>> Announcer: From theCUBE Studios in Palo Alto and Boston, connecting with thought leaders all around the world. This is a Cube Conversation. >> Hello everyone, welcome to this special Cube Conversation, I'm John Furrier join Dave Vellante for a special report and analysis on the Dell technologies VMware spin out transaction, contemplation, story, circulating rumors, thanks for joining. Dave, great to see you. Yesterday we filmed a Zoom, I was at home, you were in the office. We had to get the story out for the hot take on the news at Dell technologies is spinning out VMware. We had a lot of hot takes, you got some amendments to make but one of the things that came out of was that we, after we had the interview, we said look let's just go get some more data so I went out off on my own, you went off on your own to get some digging, get some data and get some reporting on this, investigate this further. Here's what I've found. I've heard a rumor and have confirmed from a great source that Michael Dell isn't selling so the story's off. Which would mean our half hour analysis is off. But I also got some data that points to some of the other things that we said are consistent. So one, I want to get your thoughts. The rumor that I'm hearing is that Dell is not selling, from my sources. What are you hearing? >> Yeah I think there's a different take here, John. I mean everybody assumed when the press release came out in the 13D that Dell was spinning off its stake, people inferred from that that they were selling. And I think in fact this is not a sale. I think everybody was wrong about that. I think in fact what Dell is going to do is distribute its stake, it's 81% stake to shareholders and so to Dell shareholders and of course what's going to happen is Michael Dell owns a very large portion of Dell technologies. I think by recollection it's over 60% and as a result he's the largest shareholder of Dell and he's that 81% is going to get distributed to the Dell shareholders, so he's going to end up with more than half of the ownership of VMware all said and done. So Michael Dell is I think ultimately going to have more than half of the ownership of Dell Technologies, I think it's 65%, probably 63, 65% somewhere in there by my recollection and he's going to end up with more than 51% of VMware, John and so you're going to have. I mean it would make sense wouldn't it that the majority shareholder is going to be chairman of both companies. >> And so you've talked to a bunch of people on this, is that right? So just to get some background, where'd you? >> Yeah I think some people on Wall Street have figured this out but it's definitely not hit the main stream news. I think if you read the news, you read the register I mean essentially we made the same inference that Dell was becoming untethered to VMware. I don't think that's happening at all. Also, I've talked to a number of customers, John about this, asking them what they thought about the news yesterday and there was a big shrug. I mean I talked to one customer, said hey you know in the old days I bought block from EMC, I bought file from NetApp, they both made great products, they both were VMware friendly, this doesn't affect me one bit. And other customers I talked to said yeah I don't really see any big change here. And I don't think anything's going to change. I think if Michael Dell is the chairman of both companies, I don't think anything changes. >> Alright so to correct what we had, our hot take which was untethering, spinning out VMware implying that there's going to be an untethering or VMware can make it on their own which I think our analysis was right on on the value of VMware. So I stand by that report no problem, it's the specifics of Dell Technologies appearing as if they're unloading it okay. So that's the nuance here. >> That's right. >> So the nuance is Michael Dell actually is going to maintain staying in control, he's not going anywhere. That's what you're just saying. Is that true? >> Yeah, picture the block diagrams you got Dell over here and inside of Dell you have 81% ownership of VMware and over here you have VMware and essentially what Dell is doing is saying okay all you Dell shareholders, we're going to allow you to now directly own those VMware shares and so they're going to transfer essentially from owning Dell to owning VMware directly, of course Michael Dell now is going to own VMware directly as opposed to owning it through his ownership of Dell. As a result, it cleans up the hair on this conglomerate structure which means it's, and you've seen it in the stock market today in the last month, it's unlocking value for Dell, it's unlocking value for VMware. John, on June 22nd, prior to the Wall Street Journal breaking that they were contemplating this, Dell's core value, in other words, the value net of VMware was around negative 23 billion, today it's negative 4 billion so they've already compressed about 20 billion dollars out of that negative value and that's the arbitrage play now and I think it just goes up from here. The second thing is a lot of investors that I talked to won't touch VMware stock because it's controlled by Dell. This liquidity hangover that I always talk about. I think this is going to bring other investors you know in from