 From Austin, Texas, it's the Cube, covering Pure Storage Accelerate 2019, brought to you by Pure Storage. Welcome to Austin, Texas. This is the Cube Live with the fourth annual Pure Accelerate. I'm Lisa Martin with Dave Vellante. Dave, we're in Texas. Yeah, Texas again. Austin, Texas, very interesting venue for this fourth annual Pure Storage Accelerate. A lot of construction, a lot of music, yeah, it's cool. So we just came from the keynote and news announcements, customers on stage, but the first thing to point out is this is, Pure is about to celebrate their 10th anniversary. Charlie Giancarlo, CEO and chairman who's coming on the program with us in just a few minutes, talking about what they have innovated and delivered these 10X improvements in 10 years, kind of this overnight success in 10 years and what's coming. What were some of the things that really stuck out at you in the keynote? Well, first of all, ironically, this is the 10th year of the Cube, not our 10th anniversary, but it's the 10th year of doing the Cube. And so our fourth year, I think, at Pure Accelerate, about, what, 3,000 people here? You know, the keynote, Pure was laying out what their vision is of the modern data experience. And I felt like the keynotes, Lisa, were sort of a speed date of what's coming. There's a couple of major announcements that we'll talk about. But they really are trying to differentiate as the modern storage company, trying to deposition the competition as the old guard, is to use a term that Andy Jassy uses, Pure didn't use that term, but they really talked about it's time to go modern. And so they were an overnight success. It took them 10 years, was one of the comments that was on stage. So I think it's worth pointing out a couple of things. Let me lay out sort of my thoughts on Pure as a company. They were the only storage company in the past, let's call it decade, to reach what I'll call escape velocity. They achieved a billion dollars a couple of years ago. They're doing about a billion and a half on a trailing 12 month basis. They'll do 1.7 billion this year. And their valuation's about 4.5 billion. So they got a 3x valuation and that fluctuates. That's pretty good for a storage company. They're the only major storage company that's really growing rapidly. They got 28% growth. I did a breaking analysis on LinkedIn and I'll just share with you some of the numbers. Dell is flat at 0%. So Dell is actually gaining share with no growth. That's kind of scary. NetApp minus 16% in the quarter. HPE minus 3%. IBM minus 21%. And so, and then it's Pure at 28%. So they're really crushing it in terms of growth. They've also got a 69% growth margin. Even if in its heyday, EMC's gross margins weren't that high. You know, they were in the sort of mid-60s. And so, and they've also got a good balance sheet, about a billion dollars in cash, a little more than that. They got some debt and they're shifting their model to a deferred revenue model. Now the only thing is, you know, they're growing much, much faster than the competition. But they're throwing off a lot less cash because they're much smaller. Just as an example, they probably throw off five to 6% of their revenues in cash. NetApp probably throws about 23% of its revenues off in cash. So big delta there. So the point is, long-winded, but Pure Storage is in growth mode. And until the market rewards more consistent sort of cash flow, they're going to, I think, stay in huge growth mode. So that's kind of my take. That was a great analysis, Dave. And I saw an analysis that you did with some spend data. Just a couple weeks ago, you referenced a little bit of that. There seems to be a tailwind behind Pure. You mentioned the 28% growth that they announced in Q2. And some of the things that also they talked about were, they're adding about, in Q2 of FY 2020, about seven net new customers every business day, adding about 450 new customers just in that quarter. Like you said, 3,000 folks expected here today. The momentum is behind them, but they're also a company of firsts. You've talked about this a number of times, the first with all flash, the first with NVMe on the back, and a couple of additional firsts announced today. Talk about the as-a-service model and how that youth, in your opinion, you think might continue that trajectory that they're on. Yeah, so basically Pure laid out today, said the vast majority of our portfolio is going to be available as a service. That's the cloud consumption model. It's important because Pure has about $600 million in deferred revenue, largely coming from their Evergreen service, but they are slowly shifting their model to a subscription model. It's going to be very interesting to see how that plays out. We've seen a number of companies do it. Tableau and Adobe kind of pulled the band-aid off and did it. Splunk has taken years to do it. It's going to be interesting to see how Pure goes for that. I'll bring it back to the cloud. You know, Pure is largely an on-prem storage company. That's where most of the revenues come from, but we heard the gentleman from Amazon today, I think it was Ethan Weiner, not Ethan, anyway. Mr. Weiner, he said that Gartner did a survey last year. It showed 88% of customers said they have a cloud-first strategy, but 86% of