 This is theCUBE, live from the Musconi Center in San Francisco. This is SiliconANGLE's continuous coverage of VMworld 2010, now inside theCUBE. We're back at theCUBE, siliconangle.com's continuous coverage of VMworld 2010, live. I'm here with Dave Vellante. My co-host for the week is the last day. I mean, things are happening. John, four days. This is, we're at the epicenter of transformation of the IT industry. It's great to be here. It's a cloud revolution. We've heard so many good things going on here from infrastructure applications, software developers, big money flowing in from the VCs, huge ecosystem revenue pouring in. The big guys are just totally changing their game. So it's just awesome. And the news is just continuing to pour in on three par. How many times, oh, that's unbelievable with three par. And we called it here yesterday, right? We sat here late last night, and we said the ping pong match is not over. That Dell is going to match. Dell matched. We said HP is going to take it higher. This thing's going to go higher than the valuation that data domain got from EMC. Bang. We nailed it. I called it over $2 billion. My first blog post, and we called it last night that Dell would counter. HP would win it. You're awesome, man. Shout out to the community, right? Because it's the feedback loop that we get from the people in the community that help us make these calls. So thank you. So all those sources out there, appreciate it, close to the companies. We really appreciate it. Now seriously though, we saw this coming because we, you know, a lot of the analysts out there, in my opinion, do not understand the new model, the new network, cloud revolution. And they didn't understand the value of three par. I mean, three par as a storage company has a very, very interesting architecture that fits the new network. And HP valued it from a perspective of not as a storage play, but an overall juice to their plans. And they could take this, put it instantly into their company, and it'll throw off revenues across the board. They got EDS, Field Salesforce out there. What is your angle on that? I think that ultimately, I think you're right. HP said, we need to own this asset because we got to replace our aging EVA base. They looked at it and said, it's going to cost us a billion dollars in two years to do this ourselves. So 2.4 billion is, believe it or not, a bargain in their minds. Let's talk synergies, right? Classic, you know, hey, there's synergies, but let's really talk about synergies. HP has a huge footprint in the marketplace. They're competing with Cisco and all these other guys, and they have huge presence, huge consulting organization. They're a monster, they're a whale. So what is the synergies in your mind that this brings to their other businesses? Do you have an opinion on that? Yeah, well, I think that HP for years has really competed in silos, whether it's servers or networking and storage. And frankly, my view, Donatelli has brought all those together, right? He's an executive with leadership. They've gone out, they've made the 3Com acquisition. Now they've made a huge acquisition with 3Par. You look at what they did with Equalogic, bringing all those together. Now, they still have to figure out how to execute and how to be more streamlined as an organization, but they've got the pieces and they've got the leadership in place. We had the HP executives on here, Senior Vice President, General Manager, both servers and storage. I mean, they were amped. I mean, I feel HP wants to prove something. They're upping in their game. This is a statement. I mean, herds out of the way. I think people in the company are saying, hey, let's put our game faces on. Do you see that? Yeah, and I was impressed, actually, with the few of the companies who supported us here at theCUBE. Thank you for helping us get content and customers. And I thought HP put forth some great customers. Dallas Cowboys. Dallas Cowboys, Carnegie Mellon, EMC also brought a lot of good customers. We had some interviews with some compelling customers as well. Why does HP not get the credit they deserve and innovation in their overall portfolio? Is it because it's just so big? What is your view on that? Well, I think a part of it, and we've talked about this, is that HP Labs is this renowned organization and they just haven't been able to flow enough innovation through to revenue. Not to talk about that. Well, my opinion on HP is the same. And I think also, HP as a culture is always based on people, contribution of people. And their people have been hurting and that came out loud and clear with the mark heard. You wrote about that and your sources indicated that there was a lot of disgruntled people. My philosophies, Pat McGovern, my old boss really taught me this. You need three things. You need to make the numbers and Heard did a good job with that, right? You wrote about that. And you need happy customers, but you also need happy employees. And if you don't have those three legs of the stool, eventually something bad's going to happen. According to my sources close to HP, and there are many, the real issue with HP was with Heard was, Mark