 From the SiliconANGLE Media office in Boston, Massachusetts, it's theCUBE. Now, here are your hosts, Dave Vellante and Stu Miniman. Hi everybody, this is Dave Vellante and I'm here with Stu Miniman. Welcome to this special presentation of the Dell EMC World preview. It's coming up very shortly in just a couple of weeks here. Stu, we've been to many, many EMC worlds now. I guess the second Dell EMC World, first what used to be EMC World, now Dell EMC World. So let's talk about what's transpired since the acquisition. In October of 2015, Dell announced that it was going to buy EMC for $67 billion. That merger took place last year, late last year. And since then, a number of things have happened. Dell has delevered a bunch of businesses. We can talk about that. It's paired off about $7 billion of the debt. There has been lots of reorganizations, the sales reorganizations. There have been a number of cutbacks in terms of reduction in force. And the market continues to move along and we're seeing the shifts and the ebbs and the flows. And we're going to talk about all that, but let's go back to the merger itself. Blockbuster merger, $67 billion, which basically Michael Dell and Silver Lake raised only about $4 billion to do that merger. But still, a little bit of dough gets a lot of leverage. Biggest merger in computer industry history. Where are we today? Yeah, so Dave, as we know, it was to really create an enterprise business. Because while Dell had servers, had a lot of pieces that sold to the enterprise, it hadn't, after it had a partnership with EMC for many years, it went on its own. It bought a number of companies to have its own P, networking companies, storage companies, software companies, had built a little bit of a business, but it had kind of petered out a little bit as to how its growth in the enterprise was. By buying EMC, it then created this new brand of Dell EMC, which it's pushing into the enterprise. High level, they spent over a year putting all the pieces together so that day one, when the deal closed, not only did they have most of their ducks in the row, but I mean, they rebranded it. I live in Hoppington, South Street Hoppington, day one was branded. I was actually just down in Round Rock, and it actually surprised me a little. Some of the buildings I had been up before that were Dell buildings are now Dell EMC buildings. So everybody's like, oh, who bought who and who's in charge of who and everything? Well, in many ways, it is a merger. So the Silver Lake and Michael Dell made the acquisition, but it's putting the pieces together, putting proper leadership in top, and putting all the pieces together. We know the channel piece we dug into at the November show down in Austin. Channel needed a little bit more time, so in February, they rolled out a new channel program, heard mostly positive reviews on how that worked, but you had a Dell culture and EMC culture is gonna take some time to put together because many of us that know the companies know that it's not like these are two very similar companies. Culture's a little bit different, how they run things are a little bit different, but the product lines mesh pretty well together, their strategy's all laid out, and now it's really about executing and moving forward. Yeah, so I had always said that this merger or something like this was inevitable. EMC had to do something, and from Dell's standpoint, it accelerated the vision that Michael Dell put forth many, many years ago, which really never achieved the outcome that he wanted. And now he's got the ability to, through the merger or acquisition of EMC, really fast forward to that vision. And so I think it's important that successful mergers that we've seen like this in the past take the best of both worlds. Now, not everybody presumably is gonna be happy with what's happening, but my experience in these things, Stu, is you've got, let's break it down to three simple levels. You've got top level management who says, okay, they get in the room and they say, okay, guys, this is what we're doing and they go. And they're all speaking the same language and then that begins to trickle down to the organization. The middle part of the organization is a little slower because there's a lot of details that have to be worked out. And then the folks in the street oftentimes take the longest because they're doing things the same way that they've always done them. It seems by all historical standards that this merger seems to be moving pretty quickly in terms of the reorganizations, the alignment with sales, the channel issues being, I don't want to say cleared up because there's still some concern and confusion in the marketplace, but at least speed of action. When I compare this, for example, to the compact HP merger, which kind of took a decade to bake, this seems to be happening much faster. And Dave, one thing to note that was critical in this happening is Dell had already gone private and being able to do this without the 90 day shot clock and Wall Street looking over everything