 Live from Las Vegas, Nevada, it's The Cube at HP Discover 2014, brought to you by HP. Okay, hello everyone, welcome back. We're live here in Las Vegas for HP Discover. This is The Cube, our flagship program. We go out to the events, extract the silken noise. I'm John Furrier, founder of SiliconANG. I'm joined by my co-host Dave Vellante, co-founder and chief analyst at Wikibon.org. This is day three of wall-to-wall coverage. Again, you know, going to bring the energy always the third day is always kind of like a, you know, reflection, what's going on. We've had a chance to talk to the thought leaders, the executives, some of the entrepreneurs, and customers. And more importantly, get the metadata at the parties. That's the best part. You know, when people are loose, a little social lubrication, they start talking, we start listening, we start extracting. So, great time last night at the HP Cloud Party and the night before, I'll see the storage party. We also swung by the storage group. All the key areas we're interested in, I mean, software groups, sorry. Great action. Again, this is our, you know, I think our fifth year covering HP events internationally, both here in the U.S. and in Barcelona and Frankfurt. And I got to say, Dave, we've been, we have been chronicling the turnaround for HP. And it's been fun. It's been interesting, and the commentary off camera is just as good as the commentary on camera. I just got to say it's been fun. And it's interesting. HP is not letting go. I mean, the ship might have taken on water, so to speak. But clearly, Meg has got the boat turned for all, whatever the consequences will be. She is turning the ship into the direction kind of what I call away from the iceberg. So, you know, don't slalom with icebergs in the North Atlantic if you don't have to. You know, hit the more calmer waters. But HP still has that mojo. They still are bringing the integration of autonomy, which was a real tough pill to swallow at that time, given all the controversy around that. But maintaining their innovation strategy while trying to balance a fiscal turnaround and really trimming the numbers out and trying to be a performance-driven from a number standpoint, producing cashflow, billions of dollars in cashflow deposits. So, you know, great to see. What's your take from the interviews and the event last night and the metadata that you're hearing? Well, I think when you assess a company the size of HP, you got to look at several factors. One is organization. The second is management. People in charge of that or those organizational constructs. The third is the product and the solution set. The fourth is to go to market. And the fifth is where you're investing for the future and how you're communicating that you're relevant to the customers. I think if you look at the HP turnaround that we have been documenting, there have been some organizational changes. There have been some specific management changes. I think clearly Meg didn't trust the information that she was getting from guys like Dave Donatelli. And now most recently, George Kadifa, she made some changes. He put Bill Vecti in charge. He's brought some of his people in. We've seen some other shuffling going on. You know, some of those are minor adjustments. Others are fairly major. So that's one piece. The second piece is the product and the solution. And I think that two or three years ago, HP said, wow, excuse me, we have to be in cloud. We really don't have a good cloud story. We got on-premise cloud, okay, but we got Amazon coming after us. We really don't have comparable capabilities for hybrid cloud. So they started to initiate that. I think, John, you've done an outstanding job of documenting the HP cloud journey with guys like Sargillai. And I think we're now finally at the point where HP can start going to market and ramping its cloud up. I think they finally got a product that can actually sell. You can judge that by guys like Kerry Paley that they brought in and Bobby Patrick from the go to market side. I think the other thing is the future. Where is HP investing? How is it getting back to its roots? Mike Wheatley is just about to post an article talking about this, talking about the machine, talking about what Martin Fink discussed yesterday, how HP is going to remain relevant for the future. And it seems like HP is betting, doubling down, tripling down, maybe even quadrupling down on its core systems business, building the next generation highly scalable machine, putting forth a new storage paradigm which is all in memory or in persistent memory with Memrestore, which has started and stopped and started and stopped. So big question is, is that back on track? I would say this, John, I think of all the discoveries we've been to, this is the most positive that I've seen with regard to the future of HP. And the last thing I'll add is the software piece, which again, Kadefa out, young John's in, you're going to see a lot more emphasis on autonomy, vertical, leveraging those assets. I think that group was a mess when George took it over. I think Kadefa probably did some good things. It just didn't happen fast enough for Meg. Now it's up to young John. So I think the key to watch for young John's is the developer community. It's something, John, that you've harped on. You and I both talked to him about it. Last year at Barcelona, we're starting to see signs that HP is getting more developer friendly. Yeah, and Dave, we have the finger on the pulse with HP's, know that about it. I got to say that we've done a good job of embedding in from a reporting standpoint. You know, we obviously do the reporting side with the journalism. We have social media presence here as well, as well as the analysts side covered. So really three prong extraction strategy for our organization within HP. And I got to say, you know, relative to the HP software, I do want to comment on George Kadefa. You really can't blame George Kadefa for anything. That guy is a phenomenal executive, great individual, high class, high integrity. He's a world-class manager. That was just a really, really, like a difficult assignment. He had to take essentially the autonomy acquisition and the value of, say, HP Vertica and put that together. And what George and his team have done with Colin Mahoney