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Talking Microsoft, Google, Qualcomm, Honeywell Earnings, Oracle Launches Industry Labs – The Six Five Webcast
by Daniel Newman | May 3, 2022

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. Microsoft Q3 Earnings
  2. Recent Google Earnings
  3. Intel Q1 Earnings
  4. Qualcomm Q2 Earnings
  5. Honeywell Q1 Earnings
  6. Oracle Launches Industry Labs

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.

Watch the episode here:

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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 fun-filled, action-packed Six Five Podcast. I am here with my co-host Daniel Newman, co-founder and principal and chief analyst of Futurum Research. How are you doing buddy, on this Friday morning? I’m feeling chipper, many coffees in. How about you?

Daniel Newman: Yeah, I mean, you saw me laugh when we started the video, we were having fun. I can’t necessarily share the details of our conversation, but it was funny and it spiked my heart rate a little bit, had me laughing, I’m sweating a bit. I actually got up and went to the gym early. I had actually not had a cup of coffee, but I did drink a Celsius. So, I think that counts almost the same, but no I’m feeling good, man. Look, it’s been a super big week for tech and I always love this week for our show because you know me, you know what I like to talk about, I like to talk about the market. This is going to be a market intense week.

Patrick Moorhead: This is a market intense week. In fact, we’re going to cover earnings from Microsoft, Google, Intel, Qualcomm, Honeywell, and we’re going to talk about Oracle opening up a bunch of labs out there. But a reminder, this show is for entertainment and hopefully educational purposes only, don’t take any of this as investment advice. Particularly, when we’re talking about earnings of these companies, I recommend that you do the opposite of anything that we might be inferring, seek proper counsel for your investments, because you really don’t want to listen to any of us on this and-

Daniel Newman: Don’t take it as investment advice, for sure. By the way, you may see some names that aren’t on there. We think they’re pretty well covered, Apple and Amazon. For instance, we like to talk about some of the big ones. We don’t talk about others of the big ones, but it was a big week. I mean, Apple did have a pretty good number and Amazon… Hey, at least Pat, we can say AWS did well, because the rest of Amazon, it wasn’t a great result.

Patrick Moorhead: Definitely not. But hey, you are the co-host so you know-

Daniel Newman: Your show, buddy. I’m sitting back.

Patrick Moorhead: This is great, but why don’t we dive right in here, Microsoft earnings. I’m going to call my own… Oh actually, Dan you’re covering this. Why don’t we talk about Microsoft’s great quarter?

Daniel Newman: Well, as I had predicted and I sometimes like to do victory laps, I learned it from a friend of mine. I said that the enterprise tech companies, the ones that have a larger focus on enterprise, were going to do remarkably well this quarter. Let’s just say Microsoft did not disappoint with its results. The company delivered on the top line, delivered on the bottom line, had record revenue. It was a little closer, the growth had slowed a little bit from where it had been the past few quarters, but the sentiment around Microsoft, 46% growth for Azure yet again, 18% overall revenue growth, pretty much growth in every category of the company at strength, and Xbox, it had a great number in surface. by the way, Pat, you remember surface had some pretty lousy quarters actually, when everything else was blowing up for PC. So, it seems they’ve been able to get that in order, record revenues and their LinkedIn businesses, dynamics growing solid, especially on the cloud side at over 30%.

But you know what Pat, like I said, Microsoft’s so big that we could literally spend like the whole show, just trying to break down the Microsoft piece. So, a couple of observations that I have is one is I’ve been saying a lot about the deflationary aspects of tech. Microsoft is a great example of a company that’s selling to enterprises, has that motion down very well, understands that companies are going to need automation, they’re going to need AI, they’re going to need cloud, they’re going to data, they’re going to need SaaS based apps, they’re going to move to OPEX. These are the things that companies are going to do to make themselves more robust during what’s going to be a downturn. Let’s be very, very straightforward about this, while the earnings this quarter were good, the market’s overall downturn is going to last for some time.

I mean, Pat, you and I had dinner, last night we were at a dinner together. I think the word stagflation came out and we are actually heading towards a risk of, we saw GDP didn’t grow this quarter. So, we’re already in one quarter. Two, right? Is it two? And, you’re in our session, technically speaking, but that actually means companies are going to be thinking about efficiency. There’s already an issue because there’s a low availability of labor, you got a tight workforce. Companies have had to spend a fortune to hire people. If they can utilize technology instead to displace some of that hiring, they’re going to be thinking about it and they’re going to be looking for ways to get more efficient. So, I think Microsoft overall has a really good, diverse mix of products, they’re growing in the cloud, they’re making good investments, they’re getting industrial focused, vertically focused and this quarter provided a very good indication across its businesses that it’s going to be in good shape for the long term.