those customers continue to spend on-prem. So here you have the cloud, Amazon, you know, Gorilla wants everybody to go to the cloud. Pure would much rather, they make much more money on-prem, but they realize customers are pulling them in. So they have to move to that as a service model. One of the interesting things that Pure has done, which, you know, it's not really a first, but it certainly is for the large storage companies, they've announced block storage on AWS. So basically what they're doing is they're taking the Pure experience, it looks like Pure software, and they're front-ending cheap S3 storage from Amazon with EC2 compute instances, and they've architected, using Amazon services, this basically a block storage array in the cloud. So Amazon gets paid, Pure gets paid, it's a little bit of a premium, but you get higher availability, you get great write performance, and you get the Pure cloud experience. Pretty interesting strategy. And they're talking about it really as this positioning it, rather as a bridge, a bridge to hybrid cloud. There's numbers that the Amazon gentleman share that you mentioned from Gartner were really interesting. Both sides recognizing there's a forcing function there, and that forcing function is the customers. From the enterprise to the small business who need to have data available immediately, wherever it is, be able to extract those insights from it quickly so that those companies, whether it's a Capital One or a Delta Airlines, or a smaller organization, can act on it quickly to drive competitive advantage. It's the same kind of challenge that Pure Storage has, but really that forcing function of the customer, clearly bringing the giant AWS together with yet another storage partner. So Pure, as I say, reached escape at velocity. They and Nutanix were the only kind of new entrance that reached a billion dollars. Nutanix, I really don't consider a storage company, they're kind of hyper-converged. And the way they did that is they drove a truck through EMC's install base with flash. So they were the first with an all-flash array. Maybe, I don't know, maybe they weren't the first, but they were the first to really drive it. They hired a bunch of EMC sales reps. They knew where all the skeletons were buried, and they really took out a lot of old symmetrixes and clarions and V-maxes and all the old sort of EMC install base, and that helped them catapult their way their first 10 years. Now they got to do that again. They got to get, they're on their way to $2 billion, but how do they get to $5 billion? And so the way they do that is they have to expand their TAM. I mean, we'll talk to Charlie G. and Carlo about this. I mean, my feeling is a big job of the CEO is to expand the TAM. Well, how do they do that? They go after new workloads like AI. They go for cloud, they go for multi-cloud. These are all very large markets in which they don't participate. Data protection, they'll partner with the likes of Cohesity and Rubrik and Veeam to have data protection software running on their flash arrays with very, very fast restores. That's something that's taking off. It's going to be really interesting to see, as they say, they've got this subscription model that's coming in. They've got all this deferred revenue. That, in a way, is going to slow them down a little bit just from an accounting standpoint, because when you recognize deferred revenue, you recognize it over 12 months or over 36 months. So that's a little bit of a transition. The other thing that Pure's facing on a tactical basis is NAND pricing. It's like this countervailing effects. NAND pricing is coming down, which means lower prices, lower costs, but also lower revenue. But at the same time, it becomes more competitive with spinning disks. This is something else we'll talk to Charlie Jean-Colore about, and it opens up new markets. So this TAM expansion is critical for Pure in terms of driving this modern data experience into these new workloads and fighting the competition. The competition is not sitting still. All those companies that I mentioned, the HPEs, the Dell EMCs, et cetera, are basically taking a page out of Pure Storage narrative, talking about the cloud experience, talking about flexible pricing models, building cloud products on-prem and hybrid cloud, and multi-cloud. So it's hard sometimes for customers to squint through that and really know, I guess the bottom line, the last thing I'll say is Pure doesn't have as many feet in the street as these other guys, so it's got to leverage the channel increasingly. And that's how it gets beyond $2 billion on its way to $5 billion. And that was one of the factors that they attributed the second quarter 28% year-on-year growth is to not just innovation, but also to the channel. So they've done a good job of really pivoting those large enterprise deals to be covered direct and then bringing in the channel for those smaller mid-size business customers adding a lot of momentum in Q2. You mentioned the nan pricing, that and some of the political climate with the strife in China. Most of their business is in the Americas, so they're not facing as many of those challenges. So they did lower guidance for the rest of- There's a second time they have lower guidance. 