We are Live! Talking NVIDIA, SAP, Intel, Bing, HPE, UK and Broadcom-VMware – The Six Five Webcast

By Patrick Moorhead - March 29, 2023

On this episode of The Six Five Webcast, hosts Patrick Moorhead and Daniel Newman discuss the tech news stories that made headlines this week. The six handpicked topics for this week are:

  2. SAP Datasphere
  3. Intel Org Changes
  4. Bing Image Creator
  5. HPE Acquires OpsRamp
  6. UK Concerned with Broadcom-VMware Deal

For a deeper dive into each topic, please click on the links above. Be sure to subscribe to The Six Five Webcast so you never miss an episode.

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Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we ask that you do not treat us as such.


Daniel Newman: Hey everybody. We’re back with another Six Five Podcast. Hosting today, me, Daniel Newman, joined by my always esteemed co-host, partner in crime, the number one worldwide influential analyst. I’m looking that way ’cause that’s where you’re on my screen. Mr. Patrick Moorhead. Pat, it’s Friday and if I recall, this is your favorite time of the week.

Patrick Moorhead: It is my favorite time of the week. Favorite day of the week. And in fact the previous four hours I was hanging out with horses, watching the family jump. It is beautiful down here in Florida. I don’t know if you call it fog, but it’s a little dark. The sun’s coming up, fog coming off the grass and I like it. But here we are. This is my favorite hour of the week, just to be clear.

Daniel Newman: Well, I want to say thanks to everybody for tuning in. We appreciate you. God, this is episode 161, Pat. And remember, this is our 161st of our weekly format show. I think we’ve got to be getting close to like 1,000 Six Five Podcast episodes if you count all the summit episodes, all of our event on the ground, on the road, in the booth, it has been a big bang of a year for the Six Five and it’s only going to keep getting better because the tech industry keeps feeding us and fueling us. And this year the gift that keeps giving has been generative AI. And we’re going to talk a little bit about that when we talk about NVIDIA GTC and some things going on at Microsoft yet again. But there’s a lot of other things going on. We got a busy week. We’re going to talk NVIDIA, SAP, Intel, Microsoft, HPE, and VMware-Broadcom.

Now, if this is the first time that you have ever joined the Six Five show, I would ask you why. And then I would tell you that the format of the show is six topics, approximately five minutes each. We’re doing mostly analysis, a little bit of news. The news fuels the topics of our weekly show. And I also want to say right ahead of time that this show is for information and entertainment purposes only. So while we will be talking about publicly traded companies, please do not take anything I say as investment advice.

I’ll let Pat make his own disclaimers because he’s the famous one of the group. And so we got to make sure they put that out there for you, Pat. Anyway, I’m really excited for everyone tuning in. Thank you very much. Hit that subscribe button, join us. I’ll say that again at the end. But for now, for this show, Pat, big week. NVIDIA had its GTC event. It was great that they got everybody in person and oh wait, they didn’t. Is it still… Are we still… Is it pandemic? Is that why we couldn’t get the people together? What’s going on? Now, I do understand Jensen said AI 6,421 times and got a 0.01% stock bump every time he said it for a 6.4% gain throughout the week. No, I’m just kidding, Pat, let’s jump in. GTC 2023.

Patrick Moorhead: Gosh, where do we start? So there were 36 press releases and blogs and GTC happened over four days. I’m going to hit three topics and then put some macro ideas on there. I had a good talk with CNBC street signs on Tuesday night, but I’m going to bring it all to you. So some of the highlights that they brought out, first of all was NVIDIA DGX Cloud. And this is essentially customers getting access to DGX capability through Azure, Google Cloud, and Oracle Cloud. NVIDIA actually recognizes the revenue and it runs NVIDIA’s enterprise software stack. This is a huge one for a lot of reasons at primarily because this is not, let’s say Azure on DGX Cloud. This is DGX Cloud on Azure and I think that’s a big deal because it’s being sold by NVIDIAns.

Apparently NVIDIA, CEO Jensen Wong did say, “Hey, of course the Cloud Salesforce can – Cloud meaning Azure, GCP and OCI – can sell this, but we’re going to be recognizing the full revenue of it.” Call that account control, call that whatever you want. This is a step in vertical integration of the company. The other element of vertical integration is what is called NVIDIA AI foundations. And this is a PaaS play out there. Again, the first one is an IAS play. The second one is a PaaS play, which is offering their services and this one for LLMs, visual language models, and models for drug discovery. Each of these have fancy names. Look them up in the show notes if you want to know-

Daniel Newman: One of them called Picasso.

