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:
- Zoom acquires Five9
- GlobalFoundries Rebrands at the Right Time
- Intel Earnings Report
- Recent Earnings from IBM
- Announcements from the Amazon Alexa Live 2021 Event
- Honeywell Reaches Three Important Quantum Milestones
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.
Daniel Newman: Hey everybody. Welcome to the Six Five podcast. I’m your host today, Daniel Newman, joined by my always esteemed and superstar co-host Mr. Patrick Moorhead of Moor Insights and Strategy. Excited to be doing my first broadcast in the driver’s seat from sunny, beautiful Austin, Texas, I now call home. I can’t believe it, I’m a Texan. Time to get some shitkickers and a 10-gallon hat, buddy. It is my time. By the way, I just put an advisory on this podcast. I did it in the first 37 seconds, so go me. Mr. Moorhead, big week in tech. We’ve got acquisitions, we’ve got earnings, we’ve got new construction, new buildings and new breakthroughs, and we are going to talk about all of them here. But first and foremost, how are you, my friend?
Patrick Moorhead: I’m doing great. I’m a lot better than you’re now in Texas. By the way, Texas, our cities have different personalities, and I think the shitkickers and 10-gallon hats are probably better for Dallas and maybe San Antonio. But you won’t get kicked out of any restaurant in Austin. We try to be this high-tech music, blah, blah, blah type of city. But anyways, I’d love to see you in a hat.
Daniel Newman: You know what? This head was made for wearing a hat, and that’s just unfortunately going to be my future. But yeah, you’re right. Spending a little time downtown this week, I would say a pair of flip-flops, Patagonia and shorts or pants that show all of my ankles fits in, in this Silicon-Valley-esque environment that we live. Although I will say the techs climate is much better, but that’s a debate for another time and another day. We will talk about that more in the future.
So for everybody out there, if this is your first time checking out the show, the Six Five is all about deep analysis, a little bit of news, just enough to give you the context, but in the show, we’ll cover six topics, approximately five minutes each, we are very unsuccessful in managing that, but no one is taking points against us when we go long. And when we do go long, it’s usually because the analysis is good. Now, quick disclaimer, we know this show is for information and entertainment purposes only, so while we will be talking about publicly traded companies and earnings of these companies, please do not take anything that Mr. Moorhead or myself says as financial advice. Ready to rock and roll, Pat?
Patrick Moorhead: Let’s dive in here. We have some incredible topics as you can see here, but let’s dive in. Topic number one, Zoom is acquiring Five9, just when you thought Zoom was going to be building everything in-house, they go off and do a pretty big acquisition.
Daniel Newman: Yeah. Pat, I’m going to go ahead and introduce that one again because I’m the host in the show. I’m just kidding, but-
Patrick Moorhead: Oh, that’s right.
Daniel Newman: You are on fire, man. You know what I love about you is I know if I was on stage holding the microphone and your favorite song came on, you would take the mic right out of my hand and you would just rock and roll. All is good, brother. Like I said, as long as we get what we need to say out there, it doesn’t really matter who’s driving. I’ll ride or drive what do they say? Anytime. All right. So yeah, over the weekend, Pat, Sunday night, I was just settling in to my hotel room because I’m living out of a suitcase while I figure out my situation for the next few weeks. But that didn’t stop me from getting the news.
Breaking news came across both of our desks that Zoom had struck a deal to buy cloud software provider and cloud contact center leader Five9 in a transaction that was valued at almost $15 billion. Big deal, Pat. Well, first and foremost, I just want to call out in a Business Insider exposé that went out several weeks ago, looking at companies Zoom might acquire, I believe both of us, ironically, without any coordination, put Five9 out there into the ether as a company that Zoom could possibly acquire. And guess what? I love it when there’s documentation of us getting it right.
But let’s talk about why this is happening. First of all, Zoom over the pandemic had an exponential growth, 300-plus percent growth and multiple quarters its stock price went through the roof, but a lot of I’m starting to wonder what is next for Zoom? It is a video platform for communication. Companies use it for point-to-point and small group meetings very successfully. What else? Over the past several months you’ve seen webinars become a bigger part of the company. You’ve also seen digital events become part of the company’s platform and it’s something they’re going to be putting more and more energy into as we go more hybrid.