you did, I remember you and I interviewed Michael Dell a couple of years ago, before this all went down and said, what's the biggest thing that changed? How do you really innovate and move forward? And Michael said, we need to allow people to be able to try things and fail, which we know is really tough for large companies to do. So they at least went through that piece of it and this whole merger assimilation is going to take some time, but they're doing it privately. So we get some numbers, but we don't get all the numbers and they can make adjustments internally. And yeah, there's been lots of ebbs and flows internal as to portfolios, what gets sold off, certain product lines have been sunsetted, certain ones are getting merged together and a lot of changes, but still many familiar faces that we're going to see at the event and some new ones too. Well, now of course the crown jewel of this merger, this acquisition is VMware, DVMT is the new sort of tracking stock for Dell VMware technologies. VMware of course still has its separate stock itself. And from my standpoints too, that really is the piece that does accelerate Michael Dell's transition. It's funny people talk about VMware as being the new legacy with everything going to cloud native and infrastructure as code. Having said all that, the moves that VMware is making, finally getting out of giving up, if you will, in the public cloud business, doing the deals with Amazon, which many people including myself have said, well, ultimately that's going to be a really good deal for Amazon, but there's a lot of business runway for VMware. Many, many companies rely on VMware. It's this data center infrastructure standard. There's a lot of dough to be made between now and Armageddon. Yeah, yeah, and a few things there Dave. First, many people have still been saying, oh, they're going to sell off VMware. You talk about all the delevering, they're going to push that out. And Michael Dell looked at the camera and he's like, people that think that don't understand math and they're kind of stupid. I think he said something like that because that is the crown jewel. A few things. One, VMware hasn't gotten out of cloud. They did sell off vCloud Air, but if somebody wants to buy that, I believe it's OVH as the partner. VMware can still own that. VMware on AWS, really interesting play there because at least from some of the dynamics that I heard, it's not like the Dell people are all jumping and EMC people are jumping up and down saying, oh, great. We're going to drive more business and partner with Amazon. That is still one of the big enemies out there, but it's an interesting one to look at. The Microsoft partnership is one that'll be really interesting to see what comes out of the show. We know that Dell is one of the big partners of Microsoft. By the summer, Azure Stack Solutions should be out, which something I think we're interested in seeing. I think there's some maturation that will need to go on for the Azure Stack solution, which of course isn't yet GA, but even the 1.0 version of it is pretty simple. It uses storage from Microsoft. The S2D, which is storage spaces direct, which means what is the differentiation going to be between HP, Dell, Lenovo, and even Cisco. Reminds me of some of what we saw with the early VSAN and the EVO rail solutions, which by the way leads into, I mean, the VMware stuff. VSAN's accelerating great. The NSX is doing well. There'll be some VMware stuff at the show, but it's interesting to see how those solutions like the VX rail from Dell EMC are accelerating to get them moving in some of those emerging and growth areas. Well, you mentioned Microsoft storage spaces, so there's a lot of white space there, so a lot of opportunities for partners. And, you know, let's pick up on the Azure Stack for a moment, just talk about strategy. One of the things that we, actually, let me go back a little bit. One of the things we said when we wrote up the analysis in October, 2015, was we expected the company to be between 75 and 80 billion. It looks like it'll be somewhere in that range. It's hard because it got all this merger math. You know, you got partial quarters. They released earnings for part of last, well, they released earnings last quarter, which included part of EMCs. So it's going to take some time to shake all that out. But if you look at the operating, sort of non-gap operating pieces of the business, it looks like mid 70 billions is somewhere where it's going to fall. We were expecting, you know, it's gross margins somewhere in the mid 30s. It looks like they're low 30s kind of popping back up. And part of that is because they sold off certain businesses already. That's right. And I want to talk about that too. And they're living in 2018 already from a fiscal year standpoint. That's right. Part of that too is that the classic Dell business is a little less profitable than when Dell went private. When Dell went private, gross margins were around 19%. Now they've ticked down a little bit. But that said, servers