Patrick Moorhead: I think it is. And NeMo was another one. I think that’s the one for drug discovery. But essentially these two together signified to me a vertical integration play. And on a call with industry analysts, Jensen, he really laid it out there. He talked about what the company did in gaming, which was they focused on the overall total experience and then that experience was distributed through a third party.

This is what he is bringing to the cloud. His timing is perfect. Quite frankly at scale, there is not another training solution out there. That’s just a fact. Not saying that the companies like Intel and Groq and Tenstorrent and folks like that don’t have a chance, but that’s what’s installed right now. And on the inference side there’s a lot more competition out there as well. But for the sake of enterprise and at scale, it’s still an NVIDIA game. The only caveat I’ll say is that statistically most inference is done on a CPU, which benefits Intel.

So with all that caveating said, I think this is a big move for them. You can only make a move like this when you are at the top of your game. And right now NVIDIA, whether it’s hardware but more specifically CUDA software and the de facto standard it has become, this is where you can pull this and I think sometimes you create your own luck. Sometimes timing is there and we can all debate whether NVIDIA brought generative AIs to the table or that was recent – doesn’t matter. They’re at an optimal time to monetarily, financially take advantage of this. Not just slinging hardware, but now bringing IaaS and past services to the table sold by their direct Salesforce.

Daniel Newman: You know what? I think there are a number of instances in this particular space where there’s going to be credit attributed, meaning who founded generative AI models. NVIDIA has certainly been pioneering, it’s been a bit of a one track mind in its existence, whether that’s using GPUs for gaming and generating ray tracing capabilities and next generation AI to make gaming experiences better or data center AI. But the theme has not been wrong. And Pat, there’s nothing I like more on the Six Five than doing a victory lap. And so I just want to say that in August of 2022 and NVIDIA stock had fallen to 130. By the way, it’s twice that now. I went on CNBC on Squawk Box and I said, NVIDIA’s going to have a huge year because of AI. AI is going to be massive. This was before GPT was being discussed publicly.

This was before generative was even in the minds of most people. But the trend line was obvious. And the reason I point this out is there are over rotation a little bit. The fact that there it’s a joke at times. The market cap of the company and the multiple that it gets versus say an Intel, you’re talking about 10 versus hundreds. But it is the perfect identification of when a company is attached to the right trend lines, how its value can be perceived. This GTC was all about AI. It was all about making sure whether you can consume it in the enterprise, in the cloud, it’s attaching to the hyperscaler, it’s attaching to data center. It’s making sure that the entire world knows that it is a combination of capabilities that NVIDIA has been steadfast to build over the last several years.

Hardware, software, frameworks and ecosystem is going to be paramount to the development of a vibrant AI capability. And all this generative stuff we hear on largely does run on NVIDIA. It’s like 90%. It’s a huge percentage of what we’re seeing right now. Having said that, I do think there’s some vulnerabilities that are going to be exposed over the next few years. I think first and foremost is cost is going to become a heavy sensitivity and NVIDIA is the premium product. Now Pat, you and I have no issue with being the premium product. I think you are the uber premium product, but in all seriousness, I appreciate the companies that want to make the best and charge appropriately for it.

But there is an entire ecosystem of startup companies and competitors in the chip space that are going to be coming after NVIDIA. And if they can build software like the Groq conversation we had last week where you can compile and move a large language model onto a different piece of hardware without a lot of resistance, you will start to see companies, even the Microsofts and Googles going, “How much can we spend to actually deliver all of this generative AI to our customers?”

So that’s going to be a really interesting inflection point. The second thing is of course I think this the entire GPU and its impact on power consumption and water is going to be really interesting, Pat. You and I have been following, had some interesting recent conversations. One with a company that’s actually making it rain. There is a water issue and data centers are a massive hog of power and GPUs tend to be not the most efficient way to deliver AI. So Asics are going to become really interesting over the next few years. So it’s going to be kind of interesting to watch ’cause you’re not hearing much from NVIDIA about where they intend to participate in any application specific. And then maybe the final thing, Pat, and this is a little bit more of a macro theme than I’m talking about, but that GTC didn’t cover and that’s the skilling issue.

