We are Live! Talking Oracle, SAP, IBM, Microsoft, Lenovo, Broadcom

By Patrick Moorhead - July 25, 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 handpicked topics for this week are:

  1. Oracle MySQL Heatwave Lakehouse GA
  2. SAP Q2 2023 Earnings
  3. IBM Q2 2023 Earnings
  4. Microsoft Bing Search and Sales Copilot AIM
  5. Lenovo Storage Announcement
  6. Broadcom CMA Approval

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.


Pat Moorhead: Hi, this is Pat Moorhead with Moor Insights and Strategy. We are back for another weekly Six Five. My favorite part of the week, getting up early, studying my notes, and putting them in there. I think I’m on my third cup of coffee this morning. But if you don’t know my co-host, Daniel Newman, then you obviously aren’t in tech, because he is the best analyst in the world.

Daniel Newman: Other than-

Pat Moorhead: Next to me.

Daniel Newman: There you go.

Pat Moorhead: I said next to me, not behind me. But, no, it’s great to see everybody. Hopefully you caught some of our episodes from Splunk .conf 2023. Dan and I were out there this week. If you haven’t seen our coverage, check it out. If you’re new to the Six Five, I’m sorry, but we cover six topics, five minutes each, maybe 10 depending on how much we like to talk, kind of the attitude we’re in, good mood, bad mood, is it an interesting topic, not so interesting topic?

Daniel Newman: Wait. Are you saying that sometimes you and I are in a bad mood?

Pat Moorhead: I know it’s hard to imagine, especially me being in a bad mood. You never really know who’s going to show up in the morning. Is it going to be work Pat, personal Pat, family Pat? Which one? But, yeah, no, we’re human. We’re not robots yet. You might see Dan bot and Pat bot pretty soon, but not yet.

Daniel Newman:
I actually just had a demo of Futurum AI this morning. My team was showing me. It’s getting closer to the point where my very need to exist is no longer.

Pat Moorhead:
Is that when you punch out?

Daniel Newman:
I think so. I think there’s a real possibility that the clients can continue to talk to me without actually me having to do anything.

Pat Moorhead:
Dan, you’re just talking my dream world. You’re talking my language. I don’t know. I enjoy– What the heck would I do?

Daniel Newman:
I love our clients so much, Pat. I love talking to these-

Pat Moorhead:
We’ll still visit them, but maybe Dan bot and Pat bot, maybe I can license that from you. Or in three months when it’s available from Google or Microsoft, I can just use their stuff.

Daniel Newman:
Yeah, that’s a problem for sure.

Pat Moorhead:
Well, listen. All that expense, you get a three-month advantage. Why not?.

Daniel Newman:
It’s nothing like spending millions to find out that what you just built is going to be a free SaaS service.

Pat Moorhead:
Hey, we’ve got to jump in here, but I want to make a disclaimer here. We’re talking about public companies, we’re talking about some earnings, and don’t take anything we say as investment advice. If you saw my portfolio, you would definitely not do what I do, but seek out a professional. But, Dan, we have a great show today. I mean, we’re talking Oracle, SAP, IBM, Microsoft, Lenovo, Broadcom. Wow. We’re probably going to talk a little about AI, a little earnings, some new product announcements, etc., etc., etc. But I’m going to jump in here and I’m going to call my own number.

Daniel Newman: I love that. That’s my favorite. You talk, I sit here, look pretty, and we sound smart. It’s you, us, we, and them. That’s how we get it done.

Pat Moorhead: That’s perfect. So we don’t normally talk about GA announcements, we talk about product launches, stuff like that. We did hit one last week with IBM Watson X, but it better be good, it better swing you around the room. I think this was a good one to put in here. So Oracle MySQL HeatWave Lakehouse, I’m going to say that three times fast. It was announced in March, and like I said, it’s GA today. So what is it? Well, first of all, it’s a fully managed service that is GA on OCI and Azure, and AWS later this year. It is a fully managed Lakehouse for MySQL in query up to half a petabyte.

So some definitions for the non-data geeky here. A data lakehouse combines the benefit of a data lake and a data warehouse. Just love those engineers and their naming. Now, this one’s actually pretty straightforward. A data lake is about storing raw, unprocessed data, multimedia log files, big files. A warehouse is more about structure data, process data. Tends to be texts and numbers, and you slam those together to get the best of both worlds. And then you attach that with MySQL, that by the way, is used by all the web-native companies. I mean Facebook, Twitter, LinkedIn, Netflix, Uber, GitHub, Zendesk. And then a lot of the big companies like Bank of America, Citibank, Tesla, Toyota. So very, very popular here.

