 Good morning, everyone. Welcome to theCUBE. We are live day one of our three days of coverage at VMware Explorer 2023 from the Venetian Expo. Lisa Martin here with three awesome analysts from theCUBE. You know them all. You love them all. Dave Vellante is here. John Furrier is here. Rob Stretche as well. Guys, this is theCUBE's 13th consecutive year of covering VMware events. Last year we ran into VMware Explorer from VMworld. Lots of announcements today and some big characters on stage. It's 13 years, Dave and I, Dave put a tweet out. I thought it was excellent yesterday in the analyst's day. 13 years. It's our longest running consecutive show since theCUBE started. Although the second show, as you pointed out, the first show was EMC World in 2010. But EMC sold to Dell and then they kind of folded Dell Tech World. So we kind of missed the year. It didn't get the consecutive streak. So technically Dell EMC is the first. This is 25 years. So we've done half of the VMworlds, John. More than half. We've seen the journey. And I tell you right now, one of the things this show, as we get into the keynote analysis, is that Jensen came on stage to see you of Nvidia. I think he kind of called it. I mean, he stole our line day. He said, you know, and he said the future of enterprise computing is happening now here on theCUBE. That's our line. So I love that phrase because he kind of pointed out that VMware, and this is the real story about that transition. Some say the demise of the old VMware and the rise of the new VMware is that they changed history. They reinvented and refactored computing with virtualization. And then they pivoted to HCI after hypervisors became commodity. And they thought there was going to be dead then, Dave. Remember, oh, they're going to die. VMware's going to die. They rose up and look what they are today. Now Broadcom's going to take them over. So the big story is Broadcom, the VMware acquisition, probably 30 days. People get in their letters. People know what's coming. The cuts are coming. But the VMware story is resonating. Multi-cloud, super-cloud is the next career path for cloud architects as AI comes in and automates a lot of the stuff. So big part of that theme of the keynote, Dave. The history of VMware is pretty remarkable. I mean, EMC ended up buying them for like $630 million and turned it into a, you know, multi tens of billions of dollars worth of company kept EMC alive as an independent for a long, long time. But they brought in Paul Moritz, who essentially put forth the vision, saying, I'm going to build a software mainframe. And that's where any app will run it anywhere. We'll stamp out all the virtualization overhead. So they had product-led growth. And he enterprise- And he enterprise by the way. Absolutely right in a long time. And then they brought in Gelsinger. And what Pat did is really M&A-led growth, right? He acquired NYSERA. Obviously, VSAN was homegrown, but he acquired security companies and user computing brought in Sanjay Poonan. And that was sort of a whole, and that created, you know, a little bit of a far-flung portfolio, which now they're consolidating. And now you get this opportunity of multi-cloud. And of course, as you said, the whole Broadcom acquisition, we wrote a piece last week with Rob and Zius and myself. And just one of the data points was the comparison between Broadcom financials and VMware financials. By the way, VMware financials are really good. But compared to Broadcom, they're not very good, right? So nobody's financials are good compared to Broadcom. VMware has been big-loaded. I mean, I think Silicon Valley, they remind me of the old HP. They're a great place to work, great campus, great revenue with the core product. Good engineering. They don't lay people off. It's a good culture. I mean, they don't fire a lot of people. So they have a lot of people that some would say could be cut. I think Broadcom is a lean, mean fighting machine. The numbers speak for themselves, Dave. You put that on the post. But the key note to me, though, was compelling because Octan, the CEO, was there, stood up, did the video announcement, and then stood up. And I'm not sure it was an applause there. I was watching it on the big screen outside the overflow room. Was there an applause? Yes, there was. Okay, so big applause, but... I know Michael Dell was clapping wherever he was. But what he said was telling, okay, they're going to invest $2 billion in the VM, we're just after the acquisition, and a billion of that's going to go into R&D. Yep. And he wants to strengthen that partner ecosystem. The ecosystem, that was interesting. And we, you know, that's a sign, Rob, that they're going to keep the SES and they're going to keep the partners. Well, I think if you look at how the partner ecosystem has been decimated over like the last 10 years, I think that really reinvesting in the partners, and we'll talk to a few of them later this week, but I think it's really an ecosystem that was the ecosystem. Now, if you look at it, this show used to be what reinvent what is now, and you start to look at that, and all the partners had to be here, but they went to cutting partners back. We went through and did a tour of the Hands On Lab here, out of the some 180 to 100 labs that they