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Welcome to the ATX, Elon, Qualcomm Automotive, Marvell and IBM Investor Days, Micron Event, and Intel Dispels the Apple Myth – The Six Five Webcast
by Daniel Newman | October 12, 2021

On this episode of The Six Five Webcast hosts Patrick Moorhead and Daniel Newman discuss the tech news stories that made headlines this week. The six handpicked topics for this week are:

  1. The Tesla Team Moves Their HQ to Austin
  2. Marvell Investor Day
  3. Qualcomm wins GM Ultra Cruise + Veoneer Update
  4. IBM Investor Day
  5. Micron Datacenter of the Future/ 7400 SSD Event
  6. Intel dispels the “Apple Spell”

For a deeper diver into each topic, please click on the links above. Be sure to subscribe to The Six Five Webcast so you never miss an episode.

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Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.

Transcript:

Patrick Moorhead: Hi, this is Patrick Moorhead with Moor Insights & Strategy and we are here for another episode of the Six Five Podcast, episode 97, the sometimes Friday morning trying to commit, now Saturday morning, because it’s my fault. But before I get into my pity party, I want to introduce my amazing cohost and bestie, Daniel Newman. How are you my friend?

Daniel Newman: Buddy, hey. I love seeing that big smile in the background. Nice imagery. We’re both off location today. I’ve been doing it in my studio. I’m backward. Many of you probably have seen me for some time now, because this is what my setup looked like for a long time. But you’re at home, I’m at home. It’s Saturday morning. You had a really rough week. Your week got, let’s just say “thrown off” Pat. So I’m glad we’re even able to be here today.

Patrick Moorhead: No, I know. This is the third time that Pat has screwed up the Friday morning podcast, but no, this is a pretty good one. So as we’ve talked on the show, my wife Paula is an avid horse woman. She owns a horse company. She pulls horses in from Europe and made some American hunter jumper friends and she rides horses a lot, and she rides competitively. Well, on Wednesday she was thrown off a horse, did a cartwheel and broke her hip. So I have been spending the last two days trying to take care of her and get her back. We’re hoping that she’ll be able to come back today. Sorry. Yeah, actually today. And Daniel, she was walking three hours after she had nearly a two foot titanium rod inserted into her femur and three screws put in there to get everything in place. And super happy, super appreciative of the doctors at St. David’s Round Rock.

They did a great job, little plug they deserve it, but also, kind of the miracle of medicine. Daniel, we like to criticize our healthcare system. I realized that. I was on the board of directors of St. David’s. I was actually chair for three and got a front row seat, but I got to tell you, it’s times like these, I appreciate the American medical system where you can immediately get in. There’s no waiting list and my wife is up and walking in three hours.

Daniel Newman: So let me just say, first of all, I’m so happy that everything is going well. She’s so tough and that’s such a hard thing to have happen. And obviously, she’ll probably be off the horse for a bit, but hopefully a very, very quick recovery. These are the things, man. We work a life that we want to be on top of this show. We want to be out every Friday. We want to talk about all of the most interesting things and of course provide that next level of analysis for you, our audience, but this is the world we live in, Pat. Life is not always symmetrical and every Friday is a great goal, but yay, just the fact that we’re starting to travel again, you and I getting back on the road, our show may not be every Friday at the same time, but what we can promise you is we will do our darndest to get this out every week, like we are right now on a Saturday morning, up early, chugging coffee and ready to talk about it. Pretty interesting week in tech.

Patrick Moorhead: That’s right. Let’s dive in. And aside from if… But first I have to say if you’re wondering, if I put our videos on just so I can look at myself and Daniel, I do. I just keep it up there, just, no. I needed something to interesting to put on the background on, but let’s dive in. We have some great topics. I mean, I’m so excited about the topics we have. So we have Elon and Tesla moving their headquarters from Palo Alto to Austin, Texas. Some discussion on Qualcomm automotive. There were Marvell and IBM investor days with some disclosures, but also just setting. What can we expect from these companies for the next year? We had a pretty exciting micron future of the data center event and they launched a brand new line of SSDs. And this last one’s going to be fun, Intel dispelling the Apple spell. So Daniel, let’s dive in.

Daniel Newman: Well, we can’t quite dive in because we didn’t do our disclaimer, so.

Patrick Moorhead: Oh, okay, okay. So first off, yeah, we’re going to be talking publicly traded companies, but don’t take it as investment advice, seek out professionals, because this is all about education and entertainment. I always like to say do the opposite of anything. We might infer, Daniel likes to back off that just 18 tiny bit. Also, if this is your first time on The Six Five Podcast. We cover six topics, five minutes each, sometimes nine minutes each. We go a little over and long, but we like to focus on more of the meaning of it as opposed to the news itself, because you could pretty much find the news anywhere. We might sneak in some news to get a little context, but we really wanna talk about the meaning of it. So Daniel let’s dive in if that’s okay. Tesla moves to not just Texas, but Austin and little story here.