the sideline. So that is everybody inferred that Dell was becoming untethered, Dell becomes a lot less interesting without VMware. That's wrong, nothing really changes in terms of the commercial relationship between these two companies and the impact on customers. >> So essentially if I over simplify it for my simple brain here, Dell is IPOing shares of VMware to the shareholders of Dell. What a benefit that is. >> Yeah I mean again they're just-- >> I mean it's not an IPO in the sense of an IPO, it's basically saying. Hey, shareholders of Dell, good job, if you want the value of VMware go take it. >> So you remember how this all came about? Remember when Dell bought VMware they had a gap, I mean the amount of cash they could raise, the amount of debt they took on, the amount of cash that Michael Dell in Silver Lake and a couple other partners threw in, it was only about four billion to get 67 billion and the way they covered that gap was they created a tracking stock called DVMT and DVMT was supposed to track VMware value, it really didn't. And so what happened was, DVMT was a public company, Dell wanted to go public again and said okay we're going to do this through the DVMT vehicle and we're going to issue shares of Dell. And remember, Carl Icahn, and Elliot they were very active and they sort of got Michael in a head lock and said we need more if you're going to do that and they did. Ultimately Dell goes public but then they face this liquidity hangover and so also you might recall that Dell floated Pivotal and monetized that to delever, they paid down some debt and then basically went to VMware and said okay you're going to buy Pivotal back. They used some cash and they issued shares so Dell's ownership of VMware escalated to 81% at the time. That's how they got to 81%. I remember thinking wow how much of this company are they going to own? Well this is what it allowed them to do. It now allows them to distribute the shares and allows Michael Dell personally to have the majority ownership of VMware, it's absolute genius and it cleans up the structure of the organization so instead having to own VMware through Dell which by the way I've always said it's a cheap way to own VMware, good move if you bought Dell stock to own VMware, now you own VMware directly and of course Michael Dell owns it directly. Absolute genius move over the last three, four, five, years. >> Yeah, and one of the things we did say in our hot take yesterday was that that negative value of Dell technology world, Dell Technologies gets shrunk and also can create value. Here they're even gettin' more value into ownership of VMware but I got to ask you, you mentioned a comment about this liquidity hangover and they have this dividend, could you explain that 'cause I'm just not followin' this liquidity problem ? >> Well this is very interesting, so Dell because it has so much debt, number one, number two because it has controlling ownership of VMware and it has 90 plus percent voting power. Shareholders penalize Dell and so the big thing here is the debt. What essentially Dell is doing and people always joke that VMware is Dell's piggyback and it's true. And here it comes again, we saw that with Pivotal, we saw that with DVMT. What I think is happening, John is Dell is going to essentially transfer some of its debt to VMware so it's going to have VMware take on a little bit more debt. It is said that they want to maintain investment grade ratings for VMware which currently has great ratings, Dell does not have investment grade rating, it needs to pay down more debt so essentially it's going to shift some of that debt to VMware through a special dividend of which Dell will be a great beneficiary and will allow Dell to pay down some of that debt so that it can become investment grade and they want to take on an amount of debt that will not crush VMware's balance sheets so that it will also be investment grade. So they're creating this equilibrium if you will. Now, I've heard the ceiling on VMware's debt in order to get to equilibrium or in order to maintain investment grade is no more than five billion but I've also heard much much higher numbers. As high as eight to 10, to maybe even 12 billion. I don't know if VMware can take on that much debt and maintain investment grade. The point is there's some number there which Dell is going to force VMware to take on that debt, now one last thing I'll say is despite Michael Dell, Dell Technologies' ownership and control 90 plus percent control, it has a fiduciary responsibility to shareholders but my view is it's meeting that responsibility because the value it's unlocking value so who can complain? Again it's absolutely fascinating and brilliant but that's what that dividend is all about is Dell saying okay VMware you're going to take on more debt and you're going to help us pay down the Dell debt and you're going to take on more. We'll both be investment grade. >> And they both get value increase. >> Yeah, yes, correct. >> So it's a financial engineering deal, Michael Dell still can run both companies. Do you still think he will be running both companies? >> Yeah, I think there's no question that Michael Dell will be the chairman, he is the chairman of Dell Technologies, chairman of VMware and he's going