Heard was an efficiency guy. He really took that thing down to the bone, got the ship in the right order. But there's a certain point where efficiency, you lose momentum, right? So HP, he was well beyond his months at that. I mean, HP was being more efficient and Heard was catering to Wall Street, not to the business. And sometimes momentum costs a little bit. But if you're positioned and you have momentum, you can capture it. So I see HP basically rejecting that notion of, meet the Wall Street's expectations, we have to invest. We heard VMware saying the same message here, momentum, long haul. Companies need to take that long haul perspective and say, this new innovation's here, we're at an inflection point. This cloud revolution is totally legitimate. The three-part thing is just a great proof point that storage and the cloud is all about a new generation of architecture, products, services, and users, user experiences. We'll talk about momentum, right? We had Todd Nielsen on a couple times, actually. And this company, this ecosystem has momentum, it's growing in excessive 40% of per year. It's VMware is becoming and maybe is now the new IT economy. What do you think about that? I think VMware is in a position right now where they could be the next Microsoft in a big way. And there's still a small company, relatively small. We chatted last night with Todd Nielsen and he was telling us, Maritz's philosophy is very clear, be technically strong, have a platform, not a lot of grandstanding by Maritz. He's not that kind of guy. VMware is getting down to business, build the platform, get out there, and create an ecosystem. So, you know, they're making the market and that's a long haul view. This is, I think it's real. It feels real. It's really interesting to me, the executives that you talked to from VMware, a lot of Microsoft DNA, and they're taking the same playbook. We saw that with the infrastructure and the hypervisor and vSphere. We're seeing that with the platform with Spring and even the applications. We talked to the folks from Zimbra. Real interesting play there. I'm still not completely sold on the applications play, but that's okay from my standpoint. The infrastructure and the platform is really where it's all about. I think personally, this company over the next five years has a great shot at being a hundred billion dollar player right up there from a market value standpoint, right up there with HP, IBM, Oracle, and Cisco. What do you think about that? I think that's a good assessment. I think, you know, it might even be worth more if you look at what Google's doing and you know, they could be as impactful as Google and what Microsoft is. If you think about Microsoft, what they would do if they had that kind of growth and momentum in a modern era. What Microsoft was during their run, you know, VMware has the potential. So I think it actually can go over a hundred million. But I think a hundred billion, a hundred billion, a hundred billion, sorry. And the amazing thing is their majority owner. What's their market cap right now? It's in the mid-thirties, I would say. Maybe low thirties, so 33 billion. What's EMC's is maybe 40 billion. So my prediction would be VMware will surpass EMC's market value and essentially that will be, you know, the company, right? When you look at those two companies, Joe, he's the same. If VMware, to hit a hundred billion dollars, what I think is totally doable and I think your assessment's correct, if they start doing anything close to what Todd Nielsen said, if they can throw off $15 for every dollar of licensed revenue, they'll blow past that number because what they'd be doing is basically creating an industry from scratch. And if you look at Apple and Microsoft and Intel, they did that and they created an industry that was kind of a hacker culture that grew into a monster of an industry. You know, and we have been hearing from the development of our community, and you asked this question a number of times, as did I, is where's the white space? What do you tell the developers? And my sense is, this is very similar to what we saw in the 80s and early 90s with Microsoft where Microsoft basically owns everything and you're seeing VMware really be aggressive about where it innovates. So even the security, we have security folks on later, the B-Shield innovations. If you're a security player, you've got to be looking at going, uh-oh. You're going, security is the number one reason we heard from people why cloud adoption was not being there. So the cloud service providers are stepping up with messaging around that and the IT guys who are, you know, IT guys will be irrelevant if they do not adopt and change fast. Well, and that's what VCloud director was all about, right? Is the ability to spin up essentially a cloud, a cloud-like infrastructure to really compete with the cloud service providers. It's early though. I mean, the users that I've talked to here say it's not quite fully baked. There's other richer, you know, products and infrastructure out there. This is where the ecosystem has to come in and pull together and really solve that problem. I thought Rod Johnson had a really