So if you remember during COVID there were some challenges that Tesla had restarting one of its California factories. Assemblywoman, Lorena Gonzalez said F Elon Musk. He responded with message received. And then he ended up a few months later personally moving to Texas. I think he’s living in one of those mini homes next to one of his rocket launchers, or at least that’s the lore that’s coming out. But his company hadn’t decided to move. But this week at an investor conference, he said we are moving our headquarters from Palo Alto to Austin. So Daniel, I think what we should have a robust conversation on, is this the giant tech sucking sound from California to Austin?

Is this a temporary thing? Is more like a red versus blue? Are there some real reasons? I’d like to start out just with some comparisons. And also, I’ve talked to a lot of people who have made the decision to move, including Oracle, HPE, multiple VCs, and the most important of them, Futurum Research and Daniel Newman moved from Chi Town to Austin. By the way if you’re not from Chicago, you call it Chi Town.

Daniel Newman: By the way, this could be a full on Six Five special. We might have to come back for this one.

Patrick Moorhead: I just want to throw out a few things though. So this is a very complex topic because, and it all depends on the variables that are important to you. There’s a ChiefExecutive.net and they do a survey of hundreds and thousands of CEOs. And they pick the best and the worst states for business. They picked Texas as number one, they picked California as number 50. Okay. So that’s one rating. No, by the way it’s by CEOs. CNBC puts California more in the middle. They put in a lot of social justice issues and things like that, where California scores better than Texas, but it’s typically mostly about two things. It’s about taxes and access to labor. And in there, is the whole regulation thing. So let’s do a little bit of comparison.

I mean, California’s tax rate alone goes up to 13.3% and Texas is zero. California capital gains… By the way, I lived in California. So I can tell you even leaving California was tough as I was getting harassed by their tax board three years after I moved from California to Texas, just to make sure that I actually left and that I wasn’t actually doing any work in California. Capital gains taxes are taxes ordinary income, as opposed to long term capital gains on federal. That’s another thing. California’s corporate income tax is 8.8%. My Texas franchise tax is 0.75 percent. And the list goes on and on. You’ve heard of nightmare stories of people, even in cities like San Francisco, where it takes them a year to get permits, to change the façade or the overhang that want for their restaurants.

So again, you’re right. We could do this. We could sit here and talk about this the entire show but… And I also think it’s very city-based. So Austin has gotten… their housing has gotten 40% more expensive over the last year. Now they’re going to have to build that up which I know they will because we actually have land and we encourage buildings. But then again, we don’t exactly have a huge public transportation to get people to their work. That’s why in Austin we have the sub downtowns that are forming. They’re closer to where people work, like where Apple put their corporate headquarters on the north side of town. But Daniel, is this a blip? Is this a permanent thing? What do you think is going on?

Daniel Newman: Well, I think we’ve definitely seen a migration that will be followed by some very significant companies, right? Last year we saw Oracle come to Texas. Huge company, 400,000 employees. The main sponsor of the San Francisco giant ballpark. I mean, a company that’s been as rooted in San Francisco and in the bay area, as any company in tech. We saw HPE which always had a significant presence in Texas and Houston decided to uproot the corporate headquarters and move it to Texas. Tesla had… Really, this isn’t like… It was kind of brought up as another news cycle, but we sort of knew this was happening. I mean, after Elon received the message, he up and moved within like a month, started building another, was it gigafactory, a mega factory here. He bought a city to expand his space endeavors in Texas. And he’s a pragmatic guy.

He’s in a kind class. He’s a got bigger than life personality. But the thing about Musk is he’s also, he’s a business savant and he sees the financial benefits, the talent pool, the more affordable housing and says, this is a more realistic place to grow. A company like Amazon that does more hub and spoke. Pat, you and I went to San Marcos and saw one of their major locations. And now Amazon hasn’t moved their headquarters, although I have started to see some news popping up. Actually I just read one the other day about Amazon, maybe leaving Seattle, could it be for Texas? And my point though is that cities like San Marcos though, where you have people that need affordable housing, you have thousands and thousands of… That’s achievable here. And if you want to bring talent, it’s hard.

When I was looking at moving Pat, I wanted to move to a tech hub, because that’s what we do. And when you did the comparatives of Seattle, of San Jose, of Austin, Texas, Miami, by the way, picking up steam and momentum early. If you just kind of created the pros and cons for a business in the destination, Austin’s kind of got it all. It’s got the city, it’s got the sprawl, it’s got personality, it’s got a great corporate tax structure. It’s got good personal tax structure, great university system here in Austin, Texas. And on top of it, other than the heat for maybe a month or two, the weather’s nice for people. Year round, you can be outside, even if you’re a little hot. So, Pat I think this trend will continue. I think Austin’s got more growth.

It is getting expensive. So we’re going to have to kind of keep an eye on that. And of course, here we have to keep moving. We’ve spent nine minutes now or a little more on this topic, but this is a great one, Pat. And if you and I now are calling Austin home, Elon, welcome to Austin.

Patrick Moorhead: You know how to get ahold of us Elon.

Daniel Newman: Call me baby.

Patrick Moorhead: That’s right. That’s right. Okay. Let’s jump into the next update.

