 From Las Vegas, it's theCUBE. Covering VMworld 2018. Brought to you by VMware and its ecosystem partners. We're back in Las Vegas. This is theCUBE and we're wrapping up day one. Dave Vellante with Stu Miniman, John Furrier and Jim Kobielus is joining us. Welcome, thanks for watching. Let's see, start with Stu. Big news today, Amazon, RDS, On-Prem. They made the move, David Floyer predicted it. Your thoughts? Yeah, so we talked a little bit on our keynote analysis this morning, Dave, but definitely it was what got everybody in the audience really excited. This is a partnership, right? And I want to emphasize that because when the announcement was first made, it was, you know, Amazon's the gorilla, they have all the strength and look, VMware's got over 500,000 customers. They have strong relationship with customers. This is not just a one-way move to the cloud and this is a great proof point, you know, RDS in the solution and there's a lot of pieces here. NSX with Direct Connect, there's so many pieces in here that this is an important partnership and not the only partnership that VMware has in the cloud. We heard, you know, Yan Bing Li was just on with us, Dave, talking about the cultural shift, the engineering shift to get more CICD cloud first. David Floyer had written in an article leading up to this, VMware needs to be more cloud first and you hear it from the VMware people that there is cultural change, they are changing their development and, you know, that Amazon poll is going to have a dramatic impact. Hi, John Furrier, you've seen all the waves. You've seen the legacy guys try to cross the chasm. You've seen some succeed, some fail. You have deep into AWS, into the developer ecosystems, Google Next, et cetera, et cetera. The AWS VMware relationship, is it a one-way trip to the cloud or is it a boon for the data center? Good question, I think, first of all, the Amazon news with RDS on VMware on-premises is earth-shattering news at many levels. One, Amazon's never done it before. Two, I think people are going to start to understand this downstream a little bit later, but it's going to have a significant impact on the opportunities in multiclouds. So, you know, I think Amazon's relationship with VMware is very deep at the level of technology and stakeholders at the top of both companies. Andy Jassy and Pat Gelsinger are both in this to win it together. It's obvious and anyone who says otherwise really isn't really informed. They're deep in the technical side. They have management at the top approving this. They're going to market together in the field. There is legit synergy and they're going to win the long game. Gelsinger's making the big bet and remember, three years ago Pat Gelsinger was under the gun. You know, what's his role going to be? People were, you know, nervous about their cloud. Look at VMware botched the cloud, okay? And they're kicking ass right now with cloud. So, they made the right moves. They steered the ship away from the rocks. They're out in the clear sale and love their strategy. Keynote with Gelsinger is very specifically around the generational shift around VMware and the industry. He went through the bridging and I love the cleverness of the storytelling. Bridging tech trends have been of VMware ethos. He talked about the history, servers ESX, BYOD, workspace, network, NSX, cloud migration. That was their kind of initial private cloud but right now it's multi-cloud and profit and people doing tech for good. So, I think Gelsinger's laying down the generational shift that VMware's going for and they're making the huge bet on AWS. So, it begs the question, what about Azure? What about Google? Is VMware going to be a one cloud game? Are they going to bridge to other clouds? That's going to be a very interesting tell sign because the relationship on stage with Andy Jazzy and Pat Gelsinger is pretty significant. I think it's going to be a hard thing to go in to other clouds and saying, I want to date you too. It's very interesting. Of course, all the legacy guys are trying to figure out, okay, they're cloud strategists but now all the major cloud guys are betting on prem. We saw at Google Next, the on-prem strategy was certainly Azure with Azure Stack. Oracle has bets in cloud and with cloud customers got bets for on prem. Now AWS throws its hat in the ring. Jim Kobielus, you sat in the analyst sessions all day. What did you learn? What were your big takeaways? What do we need to know? Well, first of all, it's clear that the AWS partnership, VMware is all in with that. Look at the past year since they announced in terms of customer adoption, partner enablement. The sheer variety and depth of the integrations that these partners have put together, including today, it's pretty serious in terms of VMware's investment in that relationship deepening that to the point where there were no flashy Google partnership announcements or IBM or Oracle or anybody else, it's clear that it's, they're really, they're each other's hybrid cloud partner, par excellence. I don't think either of them is going to, I don't think that VMware is going to go anywhere near as deep with the other public cloud providers anytime soon. But really my takeaway today from the analyst session was that VMware is going seriously to the edge and it's really interesting, they're building an appliance to take their entire stack and bring it down to edge deployments and then distribute that around and then manage that for customers on a global basis with automation, there's going to be AI and machine learning built in so that VMware will be able as a managed service to