(upbeat music) >> Welcome everyone, this is Stephanie Chan with theCUBE. Recently analyst Dave Ross RADIO entitled, Pat Gelsinger has a vision. It just needs the time, the cash and a miracle where he highlights why he thinks Intel is years away from reversing position in the semiconductor industry. Welcome Dave. >> Hey thanks, Stephanie. Good to see you. >> So, Dave you been following the company closely over the years. If you look at Wall Street Journal most analysts are saying to hold onto Intel. can you tell us why you're so negative on it? >> Well, you know, I'm not a stock picker Stephanie, but I've seen the data there are a lot of... some buys some sells, but most of the analysts are on a hold. I think they're, who knows maybe they're just hedging their bets they don't want to a strong controversial call that kind of sitting in the fence. But look, Intel still an amazing company they got tremendous resources. They're an ICON and they pay a dividend. So, there's definitely an investment case to be made to hold onto the stock. But I would generally say that investors they better be ready to hold on to Intel for a long, long time. I mean, Intel's they're just not the dominant player that it used to be. And the challenges have been mounting for a decade and look competitively Intel's fighting a five front war. They got AMD in both PCs and the data center the entire Arm Ecosystem` and video coming after with the whole move toward AI and GPU they're dominating there. Taiwan Semiconductor is by far the leading fab in the world with terms of output. And I would say even China is kind of the fifth leg of that stool, long term. So, lot of hurdles to jump competitively. >> So what are other sources of Intel's trouble sincere besides what you just mentioned? >> Well, I think they started when PC volumes peaked which was, or David Floyer, Wikibon wrote back in 2011, 2012 that he tells if it doesn't make some moves, it's going to face some trouble. So, even though PC volumes have bumped up with the pandemic recently, they pair in comparison to the wafer volume that are coming out of the Arm Ecosystem, and TSM and Samsung factories. The volumes of the Arm Ecosystem, Stephanie they dwarf the output of Intel by probably 10 X in semiconductors. I mean, the volume in semiconductors is everything. And because that's what costs down and Intel they just knocked a little cost manufacture any anymore. And in my view, they may never be again, not without a major change in the volume strategy, which of course Gelsinger is doing everything he can to affect that change, but they're years away and they're going to have to spend, north of a 100 billion dollars trying to get there, but it's all about volume in the semiconductor game. And Intel just doesn't have it right now. >> So you mentioned Pat Gelsinger he was a new CEO last January. He's a highly respected CEO and in truth employed more than four decades, I think he has knowledge and experience. including 30 years at Intel where he began his career. What's your opinion on his performance thus far besides the volume and semiconductor industry position of Intel? >> Well, I think Gelsinger is an amazing executive. He's a technical visionary, he's an execution machine, he's doing all the right things. I mean, he's working, he was at the state of the union address and looking good in a suit, he's saying all the right things. He's spending time with EU leaders. And he's just a very clear thinker and a super strong strategist, but you can't change Physics. The thing about Pat is he's known all along what's going on with Intel. I'm sure he's watched it from not so far because I think it's always been his dream to run the company. So, the fact that he's made a lot of moves. He's bringing in new management, he's repairing some of the dead wood at Intel. He's launched, kind of relaunched if you will, the Foundry Business. But I think they're serious about that. You know, this time around, they're spinning out mobile eye to throw off some cash mobile eye was an acquisition they made years ago to throw off some more cash to pay for the fabs. They have announced things like; a fabs in Ohio, in the Heartland, Ze in Heartland which is strikes all the right chords with the various politicians. And so again, he's doing all the right things. He's trying to inject. He's calling out his best Andrew Grove. I like to say who's of course, The Iconic CEO of Intel for many, many years, but again you can't change Physics. He can't compress the cycle any faster than the cycle wants to go. And so he's doing all the right things. It's just going to take a long, long time. >> And you said that competition is better positioned. Could you elaborate on why you think that, and who are the main competitors at this moment? >> Well, it's this Five Front War that I talked about. I mean, you see what's happened in Arm changed everything, Intel remember they passed on the iPhone didn't think it could make enough money on smartphones. And that opened the door for Arm. It was eager to take Apple's business. And because of the consumer volumes the semiconductor industry changed permanently just like the PC volume changed the whole mini computer business. Well, the smartphone changed the economics of semiconductors as well. Very few companies can afford the capital expense of building semiconductor fabrication facilities. And even fewer can make cutting edge chips like; five nanometer, three nanometer and beyond. So companies like AMD and Invidia, they don't make chips they design them and then they ship them to foundries like TSM and Samsung to manufacture them. And because TSM has such huge volumes, thanks to large part to Apple it's further down or up I guess the experience curve and experience means everything in terms of cost. And they're leaving Intel behind. I mean, the best example I can give you is Apple would look at the, a series chip, and now the M one and the M one ultra, I think about the traditional Moore's law curve that we all talk about two X to transistor density every two years doubling. Intel's lucky today if can keep that pace up, let's assume it can. But meanwhile, look at Apple's Arm based M one to M one Ultra transition. It occurred in less than two years. It was more like, 15 or 18 months. And it went from 16 billion transistors on a package to over a 100 billion. And so we're talking about the competition Apple in this case using Arm standards improving it six to seven X inside of a two year period while Intel's running it two X. And that says it all. So Intel is on a curve that's more expensive and slower than the competition. >> Well recently, until what Lujan Harrison did with 5.4 billion So it can make more check order companies last February I think the middle of February what do you think of that strategic move? >> Well, it was designed to help with Foundry. And again, I said left that out of my things that in Intel's doing, as Pat's doing there's a long list actually and many more. Again I think, it's an Israeli based company they're a global company, which is important. One of the things that Pat stresses is having a a presence in Western countries, I think that's super important, he'd like to get the percentage of semiconductors coming out of Western countries back up to at least maybe not to where it was previously but by the end of the decade, much more competitive. And so that's what that acquisition was designed to do. And it's a good move, but it's, again it doesn't change Physics. >> So Dave, you've been putting a lot of content out there and been following Intel for years. What can Intel do to go back on track? >> Well, I think first it needs great leadership and Pat Gelsinger is providing that. Since we talked about it, he's doing all the right things. He's manifesting his best. Andrew Grove, as I said earlier, splitting out the Foundry business is critical because we all know Moore's law. This is Right Law talks about volume in any business not just semiconductors, but it's crucial in semiconductors. So, splitting out a separate Foundry business to make chips is important. He's going to do that. Of course, he's going to ask Intel's competitors to allow Intel to manufacture their chips which they very well may well want to do because there's such a shortage right now of supply and they need those types of manufacturers. So, the hope is that that's going to drive the volume necessary for Intel to compete cost effectively. And there's the chips act. And it's EU cousin where governments are going to possibly put in some money into the semiconductor manufacturing to make the west more competitive. It's a key initiative that Pat has put forth and a challenge. And it's a good one. And he's making a lot of moves on the design side and committing tons of CapEx in these new fabs as we talked about but maybe his best chance is again the fact that, well first of all, the market's enormous. It's a trillion dollar market, but secondly there's a very long term shortage in play here in semiconductors. I don't think it's going to be cleared up in 2022 or 2023. It's just going to be keep being an explotion whether it's automobiles and factory devices and cameras. I mean, virtually every consumer device and edge device is going to use huge numbers of semiconductor chip. So, I think that's in Pat's favor, but honestly Intel is so far behind in my opinion, that I hope by the end of this decade, it's going to be in a position maybe a stronger number two position, and volume behind TSM maybe number three behind Samsung maybe Apple is going to throw Intel some Foundry business over time, maybe under pressure from the us government. And they can maybe win that account back but that's still years away from a design cycle standpoint. And so again, maybe in the 2030's, Intel can compete for top dog status, but that in my view is the best we can hope for this national treasure called Intel. >> Got it. So we got to leave it right there. Thank you so much for your time, Dave. >> You're welcome Stephanie. Good to talk to you >> So you can check out Dave's breaking analysis on theCUBE.net each Friday. This is Stephanie Chan for theCUBE. We'll see you next time. (upbeat music)

