 From the SiliconANGLE Media office in Boston, Massachusetts, it's theCUBE. Now, here's your host, Dave Vellante. Hello everyone, this is Dave Vellante, fresh off the red eye from VMworld 2019. And what I wanted to do was share with you some analysis that I've done with our friends at ETR Enterprise Technology Research. We've begun introducing you to some of their data. They have this awesome database, 4,500 panel, a panel of 4,500 end users, end customers, and they periodically go out and do spending surveys that have given me access to that spending data. And what I wanted to do, because you had a number of companies announce this quarter, I wanted to do a storage drill down. So Pure announced in late July, Dell just announced yesterday, late August, NetApp was mid-August, HPE was last week, again late August and IBM was mid-July. So you have all these companies, some of which are Pure plays like Pure and NetApp, others are big systems companies and so, but nonetheless, I wanted to squint through the data and share with you the storage spending snapshot for the second half of 2019. So let's start with the macro. What you heard on the conference calls was some concern about the economy. There's no question that the tariffs are on people's minds, particularly those with large exposure in China. I mean, Dell obviously sells a lot of PCs in China, so they're very much concerned about that. IBM does a lot of business there. Pure, really 70% of Pure's business roughly is North America, so they're not as exposed. So, but the macro is, probably looks like about 2% GDP growth for the quarter. IDC has the overall tech market growing at 2x GDP. Interestingly, a Gartner analyst told me in May on theCUBE that there is no correlation between GDP and IT spend, which surprised me, some people disagree with that, but that surprised me. But nonetheless, we still look at GDP and look at that ratio sometimes. The other macro is component costs. For years for the storage business, the last several years, NAND pricing has been a headwind. Supply has been down, it's kept prices up, it has kept all flash arrays more expensive relative to some of the spinning disk brethren. Something that we thought would attenuate sooner, it finally has, NAND pricing is now a tailwind. So prices are coming down. What that does is it opens up new workloads that were really kind of the domain of spinning disk before big data kind of workloads as an example. Not exclusively big data, but it just opens up more workloads for storage companies, particularly flash companies. The other big macro we're seeing is people shifting to subscription models. They want to bring that cloud-like model to the data wherever it lives, on-prem in a hybrid environment, in a public cloud. And companies, storage companies are trying to be that data management plane across clouds, whether on-prem. And that's a big deal for a lot of these companies. I'll talk a little bit more about that. So you're seeing this vision of a massively parallel scalable distributed system play out where data stays where it lives, edge, on-prem, public cloud. And storage is really a key part of that, obviously. That's where the data lives. But you're not seeing data move across clouds so much. What you are seeing is metadata move and compute move to the data. So that type of architecture is being set up, it's supported by architectures, not the least of which are all flash. And so I want to get into it now. I want to share with you some data on this slide, if you wouldn't mind bringing it up, Alex, on spending momentum. So the title of the slide is spending momentum. Pure leads the storage pack. So what this shows is the vendor on the left-hand side. And it essentially looks at the breakdown of the spending survey where ETR asked the buyers of the different companies' products. What percent of their spending is going to go toward replacing? Are they going to replace the vendor? Are they going to decrease spend? That's the, so the bright red is replace. The sort of pinkish is decrease the spending. The gray is flat. The sort of evergreen forest green is increase and the lime green is add. So if you take the lime green and the forest green, the add and the grow and you subtract the rest, you get the net score. So the higher the net score, the better. You can see here that pure storage has the highest net score by far, 48%. I'll show you some data later that correlates to that when we pull out some of the data from the income statements. So this is the July 2019 spending intention survey, specifically asking relative to the second half what the spending intentions are. So this looks good for pure. And again, I'll show you some income statement data that really affirms this. Hewlett Packard Enterprise actually was pretty strong in the spending survey. Particularly Nimble is growing. HPE overall, the storage business was down a little bit, I think three points, but Nimble was up 28%. So you're seeing some spending activity there. NetApp did not have a great quarter. They were down substantially. I'll show you that in a minute. And it looks like they've got some work to do. Dell EMC had a flat quarter. Dell has such a huge install base. They're everywhere. And everybody wants a piece of their pie. Dell, after the merger, the acquisition of EMC, their storage share declined. They then bounced back. They had a much, much stronger year last year. And now it's sort of a dogfight with the rest. IBM is in a major cycle shift. IBM's storage business is heavily tied to its mainframe business. Its mainframe business was way, way down. Its overall systems business was down, even though power was up a little bit. But the mainframe is what drives the systems business. And it drags along a lot of storage. IBM's got a new mainframe announcement that it's got to get out. It's got a new high-end storage announcement that it's got to get out. And it's really relying on that. So you can see here from the ETR data, pure, way out ahead of the pack, continues to gain share, about a little over a thousand respondents to this. So a lot of shared accounts, by