to continue to be. And so this commercial agreement that they're going to sign, it's a wired deal. VMware and Dell and by the way there is every incentive for VMware to do this. People may say hey they're strong arming Dell blah blah blah but VMware, Dell is a huge distribution channel for VMware and I'll tell you something that Dell has done better than EMC and Joe Tucci ever did and you know we're big fans of Joe Tucci, but Dell has unlocked a channel for VMware the way EMC never did. VMware through Dell has seen incredible growth and it really is Dell as I would say VMware's most important partner, biggest partner because Dell didn't apologize for super gluing itself and VMware to it. Whereas EMC was always much more cautious, trying to play the ecosystem game. >> Well they were saving their storage business with VMware, I mean VMware saved EMC, some would say. >> Yeah, I would say. I mean if it weren't for the acquisition of VMware back for $650 million in the early 2000s you know EMC would've been a really uninteresting company over its last five to seven years. >> So they milked that storage dry but then they had that uplift with VMware, Michael says hey I'll put this right in the family and this is what it is. It's a deal where it's in the Dell family portfolio and what Michael's doing is to your point and what you're saying is, he's unlocking all this value for both Dell and VMware and saying okay, let's go to market and figure it out. >> I got to tell you this John I mean as a founder, the co founder you know obviously we're a little smaller than Dell but you got to appreciate what Michael Dell has done here. He went through hell taking his company private. You know he took on Carl Icahn, I said yesterday who beats the great Icahn? Well Michael Dell beat the great Icahn. You know who out maneuvered Elliot? I mean Elliot is a very influential player in the market. Michael Dell said you know what I'm not goin' through that again, I have control of Dell Technologies, I have voting control over VMware, I'm going to do what's right for me, for my company and my shareholders and Michael Dell's making his shareholders money. I mean who can complain about it. >> I'll tell you I mean there's two playbooks I look at, from Andy Jassy and Michael Dell. I mean Michael Dell knows how to make money right, he's always been a great money maker, he's also a geek, he loves to get down and dirty in the tech, he's got two 49 inch Dell monitors since it's his company he gets the best gear. All kidding aside you know he built a company, went public, took it private and that was a reset. I mean in his stage of his life it was his reset, this is his swan song. He's havin' a ball and he's financially engineered this success with the power that he built and it's a whole 'nother level, whole 'nother chapter in his life and he's a money maker. He knows how to make money. You put Silver Lake and Michael Dell together. You put Michael Dell with these kinds of brains, with his asset base, as you say the cash flow of Dell, with the asset of say a crown jewel like VMware that literally can pave the path to the future. He can ride on the cloud backs all day long, he doesn't need a public cloud for anything. >> Yeah well so before we talk about that I just want to double down on what you said. People just always say yeah Michael Dell he's a finance guy. It's not true, yes, well he's got a finance team that is amazing, no doubt Michael is instrumental there but he's a business genius, I mean he really business visionary guy built his own PCs in college so he's obviously like you said, he's a geek, technically extremely savvy, he's a visionary, he's one of the top I don't know 10 visionaries in the computer industry, I would say history. So, now you're absolutely right, well you said doesn't need a cloud. I think my concern about this whole deal yesterday when I misunderstood that this was spinning off and coming untethered is what about the edge? What about multi cloud? You know what's Dell's play there? Well Dell's play is still VMware, their strategy hasn't changed one bit. I mean nothing changes, the only change is the direct ownership of VMware stock which unlocks value. Nothing else changes. >> Let me tell you, to wrap my piece up here and then we can wrap it up. Just in interface with Michael over the years and knowing him personally, seeing him up close, here's how I think his mind works. You mentioned he assembled PCs in college. He built out you know pioneered you know putting suppliers and supply chain, getting prices lower, direct mail, he pioneered that direct to consumer all these successes. This whole world that's in there is like assembling a PC in his dorm room. Accept he's got it with billions of dollars. Little VMware here, processor, IO, I mean he's essentially a financial geek at this point, and although he likes to look in and he loves Pivotal, he loves some of the things he's doing with VMware, he likes to look under the covers and see the engine but he's a financial assembler now so he's looking at this and you can see how it's all working and to your scoop here. Yeah I guess it looks like a spin out if that's what people want to call it and the press jump on that but if pieces, takes the hair off the deal that's basically