 From Austin, Texas, it's theCUBE, covering Pure Storage Accelerate 2019, brought to you by Pure Storage. Welcome back to theCUBE. We are wrapping up day two of two days of coverage. We're getting some applause, I'm pretty sure that's for us. At Pure Accelerate 2019, Lisa Martin flanked by two gents, Dave Vellante, and Justin Warren, you probably know Justin, who's been on theCUBE many times, Chief Analyst of Pivot 9. Justin, you have been covering this event, well, as an independent, so we want to get your take on this. Two days, we've had our first two day for theCUBE covering Pure Storage. We've spoken with lots of people, cause, Charlie, kicks. I'm sure there's more nicknames that I'm forgetting, customers, partners. Dave, let's do a quick recap of some of the trends and the themes that we've heard the last couple of days, and then we'll get some independent analysis, Justin, on not just what you've heard the last three days, starting with a tech field day, but also just your history of covering and working with Pure. Sure. Well, so from my standpoint, it's a story of growth. They even start, Pure starts all their press releases with the only company that's growing, or the Growth Storage company. The first, right? There's a first all the time. Whatever they call it, so the growth and the first. So there's growth, there's a financial story there. Pure's going for growth. The market's rewarding growth right now. So it's smart, double down on growth. That might change at some point. And we talked to Charlie, Jean, Carlo about this and they'll decide what they do at that point in time. But from a financial standpoint, growing fast, I like their balance sheet. It'd be interesting to see if they can leverage it more. But maybe they're using it for optionality. They'll do 1.7 this fiscal year, 1.7 billion. That's good. They got 70% gross margins. And a little bit of free cash flow, not much because they pour it back into the business. So story of growth, that's number one. Two is differentiation. I think it's pretty clear that their products are differentiated from the sort of big portfolio companies. I mean, it shows up in the numbers and the income statement and it shows up when you talk to customers. Simplicity, the whole API thing. I guess the third is products. I mean, they're embracing the cloud, which is kind of interesting. I don't think they're going to do a ton of business with block storage for AWS, but it's an interesting hedge. And I think it's really cool from an engineering standpoint. And I think, you know, two other things. Culture, a lot of orange, they're different, they're cool, they're hip and customers. Which at the end of the day, that's where the rubber meets the road. Customers are happy. You know, you talk to companies or customers of companies like Pure, ServiceNow, Splunk, Nutanix. And some others, and they're happy. They love it. It's transforming their business. Snowflake is another one. Really, how come? UiPath is another one. These are the hottest companies in the business right now. And you can tell when you talk to their customers. It's a good story. And their customers articulate their differentiation for them pretty darn well. You know, we've spoken to a number, I think four or five customers the last couple of days, and they're not talking about FlashArray, FlashBlade, XM, FlashDac, they're talking about their business and how the IT is benefiting from that and how the business is benefiting from that. You also see Pure's very vibrant culture being embraced organically by their customers. There's plenty of customers walking around in the brightest orange I think I've even seen here. So their differentiation, their culture, their customer experience, and their ability to really differentiate through that are loud and clear for what I heard through the voice of the customer and the partners, frankly, as well. So, and I guess, Justin, I mean, the other piece is TAM expansion. Yes. First 10 years, cloud, new AI workloads, partnerships with backup companies, growing the TAM. I've said the first 10 years is probably going to be easier. And I know that's a terrible thing to say, but don't hate me for saying it Pure, but then the next 10, because they were up against the flat-footed EMC that was getting pounded by Elliott Management with pressures to go private, trying to hang on to its legacy business and then got acquired and distracted by Dell. So that was a real tailwind for Pure. Now it's like these cloud guys got their act together, AI, everybody's doing AI. So they got some challenges, but what's your take? I think they've still got an advantage. Talking to some customers, one in particular was quite clear that they saw Pure as having at least a two to three year lead on the technology from some of their competitors. So they shopped around and they had a look at some of Pure's competitors and they thought that actually they were trying to sell me technology that's two, three, four years old and the quote from them was that this is something that I could do myself. So they clearly see that Pure provides them with something that they can't do themselves. So Pure has an advantage there. I also think that the way that the market is changing advantage is Pure a little bit as well. So you mentioned cloud there Dave and I think that we've all seen that people have realized that multicloud is a thing and that not every workload is going to go to the cloud. A lot of it is going to stay on-prem. So now that that's kind