 From Las Vegas, it's theCUBE. Covering VMworld 2018. Brought to you by VMware and its ecosystem partners. Hello everyone, welcome to theCUBE's live special coverage here at VMworld 2018. It's our ninth year covering VMworld theCUBE. I'm John Furrier with my co-host, Dave Vellante, Stu Miniman, breaking down Pat Gelsinger's keynote. Pat Gelsinger's sixth year as CEO. We got two live sets here, three days of wall-to-wall coverage. Again, ninth year covering VMworld. We're going to kick off the keynote analysis here and break into the hard call. I have a ton of news with VMware. Really got a spring in their step. Pat Gelsinger, sixth year as CEO. Dave Vellante, Stu Miniman, let's break it down. Let's go through the analysis. Six years CEO. Couple of years ago, Pat was on shaky ground. Michael Dell's making more money than God these days with his financial situation. But the big news, Andy Jassy from Amazon Web Services came off the stage and announced that they are doing their first on-premises solution. Oh, he didn't say that. That's what I'm saying. He actually means. That's what it is. RDS, Amazon Web Services Relational Database Service on VMware, which is going to be running on-premises. Guys, let's break down the keynote. That's the big news. There's a lot of other stuff in here. Obviously, emphasis on edge, showing a little bit of direction on edge. But the interplay of Cloud Mobile, AI and machine learning, Stu, your take. Yeah, John, you know, we sat here, analyzing this VMware-ABS relationship. Is this a one-way move to the public cloud? Is Amazon just going to take those 500,000 VMware customers and get them all to migrate? Even in the start of Andy and Pat up on stage, Andy goes, the number one use case is migrating your applications to the public cloud and Pat's like, and the number two use case is bursting and on-demand and things like that. So it's an interesting dynamic between what we call, you got the gorilla in the data center of VMware and you've got the 800-pound gorilla in the cloud, fast as a cheetah as Dave Vellante says in AWS. But RDS, on-premises, this is a big deal. I tell you, I'm surprised. Most people here are surprised. There'd been discussion. We were at some shows recently when they're expanding the Snowball use case. Snowball's great. It's edge, it's helping to migrate things to the data center. This is an Amazon service running in VMware on-premises. Didn't think that we would be seeing this from Amazon whose goal was, we thought to get 100% of things in the public cloud, but we know there's going to be data center stuff for a long time. Huge news, Amazon Web Services, RDS on VMware, Dave Vellante. This is interesting validation for Amazon. This is something that they've never done before. It's out of their DNA to go actually partner and then bring an on-premises device. It essentially validates hybrid cloud, validates multi-cloud, validates essentially the movement that we're seeing with, not just multi-cloud, it's all things data center on-premises is now going cloud operation. So you got operators in the VMware culture and you got developers in scale and Amazon Web Services. Who's running the show up there? Jassi or Gelsinger? What's your analysis of the big news from Amazon Web Services? Well, I got to give props to David Floyer. Three years ago he said, AWS will absolutely have an on-prem strategy to compete with Azure Stack and other on-prem solutions. They have to because of what Wikibon calls true private cloud, you can't just move all the data into the cloud. So his prediction has come true. But I want to go back to three years ago, John, you're right on. Three years ago, Pat Gelsinger was under fire, the stock was down, license revenue was in the single digit growth. Today VMware's, this year will be a $9 billion company with a $60 billion market caps too. That's a hundred X return from when your former company and Joe Tucci, EMC bought VMware for about $635 million. And Dave, I love your analysis on this because this isn't just general purpose. We're talking RDS. This is database. Andy Jassy with like nothing more than to take a big chunk out of Larry Ellison's business. The stickiest application in the enterprise today is the database that's a huge piece. And now VMware, Dave, how many years did we talk about trying to virtualize databases and how challenging that was and what the licensing and what Oracle could do. And now you've got VMware arm-on-arm with Amazon to try to help customers migrate that really sticky application. Well, the big question is the AWS VMware relationship, a one-way trip to the hotel cloud of Fornia, or is it a boon for the data center? And potentially the answer is both. However, near-term it's clearly given VMware momentum. Long-term, however, this company has some work to do before it has what we would call cloud-first hybrid cloud strategy. They talk Kubernetes, they'll talk containers, but the degree to which those things are fundamental and integrated into the platform, and you guys can talk to this better than I can, are a long ways off. And so the key is they have to invest. Now, here's the problem. VMware has $13 billion of cash on its balance sheet. 