makes the IO move better, he's got a you know good bus there, 32 bits. Again, and assembling a PC, assembling companies and creating value. He makes money, Dave. >> I love it, that's a great analogy, the PC parts are a little bit more valuable but the other thing I just want to clarify what I said. The other thing that changes is the income statement. Dell will no longer recognize you know VMware revenue and so that changes and of course the balance sheet changes, that's a huge change. Now and I guess the caveat is, this in theory couldn't happen but it just makes so much sense. I was kind of sniffin' around it in my breaking analysis when this thing first leaked and I said in that, John if the financial geniuses at Dell can figure out some way to monetize this well here it is. It now is becoming much much more clear and I'm impressed. >> Well Dave, he was assembling PCs in college, now he's assembling companies, what did we do in college? Don't even go there. >> Let's end it there. >> I will end it right there. Dave, great scoop, top story. Michael Dell is not selling VMware. It's a transaction, it's going to have all that value and it's unlocking more Dell tech value. Look for the shares to be distributed to the Dell Technologies shareholders. It's the same game, super gluing together, creating value for both. Dave, great scoop, thanks for joining me. >> Thank you, John, thanks for having me. >> Cube Special Report and Analysis here in the studio in California, Dave Vellante in Massachusetts. I'm John Furrier, thanks for watching. (light music)

(instrumental music) >> Hi everybody, this is Dave Velante. Welcome to the special wikibon community event. VMware, VMworld 2018, strong momentum but still choppy waters. How can you say that Dave? How can you say strong momentum but still choppy waters? The data center is on fire. We just came back from VMworld 2018, the eco system is exploding, revenues are up, profits are up, all looks good. Well we agree in general, but theCUBE was there. We had two sets. We interviewed over 100 guests. 75 segments on theCUBE and right now what we want to do in this special community event is share with you our community and hear from you what you thought of the event, what we thought of the event and let's collaborate and come up with some conclusions. So, what were the key points made on theCUBE by Michael Dell, Pat Kellsinger, Ray Ofarell, Andy Bechtelshtein and number of other folks, customers, practitioners, technologists and eco system partners on theCUBE? What did they say and what does it mean for users? AWS and VMware, a big theme on theCUBE last week was is the AWS VMware partnership a one way trip to the Hotel Cloudifornia or is it a boon for the data center? What about AWS with RDS, the data base, on prim, what does that mean? How effective will that be? What does it say about AWS's strategy and what does it mean for VMware and the eco system? What's VMware's play at the edge? What about containers? Containers are supposedly going to kill VMware or hurt VMware's momentum. What does the community think about that? And what about Dell's new capital structure? Dell is going public again. It's taking an 11 billion dollar dividend out of VMware's 13 billion dollars of cash. Is that the best use of VMware's cash? And is VMware constrained in terms of it's RND going forward? We're going to address these and other items with the following format. We're going to show you now highlights from VMworld 2018 from theCUBE and then we're going to come back in the crowd chat and discuss. So thanks for watching everybody. Take a look at these video clips and these statements from senior leaders and then we'll go into the crowd chat. >> Welcome back to theCUBE, I'm Lisa Martin with Dave Velante, John Furrier, Stu Miniman at the end of day two of our continuing coverage guys of VMworld 2018, huge event. 25,000 plus people here. 100,000 plus expected to be engaging with the on demand, the live experiences, our biggest show, right. 94 interviews in the next three days, two of them down. >> And evolving over the years. I mean at VMworld's core, it is a technical conference. Right, so I would say that the base of the volume of the program is still catered towards a real hands on, technical practitioner and middle management but we are seeing more business executives come. They want to know what their teams are exploring. They want to understand vision and I think VMware you know, value proposition to enterprises is growing and therefore, it's starting to be more of a business conversation. So that is a segment of the audience that is growing. >> A few questions, I think first of all the Amazon news is already on VMware on premises is earth shattering news at many levels. One, Amazon's never done it before. Two, I think people are starting to understand this downstream a little bit later. But it's going to have a significant impact on the opportunities in multi cloud. So, I think Amazon's relationship with VMware is very deep at the level of technology and stay cold is at the top of both companies. Andy Jaci and Pat Gelsinger are both in this to win it together. It's obvious and anyone who says otherwise really isn't really informed. They're deep in the technical side, they have management at the