Daniel Newman: You and I watch a lot of investors. Now, we’re+ always very clear here, we talk about earnings and investor days, not through the lens of us competing with equities analysts or sell and buy site, we really try to inform that audience. We try to provide technical depth, strategic vision, and then we couple it with what we call the truth serum that comes out through SCC requirements, because you can put architecture around anything and make a new launch, exciting and tell a story and get everybody really pumped up. But the numbers don’t lie. And so investor days are always interesting, because it’s kind of the confluence of those two things. It tends to be a big dose of numbers and a big dose of product and innovation strategy. I tweeted this Pat. I said, Marvell probably had one of the best investor days that I have ever seen in terms of one, I think the stock went up six bucks on the day of their investor day.

And again, they were trading in the 50s and it went into the 60s. So this wasn’t like a $400 stock that went to 406. This was a stock that made a 10% move as a result of its investor day. And so, first and foremost, the market loved what Marvel had to say. Now, you and I have been very bullish on Marvel. I’ve written articles on MarketWatch. I’ve called them a semiconductor name. I still occasionally run into people when I say Marvel that think I’m talking about the comic book company, not the case at all. But I’m going to hit some of these updates really quickly here, because Marvell is a company that kind of came out of what was a very difficult period, made a great hire in Matt Murphy, CEO, a really smart acquisition with Cavium, changed its direction from consumer to enterprise, entered all the right secular areas, getting a data center automotive 5G.

And in this investor day basically came out upping its outlook for revenue by a 5% swing from 10 to 15% now to 15 to 20%, noted that its market opportunity because of the semiconductor, boom has been so strong has increased 50% now. They see an opportunity at $30 billion. Their cloud business and their 5G and auto revenues are going to grow at twice the speed of the market. They see it as 40% per year. They raise their outlook for big hundred million dollar plus customers now to now having 19. Now it doesn’t sound like a lot, but 1900 million dollar customers is a $1.9 billion run rate. And that’s a hundred is the base. Some of them are spending more than that. And on top of that, in semiconductors, we always say, we’re not trying to get every Joe to buy their brand. They know who their customers are. They know who the people are, that they’re going to try to sell to, whether it’s data center, automotive.

And then of course their design way now look doubled as all part of this announcement path. So I mean, what a tremendous financial pathway for investors to just see the potential of this stock. So they got some upgrades right away from those analysts that do set that. Now, of course, on the technology side, I’ll kind of lean into this a bit and then I’m gonna pass it to you, so I can leave you a little something to talk about here. But one, the cloud optimized-silicon was a huge part of their story. There are no VM acquisition, all about creating this fabric and this connectivity layer to be able to address this cloud market that they’ve identified. They’re building on… We can have a little debate about the marchitecture here, but they’re continuing to build on the most advanced process nodes from TSMC, moving from what TSMC calls a five nanometer, we’ll just call it TSMC five to three.

And that’s all part of their plan. And probably the last thing that I thought was really, really awesome on the tech side was they got their first big automotive win and I’m talking at the CPU system levels. They’re jumping right in Pat and they’re going toe to toe for that full automotive system. We’ll talk more about that with Qualcomm in a few minutes, but Marvell’s not running from anyone. They’re working side by side, they’re competing, they’re winning big customers and they’re not afraid. And then of course they had a whole bunch about the company, the corporate sustainability, DEI, doing some really good stuff there, Pat, but God, have you seen an investor day that was more inspired than Matt Murphy and his team at this go around. I don’t know if I have.

Patrick Moorhead: Yeah, everybody likes a comeback story and listen, I’ve been interacting with Marvell since its existence, consumer, hard drive, controller play is what I knew them for. And in the past five years under Matt Murphy’s leadership, he has four X this, okay. 397% the past five years. And he started a little bit before that, and that speaks for itself. And like you said, we’re not securities analysts, but I personally like to tune in because it is the source of truth. It’s a one stop shop to get everything about the company strategically to see if something has changed, to see measurement against what they promised before. And yeah, they absolutely brought it. I mean, the company’s just… It’s indistinguishable from itself five years ago. And a lot of that is to deduced with some intelligent divestitures, but most importantly, some very important acquisitions.

And if you’ve never been part of an acquisition or a divestiture, don’t underestimate how hard it is to disintegrate and integrate. And so it’s not just Matt and company buying a company and then taking its revenue and moving it. These companies are growing after they’ve been acquired, whether it’s Aquantia, the latest one in five. Cavium, Avera Semi, Qlogic. The list goes on and on where consumer now is this tiny shred of peace. And really when I look at it, the only companies in its competitive sphere right now. Sure, there’s a little of Nvidia in networking and some of the AI work that they do. Potentially some AMD, if the acquisition goes through for Xilinx. But they’re very unique in that they are the really the only one stop shop for what they do in this area.

One other thing that I really want people to keep their eye on though in the future, and this is where I’ll end is, I love their take on heterogeneous compute, and as the wave of the future. And they found a way to do this level of customization for their customers and inserting their own special IP, whether it be through an ASIC or something like that. And that is the future. Multiple ways you can do that. We see how Intel does it with 3D packaging, AMD has talked about a little bit how they might do it in the future, but that is the future. So I’m really excited about them as a company.

Daniel Newman: They also by the way been kind of kicking Broadcom pretty hard. When you look at where that growth is coming from, first and foremost, it’s been oppressive across the world.

