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Talking Snapdragon Summit, SAP TechEd, NVIDIA & Cisco Earnings, Tech Layoffs, NVIDIA Azure – The Six Five Webcast
by Daniel Newman | November 23, 2022

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

  1. Snapdragon Summit
  2. SAP TechEd
  3. NVIDIA Earnings
  4. Tech Layoffs
  5. NVIDIA & Azure Supercomputer

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.

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 and Strategy and we are here for another addition episode 147 of the Six Five podcast. We are broadcasting from Austin, Texas, not Maui. As you can probably tell. I’m here with my incredible co-host Daniel Newman. Dan, how you doing buddy?

Daniel Newman: Doing good buddy. I have to say working in paradise was nice. If one more person tries to tell me how they don’t feel sorry for me, I’m going to get sad because frankly, I think working in paradise is kind of torture, especially when you actually work through all the breaks, you work through all the evenings you work through and then you take red eye flights home and you feel like crap the next day. But I will tell you what, it was a really great event and it’s good to be home.

Patrick Moorhead: Yeah, totally. I think once that all work and no play makes Jack take an ax and go after his wife in the bathroom in a huge Colorado hotel. I think I heard that once.

Daniel Newman: That’s a little dark, but-

Patrick Moorhead: It is.

Daniel Newman: Maybe all work-

Patrick Moorhead: As dark as the circles under my eyes or what?

Daniel Newman: Hey you look good. You look good. That plastic surgery is panning out.

Patrick Moorhead: It is, it is. I need to, my plastic surgeon and all of my doctors are going to get Christmas cards this year, so… Now, we’re back man and we are on fire and we’ve got a great show today. We’re talking Qualcomm Snapdragon Summit, SAP TechEd, and of course because Daniel loves earnings, we’re hitting NVIDIA and Cisco earnings. Just kidding, it’s great ground truth for all of us and companies lie less during their earnings. Very informal and we’re going to hit tech layoffs and talk a little Twitter and we’re going to round out with NVIDIA and Microsoft Azure’s brand spanking new supercomputer. So let’s dive in. I’m going to call my own number on this one, Qualcomm, sorry Snapdragon Summit. It was incredible and yes it is true Dan, we came in early before everybody showed up. We got set up and we had two hats there. We had not only the analyst hat to be analysts and give good advice and also report back on what we saw, but also the Six Five was there and we did nine interviews with multiple executives including CEO, Cristiano Amon and number two in control, Alex Katouzian and many, many more. Links to the show notes at least on one of those.

But where do you start on an event that you pretty much spent the entire week at? So why don’t I give it a little bit of context here. So Qualcomm is a company in transition. It essentially owned along with companies like Facebook and Apple, the mobile transition, but right now, sorry, the mobile revolution. But it’s really now moving from a phone only to the intelligent edge. And whether that’s phone, includes phones by the way, but incrementally adds PCs, cars, XRs and the internet of things and not just the human IOT or things like wearables, but also the industrial internet of things. This show, the Snapdragon Summit really focused on the next generation smartphone, which was the Snapdragon 8 Gen 2, and also the human IOT that included things like XR and also wearables and hearables. It was an incredible show. I mean if you recall, we’ve talked a lot about Qualcomm strategy pillar number one with the objective of going after the premium Android.

Now it doesn’t mean they don’t provide a lot of technology and smartphone technology to Apple. They do in fact, apple exclusively uses modems and part of the front end from Qualcomm. But listen, new year, new time to go after those smartphone and that’s exactly what the company did with the new platform. I can safely say particularly based on the increase in performance in AI, I see no reason why Qualcomm can’t continue its leadership in premium Android. And it was really interesting Daniel, how it’s not just AI for AI’s sake, but it was about AI to improve experiences, whether that was the radio with the modem, to find the best thing to connect to, whether that was the compute camera. But let’s not forget things like WIFI 7, dual Bluetooth, heck fricking ray tracing in the graphics as well. I don’t think that Qualcomm’s going to win on all the CPU benchmarks, but quite frankly when we look at experiential benchmarks, I don’t see anybody touching the company at all.

