 I got continues. EMC creates another brand called the Pivotal Initiative. And VMware and EMC sharpen their focus and bring out new management really for the first time. Hi everybody, this is Dave Vellante and this is theCUBE. And we're here at Wikibon headquarters. I'm here with Stu Miniman. And I was yesterday down in New York City at the EMC VMware Financial Analyst event. And as I said, it was really the first time that EMC and VMware rolled out its new management team in front of the financial analyst audience. There were a few analysts there. It was very well attended, a couple of hundred folks. Anyway, all of EMC's management team was there. VMware's management team, the board of directors of both companies were there in force. And Stu Miniman, who is with me here, was watching the live event. Stu, welcome. Thanks, Dave. I'm gonna break that down. I started by talking about the Flash saga. For the past week or so, Stu, as you know, we've been digging into this. We saw a number of announcements two weeks ago and one of those included EMC's ExtremeIO announcement, an acquisition that they purchased a while back. We have been squinting through that announcement. We've been asking questions. We've been getting feedback. Now, as many of you know, and as Stu, as you know, we've been doing analysis on this. We love the announcement in terms of its presence in the all flash array. We questioned some of the server side components. This particular EMC was providing benchmarks relative to FusionIO. We know FusionIO very well. We love what they're doing in hyperscale and we felt like it was somewhat of an unfair comparison. We dug into that a little bit more. We got a little bit more information from EMC and I wanna put some of that into context. As you know, Stu, EMC was showing these benchmarks. I asked specifically EMC yesterday, what kind of benchmarks were they? What kind of configurations were they? Were you optimizing the FusionIO for using their atomic rights, which is a way to write directly a memory? They said, no, no. We were just doing a straight apples to apples comparison on the cards, okay? That's cool. We clarified that. There was no attempt to inject the FusionIO super software in there and optimize that. It was really just a sort of head-to-head on the card performance and that's fine. Well, I'm sure we'll see some responses for FusionIO. Yes, so I mean, David, is that a fair comparison? Because if I look at it, FusionIO is kind of that leapfrogging of generations, right? EMC just came out with a new generation, FusionIO shipping a little bit of an older generation. Yeah, so I guess it's like Flora says, a card is a card is a card. I think the bigger issue is that FusionIO is really a software company. Their whole value add and innovation is around the software to do atomic rights and they're really pushing hard there. So we didn't see a comparison with that capability. And I think that that led us to that combined with the cancellation of Thunder, which was EMC's sort of, they pre-announced last year a cluster like server side sand, if you will, on a card, on a PCI card. The cancellation of that led us to believe that EMC was really trying to protect its own base of Symetrix and VNX. Now, as a result of our analysis, I was able to spend some time with Zahid Hussain, who runs EMC's flash business unit. They brought him in from Intel, set up a separate business unit. I spent some time with him. Our concerns do is that EMC had its head in the sand with regard to the server side flash trends. And after spending some time with, they call him Zee, after spending some time with Zahid, I absolutely am convinced that they do not have their head in the sand. They totally get the whole hyperscale movement. They understand, I think, what FusionIO is doing. And I believe, even though he wouldn't tell me sort of what their plans are, I believe they're working on things that are moving in that direction. They're not sitting on their hands. So I'm much more comfortable with EMC's posture. We're going to be digging into that further, doing some analysis, further benchmark analysis and really following this. But I think that some of the negativity that we might have had on parts of the announcement, very positive on the all-flash array piece, we think EMC's going to dominate in that space and do very, very well within its existing customer base. But we felt like they were missing an opportunity in the hyperscale side. I will tell you, I think they got some work to do. They're clearly behind there. There's no question about it. But the fact that they understand what's going on and are moving, I believe, in a direction is encouraging. So now one of the other things is, Floyer wrote when Gelsinger came on as the head of VMware, he wrote that there are some real opportunities for VMware to control the metadata and use Flash in a new and innovative way from fast servers. And I think given VMware's software-defined data center direction, that's really where they headed. Now you saw that yesterday, the