 Live from Las Vegas, it's theCUBE, covering HPE Discover 2017, brought to you by Hewlett Packard Enterprise. Okay, welcome back everyone. Live here in Las Vegas is Silicon Angles Cube, our flagship program. We go out to the event, it's an extractive signal from the noise. I'm John Furrier, my co-host Dave Vellante, been watching three days of wall-to-wall exclusive coverage of Hewlett Packard Enterprise Discover 2017, our seventh year covering HPE Discover, now called HPE Discover. Dave, we've covered them all. Now we're doing some European versions. I missed the last one in London, but you were there. But you and I have covered HPE Discover, now HPE Discover for now our seventh year. Interesting times, they say. We live in interesting times. HPE's been getting hammered. Certainly the competition's been slamming them. The press has not been kind to them. People think they're irrelevant. Wall Street just slammed them. So Jim Cramer on CNBC really taken Meg to task. But we always come back, we feel differently when we're actually at the event, when you actually talk to the people in the company. They got a lot of cash on the books. They got a lot of customers. They got technology. They're doing the vendor R&D that you guys have pointed out in your recent groundbreaking true private cloud research market sizing you put out there. Astonishing change. And I think my gut is, yeah, certainly HPE's had some changes in corporate development. But the reality is, is that they now have set that up and the market is exploding. It's got the cloud market is coming on premise. The private cloud business is taking off. Yeah, you know, John, we've have documented this over the last seven years and it's like the Band-Aid is coming off slowly. And it finally feels like this Discover, it's finally almost there, right? Because you remember the split and then the spin merge and then the software business and okay, this has been the cleanest Hewlett Packard Enterprise Discover that we've been to. There wasn't a lot of noise about software. They had a little separate event going on. Not a lot of talk about, you know, the spin merge. A lot of talk about point next. I think that's good. I like their branding. It's like they cleaned up all the rooms in the house and the outside's got a new fresh coat of paint. I got to say last year, noticeably the branding, which we were kind of originally critical on two and a half, three years ago. The show was beautiful. Branding's amazing this year. Again, they go on that next level. You're starting to see the clean messaging. It's as if the ship has been kind of re-ready. And we said that last year, but to be fair, we did say it last year, they got to prove it, Dave. They got to show the results. And, you know, I was talking with, we were talking with Alon, who runs their data signature group. He agrees. The metrics that all the other analyst firms are using out there are irrelevant. And he believes that a new metrics have to be redefined. This, to me, is the biggest story of this show, is that HP's eyeing a new sea change. And I don't think people understand it. That's my personal opinion. I mean, I think you're right. The narrative on HP is, they're just hardware company, hardware's dying, what are they doing, et cetera. Well, the reality is people are telling me the hardware business is dying since I've been in the business. The good trend for them is the hardware business is consolidating. Of course, the tough news is, a lot of it's going to the public cloud. But as you've been pointing out all week, there's plenty of growth on-prem in what we call the true private cloud. That's the biggest discussion of the show here is the impact of the Wikibon research, the true private cloud report that you guys put out. I want to spend some time with you on that and ask you some really pointed questions. What is the true private cloud report that Wikibon put out? And what does it mean? Why is it so? Why are people talking about this research so much here? So three years ago, the team at Wikibon started to quantify this notion of private cloud. And then we looked at it and said, this is cloud washing. Really, this is just virtualization. What we really want to see is on-prem mimicking to a substantial degree the public cloud. Orchestration, certainly- Agility. Management, agility, pay as you go, those types of things. Okay, so, but the genesis of the market move is something that we heard from Alan Nance, our friend several years ago, at the Vertica user conference. He said, he was at the time, CIO Phillips. He said, my CEO said 75% of our spend in infrastructure is non-differentiated. So we're going to eliminate it. And everything we're going to do is going to be as a service. That was three years ago. So massive change. And Phillips went out to all of its suppliers and said, this is what we're doing. If you can't do business with us this way, you're out. And remember, we wrote a bunch of stuff about it. Alan came back, okay. So they were one of the early folks making that move. Everybody is now doing that. So what's happening is, there's going to be $150 billion that is going to vaporize out of non-differentiated heavy lifting. And it's going to go in two places. It's going to go into the public cloud and it's going to go to what we call true private cloud. And that true private cloud business is going to grow to be about $250 billion within the next 10 years. Okay, so it's a long- So the market, addressable market for true private cloud is what, 260 or 250? 