>> From theCUBE Studios in Palo Alto in Boston, bringing you data-driven insights from theCUBE and ETR, this is "Breaking Analysis" with Dave Vellante. >> If it weren't for Pat Gelsinger, Intel's future would be a disaster. Even with his clear vision, fantastic leadership, deep technical and business acumen, and amazing positivity, the company's future is in serious jeopardy. It's the same story we've been telling for years. Volume is king in the semiconductor industry, and Intel no longer is the volume leader. Despite Intel's efforts to change that dynamic With several recent moves, including making another go at its Foundry business, the company is years away from reversing its lagging position relative to today's leading foundries and design shops. Intel's best chance to survive as a leader in our view, will come from a combination of a massive market, continued supply constraints, government money, and luck, perhaps in the form of a deal with apple in the midterm. Hello, and welcome to this week's "Wikibon CUBE Insights, Powered by ETR." In this "Breaking Analysis," we'll update you on our latest assessment of Intel's competitive position and unpack nuggets from the company's February investor conference. Let's go back in history a bit and review what we said in the early 2010s. If you've followed this program, you know that our David Floyer sounded the alarm for Intel as far back as 2012, the year after PC volumes peaked. Yes, they've ticked up a bit in the past couple of years but they pale in comparison to the volumes that the ARM ecosystem is producing. The world has changed from people entering data into machines, and now it's machines that are driving all the data. Data volumes in Web 1.0 were largely driven by keystrokes and clicks. Web 3.0 is going to be driven by machines entering data into sensors, cameras. Other edge devices are going to drive enormous data volumes and processing power to boot. Every windmill, every factory device, every consumer device, every car, will require processing at the edge to run AI, facial recognition, inference, and data intensive workloads. And the volume of this space compared to PCs and even the iPhone itself is about to be dwarfed with an explosion of devices. Intel is not well positioned for this new world in our view. Intel has to catch up on the process, Intel has to catch up on architecture, Intel has to play catch up on security, Intel has to play catch up on volume. The ARM ecosystem has cumulatively shipped 200 billion chips to date, and is shipping 10x Intel's wafer volume. Intel has to have an architecture that accommodates much more diversity. And while it's working on that, it's years behind. All that said, Pat Gelsinger is doing everything he can and more to close the gap. Here's a partial list of the moves that Pat is making. A year ago, he announced IDM 2.0, a new integrated device manufacturing strategy that opened up its world to partners for manufacturing and other innovation. Intel has restructured, reorganized, and many executives have boomeranged back in, many previous Intel execs. They understand the business and have a deep passion to help the company regain its prominence. As part of the IDM 2.0 announcement, Intel created, recreated if you will, a Foundry division and recently acquired Tower Semiconductor an Israeli firm, that is going to help it in that mission. It's opening up partnerships with alternative processor manufacturers and designers. And the company has announced major investments in CAPEX to build out Foundry capacity. Intel is going to spin out Mobileye, a company it had acquired for 15 billion in 2017. Or does it try and get a $50 billion valuation? Mobileye is about $1.4 billion in revenue, and is likely going to be worth more around 25 to 30 billion, we'll see. But Intel is going to maybe get $10 billion in cash from that, that spin out that IPO and it can use that to fund more FABS and more equipment. Intel is leveraging its 19,000 software engineers to move up the stack and sell more subscriptions and high margin software. He got to sell what he got. And finally Pat is playing politics beautifully. Announcing for example, FAB investments in Ohio, which he dubbed Silicon Heartland. Brilliant! Again, there's no doubt that Pat is moving fast and doing the right things. Here's Pat at his investor event in a T-shirt that says, "torrid, bringing back the torrid pace and discipline that Intel is used to." And on the right is Pat at the State of the Union address, looking sharp in shirt and tie and suit. And he has said, "a bet on Intel is a hedge against geopolitical instability in the world." That's just so good. To that statement, he showed this chart at his investor meeting. Basically it shows that whereas semiconductor manufacturing capacity has gone from 80% of the world's volume to 20%, he wants to get it back to 50% by 2030, and reset supply chains in a market that has become important as oil. Again, just brilliant positioning and pushing all the right hot buttons. And here's a slide underscoring that commitment, showing manufacturing facilities around the world with new capacity coming online in the next few years in Ohio and the EU. Mentioning the CHIPS Act in his presentation in The US and Europe as part of a public private partnership, no doubt, he's going to need all the help he can get. Now, we couldn't resist the chart on the left here shows wafer starts and transistor capacity growth. For Intel, overtime speaks to its volume aspirations. But we couldn't help notice that the shape of the curve is somewhat misleading because it shows a two-year (mumbles) and then widens the aperture to three years to make the curve look steeper. Fun with numbers. Okay, maybe a little nitpick, but these are some of the telling nuggets we pulled from the investor day, and they're important. Another nitpick is in our view, wafers would be a better measure of volume than transistors. It's like a company saying we shipped 20% more exabytes or MIPS this year than last year. Of course you did, and your revenue shrank. Anyway, Pat went through a detailed analysis of the various Intel businesses and promised mid to high double digit growth by 2026, half of which will come from Intel's traditional PC they center in network edge businesses and the rest from advanced graphics HPC, Mobileye and Foundry. Okay, that sounds pretty good. But it has to be taken into context that the balance of the semiconductor industry, yeah, this would be a pretty competitive growth rate, in our view, especially for a 70 plus billion dollar company. So kudos to Pat for sticking his neck out on this one. But again, the promise is several years away, at least four years away. Now we want to focus on Foundry because that's the only way Intel is going to get back into the volume game and the volume necessary for the company to compete. Pat built this slide showing the baby blue for today's Foundry business just under a billion dollars and adding in another $1.5 billion for Tower Semiconductor, the Israeli firm that it just acquired. So a few billion dollars in the near term future for the Foundry business. And then by 2026, this really fuzzy blue bar. Now remember, TSM is the new volume leader, and is a $50 billion company growing. So there's definitely a market there that it can go after. And adding in ARM processors to the mix, and, you know, opening up and partnering with the ecosystems out there can only help volume if Intel can win that business, which you know, it should be able to, given the likelihood of long term supply constraints. But we remain skeptical. This is another chart Pat showed, which makes the case that Foundry and IDM 2.0 will allow expensive assets to have a longer useful life. Okay, that's cool. It will also solve the cumulative output problem highlighted in the bottom right. We've talked at length about Wright's Law. That is, for every cumulative doubling of units manufactured, cost will fall by a constant percentage. You know, let's say around 15% in semiconductor world, which is vitally important to accommodate next generation chips, which are always more expensive at the start of the cycle. So you need that 15% cost buffer to jump curves and make any money. So let's unpack this a bit. You know, does this chart at the bottom right address our Wright's Law concerns, i.e. that Intel can't take advantage of Wright's Law because it can't double cumulative output fast enough? Now note the decline in wafer starts and then the slight uptick, and then the flattening. It's hard to tell what years we're talking about here. Intel is not going to share the sausage making because it's probably not pretty, But you can see on the bottom left, the flattening of the cumulative output curve in IDM 1.0 otherwise known as the death spiral. Okay, back to the power of Wright's Law. Now, assume for a second that wafer density doesn't grow. It does, but just work with us for a second. Let's say you produce 50 million units per year, just making a number up. That gets you cumulative output to $100 million in, sorry, 100 million units in the second year to take you two years to get to that 100 million. So in other words, it takes two years to lower your manufacturing cost by, let's say, roughly 15%. Now, assuming you can get wafer volumes to be flat, which that chart showed, with good yields, you're at 150 now in year three, 200 in year four, 250 in year five, 300 in year six, now, that's four years before you can take advantage of Wright's Law. You keep going at that flat wafer start, and that simplifying assumption we made at the start and 50 million units a year, and well, you get to the point. You get the point, it's now eight years before you can get the Wright's Law to kick in, and you know, by then you're cooked. But now you can grow the density of transistors on a chip, right? Yes, of course. So let's come back to Moore's Law. The graphic on the left says that all the growth is in the new stuff. Totally agree with that. Huge term that Pat presented. Now he also said that until we exhaust the periodic table of elements, Moore's Law is alive and well, and Intel is the steward of Moore's Law. Okay, that's cool. The chart on the right shows Intel going from 100 billion transistors today to a trillion by 2030. Hold that thought. So Intel is assuming that we'll keep up with Moore's Law, meaning a doubling of transistors every let's say two years, and I believe it. So bring that back to Wright's Law, in the previous chart, it means with IDM 2.0, Intel can get back to enjoying the benefits of Wright's Law every two years, let's say, versus IDM 1.0 where they were failing to keep up. Okay, so Intel is saved, yeah? Well, let's bring into this discussion one of our favorite examples, Apple's M1 ARM-based chip. The M1 Ultra is a new architecture. And you can see the stats here, 114 billion transistors on a five nanometer process and all the other stats. The M1 Ultra has two chips. They're bonded together. And Apple put an interposer between the two chips. An interposer is a pathway that allows electrical signals to pass through it onto another chip. It's a super fast connection. You can see 2.5 terabytes per second. But the brilliance is the two chips act as a single chip. So you don't have to change the software at all. The way Intel's architecture works is it takes two different chips on a substrate, and then each has its own memory. The memory is not shared. Apple shares the memory for the CPU, the NPU, the GPU. All of it is shared, meaning it needs no change in software unlike Intel. Now Intel is working on a new architecture, but Apple and others are way ahead. Now let's make this really straightforward. The original Apple M1 had 16 billion transistors per chip. And you could see in that diagram, the recently launched M1 Ultra has $114 billion per chip. Now if you take into account the size of the chips, which are increasing, and the increase in the number of transistors per chip, that transistor density, that's a factor of around 6x growth in transistor density per chip in 18 months. Remember Intel, assuming the results in the two previous charts that we showed, assuming they were achievable, is running at 2x every two years, versus 6x for the competition. And AMD and Nvidia are close to that as well because they can take advantage of TSM's learning curve. So in the previous chart with Moore's Law, alive and well, Intel gets to a trillion transistors by 2030. The Apple ARM and Nvidia ecosystems will arrive at that point years ahead of Intel. That means lower costs and significantly better competitive advantage. Okay, so where does that leave Intel? The story is really not resonating with investors and hasn't for a while. On February 18th, the day after its investor meeting, the