top approving this, they're going to market together in the field. There is a legit synergy and they're going to win the long game. Gelsinger's making the big bet and remember, three years ago Pat Gelsinger was the gun. What's his role going to be? People were nervous about their cloud. Look it, VMware boxed the cloud and they're kicking ass right now with cloud. So they made the right moves. They steered the ship away from the rocks, they're out in the clear sailing. Love their strategy, Keno with Gelsinger was very specifically around the generational shift around VMware and the industry. He went through the bridging and I love the cleverness of the story telling, bridging tech trends of VMware ethos. He talked about the history, servers ESX, BYOD workspace, network NSX, cloud migration, that was their kind of initial private cloud, but right now its multi cloud and profit and people doing tech for good. So I think Gelsinger's laying down the generational shift that Vmware's going for and their making the huge bet on AWS, so it makes the question. What about Asher, what about Google? Is VMware going to be a one cloud game? Are they going to bridge to other clouds? That's going to be a very interesting tell sign 'cause the relationship on stage with Andy Jaci in fact Gelsinger is pretty significant. I think it's going to be a hard thing to go in to other clouds and say, I want to dig you too. >> Last year Pat said that networking has the potential to be the next decade bigger than what virtualization was for the wave and we are seeing good movement. I think I said it on our intro this morning but when Asira was acquired, the promise that we as a networking industry felt that they could be that inter weaving kind of glue for multi cloud and it kind of got hidden for a few years while they built that intersect, they made it really enterprise ready. They did really well with adoption. But now that vision is kind of back in full and that is what VMware can ride. Not to just be virtualization. V spheres great, they'll drive that for awhile, but the networking and security pieces is why VMware has the right to sit at the table in this multi cloud discussion. Now it was funny, I interviewed Keith Townsen and he said VMware, you know, he's now a VMware employee, VMware is the best position to help customers do that transformation. I said, hey Keith, I hear ya, but Microsoft and Amazon and a whole bunch of other management people might kind of step up and say, we've got a right to be at the table too. >> Of course all the legacy guys are trying to figure out, okay, their cloud strategies. But now all the major cloud guys are betting on Prim. We saw Google next, the on Prim strategy was certainly Assure with Assure Stack. Oracle has bets in cloud and with cloud customers got bets for On Prem. Now AWS throws its Admuring. James Kobielus, you sat in the analyst sessions all day. What did you learn? What were your big take aways? What do we need to know? >> Well first of all it's clear that AWS partnership VMware's all in with them. Look at the past year since they announced the customer adoption, partner enablement. They share variety and depth of the integrations that these partners have put together including today. It's pretty serious in terms of VMware's investment in that relationship, deepening that to the point where, there are no splashy Google partnership announcements or IBM or anybody else. It's clear that they're really, they're each others hybrid cloud partner par excolons. I don't think either of them, or I don't think the VMware is going to go anywhere near as deep with the other public club providers any time soon. But really my take away today from the analysis session was that VMware is going seriously to the edge and it's really interesting, they're building an appliance to take their entire stack and bring it down to edge deployment and distribute that around and then manage that for customer on a global basis with automation, there's going to be AI and machine learning built in so that if VMware will be able as a managed service to drive the software defined data center all the way out to the edges for its clients. And they're putting themselves in a position where they could actually, that could be there next major revenue producing business. As the traditional hypervisor VMworld begins to wane in terms of putting cube and server less and so forth on an appliance. Putting that in the clients sight and managing it for them. And then white boxing it potentially to other cloud providers to provide to their customers. This could be in the future coming in the next year or two. Something that can propel VMware to the next stage where they are everybody's preferred multi cloud management, edge management partner. >> Provide a slightly different version of one of the things you said. I definitely agree. I think what VMware hopes to do, I think they're not alone is to have AWS look like an appliance to their console, to have Assure look like an appliance to their console. So through free VMware, you can get access to whatever services you need including your VMware machines your VM's inside those clouds but that increasingly their goal is to be that control point, that management point for all of these different