250, just under 250 billion. Okay. Okay, which is growing faster than infrastructure as a service, public cloud. And it will ultimately, we believe be larger than that IAAS business. Not as large as SAS. That's going to be the biggest public cloud market. But it's a huge opportunity for companies. And it's a land grab, and it's a dog. So I want you to explain this, because I think this is important. And that took me a couple of minutes to click on this. You had mentioned that the, there's a point in your slide on that deck. So to get it to size the market, it's huge as in the $250 billion, a lot of cash. But the TAM component of labor costs. Now this is the big fear when things, oh, my job's going away, AI's going to auto-weight my job away. But yet you're saying 150 billion of cash costs are going to shift. Absolutely. To where? Okay, so a couple of things. What is going to shift? Today there's so much IT labor spent on provisioning servers, provisioning storage, tuning systems, tuning databases, all this stuff that can be now hyper-automated as the CEO of Wipro said. So that's happening today as we speak. So vendor R&D, i.e., R&D money that goes into appliances, boxes, new systems, new software is going to replace and automate out those non-differentiated tasks. So if your job is provisioning loans, you really want to reskill. So what does it mean for the customer in HP? And why is that important to this show? Why are people talking about this report? Well, what's relevant? Because everybody's talking about their digital transformation. And how do you fund a digital transformation? All right, I got to spend all this money to become a digital data-driven company. Well, where do I get that money? Real cash involved, basically. Yeah, there's cash involved. So how do I do that? Well, I have to shift away from things that aren't driving value for my business and eliminate that and put the resources in things that are driving value, application development, new development paradigms, digital transformations, new partnerships, and that's where the money's going. And so, again, if you're an IT infrastructure, Patch Management Pro, you either have to reskill or you're going to be out of a job. Did you see Kate's one board light up when we talked about the private cloud? Because that's exactly her point. Yeah, well, they're seeing it at DreamWorks because essentially what they're doing, they're changing the game and animation. My prediction is they're going to be able to pump out many more movies within a year now and that's going to make them more competitive. I think that's part of the reason why she didn't want to dig too deep into what they're doing because I think they see it as a competitive advantage. Yeah, and then in her point, she did tease a little bit out by saying that the creative people are so much more productive, she mentioned the dragon. All right, other impact, Wall Street, we see a lot of analysts kind of taking H.P. to town. We know the competition, we talked to Michael Dell, he came on theCUBE, Meg stopped by but she did not come in. That's notable for the folks out there. Michael certainly sits down with us. Michael says, hey, I got plenty of cash. We're going to bring up the debt thing. He thinks bigger is better. H.P. thinks smaller and nimbler is better. Well, this is going to be really interesting. What are your thoughts on as we move forward? Look at, there's two sort of bromide, right? When the Wall Street, well, first disappointment is never the last. Uh-oh, that would be bad news for H.P. But Meg said, we have bottomed in terms of margins. Margin's will improve. And a big thing's going to happen next month is H.P. gets the cash from the spin merges. All right, that's going to happen. And that's a big deal because their balance sheet, they're going to have $12 billion in cash in the balance sheet, which will match their debt and they're going to start to be acquisitive. Dell EMC can't be acquisitive right now, right? They got to retire that debt. We saw the celebrity in Nimble Front and Center. Yep, so. A lot of good success with the software there. So it's going to be really interesting to see, is this the last disappointment? All right, and is this a buying opportunity? We're going to watch it. We're going to watch it. So if I had to bet, I'd say it is a buying opportunity based on what I'm seeing here. It's a much cleaner leaner and they've also restructured the sales organization to a great extent. So hopefully the execution's going to be better. I'm not that generous. I think I want to see more results. You know, but if you see more results, you're going to miss the upturn. Well, the question to me is, I do believe that they have an advantage with the true private cloud report you guys put out. I think that validates the shift of spend in IT, which is validates the fact that it's growing, not shrinking. And yes, people might not be buying boxes, but they'll be buying IT. And the big thing is, you know, John, the street right now wants growth. That's why Amazon can make no money and still crank, right? But if HPE can eke out any growth and start throwing off cash again, I think the stock is going to do just fine. Other notable things, obviously the outsourced business is gone. Pointnext is the solution we had Anna on from Pointnext. She was the leader. Other notable things is the absence of Chris Hsu with Micro Focus. We had a chance to saw him at the Foundation Room at the Mandalay Bay the other night. Had a great conversation. Apparently they're not included in HPE Discover because they're a separate company. They're apparently doing really well. Micro Focus is killing it, right? I mean, their stock price increased, you know, faster than Facebook last year. So that's an interesting play. I think it's a new private equity play, John. You know, the private equity play used to be, suck as much cash out, you know, and then leave the carcass. I think the new private equity play is invest and then take it to market again and try to get that value from the market. So increase the value for the world. I think you're on something, and I think, and this is why I've always been complimentary of HPE's corporate governance game, because I think the private equity is all about taking things private and being nimble and then going public again. And Micro Focus, in my opinion, picked up those assets for short money. Yeah, well, HPE owns a big part of the company, though. Yeah, of course, but that's why they did the deal at short money, and they wanted the cash, and that's why they had to put the security piece in there. Dave Vellante, I'm John Furrier here, breaking it down, ending our three days of exclusive coverage at HPE 2017. Look for us at Madrid, the show there. I won't be there, Dave will be there. And again, HPE Discover, enjoy the rest of the conference. Thanks for watching. This is theCUBE out. Thanks to team and everyone here for a great job. See you next time.