 From the SiliconANGLE Media Office in Boston, Massachusetts, it's theCUBE. Now, here's your host, Dave Vellante. I want to welcome to this week's episode of theCUBE Insights, powered by ETR. You know, this past week, we attended the Dell Technologies Industry Analyst Event. And in this breaking analysis, I want to summarize the key takeaways and discuss some of the macro trends in the industry that are affecting Dell. I'll also discuss some of the fundamental assumptions that Dell is making in its operating model. And I'll talk about some of the challenges that I see for the company going forward, and hopefully what is a frank manner. Now, let me start with the event itself. It was held in Austin, Texas, and it's clear that Austin, Texas is becoming the epicenter of Dell post-acquisition of EMC. It's shifting strongly back to Texas while the legacy of EMC remains what is the most critical part of Dell's portfolio thanks to VMware. The energy of Dell emanates from its founder, Michael Dell. The event was attended by about 250 press and analysts over a two-day period. It was very well-run, with strong levels of executive access, which is always very important to the analysts, and lots of transparency, and I thought clarity of message. Now, the number one takeaway on this is Dell, in four years, the company has gone from irrelevance to a dominant and highly relevant player in the enterprise tech, especially the CIOs, and it's one of the most amazing transformations of a company that personally I've ever seen, and I've seen several. There were four other key takeaways from me that I'll show on this first slide of Alex if you bring it up. First, Michael Dell has put forth a set of moonshot goals for 2030. Let me give you some examples. By 2030, Dell says that for every product that they sell, they're going to recycle an equivalent product. By 2030, 50% of the global workforce of Dell will be women, and 40% of the managers of people will be women. 25% of the US workforce will be either Hispanic or African. Now, most tech stories today are negative, and this is a great positive message. I'm not going to spend a lot of time on this, because there's much more that Dell laid out, but kudos for Dell for making these initiatives a priority, particularly with the women in tech and the diversity in the minorities. I think it's excellent. The second takeaway for Dell is, Dell is being driven by Jeff Clark, and this guy is on a mission to simplify the portfolio. Dell claims it's reduced its product portfolio from 88 platforms down to 20 of that power platforms. That power is a new brand. Now, the reality is Dell really hasn't deprecated 68 products, many if not most are still around, but the RMD energy is all going into the new stuff. Now, the third takeaway was a big announcement around Power One. Power One is Dell's new platform for the next generation of converged infrastructure. Now, a lot of people might look at this and say, well, this is converged infrastructure without Cisco. Well, it is actually, and while that's true, Power One, according to Dell, is a much more of a developer friendly API and microservices based platform with a lot of automation software built in. It's essentially going to be Dell's go forward platform for customers that don't want to roll their own infrastructure. The expectation or inference that we took away was that Power One will integrate most, if not all, future storage, networking, and server products. And Dell is positioning this as a compliment to HCI or a hyper-converged infrastructure, which comprises VxRail, VxFlex, which is the scale IO, and of course the OEM Nutanix. So you can see Dell still got some work to do in terms of streamlining its portfolio. And here's my lock of the day is that they'll be phasing out the Nutanix OEM relationship. You can take that one to the bank. Now, the fourth takeaway was that Dell's cloud strategy is really coming into focus. Is it a winning strategy? I honestly can't say at this point, but in my view, it's the only option that Dell has. And because of VMware, they have a fighting chance. Dell is in a much better position than other suppliers that rely on on-prem install bases because of VMware. If VMware is not only Dell's piggy bank, it is, but it also gives Dell strategic levers with CIOs and partners like, for instance, AWS. Now later on, I'm going to share some ETR data that will give you some context. But the bottom line is that the cloud is having an impact on everyone's business, including Dell's. Let me add that Dell's cloud strategy, in addition to relying on VMware, is completely dependent on the assumptions that the world is going to be hybrid, which is a good assumption, and that multi-cloud is going to evolve from what today I've said is a symptom of multi-vendor to a fundamental priority for CIOs. Again, not about assumption, but because of VMware, Dell has more than a fighting chance to compete for share. Finally, that Dell is going to be able to capitalize on the edge. Personally, I think this is the biggest wild card. What I do think is that developers are going to be a crucial part of the edge, and at this point in time, Dell and VMware are not really top of mind in the developer community. Now the event involved keynotes from Michael Dell and other execs including the CFO, who's Tom Sweet, and many other breakout sessions, you know, the normal one-on-ones as well. Now I don't have time to go into all this, but there are some things that I want to share about Jeff Clark's presentation specifically. He's the person that took over from David Goulden a couple of years ago. He's been at Dell for more than 30 years, and he was there when I think it was called