Couple things just to watch is one, the acquisition of ActiVision. That’s getting some regulatory scrutiny. I don’t know if that’ll get done right away, it might take some time. My prediction is in the end, it does get done, Microsoft seems to be better at dealing with this regulatory stuff right now than some of the other companies. But yeah, like I said, going back, I think the growth in cloud, the strength in business applications… And by the way, seeing that there’s still good demand for Surface and Xbox, these are all good indicators, and they did actually guide pretty positively, which really is the trifecta. Good results, good guidance and good performance. So, I think a good quarter from Microsoft.

Patrick Moorhead: Yeah. You know a company’s doing really well when the discussion is the rate at which they beat on the bottom and the top is slowing down. I love that type of measurement. Just to be added to the conversation here, let me focus in on a couple things that Microsoft pulled out in the call that I thought were interesting. So power, the power business, right? Essentially the low code/no code is a $2 billion business and is the fastest growing business that’s at scale. That is absolutely tremendous. I mean, it makes sense, given that Microsoft has, I call it low code/no code and a whole hell of a lot of code with things like Visual Studio and GitHub. So, that’s huge, Azure just blew it away. Azure, one of these at scale businesses, couple customer announcements with Nike and Unilever, at least from the words, it looks like they’re going all in on it.

The company also made a statement about them being SAP share leader, which I thought was quite interesting, and as we know, SAP doesn’t have its own IAS, but what it does do, is it works with folks like Azure and Google Cloud and AWS to run workloads in the public cloud. A couple of other things that I thought were interesting, security is a $15 billion business, in the past year, Microsoft supplanted Cisco as the largest security company out there, and I thought that was super interesting. One little security tidbit, AAD had over 550 million active users.

That is a big damn number. Those of you who don’t know what Azure Active Directory, essentially, if you have an application environment and you want single sign in for all of your applications, you can pick something like AAD to be that portal to get logged in, so that’s 550 million people logging in… Basically, getting approved to get into applications per month.

Another big thing is, and funny enough, didn’t get a lot of play was that Windows continues to take share, and I dug into that a little bit and Microsoft actually took share from Apple and Google Chrome. By the way, as we saw from the Intel numbers, as we’re going to talk about, and as we saw from HP, Chromebooks just went in the absolute toilet in the past three months, and something that I did a little bit of a deep squint on was, it says enterprises are adopting Windows 11 faster than any previous OS. Little surprising to me because of Microsoft going so hard on the consumer side initially, and in my opinion, maybe muddying the message on security to big businesses, and also saying, “Hey, it’s Windows 11, but hey, wink, wink, nudge, nudge, it’s actually Windows 10,” right?

So, not exactly giving enterprises a reason to change, but I believe what Microsoft says, I’m going to take them on their word. So, that was a big surprise that I had. Finally, VIVA, which is essentially a program to better manage remote employees, keep them engaged, let them check in, over 10 million miles. That’s fricking phenomenal, right? That means 10 million employees are on VIVA right now. That’s a big number.

So, just to close the loop, Daniel, like you said, if it’s business, it’s Microsoft. Not that they don’t have a consumer business, but it’s certainly not the focus right now.

Daniel Newman: They’re very insulated from some of these macro factors, Pat. But one of the things I did want to just circle back to, and we don’t need to really dive into this… By the way, they did have a crazy good security number, and I know that’s just a weird thing, but their security business is exploding, and-

Patrick Moorhead: Right. Yeah, I talked about the 15 billion.

Daniel Newman: Yeah. I mean, it’s just crazy though. It’s just very interesting because their name is not a first I think of, but they are absolutely knocking it out of the park there.

Patrick Moorhead: Yeah, I mean their insertion point is everywhere. They’ve got the leading overall security, I call it the security arbiter with Azure Active Directory, to give single sign on for pretty much everything. They’re really going after the endpoint play with PCs, and 92% of the PC market is Windows. Okay? And even a higher enterprise number is that, and then you’ve got everything in between, then they’ve got Azure. So yeah, it makes a lot of sense there.

Let’s move on to Google here, and I’m going to kick that off. Quite frankly, I’m not a securities analyst, so I’m going to stick to Google Cloud. But, they had a bit of a rough quarter versus expectations. If they miss on the bottom, they had a slight beat on the top, and they had some challenges really in YouTube. But with all that said, revenue up a measly 23%, OP INC up a measly 22%, they did get hit with a 7% EPS decline, and just to help out those investors, a $70 billion buyback.