And it is funny, I’m always skeptical when a company says “Hey, we’re focusing on the experience.” Because automatically what pops into my head is, oh it means they’re going to lose in the tech. Well this is not the case. It took, I would say Qualcomm four to five years to really make that transition from doing tech for tech’s sake to actually focusing on what people do with their devices. We got a little bit of a sneak peek also on the PC side, which was really good. We saw Adobe executive in charge of alliances get up and essentially say they’re going to keep adding more native applications to the Snapdragon platform. Some people may not know this but there’s already Adobe applications that are native including Photoshop. We saw a brand new XR platform called AR 2 Gen 1 and I like that a lot Daniel because it really narrows in on the use case of augmented reality with the capabilities to put them in normal size glasses.

In fact, the glasses that you have on right now look strikingly similar to the form factor that the AR 2 Gen 1 was delivered in. It’s a one watt part, has three co-processor, has WIFI 7 and most of the compute is coming out of the smartphone itself. And I like that model and I think it will likely accelerate what the industry does with AR and I think the timing is good for when I think Apple is going to come out. So great show, started on Sunday. You and I left Wednesday night, both took the red eye back in so we could be in the office for work and planned for this podcast.

Daniel Newman: Yeah, I came home just for this because I love all you and you matter in case you forgot.

Patrick Moorhead: There we go.

Daniel Newman: But you covered a lot of ground there, Pat, I’ll kind of keep it simple, zoom out and keep us on pace here. But for me it was really about the future of mobile compute and the implementation and application of AI and everything. And so if you kind of thematically looked across the show, a lot of energy was spent on how AI is going to really supercharge this next generation of devices. Whether it’s how AI could be implemented to the RF modem system to more intelligently deliver millimeter wave 5G, beam forming and making sure you’re getting that highest quality signal at any given time to the way you can use AI to flex across different levels of connectivity between bands, right?

Whether it’s WIFI 7, whether it’s millimeter waves, sub-6 or a legacy connectivity that we need when we’re outside of major markets and metros. And then of course if you look at XR, if you look at mobile compute, the PC part of the business, if you look at gaming, everything was “Hey, how are we going to take artificial intelligence and layer it to add performance? Can we add intelligence that’s going to help save power? Can we add intelligence that’s going to help make the device work better?” And that to me was kind of like if you went right down the line and just kind of said, “How do I streamline and digest what we saw over those two days?”` That was it. It was that the next generation, the next scale of this company’s product services and business is going to be its ability to implement meaningful artificial intelligence on top of high performance.

Some of the lowest power system on ship that are available in the market today. They got the wins, they’ve got the partners, they’ve got Microsoft and Adobe, they’ve got all the major handset makers, they’ve got the design wins, they’ve got the Snapdragon compute in beta with some really large customers. They had Citigroup up on the stage talking about this. These are the pieces and parts that are going to come together to help build the business. And in our time with Christiano, you have to acknowledge that this diversification strategy and taking every single device that connects to the network and making it accessible and making it a part of the opportunity, the TAM for Qualcomm is what the company’s looking at and I think they’re doing a good job. So, I’ll leave it there. Good event. And it was, as I said, working in paradise.

Patrick Moorhead: Yeah, probably the most interesting thing where both you and I drilled in was on their PC potential and I think we’re in the same place that we feel pretty confident with the part itself/ even that’s taken us, I think a stretch but unclear on the go to market at this point. I’m going to be interested to see how that pans out. I’m hoping that they’re making a list of what they’re not going to do as long as what they’re going to do because I think focus is paramount, particularly in getting into a new market. Let’s dive into another big show. This was SAP TechEd. I couldn’t attend but I did watch the keynote virtually when I was slogging it away on the beaches of Maui.

Daniel Newman: Yeah, fantastic. You and I both unfortunately had to have members of our team attend. You had Melody Brew, a good article on Forbes mentioned some really good insights and I’ll talk a little bit about that here in a minute. Shelly Kramer, from Futurum Research, attended the event live as well. On our end, we are very closely aligned with SAP watching the company. This year the SAP TechEd really zeroed in on one thing, the future of the citizen developer in the developer stack, meaning the citizen developer all the way to the traditional software developer and how SAP is really focusing on enabling that particular group to be more successful to build and run on SAP. And the company actually launched a low-code solution called SAP Build. And that whole idea there was to empower a broader and think about, we’ve talked a lot about power platform on this show.

So SAP is heading more and more aggressively down that path as well. What they need to empower people in your financial analysts, your supply chain workers, your operations staff, your sales team, how do they build systems, monitoring tools, analytics, process automation and various applications [inaudible] be more successful. And then how do you build this in such a way that you can really support the continuum, those that are complete novices that really don’t know how to do more than email and do Zoom calls all the way through your highly capable coders that understand different programming languages and are able to develop applications and all of those. It’s about up-leveling and upskilling. So while effectively SAP Build is a new thing, what they really are doing is taking a group of the different solutions that the company has offered in the past-  I believe it’s Work Zone and one other.