Have you ever seen a technology in your lifetime that’s been as rapidly onset and potentially disruptive to jobs as the last couple of months of generative AI? Now again, this is not necessarily specific to NVIDIA, but to all the companies including NVIDIA that are building the technology that are going to rapidly onset and displace certain categories of workers – what is the responsibility of the industry to help that particular class of worker to find their next thing? And this is something I’ve talked to executives at Microsoft about, at Google about, AWS about, and NVIDIA I think has a role to play because frankly NVIDIA’s great innovation has been a catalyst of the speed of all these next generation AI models that we are experiencing.

So Pat, I’m going to leave it there. Another big week. NVIDIA, we got a huge bump, huge run up in the market and that’s because there’s nothing hotter Pat, than AI right now. And what did I call it? The gift that keeps giving our show is going to be the week after week after week of discussions on generative AI. And guess what I don’t expect is unlike the metaverse, which by the way NVIDIA is also enabling the actual usable digital twin metaverse, I expect this trend is going to have a staying power that is different than crypto and metaverse in some of those of the past.

Patrick Moorhead: Yeah, I’d like to talk more in the future about reskilling. Back in the eighties and nineties with some of our international trading policy, we shipped a lot of manufacturing jobs overseas to get prime terms. And neither those companies, the Ford Motor Companies, the GMs of the world, the steel companies, did any of the reskilling and the government didn’t come in and help either. While I rarely trust governments to do the helping hand efficiently, this could have been an area that could have done that. So if we believe that AI will replace jobs as opposed to – let’s say market expansion – people will need to find other things to do. That’s just kind of a true statement. So let’s keep that conversation going Daniel.

Daniel Newman: Yeah. Absolutely Pat, and I’m glad that you mentioned that because one of the things for me and for you and I and just being in this space is that we do have a certain amount of responsibility as we are the arbiters of good and bad in tech is thinking about the unintended consequences, because there’s a lot of great intended consequences. Look, I couldn’t be more excited about some of the things generative is going to enable me to do in my day in and day at work and enable for our businesses to do. But I also think about what about all those agencies that we hire or those contractors that we use to do things that we could potentially not require anymore. What happens to them? If I wrote a book, by the way, it’s been translated to Chinese now – this is Human Machine – about this.

Patrick Moorhead: That was the best pat on the back I have seen. That’s so good. I love victory laps, don’t get me wrong. But you have the physical, tangible – it’s like these ribbons behind me if I actually won anything behind me.

Daniel Newman: And now if I can only figure out how to make my camera more crisp. The intended and unintended consequences though are something that I think we need to talk about.

So let’s move on though ’cause we tend to spend a lot of time on that one. And this next topic will not be nearly as in depth, but it is interesting. We talk a lot, because a lot of this stuff we talk about is the cool and excited and hyped, but underneath all these architectures, Pat, has got to be some practical usable technologies. And SAP announced what it calls Datasphere. And Datasphere is basically built on its business technology platform. And what it’s really trying to do is create an output for companies more efficiently and effectively using their data. And again, liken this to the generative AI conversation, Pat, you’ve heard me say this many times on this show over the last few weeks, some of the most interesting opportunities to be successful with generative AI is going to be based upon companies being able to expose and utilize the vast proprietary data that lives inside of their business.

Much of this proprietary data, much of this unique usable dataset that better understands customers, workflows, business performance, that’s where it lives. It lives in your systems of record. Systems of record like Oracle, like SAP. So this becomes a big challenge for companies like SAP to say, “How do we develop tools that enable our customers and our users to unlock the power of all the data?” And that’s really what Datasphere is. It’s the SAP data warehouse cloud, it’s a data lake warehouse, river stream, mountain view, valley brook. It is going to enable discovery, modeling, distribution of critical data. And it’s going to do so in a way that both lives inside of SAP, inside of Datasphere, but it’s also going to be ecosystem friendly. And so it’s all about A) being able to use your existing data, B) being able to use data models and curated data sets that come from SAP in their Datasphere marketplace.

And then of course it’s about simplification and ecosystems. So building integrations with Databricks, with Confluent, with DataRobot. And these are going to be really important things going forward because Pat, another thing that’s critical for success is going to be connectivity. You’ve got your structured data, your unstructured data, you got your real-time stream data, you’ve got your legacy and then storage data and having all that data, all of it to be accessible, all of it to be utilized and then being able to be commonly shared and collaborated upon, which is part of the Datasphere solution is really important. In the end, what did we get, Pat? We get a data fabric just like my vests. By the way, I just want to say I was the only guy at that party last week that didn’t have a suit coat on.