But still, not enough. Lots of video platforms out there. And if you’ve listened to CEOs like Satya Nadella and Mark Benioff talk about their future, well their future is focused on this operating system for business. It’s a full vertical integration stack and horizontal. It’s taking cloud to core to collaboration and all the way across verticals, integrations into ERP CRMs, and of course the collab platform acts as the center of the knowledge worker, and in some cases, frontline worker’s existence. Well, Zoom didn’t have that. Doesn’t have those features. It has a chat, but it hasn’t been pervasively picked up in any enterprise. It really has been a point-to-point solution. Well Five9 breaks that free and Eric Yuan CEO has talked a lot about the platform, a lot about making the platform more extensible.
Contact center is very logical. It actually puts Five9 on a plane to have a fairly consistent product subset as Cisco in the WebEx platform. You’ve got a chat, you’ve got video, you’ve got messaging, you’ve got now contact center. Now, Cisco is more comprehensive, made more acquisitions, there’s a little bit more width, but both of these two companies in the collaboration space right now do not have that full productivity integration and CRM integration that is what Salesforce and Microsoft are going for.
So I’m going to just say one more thing. I’m going to pass the baton so you can have at least a little oxygen left, because I’m sure there’s a lot of different things here to cover. The deal size represents, I believe, I looked at it, it was aggressive, it was 34 times revenue and revenue is growing about 30 something percent. This is the same size deal as the tap below deal that Salesforce, a lot of people thought it was very large. In my mind, it’s something that seems clearly saw synergistic, clearly saw the 435 million in revenue that was created last year by Rowan Trollope and the team as a great opportunity to extend the platform and really show their intent to be more than just a video company.
Patrick Moorhead: Yeah. Good analysis, Daniel. Whether it’s Cisco, whether it’s 8X8, whether it’s Mitel, Genesys, combining probably call it personal communications, employee communications and call center communications is the thing to do now. Not only is the backend technology very similar, but because of remote work, the requirement to better manage and understand how your employees are interacting is becoming a lot more important. And if I can apply AI or ML to what my employees are discussing or chatting about or talking about that same type of ML and apply it to customers, to understand when they’re getting aggravated or maybe they’re looking for something and pull up information, this is the future of this industry.
I mentioned this when I mistakenly turned into the host, but I was surprised that they didn’t build it on their own because the company is a very do-it-yourself, and I think they took advantage of their massive valuation increase from pre-COVID to where it is right now. Sure, it has lowered a little bit since the peak, but they did the right funding and this is the right thing to do because they could do it.
Daniel Newman: Yeah. Definitely speeding up growth, Pat, and I think a lot of integration getting tied closer to that data, that customer experience. Overall, I like it. All right. Keep moving, Pat. Interesting news broke last week. It was all about Intel potentially buying GlobalFoundries. This week though, GlobalFoundries, actually on its own without any reference to what’s going on at Intel, made some big announcements about some expansion of its fabs and did a big rebranding.
Patrick Moorhead: Yeah. If you’re not familiar with GlobalFoundries, you should be because they are a force in the foundry marketplace for semi-conductors and they do it in the area that Intel doesn’t do it in, namely, they do it for 5G RF, IOT automotive, and focus on silicon photonics. The reason that those are the focus areas is because those require special types of technologies that go into it, different types of materials that go into it, as opposed to bleeding-edge geometry improvements that gets you to the lowest nanometer node like three, five or seven. And unbeknownst to most people, our biggest issue with being able to ship more products out the door isn’t leading edge, it’s more lagging edge. It’s USB controllers, it’s security chips that go into devices. It’s chips that go into displays as we’ve moved from desktop to going more mobile.
So with that basis here, GlobalFoundries, who is planning on going IPO in the next 18 months, there was a rumor about Intel buying them. I totally get it for Intel. Regulatory-wise, it would never happen. It would just never happen. But what they did announce is they made three announcements, and this was broadcasting from their Malta establishment in New York. Good old Chuck Schumer was there to lend support, but announcement number one was they were going to expand the current Malta facility by $1 billion of investment. Essentially, it’s putting equipment in there. They already have a shell there in Fab 8. This is dumping equipment in.