And what they’re doing is really trying to simplify the product application development life cycle, taking together compliance, governance, security, management of the app development ecosystem and making it more accessible and simpler for more people to do. Make it more visual, make it more seamless, make it serverless using basically varying tools, data and models to be able to scale up rapidly applications. So a couple of key data points that I identified was that there are a number of automation tools that SAP is putting inside of Build to make it easier for users. I believe it’s over 130 and this is going to enable companies to, the users, these low coders to be able to build and automate and make sure they’re building useful applications that work. There is integrations with Google, there’s going to be UI development tools. So not only is it the back end of being able to build the application to run and also build tools and build visual tools that help applications be seamless and easier.

That’s always been one of the problems I’ve seen Pat with low-code tools is the apps that get developed really look like something that was created in a 10th grade computer science class. So this is an opportunity of something that can be built to make more non IT folks build apps that are usable but also that look like they’re been developed by real coders. In the end, real coders are low coders, low coders and no coders. That is where the future is heading. But to me, Pat, there was a lot going on at this event, but the SAP Build topic was probably the most in focus. And that is all about the fact that we have not enough developers, too many application and data requirements. How do we bridge this gap with people that have the capability to be thoughtful and understand their business and build important applications, make it seamless, make it simple, and keep them on the SAP platform. So there’s my TechEd in a quick wrap. Wish I could have been there, but for all you out there, this is going to be something important to watch, especially if you’re on SAP.

Patrick Moorhead: Good analysis Daniel. And a little bit of context in the company itself, it really is a company in transition. It’s moving, it’s a very strong on-prem, some might say legacy player who’s moving to cloud SaaS and automation. We’ve seen some incredible success on the cloud side, reasonable success on the SaaS side. And what you’re seeing here is really stepping up the automation. You and I have talked for many segments about the software trend of people going to stacks and SAP has their stack, it’s called business technology platform. It takes data and analytics, adds it to AI, application development, automation integration in one unified environment that looks, smells and tastes the same. I think what’s unique about this is first of all, most enterprise Fortune 2000 ERPs are based on SAP. So instead of here’s the alternative, which a lot of companies are talking about is either surrounding your SAP ERP, and that’s a lot of what Microsoft is doing, aside from if you have a Dynamics 365 supply chain or ERP solution or let’s say you are a company like ServiceNow where it’s, “Hey, let’s ETL a giant amount of data and then work on it in some sort of a data warehouse.”

Well first of all, ETLing anything is typically expensive because you’re copying the data into something else. And secondly, it’s not real time. You and I have talked a lot, also a lot Daniel about connecting the front end to the back end. So it’s actually an elegant solution from the point that you actually have people who know what they want, they can drag and drop to click to build an app. It really holds the context of the true data, not necessarily data that’s been ETL and massaged and moved. And in a way, if I were their marketing person, I would be talking about them unleashing the expertise of the business users. Pretty good play. Of course, people can throw stones and say they should have had it a few years ago, but there aren’t a ton of people who are exiting SAP for the doors. In fact, most of them are moving to the cloud and I see SAP and Oracle trading a lot of punches.

We see every quarter Oracle saying how many SAP customers it’s stolen and then the next quarter we see SAP talking about all the new business they have from Oracle. It is fun to watch and we can both agree, Daniel, that the competition is really good. So hopefully you and I can be there next year. You and I are both kind of first in first out guys, get the invitations out there and we will likely be there the next time. I can’t speak for you Daniel, because we are different companies. Of course, we are aligned on the Six Five, but very much separate companies.

Daniel Newman: Wait, wait what? Anyway…

Patrick Moorhead: Yeah, we are, believe it or not, I know people love to wrangle us in and invite us to the same briefings, but we are very much competitors and besties. Let’s dive into the next topic. NVIDIA earnings kind of a mixed back here.