But, the thing that I really focus on, I think we focus on the most, which is Google Cloud, they had a 44% growth in revenue, that’s super solid. Not nearly as large as Azure or AWS, but still, they’re on course for a $25 billion annual run rate, which is sneakingly and interestingly about the size of Salesforce. So, whenever we want to write off a Google Cloud, they’re only as big as Salesforce. That’s big, on at least a revenue basis. Google cloud loss did increase slightly, but as a much smaller as a percentage of revenue. I think we were talking about this at dinner last night, revenue up substantially, but the loss was around $1 billion.

Daniel Newman: Yeah. There was a lot there, I do look at the broader Google a little bit because I do have a decent bit of coverage on some of the social and the digital and the ad space. This was one of those weird ones, Pat, because it was a pretty narrow miss. YouTube came in short, and I think they’re a bit of a bellwether for the overall market in terms of like, our business is going to keep advertising and keep spending on advertising. They generate a really high earnings per share, they’re very profitable across the business, and I think it was a little bit of one of those, like they’ve done well for so long and they still grew, they still were very profitable, and like a few companies that surprised this quarter, and the market, just wasn’t really too happy with it.

So, I’m not as negative on always beating consensus. I think that’s become a bit of a macro trend during the pandemic. I think it’s more, are you growing, are you executing, are you adding and developing the right products? I think Google’s doing that in a lot of ways. I think you really did call out very clearly, what’s going on with Cloud. Look, that’s an investment part of the business. It’s a small facet of their overall revenue right now, but it’s a growing part of their revenue. They beat expectations for the Google Cloud business, which again, not the most important thing, but their growth pace is right there with where Azure is. Azure is at 46%, they were in the 40-ish percent range. But, I would say Pat, if we had to be a little bit critical, if they’re going to catch up, they’re going to have to start growing faster, and especially, when you’re growing at a loss. You’re going to have to, “Hey, look, it’s me.”

Patrick Moorhead: I know. Hey listen, I got to pump up my buddy here. This is just little old you on Bloomberg TV. So hopefully, that’s not too meta for you, audience and it doesn’t throw you off Daniel. But listen, you’re looking at your favorite person, two of you, at this point. So just roll with it, baby. Look at you.

Daniel Newman: I think the YouTube business television service quarter cutting, there’s a lot of positive tailwinds for that particular business, and I think the market is good, but Google and YouTube are doing that. So, I’m still positive on the company. The numbers just aren’t that bad. I just think in the market is just really, really low right now.

Now, Google is still trying to close this acquisition of Manly Cybersecurity Firm, $5.4 billion.

Patrick Moorhead: Why just get DMCA take down on this episode.

Daniel Newman: Yeah. You might want to stop it before we get too far.

Patrick Moorhead: Listen, I’m proud of my buddy, you’re looking good. I’m just proud to know a guy like you.

Daniel Newman: Yeah, I know. You’re going to have to stop that.

Patrick Moorhead: Okay.

Daniel Newman: All right. I’m going to shut that down, but you know what? The link is in the show notes, so if you do want to see all my comments on Bloomberg, you can see them there. I did talk a little bit about Google Cloud. I said, exactly… One of the things is they are the third cloud, I think the market largely agrees on that, but I did have to point out that Oracle has been extremely good in operating and very effective, and profitable from what I can see.

Now, they don’t break out their number and their costs the same way as Google, Google is being very transparent in how that business is running, and I appreciate that. Having said that, Pat, 36% growth, I think it was, 37% from AWS. So, Google’s growing a little faster, but they’re a fraction right now of the revenue of AWS and Azure’s at 46%. So, Google Cloud has some work to do, but they’ve made some good decisions, they’ve gone after some vertical markets, they’ve shown some best-in-class capabilities around data and AI, and I think the growth should be sustainable, and the overall cloud business is going to grow too, but it’s super competitive.

Patrick Moorhead: Yeah. So, why don’t we move to our next company here? Getting in some chip chip chippery, with Intel.

Daniel Newman: Yeah, rock and roll. Let’s talk about Intel. Where do we start, Pat? Where do we start with Intel? I guess, I can go first. The company had a beat on top line, company had a beat on the bottom line, but their guidance, which by the way, was what they’ve been telling people it would be all along. In fact, I think it very slightly improved margins and actually guided towards that, and yet the streets sold as if they were getting some sort of new news. The company also changed the way it breaks down its categories of revenue, and there were some reporters that seemingly didn’t understand that either, and were misreporting that their data center business wasn’t growing, when in fact, it actually had a very nice quarter.