The second announcement was a brand new fab, and they didn’t give the number of wafers, they didn’t give the investment because quite frankly, they’re still getting the investment, and it totally makes sense. But what they did talk about is that it would provide, let me see, 1,000 new jobs, and I did think that that was a pretty cool. If I back into that, please don’t hold me into that, I think we’re looking probably at a four to $5 billion brand new fab, very similar to what they ponied up for in Singapore. So that was announcement number two, it is a huge one. They had the secretary of commerce there on hand as well.
The final was a brand revamp, not a complete thing, but if you remember, GlobalFoundries was all cap, it’s like, “GLOBALFOUNDRIES,” like it’s screaming at you. The new one is a big G, Global, big F Foundries, and some iconography that looks suspiciously like a wafer behind it with maybe a G or an F. My expectation is that ultimately, they’re going to get rid of GlobalFoundries and just go with GF. That’s where I think that this has headed. Net net, I think it’s going to go to GF ultimately, and we can get on with… A lot of people asked me, “Why didn’t they just change the complete name? I hate the word global.” Well, you know what? Global foundry is more important now than ever. See, GlobalFoundries can be happy with the West and they can be happy, or they can be friends with China because they have the most diversified foundry establishments across the world, Singapore, Germany, United States, and even more. Okay, there we’re at.
Daniel Newman: That wasn’t boring. That is the by-product of sleeping about four hours a night for the last eight days while I’ve been in the process of relocating my entire life and still podding, because I never want to miss the opportunity to talk to our great community. So bear with me folks. Look, I’m not going to add much there because Pat, you had a lot to say, we talked extensively about GlobalFoundries when we talked about the Intel deal. You’re right. Probably not much of a possibility, although I could see how Intel would love to see that deal happen so that they can then put pressure on regulators to not allow a different deal that’s going on out there to happen concurrently.
Now, last thought on GlobalFoundries as a whole is Intel had some remarks about the chip shortage being its most acute here in the second half of 2021 as part of its earnings today. To me, that just means there’s a multi-year opportunity on the lagging and leading edge to create and to fulfill those gaps in production in the marketplace and GlobalFoundries is very well positioned. That’s probably another reason why an IPO would be very friendly because of all of the attention right now that the market is getting for a cause that can actually produce volumes of chips to fill all of the supply chain woes.
Speaking of Intel, let’s roar forward here. We have Intel Q2 earnings on the rise here. A big day for Intel. The company came in well above its guidance, $18.5 billion against a guidance number that came in, Pat, I believe it was like 17.8. Now again, all the numbers I’m giving you are non-gap, so don’t call me out by using gap numbers and telling me I’m wrong. I do not appreciate that.
The company as a whole, Pat, there’s a lot of areas to cover here, let’s just say some very strong beats across it’s BUs, some not so great numbers across its BUs. Client Computing did very well, IoT did very well, Mobileye did fantastic, record breaking. The PC platform within Client did extraordinarily well, another record-breaking quarter, 33% growth. I think it was over a million units being shipped a day, albeit it at a lower ASP. Pat, I’ll let you talk about that here in a little bit. Network had a beat down this quarter, which will probably bring some question marks around 5G because we’d expect with 5G being deployed globally, that the network solutions groups should be doing very well. Although those kinds of businesses can be lumpy and China has been very aggressive in those deals. So that’s going to be something to watch as well.
Pat, I think the demise of Intel has been greatly overstated. I got some really interesting tweets when I put out my commentary about just how good this quarter was. Of course, there’s the naysayers, but there’s also the Intel backers. The M1 was supposed to erode Intel’s business, and Intel PC business is absolutely roaring. DCG, a lot of folks that are going to scrutinize something in the business probably will pick DCG to scrutinize. I just happened to point this out last year, same quarter, Intel had an incredible blow-out result. Actually the first two quarters of last year.
So the fact that they were only about 9% off, the pace actually indicates a pretty good quarter for DCG, Pat, because all in all, last year’s numbers were tremendous and now their guidance is going to show a strength in the next two quarters. Well, that was because the final two quarters of last year were not very good. So next two quarters, they’re going to come in with great numbers and everybody is going to be cheering, and you’re going to have to realize it’s a lumpy business. It’s not flat. There are some big volumes. You’ve got buyers.