and storage continue to do well. With storage, sorry, servers and client, you know, PCs continue to do well. With storage being kind of flat to down, a little bit soft there. So we'll talk about some of that. But I want to come back to a hyper-converged, which is something Joe Tucci said in his swan song at EMC World last year. He said that we will be number one in hyper-converged by the end of the year. Are they number one? And if so, why? Yeah, so once again, how do we count things? So if you take the entire Dell family, I've got the VxRail, which has Dell hardware and VMware software. Who do we give credit to? VMware, if I take the software, do I take the hardware that's sold by other players? Who do we account that to? Dell, OEMs, Nutanix with the Dell XC solution. So, and then there's the scale IO piece. So if I take almost any way I slice it still, I should be able to say, if I take all the pieces that Dell sells, the Dell, Dell EMC family is the leader in this space. Because Nutanix as a standalone has Dell as one of its primary channels. Order, magnitude, the revenue, that solution that Dell sold of Nutanix, it's about $250 million, which is pretty strong. And by the way, I got some verification this week. I thought that was a two-year extension. That was signed last year. It was actually a five-year extension. So I know Wall Street looks at what's happening with Nutanix and says, oh, you know, that's a headwind. They're going to try to sell. Dell did sell more VxRail revenue in Q4, then they sold the OEM Nutanix. That being said, both of them have a growth plan. Expect by the end of this year, you know, the word from Dell is they will be selling more Nutanix at the end of this year, then they sold at the beginning of the year. So they're accelerating that. And yes, they're the leader, but it's made up of like four or five different components. And therefore, if you take any one product out there, there's a couple of people that can claim leadership. Well, so one of the things we've been talking about for years at SiliconANGLE, Wikibon, and theCUBE is this sort of 10-year collapse and infrastructure hardware and software pricing. And that's one of the reasons why, as I've said, this merger or something was inevitable. And if you look at sort of the old traditional EMC, you know, back in the heyday when you were there, it was sort of Symmetrix and the Clarion, sort of VNX and these sort of portfolio companies. And Symmetrix obviously huge margins. And now you're talking about, you know, Scale.io, obviously the flashes is, you know, hitting on all cylinders, but the portfolio has gotten much, much more complex, which was complex before, now it's even wider. Let's talk about some of the things that Dell has done to delever. It sold Dell services, Dell software, Documentum, which got a nice price for Documentum, then IPO with SecureWorks and that added up to about $7 billion. What's next? Are they going to, Pivotal IPO? Are they going to delever by selling off RSA? What's your radar telling me? Yeah, I mean, the RSA one is one that, when it was announced and SecureWorks was going to be spun off, it makes sense that maybe you take RSA and put that with them. When it was the EMC Federation, RSA was a little bit separate. So it can be a standalone business. It could be delevered. I mean, Dave, we've seen what HPE has been doing is it's kind of those spin merges. So how do you keep it in the broader family, but still keep control of it? Of course, I expect Michael Dell to be getting up and saying all the reasons why Dell leads HPE, which if you talk about from a portfolio standpoint, and it's been interesting to watch HPE make a bunch of acquisitions. It's SimpliVity, it's Nimble, there's rumors everybody from Veeam to many others that they've been looking at that they keep adding. When will we see Dell, Dell EMC, being more acquisitive in what they're doing? Michael has said that they have the resources to be able to do that. They are not in shackles with what they owe, but we haven't seen a big acquisition in a little while just some of those moves. Well, you're talking about $50 billion in debt, so they still got to chip away at that. Dell obviously is going to continue to, well, I say obviously, Dell will continue, I believe, to continue to throw off cash and be able to chip away at that debt, but if you look at the competition, let's sort of lay out the horses and track. You got HPE and Dell in an internacing war, put China in there as well with Lenovo and Huawei, certainly on the global scale, and then further up the stack, you got IBM and Oracle participating, but Dell and HPE, kind of the bottom feeders from a margin standpoint, they live on lower margins, they're comfortable in that world, they're comfortable OEM and things like Nutanix, IBM and Oracle, just the opposite, trying to go way, way up stack, but I would say that relative to China and the cloud is the other big one here, of course, Amazon, you've got to have that low cost structure, but looking at Dell's kind of