 Live from Las Vegas, it's theCUBE. Covering Dell Technologies World 2018. Brought to you by Dell EMC and its ecosystem partners. Welcome back to Dell Technologies World. This is Dave Vellante with Stu Miniman. And you're watching theCUBE, the leader in live tech coverage. We go out to the events. We extract the signal from the noise, break it all down, Stu. This is our ninth year at Dell, EMC, Dell EMC, Dell Technologies World. Yeah, I mean Dave, an old EMC world was one of the first places I met you. I think it was like 2008 or something like that. There was like a little blogger lounge. Yeah, this is 15 for you. I think it's 11 or 12 for me. So it's been quite a run. I mean, you remember the early days of this event that was really a technical show. And I think that's probably why it's had such staying power. Because the roots are embedded in technology. But wow, what a long way we've come. Yeah, I mean, first of all, Dave theCUBE, oh my God, I can't believe double set here. We were looking at photos of us like shoved in the corner with horrible lighting and no good cameras. And we got a massive crew here. You're always looking sharp as usual. Thank you Stu. And yeah, I mean, that first year, I was wearing like a vendor polo. No hoodies. No hoodies back then. I wear a hoodie some now. But it's interesting for me especially since I spent 10 years working at EMC. I'd been at Dell World for four or five years. Kind of the mashup of those two is the biggest tech merger we've been covering since it was announced. This show has a lot of Dell overtones. So you and I had been that Dell World was originally like that CIO event. You had people like Bill Clinton and Elon Musk up on stage here. At this show, we got people like Walter Isaacson up on stage. I love reading his books, listen to the podcast. Andy McAfee who you and I have interviewed a few times talking about the second machine age. So some of those kind of high level business issues as opposed to the deep in the portfolio, Dave Donatelli upstage, walking through 37 different product announcements. So back then, did you have hair or was this? Yeah, come on Dave. When I started at EMC, I was seven foot tall and had hair. Years of tech beat me down. But so let's look at this merger, Stu. We go back. We've said, you and I have talked about this a lot. It was inevitable. You had Amazon coming in hard, driving margins of the enterprise down. Something had to happen to HPE. Something had to happen to EMC, these infrastructure companies. And we said at the time that what we're going to see is 19% gross margin company married to the 60% gross margins company come somewhere together in the low 30s gross margin. That's exactly what we've seen. The thing that's a little bit surprising to me is we've seen growth out of Dell. You're not seeing a lot of growth out of many enterprise infrastructure companies that are large in incumbents. Obviously guys like Pure Storage grow very quickly. But at the time the merger, we pinned them at what, low 70s and they're now $80 billion. And then we want to break that down a little bit. But did the growth surprise you? It's particularly the client side grew. And then the storage side declined precipitously. Dave, as you've been breaking down and been watching you, half of their business is the client side. And when they call out 21 consecutive quarters of growth, well, if half the business has grown, that's good. And VMware, doing well. We just interviewed Pat Gelsinger. VMware's clicking well, integrating with the cloud. There's a lot of change there. Just one quick thing, talk about EMC. For me, one of the saving graces for EMC is they never bought a large services organization. Back in the day, it was like, oh, they were going to buy Accenture. There were some of these things. You look at the companies that have 100,000 services people, they're having to trim down. They're having to spin things out. The Dell spin merges, Dell did spin off Perot. So while there has been some consolidation and some reductions since Dell and EMC have come together, overall, they're growing, there's good. There's new areas that they're putting R&D together. So just to give our audience a little overview, in case you're not that familiar with what Dell has become, Dell Technologies. I mean, essentially you're looking at an $80 billion business. The core client side and infrastructure of the enterprise side comprises about $69 billion. VMware is almost $8 billion. And then other RSA and well, whatever's back then pivotal before the IPO, et cetera, you know, Dell financial, et cetera, is about $3 billion, that gets you to $80 billion. As you said, the client side is about half of the business. It's growing very nicely at around 7% a year and it's about 5.5, 5.6% operating income. The ISG business, which is the core of the classic EMC, all the server stuff, all the networking stuff. It's about, let's see, $30.7 billion, almost $31 billion. The servers and networking side are growing at 20% a year. The storage is declining, you know, quite significantly. Double digits, they're sort of moderating that decline. And it's a higher percentage operating income as a percentage of revenue, about 7%. You'd like to see that significantly higher. Now you go to VMware, right? VMware is 10% of the company's revenue, but it accounts for half of the company's operating cash flow because its margins are operating margins way up, high 20s, low 30s. Yeah, I mean, Dave, it was, you know, I remember at VMworld, I think it was two years ago, I went to Michael, I'm like, Michael, people think you're going to sell that off and he was just foaming at the mouth. He's like, they're stupid, they don't understand math. Well, why would he? It's a 35% operating margin business. I mean, Dave, to be honest, everybody watching is, VMware went through a little bit of a downturn. You know, the show two years ago, what was it, right? But NSX is now cooking, VSAN's doing great. There's lots of good areas that they have there. And the cloud picture, I mean, turn back three years ago, Dave, VMware was making statements like, when the old bookseller wins, we're losing, EMC on their side was kind of trying to play a little bit with the public cloud, but it was well understood in the field, public cloud is your enemy. And the market has matured to understood that companies are figuring out their cloud strategy and their application and data strategy. And it's not a winner take all zero sum game. Everything goes to, you know, one of the top three or four public cloud players. So I can ask you, so you feel as though that's sustainable, right? Because I got to say, if I were AWS, I would be looking at this saying, this is awesome. I need to get into the enterprise. I got to deal with the number one enterprise