But the company did point out, its next generation of Xeon has done extremely well. It’s getting wins from all the big cloud players, or most of them. Alibaba, Baidu, Microsoft, Oracle, all using Intel’s third-generation Xeon Scalable. But the one thing I will say, Pat, and then you don’t want to turn it back to you because again, I just want to make sure you have a chance to say something on these topics, buddy, is that the company overall is in a good position. It’s got a lot of headwinds.
I mentioned coming into this particular segment that the company has said more or less that the chip shortage is not over. It’s not even close to over. We’d heard some CEOs earlier in the year saying, “Later this year.” Now we’re hearing it could be one or two years into the future before. That’s not entirely because of a supply issue either. There’s a big demand issue. There’s a big lagging issue, which is what we’ve been talking about with global foundry, because none of these systems are just based on these leading-edge nodes that are coming out from the companies.
I think Intel has some chasing to do in areas like AI and graphics, and I’m interested in hearing how that continues to evolve. But listen, Pat, 10 quarters, 10 quarters in a row, Intel has beaten on the top and beaten on the bottom. Bob Swan didn’t get any love, Pat Gelsinger getting a little more love, but still not getting much love. This is the beginning of a very good trend under Pat Gelsinger. Execution’s key, I remain and I continue to believe it’s key, but there’s an opportunity with a long lag in the supply chain, Intel, if they can execute on some of this manufacturing madness and the opportunities that are out there, could be in really good shape coming out of the supply chain woes.
Patrick Moorhead: That was good stuff. So here’s the thing. I can pick apart every division and go in and do that. But on the whole, they had a great Q2. They beat on revenue by 700 million compared to their guide. Gross margin was up two basis points. EPS was up 23% over guide and they increased their forecast. But one thing that is biting them right now is margins.
The reason why I’m not concerned about the margins in the second half, given even the increase in revenue, first of all, you got some supply chain challenges out there, and like you indicated it’s downstream stuff. It’s USB controllers, it’s circuitry for flat-panel displays. But also, this very important, DCG took the burden of the 10 nanometers startup costs, and what’s happening right now in the gross margin is this seven nanometers startup in addition to supply chain and a lot more 10 nanometers is dragging things down, and I think there are some competitive things going on as well out there given AMD. ASPs are down in the client group, even though the revenue was up significantly and we’re in a supply constrained environment because Intel is really attacking the lower ASP product lines with Chromebooks and Core i3 and stuff like that with their 10-nanometer silicon. So it requires a little bit of analysis. I think we could see a reversal tomorrow morning. But listen, I’m not an equities expert, I’m an industry analyst, but I am not concerned about Intel.
Daniel Newman: Yeah. Not much to be concerned about, my friend. Not much to be concerned about. All right. Maybe a few things, but we’ll keep talking about those things. That’s the beauty, there’s always challenge, always innovation, always competition and Pat, that’s what we do here on the Six Five. We talk about these things. Let’s kick it over to another company that earnings had a big one. Biggest earnings growth, I believe it was in three years, Pat. IBM.
Patrick Moorhead: Yeah. So that was really the headline. Now, was it overall big 25% FANG or something like that? No, it wasn’t. But you have to start there before you can get in a rocket ship. I’m going to hit some of the highlights that I thought were important to hit. The first was CNCS cloud, 25% percent improvement. I think that’s probably one of the better comparisons to let’s say an AWS Cloud or a Google Cloud or an Azure Cloud. There was GBS Cloud that was 30%. Essentially, what that is, is all professional services that go around that.
Systems IBM Z. Z 15 versus Z 14, 100% increase, albeit overall systems was down, which I attribute primarily to the state of the roadmap.
