 Live from Las Vegas. It's theCUBE. Covering VMworld 2018. Brought to you by VMware and its ecosystem partners. Welcome back to theCUBE. I'm Lisa Martin with Dave Vellante, John Furrier, Stu Miniman. At the end of day two of our continuing coverage guys of VMworld 2018, huge event. 25,000 plus people here, 100,000 plus expected to be engaging with the on-demand and the live experiences. Our biggest show, right? 94 interviews over the next three days. Two of them down. Let's go, John, to you. Some of the takeaways from today, from the guests we've had on both sets. What are some of the things that stick out in your mind that's really interesting? Well, we had Michael Delon. That was always a great interview. He comes on every year and he's very candid. This year he added a little bit more color commentary. So that was great. It was one of my highlights. I thought the keynote that Sanjay Putin and Didi had an amazing guest, a Nobel Peace Prize winner, the youngest ever. Her story was so inspirational. And I think that sets the tone for VMware putting a cultural stake in the ground around tech for good. And we've done a lot of AI for good with Intel and there's always been these initiatives. But I think there's now a cultural validation that people generally want to work for and buy from companies that are mission-driven and mission-driven is now part of it. And people can be judged on that front. So it's good to see VMware get some leadership there and put the stake in there. That was the big news today, at least from my standpoint. The rest were like point product announcements. Sanjay Putin went into great detail on that. Pat Gelsinger also came on, another great highlight. And again, we didn't have a lot of time. He's running a little bit late at a tight schedule, but it shows how smart he is. He's really super technical. And he actually understands at a root level what's going on. So he's actually a great CEO right now. The financial performance is there and he's also very technical. And I think it encapsulates all of it. The Dell technology is under Michael Dell. He's making so much more money. He's going to be richer and richer. He took an entrepreneurial bet. It wasn't hurting at the time, but Dell was kind of boring, Dave. I wouldn't call it like an innovative company at the time when they were public. He was in the 90 day shot clock. They had some things going on, but they were a hardware company and supplier to IT footprints. Well, they were $60 billion in revenue and a $20 billion market cap. So something was broken. Well, I mean, it was working numbers-wise, but he seemed to- No, that's the opposite. A $20 billion value on a $60 billion of revenues, sort of a failure. So anyway. Well, he got there- At the time. Market conditions aside, right at the time, he seemed like he wanted to do something entrepreneurial. And the takeaway from my interview with him, our interview with him, was he took an entrepreneurial bet, put his own cash on the table, and it's paying off. That horse is coming in. He's going to make more money on this transaction and takes EMC out of the game, folds it into the operations. It really is going to be, I think, a financial success or if market conditions continue to be the way they are, Michael Dell will go down as a great financial maneuver and he'll be in the top echelon of deals. The story people might forget is that Carl Icahn tried to take the company away from him. Michael Dell beat the great Carl Icahn, which doesn't happen often. Why did Carl Icahn want to take Dell private? Because he knew we could make a boatload of money off of it. And Michael Dell said, no way you're taking my company. I'm going to do my thing and change the industry. He's going to have 90% voting control with Silver Lake partners when the deal's all said and done. And taking it coming private and then executing the financial engineering plus execution is really hard to do. Look at Elon Musk in the news today. He's trying to take Tesla Pup private. He got his butt handed to him. Now he's saying, no, we're going to stay public. And guys, you're saying Michael's, after he gets all this money from VMware that it will help them go public, he's not going to sell off VMware or get rid of that, right? Well, that's a joke that he would sell VMware. Unless the cash is going to be good. No, he won't do it. I don't think it'll happen. I mean, maybe someday he sells some of the portion of it, but not going to give up control of it. Why would he? It's throwing off so much cash. He's got Silver Lake as the private equity company. They understand this inside and out. I mean, this transaction goes down in history as one of the greatest trades ever. Yeah, we were talking about- Well, let me ask you guys a question because I think this is what we brought up in the interview because at that time, the pundits, we were actually right on this deal. We were very bullish on it and we actually