have, how many labs are from partners this year? It's five. Literally five, and they're all hyperscalers. So it's the partners who are actually providing some of the info. No NetApp, no Veeam, no Pure, no Dell, no HPE, no Lenovo, no IBM maybe had something, I don't know. No, I don't think so. No AI. No AI. No AI, that was interesting. So that's telling, right? And so, and I think, you know, I think honestly under EMC, they wanted it to be favored to EMC under Dell. Obviously they wanted it to favor Dell. Broadcom, I mean, Octan's all about the distribution channel, right, they don't really sell direct to the end user, so he wants to build that up and lower his cost of sales. Well, the keynote, I mean, I got to ask you guys, because I want to get your perspective on it before I share mine. What was your take on the keynote? Was it really about the announcements? It was really about what's going to happen with Broadcom? I mean, there's about three things. I think the latter. I think everything that was announced was to align with where do they dovetail into Broadcom strategy? That was my kind of going in assumption. A lot of news, a lot of talk, a lot of great, you've mentioned Octan Jensen, but my expectation was that what they announced today is really driving their dovetailing into Broadcom. I mean, I think it was three things to me. Broadcom, multi-cloud and AI. And I think, you know, Broadcom, they've said what they're going to do, and they're going to do it. So they'll, you know, execute or die. That's basically the message there. Multi-cloud, I think there's a lot of potential in multi-cloud, but they got a lot of work to do, but they were in a good position because they have such a huge install base and a lot of affinity and a lot of processes and skill sets tied to VMware. And I think in AI, they got a long way to go and we could talk more about that. But what I think, what was interesting is if you tap me on the leg, they led off with the V-SAN maps. And I looked at that and I said, this is the first thing you're going to lead off with. You're not going, I get not having the shiny new toy as it was put yesterday of AI being the first thing to lead off on, but when they talk about disaggregated storage, which is still VMware's storage, I don't know why you leave with that. But that's telling what you say because they actually led off with AI, with all the execs in the industry on camera, right? They had TK, who else, they had Satya, right? Everybody talking about the future and blah, blah, blah. So they led with vision and they were like, okay, let's talk about V-SAN. Yeah. Well, Dave, I want to get your perspective and you guys unpack the Broadcom thing because there's been the school of thought of everyone coming into this that, and I've seen firsthand, we're talking to the VMware people over the past year, they're in denial. They've been in denial for a while. Then it kind of hit them about eight months ago. Okay, this is happening. But remember the early days, last year, when we were at VMware Explorer, it was like VMware execs had to sell it. It felt like they had to sell the dream to Broadcom, even though they already bought it and told them what they're going to do. But at that time, multi-cloud really bloomed. We had super cloud explode in terms of momentum. The industry came together with super cloud. Here, I saw meat on the bone. I mean, I'll tell you, I thought this was going to be a key that they were going to mail it in. It was good. I mean, outside of the V-SAN, they had nothing to show there in terms of VMware. Jensen on stage was a game changer. To me, that was two nerds up there, okay? Raghu and Jensen. And I think that's why he's here. And that was a great moment. Because he has respect for Raghu. That was a industry moment. And I like how Jensen really did the tip of the cap to VMware by acknowledging their greatness. Yeah, but John, there's not a lot of differentiation there. I mean, there's Nvidia everywhere. Whereas NSX, V-Sphere Plus, V-SAN, it's back to the core. And then Tanzu and Aria coming together. I almost think that Haktan, like you said, John, they had to sell them on the vision, the multi-cloud vision. And I'm guessing Haktan is like, okay, hey, I get it. How much can you do 18 months from now? And you write that down and they're like, okay, go. You got time and you're going to have, you know, six months and nine months and 18 months. And if you're proving it, great. We've always said on theCUBE that VMware could be a crown jewel for Broadcom. If they don't gut it like the other ones and then make it just embedded in. Because VMware's got a lot going on. And we were talking to the execs yesterday. VMware's actually good at I-O. That was one of the comments that Chris Wolf mentioned to us. Because they had to do a lot of that stuff in the data center, IOPS and IO. You look at what Jensen was talking about with AI and bare metal, but Nvidia, you know, there's a throwback to the data center for specific AI workloads that are data IP related. And then the general council on stage came out. That was another gimmick that I thought was effective. There's going to be some issues around how you deploy AI infrastructure. And you know, Raghu is a visionary. He saw the PC wave. Notice he jumped right