One of the biggest things here are the benchmarks. When you run this on OCI, and by the way, just a caveat. This service is not as fast on Azure and AWS as it’s going to be on OCI, because it’s not using the same hardware platform. But when you are on OCI, based on at least some of the TPC-H benchmarks that Oracle threw out there, we’re talking 17 times faster than Snowflake for MySQL, 9x faster than Redshift, 17x faster than Databricks, 36 times faster than BigQuery.

Listen, I’m a fan of things like BigQuery, and I think Redshift is nice too. When you apply an appliance, an accelerated appliance, and you shove all this stuff into memory, and having super high speed storage, you can’t compete on performance. So I’m not surprised these numbers are legitimate.

It’s more than performance though, it’s about automation as well, because you could put a ton of DBAs in here to be able to support this. But the great part is, you don’t have to. I remember when Larry Ellison got on stage and talked about all the automation and all the challenges and all the mistakes you can make with people. Larry loves people, I think, but getting less people to do more work is always a good thing. So when it comes to stuff like system setup, data load, failure handling, query execution, it is auto magic.

I also appreciated with GA, you expect customers. And two customers that were highlighted were Deloitte and Natura. So get it today on OCI, get it today on Azure, get it on AWS later this year. Everybody trying to knock off Oracle and database, and they show up with a managed service that’s accelerated on their own hardware and available through Azure and AWS credits.

Daniel Newman: You hit it on the head, Pat, and there’s a lot of really good things in here. There’s some really good collaboration too. It’s a tremendous use case for AMD and Epic and what they’ve been able to build, the optimization on the silicon. The performance against the big names is pretty incredible. And that’s something that when you talk about a highly specialized accelerated workload, this is a tremendously powerful use case. I mean, they had one benchmark where they were saying, what, nine times faster than Redshift and 36 times faster than BigQuery? I mean, you’re talking about real acceleration and you’re talking about with traditional object store anywhere from twice as fast as a pure SaaS service like Snowflake to nine times faster than Redshift.

So you’re seeing some really positive benchmarks and this is what I would say isolating a specific workload and use case and really nailing it. And this is where Oracle shines, Oracle has hundreds of thousands of customers running MySQL that need access to data and need it to be able to be processed very, very quickly. So you really hit this on the head. It’s a GA thing, we did hit this when it was initially announced, so I don’t think we need to dive too much further into it, Pat. But in the era of AI, the ability to process data is the absolute demarcation between companies that are going to get productivity and outcomes and those that won’t.

Some of this stuff, when you’re a small business and you have a small number of queries, it’s like, “Eh, whatever.” But when you’re a large global enterprise that your business is running thousands or more concurrent processes, the time matters, speed matters. And these are things that create efficiency. And by the way, cost efficiency, not just personnel efficiency. So Pat, this is a really positive announcement.

It’s going to be interesting to see how the competition addresses this to not allow Oracle, because this is really a way that Oracle can wrap itself around its customer base and slow migration. And this also has an impact on the growth of OCI, which has been really positive in recent periods as customers don’t feel as obligatory to take public cloud workloads out of Oracle. And that was something that they needed to protect and this is one of those cases where they’re like, “Run it on our infrastructure and you’ll get better results.”

And by the way, this is their thing, right Pat? Is we’re cheaper. And I know cheap is a double entendre, but as they’re processing, as the silicon gets better, as the services get better, cheaper is not just cheaper anymore, it can be better, it can be. So something to look out for.

Pat Moorhead: Yeah. One thing I really appreciate is how do you compete with the public cloud? Well, what you do is you make it available everywhere, you put services together that can cross private and public cloud and even some legacy installations. And then you put the rip fricking roaring performance on prem and on appliance. My guess is if this gets too successful, you might actually see the appliance sitting in a public cloud somewhere at some point. By the way, you can stick this appliance in a colo as well. So anyways, let’s move on. Dan, SAP head earnings, how did it go for them?

Daniel Newman: Yeah. So it was solid quarter, but I think the future is more of what there is to be excited about than the quarter itself. Why do I mean that? Well, across most of its numbers for overall revenue, cloud revenue, it was kind of in line. It was in line or actually a little below. Here’s the hard news.

Pat Moorhead: The data, the facts.