I mean if you look at just raw numbers, I mean they had a slight beat on revenue, which I think people were excited about, but they missed EPS by a fricking mile. In fact, they missed by almost 18%. A lot of product transitions going on here, not only in the data center but also in consumer. They had a ton of overhang in the gaming market. Gaming/crypto market. I’m sure I’m going to get a nasty note about it. But the reality is a lot of people were using their consumer cards to do crypto even though they disabled some of that function in firmware. And if I look at the gaming numbers, 1, 2, 3, 4, it’s the lowest gaming numbers I’ve seen in two years. They came in at 1.6 billion, took a $700 million pricing adjustment on that old inventory as they work the 4,000 series into the lineup. Data center that looked pretty good.

Flattish. Year over year was up and that really was a bright spot. Pro Vis like gaming down the most in two years. And I’m going to attribute that to transition as well. So truly a mixed bag. If I look at the future, what holds them, I think AMD is going to do very well with their new lineup that they brought, and I would say for the first time in a long time, they look like more than a threat that they have been over the last two years. Now I’m going to put an asterisk there, unless AMD and its consumer graphics can muster a much more heightened assault on the marketing front, none of it matters. As you and I have advised and said for years, you have to show up with a great product that delivers a meaningful value proposition and have a great marketing backend on that.

And again, I don’t think that AMD has invested enough over the past two years to get that marketing muscle. A good example is my son who’s 22 doesn’t have any history or recollection of AMD being on top, even though AMD and ETI were on top for decades back in the day. And if you don’t have that reputation and you haven’t invested in marketing, then you have to show up with a knockout punch with a product. I don’t think that AMD has shown up with a knockout punch yet that NVIDIA can’t potentially stifle with a card that sits right at the high end of what the company’s doing.

Daniel Newman: Yeah. So, this was a tough one. There was multiple sort of warnings and adjustments down that led to this. So, when we got what was sort of a mixed bag, I guess people were relieved that the revenue was above the guide because gosh, after you guide down, if you still miss revenue, that’s just not a good thing. So, I think the company was there.

Obviously, the margin and earnings missed. So that’s sort of where it was a mixed bag. Look, Pat, the gaming area is going to take a while to get the cleanup right? You’ve got this inventory glut, you had a ton of pricing power and now you’ve got a flood in the market and all the chip companies have had to make some adjustments for this in the last quarter. Those with higher consumer exposure as well as things like PCs are going to probably be facing bigger short term adjustments to figure out how do they get that inventory balanced, how do they get all that inventory out of the system and start shipping again?

Why didn’t AMD have these adjustments, Daniel? Well, I mean there’s a couple things when you have better results is one is you have a better handle of your partners and your supply chain, what’s going on. B, Pat I think in, and this is kind of maybe a little provocative, but I don’t think AMD got nearly as tied up in this blockchain/crypto market.

Patrick Moorhead: Ding ding, ding, ding, ding, ding.

Daniel Newman: Yeah. And obviously I’ve been a very bullish on NVIDIA for a long time and so sometimes you know have to be able to come back and say, “What did I get and what did I get wrong?” I think what a lot of us got wrong was their gaming business is really good and the company is beloved for its gaming technologies, but it wasn’t all gaming. There was a big chunk of crypto related and the company actually pivoted to that.

It had products, it was building for because it saw that as a big market. And I believe in the comments on this earnings, Jensen Huang actually said he doesn’t see Blockchain, the word wasn’t crypto, the word was Blockchain as being a big part of the company’s future. But having said that, cryptos had its booms and busts. So this isn’t probably the end. But the reason it might be a little bit of the end is the most stable crypto assets, which are going to be Bitcoin and Ethereum most likely no longer get mined on GPUs. And so one’s now proof of stake and one’s done on an ASIC. And so the bottom line is even if crypto does come back, it probably will never come back in quite the wild speculative nature that was driven by this multi-trillion dollar pump into the economy from the Fed.

And so, it’s going to come back differently so that part of the business is going to have to grow more traditionally. Couple positive notes though, one automotive had a much better quarter. Now automotive, you and I have been critical that it hasn’t been capitalizing on opportunities that we’ve mentioned. Qualcomm has had really robust results. Well, this particular quarter the automotive business did perform much better. I believe it was just up 86% and sequentially 14%, quarter billion dollars in revenue. Couple of big wins included that Volvo EX90 where we talked about the lidar from Luminar, but it also is powered by NVIDIA. Also, Pat, data center is still a solid business. I’m going to stay on my bandwagon right through to the next comment section here about deflationary technology. Automation and AI will be at the epicenter of companies trying to weather what will be a tougher economic climate and being able to implement and apply artificial intelligence to workloads and things like your systems of record, ERP, CRM, business process automation, being able to use large data sets to create multi-term conversational AI that can replace heavily over employed call centers, things like that are going to be done with AI.