Patrick Moorhead: Yeah, it’s so funny, I always used to put Marvell and Broadcom together, but as Broadcom is shrinking in a lot of these areas and them not doing some of the same stuff that they do and Broadcom is still a consumer, why always play? I only put the two of them together, but it is fun to talk about. So let’s move to our next topic. And that is overall Qualcomm. So interesting. I don’t normally tune into General Motors investor days, but I was pretty excited to see what they talk about the future of autonomous cars. Their evaluation, Tesla is running laps around GM in terms of valuation, even though GM is the number five or four based on revenue or units on the planet and Tesla is way, way down there. Now, why is that the case?

Because investors see as the future as autonomy and the future as EV. And more important, I’ll call it the infinitely customizable car. And that’s something that people lose sight of. So they came out and introduced, GM introduced what’s called Ultra Cruise. And this is a higher positioned system than cruise, which think of cruise as L1 up to L2 plus, and think of Ultra Cruise as three and maybe four. It was hard to determine exactly how far it went into four, but these things are kind of amorphous. But the ability, I’ll quote GM on this, and this is part of the news that’s important, true hands-free driving across 95% of driving scenarios. And GM says Ultra Cruise will ultimately enable door-to-door hands free driving on all public roads in the US. Now they didn’t say no steering wheel and they didn’t say that the drivers weren’t going to be in there. So that leads manipulate a three and four.

But deep in their press release in their slide deck was this, we are using five, I’m going to use their quotes, nanometer technology, and the architecture is scalable. And I was like, okay, two companies that I think have that now, Nvidia, well, at least the scalable part, Nvidia and Qualcomm. Nvidia hasn’t talked so much about five nanometer, but there is a company, a chip company that you and I both know that has five nanometer and a scalable platform called Qualcomm Ride. And I did an analysis at CES 2020, that catalog that Qualcomm and GM were aligning for ADAS.

So, is this Qualcomm silicon? GM didn’t say it, Qualcomm didn’t say it, but I’m kind of following the bread crumbs there. And if I look at Qualcomm 10 billion automotive backlog, 1 billion annual run rate, based on the most recent quarter, 250 million in revenue, I’m kind of thinking that this is Qualcomm.

Daniel Newman: Yeah. I think you hit it on the head, Pat. This is not hard to back into. GM doesn’t want to get its investors lost in who its technology partners are. So, it instead focused on the process, the capabilities, the technology. But of course, if you’re a semiconductor company, only Intel has ever been able to somehow convince every one of its OEMs to slap its brand all over its products, which credit to Intel for that, we’ll talk more about them a little bit later, but in terms of companies like Qualcomm, I wrote a piece after IAA Mobility in Germany, kind of talking about semiconductor companies becoming the linchpin of the future of automotive.

This is a great example where looking at the underpinnings of companies as large as GM, and of course, you’re going to see the same thing with the Volkswagen Groups, huge automotive groups. Understanding whom, which tech companies they are acquiring their technology is going to give a pretty good insight into growth, and the role that semiconductor players are making. Now, I’m going to pivot the Qualcomm discussion here on that note, because Snapdragon Ride is, I’m almost certain, what’s going to drive the future of GM’s autonomous driving platform. And of course, Snapdragon Ride is an extensible platform that also connects the rest of the stack. When you think about things like infotainment, telematics, instrument cluster, it’s about the expansive tool set that can be built on compute, and that can be scaled out.

There are other architectures that are more closed for ADAS. Those are interesting as well and every OEM is going to approach this differently, but that’s the route Qualcomm is on. And speaking of Qualcomm, I just want to touch on the fact that you probably heard in automotive, they were in this battle to buy Veoneer. Originally Qualcomm had a deal to buy Ariva from Veoneer. And then what happened is a big tier one, Magna came in and made a tender for the whole company. And so all of a sudden, Qualcomm was going to lose out this prized asset arrive. Ariva is a L2 plus ADAS system that was acquired by Veoneer, and that was really what Qualcomm wanted. They’re looking for something that… they’re piecing together their ADAS through Snapdragon Ride. As it stands, they want to expedite that with some good technology that was held by this Veoneer organization.

But with the mag deal Qualcomm had to come back to the table, basically aggressively in the night on a Sunday, made a tender over a offer of Magna, got board support and essentially moving forward. But everyone knew what Qualcomm doesn’t want acquire the entire tier one, doesn’t wanna be a tier one. Qualcomm wanted that intellectual property innovation and some components of Veoneer, which was the Ariva platform. And so they came out this week, announced a deal, partnering with a company called SSW. And basically just to kind of be clear is now everyone knows the path. The path is going to be SSW is going to acquire the Veoneer in its entirety.

Qualcomm for a small some as compared to the whole deal is going to acquire Reviver. SSW, this organization, it’s not a private equity firm, but it’s going to act as a partner in essentially identifying the most important assets of the Veoneer organization and then finding homes for the rest of the company that are ideally more are strategic. In the end, Pat, my assessment is this is Qualcomm making a move to stay focused on what it was set out to do, which is expand that Ride platform, acquire this ADAS technology and not get stuck in the middle of parting out a large tier one, found a partner company to help header the deal. Of course it’s going to get its looks from a regulatory standpoint, but it seems like it was really well organized, put together and orchestrated under new CEO, Cristiano Amon’s leadership.