Daniel Newman: The pure ground truth of the earnings result was in just about every area, while there was growth in across the board, it was a little less, it was literally nominally less in almost every category than where they were projected. So when you have a quarter like that, you’d think, “Oh, that was bad.” But they raise guidance. So clearly what SAP is seeing is they’re seeing momentum pick up in a really significant way. Now, Pat, you and I have talked about them every quarter for quite some time and where is the growth coming from? What should people be looking for? And really the question is, is SAP building something that’s going to be exciting for the generative AI era? Because these are the questions that really need to be asked and need to be answered.

First and foremost, it’s a very steady business. One of the things I like a lot about SAP is it’s got high dependable recurring revenue streams, very similar to the company we just talked about at Oracle. Hundreds of thousands of customers run on SAP, so this isn’t a company that’s going to see massive ebbs and flows. This is a company that’s trying to reach double-digit revenue growth with some higher revenue growth in what you would consider to be its areas of innovation, most specifically cloud and now with AI.

So while the overall sort of metrics came in just below, the company had strong operating profit growth, the company had strong cloud profit, the company saw its earnings per share up double digits on both a diluted and non-diluted basis. And it saw some really good cloud numbers, Pat. Let me give you a couple to pay attention to here. So the S/4HANA, its core database business growth in cloud up 74%, its backlog for S/4HANA cloud, 65%, its cloud revenue and cloud backlog, the overall cloud business, 19% growth and 21% growth respectively. So the company is seeing that moving directionally the correct way.

And furthermore, you know how I said their revenue is sort of safe and reliable, Pat? They’re seeing that number grow even further. That number now has hit 82% of the business now is considered predictable revenue. So I like that they use predictable because it’s not truly SaaS every month recurring, but it is attached to companies running SAP and it’s pretty measurable that these numbers will be reliable.

But, Pat, my number one thing that I was happy about to see was the guidance. There’s three numbers that everybody cares about. Number one is revenue, number three is profit, and wait, number one and number three? I can’t even get them in order. Number one is revenue, number two is profit-

Pat Moorhead: Grab another cup of coffee or Red Bull, buddy.

Daniel Newman: I was jumping ahead, I was jumping ahead, just bear with me. And number three, I spilled my coffee on myself, I think I told you that, so it hasn’t been drank but it’s being ingested through osmosis. Number three is guide. And oftentimes good quarter, meaning when you beat top and bottom and you guide poorly, people are like, “That’s in the past.” So I would almost rather see a company that slightly missed on the top and bottom, but that’s guiding ambitiously towards growth. So while it’s an imperfect set of numbers because you want to have all three beat raise, it’s still a strong result overall.

But, Pat, let me just talk about one other thing. We’ve talked a lot about cloud with SAP over the past several quarters and what I would say now is I think it’s pretty well understood that SAP has a cloud strategy, it’s migrating customers to cloud, and it has a continued opportunity for growth in this space. Different than Oracle, their approach is much more collaborative. SAP is not trying to be a hyperscale cloud provider. What they’re trying to do is partner with the hyperscalers to make SAP run successfully in the cloud.

But AI, and the company, what it’s calling business AI, which has led to partnerships with Google, partnerships with AWS, partnerships with Microsoft, an approach for generative using its database technology and using SAP as a workload that most companies depend on is really the story of the future for this company. It has seemingly found the right pairings, it’s using its best of breed and best of domain knowledge. Things like HR, things like supply chain, and it’s building generative and AI tools. And I like that they’re calling it business AI, Pat. We talk a lot about enterprise AI, but SAP’s had a bit of a legacy of talking to customers that aren’t only the largest enterprises, but I don’t know if you remember, SAP runs mid-size companies and its campaign.

It is one of those things that I think the company could differentiate on. And I’ve said that for a while. While everyone’s saying enterprise AI, SAP is saying business AI. And I think that’s one of the things is every company on the planet can benefit from implementing AI into their strategy. So with that in mind, overall a pretty solid number for SAP. Work to be done, guide up, AI has got to be the future, they got to land that story, but so far I’m encouraged with what I’m seeing.

Pat Moorhead: Yeah. As tech industry analysts versus equity analysts, we look for different things in these. The numbers are interesting, but stuff said in the call and content that’s disclosed, it’s ground truth, you can’t stretch it. So first of all, the numbers would’ve been a lot better that the predictable revenue number was up as I think you inferred. Stuff like Fieldglass, Concur, the SaaS stuff was down. And if you think about the market with temporary hiring reduced, it just makes sense. On the cloud, a lot of key messages. I mean, the S/4HANA numbers were really good.