to the web and then mobile and then AI apps. So mobile apps, so web apps, PC apps, web apps, mobile apps, AI. He said a hundred percent improvement in essentially productivity or price performance in each wave. So that's like eight orders of magnitude since the PC, which is pretty impressive. And he's saying call him for another 100X with AI. But I think one of the other things, and I think this is why it does actually tie together. And we've talked about this multiple times over the last few months, is that the network is really hard. And NSX is supposed to be there to make it simple. And I think this NSX plus being a SaaS delivered service and coming, bringing it together has the potential. It has the potential to make it simpler for multicloud. And I think that's key. They also have some announcements around some service mesh stuff that should help at the layer above the data layer. We'll have to get into that again later, but there's some interesting pieces about bringing things together. And their promise on NSX plus is they're going to, basically it's the networking super cloud. They're going to abstract all the underlying complexities. They're going to API everything. NSX could be an Achilles' heel for them too. But I agree. I was going to say there's a lot of details. They're like, how are they going to do identity? How are they going to interact with all the other complexity that's out there? And plus the NSX adoption, let's face it, you've said this before, you said it on the QPod last week, I think there's a lot of shelfware out there and that could be some of it. Well, you talked about the ecosystem. I said on the QPod, I'll say it again, because this is probably going to happen. We'll get into what we think is going to happen. We'll share that in a minute. They're going to deploy as much VMware code as possible because more deployed code and features, it means more licensed renewals, right? So right now the sentiment inside the enterprise from the sources that I've talked to is they're deploying almost a hundred X dollars to every one dollar in the cloud for VMware. So every dollar of VMware, Amazon and Hyperscale are getting a hundred dollars. Okay, that's a huge, and that's because VMware needs to be relevant, right? And so if they don't, we're done, we have you in there, but we're focusing on the innovation with the cloud. That's got to change with Broadcom. They got to flip that around and be like, VMware has to be relevant. That's why this AI story with NVIDIA is compelling because now they can come in and saying the runtime is multi-cloud for AI workloads and you can run them on prem, which is their wheelhouse. So I think there's a gamification going on, Rob, around this one point. Yeah, and I think there's still a middle layer there that needs to be figured out. I mean, they're talking about using Postgres and Green Plum as the data layer and they're looking at a whole bunch of open source, even contributing back into open source where they don't really talk about that a lot and they're not going to talk about it a lot, but they do do a lot of contributions. It'll be interesting to see how that plays out to connect the NVIDIA layer to that AI infrastructure. Here's the problem that I see. I mean, Snowflake had Jensen as well live, so that was a good get, but you know, Snowflake can bolt on AI because they got the data, right? So they have some advantages there, whereas VMware doesn't have a data play. And so that to the point then, if they don't have a data play, then they have to start building relationships with data companies more than just Postgres, but they also need to have the optionality of all the different LLMs. They got to go beyond NVIDIA. They're talking that game, but I think they got one vector database and they're using Huggingface, which everybody's doing as the repo. But to your point, the other day, you're talking about a reference architecture that's 60 pages. Actually, I'm not sure they've announced that yet. But what does that even mean? Reference architecture. I think that's in Chris's keynote letter today, but it was other, Margo was up this morning, so we're good. Reference architecture is code-worshipping. We're working on it. Well, you see that from Dell too. Hey, we got a reference architecture. And that's cool. That's the way they used to do it with converged infrastructure with VCE. Absolutely. Okay, great. We got a reference architecture, but I'd rather have a SKU and a solution. Or a private beta. But I think they talked about, and they will talk about, and will kind of forecast that. They're going to talk about a marketplace for some of those middle apps that they need to actually glue things together. And to your point, Dave, I'd expect there to be some of those data players in there over time. I'd like to see LLM as a service. The only company who's announced that is HPE. Now, it's not shipping until later this year, but they at least announced it. Guys, let's get into what everyone wants to know. Right now, the number one ask, I've been getting asked here in the hallways and online, and I think everyone out there watching wants to know is what's going to happen with Broadcom. So let's report what we've found. Again, we have no data. We're not partying in discussions, but