and bringing through the autonomy, politics just on its own was massive. So if you look at what Kadefa has done with HP software, it is a world-class save in my mind. You know, it is like, you know, the big save in the game. He really saved that whole organization. He kept it together and he put it on a path. And that's his background. He worked at Silver Lake. He understands that market. He's kind of a corp dev guy. He is the guy to do that. And what he did was fantastic. He exploded HP Vertica into a powerhouse from a small startup, less than a half a billion dollar acquisition, roughly 300 in change, into the staple of value for HP software. He took the shatters of an autonomy acquisition and pieced together the value. Young Johns came in with his savvy, clear the more savvy software guy in terms of getting in the weeds and knowing all the nuances of software. But Kadefa put it together. So you got to give credit to Kadefa and in no way did he fail, in my opinion. Now, Young Johns- Didn't Meg blame him? You said you can't blame Kadefa. Didn't Meg blame him? Did he just shoot him? Well, I don't, you know, it's not publicly that he was fired. I mean, I think- Why, he's moved out of his senior vice president general manager role. He was running the show. Now he's doing some strategy role. It's like Donatelli. I mean, that's a velvet box, isn't it? HP is on- I think you're sugarcoating this, John. HP is on a turn around. No, I just think it's too hard. I mean, come on. Look, if you- I like George Kadefa. I think he did a good job. I agree with you. But Meg blamed him, I think. That's my interpretation. I saw no public record of that. There's no- No, when would they ever publicly say that? They didn't publicly say they blamed Donatelli? The numbers weren't there, obviously. So for that reason, you got to look at the operational side. And that's what happened to Donatelli. You know, Meg's got a five-year turnaround plan. Some will say that Dave is really too long in these accelerated cycles of innovation. Maybe that's five years is too long. Maybe it should have been two and a half years. So, you know, the pot calling the kettle black, if that's the case, my feeling is, if we look at the data, right, what Kadefa did in terms of the software group was phenomenal. And I'm not just saying that because I know the guy, I know him personally. And I've seen what he's done. I mean, Haven, all the stuff that was put in place. And it wasn't like Young Johns was on the sidelines. He was making it happen. So, you know, I think Young Johns is a great executive run that organization. I think he knows all the nuances on the product side and getting that product market fit ultimately is where the revenue will kick in. And in my opinion, they are poised to do some good work there. On the other side of the organization cloud, you know, Bill Hilf is really impressive. This guy is sharp. He knows the issues. He's a young executive. He's going to rise fast in the organization. And I think with guys like Bill Hilf, Sargillie, Kerry, and the team that put in together is fantastic. I'm very, very impressed with how fast that they've gone to the next level with this team. So, with Martin Fink running engineering, you're going to see, I think, a lot more activity. And my forecast for HP Cloud is, you will see some massive moves. I think there'll be some inorganic, some M&A deals. I think they're going to go target some specific things in the white space. And I think that's going to help them. They have to do that. Let me ask you a question on the cloud. I want to get your opinion on this. When you think about an Amazon and Google and very much to a large extent, Microsoft are doing with Azure in terms of the public cloud, the swipe the credit card, true cloud definition. There's Amazon sort of put it forth in 2006 and beyond. If you look at what HP's doing, it's really about the so-called hybrid cloud. And it's really a minor contribution from the public cloud is my take. Is that the right strategy? Do they have to beef up their public cloud more? What about IBM? Are they going to be more of a public cloud player? Are the big whales in enterprise IT going to stick to their hybrid cloud, really private cloud mission? Because that's really what it is. It's a private cloud with a little bit of public cloud sprinkled in. Or do they have to go whole hog on public cloud in your opinion? That's a tough one, Dave. It's really a tough one to address. And I have a couple of different opinions. I kind of go bipolar on this one. One, on one hand, you want to meet two Amazon cloud, right? You want to have that public cable because you look at the developers. They want public cloud. They want a highly elastic, massively scalable global platform. On the other side, HP said a lot of customers that want enterprise requirements. There, you shift to more of a red hat-like strategy where you have to support it. At the end of the day, support is everything. You can't have a incoherent product strategy when you talk about support for the enterprise. DevOps is a great thing. We love to promote DevOps, but as Theo said on theCUBE many times, it's ops dev. When you start getting into, it can't fail. That's an issue, right? So I think HP is kind of stuck in the middle here in the strategy. And I think what they're trying to do is flank on two fronts. Let's get some public cloud, call it R&D, call it whatever you want, get that up and running. As a sandbox for the technology they're incubating, healing on, and showing some promise in terms of strategy and direction. They got real customers that have demands. So you really can't be half pregnant here. You've got to go all in on both fronts. So what I see is that I see the public cloud being kind of more of a front end for developers and really moving into the hybrid cloud with Helion where OpenStack is a critical component of that game. HP is a huge opportunity to take their mojo in systems management, monitoring, support, and bring some serious jewels to the table with OpenStack. And again, they own almost half the positions on the product leadership there at OpenStack. I think it is a tough one, and I'm sort of bipolar on it too. I think the way in which guys like HP and I think VMware and EMC would answer that question as well is say, hey, we