Analysis of Broadcom VMware Acquisiton with Futurum Group’s Dan Newman
Transcript
[Music] all right we're on time Dan the you're listening to and watching the CTO advisor Studio from the Venetian in Las Vegas I have with me good friend of the industry and one of the better Financial analysts that I've I'm going to call you Financial elves because I always see you on CNBC uh uh you're quoted in the Wall Street Journal the all the time uh we have this thing you know you're the CEO of future and Brew principal analyst we have this thing running between us we're at VMware Explorer about this merger between VMware and broncosystem and we're going to finally have it out yeah we're going to do this man what's up can I just say something to the audience really quick sure okay this is not Financial advice I'm not technically a financial analyst let me explain what I am as an industry analyst okay but when when I founded the future Home Group what I did find was there was one thing that inspired the tech vendors more than anything else you know what that is their stock prices stock price so when you're an industry analyst you kind of talk about the product the service the go to market the strategy and all that stuff's good but the question the executives asked when they invest in Partnerships with analysts or influencers or thought leaders or they do paid media is I'll move my stock price so to be very clear understanding the connection on the 6'5 Patrick and I called the ground truth the performance the quarterly performance of a stock is the ground truth of you know is that you know uh vsphere upgrade Landing in the marketplace are people you know getting behind NSX you know I'm just using examples from VMware here of course but whatever it is so um all things considered I think knowing those the the market and the price and the stock and the products and the services really shows a holistic understanding of the business and I really appreciate that uh clarification because we're both industry analysts and I look at it primarily from the customer lens and this is where both of us let's talk about where we agree with the broadcom sharing position neither one of us are Financial analysts but I absolutely believe this is a brilliant move by broadcom from a just extracting value from an asset like VMware I think hot time will do a fantastic job of meeting his commitment to his ambassadors and returning value the question becomes were we I think start to differ is is this a net good for customers is that a question that's a that's a question is this is not good for customers so I'm scratching so I'm scratching my head broadcom I look at all the the hardware Acquisitions that they've made and they've extracted value and moved the needle on the harbor side so from a track record from a software from a hardware side uh from a chip and semiconductor perspective I've seen it happen on the networking side they've the their network products are some of the best in the industry and they continue to lead the way on just the network side for instance the software side well look let me let me chime in there because I think there is some underestimating of how successful uh the semantic acquisition has been or the ca acquisition has been Hawk tan has shown his cars in fact he's one of the more transparent CEOs and I've had the chance to spend some time with him that I've met does that mean he's not shrewd does that mean he hasn't you know karate chopped the companies and and he has you know if it was Elon Musk it would be a bigger story but because he's an Enterprise and he's in Enterprise Tech it barely makes the news because there's barely any Enterprise Tech press left but here's the thing a company's responsibility you know I did I went when I did my MBA I didn't I don't remember learning much but I remember on the first day of one of my classes the professor said the number one job of a manager is to return value to shareholders vmware's growth has been pretty anemic comparatively with most high-growth software companies you know you're talking at best 10 uh the company has made and we heard submit talking he showed some pretty encouraging numbers with larger growth to SAS but overall the business in terms of the outputs which is the equity means there's limited dollars to return to shareholders it means that the you know there's limited dollars to invest in product development you know where I think uh you know multi-cloud you know we talk cross-cloud you corrected me you can debate that at another time but being the next wave we've seen a pretty substantial uh growth uh Vector in Red Hats Direction at the expense of VMware sitting on that opportunity they tandu did not land right and so I think Hawk is looking at this thing going yeah it's a good company it's got loyal you know the the the you see it here you're at the event you see how loyal the people are that are here but are they loyal because this is the best or you know go back a decade or two to the early era of Cisco certifications when people were really knowledgeable about Cisco and they had their ccies and their ccnas and they would have installed anything Cisco because they were like the Cisco Warriors and so are the VMware folks the people that refused to fully Embrace Cloud are they the people that missed the you know again debate red hat and be an open source at this moment but the open source move to to the kubernetes and this is where I think you're great by the way but what I can tell you immediately is at 37 000 employees uh Hawkeye's looking at that and saying too many people you say too much expense uh he's already pretty much more or less publicly said or come out and said you know that there's some billions of additional profit opportunity here and how can that then be reinvested in the products he believes this is what he does I realize I'm talking a while he believes in picking the he'll pick pieces of the portfolio and we don't know for sure what he'll do I think he's going to change the portfolio so here's what I'm excited about and this is part I'm excited about their stuff I I I'm not a VMware employee I were six years ago and uh and I were that's that's that's proper English for you English Majors I wasn't being my employee and I don't invest in VMware uh uh they're not even a customer so I talk pretty freely about VMware there's businesses VMware has no business being in anymore the EUC business can just go the they haven't innovated in there they obviously have they've under investigated invested in that business it's more or less on maintenance there's a bunch of different areas VMware just shouldn't be playing again I I don't think they should have security products especially compared to Symantec if you look at the two portfolios you're like yeah there's some justification that can go on in there uh 37 000 employees is a lot of employees for a purely software company their cost of acquisition for a customer that cost of sales relatively high for a pure software business they have a challenge developing this tea for telling the customer story for crosscloud the when the customer when I talk to customers the sales folks are still leading with the vsphere message when VMware has a pretty decent cross-fired story that stuff you know free advice give it out to the to the channel and focus on developing that skill set VMware has proved they've earned the they've earned the right to be acquired by broadcom they've come to the point that they've earned the right to be acquired by broadcom because they are sitting in Pole Position they uh I think a great example of that was the conversation with Nvidia and Jensen on stage they have a legit gen AI story I was actually surprised they just repackaged stuff that they've done in the past to present it as generative AI so VMware has a opportunity or broadcom rather has an opportunity execute vmware's Vision better than VMware good executed well he's going to do that because one is going to going to remove the unnecessary costs he's going to do it quickly which a lot of people it's created a lot of stress it's created a lot of anxiety it doesn't help to have if you have 37 000 and you can say you know he's probably looking at this and saying I can do it with under 20.
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