Patrick Moorhead: Exactly. Yeah. It was that whole network and edge group that they pulled out of.

Daniel Newman: Right?

Patrick Moorhead: Yeah.

Daniel Newman: I read a couple, I don’t know where they are and I’m not calling anybody in particular out, but let’s just say ,it was an indication of speed over assessment or analysis, Pat. So, you and I are all about speed and analysis, we get our stuff out fast, but we try to get it right, and getting it right is really important. And so, I think there was a number of people on the street that thought that they’d missed on the data center. I mean, look, the PC business is down and Pat, you alluded to something when we talked about Chromebooks earlier, that low end of the market is slowing, the education buying, the low end discretionary buying of cheap PCs in the homes. That stuff is going to slow, and by the way, with no stimulus, no free cash, less liquidity in the market.

That’s the area, Pat, that I personally am looking at and saying, that’s going to get slower first. But, I think there’s been a lot of hyper focus on that with Intel, for a long time, and people are not looking at the parts of the business that have been performing extremely well for the company. DCAI business, that network group in its own, I think grew that 5G network group had about a 23% growth, 22% in the data center. Mobileye’s doing great, unfortunately, or fortunately, depending on how you look at it, that thing’s going to IPO out on its own. But that’s going to be good for Intel, at least momentarily, and they’re still going to hold a significant piece of that business too, going forward. Chip demand… You and I talked about this with TSMC last week, we’ll talk about this with Qualcomm in a little bit, chip demand’s high in data center and an enterprise 5G connectivity, that’s strong.

The PC market has been hot, hot, hot for quite a while. Intel has its challenges. AMD has been very good, we can’t knock down AMD for that. But, the actual size of Intel’s business and the market share it still has, including in their PC business is palpable, and it’s significant. And, I don’t quite understand. It’s not about having a limited… It’s almost like no appreciation for it, and that’s been interesting to watch. Pat’s been very vocal, he’s made… Pat Gelsinger, not Pat Moorhead, although you’ve been very vocal too, has been very vocal about the plan. His strategy has been well articulated, there is a horizon there and I think Pat, if I had to assume… And again, don’t make any decisions based on our advice, but I think a lot of the market just feels like they have time with Intel.

I think the market thinks if they execute this thing could run, but it’s going to be two or three years. They got to get these fabs built, they got to get these next generation architectures, they got to get all these new process technologies set up, eat these higher costs. They need to show that they can get this boundary business running, and if they do, we can do it, but we can come in a year or two. I think that’s what a lot of their, the funds and those that are going to really drive this stock up, big buyers, are waiting on the sidelines and watching. I think Pat said all the right things, but it goes back to his say, do thing. He said all the right things, they’re doing the things, but now they got to get it done.

Patrick Moorhead: Yeah. That’s good analysis there. I think, it was all about the Q, it was all about Q2, right? Because they beat on the top, they beat on the bottom. They stuck to a full year commitment, but investors just, they just don’t believe it, right? There wasn’t enough belief that they could keep that annual guide down. Now, we’re going to have to see from Dell and HP and Lenovo, how and if Shanghai’s hitting them, because at least according to Intel, they got hit with, essentially the Shanghai flu. And, we’ve seen pictures of all of the ships that are not getting in or out of Shanghai in there, and it’s a pretty simple equation. You can’t get materials in, you can’t get materials out, you can’t create PCs. You’re going to run into trouble.

One thing though, just drilling on some of these businesses, really good data center number, right? 22% increase, the company talked about hyperscale as being one of the biggest drivers that makes sense. With hyperscalers it’s kind of feast and famine. But, one of the bigger things was that really looking at hyperscaler and the enterprise, and typically you don’t get a two-for there, right? It’s either going to be enterprise or it’s going to be hyperscaler. So, I think it’s really good news for Intel on that. Here was the crusher, right? Essentially, multiple things hit on clients. On a unit basis and revenue basis, Intel had really been cleaning up on the bottom end. They have a ton of supply that they can basically give better deals and lower prices than AMD on the low-end, where AMD is fab constrained at TSMC.

So, Intel was pumping all these 10 nanometer into low-end PCs, and in Chromebooks. Also, and this is very interesting to me, they brought up Apple as a driver for the Mac Books, and I think this is the first time I had actually seen this on a piece of paper from the company. Danny, you talked about people confusing things, right? Network and edge used to be part of the data center group, and it got broken out, what, two quarters ago. But these are… I mean, look at those numbers. Revenue up 23%, primarily on the back of networking, and what a lot of people don’t know is that Intel has a very robust networking and edge group. Think of edge as all the compute and all the connectivity that you need on the edge, and whether that’s Mac, whether that’s even things like on-prem video trans coding for things that don’t necessarily make sense in the big cloud or the big data centers, really, really good.