And as I see it, they’re going to get their man, Reviver and Qualcomm’s moving forward. And this automotive space for them is going to be really significant. You said 10 billion pipeline. You can tell the company’s really focused on it.

Patrick Moorhead: Great analysis and I’m glad you added on the Veoneer piece because it’s all part of the puzzle here. I put a lot of links from Daniel and I in the show notes to… that goes over all this. In fact, Daniel, I wrote an article that said, no, Qualcomm isn’t becoming an automotive tier one. Not the most creative headlines I put out there on Forbes, but I wanted to make that point. Let’s get into the next topic here. IBM investor day. Pretty sure this was the first investor day with Arvind leading the crowd. Daniel, what happened? What’s going on there?

Daniel Newman: Man, we have hit the investor day window. In a couple weeks, we’re going to hit earnings Palooza again. Pat, it’s just, all this truth serum. So digestible.

Patrick Moorhead: I know, I know. You’re going to have a lot to talk about on your markets show, Making Markets. For Daniel.

Daniel Newman: Making Markets. Yeah. If you haven’t checked that out, I do have another show. It’s my second favorite other than my bestie show here on Six Five. But I do get some of these CEOs to come on and talk to us just like we do here, but it’s more really diving on some of that earning stuff. All right, Pat, I only did that because you did that. I wouldn’t have done that.

Patrick Moorhead: Daniel, we got a… Every once in a while….

Daniel Newman: Your Forbes piece was tremendous, Pat?

Patrick Moorhead: Yeah, yeah, yeah. Hang on a second. Hang on a second.

Daniel Newman: All right. Looking good. Still looking good.

Patrick Moorhead: Yeah. Looking good.

Daniel Newman: All the people that are listening and don’t have the video are not going to appreciate this segment. Alright. So investor briefing 2021 came on a Monday morning. So straight out the week we were on it here. It was a long session. It was several hours. And so I want to focus in on some of my key takeaways from listening in on Arvind’s section. This is gonna be the stuff that the masses of you will get the most. If you are a big follower, every one of the business units had a chance to present and dive in. We heard from systems, and we heard from infrastructure and we heard from AI and quantum and everything else. We got some of that, but when it comes to what’s going on, the big picture here is IBM is about to complete the spinoff of Kyndryl.

And so the reason I think this investor day really made a lot of sense was the world wanted to understand despite the fact that the Kyndryl and the infrastructure management part of the business that’s being spun off is not some of what I would say were the core focus areas for IBM. Long short, I think everyone’s wondering what comes next, right? What is IBM going to focus on? What does this mean for the company? So this is really where I thought he was coming out to really provide some clarity. Arvind spent a lot of time talking about optimizing the portfolio. He wants to get the offerings more clear, make sure that it’s broken down. I’ll talk about that a little bit more when they talk about how they segment, then they’re going to report their earnings going forward.

Platform. I mean, listen, every company on the planet right now is using and understands the value of the platform and being more platform-centric. Everything within the IBM software portfolio is now an optimized to run on OpenShift. They’re focused on Cloud Native, they’re focused on microservices, architecture powered by Kubernetes. So that’s was a big part of Arvind presentation. I called it platform, platform, platform. Now you talk about original headers, that was original in my piece. The investing in consulting with, like I said, parts of the technology consulting going out with Kyndryl, Arvind’s kind of headers are we’re really about AI and hybrid cloud. Those were the two big areas that he really sees driving the company forward. So there’s going to be significant resources invested by the company and making sure that their services and consulting groups are able to help companies overcome the challenges of being meaningful, hybrid, deployment, strategies, as well as getting the best out of analytics and AI.

And he was really clear that the money is in hybrid cloud. The company knows it. The company knows the public cloud is big for IBM. Public cloud growth has not been on par with the AWSs, with the Microsoft Azures or even Oracles and Googles, but they have been able to make the public cloud and their overall hybrid cloud strategy work by focusing on being a leader in enterprise hybrid cloud. They’ve got over 3200 of their clients now leveraging their whole hybrid structure. The Red Hat acquisition was massive. It was a huge dollar figure, people kind of wondering would it work. If Red Hat deal hadn’t been done, I would be actually more concerned about the prospects for IBM than I am today. And I guess I want to just kind of make one or two mentions, specifically about post-Kyndryl, what I’m looking for.

Because I can talk about a lot of things. They’re going to [inaudible] they got to change the recording structure to break in the three buckets, essentially in the consulting software and infrastructure. I’m not going to spend a ton of time on that. I’m still a little bit confused how that all breaks down, but the software is going to be one of the hybrid lives infrastructure, it’s going to be where systems lives. The consulting is going to be where GBS lives.