we've talked to a lot of people. Here's what, I'll start it off. Here's what I think is going to happen with the acquisition. They're going to cut a lot. And I think people have been in denial. Marketing sales will probably be cut heavily. They'll probably keep the SES, I predict, because SES love to deploy that shelf wear that gets out there. And we heard ecosystem telegraphed with Hock Tan. So I think that shows signs of professional services, more field techie related stuff, not sales people. So I think they're going to cut back sales and marketing. Not sure the future of Tanzu will be, but I love the modern apps. I think they'll keep that with the vSphere. And then- I think they'll give it a chance. They're going to give it a chance. So I think they're going to keep most of it and let it run for 18 months or two years and give people, like you said, you want to set it for a number? No, I think they're going to change it into be very integrated organizations, no centralized services. And I think that's what's going to happen. And they're going to be like, how do you do? I think the numbers tell the story. If you just look at just a quick snapshot of Broadcom and VMware, line them up side by side, which we did in our breaking analysis. The trailing 12 month revenue for Broadcom's 34 billion, VMware's 13 billion. Broadcom has almost a 50% free cash flow margin to VMware's 29%, which by the way, 29% is very good, but 49% is unbelievable. Broadcom's got 20,000 employees for a 34 billion dollar company. That's a 1.7 million revenue per employee, which is more than Uber. I mean, it's incredible. VMware is actually pretty good, 350,000, but compared to Broadcom. And so Broadcom's revenue multiple and evaluation of 343 billions, 10X, VMware is 5X, which again is actually really good, but they got to blend that. Broadcom has promised to focus R&D and they're going to spend, but they're going to focus it. They've promised to de-lever, so they're going to sell some assets. So it'd be interesting to see what they do with, for example, carbon black, because that's an asset that they could actually sell and get VMware paid, I think a couple billion for it. And I bet you it's worth more than that today. And so there are a number of other things that they could do and package. We talked about this on breaking analysis a little bit. So they have to de-lever to pay down some of the debt they took out. They just, they did some restructuring of some debt. They took some short-term debt, but at the long-term debt, we all know what interest rates are doing, so they have to de-lever. That's what's going to happen. So, by the way, that's from Dave's breaking analysis. Go to siliconangle.com. I'll put it on the Twitter feed. That chart is awesome. I think what's good, is digesting Octane, so they're going to put two billion in. So they cut five billion in costs and give back two and get rid of, and that's a net $3 billion cut. So if you look at the numbers, if you look at Dave, the revenue per employee, it's, what's the number there? $1.7 million. They don't have to get to $1.7 million. If you just do the math on that chart, it comes to about five billion, four to five billion dollars in cuts. So that's a lot. People think Broadcom runs like a PE, it doesn't. It runs, it takes separate businesses, it says go. I mean, it wants to invest in R&D in a roadmap that essentially will keep customers on a platform and make it less attractive for them to leave and stay. And then their other play and their playbook is spend more with us and we'll give you a better deal. Don't spend more with us, then we'll raise prices on you. So if you're a customer and you're looking at migration costs, all right, they got me, fine, I'll spend more on some of this other stuff, but I have to be able to take advantage of it. And I think that's where the big wildcard is. All this so-called shelf wear, how are they going to get adopted? Well, they got to get the license renewals. Rob, we were talking about the products. That's why I've come back to the V-SAN piece that you mentioned earlier, how they opened up with. They actually have, they've been chipping away at some great products and they're, the modern apps, I like how Amanda Levin said this in our briefing yesterday, these modern apps need to land somewhere. And that's a really interesting way to look at it. When they deploy these apps, where are they going to sit? Okay, cloud on premise and edge. So that's the distributed computing. So if runtime is multi-cloud or super cloud, you're going to have super AI apps, super chips. I mean, super AI is essentially multi-cloud across that runtime. These apps are going to be built right now for the next 10 years. Yeah, I think that the thing where, is it off the island, I'm quoted earlier today saying it's a kind of Tanzu maybe off the island of misfit toys, kind of from a perspective of, how does this not fit? I think it does, the modern apps part fits the strategy, trying to be a base Kubernetes distribution, to me doesn't. Having the manageability around that and building the ecosystem around that. I mean, a lot of the stuff that they're announcing is definitely aimed at things like Ansible or Terraform and taking on that market in a multi-cloud, super cloud way. So I