 Okay, we're back here. Exclusive coverage, this is EMC World. This is siliconangle.com's exclusive coverage of EMC World. Our fourth consecutive year, this is theCUBE, our flagship program. We go out to the events, extract a signal from the noise. My co-host, Dave Vellante. theCUBE was started and born at EMC World 2010. Joining Dave Vellante, Dave, we have a very special guest here, David Goulden, who's now running the show at EMC. David, welcome back to theCUBE. Thank you, John. Great to be here. Dave, good to be here as well. You have been the man on the move for the last six, nine months. I mean, really, Joe has given you the responsibility. So you're in the hot seat now, and you're up. It's warm, it's warm. It's fun. Well, and you've got a lot of transitions going on. You've got new companies that you're spinning out. How are you managing it all? Well, we're managing, I think, just fine. There's never a dull moment inside of EMC, and that's because this industry moves very quickly, and we need to move as quickly, if not faster, to stay in front and to really provide value for our customers. So if you look at something like Pivotal, which we launched on the 1st of April, great example of how we're leveraging assets from both parts of the company, from EMC VMware to create something that's new and completely focused upon these big, data-fast data apps. So as I said, you've got all these transitions going on. You've got very tough compares to last year's first half. You guys made that point on the Earth as well. We're very clear with that. And we're pleased. But you seem very relaxed and very confident. So what's giving you so much confidence right now? You know, Dave, I would say it comes down to a couple of things, but this week has been awesome for us in terms of being able to get together with so many of our customers, and there's nothing validator strategy, more or less, than getting in front of customers. And of course, this week has been a lot of announcements, but it's also been a lot about themes. And some of the new themes around Viper, some of the new themes around Pivotal, some of the themes around what we're doing to innovate in our storage arrays. The customer feedback is fantastic, and that's what gives me confidence. Our sales teams are fired up. The customers seem to be very supportive of what we're doing and want us to play and want us to win. And they tell us we're really focused upon the things that they are focused on in terms of helping them out. Last year, when you were on the queue, we, you know, it was our first time on the queue. We got to know you a little bit. And we asked you about the philosophy of EMC, because you were, you've been in the core circle of EMC for many, many years, Corp Dev, all the financial side of the business. So you know the machinery of EMC. I asked you, is EMC going to be the GE of the tech business? And, you know, Joe Tucci out here was talking about the four, he was proud. We're diverse, we have four companies, four brands. Four brands, right. And you're starting to see this kind of conglomerate type of role, and you're empowering. You've got Gelsinger running VMworld, Merit's got a clean canvas over at Pivotal. You've got huge investment opportunities around you. You're growing and you're expanding beyond where EMC was. As you look at that, is that how you guys look at it? I mean, you guys talk about that. We're going to be more of a conglomerate. Does that affect your investing strategy, how you operate the company? Can you share your take on that and share with the folks out there how you run EMC? Yeah, John, we don't think about it as a conglomerate. We actually think about it in a new business model. We call it a federation, or a federated type approach. The difference between a federation and a conglomerate is a federation has businesses that are interdependent, but they're connected, right? So, and what we're doing with the federation, in terms of what we've done with VMware as a great example, we're going to take a leaf out that playbook and apply it again to Pivotal down the road, is to create within the EMC family, businesses that are relevant in their own right, that can work together very seamlessly to provide the customer a very complete solution, in the case of Pivotal, if you think of new applications all the way from the application through to virtualization, through to storage, but are absolutely empowered to work with us as well. So we are really focused upon giving our customers choice, and this choice agenda is very big with customers, and we are also innovating in the governance of EMC and the model and how we set up the company around the brands, around the fact that we're using equity instruments in things like VMware to create a company that we think is unique, but positioned uniquely to help customers into the third platform. You know, usually when I ask all these questions, I'm really enamored by the innovation at EMC. Obviously, you know, on the marketing side, Jeremy Byrd and Joe Tucci talks about the technologies in the company, but you guys are actually innovating on the capital model and the governance side of it. I mean, you have this federation going, it's truly innovative, you can pop out, when Pivotal goes public, there could be another one. So you got to kind of have the, you're a large incubator as well. So what's next? You got to have an R&D organization. So how are you guys doing that internal organization around the innovation? Because