PC's Limited. So a long time, he's a trusted operational executive of Michael Dell's. I'm very impressed with this guy. He doesn't use a cheat prompter when he talks, and in fact, he has some notes, but he's got these facts and figures in his head that he rattles off like a staccato pace. He's a no BS exec, and so let me summarize his discussion. Now to bring up this slide, the big picture is the data sphere is going to grow to 175 zettabytes, and half of that is going to be created at the edge. Of that, 30% is going to require real-time processing. Now he talked about the mandate for simplification, and he called this thing the easy button. Now in Q&A, I asked him why did it take you guys so long to figure out something so obvious, which is kind of a snarky analyst question. Now to his credit, he didn't throw his predecessors under the bus. Rather what he did is he focused on the future, and he shared the figures that I stated earlier about taking 88 platforms down to 20, and he focused on the priorities of the future. So he didn't say it, but I'm going to say it for him. He inherited a very messy portfolio, and he had to clean up the crime scene. Let me tell you what a buyer said about EMC back in 2018. This is from the ETR Venn survey, where they go out and they probe specific customers, and they talk to them. This guy says NetApp has done a really good job of advertising and positioning itself within the cloud, and within data centers themselves. They've got a broad portfolio, and I don't want to make comments about NetApp, but so I'm not sure I agree with all this, but okay, come back to his statements. And they've integrated fairly well. Here's what's relevant. What he said was EMC on the other hand is not as well integrated. They've got a broad portfolio, but it's not necessarily easy to pick and choose from the different categories. Okay, so I agree with that. Look, the mega-launch product du jour worked for EMC. It allowed them to carry on for another five or six years after the downturn, but the lack of integration eventually caught up to them, and it will always catch up to large companies who rely on either lots of M&A or spinning out new products with lots of overlap. Anyway, I digress. The third thing that Clark talked about was the big market size, and the share gains. PCs are a $200 billion market, servers are an $80 billion market, and external storage is a $26 billion market. Dell has gained 600 basis points according to Clark in PCs over the last six years. 400 came in the last three years. 375 basis points in storage in the past two years. Of course, what he didn't mention is that was after a dismal performance a few years earlier, so they had a pretty easy compare. But my point is this. When you talk to Michael Dell, you talk to Tom Sweet, you talk to Jeff Clark and all the people folks in the company. Share gains are critical to Dell's strategy, especially because the cloud is taking so much share of wallet in the enterprise, and I'll make some other comments on that. Now, finally, there are two fundamental beliefs that Dell has that I want to share with you. One is that they can be a consolidator of these core markets. In a downturn, Dell thinks they can hold their breath, so to speak, longer than the competitors. And of course, in an upmarket, they think they can accelerate their leverage points, which leads to the second belief that Jeff Clark talked about, which is how Dell will deliver differentiation and value. So he cited four items there. One is they got 40,000 direct sellers, so they got a big go-to-market presence. They got 35,000 service professionals, a $66 billion supply chain, and then Dell financial services arm, which forces Dell to carry a lot of debt, but that debt throws off cash, and it's not really part of Dell's core debt from EMC acquisition. Now, others have that too, but Dell's got big presence there. All right, so I want to pivot to the ETR data, and let's see how Dell looks in the spending survey, and since market share is so important to Dell, why don't we take a look at how they're doing? So, Alex, this slide that I'm showing here, what ETR refers to as market share. Market share is defined by ETR as vendor citations in the survey, excluding replacements. So customers that are adding, spending the same, or spending more, or spending less, divided by the total number of respondents in the survey. So it's a measure of how pervasive the vendor is in the data set. What I'm showing in this slide is Dell's market share in its three most important business lines, namely VMware, Dell EMC, and Dell's laptop business. And I'm showing this from the January 17 survey to October 19. Now notice, the survey sample overall is 964 respondents. And the three brands, they show 817, 622, and 302 shared ends within that 964. So there's two points. One, Dell's doing pretty well. I mean, I'd say it's better than holding serve. And as you can see, it's steadily gaining. Now the second point is that, look at the net scores here. They're okay, especially for VMware and Dell's laptop, but Dell EMC, for instance, specifically their server and storage and networking business, not so much. So there's a mixed story here. So let me make some comments on the macro and things that I've discussed with ETR and my narrative on demand overall, some things that I've shared with you before. As we've discussed in past breaking analyses, spending is reverting back to pre-18 levels. But it's not falling off a cliff. We're seeing fewer adoptions of new tech and more replacements of old tech. So combine this with lower levels of spending and more citations overall, we're seeing net score go down relative to previous