drive the software defined data center all the way out to the edges for its clients and they're putting themselves in a position where they can actually, that could be their next major revenue producing business as the traditional hypervisor VM world begins to wane in terms of putting Kube and serverless and so forth on an appliance, putting it on the client site managing it for them and then white boxing it potentially to other cloud providers to provide to their customers. This could be in the future coming in the next year or two something that can propel VMware to the next stage where they are everybody's preferred multi-cloud management edge management partner. So John, the story is starting to come together. VMware's cleaned up its kind of messy cloud strategy. Jen was just talking about the edge, multi-cloud plays, hybrid cloud starting to come into focus, are you buying it? I do, I think VMware has got clarity, they want just the cloud in general, they know what they're doing, what they want to do in the cloud and that is lean on Amazon for public cloud. They're going to focus their energy on where their customer base is, that's the data center DNA. Listen to the music here, it's the 80s, it's guys my age, running networks, running data centers, these are guys that are operating infrastructure and software and IT for generations. So that's key. The second thing I think that I buy is that they are lined up with to me the major pillars of what I think will be the stack or the IT footprint of the future. Cloud, clearly winning, mobile, AI and ML and IoT edge. Those are the four pillars that will drive the IT footprint. Pat Kelsinger called them the superpowers. I mean, he's joking about AI being 30 years old but the reality is is that Amazon's going to mop that business up because they're going to compete with Google on AI. VMware's not going to compete in the AI world directly to the end user. They'll have ML and AI in some of their things but they will not be the source of strength for AI in my opinion. I think it's going to be under the hood, VMware powering the future and then leaning on Amazon to roll up that other side of the market. But absolutely hybrid cloud is definitely here to say. And like I said, Jassy's looking at Kelsinger. Kelsinger is looking at Jassy. They're both looking at each other. If you had a little bubble in mind what they're trying to think about is that Jassy's like, you're an edge to me and then you're an edge to me. So they're both kind of doing clouds do they care? It doesn't matter. Does it actually? You're my wingman. Oh, you're my wingman. So it's like, doesn't really matter because from Jassy wins the VMware customers. VMware customers get the cloud. So what is an edge? I mean, you can call a data center an edge. You can call a public cloud an edge. But I got to break Sue into the conversation. As a networking guy, you got to be impressed with the progress that they've made in networking. That has implications on the edge. Yeah, absolutely. Last year Pat said that networking has the potential to be the next decade bigger than what virtualization was for the wave. And we are seeing good movement. I think I said it on our intro this morning, but when NYSERA was acquired, the promise that we as a networking industry felt that they could be that interweaving, kind of glue for multi-cloud. And it kind of got hidden for a few years while they built out NSX. They made it really enterprise ready. They did really well with adoption. But now that vision is kind of back in full. And that is what VMware can ride, to not just be virtualization. vSphere is great, they'll drive that for a while. But right, the networking and security pieces is why VMware has the right to sit at the table in this multi-cloud discussion. Now, it was funny, I interviewed Keith Townsend and he said, VMware, he's now a VMware employee. VMware is the best position to help customers through that transformation. And I said, hey Keith, I hear you. I want to see the twins from two weeks ago. But Microsoft and Amazon and a whole bunch of other management people might kind of step up and say, hey, we've got a right to be at the table too. Jim, where? The new element that we'll put VMware over the top now is not just network virtualization, but it's AI, it's AI opt, it's their ability. They discussed it, Gelsinger and Ray O'Farrell during the keynote today. The ability to use AI and machine learning to baseline the normal behavior of a distributed edge to cloud environment and then lock that in. So in terms of the AI ops infrastructure to monitor when the distributed system deviates from those patterns and then take remediations or make changes automatically to keep everything running in a homogeostatic fashion very smoothly. Amazon is the AI powerhouse, but I think that VMware will become the AI ops powerhouse. I know, you're right on. This is a good nuance, a nuanced point. I totally agree with you. When I say AI, I mean from an app standpoint, natively, look at what Google's trying to do with TensorFlow, they're going to try to differentiate. Amazon has to count on Google. That's not VMware, right? I think your AI stories that you've been posting are right on the money in your research. AI ops, in my opinion, and AI ops is going to be probably where the most startup's going to come from. That's where the action is, because that's about automation. Automating away the mundane rock fetches that IT guys have been doing is a real, and it's going to be an opportunity to get much more composable architecture. It's going to be a real enabler. So, IT service