And key messages here. SAP is really at this inflection point. Well, first of all, they used to apologize for not having an IAS service, which at the time when they were doing it, they stretched that out a little bit too long. But what they did is they found their way, they accepted the hybrid cloud and the fact that it’s not just beneficial if it’s their IAS, but it’s beneficial if it’s their software in somebody else’s cloud. And that’s really where they’re at right now and the key message here is that innovation at SAP is only going to be served up through the cloud.

And it’s not that SAP is not going to do a hosted service, but it’s all about rise the cloud, it’s like clean core cloud optimized, everything keeps updated. And we’ve seen very similar transformations with companies like Oracle and Microsoft app experiences that were all native on-prem and then had to be moved to the cloud. It is impossible for a company to have as clean an application on-prem as it is going to be in the cloud unless you completely rewrite it. And that is what Oracle went through with its entire application stack.

The other thing that pointed out for me was a lot of discussion about AI and they put a 30% value premium on having AI in the SAP workflow. Think about it, it makes sense. You have a couple options. You can take data that you have in SAP, you can ETL it out to something to do all the magic, and then pull it back in to do automation on it. And the other way to do it though is to have AI write where all the data is. And that is SAP’s play. And I think SAP users should have confidence in the data, because you’re not moving it out, you’re not transforming it.

And I think from a trust standpoint, SAP being a European-based company, Germany of course, but they have stricter restrictions around data and the three Rs. We heard responsible, and that’s policies. We heard reliable, and that’s cloud, that’s the accuracy of the data, the quality of the data, is the context preserved? And we also heard relevance, which is in the flow of what you’re doing. The in-the-flow reminds me a lot of what I heard from Salesforce, which was, “Okay, we have AI today, we’re going to supercharge it with generative and it’s in the flow, it’s what you recognize as opposed to having to go off and relive something.” So exciting times. The predictable number and the cloud revenue, really good signs, looking good. Congrats, SAP.

So let’s move to another earnings here and this is IBM and I’m going to call my own number on that. So what are some of the basics? Revenue, $15.5 billion down 0.4%. They missed slightly on the revenue expectation. They beat handily on EPS, almost a 10% beat on profits. Revenue growth primarily driven by software and consulting, which it’s kind of crazy. And by the way, IBM will throw this number out when Z is not in the up cycle. It’s 75% of overall revenue.

And the other good thing about software and consulting is it helps ARR, which is at about 50% of the mix. Now, Z did well too, Z was up double digits to 11% compared to where it was at 30%, but it’s totally expected because Z has up cycle, down cycle, up cycle, down cycle, and the stock was up based on it. I also want to call out the double-digit revenue growth here because I think that’s exciting. Application operations consulting up 13%, Red Hat, 11%, I already talked about Z, and data and AI up 10%. On the call, IBM did a double-click on two AI clients, which included Citibank and J.B. Hunt. Two very impressive companies. And oh, by the way, two very regulated companies as well. So overall good performance, did almost as much as the Street expected on revenue, blew away those profit numbers.

Daniel Newman: Yeah. We had a chance, you and I, to speak to CFO Jim Kavanaugh. And it’s always helpful to get the context, Pat, when a company doesn’t hit the top line, people often start to, just like I mentioned with SAP, it’s like, “Oh, what’s wrong?” Well, as much as we’ve had this boom of AI spending, you also have to remember there is a lag between buying GPUs, which is Nvidia, and buying the software, and implementing the applications and tools into your business and starting to monetize that, especially when the monetization is in things like software and consulting.

So right now there’s an arms race, and a lot of it’s at the hyperscale level, but then beneath that is at the large enterprise level to invest in the infrastructure that’s going to be required to deploy AI at scale. So IBM making its big bets on AI are likely to benefit in a substantial way from this, but it may not come in the same kind of tidal wave effect that we’re seeing GPU purchasing. So that’s the first thing that I’m thinking about here.

The second thing as I see it is you really have to look at how well the company has done to just get out of things that aren’t going to make it money in the long run. So there was a cleanup requirement, and we saw it over years, the shedding of PCs, workstations, the shedding of servers, the shedding of Kyndryl, there was a lot of cleanup to do. And when you have a company the size of IBM, it’s not an overnight transition. So as I see it, I actually believe that the company directionally is going the right way.