Patrick Moorhead: Maybe I think I… Did you see Axe there by chance? Was he invited?

Daniel Newman: Axe is my hero, except for all the bad things he does. But anyway, so seeing a fabric created that basically allows companies to enrich all the data across all their ecosystems and then integrated. And then finally, I guess my last note on Datasphere is the tool of the warehouse, the fabric is all really promising. And of course SAP has hundreds of thousands of customers, so this is not going to be something that will not be received and be importantly and critically looked at. But the advisory and large SIs should be beneficiaries of this. And the company is planning to roll this out with IBM, with Capgemini, with Deloitte, with Ernst and Young, and of course Accenture being the biggest of the bunch.

So it’s early days for this tool, Pat, but I think this is the kind of technology that’s saying how do we take all our data, make it usable, representable, collaborative and accessible, and then connect it to the other core data applications that we’re using and then make it SI-friendly because most of this stuff gets done for large enterprises by SIs. And so this is what SAP’s doing. This is what SAP I think has historically always attempted to do, but in this particular moment when data’s going to become even more critical to apps and AI, it’s an important launch from the company.

Patrick Moorhead: Good breakdown, Daniel – a few adders here. This is very consistent with I think both of our talk tracks related to data about this notion of a data pipeline, all the way from bringing the data in, streaming or batch, any way you want. Let’s clean it up along the entire pipeline, know who gets access to it, so the governance, the privacy, the compliance, and then teeing it up either in a data lake, a data warehouse, a structured database, a non-structured database, and then setting it up ultimately if you want to augment it with AI or analytics and then deploying those models to be run. And by the way, every step of that way, a company called Cloudera that you and I have been covering, they actually do every single thing that Datasphere talks about. And the difference is that SAP is bringing out with looks like Cloudera’s biggest competitors, Databricks, Collibra, Confluent and DataRobot.

So it’s super interesting. What I really like about it is the value that it does bring to the table, its inflows and outflows. So if you’re a customer and you have things going on in Databricks, Collibra, Confluent, DataRobot, you can not only pull in data from those services and use it inside of an SAP environment, but SAP can also elegantly export that information out to these environments as well. It kind of reminds me of these data sharing alliances that SAP and Microsoft have done in the past, but this is with some of these smaller niche players.

And exclamation point Daniel, on what you said about the different types of data, the advantage that SAP has is the operation data is there. So instead of ETL-ing it, do it there. So it’s very similar to a mainframe story as it relates to let’s say financial transactions. Why ETL it out when you can do it right there. We all know you add extra cost by moving data. Anytime you have to move data somewhere, it costs you money and it also opens you up to security risks every time you move data as well. So interesting announcement from these folks. Also, it almost looks like this, I don’t know if it replaces SAP Warehouse Cloud, but it certainly certainly looks like it.

Daniel Newman: Yeah. Good adders. Let’s keep this one moving Pat. We’ve got some more org changes at Intel and you and I have the skinny, so what’s going on?

Patrick Moorhead: Yeah, so Intel is in the midst of a five-year transformation led by CEO Pat Gelsinger and transformation is short for a lot of things are going to change, big time. Intel took a two and a half year lead in process and turned that into being behind for two years and the rippling effect that that has on every design out there. When you start a design and every chip you have to target a certain process and what happens if you can’t meet that process is you have to back port and the hardest part about an SOC, if you want to keep the same size of the SOC, you have to shrink the core IP. So let’s say, instead of having 30 cores, you can only have 20 cores to stay in the same size. So that rippling effect has hit Intel and given companies like AMD and potentially Qualcomm, the capability to come in and it has made it harder for the company to directly compete with NVIDIA on GPU and AI.

Okay, I know that was a long intro but it’s important to know where we’re going here. I believe that the company does have the right strategy and part of that strategy is called IDM 2.0. IDM is Integrated Device Manufacturer and that means you have your own fab and you do designs. But IDM 2.0 with the Intel strategy is also was opening up a foundry and what that is being able to manufacture chips for the likes of AWS, Qualcomm and even NVIDIA. Heck, NVIDIA is actually signed up to Intel Foundry Services in the RAMP-C program for the Defense Department. So, the news is that Intel put Stu Pann to lead that. I’ve known Stu Pann since 1995 when he was my sales guy for Compact Computer. And yes, I’ve aged myself and no, that was not my first job. So you can get an idea of how old Pat really is.