And NVIDIA is one of the core technologies to this. While visualization numbers were down, Metaverse is also part of the future. Cristiano Amon from Qualcomm actually doubled down in our interview this week about how bullish he is on the Metaverse. And the Metaverse will eventually be a thing, the exact iteration of it, where it happens. But the digital twins, the industrial applications for simulation autonomy, self-driving, these are the things that’ll be done in a Metaverse. And Nvidia has a large advantage on software to become a really big player in this space. So, it’s a mixed bag. I’m not down on Nvidia, but this gaming thing’s got to get cleaned up before we get a real… It’s just such a big part of the business, before we’re going to have real clarity about when they’re going to return to meaningful growth.

Patrick Moorhead: NVIDIA just is like a cat man. You think you have them down and they just come back and just get you. Let’s dive into the next earning topic that is Cisco earnings.

Daniel Newman: Yeah, I mean Pat, I’m going to start here, where I finished there, I have been on a soapbox for a year now. I was talking to my publicist about this yesterday and I said I have been talking about.

Patrick Moorhead: Wait, wait, wait. Wait, wait, wait. Wait, wait. You have a publicist?

Daniel Newman: I do.

Patrick Moorhead: God you’re…

Daniel Newman: Don’t we all? Don’t we all have publicist?

Patrick Moorhead: I’m my publicist.

Daniel Newman: Oh yeah, but you’re good at it by the way.

Patrick Moorhead: I talk about my favorite topic and that’s me.

Daniel Newman: Don’t we know.

Patrick Moorhead: I’m just joking audience. No, I’m not.

Daniel Newman: Don’t tweet Pat. Tweet that out. Tweet Pat likes to talk about Pat. And the reason I did this is because we both do TV. You know were on CNBC a week or two ago. I do a lot of TV and I do a lot of op-eds and things like market watch.

And my point is that I’ve been beating this drum, just beating this drum of “Hey, boring, stodgy old tech and companies that focus on things like AI automation, we’ll call it deflationary technologies are going to do well as the economy gets tougher.” Well, who are these companies? It’s going to be companies that have software for workflow like ServiceNow. It’s going to be companies that have tools, technology services for automation like IBM. It’s going to be companies that have core infrastructure that keeps your ecosystem secure like Cisco. And these are going to be the kinds of companies that are going to be invested in, are going to be the enterprise technology providers that enable companies to finish the complex digital transformation projects that actually didn’t get done during the pandemic.

And let me go back and say why I’m saying this, okay. In the beginning of the pandemic people that talked about digital transformation, the yuppy puppeter pundits, that wrote books about it. You know what clowns? Totally. Anyways, you know, oh, we transformed 20 years in 15 minutes. Those were the comments. We just did 20 years of transformation. What really happened, if you go to Silicon Valley, and we’ll talk about this topic next is companies over hired, they threw bodies at every single problem. Revenue grew so fast, demand grew so fast, the companies hired more people. They hired sales, they hired marketing, they hired product, they hired warehouse workers. They hired whatever it took to basically deliver on surging demand. They hired. And yes, there were some technology implementations that took place, but actually think about the Zoom bombing problem. A lot of security problems popped up early on in the pandemic because companies through so much at growth that they actually didn’t shore up their fences or they didn’t automate processes.

They hired thousands more people in call centers or they didn’t automate warehouses, they put more bodies in warehouses than they needed so they could get stuff shipped out the door. So, the idea that all this automation took place was actually sort of human backed with a good story that pundits could tell about how this stuff could work in the future. Maybe someone should write a book, we’ll call it Human Machine. And we’ll talk about how all this stuff goes together, maybe someday. Long story short, and I realize I’ve gone down a way tangential to Cisco earnings, but you know what? You don’t need me to read the results. Cisco’s results were really good. And so, what I’ve been kind of down this path of saying is that companies that are in this steady enterprise backing technology state are going to actually have solid, robust results. So, Cisco’s revenue up year over year, Cisco’s earnings up year over year.

Cisco’s guidance up year over year. This is really good stuff. So overall, the company has been focusing on software revenue growth, which they’ve done. They’ve been focusing on ARR growth in which they’ve done. Now these aren’t staggering 20 and 30 and 40% growth. This is steady state, 5-10% growth in a very difficult FX world in a difficult macroeconomic situation because Cisco offers security, offers tools for data management, offers the hardware people need to run their businesses and actually finish these digital transformation projects. I know we got more to talk about. I could go on a while. I wasted my time on my soapbox here, I’ll let you take this one home.