I’ll finalize in a couple comments, Mobileye was only up 5% and I dug into that a little bit, and it really was a tough compare. A year ago with Mobileye, there was this huge, I wouldn’t call it post COVID boom, but we were literally, the auto industry was shut down for six months. Remember when we couldn’t get chips, even Biden was visiting and talking to TSMC and Intel about, “Hey, how do we shore this up?” And a year ago, Mobileye had such a good quarter that it was really just a tough compare. Really good to see IFS showing revenue, albeit lower than any of the other Intel, business is 175% growth and a couple hundred million dollar business. But all in all, I think investors might be waiting for risk to clear up.

Let’s move on to another chip maker here, and that is Qualcomm. What do I say? Qualcomm absolutely destroyed earnings that I put it up there on the level of even doing better than Microsoft did. They blew past expectations, records everywhere, and I think the macro picture is, not only did they clean up an Android smartphones, but they also delivered on those beyond smartphone commits. Revenue was up 41%, EP ep was up 69%. The auto backlog was up another 3 billion to $16 billion. A big question for me is, will that auto unit get to a billion dollars of revenue, that was committed at the analyst day? So all in all, I mean, my gosh, a great quarter.

On handset side, just in color there… It’s funny, I think this might be the first time I remember Qualcomm actually pointing out how much it does in a Samsung product. Usually it’s a hush-hush type of number, but they went all in even in their investor deck saying that they increased their premium tier processor volume for the Samsung Galaxy S22 smartphone to 75%, up from 40% in the Galaxy S21. Part of this, I think is attributable to just how good the latest Snapdragon is, but also the Exynos businesses quite frankly, had a tough time and you have a lot of users overseas demanding that they put the Qualcomm chip in.

I also have to give credit to Qualcomm marketing. They have a very aggressive, essentially a Snapdragon inside program that actually makes a difference in smartphones. It might be hard for us to imagine this in the United States, but there is actually processor affinity, in the case of smartphone processors, the highest level of affinity and outside of the US, they’re more surgical shoppers, in that they actually care about the processor of it. And particularly, when you might have some off brands, maybe brands that aren’t super strong, you have a brand like Snapdragon carrying the day.

Daniel Newman: Yeah, you hit a lot of the big points, Pat, but it was a very strong, robust quarter for the company. I mean, we’ve seen the chip space all have a big drawdown, the ones that are on the front end that saw the front end as a double entendre, not just leading edge, just the companies that are seen as the highest growth, have seen the biggest drawdowns. So, you’ve seen AMD, you’ve seen NVIDIA and Qualcomm come back after really remarkable runs that took place when the chips were on high. Now, the funny thing about it is, Pat, is the demand doesn’t really seem to be slowing all that much. If you actually look at the results, very good Pat. But the other thing was, the guidance was very good. The company doesn’t seem to have any real indicators that the slow down is going to be substantial anytime soon. If you go back and listen to my comments about Microsoft, some of it follows right over here, because bottom line, all that cloud, all that connectivity runs on chips.

Now for Qualcomm, it’s still largely in the handset space, but one of the stories of the day for Qualcomm is the diversification of its business. The company has worked really hard to make sure the market realizes that it’s not only growing in handsets. Having said that, the handset business was remarkably good this quarter. So, it kind of slowed down the momentum of that story a little bit, because the disproportionate volume still sits there as you look here, you got 6.3 billion in handsets, and then these other three adjacent businesses. Now they are front end business, which does tie into the handset business. It actually very literally does, but it’s a different revenue stream.

Then of course, you’ve got the automotive business with this $16 billion pipeline now, but it’s not generating that in terms of revenue yet. Having said that, Pat, we probably should give some credit for the growth automotive has had, because in the last couple of years, it’s seen remarkably large growth, and if you look at a company like NVIDIA, which is a bit of a hero of the day, most days, the Qualcomm business in this particular space, has outperformed. It just simply has outperformed.

Patrick Moorhead: Yeah. I mean, it’s a four to five times larger business. NVIDIA seems stuck in that a hundred million dollar a quarter, zone.