management, ITL, IT operations. AI will be, I think, a factor. But that's under the hood. That's my point. AI under the hood, VMware wants that. They don't want to go compete at the top of the stack. Okay, I want to shift conversation to a third leg of our analysis stool, which is the Dell corporate structure, the new capital structure that's been proposed. Dell came out a while ago and sort of floated this idea of a reverse merger. Street puked all over it. And then all of a sudden, I came up with this other idea of, I call it the independence vig. Okay, VMware is having to pay an $11 billion dividend. $9 billion of that is going to go to DVMT shareholders to clean that up. And you're going to get cash or pro-rata shares in the new Dell. Okay, so the question on the table is, will that constrict VMware in any way in terms of its ability to fund R&D? My quick thoughts are short-term, no, long-term. Dell has to walk a fine line between taking VMware cash, paying down its debt, and funding the future. Your thoughts? Yeah, so here are my thoughts on this. So I think that, first, let's explain to the people what you just talked about. I'll translate. What you describe as Michael Dell's going private, $60 billion, whatever the number was, debt deal he did to buy Dell EMC. So he has all this debt. Debt is like heroin. You get addicted to it. Hard to get straight from that. So you got to pay the down the debt. He's been knocking down the debt and big bag of money called VMware's sitting there. As long as VMware's throwing off cash flow, that's going to be a key consideration. So the independent VIG, as long as this cash flow coming in, I think it's fine. It's not going to really hurt it. But I think Dell has been brilliant in this because he's been essentially land grabbing the computer industry and the infrastructure side, and he's going to make more money than ever before. He's going to pull it off. And the only thing that could hurt him is either some sort of force-major downturn or revenue not coming in from some of his sources, whether it's either a public offering, acquisitions he's trying to sell off, and or VMware sputters, which I don't think it will, not with the Amazon, even if they just go all in on Amazon and blow off all the other clouds, they'll still make a boatload of cash. I think it goes down in history as one of the greatest trades ever. I mean, it's just phenomenal. Look, I mean, Dave, we talked about when EMC bought VMware, it was one of the greatest acquisitions of all time. 635 million, now a $60 billion valuation. Dell buying EMC, most people were like, I'm not sure what's going to happen, but Michael will make a lot of money. VMware is doing so well that they can now fund Dell going public again based on this deal. So it's been one of the most fascinating financial orchestration pieces to be out there, but Dell's doing well. Just the quick thing I'll say is there, if you notice the Dell booth is called Dell Technologies. How rapid have we gone from Dell EMC branded everything to now Dell Technologies there? There's rumors that, go ask Michael tomorrow. Hey, Michael, after you get that big payment from VMware, you're just going to sell them off or do them off and he will either laugh at you or just get angry like he did when I asked him a year or two ago, because VMware is still the crown jewel, super important to the Dell Technologies piece and the synergies between them and Pivotal and all the other pieces that they have there. They're getting full of lots of room to grow and innovate and throw off lots of cash. EMC's been chopped up into pieces. We know it's been, people have been laid off, they've laid off Wednesdays like what they call it. They've been chopping it down, make the numbers work. Who wins in all this? NetApp, Pure have been mopping up business, other storage potential rivals. That's what we're hearing. Do you guys agree with that? So let's not forget. So while VMware is probably half the company's profits, the PC business doing better than anybody thought it would. So that's throwing off cash. The storage business was sucking wind, but now it's back and the server business is kicking ass. And so there's a lot of cylinders pumping for Michael, obviously VMware is the big one. I mean, what about that declining market? Wasn't infrastructure supposed to be dead like four years ago? I've been hearing that for 35 years. It's a massive market. Infrastructure is not going away. On-premise is the true private cloud report shows that the on-premise is going to be there, but it's going to look and smell like cloud. That's the bottom line. Lots of innovation. It sure isn't boring here. Lots of interesting things to dig in and discuss. I had a great day one and looking forward to two more. Well, day two is going to be huge. Well, Michael's coming on, Michael Dell, Pat Gelsinger's coming on, Sanjay Poon and Robin Matlock. We got customers. We got two cubes here. Go to siliconangle.com and check out all the news. We have a future of the data center series that's running. Go to wikibon.com. Yeah, even cloud health technologies was acquired. I'll have the founder on tomorrow too. Awesome. There's a new AI ops note on wikibon today, in fact. Yeah, Jim's been crushing it there. The true private cloud report is out. VMware's hybrid cloud strategy is out. He was hunting. He was hunting. Cube.net for all the videos. Go to cube.net for all the videos. We're flowing video clips. Check out the cubes at the cube Twitter handle. That's a wrap for day one, guys. Great job, Jim. Thank you, John. Stu. Good job. We'll see you tomorrow. Thanks for watching.