that federation implies there's more federated states coming on, if you will. So we heard half going into organic R&D, half into M&A. How do you manage that? And what's your strategy for that? How do you grow that piece of the business? Let's start with the technology, because really we are a technology company. And the innovation around the governance, the business model, there's really ways to kind of foster that innovation around technology. So as Joe talked about, very strong commitment, typically 12% of revenues on R&D each year through the income statement, then maybe up to 10, on average, about 10% extra on the balance sheet. The companies that we buy are almost exclusively technology companies, we can plug in and kind of get time to market advantage from or expand the scope of our portfolio. So it really, it starts with technology and the technologies there obviously solve customer problems, it comes back to my point about why I'm excited because of the customer feedback from this week. And then the innovation around the governance and the business model is just a way to kind of accelerate and fuel that whole environment. We do recognize that we are in a market where we're playing for big stakes and some of the people we're playing against on paper have more resources than we do. It's all about the people though. It's about getting the right talent. Technology is a people business and what we try to do in terms of the investments and the innovation is to create an environment where people want to come and the smartest people want to come work for MC. Doesn't splitting things out like that in a way make your job harder. You kind of got to herd cats. You got to hire sales costs. It's harder to get synergies working together. Do you ever just think in the back of your mind, ah, once the old man goes, I'm just going to get the port to consolidate this whole thing. I think you're right. Obviously there with the governance model, with the federation, there are inherently some additional, if you like complexities, which you create, but I put it in the high class problem category. I think that the benefit we get from the federation, look at how we've been able to develop VMware over the years. Look at the position we've been able to develop with VMware working in an open environment where VMware can work equally well with people who are competitors to MC as they come with the MC. The ability to attract and retain the talent inside that company overcomes any of the complexities around capital structure or balance sheet structure or cash management or any of those things that people focus on. Okay, so given that the advantage is outweigh the challenges. High class problem, yeah. You get this question a lot but I'm going to ask it differently. Then why not just go whole hog and spin everything out? Take VMware for example. Why do you guys insist, Joe has always said, we are not spinning that out, explain that. The difference again between a federation and a conglomerate. A conglomerate owns different businesses and the value of a conglomerate is just to create value. And if it can spin out and through that financial transaction can create more value, that's what a conglomerate should do. Federation is different. We are building businesses that are interconnected and need to be together. For us VMware is often the tip of the sphere in terms of the virtualization conversation that can then result in people thinking of how they want to redesign the data centers which creates opportunity for storage and creates a platform for big new data applications. So it's a very different approach. We have no intention of spinning out of VMware and as and when we do a partial type IPO of Pivotal we have no intention of doing that. We intend in EMC and we do maintain control of these entities. So owning the control, having the destiny and having the ability to shape how the business develops in total is very much part of our model. But being able to innovate around a capital structure is if you like icing on the cake. It's a fairly unique model. Did you guys sort of invent that yourselves? Did you model that after some other examples maybe outside of this industry or? I think it's fairly unique. As you said Dave, we thought about it long and hard and we did thoughtfully. I think there's also a big balance. Obviously from a federated approach there needs to be a logical number of companies and they need to be connected and work well with each other. So that model applies to a few but it wouldn't certainly apply to a situation where you had 20 or 30 different substrates of that. So I got to ask you kind of the organizational theory behind this is which by the way I love the Federation model, I think it's fantastic. Condomers are cool too and make more money maybe that way but Federation's got some synergies. Alignment's a big challenge right? And so aligning overlapping resources better have some overlapping gaps as we've been saying on theCUBE. So as you get into more and more of the Federation do you look to a shared structure, shared HR or shared functions across Federation? Is that something that you guys look at or do you have? Can you elaborate? We do, we actually kind of leverage the corporate structure in a couple of areas. So obviously at Joe's level kind of sitting on top of the Federation there are certain things that we do like corporate development is resources available for all parts of the company. Some of our recruiting functions