good quote. I asked him directly. I said, hey, what do you get excited about? I mean, you know, we just sold us coming over a couple hundred million bucks. Okay, is that VMware? That's 300 and change, right? His response was interesting. I thought it was going to be, yeah, we're going to change the world, software, blah, blah, blah. No, he answered really interesting. The current green environment, the data centers, the power, the cooling, is not sustainable and that's an interesting angle because virtualization powers a whole new generation of architecture around what the data center is. And I wrote a post about this a year ago after I came out of HP Labs meeting all these scientists over at HP is that there's going to be a data center operating system and that's going to be a systems approach. So it's not about physical footprint anymore. It's about efficiency around power and enabling growth. So it's a balance between efficiency and growth. And I think not a lot of folks are seeing that and I didn't hear from the other guests a lot of that messaging. Well, but we did hear that from the Dallas Cowboys, right? Who are basically using virtualization as a way to drive growth outside of the TV revenues in whatever it is, concessions and other merchandising that they're doing. Using virtualization, yeah, it cuts costs but it allows us to, we heard change prices on the fly, right? And actually drive a lot of revenue. And I think that's where VMware's big challenge is and hopefully they can step up to it is going beyond efficiency and cost cutting to greater business enablement. You know, I think the other observation that I would share is that it's like an earthquake has hit San Francisco right here in terms of the cloud business. It's a real deal. And I'm seeing some consolidation with the big guys buying up companies to some consolidation in the sectors. But what's happening in this ecosystem is everyone's out there, we've talked to entrepreneurs in the trenches, we see the big guys, VMware has consolidated a message and an industry is coalescing around that. And I think, you know, there's some open holes we have questions that we'll find answers to well with another Q broadcast and through cloudangle.com but there are white spaces. But that was important. Paul Moritz clearly knew that they had to put a stake in the ground and set an agenda and say, let's consolidate because the people that are consolidating and coalescing around this agenda it's not about efficiency and getting small, it's about growing. So sometimes you got to come together to grow and that is very Microsoft like. Yeah, and the other, you mentioned questions, the other big question that I'm hearing within the Wikibon community and I'm presuming you're seeing it in SiliconANGLE as well is what about this whole notion of a virtual desktop? Where's the tipping point? Today, VDI is really focused on a few niche use cases be it call center or very narrow sort of use cases. And I think in some respects, one of my takeaways from this show is VDI is sort of a do-over. The whole virtual desktop, the parlance is changing from one of desktop to the end user being the point of centricity. And I think that has a lot of potential. If VMware can figure that out and really make the iPads and the iPhones and the end user devices, bring that into the mix much frankly in the same way that Citrus has done VMware's got way more juice in the industry. They could really disrupt Microsoft. The other point I'll make about that is if they don't, I think Microsoft's going to maintain control of that desktop for a long time because they got the pricing power and obviously you're a good competitor. So that's the real disrupter in my mind. What do you think about that, John? You know mobile really well. Well, I think you're right on the money. And I think the key thing is that there are people in the legacy mindset that are clutching and grabbing do not want to give up the desktop. And that's sometimes IT and sometimes other vendors. You have to peel their dead hands off that control. And we saw that in other movements like the mainframe, the mini and other revolutions that clouds going through. So it's not just IT guys who don't want to change. There'll always be pockets of that, but it's other vendors. I mean, Microsoft's now got this bloated PC model and that's not clearly the direction that people want to go. They want to go. Microsoft's the legacy, aren't they? Microsoft's legacy right now. And Microsoft's legacy has to change their game and really move fast. And we talked to Mike Neal who was really straight up about that and they're working to do it but they just don't have the messaging. It's confusing. Microsoft's confused in my mind. So we got to get more data on that. And that's an open question. Can they compete? Do they want to hold on and hold on to that market? Or can they cannibalize their own dollars to be positioned for growth? And I think that's a strategic issue for Microsoft. Eat your own to own the position in the future. If they hold on too long, you know. My feeling on that, John, is that Microsoft unquestionably can compete. The other question I