I know, I’ve followed Stu’s career at Intel, where he was essentially the guy who was in charge of all pricing allocation and making sure that the company met the quarter, he was in that job for 15 years during the glory days of Intel. He then went and ran procurement for HP for a while. So he’s not only done the chip side but he is done the customer side and now Pat has put in charge of the entire operation. It signals to me that – say it’s a growth statement. Stu Pann is not the guy that’s going to figure out the next node himself, but Intel has tens of billions if not hundreds of billions of dollars in investment to help figure it out. So it’s going to be important that Stu has the right team around him do that. But Stu knows how to ring that bell and I am expecting him to do just that.

Now, customers that have already signed up, Media Tech has already signed up. There’s this stealth cloud customer who they can’t give the name. I think it’s probably Azure. AWS has already signed up for packaging and Qualcomm has been discussed and I think if Intel can hit the 1.8 nanometer or 18 Angstrom, Qualcomm will be a customer too. So good luck Stu with that.

Second announcement. Raj Koduri. I worked with Raja when I was at AMD. He was in charge of graphics architecture, then he ran the graphics business at EMD and then he went to Intel to essentially start the discrete graphics business. He cranked out a ton of parts with his team on the consumer side, on the workstation side and also on the data center side. Did a lot of work, but it was time for Raja to try something new and he’s going to be CEO – I actually talked to Raja this week about what he’s doing. I’m going to leave it up to him to provide the details because quite frankly, I don’t know what’s public and what is not. But good luck to Raj on everything and hey, if you need any help with that, there’s two analysts here who are open to help.

Daniel Newman: And there you have it. You covered a lot of ground there Pat. I think another question that comes out of this with Stu is what’s going on with Tower. I think that’ll be an interesting thing to keep an eye on. I think that acquisition still happens and I think it’s going to be important for the future of Intel. I do agree with you. I think the IDM strategy remains correct. I think there’s some indirect reasons it’s very important and direct reasons. Keeping a fully integrated manufacturing operation here in the US with all the things going on with CHIPS Act is going to be something I think Intel is going to be able to parlay long term. I do not think we’ve heard the last about CHIPS Act and I do not think that the importance of manufacturing more leading edge note here in the US and within what I would say are ally countries is going to be important.

And Intel has largely been the most willing to raise its hand to take on that responsibility. So this makes for a big role. You mentioned a lot about who the players are, which companies could potentially be using IFS, so I won’t dig too much deeper into that one, but I think kind of making note that there is a massive business opportunity for Intel to play the ally to all of its competitors. All the companies that have been essentially accused of taking its market share potentially or could end up coming back to Intel to actually build the chips that they’re going to need to continue to grow. And I’ve always really liked this strategy and why? One is because I think TSMC has some vulnerabilities and of course with everything going on in Taiwan, those vulnerabilities continue to grow even larger despite its pretty successful capabilities of executing on its roadmap.

The other side of that though is this gives Intel a chance to make money on all sides of the chip manufacturing process. They can make it for their own designs and they can manufacture, which is important as I mentioned, but if they don’t win the design or they aren’t winning on the actual leading edge, if they can show and prove that this IFS business can be successful, that it can deliver on that roadmap and be a facilitator of manufacturing for those other companies, Intel can win either time in when it’s their own chips or when it’s someone else’s chips, Intel can still be monetizing and making money and of course being a part of a very significant long-term political agenda here in the United States. So I don’t know Stu as well as you do Pat, so I thought you covered that pretty well, but I did want to add a little bit of color there-

Patrick Moorhead: It was fun, I actually had a very adversarial relationship with him when he was at Intel. I turned my product line, I was a product manager, a group product manager from a hundred percent Intel to 85% AMD.

Daniel Newman: That’s one way to make friends in this industry.

Patrick Moorhead: Oh no, no, no, I know. No, we laugh about it now, but that that’s kind of very respectful relationship both ways.

Daniel Newman: All right, so in a little lighter and more fun, let’s talk about Bing Image Creator and I’m going to wrap in some things. So we’ve heard a ton about all this generative AI. We’ve heard about obviously Search, but that’s just one part of where generative AI is super powerful. You’ve probably heard about Dolly, probably heard about some of these different tool sets that can be used for everything from video creation to using Copilot for creating PowerPoints and more graphical. But we’re going to continue to see the growth of graphical and image creation. Pat at MWC, you and I played with Stable Diffusion, which was running on an Edge device with no connectivity showing a billion parameter AI model.