analyzed it. You guys did a good job at Wikibon and we in theCUBE pretty much laid out what happened. He executed it. We put the risks out there, but at the time people were saying, this is a bad deal, EMC, the current state of IT at that time looked like it was dismal, but the market forces that changed were cloud. And so what were those sideways impact points that no one understood? That really helped him lift this up. What's your thoughts, Dave? Well, so the first of all, the desktop business did way better than anybody thought it would, which is amazing. And actually EMC did pretty poorly for a while. And so that was kind of a head fake. And then as we knew, VMware crushed it and crushed it even more than anybody expected. So that threw off so much cash, they were able to deliver. They did pivotal, they did a pivotal IPO, sold some software assets. I mean, basically, Michael Dell and his team did everything they said they were going to do and it's worked out, as he said today, even better than they possibly thought. Well, and the commentary I'd give here is when the acquisition of EMC by Dell happened, the big concern we had is the impact of cloud. And we said, well, okay, they got VMware over there and they've got Pivotal, but Dell's just going to be a boring infrastructure company with server network and storage. The message that we heard at Dell World and maturing even more here is that this portfolio of families, yes, VMware's a big piece of it, NSX and the networking, but Pivotal with PKS, all of those tie into what Dell's selling. Every time they're selling VxRail, that has a big VMware piece as they do the networking piece that extends across multi-cloud. So Dell has a much better multi-cloud story than I expected them to have when they bought EMC. But now VMware hides a lot of warts. Right, let's be honest about that. Okay, well, so I just still think the client business is exposed. I mean, as great as it is, you've got to gain share in that business if you want to keep winning. Number one, number two is, the big question I have is, can the core of Dell EMC continue to innovate or will it just make incremental improvements have to do acquisitions to do innovation, inorganic acquisitions, and end up with more stovepipes? That's always been, Stu used to work that. That was always EMC's biggest challenge. Jeff Clark came in and said, okay, we're going to rationalize the portfolio. That has backlash as customers say, well, wait a minute, does that mean you're not going to support my products? No, no, we're going to support your products. So they've got to continue to innovate. As they say, VMware, because of how much cash it throws, it's 50% of the company's profits, hides a lot of those exposures. And if VMware takes a turn, if marketing conditions change, the debt looming is exposed. So again, the game's not over for Dell. We see, you can see the finish line, but. I low sell high, I guess you're selling right now. So a lot of financial impact continue to innovation, but at the end of the day, guys, this is all about impacting customers' businesses. Not just from, we've got to enable them to be successful in this multi-cloud era. That's the norm today. They need to facilitate successful digital transformations, business outcomes, but they also have VMware, Dell, EMC, Dell Technologies. Great power to help customers transform their cultures. I'd love to get perspectives from you guys because I love the voice of the customer. What are some of your favorite Dell EMC VMware partner customer stories that you've heard the last couple of days that really articulate the value of this financial successful company that they're achieving? Well, the first thing I'll say before we get to the customer stories is on your point about what VMware's doing is, they're a technology company. Robin Matlock, the CMO is on theCUBE, talking about their technology company. They have the hands-on labs. They're a very geeky audience, which we love, but they have to get leadership on the product side. They got to maintain the R&D. They got to have best-in-class technical products that actually are relevant. You look at companies like Tintry that went bankrupt. Great technology, cul-de-sac market. There's no market there, the world's going cloud. So to me, VMware has to start pumping out really strong products and technologies that the customers are going to buy, right? In conjunction with the customer to help co-develop what the customers need. So I was talking to a customer and he said, look, I'm 10 years behind where the cloud guys are with Amazon. So all I want is VMware to make my life easier, continue to cut my costs. I like the way I'm operating. I get constant pressure to cut costs. So if they keep doing that, I'm going to stay with them for a long, long time. Keep Townsend said it best. Companies like VMware, Dell EMC, they move at the speed of the CIO. And as long as they can move at the speed at