have a network. HP just announced the Helion network, the VMware vCloud hybrid service. EMC's got a velocity partners program that we're going to enable our partners to be the ones to compete directly with Amazon. Having said that, I don't know if that's going to work. I don't know if they're going to have the scale to compete with the Amazons and Googles of the world. They might, some of them might, but generally there's a lot of hosting companies in there. There's a lot of smaller cloud service providers, a lot of tier two and tier three guys that are maybe specialized in certain industries where I think that Amazon, Google, and Microsoft are just massive, massive scale. So maybe if somebody partners up with, for instance, John, IO Data Center, one of the firms that we introduced our community to back in VMworld in 2013, George Schlesman's company, they've got the scale. But what they don't have is the servers, the storage, the networking, the infrastructure pieces, all the orchestration pieces. Maybe if they become part of that ecosystem or companies like them, they could compete at scale. It's a tough one. We heard Antonio Nier yesterday, I was running two groups now, Service and Networking. I talked to some folks last night off the record and essentially it's pretty clear of their strategies about compute. They're looking at the integration of the convergence, converge infrastructure as a critical, critical part. And his comment about not giving up on the servers day was pretty telling. And when you asked him a question about the x86, the IBM move, Nier responded pretty candidly and he didn't even blink. He's like, it's very clear, our strategy is on course. We think that you have to be a player in the infrastructure equipment to be a winner in the cloud, hybrid cloud on-prem. On-prem is not going away. And we've been saying that all along. It's a hybrid model of on-prem in the cloud for the next at least 10 years. And ultimately, I think the cloud will play a much more dominant role. So sometimes the best move, Dave, is not to make a move. I think what HP's doing right now is they got the two fronts with the public and hybrid cloud called private in there just on-prem. But going out there, they don't really have to make this decision right now. But if they play their cards right and innovate on those two fronts, they can then cherry pick the technologies that make sense for them. I mean, I was speculating last night, again, my opinion, that HP should buy Rackspace. Put the numbers aside. I don't know if it's going to be even possible. But if Rackspace is for sale, why not pick up Rackspace? You know, they have a cloud. They have a hosting environment. IBM has soft layer. That might be an interesting play for HP. If they had the dough and they had the guts to do it, and I'm not sure Meg would want to stomach that kind of acquisition. But that's an interesting play. If HP had Rackspace, what would they do with it? What about the developer angle? You're seeing Cloud Foundry a lot. You're seeing Cloud Foundry do a deal for IBM Bluemix. You're seeing HP participate in Cloud Foundry. What about the developer angle, John? What's your take on that? This is something that's close to my heart, because we're close with the developers in the emerging modern infrastructure, both on the consumer side and also on the enterprise. And this is a huge opportunity for HP. If they blow this, they could lose the whole game. And let me tell you why. The new modern infrastructure is a combination of new talent coming in that's hard to find. It's the young guns that have a DevOps mindset that will evolve into IT enterprise and cloud development. And then you have the old guys who know distributed large-scale computing systems. So those guys are going to be tweaked. At the same time of the talent war, you have a complete reconstruction. That's the stuff that we talk about all the time on theCUBE, the business process innovation, the value chains that are being tweaked, different products that are going to come out and converge infrastructure all the way up to the top of the stack. But the developers that want to build out the next generation have now the opportunity with Cloud. And what Amazon has shown is that you can actually do some really, really agile, fast development. That is the DevOps way. If you can back that up with the kind of support and industrial strength of infrastructure, HP is in a perfect position. So if they can leverage their work with OpenStack and can get their app together on both the software front and Young John's organization, which has also the big data piece, and then bring that into what the cloud group has going on with OpenStack, they could really win the developers. They could win those guys over. They could provide a great place, open standards, open source-based frameworks for the enterprise. So to me, I think strategically, that is a game changer. HP should be 100% on this. They should put in their best people on it, in my opinion. And I have not seen that yet. I talked to everyone. You hear a little bit here, a little bit there. Best people on developers, that's what I want to see from HP. Last point I want to make about the turnaround is if you're an investor and you bet on HP in the past year, HP was a dog at the Dow in 2013. It started to turn things around. So yeah, from a technical standpoint, I guess that was a good move. But I think, John, the fact that HP is so undervalued, I'm putting that in quotes, relative to other technology companies. I mean, it's basically trading for 50 cents on the revenue dollar. I think there's a lot of upside there. HP's a cash flow machine. It continues to pay down its debt. So Meg's doing a good job from a financial standpoint. I do think there's a lot of upside in this company from a stock perspective and a valuation perspective. Okay, folks, this is day three. We're bringing the energy. We're bringing the analysis. This is theCUBE, here live in Las Vegas for HP Discover 2014. Go to crowdchat.net slash HP Discover and join the conversation. Bert Latimore's moderating a great chat over there, Bert. Good job. And come in and comment, ask some questions, comment to the threads and have some fun with us. This is theCUBE. We'll be right back with our next guest after this short break.