Patrick Moorhead: I don’t know. Your ratio of plugging your books as a percentage of minutes talking was extraordinary. I loved it.

Daniel Newman: I learned from you buddy.

Patrick Moorhead: Really? I learned it all from you.

Daniel Newman: Dang it. Then who did we learn it from?

Patrick Moorhead: I don’t know. I don’t know. I just read one of your books. No, I mean listen. Beat on the top line, beat on the bottom. And they raised guidance. Mic drop. No, no. I mean I was incredibly bullish after I left their partner conference. I got to meet with pretty much their entire C-suite, Chuck, all the product leaders, CFO. And so, I’m pretty high on the company right now. They had records everywhere. Largest quarterly revenue, second highest quarterly EPS in the history of the company. Pretty much grew in network, security and applications. CAT9k, Cisco AK, Meraki Wireless ThousandEyes duo. Not hearing a lot of talk about WebEx in there. But then again, we’re not at peak covid. RPO 31 billion, right? I fricking love that. That’s 16 billion over the RPO that they expect over the last 12 months.

And yeah, single digit increases. I totally, totally get it. It’s not like some of the growth engines that we lean on, but I like to see anything compared to them. The company, Daniel is really in an interesting spot. I feel like it has differentiated itself from the HPEs, the Dell Technologies of the world, but it doesn’t have that cache of let’s say the Microsoft’s and the AWS and the Googles of the world. So, it’s in this really interesting position. And I could see with all the tech investor pundits out there, “Hey, who do we compare them to, right?” I could totally see that being a challenge. But when I look at what they said they were going to do, what they did and then look at RPOs, I feel like this train is going to continue going down the road. But let me reiterate, the show is for informational educational purposes only.

We might talk about public companies and their earnings, but please don’t take anything that I say or Daniel says or infers for investment advice. Daniel, let’s move to tech layoffs and a little sprinkling of Twitter. This has been a lot of fun. It’s been depressing for some, listen, I’ve been laid off so many times, Daniel, I can’t even tell you. Every time I bounce back baby to something better.

Daniel Newman: Have you really?

Patrick Moorhead: Oh yeah.

Daniel Newman: All right.

Patrick Moorhead: It’s been people getting out of businesses and AMD was down to six months cash. They pretty much got rid of anybody who wasn’t in engineering or in sales and I was in neither.

Daniel Newman: This one’s yours buddy. You can start.

Patrick Moorhead: Oh my gosh, you got to be kidding me. It’s me. I was totally punting this over to you. So, first of all, we’ve seen layoffs from Meta, Twitter, Amazon, Lyft, Stripe, Salesforce, Microsoft, Robinhood, Coinbase, Cisco. A lot of different companies. And instead of focusing in on the numbers and the companies, I want to talk holistically about economies and how this works. So, Dan, I know you like to play virtual economist and I think you’re really good at it. I’m a student of history and essentially, we have different cycles that have happened over the last hundred years and they are boom and bust cycles.

Rarely is there a stasis of GDP and inflation and interest rates. We have an incredibly high interest rates compared to where they were when there was literally the Fed was loaning at 0%. That’s free money. Banks might put two or three points on it, but essentially it was free money. And what happens is you are able to go and get a lot of debt and that included a lot of tech companies who were making some very good but some very bad investments out there.

And here we are in the state of economy. So don’t be surprised. I think what’s surprising people is this is some of the first time that any of these companies is doing layoffs. Companies like Amazon who’s been on this rocket ship. You made a very good point about automation, Daniel, which was people just when it came to things like production and warehouses, just hire bodies and get them in there. Very little investment in automation like robotics or software automation like we talked about earlier with the Build product from SAP. But I think that people will look at this, companies will look at this time to get lean. Quite frankly, get rid of some of the C and the D players that were hired. Some companies hired 100,000 workers over the last decade and hard to keep people. And I guarantee you that there were some very bad hires along the way. So, this is a good time to get focused on what matters. Cut out what doesn’t. That’s my thoughts on the tech layoffs.

Daniel Newman: All right, so how much time do we have? We have one more topic. Probably a quick one though.

Patrick Moorhead: 11 minutes.