shared accounts, I mean the number of accounts that actually have some combination of multiple storage vendors. And so they were able to answer this, 1,068 respondents pure the clear winner here. Now, let's put this into context. So the next slide I want to show you is some of the key performance indicators from the June quarter off the income statements. So again, you see I got the vendor, the revenue for the quarter, the year-to-year growth for that quarter, relative to last year, the gross margin and the free cash flow, this is some of the key performance indicators that I'd like to look at. So look at pure, let's go to the third column and look at growth. Pure, 28% growth, Dell, flat. So 0%, this is just for storage. This is storage growth. Net app, down 16%, net app at a bad quarter, HPE down 3%, IBM down 21% due to the cycle that I discussed. You can see the revenue, pure growing very, very fast, from a small base, right, 396 million versus compare that to Dell's 4.2 billion, net apps, billion plus, HPE, almost a billion. IBM, not nearly as large. And then look at the gross margin line, pure as the industry's leading gross margin, it's just slightly above 69%. Dell is a blended, that asterisk is a blended gross margin. So it includes PCs, servers, services, VMware, everything and of course storage. So now when Dell was a public company before it went private, its gross margins were in the high teens. So Dell is in gross margin heaven with both EMC and VMware now as part of its portfolio. Net app, high gross margins at 67%, but that gross margin is largely driven by its gross margins from software and maintenance. And so that's a considerable contributor. Their product gross margins are in the mid fifties, kind of where I think EMC probably is these days. And when EMC was a public company, its gross margins were in the mid sixties, but then as it, just before it went private, I think it was dipping into the high fifties, as I recall. You see HPE again, that's a blended gross margin just roughly around 34%. I don't have as much visibility on their storage gross margins. I would say they are below in my view what EMC and Net app, well below what Net app would be. And then IBM, that's again blended gross margin includes hardware software services, 47.4%. Probably half or more of IBM's business is professional services. And IBM has of course a large software business as well. So, and then the free cash flow, you can see Pure crushing it from the standpoint of gaining share. I mean way, way ahead of the other market players, but only 14 million in free cash flow. So coming from a much, much smaller base. However, Pure is purely focused on storage. So their R&D, all their R&D is going into that storage space. Dell, free cash flow, very large 3.4 billion. That again is across the entire company. Net app, you can see 278 million HPE, 648 million. Great quarter for HPE from a free cash flow standpoint. I think year to date, they're probably 830, 840 million. So big, big quarter for them. And IBM at 2.4 billion. Again, Dell, HPE, IBM, that's across the company as is the gross margin. So the spending data from ETR really shows us that Pure is strong, as I showed you that very high net score and the intentions look strong. So I would suspect Pure is going to continue to lead in the market share game. I don't see that changing. Certainly there's no evidence in the data. I think everybody else is in a sort of a dogfight. Dell holding firm, 0%, you'd like to see a little bit of growth out of that, but I think Dell is actually, Dell's key metric is are we growing faster than the market? That's their sort of their a primary criterion in metric for Dell is to grow faster than the overall market because that means you're growing some share. I think Dell's comfortable with that. Dell's gross margins actually were helped this quarter by the fact that Dell's server business was down 12%. So it was a higher storage mix. So it propped up the margin a little bit. But again, generally speaking, it looks like Pure is the market share winner here, but much, much smaller than the other guys. HPE, Nimble, very strong and it shows up in the survey data from ETR and then IBM just needs to get a new product cycle out. So we'll come back, we'll take a look at this in January and see what it looked like and we'll continue to follow obviously the income statement and the public reporting. Pure Accelerate is coming up next month, just in mid-September, I have no doubt. Pure has been first in a lot of different areas. They were first were the all-flash array, they're the only all-flash array company that reached escape velocity. They and Nutanix were the first kind of new billion-dollar companies that people said would never have a billion-dollar company, Pure is a pure-play storage company, well over a billion now. They were first with that evergreen model, they made a lot of play there. They're first with NVME, first with NVIDIA relationships, so Pure likes to be first. I have no doubt at Accelerate next month down in Austin, curious that they picked Austin, Dell's backyard, but I have no doubt that they're going to have some other firsts at that show, Cube will be there watching just off of VMworld, the other big player here, of course, that I'm not showing is VSAN. VSAN is very, very strong, the ETR data shows that, and certainly the data from the income statement shows VM where NSX, they're networking products, they're software-defined networking, they're software-defined storage, the VSAN, very, very strong. Pat Gelsinger in the Cube, we asked him last week to take us through so as some of his big memories, and one of them was sort of VSAN, excuse me, one of them was VSAN, and the board meeting with Joe Tucci, who was on the VMware board, really put a lot of pressure on Pat, saying you can't do this to me, it's funny, EMC had the shackles on VMware for a number of years, but the shackles are off and VSAN is very, very strong. So these are some of the things we're keeping an eye on, thanks for watching everybody. This is Dave Vellante, Cube Insights, we'll see you next time.