whole software-defined thing. What do you make of all that? Sure, so Dave, one of the things that we've all been watching with VMware is how much are they gonna compete with the storage guys? And Joe Tucci made it really clear that it's okay for the parent companies to really go on offense and compete with each other. So if VMware is gonna expand its virtual sand technology, which is its VSA technology, really attack the load of midrange. And we expect they actually have a technology called Virtual Flash, which should be able to, I think, do some of those things that David Floyer's been talking about. And extend how much intelligence VMware pulls into its environment and therefore can pull dollars away from its ecosystem in the storage world. So essentially what's happening here, if I understand it, is VMware is trying to do to storage and networking what it's done to compute in memory, creating an abstraction simplifying, better utilizing the resources and take that same concept into storage and into networking. Yeah, so the other big announcement that VMware talked about is their networking stack. They're pulling together the NYSERA components that they had and the networking components, which were mostly in really like the firewall and security portion of the V Cloud portfolio and putting those together. I believe the term is now NSX. It was an old Acura car, but now turned into a VMware portfolio. And VMware is not only looking to have this be the platform for its network virtualization transformation, but they also said that they're going to basically give their entire NYSERA stack to OpenStack. So one of the kind of wars that we've been watching is the VMware stack versus Amazon and OpenStack as the other alternative there. So VMware is trying to inject some of their intellectual property into OpenStack so that hopefully they can kind of get their arms around it and therefore be able to really control some of the environment. Well, Stu, speaking of OpenStack, as you know, I mean, I wrote a piece a while ago now is OpenStack ready for prime time and kind of concluded no. But I will tell you that since that piece, well, first of all, we always knew the developers were behind OpenStack. John Furrier called it a hail, when it first came out of Hail Mary against Amazon, it looks like the pass was connected. It has great potential of being connected. We heard from HP last week. HP is all in an OpenStack. We heard from Ambuj Goyal today, the new head of IBM's storage division, that IBM is all in an OpenStack. And we heard yesterday from VMware that they are embracing OpenStack. Well, I would say VMware is embracing multi-cloud environments and heterogeneous environments. If you were to ask VMware, should you choose OpenStack or should you choose, say, the new hybrid cloud offering that they have? Of course, VMware is going to recommend that you do their stuff. And HP and IBM are going to recommend... OpenStack. Right, so that's very encouraging for the OpenStack community. And of course, as you know, Rackspace and Dell and many others have been behind this. But so OpenStack looks like it's really viable competition, open source competition for Amazon. And we'll be tracking that. Amazon, as you know, is a firm and entity. AWS is a philosophy and a movement, if you will, that we've been tracking for quite some time. I want to come back to the news yesterday. The big news was the Pivotal move. Now EMC had previously and VMware announced the Pivotal initiative, carving out key components of each company and then placing them into a new entity, I guess it's going to be called Pivotal Link under Paul Moritz. So EMC has contributed Green Plum and Pivotal Labs, the rapid application development shop that it picked up. And a chunk of cash. And a chunk of cash and a bunch of employees. And VMware has contributed a number of assets. So we're talking about things like Cetus and Cloud Foundry and Spring and Gemfire. So as well as I think 500 employees, roughly yes. So and what Joe Tucci said and others is that they're going to start off basically with about $300 million in revenue. So 300 million this year. Now essentially what happened is Jonathan Chadwick, the CFO of VMware who was very impressive, took us through what was happening here. So they're taking a piece of the revenue from VMware, putting it into the Pivotal initiative. Obviously EMC is doing the same with Green Plum and Pivotal Labs. But VMware is reducing its operating costs. As a result, it's operating margin forecast for 2013 ticked up. Well, guess what? The street loved this message. Yesterday morning, the market was down, the Dow was down, S&P was down, the NAS was down. VMware was up, EMC was up. When the market rebounded, recovered, VMware's up nearly 9%. And so the street loved the message. So Dave, question on that. So does Wall Street, can they really peer through the way that these companies work? So I think about VMware. VMware's over 80% owned by EMC. You've done a lot of analysis looking at VCE. VCE has a lot of their funding from