have is can they maintain their relevance? And we've seen their relevance wane. I mean, let's face it. VMware is the relevant company in the data center today. The ecosystem is behind VMware. And the reason is customers are adopting VMware. Customers want more innovation out of this ecosystem. So people are supporting it. They're talking a really strong game in terms of openness, right? They have a, we heard this from Raj Johnson. The open source ethos lives. But again, they're a profit-based company. My guess is they're shooting to $100 billion. I think there's a, Microsoft's so huge. And you know, people have been, you know, challenging volume or saying he's out of touch. But Microsoft's got a huge business. And so the question is, are they positioned? Their messaging is clear that they don't. They have some stuff out there that speak and show some proof points. But they just been behind. Apple's been kicking their butt on the phone side. We saw that. Everyone's seeing that. Google-owned search. Bing is trying to make a comeback. You know, small market share growth. But Microsoft's just all over the place. And you know, the new generation of users don't have that brand loyalty to Microsoft, like some of the older school legacy guys. Yeah, I mean, you know, I don't think, I think we can agree that Windows is not driving the innovation of this industry anymore. And that hasn't been the case for many, many years now. And that's why I sort of questioned the relevance. If you're not relevant in this business, then- You're out of business. You're out of business. But now, is Microsoft going to be out of business? No, with that balance sheet and that monopoly and that's going to continue for a long, long time. But the growth is just not there. They need to turn around. They need to do what Apple did when Steve Jobs came back, put some positioning in the ground, reach range, they got a huge labs organization. They just got to get some good guys on the front lines and just kick ass. I mean, Microsoft, he's got to get their act together. They've reinvented themselves before. We'll see if they can do it again. But I just don't see what the answer is to stop the momentum of VMware. Now, they're giving stuff away for free in their hypervisor. I mean, that's going to make an impact. We heard Mike Neal say they're the fastest growing hypervisor in the planet from a very small base. So, what do you think about that? What do you think about that Microsoft playbook? How is that going to affect VMware? I think VMware World 2010 is the inflection point. We are here on the ground floor and this is the inflection point. VMware World 2010 is where it all came together and it's like an earthquake. And it's really about, Dave, to your question, what side of the street are you on? What side of this are you on? Are you on the innovation enablement side or are you on the I'm going to hold on and milk my install base side, legacy side? So, I think people got to look in the mirror and say, okay, what side of the street do we want to be on? Yeah, I think that's a really good point. I mean, last year, 2009 VM World, the middle of the recession, it was actually pretty upbeat, but this year, explosion. I mean, it's clear to me that VMware is the IT economy. So, you got VMware and you got all the storage activity, EMC number one in storage virtualization. That's come out by ESG, ESG puts some data out there. And number one in virtualization, I think in general and number one in VMware. So, NetApp, you got NetApp here, NetApp, EMC, EMC's number one, you got NetApp in there. I was surprised at those numbers. I mean, ESG does a good job, you know, they've got good stats guys and that was astounding to me, especially given that EMC is not known as the virtualized storage company, right? That's, you think, compelling. You think, three par, you know, to a certain extent NetApp. But they've been able to maintain their share there, which is pretty impressive. And I think the reason is- Are you surprised? I mean, you know EMC, you're out on these coasts. Are you surprised that they're number one in storage? I mean, that was not a super surprise to me, but I didn't know they were that deep in virtualization. The thing is that what surprised me is that they've been able to keep their share that they have in the core business and maintain that in virtualization. We heard why from some customers and Richard Napolitano was on. It's really because they do a great job of demonstrating to customers that their stuff works, right? I mean, that's where EMC does really well. They have these proven solutions. They put a big investment in there, like IBM Red Books is another one, but in storage, EMC is the gold standard for those types of reference architectures. NetApp does a great job, but they just, they don't have the scale at least today at EMC. So EMC got Pat Gelsinger, worked at Intel, 30 years. Paul Moritz, the CEO of VMware, worked at Microsoft. And so what do you draw from that job? That's a wind tail is now moved over to a new generation where VMware and EMC are the wind tail for cloud. I mean, that's to me a data point that I'm seeing emerge out of this. And