And what were we doing? We were doing image creation. Pat was drawing, what were you drawing? Something in a field or a leprechaun in a, I don’t remember. There’s a tweet out there. Pat will link you to it. But anyways, AI powered visual stories, knowledge cards, social tiles, graphics, can you do this kind of work in Bing or in Search or in Edge or in the browser? And the bottom line is yeah, Bing is now offering Image Creator. This week by the way, Adobe launched something called Firefly, which is its generative AI-

Patrick Moorhead: Cannot wait to use that.

Daniel Newman: All the stock and licensed images in the Adobe portfolio. And now Bing’s doing the same thing with create an image as prompt. Like I said, the story itself about Bing in AI and image and prompt is in my opinion more of a macro story of, you’re going to see this in Google soon. Bard is going to do an image creator, the Adobe one – and like I said, I’m only kind of pivoting here because I think there is a bigger story – is I like the ethical approach of Adobe only using its own and licensed data. Now Microsoft talks about its responsible and AI principles and AI standards in the press release to make sure that AI is being developed and deployed. Image creator is going to create a challenge though because I still think there’s a bit of a wild west in terms of where it’s getting its data from and how it’s creating images and how it’s creating attribution for those images.

And if it uses 500 different licensed or a creator images to create a new image, how does attribution get go get given to all of those others that have created and stamped and marked, or not marked, their work. But what I will say Pat, is I’m extremely excited because I don’t know about you, but I’m not a patient person. Meaning when I have to work with designers, nothing ever happens fast enough. And two is really the simplicity is I don’t tend to be all that particular, meaning I just want a high quality social tile or a high quality graphical card that looks professional. I’m really jazzed. I remember Canva, kind of the launch of Canva and something like that where this is 2.3.0 Canva now, where it’s like just tell it what you want. And now I need a food service that works the same way it’s called a restaurant, but I just need something a little bit more efficient. It’s like get the food real time, Jetson like. But yeah Pat – hey Microsoft just literally can’t help itself right now but just continue to launch stuff and it’s a pretty exciting time.

Patrick Moorhead: So I think this shows just how long Microsoft has been working on this and I’ve used the tool myself. By the way, related to the AI principles and responsible AI, this does abide with Microsoft’s responsible AI principles and responsible AI standard just like Chat did. I found it very conservative, but hey, we usually don’t do demos but I thought hey, why not just show what this does and how to do it. So as you can see here, you literally just type in what you want to see up here and then you press create. Over here are the amount of credits you have for boosting what you get. And it says create images more quickly with Boost. If you run out, image generation may take longer. What comes up here, Daniel? Monetization. Anyways, let me show a couple that I did that might some-

Daniel Newman: I want a picture of the host of the Six Five.

Patrick Moorhead: Yeah, so hunter jumper horse in heaven, photorealistic. Okay, how about a horse show? I thought that would be cool. Here is a sprinter in the four by 100 race diving for the finish line side view, digital art, make it more. And Daniel, you might enjoy this one. This is 2022 911 GT2RS jumping the Grand Canyon on a sunny day in Crayon. Thought that was cool. And here’s the photorealistic version of that. Now when it comes to people and animals, it’s kind of iffy, okay? 10 different colored French bulldogs. It kind of got it right here. But here’s where… Well let me show you the ones that I got. I thought it that were just cute. Check this out. Isn’t that cute?

Daniel Newman: Cuter to you than me. I’m not a Frenchy. I don’t-

Patrick Moorhead: Here is where it had some trouble and this is where it takes some hits, French bulldog riding a horse and jumping over a show jump it turned the horse into a dog and then put something on its back riding, which is kind of creepy. Here’s another creepy one. So yeah, I recommend it has some trouble with animals and it has some trouble with people. But anyways, I just thought that all of you-

Daniel Newman: How about the hosts of the Six Five Podcast?

Patrick Moorhead: Doesn’t do names buddy. And that’s where it’s conservative. I wanted Abraham Lincoln in a spacesuit and a spaceship and it won’t let you do any people. So very conservative and quite frankly, not nearly as fun as it could again. But-

Daniel Newman: Were getting there. We’re getting there.