EMC, some from Cisco, and the street just doesn't seem to be able to look at these and find out where the revenue's going and how to account for it. So EMC stock has not been doing great of late. VMware took a big beating after their last quarter, coming back some after the recent announcement. And now you've got Pivotal, which is going to be 69% owned by EMC and 31% by VMware. This is a complicated mix of assets between multiple companies. How does this work? I was talking to some of the board members about this and they said, yeah, it took us some time to figure out, okay, who goes what? Who owns what? What's the overlap? What's the charters? But I think they've done a really good job with it. I mean, VMware is virtualization and the software does define data center. EMC is all about infrastructure and really, really focused there and of course, trust with RSA. And under Meritz, the Pivotal piece is really trying to build the platform for big data. And so they really are identifying a new style of computing, Green Plum just announced a hawk which is Hadoop with Query, bringing real time into Hadoop. So really going after it. And I think I totally agree with what Meritz said. Somebody is going to emerge from this as a dominant platform player because a new style of application development and deployment needs to be created and we are going after that hard. Now, here's what I would say about that. By, first of all, I think the move is brilliant and I think the reason why Wall Street loves it is because they've taken some money losing assets but that have high growth potential and of strategic value placing them into an entity and they stated the intent is to do an IPO. They got a lot of work to go before they do an IPO but that's the intent. Now, by doing that, they increase, for instance, VMware's operating margins, make them more profitable, get them more focused because it was kind of fuzzy, Stu. Developers were, there was some backlash there and they create this incremental value that can now be counted and very importantly they can incent employees and this is particularly important as you know in California and tie them to the growth of the Pivotal initiative and not have them sort of lost in VMware or even EMC. So from that standpoint, I think the street really, really likes it. Yeah, no, I think it's a win even if you look at what VMware was doing, there was some confusion. If you went to VMworld the last couple of years, Cloud Foundry had its followers and people that were interested but they weren't the same people that cared about infrastructure and about improving virtual environments so there was that schism inside and now that's been cleaned up. VMware is going to be focused on virtualization, the software-defined data center, they've got Hybrid Cloud as a piece of it and the third piece they had is the end user computing which kind of rounds out the vision of where they're going. So the other important piece yesterday was you got to see the EMC family, Joe called it and there was a really tongue-in-cheek discussion because Joe's Italian and he had this conversation about my name ending in UCCI and one of the analyst names ending in UCCI and the analyst suggested he maybe changes the reference from family to something else. We're in New York, it was kind of funny but nonetheless, you basically saw Joe Tucci as the orchestrator of this portfolio. Very clearly David Goulden is taking the reins over at EMC. He's got a dual hat right now, he's running the day-to-day business and he's the CFO. I think they're going to bring in the CFO and relieve him of those duties and he's going to take that on and very clever transition plan bringing Goulden along. So Goulden is in charge of EMC, that was clear. Gelsinger was kind of his coming out party, very clear of Pat's vision and focus on the software-defined data center, explaining what that was, taking us through sort of the progression of VMware and where it's headed and then Moritz who is Mr. Strategy, he's proven he's also Mr. Execution, he's also Mr. Developer friendly. So they've got really solid leaders in those three companies and it was quite impressive to see and I think that it's amazing, the talent that they've been able to capture. Now the other piece is that VMware announced its hybrid cloud offering. So essentially they are getting into the service provider business but they were very careful to say that it's going to be open and all this IP is going to go to our service providers, partners as well. They're walking a fine line there, Stu. I mean, essentially Tucci has said we're not going to compete with our partners. Isn't this a form of competing with their partners? Yeah, Dave, absolutely. So they've had this VSPP program now for a while and now there's the option. You can either go to those guys or you can come to us. But if VMware becomes an infrastructure as a service provider, who's going to build and operate this environment? Is VMware going to build out this services force that then does compete against the ecosystem