we use across the entire company. We share where we can make sense. We share senses of excellence in the back office. We share things like real estate footprint. So there are absolutely areas of synergy. We want to make sure we don't sub-optimize around the things that are not creating direct value and we want to optimize around some of the corporate assets that do create value. For example, EMC I think as you would all agree is and has been continues to be a very successful acquirer and integrator of companies. That is not an easy skill set to hone and develop. It's not one that you've always had. I mean in the early days it took some time to get that right. It takes some time to get that right. So that is a capability that's Federation-wide. Now obviously individual parts of the company build upon that, develop their own skills but that DNA of how you do that right is something we share across the company very carefully. You guys deserve props for that because we hear time and time again especially in theCUBE that the feedback is EMC knows how to do M&A. They do it right and they do it an elegant way and they clean it but they get what they need and they let the people do their jobs. With that we got the new Federation going on with the new little satellite group called Pivotal which as Dave calls it the misfit toys kind of get cobbled together. And nobody likes when I say that. Pat didn't really kind of like that but it allows Paul to focus. So the question I want to ask for you is culture of Federation. Obviously Joe is still at the top. The culture of EMC is what it is. It's there. Now you have this new project. VMware was acquired during a different time. You got a good value for that. It grew in the great space. It just flowered naturally. Pivotal seems to need some watering. You put $300 million of revenue in there. Thousand employees you're putting some steroids in there. Kind of pumping that up. Question I have here. How are you going to manage that and how does the culture manage this new Federation? What are you guys doing to protect against that blowing up in a bad way? And Silicon Valley doesn't have a good track record of cobbling together these 10 and JVs and you look at the track record and there's a little more failures and successes. So how are you managing that? How do you get that new piece of the Federation up and running? John, so I think the first thing it all starts with leadership and people, right? So with having Paul in charge of that business, somebody who's got great track record, a lot of experience of bringing together complex teams and the team underneath Paul is also strong. But what we've really done in the early stages is we've laid out a bit of a vision for where the company's going because obviously you're right. By definition, the assets in Pivotal came from different genres, some from EMC, some from VMware, put them together, create Pivotal. So you've heard us talk about getting to the first release of a fully integrated platform called Pivotal One. And Pivotal One actually takes advantage of every single piece of technology we've put into Pivotal and kind of shows everybody what role they're going to have in our architecture. Pivotal One, which we're going to ship towards the end of this year, is going to be unique, it's going to be the first Paz platform designed to be cloud independent with a big data fabric, an application fabric for next-gen apps. And so everybody now has a roadmap as to where you're going and that's how you kind of unify people. Get people to focus upon where the company's going and where they fit in. And then I think any concerns about where they came from or what happened differently or what changed is resolved. What do you mean with the revenue came from, you mean? Where the people came from? Where the people came from or where the revenue came from? How do you protect against the, well, I'm green plum, I got bulk of the revenue, therefore I'm going to drive the agenda when you got Gemfire and all these different components. Because the 300 million is past revenue, not new revenue. 300 million is kind of existing rubric revenue, just about. Yeah, so it's a combination of 2013. It's a 2013 projection for the pieces that came into Pivotal. In terms of the synergy revenue or the run rate from the previous assets? A little bit of both because obviously what we're doing is we're refocusing some of those assets around the new Pivotal One vision. So there's a little bit of a transition going on within the revenue but the revenue stream did come from both sides. It's not as if it all came from one side. But again, it comes back to what I talked about. Let everybody know where Pivotal's going. The vision of Pivotal One is very strong. Let people know that everybody has a role to play in getting to that vision. And now we're all kind of driving towards the North Star of Pivotal One. And that's where the energy is right now. I mean the team is excited and they're focused on it. If you hit that target at 300 million that's a pretty sweet deal for GE. Well, so VMware flowered up on its own, beautiful deal, that was a great valuation. You got it for a song. And it played a great strategic asset. Pivotal's getting a little water on it. Now you put a little bit more gas on it with GE's $105 million investment. Can you walk us through how that went down and the role of the internet of things is new positioning, which is not out of band of what they're doing. It's right in line