11 billion of that is going as a special dividend to VMware to shareholders to Dell, 80% to Dell. And Dell's using that to buy out the DVMT stock and then do a public offering. Is that the best use of VMware's cash? Obviously not, but that's the price you pay to have independence. Well, VMware's printing money right now. The revenue's great, the profits are strong, as you pointed out. Dell's making more money. He's going to double his money from when he started this deal. But if you look at the world of Amazon and cloud, Stu and Dave, let's look at this because the growth that's going to happen over the next 20 years is going to be different. I think, you know, Pat Gelsinger's an Intel guy, Wintel, Windows Intel. This is a, you know, is this a Windows Intel moment for cloud where you've got Amazon and VMware essentially dividing and conquering the territory and what's the growth going to look like if that flywheel is going to be integrating. And Gelsinger said, you know, servers, I mean, working with cloud and machine learning all have an interplay component, more data, more, better AI, faster horsepower. So I don't see this as a mutually exclusive. And I think the validation of the Amazon deal that Jassy talked about is RDS on premises absolutely means that Amazon is looking at the data center as an edge. The VMware community looks at the cloud as an edge for them. So this is all cloud. The growth is going to be massive. And the piece that ties it all together is networking. I have to say, I was super skeptical when a few years ago, Pat Gelsinger got up on stage and said, we're the biggest networking company in the world because of all our virtual switches. And the audience was like, what are you talking about? We're not networking people. We're not doing this. Look at the NSX business. They have the VeloCloud acquisition. They've been building out what the promise of NYSERA was. I was so excited. And my friends in the networking world, when NYSERA talked about the vision for this multi-cloud and really the glue that'll tie all these things together, there for a few years it was just, well, we're making virtualization better. And that was nice, but now it's a multi-cloud vision. They're extending the NSXT. They've got a deep integration with Amazon that I think it's in preview right now. I've talked to some people that are playing with it. It doesn't fully work yet, but with AWS Direct Connect, they're partnering with Arista. John, we're going to be talking to Andy Bechtelstein, legend in the industry in a couple of minutes. Networking and security. If VMware can ride that next wave, what Pat said next year is that this will be even bigger than kind of the virtualization wave was the networking and absolutely the opportunities there. And we're starting to see some proof points that VMware is heading in the right direction. I want to share some data from research. Wikibon's true private cloud report says that true private cloud this year will be a $32 billion business. Gartner guy came out and said, 80% of data centers will shut down by 2025. That caused a lot of brouhaha. My friend Kwong Kim over at ETR, Enterprise Technology Research, their data, their research shows that VMware is being pressured by both public cloud and containers and interestingly, Nutanix, Azure, AWS, Kubernetes, and Docker right now have all the momentum. You know, on that point, the thing that Gelsinger said, a couple of things on there that got my attention. One is he made a comment that customers should never pay for DR ever again in the future. I made a note of that one. But he made a comment about the quote that was mentioned in history of tech, which is the network is the computer. He said, in the future, application is the network. And that's to your point that as the world starts changing with DevOps, the entire role of the network and the application are going to change significantly. We know that the network's going to be programmable. We know apps going to start self-provisioning. And then when you start adding in this notion of on-premises with Amazon, the database business is what VMware is essentially helping Amazon win. Jassy said, quote, our database business and the billions of revenue. So they're doing billions of dollars in database as a cloud company. Absolutely a strategic deal for AWS to do that. And again, storage options are getting cheaper. They're integrating EBS with vSAN. That was a notable integrate NSX with AWS Connect. Again, is NSX going to be the interconnecting component between clouds? Is that going to be the TCPIP of what cloud is? Database is a linchpin here. And Dave, you're pointing out, VMware has work to do to be cloud first, if you will. One of the moves, they made an acquisition day. 200 person company, Boston based, we know them well. Cloud help technologies, Joe Cansella, I've had a chance to interview, talk to a number of the team. They're actually opening their new headquarters in Boston on Thursday. I'm hitting it when I fly back to Boston, when I get back. They are deep in the Amazon ecosystem and doing quite well there. If VMware can be seen not just as a data center, virtualization company, but do they have a real play across, they talked about Google and the keynote. They talk about how they tie into the Microsoft ecosystem. If they can really play in this multi-cloud world, they have an opportunity to be one of the strategic players to help companies in this next generation of IT. And they have some time, but they got to get going. It can't take as long for them to go cloud first as it did for them to actually get V-SAN to the marketplace up and running. So, and Dell has to have a fine line, a balancing act between paying down its debt, sucking out the money, doing things like recapitalization and funding VMware. I mean, it's not cloud first anymore, it's cloud now, cloud is happening now. You see the big news, Amazon Web Services on-premise with RDS, Relational Database Service on VMware, VMware acquiring cloud health. These are tell signs that the cloud business is reshaping and reimagining how enterprises and the suppliers do business. We're going to break it down for you here on theCUBE for three days. We have our wrap up at the end of the day with a big lineup of guests, 94 guests throughout the entire event, over 72 interviews we got going on, ton of actions, stay with us for three days. This is theCUBE here at VMworld 2018. I'm John Furrier, Dave Vellante and Stu Miniman. We'll be back with more coverage after this short break.