Patrick Moorhead: Yeah. No, no, there we are. So I’ve found my experience so far better on non-human, non-animal images. When you use the tags on the end like photorealistic or digital art didn’t see big difference. And there’s some hidden types that I found like watercolor and crayon. Can’t do fun ones with us, which would be fun. Again, Abraham Lincoln wearing a spacesuit and a spaceship digital art, I got a warning and they threatened to ban me if I do something else. I can totally see integrating this into PowerPoint. Final comments. And these are just some fact-based, this is based on Dolly model that comes out of the open AI. So great stuff. We saw LLMs with Bing Chat and now we have Dolly with Images and-

Daniel Newman: We got to do a side by side with Firefly, check out-

Patrick Moorhead: It would be fun, and also side by side on cost. Again, nothing wrong with price, but I saw some – I mean this is not a Firefly replacement or anything like that. This reminds me right now very “consumery” test tool. And this will be integrated into PowerPoint, which I’m going to fricking eat that thing up.

Daniel Newman: All right. Hey, you ready to talk some more?

Patrick Moorhead: Sure.

Daniel Newman: All right. HPE acquisition rampage. I was chatting up Antonio, I was in New York with them. He didn’t say anything to me about it. And then all of a sudden the next day, there it goes. Another acquisition. This time OpsRamp.

Patrick Moorhead: Yeah, so again, HP is on a tuck-in acquisition and integrate tear to build their own cloud data security networking fabric, I mean, an everything-fabric company and OpsRamp is a leading company that, again, I hate to use the word ITOM because that’s a Gartner term, but it’s monitoring, observability, automating and managing IT infrastructure in the private cloud and in the public cloud. So it’s a hybrid multi-cloud solution. I love this acquisition because it fills in so many different blanks out there about what HPE can do and Daniel, I mean observability, hot. AIOps, hot, hot. Hybrid multi-cloud, hot.

So this hits on three or four things that I’ve fallen in love with this. Customers will have to make distinct choices versus I’ll call them category killer products. For instance, observability. How does this work with Splunk or Dynatrace or something like that or App D from Cisco. The final comment I’ll make is this also falls into my hybrid multi-cloud pitch, which is, it’s all about fabrics. And this is a hybrid multi-cloud fabric where HPE can make money even if their customers are in the public cloud. It’s something that Cisco has done and I give them a lot of credit for. I’m going to now give HPE credit for this as well.

Daniel Newman: Yeah. You hit it pretty straightforward Pat. And I think you make a good point about the category killer versus the sort of expanded. We’ve seen Cisco make big inroads into observability. We’re seeing HPE now. We’ve seen IBM get much deeper into this space and Starna and others. I think the idea of as this data proliferation ecosystem infrastructure, being able to keep an eye on all of your hardware and then of course all your data and being able to make sure your system is running efficiently and effectively. This is big business. And I also see a pretty significant opportunity for a company like HPE to GreenLake this. So everything about HPE is about subscription, moving to everything as a service model. And as far as I’m concerned, Pat, that’s what the play is here. The play is this becomes part of GreenLake, it becomes an overlay, it becomes a subscription that becomes a data-driven, cloud based way to keep an eye on all your hardware, all your software.

And eventually, like I said, it moves towards full stack observability. HP has partnerships with companies like Splunk. I think the “coop-etition” concept doesn’t really go away here, but I think having something in-house that is off the shelf that can be delivered and put into the GreenLake portfolio was the move here. I think HPE is going to continue to make lots of these kinds of tuck-ins and I think IT ops management, observability, whatever you want to call it, is a red-hot area in focus. And HPE has been on this roadmap for a while and seems to continue to be doing this. So good acquisition, nice tuck-in, should be a long-term engine for the company’s growth.

So Pat, let’s take this home and let’s talk a little bit about the UK Competition Authority. Coming back, second level probe, it’s called the UK Competition Markets Authority expressed its concern this week, I think it was two or three days ago, that there could be more expensive servers for UK businesses. So they’re basically saying that this deal could enable Broadcom to cut out competition from supply of certain hardware components. And this could slow innovation. Boy. So this is a pretty fast turn. They gave five days for them to respond to this. And by the way, this is not the only probe. The EU had a probe as well. I think the really interesting question here, Pat, is Broadcom does have some very critical components that are in a lot of servers. Customers have a lot of choice. And what I’m not quite sure about is what is the specific VMware role to play? Meaning Broadcom could always play the card of making some of their – that’s always been their ethos is they buy these component companies that have very limited competition and they become the biggest supplier of certain network or certain components that go into compute and others’ infrastructure devices.