stock was off. It's rebound a little bit but investors are, you know, they're probably prudent to wait unless they have really a long term view. And you can see Intel's performance relative to some of the major competitors. You know, Pat talked about five nodes in for years. He made a big deal out of that, and he shared proof points with Alder Lake and Meteor Lake and other nodes, but Intel just delayed granite rapids last month that pushed it out from 2023 to 2024. And it told investors that we're going to have to boost spending to turn this ship around, which is absolutely the case. And that delay in chips I feel like the first disappointment won't be the last. But as we've said many times, it's very difficult, actually, it's impossible to quickly catch up in semiconductors, and Intel will never catch up without volume. So we'll leave you by iterating our scenario that could save Intel, and that's if its Foundry business can eventually win back Apple to supercharge its volume story. It's going to be tough to wrestle that business away from TSM especially as TSM is setting up shop in Arizona, with US manufacturing that's going to placate The US government. But look, maybe the government cuts a deal with Apple, says, hey, maybe we'll back off with the DOJ and FTC and as part of the CHIPS Act, you'll have to throw some business at Intel. Would that be enough when combined with other Foundry opportunities Intel could theoretically produce? Maybe. But from this vantage point, it's very unlikely Intel will gain back its true number one leadership position. If it were really paranoid back when David Floyer sounded the alarm 10 years ago, yeah, that might have made a pretty big difference. But honestly, the best we can hope for is Intel's strategy and execution allows it to get competitive volumes by the end of the decade, and this national treasure survives to fight for its leadership position in the 2030s. Because it would take a miracle for that to happen in the 2020s. Okay, that's it for today. Thanks to David Floyer for his contributions to this research. Always a pleasure working with David. Stephanie Chan helps me do much of the background research for "Breaking Analysis," and works with our CUBE editorial team. Kristen Martin and Cheryl Knight to get the word out. And thanks to SiliconANGLE's editor in chief Rob Hof, who comes up with a lot of the great titles that we have for "Breaking Analysis" and gets the word out to the SiliconANGLE audience. Thanks, guys. Great teamwork. Remember, these episodes are all available as podcast wherever you listen. Just search "Breaking Analysis Podcast." You'll want to check out ETR's website @etr.ai. We also publish a full report every week on wikibon.com and siliconangle.com. You could always get in touch with me on email, david.vellante@siliconangle.com or DM me @dvellante, and comment on my LinkedIn posts. This is Dave Vellante for "theCUBE Insights, Powered by ETR." Have a great week. Stay safe, be well, and we'll see you next time. (upbeat music)

>> From theCUBE studios in Palo Alto in Boston, bringing you data-driven insights from theCUBE and ETR. This is Breaking Analysis with Dave Vellante. >> Much of the discussion around Intel's current challenges, is focused on manufacturing issues and it's ongoing market share skirmish with AMD. Of course, that's very understandable. But the core issue Intel faces is that it has lost the volume game forever. And in Silicon volume is king. As such incoming CEO Pat Gelsinger faces some difficult decisions. I mean, on the one hand he could take some logical steps to shore up the company's execution, maybe outsource a portion of its manufacturing. Make some incremental changes that would unquestionably please Wall Street and probably drive shareholder value when combined with the usual stock buybacks and dividends. On the other hand, Gelsinger could make much more dramatic moves shedding it's vertically integrated heritage and transforming Intel into a leading designer of chips for the emerging multi-trillion dollar markets that are highly fragmented and generally referred to as the edge. We believe Intel has no choice. It must create a deep partnership in our view with a semiconductor manufacturer with aspirations to manufacture on US soil and focus Intel's resources on design. Hello, everyone. And welcome to this week's Wikibon's Cube Insights powered by ETR. In this breaking analysis will put forth our prognosis for what Intel's future looks like and lay out what we think the company needs to do not only to maintain its relevance but to regain the position it once held as perhaps the most revered company in tech. Let's start by looking at some of the fundamental factors that we've been tracking and that have shaped and are shaping Intel and our thinking around Intel today. First, it's really important to point out that new CEO Gelsinger is walking into a really difficult situation. Intel's ascendancy and its dominance it was created by PC volumes. And its development of an ecosystem that the company created around the x86 instruction set. In semiconductors volume is everything. The player with the highest volumes has the lowest manufacturing costs. And the math around learning curves is very clear and it's compelling. It's based on Wright's law named after Theodore Wright T.P Wright. He was an aeronautical engineer and he discovered that for every cumulative doubling of units manufactured, costs are going to fall by a constant percentage. Now in semiconductor way for manufacturing that cost is roughly around 22% declines. And when you consider the economics of manufacturing a next generation technology, for example going from ten nanometers to seven nanometers this becomes huge. Because the cost of making seven nanometer tech for example is much higher relative to 10 nanometers. But if you can fit more circuits on a chip your wafer costs can drop by 30% or even more. Now this learning curve benefit is why volume is so important. If the time it takes to double volume is elongated then the learning curve benefit they get elongated as well and it become less competitive from a cost standpoint. And that's exactly what is happening to Intel. You see x86 PC volumes, they peaked in 2011 and that marked the beginning of the end of Intel's dominance from manufacturing and cost standpoint. You know, ironically HDD hard disk drive volumes peaked around the same time and you're seeing a similar fundamental shift in that market relative to flash. Now because Intel has a vertically integrated model it's designers are limited by the constraints in the manufacturing process. What used to be Intel's ace in the hole its process manufacturing has become a hindrance, frustrating Intel's chip designers and really seeding advantage to a number of competitors including AMD, ARM and Nvidia. Now, during this time we've seen high profile innovators adapting alternative processors companies like Apple which chose its own design based on ARM for the M1. Tesla is a fascinating case study where Intel was really not in the running. AWS probably Intel's largest customer is developing its own chips. You know through Intel, a little bone at the recent reinvent it announced its use of Intel's Habana chips in a practically the same sentence that talked about how it was developing a similar chip that would provide even better price performance. And just last month it was reported that Microsoft Intel's monopoly partner in the PC era was developing its own ARM-based chips for the surface PCs and for its servers. Intel's Zenith was marked by those peak PC volumes that we talked about. Now to stress this point this chart shows x86 PC volumes over time. That red highlighted area shows the peak years. Now, volumes actually grew in 2020 in part due to COVID which is not really reflected in this chart but the volume game was lost for Intel. When it has been widely reported that in 2005 Steve Jobs approached Intel as it was replacing IBM microprocessors with with Intel processors for the Mac and asked Intel to develop the chip for the iPhone Intel passed and the die was cast. Now to the earlier point, PC markets are actually quite good if you're Dell. Here's some ETR data that shows Dell's laptop net score. Net score is a measure of spending momentum for 2020 and into 2021. Dell's client business has been very good and profitable and frankly, it's been a pleasant surprise. You know, PCs they're doing well. And as you can see in this chart, Dell has momentum. There's approximately 275 million maybe as high as 300 million PC units shipped worldwide in 2020, you know up double digits by some estimates. However, ARM chip units shipped exceeded 20 billion units last year worldwide. And it's not apples to apples. You know, we're comparing x86 based PCs to ARM chips. So this excludes x86 servers, but the way for volume for ARM dwarfs that of x86 probably by a factor of 10 times. Back to Wright's law, how long is it going to take Intel to double wafer volumes? It's not going to happen. And trust me, Pat Gelsinger understands this dynamic probably better than anyone in the world and certainly better than I do. And as you look out to the future, the story for Intel and it's vertically integrated approach it's even tougher. This chart shows Wikibon's 2020 forecast for ARM based compared to x86 based PCs. It also includes some other devices but as you can see what happens by the end of the decade is ARM really starts to eat in to x86. As we've seen with the M1 at Apple, ARM is competing in PCs in much better position for these emerging devices that support things like video and virtual reality systems. And we think even will start to eat into the enterprise. So again, the volume game is over for Intel, period. They're never going to win it back. Well, you might ask what about revenue? Intel still dominates in the data center right? Well, yes. And that is much higher revenue per unit but we still believe that revenue from ARM-based systems are going to surpass that of x86 by the end of the decade. Arm compute revenue is shown in the orange area in this chart with x86 in the blue. This means to us that Intel's last mot is going to be its position in the data center. It has to protect that at all costs. Now the market knows this. It knows something's wrong with Intel. And you can see that is reflected in the valuations of semiconductor companies. This chart compares the trailing 12 month revenue in the market valuations for Intel, Nvidia, AMD and Qualcomm. And you can see at a trailing 12 month multiple revenue with 3 X compared to about 22 X for Nvidia about 10 X for AMT and Qualcomm, Intel is lagging behind in the street's view. And Intel, as you can see here, it's now considered a cheap stock by many, you know. Here's a graph that shows the performance over the past 12 months compared to the NASDAQ which you can see that major divergence. NASDAQ has been powered part by COVID and all the new tech and the work from home. The stock reacted very well to the appointment of Gelsinger. That's no surprise. The question people are asking is what's next for Intel? How will Pat turn the company's fortunes around? How long is it going to take? What moves can he and should he make? How will they be received by the market? And internally, very importantly, within Intel's culture. These are big chewy questions and people are split on what should be done. I've heard everything from Pat should just clean up the execution issues. It's