surveys. So here's what we think is happening. There's less experimentation going on with the digital initiatives, which started back in 2016. So you're seeing fewer adoptions of new tech as customers are start placing their bets and they're retiring legacy systems that they were keeping on as a hedge. And they're narrowing their spend on the new stuff and unplugging the stuff they don't need anymore. And they're going into serious production mode with the POCs. So that means overall spending is softer. It's not a disaster, but it's lower than expected than coming into this year. Storage is on the back burner in a lot of accounts because of cloud and the big flash injection that I've talked about giving him more headroom. Servers are really soft for Dell, especially because they have a tough compare with previous, with last year. PC is actually pretty good, all things being considered. So where is the spending action? Well, it's in the cloud. Now how many vendors tell me that there's a big repatriation trend happening, i.e. people have cloud remorse and they're all moving back on-prem, not all, but many, I'm not saying it doesn't happen, but at the macro level it's noise compared to the spending that's happening in the cloud. Just do the math. All you got to do is look at AWS and Microsoft and what they report and compare it to any enterprise company that relies on on-prem selling. I mean, I don't even want to argue about it. I mean, believe what you want, but I would much prefer to look at the data. So let's do that. So here's a slide that shows ETR data on customer spending on the cloud. So you got AWS Azure and Google Spenders and how their spending patterns have changed over time for Dell EMC servers. So you got 636 cloud accounts, 175 to 200 shared Dell EMC server accounts over the past three periods. And you got net scores of 24% down to 16%. So look at the gray bar versus the yellow bar. Gray is October 18, yellow is October 19. Okay, you get the picture. The next slide is the same view for Dell EMC storage. The gray bar is last year, yellow bar is this year's survey. So look at it, 22% down to 5%. I mean, that's not good. So storage is getting hit by cloud and that's going to continue. All right, so let me conclude with some comments in general. Overall, I like Dell's strategy. Honestly, without VMware, I'm probably not going to fly to Austin this week. Just being honest, but with VMware, Dell is far more important to our community. So I pay more attention to it. I haven't shared many thoughts on Dell's financials, but I think they have some upside here as they continue to pay down their debt. By the way, every $5 billion that they retire in debt, it drops 25 cents right to earnings per share. Dell throws off a lot of cash. It's a very well-run company. They got an excellent management team. We talked about their share gain lever. They don't have a public cloud, so they got to make on-prem as simple as possible. And ideally, as cloud-like as they can. The on-prem experience, frankly, is well behind that of the cloud, but cloud getting less simple and it's not cheap. So on-prem, in my view, doesn't have to be exactly cloud. It's just going to be good enough. Now Dell this week also refreshed its on-demand pricing. It's good. It's obviously relevant to cloud. I don't have time to go into all the detail, but suffice this to say that near-term, they're on-demand stuff. It's going to be a small factor in their business, but longer-term, I think it's going to play in, particularly to the cloud model. Dell is also betting on hybrid and multi-cloud. They have to, but they're up against several competitors. Microsoft is really strong in this space. Microsoft is also a partner, of course, but you got IBM and Red Hat, Cisco, Google, sort of, and some others. But VMware gives Dell an advantage, and that is the key. The big hole that I see in Dell, I'm going to come back to innovation. Dell spends billions of dollars on R&D. I think it's the number's 20 billion over the last four years. So that's good. But innovation in this industry is being delivered by developers. Those are the drivers. They're taking advantage of data, applying machine intelligence, and cloud for scale. And Dell is clearly well-positioned for the data trend. It could partner for cloud. It can certainly play in AI, but what it lacks, in my opinion, is appeal to the developer community. And just as Dell has become relevant to CIOs, it needs a similar type of relevance with the devs. And that's a different ballgame. So its hopes are leaning on VMware, and of course it's acquisition of Pivotal. But if I were Dell, I would not sit back and wait for Pivotal and VMware to figure it out. Here's what I would do if I were Dell. I would deploy at least 1,000 engineers. They've got 20,000 engineers. Take 1,000 or 1,500 of them and point them toward developing open source tools and build applications and tools around all these hot emerging trends that we hear about. Multi-cloud, multi-cloud management, Edge, all the innovations going on at Edge, autonomous vehicles, et cetera. AI workloads, machine intelligence, machine learning. I would open source that work and make a big commitment to the developer community, big contributions, and that would build hooks in from my hardware into these tools to make my hardware run better, faster, cheaper on these systems. I want to thank my friend Peter Burris for giving me that idea. I think it's a great idea. I think it's radical, but it makes sense in this world that it is really being driven by developers. Okay, this is Dave Vellante signing out from this episode of Cube Insights, powered by ETR. Thanks for watching. We'll see you next time.