Pat, IBM has probably for the past, I don’t know, how is it, 10 years now, kind of suffered from a sideways growth trajectory. Meaning they’ve gone down a little, they’ve gone up a little bit. It’s been kind of small movements in both directions. The Kyndryl move as I saw it, was all about accelerating growth. You have a company that wants to be looked at as a player in the most important secular trends, AI, cloud, 5G, automation, attached to telco, financial services, blockchain, quantum computing, and you’re growing one or 2% or going down one or 2%. I think Arvind identified that GTS, which is going to become… Kyndryl had become a bit of a boat anchor in terms of the company’s growth.

Being able to fully focus and lean in on the areas where they believe they’re aligned, which I mentioned hybrid, automation, AI. Making those the core, including with Red Hat is going to give them a much more realistic trajectory to start hitting high single digit growth, et cetera, et cetera. So with that in mind, I’ve gone a little long and thank you for letting me do that, overall strong days, some good movement from the company, but proof will be in the pudding pack. Company’s growth after Kyndryl needs to be faster than it’s been since.

Patrick Moorhead: Well, the good news is, is that first off, expectations for tech companies vary widely. You have some of the tech stalwarts and then you have kind of mega growth companies, not necessarily based on what maybe these companies are doing, quote, unquote wrong when you’re getting into single digit growth numbers, but it’s the fact that they have monster businesses and they’re getting into the higher growth markets that didn’t start those highest growth markets. Let’s say like SaaS or the public cloud. So the commitment that Arvind made was mid single digit revenue growth starting in FY 22, that set the bounds. That doesn’t mean the company’s not going to have 40, 50% growth businesses. They have that today in a hybrid cloud, but it’s just a smaller percentage as the overall and the Kyndryl’s spin, I like. Because it is a drag that is a declining business as a sector in itself.

And it’s really focused on automation as opposed to what I would call innovation. I’m sure Kyndryl and IBM would argue that, but I’m just looking at the big picture. And it’s not a criticism either. So we’re also looking at he made the cashflow statement, which is, hey, over three years, we’re going to have $35 billion in free cashflow at mid single digit revenue growth. That is the way you should be looking at us. Half the revenue is software and a third of that revenue is consulting. And I got a lot to talk about here, but I’m not, because we were going super long. But net for me was the reinforcement that the hybrid cloud is going to determine the degree of success for IBM for the next 10 years. And the linchpin in that is absolutely going to be Red Hat. That might be low value conversation, but and there’s the dogs, I love it. But that is it. And will Red Hat, can they get some of the… IBM loves to talk about the Fortune 50 and the Fortune 100.

A lot of business there, but you know what, Daniel? There’s a lot of business below the Fortune 100 that Red Hat is huge in and first, can they combat VMware in this space. Because essentially, the value propositions are very similar, but most importantly, can they combat the hybrid offerings of the native cloud players like AWS, GCP and Azure. I’m going to leave it there folks. We have a lot more to talk about it, but we must go on. In fact, let’s get into our next topic and that was Micron data center of the future. I had the pleasure of hosting the Micron data center of the future event for a press and an analyst and had a great conversation with their companies ahead of memory and compute and their head of storage.

These guys are great. Jeremy Warner, he’s the storage head and Raj Hazra, you might have remembered him from some compute jobs he’s been in, but he’s now the computer networking head for Micron. And essentially, what compute means is memory. And we have this great discussion. And I think where I was left with Daniel and I’ve this whole notion of composable memory, okay, where today, if you want more memory in the data center, you probably have to buy a new compute node. But why do we have to do that when it comes to storage? You can put a sand, you can put a NAZ, you can make a composable. And that is how the big hyperscaler players have been architect in your data center. But this whole notion of the ability to, if you want more memory, you have a rack of memory. Imagine that like having a rack of storage.

So that is the future and it’s a standard called CXL that they’re working on it. And I have personally talked to architects at the largest hyperscalers and that is the next big thing. Micron is leading the pack when it comes into that compared even to, in my opinion, compared to Samsung and what Hynix is doing out there. And certainly, Micron is doing a lot of thought leadership. I had the pleasure that same day that Mion came out with their 7,400 SSD line. And essentially it’s a full set of high-performance SSD with, let me see 1, 2, 3, 4, 5, 6, 7 different four factors that can hit the edge of the data center. High performance, mid-tier performance, highest security, good security, all of these different flavors. And I was really left thinking, it’s great that SSDs now have so much heterogeneity because quite frankly, they were just one form factor for everybody.

And what that says to me is that SSDs are becoming even more important, which gets all the way back to Daniel. A lot of what I’ve seen you talking about related to consumer behavior and this notion of I want it now, I want it fast and I want it free. And then a flip side, the SSD folks are like, okay, well, how do I do that and use less energy to protect the environment? So probably going to do a writeup on it. It was really fascinating, but I appreciated Micron having me on.

Daniel Newman: Yeah, it was great to see you there. Micron has been kind of a little bit of an unsung hero of the semiconductor space here. The company has performed very well. Storage, memory doesn’t always get the same excitement that a compute does. It just is what it is, but Micron has been extremely competitive. We’ve heard from the company that they’ve been innovative, they’re trying to knock down barriers to helping an enterprise scale data center of the future. Look, if you don’t have the memory and storage, you need all that compute? Is it relevant? You need the data to serve the applications. This stuff works harmoniously here, Pat, and Micron is very much at the center of this.