financials and squinting through them as we do, as I say, they're operating margins, or they're operating, it comes as sort of the high single digits maybe, contrast that to someone like Amazon, where you're looking at low 30s, I mean just massive profits, and so you've got to have a low cost structure to compete with Amazon and to compete with China. My question to you is, is the cost structure low enough and can they grow the business? Yeah, it's an interesting question, if you look, the knock many of people have had about HPE is they don't have much software and therefore what is their future? We know that software is eating the world and software to find means to be a major piece of what they're doing. Dell and the Dell family has a number of software assets, we talked a lot about VMware and Pivotal and some of those, so I think margins are there, but my question is where are they going to grow? If we look at the cloud guys lately, I mean Dave, we've got Jim Kobielus on the team now and it's all about kind of the AI and machine learning piece. Will they be talking at Dell EMC World about that kind of activity? Or are we going to be talking about the next chipset from Intel, the next faster thing in storage? So are they more than a server and storage company? Because usually when I hear the executives get on stage they're talking about the digital transformation and there's more that they need to have to that portfolio and it's usually those up the stack things that help us drive those margins up and gain leverage from not that many people. I mean, we know how many, the five person software team that can grow tremendous amount of resources and you look at companies like Amazon and Google either buying companies or saying come build your next product on our platform, where does a Dell live in that ecosystem? Okay, so let's talk about Dell EMC World and what we expect there. Michael Dell is going to stand up as he always does, he's a consummate gentleman at these events. He's going to thank his customers and his employees and his partners for participating in this exciting new opportunity. He's going to talk about the challenges of digital transformation. He's going to say that Dell EMC wants to be your partner in that digital transformation and then he's going to go through a litany of where they're number one in Gartner Magic Quadrants and IDC market shares and that's a good story that he will tell and his narrative focuses in on those areas where they are winning. His narrative is not going to say, hey, our legacy business is declining faster than our new businesses are growing and therefore we're not able to grow as a company. Not going to talk about that, but that is the fact of where all these big legacy companies fit, but then the other thing you can expect that at Dell EMC World is they always have big announcements, right? There's going to be some reveal, some unveiling of some new cool product. Yeah, I mean, Dave, Jeremy Burton is the CMO of the whole company. Jeremy knows how to do some flashy stuff, get the attention out there. He used to do the, what was it? It was the Breaking World Records. The Mega Launch. The Mega Launch, the giant truck jumping over something else. So expect something to help them go viral with what's going on there and excitement. It's a great show. I'm a little sad to be missing it, Dave, but every 15 years I get to take one of these off as what I said and be at a show in Boston where I'll see Dell people at the OpenStack show. Well, what about the cloud strategy, Stu? I wonder if we could talk about that because we had sort of, I had written a piece and it was a collective piece, but we had rated it at the time of the merger, the announcement of the merger. The cloud strategy is negative and the sentiment was there because VMware was struggling in cloud. EMC really didn't have a concise cloud strategy. Dell really was just an arms dealer to the cloud, but that has essentially been cleared up. I mean, there's no effort now of Dell EMC trying to own the public cloud. They are selling technology to those cloud players that will buy from them, not likely Amazon and Google and... Right, but that being said, the Dell family, including VMware, has done partnerships with Google in the past, VMware partnered with Amazon. Because for the server side. And Microsoft, yeah, for the server side and on the PC side, of course, Microsoft and Google are both partners that get involved in some of those. So they do participate there. It's the core EMC business doesn't participate there. But so the cloud strategy, I'm more sanguine on the cloud strategy than I was previously because they can sell to cloud players. The big three or big four aren't going to completely dominate the market. Or it will stay fragmented. And Dell can make a lot of money there. The question is, can they compete with the ODMs long term? Yeah, just first thing on the cloud, just finishing off. Where will IoT fit in? So Dell last year shared a little bit of what they're doing with their IoT strategy. And