I think that's interesting dynamic. And I think VMware actually might have a higher market cap than EMC pretty quickly. I don't, you know, if you- I would agree with that. And I think, you know what's impressive to me about meeting with the VMware executives who are, again, a lot of former Microsoft executives is Microsoft, great competitor, but did it with that monopoly advantage? VMware doesn't have that monopoly advantage. I don't agree. I think Microsoft's not a good competitor. I think they've really lost it since the anti-trust suit. I think the government really screwed Microsoft. And they had did some things. I was, that was during my years, I was working with some of those guys over there. And they were fierce competitors. They killed Netscape, basically. So they killed Netscape. And they used some tactics. Netscape, Novel, yeah, they were good. I mean, but their ecosystem thrived. I mean, they killed every competitor. Microsoft's mission was clear. If you were in their ecosystem, and you were gold, they took care of you, they took, and everyone won. If you were not in their ecosystem, and you were a competitor, they rolled you over. Yeah, but you know, this is a good point that you're making an interesting point I want to explore a little bit. If you were in that ecosystem and you got too close, a lot of times you got gobbled up. Right? Yeah, they did a lot of acquisitions, but there was a lot of independence. No, no, I don't mean acquisitions. I mean, you're crushed. Take Novel, for example. Novel, and you know networking, right? Novel had. Still around. Yeah, they're doing, not doing what they used to do. They had a monopoly in the network operating system, and Microsoft just said, we're going to take that. Yeah, right? They were part of the Microsoft ecosystem. They were powerful. So my question is, and developers, we're hearing this a lot from the developers, is where is the white space in VMware, right? So you have to be really fast and really good, whether it's security, or systems management, or network management, and try to deliver a value proposition that either is going to require. Let's talk about VMware, white space, and opportunities. So the show is here, it's a cloud revolution, all that great stuff, but let's get real for a minute, just some critical analysis around VMware. In your opinion, what do you see the open questions are? It's a VMware show, VMworld 2010, is the inflection point. But what are the open items that we need to get answers to in your mind? What did you hear from your community over the past couple days? What I've been hearing is really, how do we go beyond the hypervisor, and how do we actually get a management environment and a framework that really can be automated, right? Because when you talk about cloud, you think of simplicity, fast provisioning, automation, and those things are coming, but they're little pieces that are coming together. I think VMware has put down the framework. My question now is, how fast can the ecosystem adopt that framework, fill the white space, and deliver value? So continue the momentum is a key goal for them. Get the momentum going, and let the ecosystem fill in the white spaces. Right, and that's that, you said it. For every dollar spent on licenses, there's 15, spent in licenses. And the VCs are investing like crazy. We had the VC panel on, you know, from Excel partners, NEA, and I'll drive. Congratulations for putting that together. It was fantastic. Appreciate it, yeah, that was very relevant to the show. Where do you find those guys, John? They're all in Palo Alto, in Menlo Park. Pretty connected, there's no doubt about it. Yeah, we're having fun. I mean, I think there's a lot of open questions, a lot of excitement. We're going to cover all the angles on the cloud revolution at cloudangle.com, our new site, so great to work with you and collaborate on that. Can you talk a little bit about that? Cloudangle is a new publication, what's that all about? What's the... So cloudangle is a new publication, cloudangle.com. It's a part of siliconangle.com. And it's really going to be very focused because we've been covering mobile and cloud and the real-time web on Siliconangle, that's been our editorial, where computer science meets social science. However, this huge demand for in-depth coverage, blanket coverage, wall-to-wall coverage of all things cloud, and we're going to do that. With cloudangle, we're going to have all the news covered, we're going to go in-depth on labs, we're going to go in-depth on analysis, we're going to do in-depth on opinion, and we're going to cover it all. I mean, we're going to cover this phenomenon of cloud. And VMware is the center of that action as is other vendors and all the ecosystems. So we want to cover, and I'm going to watch, I want to watch VMware, I want to cover them like a blanket. Okay, Todd, great guy, $1 of license is $15 of ecosystem revenue. I want to see that. I mean, I want to see that on play out because there's an old saying in business, follow the money, and you follow the money, that's cash. So $15 for every dollar of license revenue, that's just an ecosystem flush with cash. When