resources that are building and it is very compelling. I think that there's one area that I still think we need more from. As analysts we always got to look through what's more required. And I hear what you say about broad dimensions but I think that the edge story still requires a fair amount of work. >> Oh yeah. >> It's a project in place, but that's going to be an increasingly important focus of how architectures get laid out, how people think about applications in the future, how design happens, how methodologies for building software works. David, what do you think? When you look out, what is more is needed for you? >> So I think there are two things that give me a small concern. The edge, that's a long term view. So they have a lot of time to get that right. But the edge view is very much an IT view top down. And they are looking to put into place everything that they think the OT people should fit in with. I think that is personally not going to be a winning strategy. You have to take it from the bottom up. The world is going to go towards devices, very rich devices and sensors, lots of software, right on that device, the inference work on those devices. And the job of IT will be to integrate those devices. It won't be those devices taking on the standards of IT. It will be IT that has to shape itself to look after all those devices there. So that's the main viewpoint I think that needs adjustment and it will come I'm sure over time. >> But as you said, there's a lot of computer science, it's going to be an enormous amount of new partnerships are going to be fabricated. >> Exactly. >> Once you make this happen... >> I want to see the road map for Kuhernettys and server less. Last year they made an announcement of a server less project, I forgot what the code name is. Didn't hear a whole lot about it this year but they're going up the app stack. They got a coop distribution. They need a developer story. I mean developers are building functional apps and so forth. And they're also containerized. They need developer story and they need a server less story and they need to bring us up to speed on where they're going in that regard, because AWS, they're predominant partner, I mean they've got LAM dysfunctions and all that stuff. That's the development platform of the present and future and I'm not hearing an intersection of that story with VMware's story yet. >> Actually before VMware's was server installation it was work station. >> Work station, that's right. >> And we were an investor of VMware and we thought that was cool. Anyway, so fast forward to 2013, we go private. 2014, Joe Tuchi and I restart the discussion that we'd had earlier back in 2009 about combining together. 2015 we announced it and we thought that if we could combine everything together, that customers would really like it. And thankfully, as we found that that's been true, it's been more true then we thought. And the innovation engines are cranking on high. 12.8 billion dollars in RND invested in the last three years. And you see here at VMworld and in Dell technologies world the strength of the road maps. And so every turn of the crank, we're just getting stronger and stronger. We never believed that everything was going to go one place or the other. It's actually great that the edge is booming. Now if you said, did you know that five or ten years ago? No, I didn't really know, but you can kind of see some things starting to happen. But look, distributed computing will be even more distributed in the future. >> For your commentary, people at the convention of wisdom on that deal was it was a one way trip to the Hotel Cloudifornia and it's become a boon for the data center. Why the misconceptions? Why are you confident that it continues to be a boon for both companies? >> Yeah, and hey we got to go prove it. At the end of the day we have to go prove it. So, but the analysts were sort of viewing hey, there's this big sucking sound in the public cloud where everything congregates. You know point one, and three years ago that was the prevailing wisdom. Right, so that was going to be the case. Now everybody, you know, and like I had the big CIO who basically said, hey I've got 200 apps. I tried to move them to the public cloud. I got two done. I can build new things there, but this moving was really hard until we had the VMC service. So this ability to move things to the cloud and from the cloud, I call the three laws. The laws of physics, the laws of economics and the laws of the land. The laws of physics, hey if need 500 millisecond round trip to the cloud and the robotic arm needs a decision in 200 milliseconds. You know physics, economics. I'm not going to send every surveillance picture of the cat to the cloud. Ban would still cost, right. And then laws of the land right, where people say, government issues, GDPR, other things. So because of that we see this hybrid world and particularly as edge and IOT becomes more prominent, we fully expect that there's going to be more of that not less and as I showed in my key note last year, this pendulum of centralization and decentralization has been swinging through the industry for 40 years and we don't see that stopping and Edge will be a force of more data and compute pushing to the edge and that's