2020, however, they kind of attributed that to the nan supply, oversupply, and expecting that to flatten out quickly. They say they're not worried about the macro. I mean, look at it, if the economy's good and it's booming and people are spending money on CapEx, that's good for even a high-growth company. They're basically positioning to the street that if the economy does turn down and there's a softness at the macro, they'll actually gain share more rapidly, which by the way is probably true, but look at the rising tide lifts all boats. Nobody wants to see a recession. Having said that, well, it's interesting. When you saw pure lower its guidance, the stock took a hit. And then NetApp, IBM, all these other companies, EMC or Dell EMC, they announced and the market said, wow, Pure must be doing really well compared to these other guys. So it's come back in a big way. My opinion, Pure is going to, and the ETR data shows this from a spending intentions, Pure is going to continue to gain share at a much, much more rapid pace. The other guys from a product standpoint are, Dell EMC is consolidating its product portfolio, trying to lower its cost. HPE is really focused on Nimble. IBM needs a mainframe product cycle to get back going. NetApp's facing its challenges and it's kind of tweaking its go-to-market model. So all these other companies are dealing with sort of some structural changes where it's pure as like put the foot on the gas and accelerate, no pun intended. And so I think they're going to continue to gain share for quite a number of quarters. I want to talk about sustainability before we break. And one of the things that Charlie talked about on his keynote is in terms of the modern data experience, he said it was three things. It was simple, seamless and sustainable. And in sustainable, you really started talking about the evergreen model that they launched a while ago that seems to be really sticky with organizations. He also talked about sustainability as a lot of other organizations need to address it in terms of waste and carbon emissions and things like that. But I'm just curious, since pure is much smaller than the competitors that you mentioned and a lot more focused obviously all in on flash, where does the evergreen model in your opinion give them that tailwind or that advantage? Well the evergreen model was first of all brilliant marketing strategy and a business strategy because if you think about the traditional storage vendors, they make so much money on maintenance. They would never have done this unless Pure forced them to do it because they're making so much cash on the maintenance, you put the storage array in and we're just going to charge you maintenance. And if you're not on a maintenance contract, sorry, you don't get all the software upgrades, everything else. So it's just this lock-in strategy which has worked brilliantly for two decades. Pure comes along and says, hey, we're software driven, we're going to allow you to get all the modern software as long as you've got a subscription with us, we'll swap out your controller for free. You know, the competitors hate that. You know, there's all kinds of nuances and stuff. But it worked and customers love it and so it's very strong. And it's a fundamental, as I said, they got $600 million in deferred revenue largely from that evergreen model. So they, you know, Charlie mentioned first for non-disruptive upgrades, first for cloud management, first for AI ops, first for always on QoS, first with always on encryption. I don't know if they're really the first but they're probably the first big company. They got a lot of attention there. Last thing is, it's four big announcements today. There's AI-ready infrastructure, AIRI, they're doing some stuff. They were first to announce with NVIDIA, you know, a year or so ago. They got cloud offerings, block storage for AWS and they've got a cloud snap for Azure which is actually pretty hot, it's back up on Azure. And they got product extensions. They got cheaper flash with flash array C for capacity. And then they've extended their all flash arrays, their flash blade, et cetera, with storage class memory and storage memory. And then this as a service model. Those are really the four big announcements that we're going to dig into all this week. We are and we're going to be talking with, this is a great event. Two days, the Cube is going to be here. We have seven pure customers to talk to. That's, I think, kind of a record at least in my Cube experience of the last few years. AWS always puts a lot of customers up too, you know. Do they? All right, well, there's no better validation than the success of a brand, whether we're talking about Evergreen or their first or the reaction of the market to bringing flash down to a set of prices. So excited to dig into customer stories with you, Dave. Of course, we'll talk to some partners. We've got Veeam on, Splunk, Cisco, somebody else I'm probably forgetting. And of course, some of the pure execs. So going to be an exciting two days with you and looking forward to it, Dave. Looking forward to it, Lisa, great. All right, stick around. Dave and I will be right back with our first guest, Charlie Giancarlo, chairman and CEO of Pure Storage. Stick around, coming back from Austin in just a minute.