Daniel Newman: Yeah, and the design wins have been notable. This quarter, they made this Delantes announcement, which is like 14 or 15 major global brands, that are all going to build on Qualcomm and on their Snapdragon. Now, that really comes down to the fact that the company is focused on the needs of the day, meaning while there is that L4, L5 promise for the future, right now we need L2 plus, we need next level of driver assist type technologies that can help with drive policy, telematics, navigation. And that’s the technology that they’re offering, and they’re making it very modular, but we’ve talked about that a lot. We’ll do that another day. The IOT business, which is a bit of a catchall for a lot of parts of the Qualcomm business, but the growth in that business has been really good. You’ll see now they have basically all their businesses are on a trajectory to being over $1 billion annual, several of them now over $5 billion annually, and then of course that core handset business.

Licensing business remains strong. It’s not big of a focus in terms of what the company’s been talking about, but it is a really nice business to have, when you think about a business that basically gets a little bit of revenue from every single mobile handset sold every day, because of the investments that are made in IP and the R, in R&D by Qualcomm. So Pat, good top line, good bottom line, strong guidance, revenue diversification. There’s definitely more work to be done, but Qualcomm didn’t really give the market any reason for its recent 30 to 40% draw down, other than the fact that higher interest rates and inflation are creating a discount on future growth. So, result’s good.

Patrick Moorhead: Yeah, they rocked it. They totally rocked it, and if I had to pick the overall winner of our podcast honorings, it would definitely be Qualcomm, but we’re not done yet. Maybe there’s room for one more big winner here. That is Honeywell, Daniel. Honeywell, the once industrial, now tech industrial company had a great earnings.

Daniel Newman: Yeah. They beat on the top and they beat on the bottom. The market is loving it, they certainly fall more into that defensive stock, literally. They’re not so much defense, but they’re in aerospace and industrial and building technologies, they’re in materials, and you and I put most of our focus on the company’s evolution and revolution into software, into IOT formerly, we know they’ve spun off their quantum business. We’ve gotten a little bit into some of their autonomous aviation technologies. What propelled the quarter? Well first of all, the top and bottom beat was great, the guidance was strong. It’s funny, you go to Honeywell’s investor relation page, and it talks about what the company’s done, but it just announced 12 dividend increase since 2010, Pat, 397%, 10 year total return to shareholders.

So, it may not be hypergrowth or considered hypergrowth, but Pat, I wish I’d put a couple dollars there 10 years ago. Because for a dollar you’d have 3.97 on every dollar, $3.97 on every dollar you put in. So, it’s not a bad return. Where did the growth come from? Look, it’s actually one of those funny things Pat, when you read up the results, and I’ve been spending some time, it just came out this morning. So, we’re kind of doing this with you guys in real time, right now. They were at the high end of their guidance, they exceeded their range on earnings, they deployed capital and repurchasing. So they spent, it says about $1 billion in share repurchases, so that’s obviously not bad for the price, and they raised the range in the midpoint of their sales.

The organic sales growth though, Pat, were 1%. Imagine that in tech, in a traditional tech company, that would not be driving a… I think the stock’s up like 5 or 6% today on this. What I think the market loved though, Pat, and this isn’t really our space, but I think it’s just worth noting, aviation’s getting hot. So, we’re hearing this uptick in mobility. Honeywell, basically has a piece of every airplane. We were just talking about having a piece of every phone for Qualcomm. Well, Honeywell’s similar in the aviation space and that business is heating up, and so the company had a huge quarter there. And I think the market knows, as the mobility goes up, as orders for airplanes go up, this is going to mean good things for Honeywell.

I think for you and I, we like to watch how’s the forge business going, the data business, how their leadership in sustainability, their urban aerial mobility and autonomous technologies, drones. But, I think as a whole, this is one of those companies that really is a bellwether, really probably does provide a bit of a beacon of safety in this crazy volatile market that we’re in, and as it continues to show and flex its growth muscle in getting into some of these tech areas, they’re going to be interesting to watch adjacently to all the technology companies that we typically talk about.

Patrick Moorhead: Yeah. It’s interesting with Honeywell, it’s always to me, the conversation is what is tech now, Daniel? We have all these tech companies doing space, we have all these tech companies doing sustainability, we have all these tech companies wanting to get in and redo the edge. These are all businesses that Honeywell’s in, and unsurprisingly this quarter, they had strengthened aerospace, right? Which is tech, they had a big increase in warehouse automation, and listen, that’s a combination of material goods, moving goods inside of a warehouse. You and I visited a warehouse. One of the things we weren’t allowed to take a picture of in this distribution center, was their warehouse automation, and we also weren’t allowed to tell which offender that was either. But guess what? Behind warehouse automation, is a computing system and sensing system to be able to properly have the most efficient warehouse out there.

