 Live from Las Vegas, Nevada, it's The Cube at IBM Interconnect 2015. Brought to you by headline sponsor, IBM. The presentation of IBM Interconnect, IBMInterconnectGo.com is this website for the social digital experience, powered by CrowdChat, powered by The Cube, powered by Veronica Belmont and all the VIP influences and more importantly, powered by The Crowd. This is The Cube, our flagship program. I'm John Furrier, the co-founder of SiliconANGLE Media, with the other co-founder of SiliconANGLE, Dave Vellante, putting SiliconANGLE, Wikibon, The Cube together to bring you all the action. Dave Vellante, great to see you again here. InterconnectGo is really where the action is changing for IBM. Two big shows now for IBM. Interconnect is one of them. They've put all their cloud, mobile and developer all in one show and their next show inside which we're going to also do as well. It's all about a new way, a new way to do things and their slogan, a new way to fill in the blank, a new way to work, a new way to inspire, a new way to do things. IBM is bringing technology to the enterprise which is starved for cloud, mobile, social. Big data, big data analytics. Great to see you. You're snowed in last week. Good to see you, John. Yeah, it was pretty crazy. I was watching, of course, the live stream and of course, you guys are talking a lot about big data and we're going to talk about big data this week. IBM has a huge analytics business. The conversations here at this show at Interconnect, are going to be much different than we heard last week. A lot of geeking out about Hadoop and Spa, all kinds of things that are happening in that community. IBM is really focused on business outcomes. We're going to hear a lot about that this week. I think as well, I want to address the show, Interconnect itself. It's a consolidation of a number of other impact and pulse. And I think John, it underscores the transition that IBM is in. IBM is undergoing a transition. Ginny Rometti, the CEO, is orchestrating that transition, repositioning the company around cloud and mobile and systems of engagement, really which means social and analytics is the other big one. And so those businesses are growing very nicely, but the problem that IBM has is it has to shrink to grow. A lot like HP in some respects. IBM was a $106 billion company in 2011. It's a $93 billion company today. To me, John, that's a good thing. IBM divested $7 billion worth of business last year with its systems X business. It's Michael Electronics business. And it's business process outsourcing component. That's $7 billion that just sort of pushed aside because they were losing money. You know, Dave, we cover all the different events, the shows, we're on the ground, on the Vmware, IBM, all the top companies. And the one trend that's consistent, I will say, is on the right trend line, entering in the right direction. Their new way to think and their keynotes this morning, very relevant. And we heard from Ping Lee and Excel partners last week at Big Data SV as part of Big Data Week in Silicon Valley, as well as Frank Artali with Ignition Partiz. He's a former time Microsoft guy back in the early days. Bottom line, the entire stack of technology is up for disruption. And that means there's a new way to think, a new way to attack problems and create value. IBM over the past three years, we've watched a couple of little shows that bring them together for a big tent. Great strategy. More importantly, their customers are hungry for being faster, more agile, more capital efficient. This new way to do things that they're talking about includes analytics, in memory, Watson, cloud, developers. IBM is truly, in my opinion, on the right course. The question is, can they execute? Can they shed some of the things that they've done in the past? We saw some divestitures. We've seen some changes. We heard about Bapachiano talk to us in New York City. I believe that they are on the right track. I spoke with Adam Gunther from the team last night. And Blue Mix, I said, you guys got to go faster. Pedal faster. He said, we're pedaling as fast as we can. The bottom line is Blue Mix is a catalyst. They are driving the cloud, putting the software mix in there. So, dockerization, containers, redis. This is stuff that's in the IBM ecosystem now. This is cutting edge, developer, Amazon-like innovation that was part of the last decade of growth now coming into the enterprise. This, to me, is the big story. It's about using those technologies, re-engineering the value chains in IT. And reinventing the future. Mobile, innovative things. These are all the ways that are here. Robert Labanque said in his keynote today, you're either going to be a disruptor or you're going to get disrupted. The interesting thing about IBM is they're on both sides of that coin, right? IBM is a disruptor with its cloud, mobile, social, analytics. And it's getting disrupted with a lot of its old business. A lot of its outsourcing business, which I want to make a comment on. It's hardware business. Its software business is actually mixed. But the core of IBM now, John, is the new strategic initiatives. They're growing at 16%. They make up about more than 25% of the company. That's really where IBM is investing. You know how IBM works. Sometimes it's slow. It takes its time to really focus its strategy. But once it gets the strategy right, we saw this, you know, the last big wave under Gerstner. Once it gets that strategy right, it points all the resources toward those new growth areas. And then, boom, it goes. And that's really what's happening now. You know me, John. You always say, follow the money. IBM threw off over $6 billion in free cash flow last quarter. More than $12 billion in free cash flow last year. Now, that's down a little bit. It's under pressure. But nonetheless, IBM continues to be a free cash flow machine. What is that free cash flow? It allows them to buy back shares. IBM has funded enormous share buy backs, which Wall Street loves. IBM used to have over 2 billion shares outstanding. It's now under a billion, John. So what does that do? It lifts the tide of the stock market. So, Dave, one of the themes we're going to be talking about here is the cloud is where the action is. It's fueling a lot of the old-school, new-school transformation, but also not really killing the old to bring in the new. It's a co-op petition, if you will, from a tech standpoint. But unification is a theme that we're seeing in tech. And it's a term that's been used in the cloud DevOps world called standing up some infrastructure. The word standing up. What that implies is getting it up fast, putting stuff up. We do it with content. We do it with... That's what cloud has shown is that customers want to stand up solutions. They want to stand up solutions that matter and they want to stand up solutions that can get to value fast. With analytics, with the cloud technologies, this notion of standing something up will be something we'll be talking about. Well, again, I think last week you guys were at Data Week and Big Data SV, Strata, Hadoop World. You heard a lot about products, a lot about innovations, and it's sort of the main spring of the Big Data meme is really coming from Hadoop. But you didn't hear a lot about solutions and that's what IBM is all about, is solving customer problems. I'll tell you, I've mentioned outsourcing before. I've been sort of critical of the outsourcing business in general. The world is moving to IT as a service, no question. IBM did two $1 billion plus outsourcing last year. One with Lufthansa and one with ABM Amro. And the underpinning of those outsourcing deals, John, was cloud. And they're bringing cloud, mobile analytics solutions to your point to the business. That's where IBM wins. You know, IBM, we're going to watch these guys been watching all their moves. They're doing something really innovative. They are attacking those problems. What they're doing here is providing really awesome cutting-edge stuff from technologies, but also to how they're interfacing with their customers. They are practicing social business. We are part of the social experience, the Go Social Lounge at the Mandalay Bay. And now the CrowdChat and the Cube and all of our technologies that we've been connecting with are going to bring it into the social world. We're going to talk to Veronica Belmont and all the VIP and we're going to capture all the data, share that with you about being open, being transparent, and bringing that data to you. So Dave, I'm really looking forward to it. You will watch the Cube interviews with the top executives, top developers, and we're going to ask you the questions. Where's the meat on the bone? What's happening? What's happening with IBM customers and the technologies? And what does it mean? This is the Cube. Stay tuned for our next interview after the short break for three days of wall-to-wall coverage here live in Las Vegas at Mandalay Bay, part of IBM Interconnect. And for your digital experience, go to InterconnectGo.com. You'll find all the influencers there, the trending stories, what hashtags are trending, and also chats you can jump into. So stay tuned and be part of the conversation and join us. We'll be right back after the short break. First time on the Cube. It was fun. Do it again. Do it again. I think what I've come to find, letting my second time on the Cube is, I mean, it's just such a real time.