the CIO, I've said this a million times, the rich get richer. And it's why competent management that led by founders like Larry Ellison, like Michael Dell, continue to do well in this industry. And Andy Jassy technically is what I'd say a founder of AWS because he started it as key. The other thing I would also say from a customer, we hear a lot of customer. I won't name names, because a lot of our data is in the hallway conversations and at night when we go out and get the real stories. On theCUBE it's mostly, we've been very successful at VMware, we use virtualization, blah, blah, blah, and it's an IT story. But the customers in the hallways that are off the record are saying essentially this, I'm paraphrasing. Look it, we have an operation to run. I love this cloud stuff and I'd love to just blink my fingers and be in the cloud and just get rid of all this stuff and operate at a level that's cloud native. I just can't, I can't get there. So they see Amazon's relationship with VMware as they bridge the future and takes away a lot of cognitive dissidents around their feelings around VMware's lack of cloud, if you will, in this case now that's satisfied with the AWS deal and their focus on operations, on premises and how to get their app work loads, like modernize. So a lot of the blocking and tackling of the customer is I get virtualization and that's great but I don't want to miss out on the next level of innovation. Okay, I'm looking at it going slow but no one's instantly migrating to the cloud. You're either born in the cloud or you're on migration schedules now really evaluating the financial impact, economic impact, headcount impact of cloud. That's the reality of the cloud. You got to throw a flag on some of that messaging of how easy it is to migrate. I mean, it's just not that easy. You know, I've talked to customers that we said, wow, we started and we just kind of gave up but there was no point in it. The new stuff we're going to do in the cloud but we're not going to migrate all of our apps to the cloud. It just makes no sense. There's no business case for it. This is where NSX and containers and Kubernetes bet is big, I think. I think NSX can connect the clouds and some sort of interoperable layer for whatever workloads are going to move on either Amazon or the clouds. That's good. If they want to get the developers off virtualization into a new drug, if you will, it's going to be services, services, microservices, Kubernetes, because you can throw containers around those old workloads, modernize with the new stuff without killing the old. And we, Stu and I heard this clear at the CNCF and the Linux Foundation, that this has changed the mindset because you don't have to kill the old to bring in the new. You can bring in the new, containerize the old and manage on your speed of the CIO. And that's Amazon's bet, isn't it? I mean, look, even Sanjay even said, if you go back five, six years, the original reinvent, it was sweep the floor, bring it all into the cloud. I think that's in Amazon's DNA. I mean, ultimately, that's their vision. That's what they want to have happen. And the way they get there is how you just described it, John. And that's where this partnership between Amazon and VMware is so important. Because right, Amazon has a lot of the developers but needs to be able to get deeper into the enterprise. And VMware, starting to make some progress with the developers, they've got a code initiative, they've got all of these cool projects that they announced with everything from serverless and Kubernetes and many others edge, going to be a key use case there. But VMware is not, this is not the developer show. Most of the conversations that I had with customers, we're talking IT things. I mean, customers doing some cool things, but it's about simplifying my environment. It's about helping operations. It's not, most of the conversations are not about this cool new microservices building these things out. Cisco really is the only legacy, traditional enterprise company that's crushing developers. You give some IBM some chops too, but I wouldn't say they're crushing it. And we saw that at Cisco Live. Cisco is doing a phenomenal job with developers. Well, the thing about the cloud, one thing I've been pointing out, an observation that I have is if you look at the future of the cloud, and you can look for metaphors and or real examples, I think Amazon web services obviously we know them well. But Google cloud to me is a picture of the future. Not in the sense of what they have for the customers today. It's the way they've run their business from day one. They have developers and they have SRE, Site Reliable Engineers. This VM world community is going down to two paths. Developers are going to be rapidly iterating on real apps and operators who are going to be running systems. That's network storage all integrated. That's like an SRE at Google. Google's running massive scale