of allowed, people are allowed to talk about that, that there are CIOs who would have been being pressured by boards and so on to say we have to go all in on the cloud. Now they can come back to them and say, well actually we can stay on-site. That means that we should be looking at some of these on-site products like Pure so that we can go and put storage arrays in a data center. May not be our data center, it might be in Colo, but we have this on-site method of doing things. Not everything has to go to the cloud. So I think that will help them with some of the growth. So I'm left thinking, what would Andy say? To me it's the number one hottest company, notwithstanding some smaller companies right now, and companies moving the market as AWS. Obviously Microsoft with a trillion dollar valuation, but Amazon to me is the benchmark. So I feel like Jassy would say, well, so hey Andy, you've acknowledged hybrid. You know, actually, I guess he uses that word. And you're doing some stuff on-prem. But I think he would say we still believe that the vast majority of workloads are going to land in the public cloud. And what you just said is what everybody else believes. And to me, they're in conflict. And I don't necessarily have the answer, but you got the big gorilla now, the big cloud gorilla was moving the market saying, with one philosophy, and they've made some good calls. And then you got the entire IT industry. The other one to the spectrum. Except that AWS has Outpost. They have a product that actually sits on-site, and they did, and Jassy last year said that, he did say the verboten word, multi-cloud. You know, so I'm not sorry you used the word multi-cloud. I think you used hybrid. I was at hybrid cloud. They don't say they're multi-cloud. In fact, that's verboten. But no, but to my point is they've acknowledged hybrid, which they never used to talk about hybrid. So they capitulated there. VMware capitulated on its cloud strategy. But he has not capitulated on the belief, the firm belief that most workloads are going to be in the cloud. How much are you wrong? That may be true, but on what time horizon? So that's not going to happen next year. No, for sure. I pointed out that the Agile manifesto came out in 2001. That's 18 years ago. Not every shop is doing software in Agile. So enterprises take a long time to change. So there's plenty of room for Pure to grow while that change is going on. Even if it does go all in on cloud, it's going to take a long time to get there and Pure can make plenty of money in the meantime. But I believe Pure is, sorry. I believe Pure is growing in what is a crappy market. I think the storage market is a crap market right now. It's one that's very difficult. The leader, Dell EMC is growing at zero percent, and that's a goodness because they're gaining share. NetApp's down last quarter, not minus 16%, IBM minus 21%, HP thrilled with whatever, 3% or whatever they're at a minus three, I can't even remember now. Pure is the only one that's showing any substance of growth. My premise is they're doing that by having a superior product and business model and they're stealing share. So, and then I ask you this, so I believe in hybrid by the way, but I'm just playing kind of devil's advocate here. Cloud is growing and it's consistently growing and everybody talks about repatriation. You don't see it in the numbers. Everybody talks about the law of large numbers. Like in other words, they'll hit a wall. You don't see that in the numbers. What you see is the traditional IT space is flat-ish. The new stuff that they're all developing is not growing fast enough to offset the old stuff. You see that at, certainly see that at IBM. You see that now at Dell, even though they had good bounce back last year, but now you're seeing that at Dell. Oracle, you know, eeks out 1% growth. So the big legacy companies aren't growing. They're hanging on, they're throwing off tons of cash. They got good, strong balance sheets, maybe taken on some cheap debt, but the cloud continues to grow at a pace that I think is stealing share from traditional IT. Yeah, that's a reasonable sort of analysis, I think. Yeah, whether or not we'll see an increase in growth of onsite, particularly with things like edge computing. We maybe need to redefine what we think of as data center and maybe we're not thinking about a broad enough market. I actually think that a lot of those workloads that we would traditionally have said would go onsite in Colo. I don't think Colo data center is actually growing all that much, but I think we are going to see growth in things like edge. So, that's a really great point. I want to come back to that. But so the big question is then, okay, can cloud be, before we get to edge, can cloud be a tailwind for Pure? They've embraced it, you know, 20 years ago, the leaders of a company would say, oh no, cloud is crap, PC's are toys. All right, you remember that. Pure embracing cloud I think is impressive, not only from an engineering perspective, but business model. So, can they make, in your opinion, cloud a tailwind and an opportunity? Maybe that's where multi-cloud comes in. Yeah, it's tricky. I think it will become more of an advantage once things like Kubernetes and containers mature a bit further and people are used to being able to deploy things in that way, both in cloud and onsite. I think that's the portability play and it's more about making onsite more cloudy rather than making the cloud more enterprise-y, which I think was