find it very interesting. And I think they'll get some time to see if it plays out and which pieces, but I think they'll definitely delever some of that. And I think when they started to fold in ARIA into that, which is another grouping and trying to make it simpler, which was V-Rops, it was the cloud health stuff, it was a couple of the other acquisitions they made, it'll be interesting to see if they keep all of that as well and how much, and the branding has, I mean, I need the Ciccer Dakota ring to figure out what everything's called now. It's like crazy. It's all the old, you know, the spring and the pivotal stuff that they're trying to cobble together and keep alive. I mean, their fallback is to just go use open source. Cloud smart and what is that? We're going to find out that's one of the questions I have, how do you define that? What does it mean? How do you get there? We talked about the financials. We talked about, you guys all did a great job of really talking about what VMware announced today, what you think it means to you, Broadcom, Hock 10 was there, as you said, with expectations that this deal will close by the end of the year for them, which I believe is end of October. What does a post acquisition life look like for customers? We had Hock 10 there in the audience, was in the video, so a good show to customers. You talked about, I love this, and the breaking analysis you guys did on siliconangle.com, homepage, check it out, the Hock California scenario. What does post acquisition life look like for long-term VMware customers? What do you guys think? Well, the Hotel California scenario talks to, hey, public clouds, basically, you can check in, but you can never leave. And so Hock 10's premise, the whole premise for the VMware acquisition, when they get heat from places like the regulators, like the FTC is, we're going to actually create more competition. And I think that's true, by the way, when you look at VMware's presence relative to AWS and Azure, it's quite prominent. And so they are the on-prem cloud alternative, and they're running VMware cloud on AWS and all the other clouds. So I think it's a viable premise that they can create competition. I think the big difference is, VMware to stay relevant has had to come up with all these other projects and all these sort of side things and all these acquisitions, and then the Salesforce have to go sell it. I think Broadcom's going to say, no, let's narrow that down and focus on the core. Right, ESX, vSphere, vSAN, NSX, Tanzu, go ahead, make a bid. Let's see if you can actually sell cross-cloud services and make money at it. And that's really going to be the core focus. I think a lot of these other areas that we've seen over the years that are aspirational are going to go away. I think the impact of customers is going to be the same old VMware. And that means the boring VMware, like, okay, I got licenses, I got to renew. The issue is going to be how well they don't lose focus on accelerating that innovation story. So the question is, can the innovation story continue and can Broadcom hold back to regulators to get through this last hurdle and stay in that position of fostering competition with the hyperscalers? The reality is that if Edge and On-Premise come together with AI, AI apps, a whole reset could happen in the pecking order of hyperscalers, public cloud dominating. So it's not repatriation, it's new growth. It's not, you're not repatriating back to On-Premise, you're actually growing On-Premises or private clouds. And so I think customers are going to have to look at the focus of where VMware is. Is it relevant? And right now, the numbers that we're hearing from a spend standpoint is clouds getting all the attention, I say a hundred X on the major enterprises. And VMware is just like, oh, we got VMware. We don't need to look there. It's like, it's like part of the furniture. And so that has to become the next big thing. And that's going to be where Broadcom has their work cut out for them. And they got a chance. I think VMware is very relevant to pivot off that. There's going to be some hard negotiations with customers when the ELA's come up. And I said before, if you spend more, you're going to get the better deal. I'm not saying it's a great deal. You might not, they might not cut. I don't think they're going to cut prices, but if you spend more, you're going to get the best deal, which is natural, same thing in the cloud. If you spend less or do less with them, then I think prices are going to go up. Yep, yep. Wow, you guys, amazing analysis from the CUBE analysts here, our two co-founders and co-CEOs, John Furrier, Dave Vellante, Rob Stetscher, our CUBE analysts as well. We're going to continue this on the green set, by the way. Rob and I. Excellent. There are two sets. We'll dig into the VSAN stuff and the NSX, the V-SPAIR. More about customers as well. All right. Two sets, tons of CUBE content coming to you for the next three days. We're going to be covering multi-cloud. We're going to be having the Broadcom acquisition. We're going to tell you what a cloud smart strategy is and so much more. Stay tuned, guys. We thank you so much. Next up, we're going to have some great conversations. You're watching the CUBE, the leader in live tech coverage.