no.. This is, you know, very workable and not make any major strategic moves all the way to Intel should do a hybrid outsourced model to Intel should aggressively move out of manufacturing. Let me read some things from Barron's and some other media. Intel has fallen behind rivals and the rest of tech Intel is replacing Bob Swan. Investors are cheering the move. Intel would likely turn to Taiwan semiconductor for chips. Here's who benefits most. So let's take a look at some of the opinions that are inside these articles. So, first one I'm going to pull out Intel has indicated a willingness to try new things and investors expect the company to announce a hybrid manufacturing approach in January. Now, if you take a look at that and you quote a CEO Swan, he says, what has changed is that we have much more flexibility in our designs. And with that type of design we have the ability to move things in and move things out. And that gives us a little more flexibility about what we will make and what we might take from the outside. So let's unpack that a little bit. The new Intel, we know is a highly vertically integrated workflow from design to manufacturing production. But to me, the designers are the artists and the flexibility you would think would come from outsourcing manufacturer to give designers more flexibility to take advantage of say seven nanometer or five nanometer process technologies versus having to wait for Intel to catch up. It used to be that Intel's process was the industry's best and it could supercharge a design or even mask certain design challenges so that Intel could maintain its edge but that's no longer the case. Here's a sentiment from an analyst, Daniel Donnelly. Donnelly is at Citi. It says he's confident. Donnelly is confident that Intel's decision to outsource more of its production won't result in the company divesting its entire manufacturing segment. And he cited three reasons. One, it would take roughly three years to bring a chip to market. And two, Intel would have to share IP. And three, it would hurt Intel's profit margins. He said it would negatively impact gross margins by 10 points and would cause a 25% decline in EPS. Now I don't know about this. I would... To that I would say one, Intel needs to reduce its current cycle time, to go from design to production from let's say three to four years where it is today. It's got to get it under you know, at least at two years maybe even less. Second, I would say is what good is intellectual property if it's not helping you win in the market? And three, I think profitability is nuance. So here's another take from a UBS analyst. His name is Timothy Arcuri. And he says, quote, We see but no option but for Intel to aggressively pursue an outsourcing strategy. He wrote that Intel could be 80% outsourced by 2026. And just by going to 50% outsourcing, he said would save the company $4 billion annually in CapEx and 25% would drop to free cashflow. So look, maybe Gelsinger has to sacrifice some gross margin in EPS for the time being. Reduce the cost of goods sold by outsourcing manufacturing lower its CapEx and fund innovation in design with free cash flow. Here's our take, Pat Gelsinger needs to look in the mirror and ask what would Andy Grove do? You know, Grove's quote that only the paranoid survive its famous less well-known are the words that proceeded that quote. Success breeds complacency and complacency breeds failure. Intel in our view is headed on a path to a long drawn out failure if it doesn't act aggressively. It simply can't compete on cost as an integrated manufacturer because it doesn't have the volume. So what will Pat Gelsinger do? You know, we've probably done 30 Cube interviews with Pat and I just don't think he's taking the job to make some incremental changes to Intel to get the stock price back up. Why would that excite Pat Gelsinger? Trends, markets, people, society, he's a dot connector and he loves Intel deeply. And he's a legend at the company. Here's what we strongly believe. We think Intel has to do a deal with TSM or maybe Samsung perhaps some kind of joint venture or other innovative structure that both protects its IP and secures its future. You know, both of these manufacturers would love to have a stronger US presence. In markets where Intel has many manufacturing facilities they may even be willing to take a loss to get this started and deeply partner with Intel for some period of time This would allow Intel to better compete on a cost basis with AMD. It would protect its core data center revenue and allow it to fight the fight in PCs with better cost structures. Maybe even gain some share that could count for, you know another $10 billion to the top line. Intel should focus on reducing its cycle times and unleashing its designers to create new solutions. Let a manufacturing partner who has the learning curve advantages enable Intel designers to innovate and extend ecosystems into new markets. Autonomous vehicles, factory floor use cases, military security, distributed cloud the coming telco explosion with 5G, AI inferencing at the edge. Bite the bullet, give up on yesterday's playbook and reinvent Intel for the next 50 years. That's what we'd like to see. And that's what we think Gelsinger will conclude when he channels his mentor. What do you think? Please comment on my LinkedIn posts. You can DM me at dvellante or email me at david.vellante@siliconangle.com. I publish weekly on wikibon.com and siliconangle.com. These episodes remember are also available as podcasts for your listening pleasure. Just search Breaking Analysis podcast. Many thanks to my friend and colleague David Floyer who contributed to this episode and that has done great work in the last better part of the last decade and has really thought through some of the cost factors that we talked about today. Also don't forget to check out etr.plus for all the survey action. Thanks for watching this episode of the Cube Insights powered by ETR. Be well. And we'll see you next time. (upbeat music)

>> Narrator: Live from Denver, Colorado it's theCUBE. Covering Commvault Go 2019. Brought to you by Commvault. >> Hey, welcome back to theCUBE. Lisa Martin with Stu Miniman, we're wrapping up close-- Wrapping up our coverage of two days at Commvault Go in Colorado and we're excited to welcome a new gust to theCUBE. We have Tim Carben, Principle Systems Engineer for Storage and Data Protection at Mitchell, a Commvault customer. Tim, welcome to the program. >> Thanks for having me. >> Lisa: First question. >> Yes. >> Are you ready for the interview? (Tim shows off his shirt) >> I came ready. >> Lisa: You were born ready! >> Yes. (Lisa laughs) >> So for those of you who weren't here, the get ready, be ready is a big theme of the event. So, Tim, first of all, before we get into what Mitchell is doing with Commvault, tell our audience who Mitchell is, what types of products and services do you deliver? >> Well, Mitchell is a little known name, but we are a technology company that provides smart solutions, or smart insurance solutions. (Tim sighs) I'm sorry, we provide smart technology solutions for insurance companies in the area of property and casualty. >> Okay. That's a big, that's a-- >> That's a mouth full. >> It is a mouth full, but you did really well. So based here in the US? >> Tim: Yes in San Diego. >> Oh, that's right, Sunny San Diego. We were just talking about the scooter problem. How could I forget? So, you came onboard there, you said around five or so years ago? >> Tim: Yes, about five and a half years. >> If I think of like, insurance. (Lisa cringes) The data volume growing, right, must be, you're wincing, exponential. Talk to us about the data strategy and the importance of data to Mitchell and what you're doing with Commvault to protect it, get that visibility and use it to deliver stellar services. >> Well that's exactly it. It's, we see growth and, year over year and making sure that we keep that data protected is the most important thing. We have to be able to provide that back to our customers, in an instant and keep it available. That's number one is keeping everything available. So, of course I'm going to choose Commvault. I always look into everything that's in the market and I talk with everyone. I mean, I've had conversations with everyone from Rupert to Veritas and I agree with Forrester in saying that Commvault's the best product for the data protection. >> Lisa: Why? >> Mainly, because we're seeing them move forward faster than anyone else. They're able to-- Or I'm able to, I guess I should say, utilizing Commvault, microtune my environment to be able to provide the fastest level of backup and recovery. Rather than buying blocks and putting these blocks together. And even when it comes to the hyperscale product, it's a Red Hat server cluster. So it's not a black box you can't see inside of, you understand what's going on underneath it and it is a tried and true methodology for doing what you're trying to do and it's... I guess for lack of better words, just really resilient, I love it. >> Great, so Tim, you said you've looked at a lot of solutions, you've been on Commvault for quite a while. Talk to us a little bit about that usability of the product, you know? Some of the questions we have is, you know how simple it actually is to use, you know how much your team needs to study up and get on it and just, kind of, the cadence of change that you're seeing coming from Commvault. >> Now, my team's really good. You know we've been-- They've been with Commvault since version six they know how to use the Java console. So, it's not so much as, they are learning something new, but what's happening and what I've noticed with Commvault, from within the Java console to the command center, is they're making everything else a lot easier. So, they're not changing the way I'm doing my mature backups of, say Oracle, or, you know file system, things like that, but they are making it a lot easier for me to start and recover and I guess, change configuration of the VMware backups. They're making it easier of me to manage my storage and with the command center or with the web console, I should say, they're making it so much easier to report. Anyone that's utilized the CommNet from back in the day, the old reporting tool, versus the new centralized metrics reporting tool, knows that there's no comparison whatsoever. And I can point all of my CommCells to one reporting system and provide reports that go over everything from storage utilization to, you know, just resource utilization all the way down to chargeback, based upon any given criteria I want. >> You have full visibility? >> Full visibility. >> You mentioned that you've been a Commvault customer for a while, not just at Mitchell, but your previous company, you also said before we started that you've done a lot of speaking on behalf of Commvault, your use case, other challenges that you had, the business outcomes. I would love to get your perspective on being one of those customer champions, what are some of the things that you're hearing from prospective Commvault customers? Are they asking you for your advice, like hey, we had this kind of compelling event, Tim, what would you recommendation be? >> A lot of it is specifics and I think that's, you know, they'll be asking questions based upon who they're talking to and I'm the guy that you talk to when you want to talk the details. So they'll come to me and say hey, what about this