one of the messages that we had here. Because enterprises, a lot of what Pure's messaging so far and its product development, particularly around cloud blockstores, to make the cloud look more like an enterprise, whereas what we actually need is it to go the other way. Pure is doing things in that regard with Pure Storage Optimizer, which takes a lot of the decision-making away that from the way you would normally do things onsite, the way we've gotten used to it, manually configuring things. It's actually turning it into software and just letting computers handle it. That integration with things like VMware is making things operate a lot more like cloud. So once enterprises become used to operating a lot more like cloud, I think that's going to be an advantage for Pure to be able to have that operations be in cloud and then they'll bring in products in time for that to happen. You had the opportunity, Justin, a couple of days ago to attend the technical field day, the TFD, that Pure did. So you got that double-click the day before all the press releases broke about some of, we talked about the expansion into cloud with AWS, more of their portfolio delivered as a service, the AI data hub. But if we look at one of the things that stuck out today was differentiation, and we've talked about that at a number of levels in the last few minutes, but talk to us about the technical differentiation that you've not only heard this week from Pure, but that you've been engaging with them for years. You have an interesting story of John Calgrove cause their CTO and founder really describing something very unique that seems to be quite a technical level of differentiation that you even said, we don't see this from a lot of their competitors. Give us a little snapshot of that. Yeah, you don't sort of get that level of detail in some of the briefings as well. So it was another Tech Field Day event some years ago and it was talking about FlashArray and we sat in a room and they had a FlashArray in front of us and I think they were talking about the newest kind of Flash that they were putting into this. But they described some of the technical decisions they made about the architecture inside the blade. So at that time, and I hope I'm getting all these details correct, they had designed an ASIC to go in front of the Flash so that they could essentially create a layer above the Flash that they could speak to within their software that meant that it didn't matter which Flash foundry they bought it from. Cause there are certain differences around the way the Flash works and they do address the Flash directly unlike buying SSDs and putting them inside the box. So that gives them a performance advantage cause you don't have a whole bunch of software translation going on to get into the Flash. But that decision meant that they could then change Flash foundry without changing the experience of all the software developers up the stack inside their array. So that meant that their cadence of being able to bring out new products and gradually drop down the cost of the supply of Flash which makes up a large amount of the cogs on these particular devices. It provided them with better options so they could maintain optionality essentially and be very, very flexible and react to the things that they can't predict. So Charlie mentioned in the briefing yesterday that in this industry you might get a 20% drop in the cost of Flash in one month which will then affect their revenues in coming months after that because clearly they want to pass on some of those cost drops to customers but it needs to be done in a slightly more managed way. When you have that kind of dynamic behavior happening in a market being able to react to that well in something where the hardware design time can be 18 months to two years building that into your product so that it then provides you with business options as a technology. That's a really impressive way of thinking about how all the different pieces of your company have to interact with each other. So it's not just about the technology, it's about the business and the technology working hand in hand. And those lower Flash prices should open up new markets for them. Flash Array C I think they call it is still not at the price of hybrid I wouldn't think although they're saying it will be. Hybrid arrays are priced around 70, 60, 70 cents a gigabyte today. This is according to some Gartner analysis. The big challenge with hybrid arrays which Flash Array and Flash Array C wouldn't actually wouldn't have this problem is the reliability of the latency and predictability. So with an all Flash Array you don't get latency spikes if you suddenly exhaust the amount of Flash that you have in a hybrid array and it has to go back to the disk. So if you need that predictable performance that's why people have gone with Flash Arrays from the very beginning. Getting that as a capacity tier I think it provides a lot of reliability for particularly when you've got large amounts of data need to write Flash. And the price is coming down and maybe it's double now on a per gigabyte basis that'll come down further. But I want to come back to Edge because I think you bring it up a good point. And we didn't thankfully hear a ton about Edge. I don't think we heard anything about Edge at this show. We didn't get inundated with Edge which we always do with these big shows. And I'm happy about that because I think that a lot of the companies that we attend, I think they get it