while we had a move from the data center to the public cloud, we also know that there's a move from the public cloud to the edge. And that's very different from the data center. So the Dell family has a play in a lot of those environments. And therefore, even if they don't win a lot of the public cloud, they have an opportunity at the edge. Especially, Dave, I remember when I first started with you seven years ago, it was like consumer and enterprise, keep them separately. We saw HPE breakup. As the edge becomes more important, do I need to be able to bridge those solutions together? And therefore having both of them is something that's interesting. Something that Microsoft and Google and Amazon all have. And so does Dell. And that's really Dell's strategies from edge to core, the data center, end to end, it doesn't have the wireless play like Aruba does, but nonetheless, it's got the infrastructure play. Okay, but back to cloud. What are your thoughts on their ability to compete in cloud long-term? So I don't think they're going to compete in public cloud, Dave, and I don't think they want to. You agree. Yeah, it's going to be an IoT where they're going to be able to help. It's some of the broader general digital transformation activities that are going on. I'm interested to see they've got some gurus there. I mean, Tim Berners-Lee is going to be one of the speakers at the event. So with this next generation of the internet, where does Dell position themselves? So on the cube, we've got Michael Dell coming on, Jeff Boudreau, who now is the president of the storage division, Dell EMC. Dell was able to keep a lot of EMC execs, although it lost a couple of big name execs. CJ Desai and Guy Churchwood left, which I think was sudden. Jeff Boudreau's taken over for those guys, very seasoned, exactly. David Golden, of course, be there running the Dell EMC piece with Jeremy Burton, CMO for the entire company. Pat Gelsinger will be there. Absolutely. He'll be coming on the cube as well. Pat's going to be upset that you're not there, Dave. I know it's two in a row I've missed with Pat. Chad Sackich will be on. Ashley, who runs the server division, as you say, David Golden. What other highlights can we expect to do? We had two cubes. Yeah, double cube. I believe it's third year in the row we've done that. We've got a, I think our biggest team we've ever seen, we've got analysts that are going to be there digging through all there. Furrier, of course, will be anchoring it. And more ecosystem participation. This is a real sort of change in sentiment now. You mentioned Dell selling into the big cloud guys. You mentioned Nutanix, five-year OEM deal. Dell knows how to partner. Dave, we're going to have Dhiraj, CEO of Nutanix, is going to be on at the Dell EMC show, which, right. If a year ago even, you said, wait, this is another storage company on at Dell EMC world. I don't understand why that's happening, but it's now a Dell show. So Dell has a broader ecosystem, wider tent, if you will, and going to get some of those on. Yeah, absolutely. Good, all right. So we'll be there, as we say in force, big week for us, obviously. You see, you'll be here with doing- OpenStack. OpenStack. I'll be doing service now, knowledge, to hanging out with the CIOs and the IT peeps. So check out theCUBE, go to siliconangle.tv. All the channels will be there. Still, I'll give you a final word on what to expect at Dell EMC world. Yeah, so it expects, when this merger happened, it really kind of re-energized a bunch of the things that were happening this show. It will likely be the largest show ever. Vegas is where they can do some blitz and glamor. They've got Gwen Stefani and Andy Grammer in the show there. So I wish I could go see Gwen. She puts on a great show. I saw her as the part of No Doubt a couple of years ago, but always a good show. And remember, it started out with the engineers. I mean, I remember back, the original show was Wizards, then became EMC Technology Summit. So when I was in engineering actually at EMC, it was like my favorite time of the year because I actually got out of Hopkinson, got to go travel to a show and talk to the users. And that's still at the core of what they're doing. It's bringing these people together. It's a hardcore technology engineering show. Yes, there's business and marketing and some of that other stuff going on. Channel's going to have their show. There's so many pieces of this show, but at the end of it, it's a big tech show. It's always been, for the last decade, it's been the biggest server storage show. And now with server and storage, it's still one of the anchor shows. I know our audience always loved this. It was the first CUBE show back in 2010, Dave. So eighth year of it, I know our whole team's excited. Furrier's all fired up to be able to bring theCUBE magic. That's right, May of 2010 was the very first CUBE. So check it out, hashtag Dell EMC World, SiliconANGLE.tv. Thanks for watching everybody this preview. Thank you, Stu, for coming on. See you next time.