I’d say just to keep our show moving, this will be one to watch. It’s a company to keep an eye on. I would hope that when you have a link to your piece for people that want to maybe read a little bit more in depth here, you’ll drop it out there for everybody. But yeah, great day for Micron great event. And the host was pretty good as well. I’d give him a seven.

Patrick Moorhead: Yeah, I appreciate that, even though I have to wear a code. I didn’t have to wear a coat, but when you see people show up with coats, you kind of got to put the coat on. But no, it’s good in it. I’d love to have Micron around The Six Five Summit as well to talk to them. I’ve never seen more action on memory side and Daniel, I kind of did my career as 10, 10, 10. I guess, 10, 11, 10, but on the systems providers and then the chip part, and then the analyst thing. And I even see Intel and Andy talking about memory more and more.

So, Hey, let’s move forward. This next one is kind of the dessert of the show. And this has been a lot of fun. I mean as you know, Intel pretty much today public abandonment of Intel out there, to focus on their own M1 Silicon. And it’s been nice to see what I consider a truth-telling that Intel has been doing. And Intel came out with their second generation of their positioning work which we’re calling Intel dispelling the Apple spell.

Daniel Newman: Yeah. And by the way, I’m still hung up on you wearing a coat. I don’t know about all that, but I actually have to speak at a conference on Monday and I’m going to… I don’t know what I’m going to do.

Patrick Moorhead: Daniel, who are you speaking with again?

Daniel Newman: Yeah, it’s pretty cool. So thanks for letting me plug that Pat, but I’m speaking at the channel companies. If you maybe know Sierra and they’re best of breed conference talking about the shortage and what caused the semiconductor shortage, what’s being done, and I’m going to be speaking alongside us. IBM CEO, Arvind Krishna, Cisco CEO Chuck Robbins, HPE CEO, Antonio Neri. I go first, I go first. So, I’m the warmup act, but I’m very excited to be there. It’s going to be a lot of fun, even if it does mean traveling on a Sunday,

Patrick Moorhead: I don’t know Daniel. I’ve been to a lot of concerts when I was younger and sometimes the opening act is the preferred act. So I’m expecting you to bring it.

Daniel Newman: Mine will be a little fun, Pat. It’ll be a lot of story. We’ve told a few times about how we got into this mess. And sometimes I think about the world that everybody knows that what’s going on with chips, but then I realized that we know this so well because we live this every single day. Speaking of chips, all right. The final topic, the final topic. Okay. So Intel, Pat… A lot of people probably saw the Justin Long campaign loved that campaign received a little criticism for how much I love that campaign because, well, it doesn’t really matter how good someone does a compete campaign with Apple. There’s always going to be people that are just going to tell you it’s stupid because Apple people are just… They’re actually out right now trying to go buy an Apple car.

Anyway, but Intel being more realistic is looking at that broader market and the opportunity and saying, can we do some things that are really innovative that Apple still doesn’t do. Now, full disclaimer, you and I are both super critics of M1. We thought it would take a long time. Apple did a little better than I thought in terms of getting M1 optimized, but Intel still doing so many innovative things. And their OEMs are able to really pivot off that, whether that’s dual screen, whether that’s your flexible notebooks, detachables, touch. I mean, my God Apple, get it, gather, put a touch screen on your Mac. I know why you don’t do it, because you don’t want to stop selling iPads, but for crying out loud. So anyways, this was like a real people campaign. They were paid, but they had full option to opt in or opt out.

And essentially, this was done as kind of a in a marketing traditional way where people were brought into a room, they were shown something, with an unbranded standpoint and they were asked how excited they would be about it. They thought they were seeing features that were going to come out in a new Apple, turns out what they were really being shown as features that have been available in some cases for some time on Intel devices. And a lot of them just being blown away. I thought it was pretty clever. I thought it was something that I think just needs to keep being hammered home. I think Apple fans will think it’s dumb. They will always think it’s dumb. So Intel cannot make a decision on how it markets based on how Apple fans are going to operate. If I’m being critical in any way or that campaign.

Some of the features I think were hard to believe that not everybody already knew, but this also Pat is where I say I’m in a vacuum of being a guy that has 40 laptops in my office that gets to play with tons of technology all the time. And sometimes I forget that even people who are prosumers that really know tech may not be as connected to it as we are. But Pat, you know what? Look, Intel has been a company that has had the benefit for a very long time of having very significant market share. At times that has kept them somewhat humble. Maybe not being aggressive enough when companies like AMD and Apple have made moves that have been somewhat difficult on the company’s longer-term prospects. I like seeing Intel coming out with a little humor, a little aggressive posture. Like I said, I love the Justin Long stuff, because it was playful, it was fun. Yes, it picked an Apple, but why not? It’s not a common.

It wasn’t ill or nefarious. It was just fun. And so this one was a little more technical. It was hitting the spots that Intel knows it’s got strength and its platform and its wide variety of products. But having said that, like I said it’s going to be met with mixed reviews. It was met with mixed reviews. The real question for Intel, will they sell more client PC chips because of this campaign? That’s what it’s all about. We won’t know for a few months, but the Apple spell, at least for a few people, may have been dispelled. And as we keep seeing it, people will realize, the best innovation, really isn’t being done at Apple.

