 Hello, this is Dave Vellante. We're here to talk about the massive 61 billion dollar planned acquisition of VMware by Broadcom, and I'm here with Phil Brotherton of NetApp to discuss the implications for customers, for the industry, and NetApp's particular point of view. Phil, welcome, good to see you again. That's great to see you, Dave. So this topic has garnered a lot of conversation. What's your take on this epic event? What does it mean for the industry generally and customers specifically? You know, I think time will tell a little bit, Dave. We're in the early days. We've, you know, it's heard the original announcements, and then it's evolved a little bit as we're going now. I think overall it'll be good for the ecosystem in the end. There's a lot you can do when you start combining what VMware can do with compute and some of the hardware assets of Broadcom. There's a lot of security things that can be brought, for example, to the infrastructure that are very high-end and cool and then integrated so it's easy to do. So I think there's a lot of upside for it. There's obviously a lot of concern about what it means for vendor consolidation and pricing and things like that. So time will tell. You know, when this announcement first came out, I was, I wrote a piece, you know, how Broadcom will tame the VMware beast, I called it. And you know, looked at Broadcom's history and said they're going to cut, they're going to raise prices, et cetera, et cetera. But I've seen a different tone, certainly as Broadcom has got into the details. But, and I'm sure I and others maybe scared a lot of customers, but I think everybody's kind of calming down now. What are you hearing from customers about this acquisition? How are they thinking about it? You know, I think it varies. There's, I'd say generally when I, we have like half our installed base, Dave, runs the ESX server. So we, the bulk of our customers use VMware. And generally they love VMware. And I'm talking mainly on-prem. We're just extending to the cloud now, really at scale. And there's a lot of interest in continuing to do that. And that's really strong. The piece that's careful is this vendor, the cost issues that have come up, the things that were in your piece, actually. And what does that mean to me? And how do I balance that out? Those are the questions people are dealing with right now. Yeah, so there's obviously a lot of talk about the macro, the macro headwinds, everybody's being a little cautious. The CIOs are tapping the brakes. We all sort of know that story. But we have some data from our partner, ETR, that ask, they go out every quarter and they serve a 1500 or so IT practitioners. And they ask the ones that are planning to spend less, that are cutting, how are you going to approach that? What's your primary methodology in terms of achieving cost optimization? The number one by far answer was to consolidate redundant vendors. It was like, it's now up to about 40%. The second, the distant second was, we're going to optimize cloud costs, still significant, but it was really that, that consolidating the redundant vendors. Do you see that? How does NetApp fit into that? Yeah, that is an interesting, that's a very interesting bit of research, Dave, that I think is very right. One thing I would say is because I've been in, I've been in the infrastructure business in Silicon Valley now for 30 years. So these ups and downs are, that's a consistent thing in our industry. And I always think people should think of their infrastructure and cost management. That's always an issue with infrastructure is cost management. What I've told customers forever is that when you look at cost management, our best customers at cost management are typically service providers. There's another aspect of cost management is you want to automate as much as possible. And automation goes along with vendor consolidation because how you automate different products, you don't want to have too many vendors in your layers. And what I mean by the layers of ecosystem, there's the storage layer, the network layer, the compute layer, like the security layer, database layer, et cetera. When you think like that, everybody should pick their partners very carefully per layer. And one last thought on this is it's not like people are dumb and not trying to do this. When you look at what happens in the real world acquisitions happen, things change as you go. And in these big customers, that's just normal that things change. But you always have to have this push towards consolidating and picking your vendors very carefully. Well, so just to follow up on that. I mean, when you think about multi-cloud, and you mentioned, you've got big customers, they do a lot of M&A. It's kind of been multi-cloud by accident. Oh, we got all these other tools. And storage platforms and whatever it is. So where does NetApp fit in that whole consolidation equation? I'm thinking about cross-cloud services, which is a big VMware theme, and thinking about a consistent experience, on-prem, hybrid, across the three big clouds, out to the edge, where do you fit? So our view has been, and it was this view and we extended to the cloud is that the data layer, so in our software it's called ONTAP, the data layer needs is a really important layer that provides a lot of efficiency. It only gets bigger, how you do compliance, how you do backup, DR, blah, blah, blah. All that data layer services needs to operate on-prem and on the clouds. So when you look at what we've done over the years, we've extended to all the clouds our data layer. We've put controls management tools over the top so that you can manage the entire data layer on-prem and cloud as one layer. And we're continuing to head down that path, because we think that data layer is obviously the path to maximum ability to do compliance, maximum cost advantages, et cetera. So we've really been the company that set our sights on managing the data layer. Now, if you look at VMware, go up into the network layer, the compute layer, VMware is a great partner. And that's why we work with them so closely they're so perfect fit for us. And they've been a great partner for 20 years for us, connecting those infrastructural data layers, compute, network and storage. Well, just to stay on that for a second, I've seen recently you kind of doubled down in your VMware Alliance. You got stuff at Reinvent I saw with AWS, you're close to Azure. And I'm really talking about ONTAP, which is sort of an extension of what you were just talking about, Phil, which is kind of NetApp storage operating system, if you will. But so maybe talk about that relationship a little bit and how you see it evolving. Well, so what we've been seeing consistently is customers want to use the advantages of the cloud, so point one. And when you have to completely refactor apps and all this stuff, it limits its friction, it limits what you can do, it raises costs. And what we did with VMware, VMware is this great platform for being able to run basically client server apps on-prem and cloud the exact same way. The problem is when you have large data sets in the VMs, there's some cost issues and things, especially on the cloud, that drove us to work together and do what we did. We GA, so NetApp is the only independent storage, independent storage, say this right, independent storage platform