Daniel Newman: I’m going to use the majority of our time on this because the last topic I think is more of a bit of an update. The layoffs themselves are almost entirely a byproduct of what I said in that last segment. And that’s that companies relentlessly through bodies of things. And by the way, paid extraordinary prices to hire people during the labor tightening cycle that we just went through. But because growth was felt to be or seemingly endless with zero interest rates made, liquidity very easy for companies, they could kind of go all in and of course all time record high stock prices gave the market a lot of confidence to continue forward and companies continue forward. We’ve seen that completely get slashed now. A miss on earnings, you may as well set your business on fire right now. The labor market is still tight and pricing hasn’t necessarily come down, but you still have to grow and you have to grow earnings too.

And there’s no patience in the marketplace right now. CEOs are under fire. Mark Zuckerberg basically said we’re going to stay flat. And then the market was like, “No you’re not.” And they sold the stock. They were going to sell them down to $50 a share. He would’ve gone down 90% from the highs had he not basically made those layoffs. Investors, the market wants to see companies doing what it’s going to take to put themselves in a position to survive this period of time. Period, period, period, period. So that’s where we’re at with layoffs. Can I use a segment? I’m just going to pivot. I want to talk about Twitter though really quickly.

Patrick Moorhead: Yeah baby. Roll it up dude. Let, let’s hear it. Preach. Preach.

Daniel Newman: Okay, this isn’t a bitch fest. This is just going to be an observation. It may or may not be popular, but I’m extraordinarily tired of people that have never built a company of 1, 10, 100, 1000 people thinking that Elon Musk should somehow put on a Superman cape and be able to reverse over a decade of really poor management, poor product management, poor monetization, poor customer service and treatment, poor innovation, and just turn it around and everybody’s just absolutely bombing the guy. Now look, did he make some mistakes? Should he have weighed in on the Pelosi thing? Probably not. But you know what? He’s complex. He has built a right through creating from scratch trillion-dollar companies from putting everything on the line in his career to be able to have an opinion and sometimes his opinions are going to be wrong. I also want to know when we got to a zero inaccurate, zero wrong, zero world where people can’t ever say anything wrong, I just want to know when that happened.

Somewhere along the lines we lost the ability to have real discourse in public or even throw out a possibility of something being wrong and things like Covid and things like policy and politics. We have learned now that people had said things correctly, been filtered out, blocked and deplatformed for things that later turned out to be true. So, there’s a lot of problems right now with this. He basically bought a company that is not only in transition but a company that was in an absolute disaster. I love Twitter, so this is not like me putting on Twitter. “Hey.” And he was asked, like I said, within what, 48 hours to make it hum. Privatization of this company is going to be the best chance of it to have a chance to reboot, recreate its culture. People that don’t want to double down right now while this company is underwater.

His whole memo thing, look, you could say hardcore, you could say hard work, but the culture of that company was like no work, nobody worked. There was too many people and nothing worked. Whether it’s the software bloat in microservices and just all the poor architecture and design that he’s trying to unravel right now or it was the complete lack of a strategy to monetize the platform successfully for over a decade. Now all needs to be reflected upon, and look, I’m not an apologist for Musk, I’m just saying nobody can turn around a $44 billion company inside of what? 10 days and expect it to be really successful. And if it was anyone but him, I think people would have a more reasonable outlook and expectation for how quickly this should happen.

But I would say give it three maximum six months and come back with an opinion then. If you have an opinion at that point and it’s still as bad of a disaster as it was the day he got it, then you know what? Shame on him. But I think for all of those kind of armchair quarterbacks out there that have never built anything, it might be a moment to reflect a little bit upon why you’re so angry about this and maybe give the guy, a CEO that has built a trillion dollar market cap company from scratch before and say, “Let’s give him a little bit of time to see if maybe he can pull this together and make Twitter better than it was.” Because it couldn’t have been much worse.

Patrick Moorhead: Yeah, I think people don’t like Musk primarily because of his political affinities and the kind of moves, he’s kind of like a centra. Sometimes he’s conservative and sometimes he’s liberal. So, I don’t think people like that. I think all the liberals want him to be liberal all the time and I think many of the conservatives want him to be a Republican all the time. I think that’s what it is. With regards to the memo, I tweeted it out today. I received two of those memos from senior management. One of them was from a huge company and one of them was from a startup. And I pressed the yes button and I got promoted and I got super experience and ended up turning at least one of the companies around that I said yes to. So, I kind of like the sign up or get out and every company I’ve worked for I guess except my own, I’ve seen that memo. Anyways, I like it. And the great thing is this is a free country and you don’t have to like it if you don’t want to. Let’s hit the next one. Daniel, take us from NVIDIA and Azure Supercomputer in the cloud.

