all stop whining about that. I was a chief whiner on that.

Daniel Newman: By the way, I just want to say this to everybody out there. Hello beautiful. All right.

Patrick Moorhead: So nice. Hey, let’s move to the final topic. Slack founder Stewart Butterfield leaving Salesforce on the heels of Bret Taylor leaving. What’s going on, Dan?

Daniel Newman: What is going on at Salesforce? Just a week ago, I went on CNBC, talked a little bit about that earnings and the big Bret Taylor news. You go, wow, what an inflection for the company. This is a company in transition. Guess what? I really do have the feeling that what is happening is with the stock down second most out of any Dell component this year, besides Intel, I think Marc Benioff is back. I think he’s back. He’s showing us space. He’s not happy with the product, the innovation, the development. He’s basically handed the keys to a few people. He made a $27 billion investment in Slack. I’m on the record by saying for a long time, I think the Slack Salesforce portfolio has some massive potential. But Pat, do you think it’s potential has been reached just yet?

Patrick Moorhead: Oh my gosh, absolutely not.

Daniel Newman: No. I’m going to let you fill in your gaps, but no. It is just not even close. Microsoft Teams is literally in Salesforce’s cafeteria on the daily having lunch on that potential. Now, could Slack in Salesforce be together? It could absolutely be the most legitimate competitor in the market to that full suite of productivity, of collaboration, of automation and platform for low-code and no-code, and of course, developing feature of work. What Marc Benioff coined as the digital headquarters. Well, it hasn’t happened yet. So you have Bret, who’s been really focused on the Twitter deal, and it’s hard to be the chairman of the board of a deal that’s going on with Elon Musk that’s taken up every headline. But unfortunately, when you are the CEO of the world’s largest and one of the most exciting SaaS companies on the planet, you got to do that job before you can be a board member.

Now again, I know Marc Benioff went on air. He was very emotional and I think those were real emotions. I think he really did want to see Bret succeed. I think he really wanted to see Keith Block succeed. I think he also really wanted to see Stewart Butterfield with Slack really helped bring it forward. But for whatever reason, the parts and pieces that have been put into that organization just have not quite created this ripe environment for innovation across all these acquisitions. Now, we were critical early on about the inorganic spend. Look, I like inorganic acquisitions and growth. I think inorganic is critical once you hit a certain point in a company. But it doesn’t work if you don’t integrate these inorganic things in a situation where integration is the whole purpose. This isn’t a roll up, this isn’t a house of brands. This is a platform. This is an ecosystem where Salesforce needs all of its tools and technologies to be unified.

By the way, not everything in Microsoft works together, but the story does. The story right now is very compelling across portfolio and every day they’re building towards that. The story at Salesforce still leads a lot of will Slack and Salesforce and marketing cloud and service cloud and automation and bots and all this stuff ever really truly work together, where someone’s going to come into work, open up Salesforce, and that’s going to be their working ecosystem? I think that the answer to that is not yet.

So, Stewart’s leaving. New CEO in Lidiane, she seems very compelling. We sat on that call this week. We listened to them speak. It was a very eloquently delivered transition, just like the one with Bret. But don’t mistake, there is some uncertainty going on at Salesforce. I think these new leaders, and I think with Marc back, look, Marc will always be the heart of Salesforce. Marc is Larry. Marc is to Salesforce what Larry Ellison is to Oracle. When things get tough, Marc is going to be the guy that’s going to come back probably one or two more times over the next couple of decades. He’ll be 115 years old and he’s going to come back and work. When they need a new innovation, they need a new disruption, Marc will be there, Pat. But not the end of the world. I think they’re going to push through this.

Patrick Moorhead: It is a house of a full stack platform. There are some companies who’ve had that full stack for a long time like Microsoft and Google. There are companies who are actively building it like Salesforce want to do it, trying to do it between a combination of inorganic and organic. Then you have even companies like Zoom trying to do it organically. It was going to happen through Five9, but that didn’t happen because the stock cratered and they had to back out. Now they’re building everything. With building stacks, like you inferred, you need to show incremental value to your customers that it matters. To do that, there’s the technical side, there’s the really honing in on the core value proposition of what that means. Then it means marketing and then getting your sellers to engage to make that happen.