hyperscale configuration and I'll say, well rather than go with the larger environment, go with the smaller nodes and spread it wider, that way you can transfer more data in. But... It's a lot of just how is it working for you? And even into the newer environments where we're looking at the, you know, 0365 being backed up by SaaS is, how easy is it to configure? And that is quite possibly the easiest thing to configure that I've ever run across. >> Wow. Ever? >> Ever. Well, like I said, they keep making things better and in the past I've used, you know, Veritas backup Exec, as everyone has back in the day. I mean, we've done data transfer on tapes, I've used TSM for seven years, so everything's going to be easier than that and even a lot of testing of different backup applications and when you look at what we're doing with cloud configuration and Commvault SaaS model, Commvault really takes a lot of the configuration out that you would need to do and they have their own CommCell administrator that takes care of it. I was talking with Justin not too long back, he's here I was so happy to get to meet him and he manages all that for us. We enter in the specifics as far as configuration and it's done. >> So you guys-- Oh, go ahead, Stu. >> So, Tim, you know, what I'm curious about is the feedback loop that you have with Commvault. Obviously you're quite happy with the product, you've seen the maturation over time. Are there things you're asking for, or things that you're seeing on their roadmap or maybe things that were announced this week, that are exciting you or things that you would love to help be doing things even better than what you're doing today? >> I don't know, this may be the thing that the sales people don't like about me. Is I don't hold back when I see something that I want to see different and I've done this with different storage manufacturers that I've worked with, as well as, of course with Commvault and the one things that I always come back to and this is one thing I joked with my previous sales person on is, if you're going to call it Commvault Complete, why doesn't it include orchestrate and activate? You could just call it Commvault and then give us another Commvault Complete that actually contains everything in it, because, I wish I could run the activate in-house. The problem is, is I've priced it out, I've provided that data to my upper management and they just will not buy off on it. >> And what was Commvault's response to that feedback? 'Cause they're very pro-listening to their customers, we've heard that resoundingly. >> They are and there really wasn't anything. They said they're hand things up the channel and what's interesting about it is in talking to the activate people today, or, yes, either way. During the show, I found out that they added another plan that would allow you to buy activate by the terabyte and not by the user. So that may be something that could help drop the price if we isolate specific environments to what we would use the activate for and that would be (Tim nods) workable, I guess I should say. >> So, speaking of activate, data governance, insights, the California Consumer Privacy Act, CCPA is around the corner. >> Yes. >> You're based in San Diego. Where is Mitchell in terms of its readiness for that and how is Commvault, ar they part of that solution to get ready? >> As far as-- I can speak to the data protection side of it, because that's where I'm at. >> Lisa: Yeah. >> And I have everything in place for us to be ready by the time everything comes through. And it is utilizing Commvault. I mean, that's the backbone of being able to keep us protected. At that level and all levels, I should say. >> Tim, as we mentioned before, you've been speaking, you've been quite busy at the show, give us, you know, some of the highlights that you've had and, you know, what brings you to Go and how many of them have you been to? >> Well, I went to the first two Florida and DC. I skipped out on the last one, I wanted to send my coworkers there. So my coworkers that I work with, I made it a point I said I'm staying at the office, I'll take care of everything, go and-- No pun intended. >> Lisa: I was going to say that was good. >> Yes. (Lisa and Tim laughing) And then I came back to this one. The big thing is learning. This is an opportunity for me to talk to industry experts, to talk to customers who have done things that I'm planning on doing in the future, to help out customers who haven't done things that I've already done and let 'em know hey look out for this or look out for that. But, with this one a big part of it is looking at the workflows, looking at the automation. Utilizing or being able to utilize all the other features that I have available to me that I'm not using right now. >> Last question in the last few seconds of the time we have left, lots of announcements from Commvault in the last nine months a lot of change, a lot of leadership change, reps to market change, new ventures. Some of your perspective of what you're seeing with this new Commvault? >> Well, it's exciting when you look at it. At first I wondered about the Hedvig acquisition. I mean, it's a step into the primary storage market and some people say that a lot of the companies that are partners with Commvault could see that as overstepping boundaries, but when I learn what they're doing and what they're planning on doing and utilizing it as more of a data protection multicloud strategy, this really could push them a little bit further along than anyone else than the data protection market is. So, the changes look to be, for lack of better words, really good for the company and in turn really good for us, the consumer. And making sure that we can do everything that we need to do and we're ready to move forward. >> 'Course you are, you have the shirt. >> Tim: That's right, we're ready >> Well Tim, Tim thank you for joining Stu and me on theCUBE this afternoon. Sharing with us what's going on at Mitchell and you perspectives on knowing Commvault as long as you have. We appreciate your time. >> Thank you for having me. >> Our pleasure. For Stu Miniman, I'm Lisa Martin and you're watching theCUBE from Commvault Go '19. (upbeat tune)

>> Announcer: Live from Las Vegas, it's TheCUBE! Covering IBM Think 2018. Brought to you by IBM. >> Welcome back to Las Vegas, everybody. IBM Think, the inaugural IBM Think. This is TheCUBE, the leader in live tech coverage. My name is Dave Vellante, and I'm here with Ed Walsh, the general manager of IBM Storage. Ed, always a pleasure, my friend. Good to see you again. >> As always, great. >> Wow, what a show! >> It's amazing, it's fantastic. >> 30,000, 40,000, I don't know. I said to John, too many people to count! >> Hard to get through places, right? Just to get here, it was hard to get here. >> We're going to get into your business. You're not a newbie anymore. >> Ed: 18 months, right? >> Second time at IBM, so you really know the ropes. But let's start off with Ginni's talk. You heard our riff, John and myself at the talk. I really like her style. I was poking at some things, but what was your take on her message to the audience? >> Well, just consistency. As an outsider from IBM, the power of IBM to actually change the environment's pretty good, but putting smarter to work and really focusing on business is where we're core. I think it's powerful, but also it allows you to have the overall message of IBM come in, innovative technology. Now, we're going to talk about data and cloud, but innovative technology, an industry split on things, and then, really, the trust and security piece, that comes together. Now, when we talk about it, how do we in the data area move people forward? I think it's a powerful message of, I heard your earlier statement about that, the power of the incumbent. If you look at this, global 2,000 clients that we deal with are looking to user data and to more aggressively advance themselves, and that's where we're perfectly positioned. Even as storage, and we'll get back to storage in a second. But it all comes back to data, which I can include storage, but it's leveraging the data for the competitive advantage and doing what they maybe were slow to do. The early phase one of the data era was really the consumer companies really taking over. We'll talk about good tech versus bad tech. Really, now, we believe it's the rise of the incumbent, which you messaged pretty well, because they do have all this data. Maybe they're slow to adopt how to use that data. With the right partnership at IBM, we can do that. And that's where we're getting the most traction for the clients is telling them, "How do you actually get data-driven in your business?" "It's not as easy as you want it to be." It is about technology, but it's also about human capital as well. >> You obviously talk to a lot of customers. You have for years on both sides of the fence. You've been talking to customers about disrupting companies like IBM, and now you're a part of IBM, and you're helping the incumbents not get disrupted, and maybe be the disruptors, as Ginni was saying. The reason why I was poking at that a little bit is because it is all about the data, and if you, I mentioned yesterday, look at the five top companies in the US in terms of market cap. $600 billion, $700 billion companies. We know who they are. They're the Amazons, the Facebooks, the Googles, et cetera. The premise that I have is they have data at the core of their business, and they've organized human, human expertise around that data, whereas historically, I was talking to Peter Burris about this the other day, he said, "Historically, people have organized humans "around their assets," which might be plant equipment, it might be the bottling factory or whatever it is. So, how do companies go from that distributed, bespoke, siloed data model into this core data model? That's a cultural change, it's a technology change, it's a people and process change. What are you seeing, now, we saw some examples today. RBC, we saw Maersk, we saw Verizon, I'm a little more skeptical on Verizon. Big telcos have a lot of infrastructure that's unchanged, but what are you seeing with companies, how receptive are they? Are they sort of sidecaring their digital transformation, or are they jamming it right through the center, the heart of the company? >> Everyone's on a different maturity curve for sure. We see the leaders and the laggers, right, and the people in between. But everyone desperately wants to do it, so we spend a lot of time saying with our clients, "Let me show you how others are getting more data-driven." On-prem, we focus a lot on private clouds in my division, but also how that's multi-cloud in nature. Because you do have to look at the overall environment and how to look at it, and everyone has their own vision about how they're going to go from where they are to where they need to get to. To get them there in the right steps takes, actually, the girth of an IBM with our technology, with our consultant, our capability to do that. It does take innovative technology, but to get clients is really sharing, really, we see three patterns on-premises are people leveraging to get to multi-cloud. But really, how do they modernize and transform their current environment to do it? We spend a lot of time explaining what other people are doing so that they're, 'cause some of 'em are laggers. Everyone wants to be data-driven. They've tried different areas, and