obviously part of our key note as well. >> Yeah John, you know, we sat here analyzing this VMware AWS relationship. Is this a one way move to the public cloud? Is Amazon just going to take those 500,000 VMware customers and get them all to migrate? Even in the start of Andy and Pat up on stage you know, Andy goes, the number on use case is migrating our applications to the public cloud and Pat's like, and the number two use case is you know, bursting and on demand and things like that. So it's an interesting dynamic between what we call, you know, you got the gorilla in the data center of VMware and you've got the 800 pound gorilla in the cloud. Fast as the cheetah as Dave Velante says in AWS. But RDS on premises, this is a big deal. I tell you, I'm surprised, most people here are surprised with the discussion. We were at some shows recently when they're spanning the snowball use case. Snowballs great, it's edge, it's helping to migrate things to the data center. This is an Amazon service running into VMware on premise. Didn't think that we would be seeing this from Amazon who's goal was, we thought to get 100 percent of things in the public lap. >> Decisions on cloud. Okay, Andy Jaci comes on stage. You're personally involved with Andy on the Amazon analysis which is, I think people don't know how big that's going to be. But VMware and Amazon are seriously deep in a partnership. This is a big deal. This feels like a little wind tail kind of easy synergies across the board. >> Well you know, in some ways we'll say number one in public coming together with number one in private. That's a big deal. And you know, yesterday's announcement of RDS on premise to me sort of finishes this strategic picture that we were trying to paint where it really is a hybrid world, where we're taking workloads and giving people the access to this phenomenal rapidly growing public cloud. But we're also demonstrating that we can seamlessly connect to the private cloud and now we're bringing services back from the public cloud onto the private and neuron data center. And that's so profound because now customers can say, oh, I like the RDS API. I like the RDS management model. I can put the data wherever I need it for my business purposes and that hybrid bi directional highway is something that we're uniquely building with Amazon and hey, obviously we're working with other cloud providers. But they're our preferred partner and we're pretty thrilled. >> How are customers going to deal with the multiple clouds? I mean is there an infra ability framework coming? Do you see a real disruptive technology enable that'll have that kind of impact that TCP spawn massive opportunity and wealth creation and start ups and functionality? Is there a moment coming? >> So, TCP of course was the proper layering of an interact between the physical layer, you know layer one, layer two and the routing or the internet layer was just layer three. And without that, you know, this is back to the old internal argument, we wouldn't have what we have today on the internet. That was the only rational way to build a architecture that would actually. And I'm not sure if people had a notion in 1979 when TCP was started, that it would become that big. They probably would of picked a bigger adverspace if they had known. But it was, not just a longevity but the impact it had was just phenomenal, right. Now and that applied in terms of connectivity and how many things shift to interact between point a to point b. The NSX level of network management is a little different because it's much higher level. It's really a management plan, back to the point I made earlier about management plans, that allows you to integrate a cloud on your premise with one of Amazon or IBM or the future Google and so on in a way that you can have full visibility and you see, you know exactly what's going on, all the security policies. But this has been a dream for people to deliver but it requires to actually have a reasonable amount of cold in each of these places, both on user. It's not just a protocol, it's an implementation of accountability right. And VMware is the best solution that's available and I can see for that use case which is going to be very important to a large number of enterprises, many of which will want to have a small connection between on premise and off premise and in the future, to Edge, Telcol, and other things that will run a VM environment today but that will allow them to be fully securely linked >> I think, so we are seeing lots of customer energy around what we're doing in storage. There's huge momentum behind product like Vsend and our customers are truly embracing ACI in very mainstream use cases and we've seen customer after customer have gone all in meaning they're taking ACI and made a determination to run that for all of their virtualized workload. It's a very exciting time. But what's more interesting is their expanded view on what ACI is about. You know, certainly, we started was virtualizing computer and storage together on servers. But we're seeing rapid expansion of that definition. You know, we've been believer that HCI is a software architecture. I think now there's more recognition that. And it's also going from just computer storage to the full stack of the entire