infrastructure player in VMware, in terms of its brand and its presence. I mean, a half a million customers I think is the number. I'm very excited. The flip side of that is the reality is, is that deal for VMware has been a huge tailwind for them. So help us square that circle. Yeah, and Dave, it's nuanced and complicated because when I talk to service providers, when I talk to the channel partners here with VMware and with Dell, they're all starting to work more and more with VMware. So, you know, short-term, next two to three years, I think there's a great tailwind for VMware to get involved here. But my concern is long-term that people get on Amazon and they say, this is great. Look at all these services and all of these things. Maybe I don't need to pay for my server virtualization anymore. Maybe I don't need some of those pieces. What do I need in my data center? Sure, I'll continue, but it's slowly declining. Like you mentioned, storage is on a bit of a decline overall. So, you know, it's death by a thousand cuts. It is that replacement. For me, it's always watching, you know, that data and that applications. It is tough, like super tough. David Floyer always say, you know, migrations don't do them. You're going to go through so much pain, especially things like database migrations. But it is something that's happening. It's going to take the next five to 10 years as we look at these shifts. People are building new apps all the time that tends to favor, you know, the public clouds. And there's so much happening in that space. But, you know, the whole Dell family, including Pivotal and VMware, Virtustream, RSA, there are places where they win and still do well. Because remember, of course, none of these companies, it's not like they have 75% market share. So, you know, if you ask Michael Dell, number one thing is he wants to take market share from, you know, HPE. And if he continues to take some of their market share, it can help offset some of the things that he's losing to the public cloud. Well, and you have to take market share in a market that's not growing that fast. But, you know, as we say in theCUBE many times, these disruptions are not binary, right? We still have mainframes, for example. In fact, they're helping their tailwind for IBM right now. So, you can put forth a scenario where, yeah, a lot of these cloud native apps are going to be built, you know, in AWS and a lot of VMware customers are going to do that. But as we often say, organizations can't just take their data and stuff it into the cloud, the public cloud, right? They've got to bring the cloud operating model to their data, to their business. We asked Pat, is it just use case specific the Amazon cloud and IBM, I guess, as well? Or is it really bringing that cloud experience? And he, you know, definitively said it's both. And I presume you buy that. Yeah, and I mean, Dave, I listened to Michael Dell's keynote and he said, you know, their goal is to integrate from the edge to the multi-cloud world. There's things that I want to understand this week. You know, I talked to some of my, you know, the real pep-peller heads here that do really advance type of technology. There's sessions here on containers. You know, there's probably people talking about serverless here at the show. So they're looking at those next-generation things, especially the VMware side of the house, is there at the edge. You and I got to hear really the IoT strategy that Dell laid out towards the end of last year. Edge, absolutely huge, you know, opportunity and there is no clear leader today because it's very early here. So how real are some of these opportunities to really expand beyond the traditional market because, look, Dell's doing great in servers. That's the core of their business. It's the, you know, main driver for a lot of it. And, you know, as Michael's happy to say, he said, you know, hey, the PCs and, you know, laptops are still doing well, you know, two decades after IBM called it the post-PC world. Thank goodness for client side. I mean, that has been, you know, the savior here. What do you think, I mean, you were at EMC for a number of years. What do you think happened to the storage side? That was a surprise to me because EMC is very rarely, if ever, lost share in storage. They have all the held share, bumped it up, doing acquisitions and so forth. But you had kind of Tucci with his hand at the wheel doing tuck-in acquisitions, really focused on maintaining that share. Do you think it was just the disruption of the merger? Was it just inevitable that you had, you know, just the storage business getting too long in the tooth? What happened? Yeah, I mean, Dave, and there's so many things. Everything from the quarter shifted. So, you know, it was going to take the end of quarter, which, you know, EMC always had a huge hockey stick on, shifted by a month. So some of it was just financial, where it landed up in the quarter. Some of it, some of the big shifts that are happening in the market. EMC was very early on Flash and did well in it. And they've got the VMAX and they've got the Extreme I.O. And they're doing well there, but there's lots of competition there. Hyperconverge, once again, Dell and EMC doing great there. But there are some of these macro shifts and clouds eating way at it. So I don't have a single answer. It's, there's so many different pieces. You know, storage has always been a knife fight. One of the things I want to understand this week, Dave, is the old EMC, well, we're going to have, you know, nine or 17 different products and they'll all overlap. You wonder if Dell is going, I really expect that Michael, Dell, Jeff Clark are going to stream that in that portfolio. Profitability, make sure that they're getting the market share that they need because the old model might have worked in a growing market, but in a, you know, flat to slightly negative market, it's not going to make a lot of sense. And you already said that. I mean, you made the point, Michael's keynote, the keynotes, generally this morning, no question had Michael's fingerprint on them. But it's much more like a Dell world than a traditional EMC world. We had, you know, Jeremy and Jonathan coming out of motorcycles, all kinds of crazy stuff. You know, much more staid. I think conservative, sending a message of steady, we're here for you to support your digital transformation. We are your infrastructure partner. So, I mean, I think it's clear who's running the company. All right, Stu, well, looking forward to this week, three days of wall-to-wall coverage, double cube sets, you know, check out the cube.net for all the live coverage, check out siliconangle.com, wikibon.com as well for all the research. We'll be back right after this short break. We're live at Dell Technologies World 2018.