now, how do we make it easier to do that? We're also making investments to make it easier to do that. Little things like machine learning, deep learning. That can be hard stuff. You can wrestle with a lot of the tools and building models. We're doing simple things like, Power AI would be example, in the environment where we bring these open-source tools and make it very easy for you to get your team to start focusing on business value, not the technology components. That's just making it easier, allowing, maybe you'd say the slower, right? Phase one is largely consumer disruptors disrupting it, 'cause they're moving just much faster than maybe the incumbent was. But we can make the incumbent get nimble, which they can with the right technology, but also, it's human capital as well, we can get there. We're doing a lot, not only in the infrastructure side, but you can do in public cloud, by private cloud, but leveraging that system record data is kind of hard, so it's all about tools and being more agile. But also, it's about making it really simple to do some complex things. I gave you the AI. I'll give you another one. People want to do app modernization there on native cloud apps. They want to refactor applications. They want to go to containers and microservices. Yeah, so, and how's that going? And they'll say it's pretty hard. So what do we do? We come out with IBM Cloud Private. What is that? Well, we've taken the challenge out of putting all these tools together. They said Docker, Kubernetes, Cloud Foundry, but also our operational layer to make it easy for you to deploy that, and then now you have complete portability between different clouds, multi-clouds, including IBM's cloud. But you can do it on-prem as well. But now what you can do is you're not focusing on getting all the components together. You're driving your value, which is where, typically, all these things, they focus so much on building a data lake and actually getting, how do I get the data lake up and running, compared to, how do I actually make sure I'm doing the right data, the right business? That's where I think you're seeing IBM focus a lot of innovation. It might not seem like, you know, that doesn't sound like storage to me, right? But it allows us to help our clients move forward, and those are the things holding them back. Storage is about having API-based automation, which, you're not thinking about storage that way, but you need to do it to fit in to this new world. You're going to see us do more and more. When you talk about putting smarter to work, we're trying to make it dramatically easier to get value, even for the incumbent. Which, maybe you could say they were slower, they don't have the right skills, or they have to do some things. I think we're going out of our way to build the right things. >> Well, my takeaway is, you're allowing the incumbents to get value out of their existing advantages, and their existing, I've talked about app modernization. They're making a lot of money on those apps, and if they can modernize, they can use that as a competitive weapon. I want to talk about your business. People that don't know you, you've done a bunch of startups, you kind of had the Midas touch. You're a technologist. You really understand deep technology. I'm told you're a tough boss, but a fair boss, so you're demanding. You know what it takes to win. IBM Storage, four consecutive quarters of growth, and not just 0.05 % growth, you're talking about substantial, meaningful, high single digits, mid single digits, and the market's growing at whatever, 2%, 3%. You're gaining share in a very large market. Give us the update on your business. How are you doing it? >> You nailed it. A lot of people highlight after years of not keeping with market, we went for not only growing, but we grow in all four quarters. But more importantly, we grow 7% year to year, which the market's grown about 0.9%. But it's really, it's also broad-based. It wasn't a particular product. If you look at our portfolio, every report segment we have internally, externally, grew for the year. If you look at geographies, six out of seven geographies grew. The only geography that didn't grow for us was China, and it's growing in software, it's just not growing in hardware because of some of the unique instances dealing with business in China. But if you look at broad-based, it's not a particular thing. Our portfolio's doing well. It's really how we're approaching the customer, and it's resonating with clients. Then it pulls together the whole portfolio. We have the broadest portfolio, which, you know, we talked about early on. Are you going to simplify that, or is it too much? I actually think it's an advantage, 'cause if you're trying to help people, and this is where the advantage is. All our clients are challenged. We talk about being data-driven. Now, that's a big challenge. But also, they're challenged with budgets and other things for efficiency. How do you get from where you are, where you need to get to, and then make the right steps? You need a broad portfolio to do that. I think the biggest value is we help people get more data-driven. A lot of that is showing what other people are doing walking forward, and it's very into modernizing and having the right agility in the infrastructure. But that's where it's really resonating with the market. And then we're focusing on offerings. We probably have the most competitive offerings. We have hardware and software, but also, the right go-to-market. How do you have the right messaging? We talked more about modernizing, transforming, helping clients free up critical dollars for resources so they can transform and do that in a concrete way. That's what you need to do so that you connect, you transform. And then we help 'em with the data, how to be truly data-driven. That message really plays because all of our clients, big and small, are just challenged that way. What our competitors are, to be honest, more pure storage players, I think I've told you a couple times, the reason I'm happy to be here is, you think of what IBM, when it shows up, can do to help you. I think storage and helping people into the next data-driven era is a big boy/big girl game. You have to bring a lot to bear. We're going to talk about analytics, machine learning, different tool sets. It's not about the next array, but underneath my portfolio, we'll go toe-to-toe with everyone product by product. That was just a lot of offering-by-offering work that had to be done, but we're in much better shape now, and then you're going to see continued innovation through this year. >> Well, I have to bring in the competition, 'cause you're stealing share from the competition. If I'm hearing you correctly, you're saying, Joe Tucci used to say, "We'd rather have overlap than gaps." That's a philosophy that you seem to be taking. EMC now under Dell's ownership taking a different philosophy. They seem to be consolidating their portfolios, they seem to be going for more volume plays, which is consistent with how Dell would operate. I wonder if you could compare and contrast those two philosophies. Am I right that you'd rather have a broad portfolio with no gaps than have gaps and not being able to meet market demand? Is that fair? >> Yeah, I think you'll see us be disciplined in portfolio. But my point is, someone's really trying to, you're trying to really help someone get from A to B in their environment. One product doesn't do it. A couple products don't do it. You do need the full solution set to do it. I also think it's not only what we can do with storage, what we can do with systems. You talk about data-driven. I bring in the overall group. Analytics, we're number one in analytics, et cetera. That's where you start to get, where we show up, it's a different value proposition. That's where we're winning. Now, we also still get involved with, hey, I'm going to, it's U-verse, EMC, array-by-array, winner takes all. We do that all the time, and we'll stand by every product. But you said it, well, you used Tucci. Conversation with Tucci has been reported, but he said to me, which was, "What do you fear most is, "if IBM ever got their act together," he said, "It'd be scary." All we're basically doing is getting IBM's act together, and then from clients are responding to it because they're actually getting a bigger value. That's changing some of our relationship with the clients because they still want to focus on this product and that product. But I think that's really what's affecting the change and the overall business direction. >> Well, getting your act together involved a lot of blocking and tackling, and still does, I'm sure, but it also involved a focused effort on taking R&D, pinpointing that on what the clients needed, getting products out. I mean, when we first did TheCUBE with you guys years ago, it was hard to see a rapid cycle of new product innovation coming out. My sense is that that's changed. I see more announcements, I see a lot more announcements. That makes products that people can buy, it drives revenue, it drives transactions. It brings partnerships. Is that a fair assessment of what you guys have done? >> It comes back to team. We'll go to the high-level team offering at go-to-market, but if you don't have the right team, so, basically, the first thing you do, you have to get the right team. The right team will make the right call. I built Insight IBM. The team I have now is not the team I started with, but it's really getting the right people that are knowing their business cold, inside, outside, that know storage, that can really drive that. The decisions become pretty easy. You got to have the right vision. The vision's all about having a dynamic vision that people understand and can give feedback to, and it does outside-in. It's what's going on with the customers that really matter to us. But get everyone around that, you have an open culture that that feedback loop down to every IBMer, right? You need to ignite the IBMer, I'm talking about, like, a third party, but it really, it's an amazing culture that if you give them the right direction, they'll drive for walls. It was probably my easiest turnaround I've ever done with the right vision. Also, at this-sized companies, a lot about having very agile operation. I spent a lot of time on things that you're not going to talk about on TheCUBE, but what we're doing with costs and quality, all the different things we're doing in serviceability that really do show up as far as NPS. We do a lot of things on a net promoter score, or every time we sell something or service something, we're getting feedback from clients, and they're filling in these verbatims. Boy, that is rich information that is going directly in a, I can give you a couple examples, goes directly into it. What we did is, one of our products is Spectrum Protect. Again, I'm not going to try to go to, but might as well. One particular offering that I have is a great offering, but it's been around for a long time. TSM turned to Spectrum Protect. Verbatims from clients, "I just need and it was simplicity, agent, listen," and they came up with three or four different things that had to be done on a particular environment. So, guess what? We deliver that, and literally, do this, get that. You listen to clients, we deliver that with quality. You put it as part of the overall Spectrum Protect, all of a sudden, transaction revenue goes up by 6%, which is a big revenue stream