certified to run with VMware cloud on Amazon. We GA'd that last summer, we GA'd with Azure, the Azure VMware service a couple of months ago. And you'll see news coming with GCP soon. And so the idea was make it easy for customers to basically run in a hybrid model. And then if you back out and go, what does that mean for you as a customer? It's not saying you should go to the cloud necessarily or stay on-prem or whatever, but it's giving you the flexibility to cost optimize where you want to be. And from a data management point of view, ONTAP gives you the consistent data management, whichever way you decide to go. Yeah, so I've been following NetApp for decades network appliance and I saw you go from kind of the workstation space into the enterprise. I saw you lean into virtualization really early on and you've been a great VMware partner ever since. And you were early in cloud. So you're sort of talking about that cross cloud, what we call super cloud. I'm interested in what you're seeing in terms of specific actions that customers are taking. Like I think about ELA's and I think it's a two-edged sword, should customers lean into ELA's right now? What are you seeing there? You talked about sort of modernizing apps with things like Kubernetes, cloud migration. What are some of the techniques that you're advising customers to take in the context of this acquisition? So the basics of this are pretty easy. And I think even Ragu, the CEO of VMware has talked about this. Extending your ELA is probably a good idea. Like I said, customers love VMware. So having a commitment for time, consistent cost management for time is a good strategy. And I think that's why you're hearing ELA extensions being discussed. It's a good idea. The second part, and I think it goes to your surveys that cost optimization point on the cloud is moving to the cloud, if moving the cloud has huge advantages, but if you just kind of lift and shift oftentimes the costs aren't realized the way you'd want. And the term modernization, changing your app to use more Kubernetes, more cloud native services is often a consideration that goes into that. But that requires time and most companies have hundreds of apps or thousands of apps they have to consider modernizing. So you want to then think through the journey, what apps are going to move? What gets modernized? What gets lifted, shifted? How many data centers are you compressing? There's a lot of data center, the term I've been hearing is data center evacuations, but data center consolidation, so that there's some even energy savings advantages sometimes with that. But the whole point, back up to my whole point, the whole point is having the infrastructure that gives you the flexibility to make the journey on your cost advantages and your business requirements, not being forced to it. Like it's not really a philosophy, it's more of a business optimization strategy. When you think about application modernization and Kubernetes, how does NetApp fit into that? As a data layer? Well, so if you kind of think, you said like our journey, Dave, was when we started our life, we were doing basically virtualization of volumes and things for technical customers. And the servers were always bare metal servers that we got involved with back then. This is like going back 20 years. Then everyone moved to VMs and like it's probably today, I mean, getting to your question a second, but today, loosely 20% bare metal servers, 80% virtual machines today, and containers is now a big growing piece. So if you will, sort of another level of virtual machines in containers. And containers were historically stateless, meaning the storage didn't have anything to do. Storage is always the stateful work area in the architectures. But as containers getting used more, stateful containers have become a big deal. So we've put a lot of emphasis into a product line we call Astra that is the world's best data management for containers. And that's both a cloud service and used on-prem in a lot of my customers. It's a big growth area. So that's what it, when I say like, one partner that can do data management, just that's what we have to do. We have to keep moving with our customers to the type of data they want to store and how do you store it most efficiently? Hey, one last thought on this is, where I really see this happening, there's a booming business right now in artificial intelligence. And we call it modern data analytics, but people combining big data lakes with AI. And that's where some of this, a lot of the container work comes in. We've extended objects. We have the thing we call file object duality to make it easy to bridge the old world of files to the new world of objects. Those all go hand in hand with app modernization. Yeah, it's a great thing about this industry. It never sits still. And you're right, it's like- Why admit it? Yeah, it's always something. And it's an abstraction layer. There's always going to be another abstraction layer. Serverless is another example. It's primarily stateless. That's probably going to change over time. All right, last question. Thinking about this, the Broadcom acquisition of VMware in the macro climate, put a sort of bow on where NetApp fits into this equation. What's the value you bring in this? Yeah, what's like I said earlier, I think it's the data layer of, it's being the data layer that gives you what you guys call the super cloud, but gives you the ability to choose which cloud. Another thing, all customers are running at least two clouds. And you want to be able to pick and choose and do it your way. So being the data layer, VMware is going to be in our infrastructures for at least as long as I'm in the computer business. Dave, I'm getting a little old. So maybe the decades, I think is an easy prediction. And we plan to work with VMware very closely along with our customers as they extend from on-prem to hybrid cloud operations. That's where I think this will go. Yeah, and I think you're absolutely right. Look at the business case for migrating off of VMware, it just doesn't make sense. It works, it's world-class, it recover. They've done so much amazing. We used to be called the Merits, called it the software mainframe, right? And that's kind of what it is. I mean, it means it doesn't go down, right? And it supports virtually any application around the world. So... And I think getting back to your original point about your article from the very beginning is I think Broadcom's really getting a sense of what they've bought. And it's going to be, hopefully, I think it'll be really another fun era in our business. Well, and you can drive EBIT a couple of ways. You can cut, okay, fine. And I'm sure there's some redundancies that they'll find. But there's also, you can drive top-line revenue. And we've seen how EMC and then Dell used that growth from VMware to throw off free cash flow. And it was just funded so much innovation. So innovation is the key. Hocktan has talked about that a lot. I think there's a perception that Broadcom doesn't invest in R&D, that's not true. I think they just get very focused with that investment. So Phil, I really appreciate your time. Thanks so much for joining us. Thanks a lot, Dave. It was fun being here. Yeah, our pleasure. And thank you for watching The Cube, your leader in enterprise and emerging tech coverage.