You’ve got new platforms that are in the pipeline. Free cashflow, $11 billion on an LTM basis. But finally, the big nut was Red Hat. Red Hat had 20% growth year over year. They said open shift revenue was up 3X from before the revenue and have 3,200 IBM clients on a hybrid cloud platform up 4X since acquisition closed with a $5.2 billion backlog. So net net, it’s hard to say. It would be hard for anybody to come up and say that Red Hat isn’t working out for them so far. Do I want double-digit growth top line for the entire company? Yeah, I do. But that’s just not the company that IBM is. So you’ve got to look at to me, what are the growth areas in the marketplace and how is IBM performing in those? It’s AI and it’s cloud, and IBM is doing respectable double-digit growth in cloud. AI, not so much, but I think we’re going to have to see what IBM does with AI in the future.
Daniel Newman: Yeah. A lot to unpack here. It was a good quarter for IBM. Here’s the thing, they’re on the precipice of a very big divestiture of the global technology service business, also known as Kyndryl, which has been proverbially speaking, a boat anchor on the company, has not been showing much growth, it’s heavy, it’s cost-intensive. It’s an important part of the business, but it’s been a business that doesn’t really mesh very effectively with the growth areas that are Arvind Krishna and the leadership team at IBM are focused on. They’re all in on hybrid cloud.
Hybrid cloud. That’s important to point out the difference there, because if you look at public cloud growth, if you look at the battles between AWS, Google, Microsoft, and Azure, and even Oracle, IBM is not really coming out saying, “We want to be the public cloud company,” but they’re building solutions with Red Hat, with satellites, they’re very focused on being able to win and participate in ecosystems that may have AWS, that may have Azure or Google or any of these others. The results though, I believe this quarter are going to be looked at as positive, but I think the race really starts for Arvind and team when that divestiture is complete.
As you suggested, Pat, in the areas like cloud and cognitive services, when you actually break in the service in cloud and growth, and you’re seeing 29% growth, or you’re seeing 35% in global business services, this is the potential of the company. This is the potential of growth if you focus on the areas where they have the right products, the right mix, and have been putting the acute attention over the past few years. That’s where the attention has been spent. That is where growth is coming. Of course, down the pipe, you’ve got things like IBM Quantum, which you can count on being an important long-term growth engine for the company.
As you said, I think AI, IBM was so early with bots in. I feel like it might’ve been a little bit of a missed opportunity for a more rapid growth trajectory for the company, but it has built a really strong reputation in that space, and I do hope there’s a way that the company can revive and grow that. My last ask is that I do hope the company can continue to provide greater and greater transparency, taking out any ambiguity in the cloud numbers because when you come out and you say you’re a cloud company, you want your cloud growth to always be double digit, and when you bolt it up into that big cloud number, it wasn’t 10% plus and the whole company’s not growing 10%, I can live with that. But if cloud isn’t growing 10%, I’m going to struggle with it and I guarantee you, the folks on Wall Street and the investors, and retail, and funds are going to say, “Whoa, why are they not growing faster in cloud?” So that’s something to watch.
All right, buddy, we’ve got to keep moving along on this show. Another big one, Amazon Alexa Live 2021, and this time it turned its attention to the developer. So they do two iterations of it. They have the Alexa Live, where they launch all the gizmos and gadgets, things that fly around your house and take videos and listen and provide AI and multi-term conversations. This one though was all about skills, future of work, building that platform for developers to get paid for all of the intelligent things they’re building to be done on these millions and millions of Alexas around the world. Pat?
Patrick Moorhead: I appreciate you punting that over to me. Yeah. Listen, here’s the funny part. You don’t hear as much about Alexa as let’s say, you did a year and a half or two years ago when it was first out. Do you know why that is? That’s because people are actually using it. It’s become the fabric of what we do. I know the word fabric sounds like a marketing word, and it kind of is, but it is in our life. And whether it’s even asking the time or, “What’s my calendar,” or, “Set an alert,” everybody is using it for that.
But what I was really surprised about was how many skills are being used out there and how many interactions that are out there, and it’s crazy. It’s absolutely skyrocketing. Amazon strategically described it as what they’re going at. They want to make Alexa ambient. Listen, I’ve been talking about ambient computing for 20 years. We see it in science fiction all the way, Space Odyssey, where HAL, I know that’s probably a bad example, but it’s a negative example of where you can essentially ask HAL anything and it does it. And hopefully, it doesn’t lock you out of the spacecraft. But with that said, what Amazon did is they added about 27 new features to developers to make Alexa more ubiquitous, make Alexa more multimodal and make Alexa just smarter.