to just pop in a very single quarter. We're going to do that, but that's like an offering by offering work that has to be done, and you have to have the right team to do it. I would say the credit goes to the team, and the IBM team that really responded to it and lifted it. >> I mean, 10 years ago, that would've taken a year and a half or more to actually get into the product flow, right? >> It's fast. >> Okay, but the other thing I would observe, I've been hearing from companies like yours for decades that, "Well, we're going to use the adjacencies in our other business "to compete with the leaders." And it's never happened. It's starting to happen now, and presumably because people don't care as much about the speeds and feeds as they do about transforming their business and digital business and all that stuff. It seems like you're able to leverage that, so let's talk about some of those other trends. Cloud, that's the other big competitor, the public cloud. You've got a cloud option, but private cloud, we've talked about true private cloud. I think you're familiar with our research, there. How is that going, is it a tailwind for you guys? Is it working? >> Your research on true private cloud, I use it a lot, by the way. That's the idea, and I'll play it back, is having all the agility, flexibility, but also cost models of in the public cloud, but they want to do it on-premises with any time we don't leverage the public cloud resources, APIs, resources, as business demands. That's where my clients are looking to drive it. They want to have all the flexibility. They want to be able to go to the cloud for particular things. But it's lift and shift. We spend a lot of time, that is where we're getting the most traction. We spend a lot of time saying, "This is what we're seeing on-premises "with true private cloud, "and this is how they're going to "multi-cloud." We do show 'em all of our solution sets are now available in, not only IBM, but some of the other major clouds, because we do believe it's truly multi-cloud. But the biggest thing is helping clients understand what they can do along that maturity curve, and I think that's where clients really get the benefit of engaging. And always, the conversation does always come to something outside just storage. It comes into what you can do with server, or machine learning, deep learning, how to be data-driven, what we're doing as far as containers. We're not just saying our storage works for containers. Hey, are you wrestling with that? Let me give you, I'll give you IBM Cloud Private, which is a distribution that allows you to do, literally, in a matter of 40 minutes, be up and running, and then focus on getting a value. That's my storage message. You're saying it's not storage, but that's exactly how the clients are responding, and they need a partner to help them do that. It's not only having the vision of where they are and where they need to get to, data and cloud vision, but then they need someone to actually help them get there. Some things that don't seem like hard storage things really make a difference if our clients get the value out of the data. >> Infrastructure, as Tom Rosamilia says, "Infrastructure matters." It's interesting to see IBM's financials, the Z, Power and Storage driving a lot of the momentum. >> It's hitting the market where it needs, as far as the capabilities. You think about security and what we're doing the mainframe, it's amazing the capability you can accomplish there. Same thing on Power, the ability to do what we're doing on AI. You can do things on our infrastructure you just simply can't do. And then, analytic speed actually really does matter. Bandwidth does matter. And of course, storage fits in all that. >> Well, for 30 years, I've been hearing how hardware's dead, infrastructure's dead, and it just keeps bumping along. Sometimes you see a little spike. You have to have infrastructure for AI and this cognitive world, as you guys call it. So, Ed, great talking to you. Thanks so much for coming to TheCUBE. I wish you continued success. >> Thank you very much. >> Appreciate the time. >> Keep it right there, buddy. We'll be back with our next guest right after this short break. You're watching TheCUBE live from IBM Think 2018. We'll be right back. (fast electronic music)

from the noise it's the cube covering vmworld 2015 brought to you by vmware and it's ecosystem sponsors and now your host dave vellante we're back at Moscone everybody this is the cube SiliconANGLE Wikibon it's continuous production of vmworld 2015 we're riding the data wave Eric Harris dog is here he's a vice president marketing IBM storage in the Hawaiian shirt great to see you again my friend well Dave thank you very much as I keep telling people it's not about data lakes people have oceans a day to these days yes I oceans a day to dos today that oceans a data now so what's the story get the Hawaiian shirt on what do you got going on across the straw our big thing really is oceans of data so between all the solutions we have from a storage solution set a platform computing environment our joint deal that we do with Cisco with what we call the versus stack and our spectrum family of software now our customers are saying everything's going digital and it doesn't matter whether you're a global enterprise a midsize company or even an SMB with everything going digital it isn't about lakes of data it's about oceans of data so let's start maybe at the versus stack as a hyper converge is sort of taken the world by storm you're seeing vmware's obviously talking about it you got a bunch of startups talking about it when you guys made the move to to sell the the server business the x86 server business to lenovo BNT the acquisition of B&C went with it opened up whole new opportunities for IBM from a partnership standpoint and one of the first guys you went to a cisco so talk about that well we've had a great partnership with Cisco we deliver the versus tak through our mutual channel partners so globally so we have channel partners in all of the gos that are selling the versus stack solution we started originally with our v7000 product which allows us to not only provide a strong mid to your offering but because of our integration of our spectrum virtualized actually will virtualize heterogeneous torso over 300 arrays from our competitors can be virtualized giving any data center or cloud deployment single way to replicate single way to snapshot and of course a single way actually my great dinner which is a huge issue obviously in big deployment well and the same volume controller was really the first platform to do that that was the right gold standard and the whole the original you know tier 1 tier two storage sort of was defined by the sand volume controller kept really now you've built those capabilities into an end to the array so we started with our v7000 storwize was the first with a versus tack we announced last week two new versions one hour v nine thousand which incorporates that same value of the sand volume controller but an all-flash array okay that product is been incredibly successful for us we have thousands of customers we have deployed more petabytes than anyone in the industry and more units than anyone in the issue for you know some of those analysts that track the number side of the business we've done more than any pricing it right is what you're telling me we are definitely pricing it right we do north petabytes more minutes and more units than anybody by far but not the most revenue second most revenue so you well we're a fair price for a fair job as opposed to a high price for okay job that's what we believe in delivering more value for the money so we've got that so that opens up heavy virtualized environments heavy cloud environments big data analytics all those applications were all flash high-end Oracle deployments SP Hana configs all those sort of things are ideal same time you brought in the v5000 at the lower entry place of the mid-tier and it's with the UCS mini from Cisco so it gives you a lower entry price and allows a couple things one you can go in department until deployments a big enterprise to you can go into remote office deployments and also of large enterprise but three it allows you to take the value of a converged infrastructure down into smaller customers because it's a lower entry price point it's got all the value of the virtualization engine we have in all of our V family of products that v5 to be seven in the v9 all flash but it's at a much lower price point with a lower cost UCS mini and a lower cost switch infrastructure from from Cisco so it's a great solution for those big offices but again remote and department level and ideal though to move converged infrastructure down into smaller companies so so cisco has been incredibly successful with that space when Cisco first came out I a misunderstood I said how they going to fall flat in their face and servers and I was totally wrong about that because I didn't understand that they were trying to change the game what's it like partnering with those guys and how is it added value to your business well it's been very strong for us one they've got an excellent channel two they have a great direct sales model as does IBM three we've been partnering them for ages and ages and ages in fact in the 90s we sold a bunch of our networking technology to Cisco and is now deployed by Cisco so some of the networking technology at Cisco puts out there to the to their end users to their channel partners into you know their big telcos that actually came from IBM when we sold our networking division to Cisco in the mid-90s so strong partnership ever since then so let's talk more about the portfolio particularly i'm sickly interested in the whole TSM vs TSM came over to the storage group which thrilled me i think there was a great move by IBM to do that whoever made that decision smart move how has that affected having that storage software capability embedded into the storage business how has that affected your ability to go to market well it's been great so that's our spectrum family there are six elements to that spectrum protect which used to be TSM spectrum control which used to be the tsc product spectrum virtualized which is a software version of the sand volume controller so you can get as a software-only solution spectrum archive spectrum accelerate which is a scale-out block solution think of it as a software version of our XIV platform but software only and spectrum scale which gives incredible scale-out nas capability in fact spectrum scale has a number of customers in the enterprise side not in the HPC market but in global enterprises over 100 petabytes and we even have one customer that has one exabyte in production under spectrum scale exabyte one exabyte in production and not an hpc customer or not not one of the big universities not one of the think tanks but a commercial large global fortune 500 company we an exabyte with spectrum scale so so talk a little bit more about the strategy I think people all times misunderstand IBM's approach they say okay IBM getting out of the hardware business which they think Inferno must get another storage business you're not get out of the storage business obviously they hired hogging store oh so talk more about the strategy and how you're you know pursuing that yeah well I'd say a couple things so first of all our commitment to storage is very strong we're investing a billion