with big data, big fast data. You got the GE piece. Can you talk about the valuation of that deal and what their role is in the Pivotal deal? I mean obviously GE's a very sophisticated company. They have their view of the internet. They call it the industrial internet. That's their view of where things are going to go in the future. And obviously they're a sophisticated company and they put a valuation upon Pivotal. And it doesn't take a whole lot of math to figure out that for $105 million or 10%, it's a little over a billion dollars is how they decide they're going to value Pivotal. So they're a sophisticated investor. That's a pretty good valuation. And a $3 million run rate, that's a pretty good deal. I mean, given multiples, what do people get? Well, given where we are today in valuations, that may, you're not going to comment, but we will, that's a good deal. But also it's also a pretty healthy value for a startup as well, right? So yes, it's a well-funded startup and it has some revenue. Yeah, you're right. And so you can look at it both ways. But I think what we feel in terms of GE coming in at this point in time, we're doing something very new with Pivotal. There really is not a comparison point. There's nobody out there trying to achieve what we try and do with this application platform and the validation. There's no standard there. I mean, I called in my blog post I wrote, the startup superpower, instance superpower, because you got the investment you guys made. You guys disclosed how much it was invested in besides the $100 million on your end? We told you that we put in basically what was the EMC put in, the assets we put in some cash and VMware put in there. And then $100 million, so it's well-funded. And headcount, yeah, about 500 people came over from VMware about roughly 750 from EMC. That's how you get to the 1250 starting point. So it's a super startup. It's a super power startup. So I instantly got some comments on Twitter when I made that blog post from some big time VCs. I won't say their name. You didn't feel a lot of luck. Okay, it was benchmark. And they said, well, we put in $100 million. Well, not in a basically A round or B round. What do you call that? A B round that GE put in. So how has that deal impacted the market, especially the capital markets? A lot of the ecosystem VCs in particular, look at that move as a power move by EMC to plop down major asset in Pivotal. Are you guys hearing anything? What are some of the feedback? Because you know, you obviously talk on the M&A side. You're hearing rumblings and... There's a lot of buzz and it's good buzz. A lot of people want to understand what the secret source is. And there is secret source in Pivotal. And I think that the fact that somebody, the size and strength of GE at this early stage, prepared to step up very publicly and make a commitment. I mean, obviously, the money is important. And the money is a key piece of it. But also, there's the recognition, there's the public endorsement. And there's the agreement that we're going to work together to really help industrialize something that is very new. So we couldn't be more excited. It's great. So let's talk about some of the action on the marketplace side. You guys do a lot of M&A. Since you have that background, obviously we talked about some VCs. Let's talk about EMC Ventures. Obviously, that's a federation resource for now across the portfolio or federation. You guys are looking to do buy companies so that the shop is open, the checks are being written, you're prospecting. I'm sure you have all those relationships with the VCs and other bankers out there. How is EMC Ventures working? I know it's been reorganized. Some new leadership in there. Is there any changes or updates to EMC Ventures and or how you're dealing with deal flow for your M&A strategy? EMC Ventures really looks at two things for us. So it looks at investments which we make because we do make investments in early startup companies, particularly in areas which are important to us. So for example, if you rolled the clock back three or four years ago, we made a lot of investments in flash technology and we really helped bring that technology to market. One of those investments turned into an acquisition. So Xtremio, which we acquired a little over a year ago is one of those companies we invested in in the early stages. So what we were able to do is really build a deal pipeline for M&A from a number of things from our investment in C technologies in early stage companies, as well as obviously just from out there in the industries in which we are focused on. From an M&A point of view, our strategy has not changed. We're not looking to do big acquisitions. We're looking to augment our portfolio with a string of pills type approach. And that's where we're looking. So we're looking for companies. We have complementary technologies, help accelerate our time to market in cloud, in big data and in trust and expect us to continue to be acquisitive but in the areas that we've already declared our focus to be. But you'll do big acquisitions if you see market movement change. Say for example, the cloud service provider market and the service provider market, that's under a major flux right now. John Rose talked about how that stack is kind of completely needs to be realigned and through some disruptive innovations, he called it. So this is possible scenarios where people could usurp EMC in terms of the product. So, I mean, you still have