Quite frankly, you could read my Forbes article where I go into feature by feature, but I don’t think that’s most valuable here. I think what’s most valuable strategically is them looking at this as a ubiquitous service, which strategically is 100% the right way to go, and also that usage of Alexa is skyrocketing along with the partner opportunities. One of the things that’s crazy is this B2B opportunity that they have which is crazy, and there were hotels, there were banks that are able to… It’s almost a physical embodiment of chatbots. It’s a device that can do things for customers, whether that’s, “Get me a reservation,” or I’ve seen one of these in one of my hotel rooms where actually, you can ask it, “Hey, can you please send me a toothbrush?” Or, “Can you please turn off the lights inside of the room?” That really is the future of where this is headed.
Daniel Newman: Yeah. That’s some great analysis, Pat. I had some time to tune in between unpacking boxes. I always loved the gizmo gadget show. The developer stuff is super interesting because it’s really what brings everything to life. A lot of people hear about developer platforms for iOS. You hear about developed platforms for Android. Well, all of this headless commerce and all these applications that are going to allow us to do more with these Alexas that we’ve deployed. And again, oftentimes you have one phone, you might have eight Alexas, 10 Alexas, depending on the size of your home, your house, your office, and this thing has been very successful. Tens of millions are being deployed right now. I think is on a yearly, I think there’s like 165 million of them out there. I’m going to have to double check that number, so don’t hold me accountable to it. But it is quite a few.
I boil this down to three things of the 50 plus various announcements. One, it was all about improving customer and user experience. Customer and user experience, many features were designed to just make the experience of using Alexa better. Two, drive growth with easier customer acquisition, retention, and monetization. So you got to make this lucrative and attractive to the developer community. You want developers to come play in the sandbox, they have to have a reward. Things like paid skills, which were added and shopping actions give developers more opportunities to monetize what they’re building. Then finally, simplified development. We hear all about things like low code, no code. We need to make it easier so that developers can build faster, give them more plug and play, give them resources, design guides, entities, and even AB testing that can be done right in the platform. All these things were there. So overall, like I said, a great event, I am looking forward to seeing the next group of gadgets, but all good stuff here.
All right, let’s go to the final. We talked about IBM Quantum. Let’s talk about Honeywell Quantum. Pat, this is something we talk about quite a bit on show, making quantum cool again, making quantum cool, and making Honeywell cool. Honeywell’s a really interesting company. We’ve talked a lot about the fact that more and more becoming a tech company. At our Six Five Summit, we had the CEO, Darius Adamczyk join us. We also had Tony Uttley, CEO of Honeywell Quantum join us, and made a special guest, Ilyas Khan of Cambridge Quantum Computing, which ended up announcing right around the time of our summit… Yeah, maybe it was because of our summit, but they happened to announce a new joint venture, 55% owned by Honeywell that would be Honeywell, Quantum Systems and CQC together. Well, this announcement included three breakthroughs that for the first time, the two companies were going to co-announce. So despite the fact that this deal has not completely been announced and formalized yet, that’ll happen later in the year, this announcement did put some breakthroughs of the companies on the map.
So let’s talk about what they are. The first, Pat, remember when we were talking in quantum volumes of under 50, when we first started talking to Honeywell? It was just a few cubits. Well, they were able to achieve quantum volume of 1024, doubling its record from only a quarter ago. So you see how much faster this is getting. And with ion trapping, as we know, these things tend to have more longevity because of the way these cubits are managed in the ion-trapping platform versus superconducting, which has its own value. But in this particular case, this was a big breakthrough. They’ve moved very quickly in just a couple of years.
The second was something called real-time error correction. Well, the state of the cubit has to remain in a consistent state so that they can actually handle solving the problems that you’re applying the quantum computer to solve. Well, if the errors aren’t corrected in real time, the outcomes will not be good. So the ability for this system to actually correct itself in real time is a big breakthrough, and it’s something that Honeywell has been talking about for a long time, but has been now able to demonstrate.