you have cash, there's funding, there's innovation. So that is why if they even come close to even on a trajectory of fulfilling that objective, they'll be over a $100 billion company. So they're worth watching, the message is tight, I'm really pro VMware at this point. And I think the keys to that are vision, they clearly have that, right? I mean, Moritz really is a visionary, brings that in. Execution, it looks like they've got a great execution ethos, certainly sharing some of EMCs, but even more so, bringing in the executives that they've brought in the team they have together, and openness, and I think they got to keep that openness for a while. I mean, there's some things that they can screw up on. Let's talk about what they'll screw up on and what will make them fail. VMware will fail if they don't hire the right people, if they turn on their ecosystem, they got to deliver. I mean, this is a major stake in the ground. VMware has changed as a company, yeah, they're very technical, Moritz is in charge, but if they screw over their developers, if they don't deliver on the ecosystem partnership, and if they don't hire the right people, we heard the hiring is ramping like crazy. So when you hire fast, that's a risk. Yeah, and I think another way that they could screw it up would be if EMC wags the dog, if you will, not that EMC's the tail, but if EMC starts to inject- They're the head. And they own it. Right, and they say, hey, we want an advantage. We want to stack the deck for us. That would kill the VMware momentum, certainly in the storage industry, and here's why I don't think it will happen, because I think the executives, the board of VMware understands that the path to 100 billion requires that they stay open. I think there's a relationship there, obviously with the ownership structure between EMC and VMware, and not a lot of people are talking about this, but in my opinion, VMware is too independent, too important, and the people at VMware recognize that their stuff really needs to be enabling an ecosystem, so you cannot play favorites. And EMC knows, as I was told by some EMC folks that, hey, we don't want favors, we just want access like everybody else, and EMC's game will speak for itself. Well, NetApp is going to be in there, so VMware has those partnerships. So, if EMC starts to meddle, the boat will take on water. I think what EMC has to do is compete on the merits of its own vision and its own engineering resources and the value that it can add to VMware and the ecosystem, and let's face it, EMC does a pretty good job of doing that. And VMware's going to play at a different part of the stack, so there's areas that VMware is moving into that. Quite frankly, EMC may or may not have touchpoints, so as you move up the stack to end user experience where you've got things like unified environments, business policy tied into network policy and storage policy, you're going to have a dynamic real-time environment. EMC will be involved from a storage standpoint, but it won't be one vendor. And whether that's EMC or cloud service providers or whatever other sector around VMware, VMware has to be that kernel. And I think staying on storage for a moment, we had Tom Georgins on here. It's very clear that Georgins is betting the company on virtualization, and their success rate shows that, they're growing at more than 30% a year, so there's obviously room for more than one player there. So let's wrap this up, but I want to thank everyone out there who watched. We had huge numbers. I mean, I think, guys, what was the numbers over 200,000 viewers this week? We got to 200,000? That's fantastic. We're just under 200,000 viewers. Congratulations. I want to thank JustinTV for not going down. We had HD content pumping out over JustinTV. I want to thank Michael Sean Wright, the director of theCUBE. Nice job, guys. Marcus and Hopkins, editor-in-chief of SiliconANGLE, but also producer behind the screens. Kristen Nicole, who has been on the scene doing the reporters. And Dave, I want to thank you for being a co-host and Wikibon, and your research is cutting edge. You're a new kind of firm, and we appreciate the collaboration. Yeah, thank you, John. Thanks for giving us the opportunity to participate. And if I may, David Floyer, Stu Miniman, Bert Latimore, really helping pull this together. I want to say hi to my kids, Alicia Roman, Pilar Garrity. I miss you. Be home soon. So special thanks goes out to John Troyer, the executive producer from VMware, who put the blogger lounge together and the whole social media program here. Great job. Eric Hielson and the whole crew at VMware. So we really had a great time. Final thoughts, I would say, from my standpoint, the cloud revolution is here. VMworld 2010 is the inflection point. The company pulled the story together. People are coalescing around it. Huge ecosystem developing with numbers and dollars flowing in, and a new network architecture, new storage architecture, new application architecture, and it's a new path. So it's a great show. Yep, it's a place to be. We are at the epicenter here, live, day four, VMworld, SiliconANGLE's continuous coverage. We'll be back soon.