and they perfected it. Hence Kubernetes and some of the tools coming into services like Istio and things that we're seeing in the Linux foundation. To me that's the future model. It's an operator and set of developers. Whoever can make that easy, completely seamless is the winner of it all. A linchpin is a linchpin. Maybe not the linchpin, but a linchpin is still the database, right? If you've seen that with Oracle, you see it, why is Amazon going so hard after the database? I mean it's blatantly obvious what the strategy is. Database is the hill that everyone is trying to take down. Capture the hill, you get to high ground with a database. That's a big prize. When you used to do the financial models of how much money is spent by the enterprise, that database was a big chunk. We've seen the erosion of lots of licensing out there. When I talked to Microsoft, they're pushing a lot of open source, they're going to cloud, so Microsoft licensing isn't as much. VMware licensing is something that customers would like to shrink over time, but database is even bigger. It's a strategic fulcrum. Obviously Oracle has it. Microsoft clearly has it with SQL Server. IBM, a big part of IBM's success to this day is TB2 running on mainframe. And so Amazon wants a piece of that action. They understand to be a major player in this business, you have to have database infrastructure. I mean costs are going down, it's going to come down to economics. End of the day, the operating models, like I said, some of the things are about TB2 on mainframe. The bottom line is going to come down to when the cost numbers to run at the value and cost expense involved in running the tech, that's going to be the ultimate way things are going to be cleared out or replaced or expanded. So the bottom line is it's going to be a cost equation at that level and then the upsides are going to be revenue. And just a great thing for VMware, since they don't own the application when they do things like RDS in their environment, they are freeing up dollars that customers are then going to be more likely to want to spend with VMware. So I want to make real quick, three things we've been watching this week. Is the Amazon VMware deal a one-way trip to the cloud? I think it's clear, not in the near term anyway. And the second is what about the Edge? The Edge, to me, all about data. It's like the wild, wild West. It's very unclear that there's a winner there, but there's a new type of cloud emerging. And three is the Dell structure. We asked Pat, we asked VMware, Ray O'Farrell, we asked Michael, if that $11 billion special dividend was going to impact VMware's ability to fund its future, consistent answer there. No, we'll see, we'll see. I mean, what are they going to say? Yeah, that really limits my ability to buy compass in the queue. No, that's the messaging. So, of course, $11 billion gone means they can't do M&A with the cash. That means, yeah, it's going to be, yeah, R&D. What's that mean investment? So I think the answer is yes, it does limit them a little bit. It's cash. But VMware just spent, it is rumored to brown $500 million for cloud health technology. Dave, Boston based company with about 200 people. So, you know, hey. Well, they're going to pay dividends. They're going to put back a dividend anyway and do stock buybacks. But I'm not sure, you know, 11 out of the 13 billion is what they would choose to do that for. So going forward, we'll see how it all plays out, obviously. I think, Floyer wrote about this, more has to go toward VMware. Last tour. I think it's the other way around. Well, I think it's really good that we have one more day tomorrow. I think it's the one way trip to the cloud in a lot of instances. I think a lot of VMware customers are going to go off virtualization, non-hypervisor and end up being in the cloud most of the business. So it's going to be interesting. I think the size of customers that's going to, the size of the customers that Amazon has now versus VMware is what? Does VMware have more customers than Amazon right now? It's pretty close, right? VMware's $500,000 for VMware. And Amazon's over a million. Are they over a million, really? Yeah. A lot of smaller customers, but still? Yeah, I mean, customers are customers. But VMware might have bigger customers. No question the ASP is higher. Conflict, I'm just thinking like, cloud is natural, right? So like, why wouldn't you want to use the cloud, right? So guys. So the debate continues. Exactly. Good news is we have more time tomorrow to talk more about all this innovation as well as see more real world examples of how VMware is going to be enabling tech for good. Guys, thanks so much for your commentary and letting me be a part of the wrap. Thanks Lisa. Looking forward to day three tomorrow. For Dave, Stu and John, I'm Lisa Martin. You've been watching our coverage of day two, VMworld 2018. We look forward to you joining us tomorrow for day three.