software defined data center is expanding into the cloud as you see from VMCIWS. It's expanding to the edge, expanding from just traditional apps to cloud native apps. You know we've announced Beta 4, you know V send to become the storage platform for Cupernetis NEV sphere environment. So lots of exciting expansion around how customers want to see HCI and if you look at HCI, hybrid cloud, SDDC the boundary among these three is not very clear. I think they're all converging to work something that's very common. >> That's been proposed. Dell came out a while ago and sort of floated this idea of a reverse merger. Street puked all over it. And then all of a sudden they came up with this other idea of I called it the independence vig. Okay, VMware is having to pay a 11 billion dollar dividend. Nine billion of that is going to go to DVMT shareholders to clean that up. And you're going to get cash or prorata shares and the new Dell. Okay, so the question on the table is will that constrict VMware in anyway in terms of its ability to fund RND? My quick thoughts are short term no, long term, Dell has to walk a fine line between taking VMware cash, paying down it's debt and funding the future. Your thoughts. >> Yes, so here are my thoughts on this. So, I think that, first let's explain to the people what you just talked about, I'll translate. What you described is Michael Dell's going private, 60 billion dollars. That number was debt deal he did to buy Dell DMC so he has all this debt. Debt is like heroin, you get addicted to it, hard to get straight from that. So you gotta pay down the debt. He's been knockin' down the debt and big bag of money called Vmware's sitting there. As long as Vmware's thrown off cash flow that's going to be a key consideration. So, the independent vig as long as this cash flow's coming in, I think is fine. It's not going to really hurt it. But I think Dell's been brilliant in this because he's been essentially land grabbing the computer industry on the infrastructure side and he's going to make more money than ever before. He's going to pull it off and the only thing that could hurt him is either some side of force major or downturn or revenue not coming in from the sources whether either it's a public offering, acquisitions he's trying to sell off, and or VMware sputters which I don't think it will. Now with VM is on, even if they just go all in on Amazon and pull off all the other clouds, they'll still make a boat load of cash. >> I think it goes down in history as one of the greatest trades ever. I mean it's just phenomenal. >> Look, I mean Dave, we talked about when EMC bought VMware it was one of the greatest acquisitions of all time. >> 635 million. >> Right but. >> Now it's 60 billion value evaluation. >> Dell buying EMC, most people were like, I'm not sure what's going to happen but Michael will make a lot of money. VMware is doing so well that they can now fund Dell going public again based on this deal. So it's been one of those fascinating financial orchestration pieces to be out there. >> You ever feel constrained writing an 11 billion dollar dividend? Do you ever feel constrained in terms of your ability to fund the RND necessary to do some of those things? >> No. >> Rio said the same thing off camera but I ask you on camera. >> Yeah, generally I mean, am I constrained at how much RND I can do? Well hey, I've got a budget, we build a PNL, we communicate it to the street and everyday possible I'm pushing the growth of business faster so I can shove more dollars into one of two places. More dollars into RND or more dollars into sales and customer facing. Right and if Robin Matlock is here, I keep giving her the table scraps at the end of those things. But build products that are innovated, radical and break through. Sell products and support our customers using them. That's the two thing... >> And I think it's a really interesting point that after a lot of conversations with a lot of folks saying AWS is all going to go up to the cloud and wondering whether that also is a one way street for VMware customers. But now we're seeing it's much more of a bilateral relationship. >> It's moving it to the right place. And that's the second thing. The embracing of multi cloud by everybody. One cloud is not going to do everything. There's going to be fast clouds, there's going to be multiple places where people are going to put certain workloads because that's the best strategic fit for it. And the acceptance in the market place that that is where it's going to go. I think that gain is a major change. The hybrid cloud and multi cloud environments. And then the third thing is I think the richness of the eco system is amazing. The going on the floor and the number of people that have come to talk to us with new ideas really fascinating ideas is something I haven't seen at all for the last three, four years. >> Alright, we've heard from some of our guests on theCUBE and you've heard our teams initial analysis of the news from VMworld. Now we want to hear from you. Please hop into the crowd chat below, give us your feedback, want a community discussion and let's hear about what everybody thinks about VMware and VMworld 2018. Once again, thanks so much for joining us and look forward to the conversation.