But the VMware thing frustrates me because they keep saying harming rival and choices and is it a nick or what is it going to be? But the fact is there’s so much choice these days for how you would go about virtualization. There’s so many different hardware options, there’s so many different hyperscale cloud options now. You’ve got open source options, you’ve got Red Hat, you’ve got SUSE, you’ve got lots of different ways to do the VMware thing and it’s no longer… Yes, the one thing is there is a huge installed database of VMware customers that maybe would not prefer in this moment to have to pivot to a different architecture. But Pat, I guess what kind of gets me, and maybe I’m going to try to keep this short ’cause we’re a little bit tight on time and we’re at the end of the show, but Pat, of all the things that regulators could be probing, is this the thing, is this really a good use of our regulator’s time when it comes to how consumers are being harmed by things like high fees in app stores that literally are costing them money?

I just can’t see how Broadcom, the specific acquisition of VMware reduces choice in any substantial way where a customer can’t move off or Broadcom as a punitive result, meaning they move off VMware. So if Broadcom uses this to shoot more hardware, to win more server sales, they’re going to lose VMware customers. And so this cycle is brutal to me and I just don’t see it. So maybe I’m oversimplifying it a little bit but because we’re a little short on time, I want to give you the last word Pat. I don’t agree with it, I don’t get it. This deal for all contents purposes should move forward. Dell already owned them and didn’t do anything like this notably with it. I don’t see it being any different here.

Patrick Moorhead: If there’s nothing more than I have picked up from interacting with the senior leadership at Broadcom, is that they’re business people and they’re going to go where the profit dollars are and doing something like limiting Broadcom only nicks to the VMware stack would absolutely be business. I called it business suicide in my article that I wrote about the EU. You make a hundred X more on a VMware license than you do on the profit dollars on a nick, a cheap nick, okay. That would be dumb. VMware also makes more of its money on historical hardware and supporting that than they do the new stuff on their licenses. So that would be dumb. So that’s my reason number one. And the second, and you hit on that, there’s a ton of competition. There is literally an industry of people out there – do the search on it – of replacements for VMware or ways to get off of VMware and go to KVM, go to Zen, or go to HyperV, makes migration pretty darn easy.

So people go other ways. And the third thing is you have to understand why Broadcom is buying VMware. And that’s for the hybrid multi-cloud opportunity. It’s to have the application and potentially the security and networking with NXX fabric for the future of the hybrid multi-cloud. So go where the money is and also just put a decree out there if you want, as opposed to slowing this thing down in terms of accessibility. So I’m going to leave it there Daniel, but check out my Forbes article in the show notes. I’ll put that in that I added on the EU which translates to the UK’s CM.

Daniel Newman: Yeah, I had a good LinkedIn debate going, some very good insights to both sides of this debate. It is always more complex. I just can’t help but wonder what regulators are really – how we get hyper focused on something like this and then we just miss, just glaring antitrust infringements.

Patrick Moorhead: I mean the way that Apple has dominated and used its monopolistic practices, it barely gets a nod.

Daniel Newman: It harms like real everyday people because this is at the very edge of consumer, which is really what this was set up to do. Not to protect large profitable companies being more profitable. That’s just not ever been the thing. So we can play both sides of the capitalism, but this one befuddles me. By the way, we’re going to maybe have another one of these topics next week ’cause it looks like Arm is changing its business model Pat, and potentially changing the way it’s going to license. And this could get really interesting with its impending IPO. It’s ongoing lawsuit with Qualcomm. So that’s going to be one to watch. Not going to hit it now. Not going to talk about it now, but let’s put that on the list. All right buddy, that’s it. Time to go. Time to wrap up. Everybody out there, thanks so much for tuning in.

It’s been a great week, great show. Great way to start my Friday. I only got two more workdays in this week, today and tomorrow. And then I can start a new workday on Sunday. That’s terrific. If you like what you heard, hit that subscribe button. We do really appreciate our community. Don’t forget the Six Five Summit. It’s coming up first week of June. Love to have you join us. So go ahead, sign up now. It’s free to you and we promise it will be a blast. Pat, for this week, for this show for episode 161, time to say goodbye. We’ll see you all later.

Patrick Moorhead
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Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.