in all flash technology and a billion in spectrum software in addition to our normal engineering development for our store wise family and our other members of our products that we've already had so a billion extra in flash and a billion extra in our software family in addition to that we've got a method of consumption that we're looking at so some end users want a full storage solution our ds8000 our flash systems are storwize some customers want to move to the software-defined storage and in several cases such as XIV software only spectrum virtualize okay we've got a number of different ways that you can consume the product and then lastly in several of the products such as spectrum scale spectrum accelerate and a lite version of spectrum control that we call spectrum control storage insights available through a cloud consumption model so if the customer wants a comprehensive solution we have it if the customer wants software-defined storage we have it if the customer wants integrated infrastructure with our vs stack we have it and if the customer wants a cloud storage model of consumption we have that too and quite honestly we think in bigger accounts they may have multiple consumption models for example core data center might go for a full storage solution but guess what the cloud solutions would be ideal for a remote or branch office so talk to me more about the cloud you're talking about the SoftLayer we here we go to the IBM shows you a soft layer of bluemix you know so a lot of money or the devops crowd what's going on bactrim accelerate spectrum scale and spectrum control are all available as a soft layer offering they are not targeting test and Dev they are not targeting you know just the bluemix out these are targeting core data center they could be testing dev or they could be remote office branch office opportunities for large enterprises that want to spend a full storage solution and spend that money on the core data center but for the remote office have spectrum scale delivered over softlayer an ideal solution and various consumption models which ever fits their need so David flora just wrote a piece on Wikibon calm of talking about latency and capacity storage at a very high level sort of segmenting the market those ways it's sort of sizing it up and projecting some of the trends and obviously latency storage he's thinking you know more flash oriented capacity storage more more disk spinning disk and tape is that a reasonable way to look at the business and how does it apply to your portfolio so we do think that's a reasonable way to look at it you have if you will a performance segment and a capacity segment depending the number of things that people need to really look at when they buy storage first of all I'm a storage guy for 30 years no one cares about storage it's all about the data it's all about the data that your storage optimizes it's about the workload the activation the use case for me I do too but unfortunately almost every time you know see how it's going to say almost every CIO is a software guy so it's how does the storage optimize my software environment and that's what's critical to them so we see certain applications that are very performance exit certain SLA s they need to meet we have some that are medium sensitive and we have some that of course are very capacity oriented which is our spectrum scale one exabyte with a single customer now that's capacity that's an ocean of data but we also have solutions we're able to put it together so for example in a lot of data analytics workloads that would run in spectrum scale we actually sell a lot of our all flash flash systems use the flash to ingest the data use flash to manage the metadata use the flash to run the search engine in a big giant config such as that and when you're running an analytics workload you run the analytics workload on that flash yet you're really doing a very large deployment hundreds of petabytes to an exabyte with our spectrum scale so we see if you will a continuum and the key thing as IBM offers all of the various piece parts to any level of the continuum and in that example I just gave combining high performance and deep high capacity software in a single solution to meet a business I mean IBM is an unbelievable company think about Watson cloud bluemix the analytics business deep deep heavy rd z mainframe so you got all the pieces how is the storage business how can it better leverage those other pieces and and is it or is it is it relevant or is it just just take the storage hill so we see our storage products as integrating with our other so for example we do a lot of deals where they buy a mainframe in our ds8000 sure we offer integrated infrastructure not only with cisco but actually with the power family as well it's called pure power and that has an integrated v7000 with a power server and we're looking at deepening that relationship as well a lot of analytics were lot alex workloads going scale so whether they buy the big insights whether they use in Watson we've got several customers use Watson but by flash systems because it's obviously very compute intensive so they use flash systems to do that so you know we fit in at the same time we have plenty of customers that don't buy anything else from IBM and just buy storage so we are appealing to a very broad audience those that are traditional IBM shops that by a lot of different products from IBM and those that go in fact one of our public references general mills they had not bought anything from any division of IBM for 50 years and one of our channel partners in Minnesota we are able to get in there with our XIV product and now not only do they buy XIV and some spectrum protect for backup but they've actually started to buy some other technology from IBM and for 50 years they bought nothing from IBM from any division so in that case storage led the way so again in certain accounts we're in there with the ds8000 and Z or were in there with Watson and flash systems and other accounts were pioneering and in some cases we're the only product they buy they don't buy from IBM we will meet whichever need they have now in periods in the last I mean it's been Evan flow in the storage business for IBM periods the last decade IBM deep rd but the products couldn't seem to go to market now you shared with me under under NDA so we can't talk about it in detail but shared with me the roadmap and and the product roadmap is accelerating from release maybe it's just my impression from what I'm used to should we expect to see a much more you know steady cadence of product delivery from IBM going forward absolutely so keeping in our spirit of oceans we ride the wave we don't fight the way and in today's era in any era of high-tech not just in store it doesn't matter whether storage whether its servers whether it's web to know whatever it is it's all about innovation and doing it quickly so we're going to ride that wave of innovation we're going to have a regular cadence of releases we released four different members of spectrum plus two verses stocks and next quarter you'll see five really five major product releases in one quarter and then in q1 you're going to see another three so we're making sure that as this trajectory of innovation hits all of high tech in all segments that IBM storage is not going to be left behind and we're going to continue to innovate on an accelerated pace that pace is is really important you know IBM again spends a lot of money on R&D it's key to get that product into the pipeline let's talk about vmware and vmworld obviously we're here at vmworld so on vmware very important constituency a lot of customers you got a you got to talk to vmware if you want to be in the data center today what is your strategy around vmware specifically but also generally as it relates to multi cloud environments whether it's your own cloud or other clouds OpenStack or what if you could talk about those so let's take virtualization first so we support a number of different hypervisors we support VMware extensively we support hyper-v we support kvm we support ovm we support open initiatives like OpenStack cinder we support Hadoop we have Hadoop connectors in many of our products so whether it's a cloud deployment or a virtual deployment we want to make sure we support everybody for example spectrum protect was announced last week with support for softlayer as a target device basically a tier well guess what in 1h we're going to support amazon and as you're not just softlayer so again we want to make sure we support everything with VMware specifically for the first time ever VMware has invited IBM storage on stave at three questions iBM has done things in the server world in the past but we have never ever ever been invited by VMware to their technical sessions in fact when is it five o'clock today it's called Project capstone which they publicly announced last week and it's about deploying Oracle environments in VMware virtualization it's a partnership with VMware with IBM flash systems all flash and with HP superdome servers and that's going to be on stage at five o'clock today here at moscone center awesome so we're starting to see a tighter relationship with with VMware building out the portfolio what do you say to the customer says yeah I hear you but vmware's doing all this sort of interesting stuff around things like v san what do you what do you tell a customer you know what about that so we see the San as it you know in this era of behemoths everyone is your partner everyone is your competitor but we work with Intel all the time other divisions of IBM think Intel's a major competitor some of our server division work with some of our storage competitors so we think you know we will work with everyone and while we work with VMware a number of angles so if he sounds a little bit of a competitor that's fine and we see an open space for all of the solutions in the market today we got to leave it there the last question so take us through sort of your objectives for IBM storage over the you know near and midterm what do you what should we be well so our big thing is to make sure we keep the cadence up there's so much development going on whether that be in software defined and integrated infrastructure in all flash in all the areas that we are going to make sure that we continue to develop in every area we've got the billion dollars in all flash in the billion dollars in software to find we are going to spend it and we're going to bring those products to market that fit the need so that the oceans of data that everyone is dealing with can be handled appropriately cost-effectively and quite honestly that oceans of data it's about the business value of the data not the storage underneath so we're going to make sure that for all those oceans a data we will allow them to drive real business value and make sure that those data oceans are protected meet their SLA s and are always available to their end user base I love it yet the Steve Mills billion-dollar playbook obviously worked in Linux it was well over a billion in analytics business IBM's a leader they're applying it to flash great acquisition of Texas memory systems you become a leader they're now going after the software to find Eric Herzog thanks very much for coming to the cubes great very much we love to have all right everybody will be back with our next guest right after this World we're live from vmworld and Moscone keep right there you