Then the third was an announcement from CQC. CQC, really if you don’t understand, Honeywell builds the physical, the hardware of the machines, CQC has always been a partner, they build the software. So you think about, as we move things from hardware to software, we moved to software to fine, we moved towards containers and we moved to the DPUs, all the things we talk about regularly on these shows, this is kind of the same thing. We’re starting to apply software, whether that’s simulation, whether that’s putting a simulation into Azure or using Amazon Bracket to do quantum simulation from a computer using an interface, it’s the software that’s going to bring this stuff to life. Well, CQC has been working on an algorithm that’s going to enable these quantum machines to be more efficient, effectively doing bigger and larger and more complex calculations using fewer cubits. So it announced that it’s been able to achieve this, it’s got this new algorithm and this is going to be really important for quantum going forward.
I’ll leave this thought here. The future of quantum isn’t really so much just about these machines and their ability to maintain an error-free or low-error state. These machines are something else. They’re very wild. If you ever see one, you’ll know what I mean. You check the picture of the blog posts that Pat and I put up about these, it doesn’t look like a computer in any way that you think, but it’s really going to be a marriage between classical computing and quantum computing, and it’s going to be software that you and I and everyone else on the planet can manipulate the way we do our CRM, our ERP, our productivity, our collaboration, our web experiences and our apps, that are going to use the power of the quantum computing to solve problems that our classical computers either can’t solve quickly or can’t solve at all. That’s when it gets done. Don’t underestimate the value of software when you’re talking about the future of quantum.
Patrick Moorhead: Wow. Daniel, you just sound like a quantum computing expert or something.
Daniel Newman: Thanks, buddy. I practiced that all night.
Patrick Moorhead: I know. I think we’re going to have to get a propeller for you. I liked this trifecta of announcements because it hit on nearly everything that’s important. So quantum volume, which is raw performance with good cubits, the error correction that is required over time because you don’t have perfect cubits that last the whole time, and an algorithm which increases efficiency. So I like the trifecta. Even though the deal’s not closed yet, the JV, the new company doesn’t even have a new name. But we have CQC and Honeywell working together on announcements.
Now, they were always working together before, but now it’s going to be more like a marriage as opposed to dating. So I like the way it was rolled out. It hit the three elements that make the quantum world go around. I don’t know about you, Daniel, but I am honored to be part of this as we go in the future because if you look at the different eras of computing, you and I were not around when mainframes first came out, but they’re still here. We were here for client server and then cloud computing and mobility, but this is different. This is going to reset everything, I’m convinced, even though it is the third or fourth try for quantum computers. It took AI and machine learning three or four rotations to be real as well.
Daniel Newman: Yeah, absolutely. I still remember, not that long ago, meeting a person who got a PhD in artificial intelligence in the 1980s. So for all the people out there that think that it’s a brand new thing and it’s something of the 2010s and ’20s, it is not, nor is quantum. Sometimes it isn’t about being first, it’s about getting it right. And sometimes it is about being first, and that’s why we’re here to tell you when it’s about being first and when it’s about being right. Anyway, that’s it, buddy. That’s our show. That’s everything. We hit it. We hit the Zoom, the Five9, GlobalFoundries, Intel, IBM Honeywell, Amazon. Appreciate everybody tuning in. Pat, nicely done.
Patrick Moorhead: Yeah. Good to see you. We normally try to get this in on Friday, but I screwed that up because I’m taking a flight out in the morning.
Daniel Newman: No worries about it whatsoever. I will be unpacking, hopefully moving into my temporary housing and I will finally be sleeping in a bed that I do not have to share with children and a dog. It has been crazy here, but overall all good. Welcome to Tech Sis, and you saw that in episode 85 if you were there. For this show, for episode 86, it’s time to say goodbye. So everyone out there, hit that Subscribe button. Join us, be part of our family. Check out all our episodes. Watch us on the YouTube. Get us on Spotify. Hit us up on Apple. Be a subscriber, share with your friends. If you don’t like what you heard, @PatrickMoorhead, and if you like it, @danielnewmanUV. That’s the way we do it. When he hosts, he sends you my way, and I’ll send you his way. But for now, we got to go. See you later. Bye now.
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