I spent a summer working in a warehouse in high school doing picking. Pick, pack and ship. And let me tell you what, there was no automation. It was me going from bin to bin, filling essentially a fancy shopping cart and putting into a bin and going into someplace else.

What’s one of the biggest issues in sustainability. It’s the materials we use out there. Do they pollute, do they not? Honeywell has a very robust materials technology, which was cited in the earnings, which really grew those orders 13%. From a backlog basis… It’s funny, Daniel, whenever there’s a supply chain crunch or something like that, we’re always talking backlog. We really get impressed with single digit billion backlogs, but Honeywell had a 20, essentially a $28.5 billion backlog, which to me is mind boggling. But then again, when you have a lead time, you’re doing systems for, 7-77s or rocket ships, you can’t just crank that out in a week.

In relation to Russia, there was a $300 million backlog hit that I thought was interesting. Not a whole lot of people talking about Russia, but I think that shows what a global business Honeywell is, and hey, they’re up 5% after hours. Good job, Honeywell.

Daniel Newman: Right. Well, it’s in hours now, buddy.

Patrick Moorhead: Okay.

Daniel Newman: It’s 9:48 in the morning.

Patrick Moorhead: Gosh, I’m losing track.

Daniel Newman: It’s 5:00 somewhere, but no, it was the reaction, Pat, was really good. So, hey are we done with Earnings Palooza?

Patrick Moorhead: Yeah. As industry analyst, I don’t know, I kind of need to take a shower after new earnings, but let’s move into some real tech analyst stuff. You and I both attended an Oracle Industry lab grand opening in Chicago, a suburb Chicago called Deerfield, Illinois. I was completely, not properly dressed. I think it was 40 degrees as I was walking from the hotel to this pretty incredible center. So, a little bit of background in industry, right? Every big tech company and enterprise says that they’re doing industry, and whether that’s an industry cloud, industry software, or even industry specific endpoints, Oracle is already very strong in certain verticals for various reasons. They’ve been doing it for 20 years. Probably one of the biggest areas they have strength, is even retail. You go into most, you see that MICROS brand name, they actually own the electronic cash register or the electronic endpoint, and they have the software, and they have the infrastructure for everything to sit on.

But, this industry lab that we visited in Chicago… And stay tuned for a Six Five on the road, where we talked in depth and we’ve got some fun stuff to show. They really hit on, I would call the harder type of, kind of the brown field. So utilities, communications, construction, warehouse. Yeah, I think I repeated myself with manufacturing, but this center… And I visited a ton. I visited innovation centers from Cisco, innovation centers from HP, I’ve been to one from IBM. I’ve seen a lot of them, and I’ve worked at companies that had innovation centers, and the way that I like to segment these is into, you have innovation centers that are show pieces, that are more like demo centers, like EBC or something like that. Then, you have others that are a roll your sleeves up and actually get work done.

I challenged the director of this, and that was one of my biggest questions, Daniel if you recall, which was, “Hey, are you really doing work here?” And he pulled out his phone and he showed me a picture of what it looked like the week before, and then the layout for the week afterwards, and it’s a completely cleared floor, which by the way, the floor is not cement. The floor is fricking gravel, okay? Which was interesting. But net, they bring customers in there, they co-innovate on end to end solutions for all the vertical markets. I forgot the public safety one, and then they get to work. I just thought that was super, super cool, and I think quite unique. And I think the other two… One was in London, I think the other one was in Australia, and I heard a hint that there might be one coming to Austin.

Daniel Newman: Well, I’ll attend that one maybe, depending on traffic here, it’s getting a little crazy these days.

Patrick Moorhead: Just fly a Honeywell drone.

Daniel Newman: A drone taxi. That wouldn’t be so bad. Yeah, you know my impressions, Pat, we heard from the telecommunication space, the public safety space, we had, what was it? The third one, it was Telecom, it was public safety. Pat, what was number three?

Patrick Moorhead: Manufacturing.

Daniel Newman: Manufacturing, construction, but there was several others, we got to hear from some of the leaders of these businesses. Look, this is where the rubber meets the road. This is where the technology that we talk about every day. I mean, we had demonstrations in this of how high performance compute and GPUs are trading drones or vision systems, inside of major warehouses to be able to manage inventory or be able to identify gaps in the supply, so that they can automate the reordering systems to get more supply on order. This is the intelligence that sits behind all the benchmarking stuff that we like to talk about. This is what it’s really all about, and that’s why I like this, and Pat, it brings us back, it connects us to the industries, to the consumers. Not consumer, but consumers of these technologies, how it’s being applied to help companies be more efficient, to be more productive, to deliver better results.