Daniel Newman: Well, this was super compute week and we talked a lot about NVIDIA and earnings, but it never hurts in this particular area, the area, Satya Nadella to announce a partnership. We watched multiples of these at Snapdragon Summit this week. The company is basically looking as Microsoft is set to be the first public cloud that’s going to take the entire NVIDIA stack of a GPU network and AI software to offer a super computing instance. To me, Pat, it’s pretty early days. I’m just kind of reading about this because we weren’t there, I wasn’t on this announcement, but it seems to me that this is A, it’s a big win for NVIDIA to be on Azure’s platform and to get the full buy-in across the stack. And to me for Microsoft, this is tapping into a powerful combination and doing a little bit like what we’ve seen with Quantum.

These kinds of workloads are going to be migrated into the public cloud to make them democratized and make them more accessible to people. And there’s not a name that if you look at the ML perf results and some of the data that’s come out, NVIDIA’s clearly been leading for quite some time and I think Microsoft’s looking for ways to diversify, bring more data and workloads into the Azure ecosystem. And this is an interesting partnership. And since we only have a couple minutes, I’m not going to say too much more because I haven’t had a chance to fully dive into it Pat, but I think that this is a timely partnership. It’s a great way for Azure to go out and sell more to this high performance computing ecosystem and scale up that particular business. And it’s good for NVIDIA to continue to lean into this market, which is going to be much more robust right now in this current ecosystem than some of the more consumer led parts of its business. So early days, don’t have a ton yet to add on this one. Going to spend some time, but I think this is going to be the way we’re going to see a lot of these kinds of high performance workloads adopted in the future is going to be through instances launched on public cloud.

Patrick Moorhead: Yeah. And if you want to see more about Supercomputing 22, we shot some Six Five videos with Dell and also check out some stuff from HPE as well. Daniel, there are companies like Grok and even Habana and we’ll see with Trainium coming up here at AWS Reinvent that I do believe have a potential here. And I think the market does need more competition, particularly on the training side. Really it has become a competition between software ecosystems. Now year after year I’m seeing the cloud guys either try to disintegrate or find a intermediation layer between it and NVIDIA or find ways to leverage CUDA using other people’s hardware like AMDs, but is a fascinating spot and it is completely amazing how long NVIDIA has been in the top spot.

Dan this has been a great show. Boy, we love to go long and we love to talk and listen to ourselves talk and sometimes even stroke ourselves. But we are going to be back.

Daniel Newman: What?

Patrick Moorhead: We’re going to be back on the Six Five in two weeks. So, we’re going to be landing at reinvent, have a lot of good stuff, a lot of good content and interviewing with senior executives. But check out the stuff that we did at Qualcomm Snapdragon Summit. You can find that in show notes. We did nine videos talking tech with all the executives here. I learned a lot. I think you can too. So, for this week’s episode, you want to put something in there Dan?

Daniel Newman: No, I was just going to say next week with the holiday we may or may not be jumping back on. There are a couple of big earnings, Dell and HP and a couple others. So maybe you and I have time permits, we’ll do a quick special ed for everybody. But if we don’t see you before the holidays, I just want to wish all of you in America or that celebrate the Thanksgiving holiday. A wonderful Thanksgiving.

Patrick Moorhead: I appreciate you adding that, Daniel, you always tend to bring the human part because you’re just that kind of guy and you’re a millennial. I’m a little hardened in my old age here, but somebody has to do it. There’s always going to be a new young person who’s going to knock us off, Dan.

Daniel Newman: No way buddy. Let’s take the world over my friend.

Patrick Moorhead: We can at least for this decade. Everybody thanks so much. We appreciate you. You know where to find us on Twitter and LinkedIn for as long as LinkedIn is up. No, I haven’t moved to Mastodon yet, but apparently somebody was spoofing Daniel on Mastodon, which-

Daniel Newman: I think they were just, I think what ended up, it wasn’t a spoof. I think they were syndicating my feet.

Patrick Moorhead: Ah, very cool. Anyways, thanks everybody for tuning in. We really care about you. Take care. Talk to you next week.

Daniel Newman: Bye.

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