Patrick Moorhead: Certainly not in MacBook, so and I would even pose at the iPhone, watch scalar.

Daniel Newman: Well, I get in trouble for saying that, by the way. The best innovations, I mean, knowing an Apple. So we not parsed that out and quote it?

Patrick Moorhead: I don’t know. I mean, you and I showed up on some people’s hit lists on our coverage on the M1. We even had a.

Daniel Newman: I got the, yeah, the Apple lope or what was his name? Yeah.

Patrick Moorhead: Yeah, no, it was great. Listen, I’m going to jump right in and I saw some of the criticisms. But you know it’s funny, Daniel is old, there’s only a few things good about being an OG. And that’s, you’ve seen things behind and you would like to think that it may be gives you a little bit of perspective as well. And being in the industry over 30 years, I’ve seen things like this go back and forth so many times. There were some people said, hey, I’m going to read this. All of it looks staged and you will ask yourself why you’re even watching it. So if you haven’t done a primary research group, you need to shut the up. I’ve done probably 200 behind the glass research projects. And this is exactly what they look like. Now, if Apple lovers went in expecting that it was Apple, there might be a little bit, hey, I’m going to say that I love this stuff because I love Apple.

And I think this is Apple. I forget the name of the guy who was proctoring this, was it ship or Nick, but definitely looked like some of the people that I’ve met at Apple. So it was actually really good. So there is a little bit of that. And there is the disconnect between what people say they’re going to do in a primary research session versus what they actually do. But all this stuff is completely missing the point. And then another person said, it’s so insulting Apple fans, isn’t exactly a bright move. So let me address the two of these very quickly. Listen, we’re way over. We’re just riffing right now. It’s Saturday morning. But first of all, Intel is not targeting to educate the unmovable Apple fans, probably like my wife, which is like, she’s got her MacBook.

She knows how to use it. She’s comfortable with it. And she’s going to get, just keep buying it and buying it, buying it because she doesn’t have to relearn something. And she likes how it integrates with her iPhone. That’s it. She’s never going to move, but she’s not the target. What Intel is doing is they’re targeting people who are on the fence, okay? The on the fence voters. And the other thing they’re doing is they are communicating to their ecosystem, software and hardware partners. That we’re very proud of what we do. And we think we do a good job at it and look at this. So missing the point, they’re not targeting Apple people, completely missing the point. And you know what? If you haven’t sat in a research study at 10:00 PM, eating M&M’S questioning people, you don’t have any idea what you’re talking about.

With that said, the fact is that Windows PCs and the ecosystem has a much higher level of innovation that Apple has brought to the table since they brought the original MacBook Air. There’s just nothing there. Why? Because the resources were not because Apple is not smart. They are. It’s because the resources were put on iPhone, watch and iPad. That was the priority. And number four, maybe number five was MacBooks.

Daniel Newman: And now services. Yeah. And they’ve crank this up. I’m wondering maybe autos in there somewhere. But quite frankly, it just never was a priority. And if you remember, I call this the Tim Cook apology tour, where Tim Cook went out and said, no, no, no, no. PC’s are actually important to us. Just wait, but I do give Apple credit for the M1. It is a high performance, low power on the leading edge of manufacturer. It doesn’t run many games at all that gamers want to play. It’s not fully compatible yet with some professional audio and video peripherals. And that’s one of the biggest reasons that they’re keeping Intel around. And also for the corporate users who have a nine month to a year process of testing. And when that security software doesn’t work with the M1 processor, it becomes an issue. Okay. So give Apple credit for innovation, where it’s due on the M1. But when it comes to the MacBook as a platform, not even close.

I’ve got nothing. I’ve got nothing, man. I know, but that you hit it home, some good silicon valley innovation path, but not necessarily in terms of that whole user experience, certainly not at the enterprise level. Like you said, we’re just kind of riffing at this point, but I give Intel credit. Like I said, they stood back for a long time and let everybody kind of throw spears at them. And to some extent, they’re standing strong, still a very significant market share, great partnerships and OEMs. If they want to take a little poke at Apple very now and again, I think they deserve that.

Patrick Moorhead: Yeah. It’s exciting stuff. Pat Gelsinger recently came out and said, quote, unquote, “AMD’s lead is over after all their lake and Sapphire rapids. And it’s like, wow. And I can tell you that Intel or Microsoft is not going to take even the M1 standing down. And let’s put that in perspective. Apple has 8% market share. Now most of that’s in the premium market a thousand bucks, so it’s very profitable. But kind of put in perspective, 8% market share as opposed to iPhone global market share at around 25%. And USI phone market church, 50%.

So there’s a big difference there. Daniel, I told you I was hopped up for this show and we just let it rip. Everybody who hung in there, thank you so much. We appreciate you. And we also love feedback. Tell us what we’re doing right. You can send those to me. Send the stuff that you can’t stand to a Daniel @Danielnewmanuv. We love you. We care about you and really appreciate you hanging in there. So with that, Daniel, I am taking us out of here. Have a great weekend, everybody.

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