wrong. They're taking a box and they're throwing over the fence they're trying to do a top down model to the Edge. Hey, here's a server or here's a storage device that we're going to put it at the Edge. It's like, okay, I think the Edge is going to evolve as a software development play not as an over the top box. It's going to be bottoms up innovation. Now I don't know if people question about whether Amazon at the Edge, VMware at the Edge but I don't see any traditional IT companies crushing it at the Edge. They're talking about it. They're trying to build out ecosystems and but nobody's has meaningful revenue today at the Edge. But it's a new way to think about this distributed massive compute engine. Yeah, and I think we'll start to see that mature as people start to bring out products that actually do operate at the Edge. We heard from Nvidia about some of their ideas that they have about doing AI processing at the Edge with things like image recognition systems where you train your model on large data sets in a cloud or in a data center and then you ship those models out to devices that operate on a smaller data set. But for a lot of these things you need to do data collection at the Edge. So Formula One is a classic example basically the F1 racing team is an IoT company that is connected to an AI and analytics company, really. Yeah, that's right. We did hear about Edge in an actual use case. They just didn't call it Edge. So there's going to be a lot more of that. We have things like sensors are just all over the place. So anything in retail, if you have fridges in retail you need to monitor the sensors in those to find out whether or not is the temperature going out of control or outside of your control limits because that will affect the food that's in that fridge. There's a whole bunch of kind of boring examples that are actually all IoT. So I think some of those will start to push more data into devices at the Edge and as people's understanding of how to use machine learning and AI matures away from the hype, I think we're pretty peak hype at the moment. Once we actually drop that back a notch and we see that people are doing real use, real world use cases with real world business value that will start to drive a lot more of the growth of practical and that will drive growth in data which will need to get closer out to where those devices are. Well, I think you're right. I think that data is going to be at the Edge. I think a lot of that data, I would say most of that data is going to stay at the Edge. It's probably, it's not going to, probably it's definitely not going to sit in a million dollar storage array and it's going to comprise a lot of alternative processing, ARM, GPUs versus conventional microprocessors. And that's where I think Pure is thinking about, like the way Pure One works for example. Pure One works the same no matter what product you have from Pure and they've been very clear and stating that they want to make sure that when they bring out a new array or a new product, it works with Pure One. So it's that consistency of experience for their customers which I think is fairly unique in the industry. There's a lot of other products that will come out and they only partly support it or they're not full support for their entire race. EMC struggled with that for a long time simply because it has so many products and needed to kill a whole bunch of them first. So when you have that kind of engineering discipline built into your company, when you go out and you have customers who have edge devices or you have stuff in the cloud and they have devices on their phones which they're used to showing off at conferences and say, hey, come and have a look at my array. It runs on software on my phone. That's Pure One. That software ability that Pure has of being able to address this data wherever it is, I think there's a real opportunity for Pure to put that kind of intelligence onto edge things even if they don't actually sell any flash arrays to those people. They could start to sell them software. All right guys, so 15 seconds each since we're almost out of time. Pure's competitive positioning, your thoughts in a quick summary about what you've heard the last few days and what Justin has shared. To me, I would expect continued growth, forgetting about the macro for a moment. Even then, they're going to grow faster than the marketplace and like I said, they don't throw off as much cash as the big guys. So it's going to be a game of the big guys when stock buybacks, free cash flow, and Pure Storage investing in growth. Excellent, Justin. Yep, I agree. I think they're going to double down on the R&D spend to make sure that they maintain a technological advantage over their competitors. The biggest risk to Pure is if the Dell, EMC, other players in that big iron storage market, if they actually get their act together and start bringing out competitive products, that's the biggest threat to Pure, but Pure has a big lead on them, I would say. Yeah, I think the last thing, Cloud kind of a question mark. And I think VMware, to me Dell, of course they care about storage, it's a huge business for them, but they're all about VMware. And to the extent that they can leverage VMware as a competitive weapon, they'll use it against anybody, damn the ecosystem. Excellent, well thanks guys for a great wrap up to our two days here for Justin Warren and Dave Vellante. I'm Lisa Martin. Thank you for watching theCUBE's coverage of Pure Accelerate 2019.