I think Oracle, sometimes the market doesn’t fully appreciate the diversification of its business, right? It’s got 74% or so, of its businesses recurring revenue, which is really robust. But, the other side of it is, they’ve got this huge portfolio of apps and they’ve built a really competitive cloud infrastructure, some world class database technologies, and then their whole application and experience stack, that they’re really saying, “Come on in, tell us what your problem is, we will mock it up for you. This is not a demo center in the sense of, you’re going to see what we offer for an industry. We’re going to work with you, and then mock something up that’s very specific to solving your particular problem.”

I mean, I love that. That is literally the definition of being agile. So very cool, Pat. It’s great to see my old hometown, way too cold, my skin is way too thin to go back. I did not miss it. I’m sorry, Chicago, great city for about two months a year. September’s always nice, September’s very nice. But in terms of those particular industries, Pat, that’s where it’s at. The industrial industries, telecommute, Chicago, Dallas, New York. That’s where these things are happening. So one time, of course, great to see you. Sometimes we have to travel halfway around the country or the world to actually hang out, even though we live a couple blocks apart.

Patrick Moorhead: So, I have seen Spot, the Boston Dynamic’s robot dog, in so many different places. By the way, if you ever wondered if Spot the dog rests, it actually does. I caught Spot taking a nap. He’s not plugged in with that little dinky cord there, but it was funny looking over there and seeing him taking a little nap. But, we saw a Spot with LIDAR cameras being put on. We saw drones with LIDAR and visual systems. We saw helmets with millimeter wave to be able to track productivity and manage worker safety. This is real stuff happening, you and I have all seen the whole vision stuff, which you always have to have a vision before you get into reality. But like you said, the cool part about this is it was the real deal, like real stuff happening. So anyways, great show, man. We covered a lot, we had an Earnings Palooza, and I think we’re going to have another one of these next month, and we also covered literally hard tech with Oracle, and even to a certain extent, Honeywell.

Daniel Newman: Yeah, it was a great show. It’s been a hectic week and sadly, we could have been an 8-5, 9-5, 10-5, because there are that many of these kinds of earnings drops this week.

Patrick Moorhead: Yeah, yeah. Yeah, you talked about Amazon, you talked about Apple, two very important companies. You and I are off to another show next week. We’re off to Dell Tech World.

Daniel Newman: Yep, and speaking of a show, Six Five Summit, I can’t talk about it enough. June 7th, we’re going to have Arvind Krishna, CEO of IBM, kick it off. Three days, 12 different topics, some very new and emerging topics. We’re going to fill in some new areas that we haven’t in the past, check out the Six Five Summit.com. It’s been updated, the registration there, and it’s free to everybody out there to attend. We’ve got unbelievable list of partners, Pat. Just some class speakers, companies, I could not be more excited. I’m almost at a loss of words, Pat, because you and I, you may not realize it, but we work pretty hard. It looks like this is really easy, but actually it takes a lot of effort to pull 60 or so tech companies together to speak about, I don’t know, the most important, what do we call it, Pat? The Davos of Tech.

Patrick Moorhead: Yeah listen, I steal this from you because I like it so much, but what we wanted to form was The Davos for Tech, that’s remote, right? The best speakers with the most compelling content and to be quite frank, even Davos can’t pull in live all the speakers that we have up there. I mean, we have 20 corporate officers or 65 speakers. One of the things that I’m probably proudest of is that we’re not just getting the hugest behemoths, like AWS is speaking, but we also have startups, right? Like Dreamium Labs. We have companies like Movandi, we have Luminar, we have Grok. So, we have startups at this as well.

I’m equally excited of our new tracks that we have this year. Which is the Metaverse, we have automotive technology, we even have a new quantum track and finally, a new ESG track, which I think is important to talk about given the conversation. I’ve done some of my interviews already and I’m so fricking excited to get this out. I got one of our speakers to literally crack up. If he were eating Cheerios, milk would’ve gone out of his nose. So, I’ll flag that as a win.

Daniel Newman: Are we having fun yet, buddy?

Patrick Moorhead: Heck yeah, we’re having fun.

Daniel Newman: We’re working hard. We’re working hard, we’re having fun and it’s all for you out there.

Patrick Moorhead: Yeah. So hey, I want to appreciate, thank everybody for tuning in. If you like what you heard, hit that subscribe button on whatever format you’re listening to today. If you have any comments, questions, Daniel and I can be reached on Twitter where both of us spend way too much time. That’s the show. That’s a wrap. Have a great weekend. We appreciate you, take care.

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