to kind of make those bold moves, right? Well, you've done that in the past, but it's been opportunistic. We are always prepared to make the bold moves. So we never show it away from the bold moves. That's important. But in terms of service providers, we're a technology company. So our core is we provide arms to the armies and those armies are retooling around cloud. And a lot of the technology that we are bringing to market, we want to help them retool around it. So our focus in terms of the SP environment is to really enable the ecosystem and help them compete in this web scale world. I like the string of pearls. You guys have talked about that for a long time and I look at software-defined storage and Viper. And I love the fact that you say, well, we've got 30% of the market, we have 70% to go. And you put forth this vision of a storage platform as a way in which you can maybe go attack that other 70%. In my view, anyway, there aren't a lot of companies out there that's maybe three or four that can actually deliver a storage platform like that that could rapidly gain share. Having said that, you've got a long way to go to actually build that out. We had a number of Amitabh's people on yesterday and they essentially confirmed a lot of that, but most of it, actually all of it is organic development. Starting code month to bottom up. It's very hard to build, as you know, a hardened storage stack in a matter of a year or two times. So the string of pearls approach would seem to fit into software-defined storage. Or do you think you can do that from an organic standpoint? No, I think that what we've done because we build a platform, Dave, you put it very well. Our software-defined storage through Viper is a platform. It is not a standalone software product. It is a platform which is going to be foundational for us building new controller capabilities and new data sources capabilities. It is, yes, organic development, but it's developed with the 20 years of knowledge we have of what it takes to build and harden the storage platform. Bear in mind, it's also leveraging the underlying technology itself. So it's not replacing storage arrays, it's leveraging storage arrays. So we have a roadmap for Viper, which we talked a little bit about this week where we're going to start off with the first data source will be objects, then we'll add block and file. We have the IP we need in-house to develop and integrate that level of platform. So that's not an area where I'd expect us to see just do anything unless perhaps just a very small technology by to accelerate one small part of it. But that architecture is an EMC foundational architecture for the future. David, we got to wrap up, but I'll just ask one final question. First of all, thanks for coming on the queue. Joel, thank you. Dave, thank you. We've been very impressed with you for years and following you, but Dave and I love to speculate on the queue, right? Past four years of the queue, we've seen Pat Gelsinger come into the mix, Paul Moretz over here, Joe Tucci, the commander-in-chief, walking the floors, meeting and greeting, even last night, Joe Tucci was out on the floor at 11 o'clock at night, talking to customers. Love that about Joe Tucci's great leader. But Pat Gelsinger and Paul are finding their groove. Pat's always been into the big data. Paul Moretz always wanted to do the cloud application market. That's happening. You're running the ship for the Federation. What are you personally most excited about? Given your history, you have a lot of history at EMC and you've seen it evolve and transform. What are you most excited about right now and looking forward over the next five years or so? Yeah, just to clarify, Joe, when you say I'm running the EMC information infrastructure part of the ship, right? So I'm also wearing my CFO hat across the entire ship, but my day job is obviously running everything apart from VMware, everything apart from Pivotal, right? So that's the piece that I'm looking at. But of course, I'm also with Joe and Pat and Paul, the four of us spend a lot of time looking across the business, right? So what I'm excited about is just the ability to drive the transformation in this industry. We are at the, in the first innings of this third platform agenda. The third platform and the opportunity to harness big data, fast data is going to transform the way businesses think about themselves. It may even transform some business models. And for us to be in the middle of that and hopefully driving it and providing infrastructure for customers to really leverage it, that's exciting. It's about helping change businesses. It's helping the IT industry move to the next level. And then it's the ability to how we best marshal 60,000 people and have fun doing that. I mean, that's the exciting part of this job. It's fun to watch you guys innovate and continue the past four years. It's been great and theCUBE was born here. And you guys on the business model side, the innovation around Federation, how you guys are managing that in a little corporate voodoo or magic juju as Dave would say is really important. And this Federation is interesting and let's see how it goes. Thanks for coming on theCUBE. We really appreciate the insight and the data. This is David Gould and the President and Chief Operating Officer of EMC Corporation. We'll be right back. This is theCUBE. I'm John Furrier with Dave Vellante. We'll be right back after this short break. Thank you guys. Thanks, David.