I think, again, I have nobody inside that told me any of this, but what’s your natural reaction if you are founder Benioff? You’re going to raise the heat. There were some people who could have just said, listen, I’m not up for that right now. I think even separating my intuition and connecting that to Stewart Butterfield and the conversation that you and I both had live with him. He said, “I’m tired. I’m 50, I have a new baby.” Listen, I appreciate the honesty. I get that. I’m older than Stewart. I get what it’s like.

Daniel Newman: Do you believe that Pat?

Patrick Moorhead: I believe that. By the way, I think it connects perfectly with your thesis of turning up the heat. I got to tell you though, I appreciate him bearing his soul. With that though, the show must go on, and Lidiane Jones is coming in. I appreciated the kind words. I’m old enough to cut through the BS of executive happy talk and reality. Lidiane really appreciates Stewart. I think that’s important. Because when your executives trust each other or each other at a certain point, things are just smoother in how they act. Based on what they said, I have confidence in the future of the integration. I got a better idea of just how hard the integration has been when you put a chat modality inside of multiple products in multiple countries and the impact to the data. Lidiane’s words, check out the link I put in the show notes to Lidiane’s public things that she talked about and see for yourself.

In the end, actions speak louder than words and results speak more than actions. We’ll see what the company can do. It is amazing. Sometimes the grand purifier, Daniel, one of those can be a recession. When you’re a Salesforce and you’re hitting your numbers, you’re at 25% growth every quarter per year on end, and that comes to a temporary end, you have to take action and you do have to turn up the heat. So, if Benioff truly is turning up the heat, I can’t see that’s a bad thing.

Daniel Newman: Yeah, I know Pat, you make a great point. It’s exactly like what we’ve said about some of these layoffs. These companies just, we’re growing, we got a lot of staff, we got some extra cost, but we’re growing. The tunnel vision gets real. All I’m saying, all of a sudden when the stuff hits a fan, that lens opens up and you’re like, holy crud. How did we get so overstaffed? How do we get our expenses running through the roof? Well, as long as you’re growing, what do we always say Pat? Revenue covers a lot of problems for companies. So, this is an inflection point. But yeah, good analysis, Pat.

Patrick Moorhead: Great episode. It was fun. We talked Lattice, Marvell, MongoDB, Broadcom, Slack, Microsoft Activision. I do like these more balanced ones. I like a little bit of earnings, I enjoy Earnings Palooza less than I do… we’ve got a nice combination here of SaaS, antitrust, chips and core databases here. I like when they are balanced like that. Daniel, what do you think?

Daniel Newman: I do too, Pat. I’d actually like to add some shows in the future, do some shows where we talk about things like this Activision deal, go more in depth into some of these controversial stories like the Apple China news, because I think people need that. I think the media tends to have too much of a side on these. Doesn’t necessarily always understand everything that’s happening. We tend to have the insights to know what these things mean. So, I don’t know if we’ll ever get to that. Maybe someday we’re not a little bit busy. But I really enjoy diving into some of these complex topics.

Patrick Moorhead: I do too. The sad part most of the time is the press don’t have more than a couple hours to crank something out. Now, they’re feature stories, the 4,000 award ones that they get a month to do, but they don’t have a lot of time to dig in. So I think it’d be fun. Let’s consider it. Maybe even consider a specific earnings show where it’s literally all about earnings and we can put sharks up, we can talk turkey like that, maybe have some-

Daniel Newman: We’ll get our producers on it, Pat. We’ll get our producers on it and we’ll get our bookers to help us with our calendars because time is the enemy.

Patrick Moorhead: It is.

Daniel Newman: It’s Friday everybody. It’s a great Friday.

Patrick Moorhead: It’s funny though, how much we would dive in once we like something, right?

Daniel Newman: Head first, buddy, into the empty pool.

Patrick Moorhead: This is Pat Moorhead, signing off with Daniel Newman from Futurum Research for another Six Five. Hope you enjoyed it. Hit that subscribe button if you liked it. If not, well you know where you can go. No, seriously, if you have any input, Daniel and I, you know where to find us on Twitter and LinkedIn. We spend way too much time out there. Have a good morning, afternoon, night, wherever you are on the planet. Take care. We appreciate you and we will see you next week.

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