that really helped build VMware? It's a big question. There is concern. It's kind of interesting that this week, Amazon came out with kind of a repackaging of their private offering. So Amazon's going after the channel that VMware has held onto. So there'll be this real battle, the cloud wars out there. VMware has the data center today is trying to extend out and Amazon and Rackspace and others are really trying to go into that data center and displace VMware licenses. Yeah, my quick take on that by the way is I think partners like Capgemini and Accenture and even CSC are going to love it. I think that guys like TerraMark are going to say, whoa, wait a minute. So we'll see, we'll see how that plays out. Two more things I want to cover. One is trust, big message on trust. Tom Heiser, who's running the show over at RSA, spoke, the takeaway there, and we heard this from HP last week too, is that all the investment in security is really to protect the intruders from getting in. But all the damage is being done once they get in. So there's got to be a shift in from investing in just prevention to really understanding what people are doing when they get through and detecting what they're doing and monitoring that and then remediating it. So you're going to see a big shift in spend and innovation and technology around that. The second is project-born. So there's a big talk about software-defined storage. Jeremy Burton at the analyst meeting talked about how they're essentially going to abstract the storage function as services and be able to run that on virtually any infrastructure. They reiterated that yesterday for the hyperscale guys who just want C8 disks. EMC is claiming that it's going to allow their data management and storage management stack to run on that. But it will also run on EMC hardware, presumably with some additional benefits. Now I had to split to catch a plane. You heard the project-born presentation and I guess there's some confusion as to when it's actually going to be available. But not if you listen to David Goulder, right? So tell us. So Abitab Shrivastava went through the presentation, talked about how, in some ways it sounds a little bit like storage virtualization. If you have multiple boxes, whether it's EMC or non-EMC, they're gonna be able to help you manage it and help extract it and going to be able to really span between the virtual environments and the physical environments because, of course, if something goes wrong, you need to be able to dig below that layer of abstraction. And storage has been one of the real problems in bottlenecks in virtual environments. So real thorny problem. And at the end of it, of course, one of the analysts on Wall Street said, well, when can we buy it? And David Goulden set up and he said, hey, Abitab, everything you've got here, it is gonna be shipping by the second half of this year. And he kind of got the, yes boss, absolutely, it'll be shipping. So kind of the telegraph that they have is, I'm sure we're gonna hear a lot more about this at EMC World in May and it'll be shipping this year. So that's- Well, I'll tell you, I think we're gonna hear more about it at EMC World in May. I'm very skeptical that the whole suite is gonna be shipped. This is complicated stuff and being able to, of course, it'll come out in phases, but here's the key, Stu, in my view. I think EMC really gets this notion of software defined, really pushing on it. I think they understand they just cannot sit on their lead, they can't sit in their legacy business, they have to really keep pushing on. And the way they've formed the company, capitalized the company, created these other entities, created these competing entities in a way like they did with Flash, it's like it's a testament to the way in which this company has survived and evolved. So I'll give you the final word. Okay, so I think if you look at it, the portfolio makes a lot more sense now. VMware can really stick to its knitting. It's not going off trying to be the next big thing for big data, the portfolio is sharper. It's gonna be simpler to understand where the different companies fit, but at the same time, as Joe said, they're gonna overlap with each other and the proof's gonna be whether we actually see EMC doing things that might possibly negatively affect VMware and VMware, of course, doing things that might affect the other partners. So it's a dynamic environment. EMC keeps it interesting for two market leaders to be able to try to transform businesses and stay ahead of all those startups and everybody that's trying to disrupt them. It's an audacious plan and it's exciting to watch. So you like the strategy? Yes. Now it's all about execution. EMC, one of the best companies on the planet at executing, obviously the same can be said for VMware. I would expect similar things for Pivotal, although it's the wild west of big data. All right, Stu, thanks very much for filling us in on your angle and I'm Dave Vellante. That's Stu Miniman with me. Thanks everybody for watching and we'll see you next time.