Now, the biggest thing is that when you and I did a GA thing last week and it was IBM-related, was the fact that IBM has its IBM Watson X AI and Watson X data in market today to sell is a pretty big advantage for the company. The other thing is with probes into the OpenAIs, question marks around data and the way data is being exploited, utilized, Pat, IBM is in a unique position to get with enterprise customers right now and say, “Look, while we’re sorting out some of this inconsistency or uncertainty with how AI and data is being utilized, potentially exploited in some of these LLMs and some of these consumer products that have come to market, we’ve built a governance-enabled solution.”

“We’ve built a tool that’s driven by protecting personal data, governing the models, making sure that the models are very specific to business use cases that data’s not being exploited or leaked into a situation where that data is being collected in a way that’s nefarious, or even accidentally just negligent on behalf of the company.” And there’s a lot to be said for that. This is something that I don’t think will be a forever advantage. I think it will get caught, but I think in the early innings with a large global Salesforce, GA services and products, it will help.

Now, I’ll continue to say IBM needs to really help the market understand its growth in TAM and the opportunity and how much revenue and the expectations around Watson X so that people could say, “This is a good bet.” I think in the near term those numbers are going to be harder to define, so what I think you mentioned, Pat, use cases, customer studies, and then showing how that ramps up to volume and revenue is what the market’s going to want to hear. Good management of the business, beating on the bottom line, I think that’s really important when revenues are a little slower, it’s how do you manage the business to be profitable, to drive cashflow? That’s something the company’s doing real well.

I think the overall IT spend is still in a bit of a mixed state. I think there’s been a huge surge in the market, very much driven by one factor and driven to a very narrow band of companies. And don’t forget that IBM was one of the darlings of the downturn, one of the best performers when everything else was performing really poorly. So the fact that it’s moved slower in this market kind of makes sense. It’s a safe stock, it’s a safe company. It’s seen as one that, hey, it pays a dividend, it manages its business very well, it’s competitive in innovation, but it’s not taking huge risks. And I think that’ll always mean it’s going to be a little bit more sturdy during downtime, but of course it’s never going to see that same kind of catapult effect in the uptime.

So overall good quarter for IBM, I mean look, you and I both I think would agree we want to see the double-digit growth, that would just make us and everybody else feel good, but what Arvind is committed to is really pretty reflective in what we’re seeing, which is lower single digit, currency matters right now, getting rid of the slow and the bad, bringing in the good and the disruptive, and being on the cutting edge, but doing it IBM’s way, which is not in such a way that it’s going to be massive risk for the company.

Pat Moorhead: Yeah. IBM is doing exactly what they say that they’re going to do and the huge risk they did take was with Red Hat, but when you have a company the size of IBM with the revenue that drives that double-digit improvement from Red Hat is amazing, but it doesn’t convert everything else into double digits. So let’s move on into the next topic. Heck, since November we can’t have an episode without talking about AI. And Microsoft came out with a GA for one product and I believe introduced another. Why don’t you dive into that?

Daniel Newman: Yeah. So I’ll talk a little bit about Sales Copilot and AIM, and it’s two different things. It was a bad Chiron by me, but it’s two different things for those of you that are looking at the pod. Or is it Chiron?

Pat Moorhead: I have no idea. It’s Chicago, not Chicago.

Daniel Newman: Chicago? It’s Chicago?

Pat Moorhead: Yeah.

Daniel Newman: All right, just checking. So if you haven’t been following what Microsoft is doing, what it’s done since its investment in OpenAI has been layering in generative capabilities across its entire business portfolio. There seems to be an announcement almost every week, Pat. It goes from Dynamics over to Teams, to Windows, and M 365 and Office. Well, at this week at Inspire, the company zeroed in on its sales, its Copilot, which is part of its Dynamics 365 and CRM solution. And really it’s a set of tools that sits on top of, so just for background, the Copilot, basically it sits across the suite of productivity and collaboration apps.

The idea is this is the generative capability, automate tasks, create content, being able to analyze data, design PowerPoints. Some of you have probably seen this, I’m dying to try it. I want to build a PowerPoint in two minutes and then I want to fire myself, Pat, my goal is to replace myself. You hear this?

Pat Moorhead: It’s another one. I mean, whether it’s videos, whether it’s presentations, research reports.

Daniel Newman: And they’re coming to something like $30 a month per user for all this, seems like it could work, but it’s not yet broadly available. So about 600 global enterprise customers are able to use this, but basically what the Sales Copilot is and what they’re really focusing in on now is, how do you improve that end-to-end sales experience in CRM? Generating follow-up emails, creating initial introductions, putting that into the system, being able to use customization and text, being able to blend private enterprise data with public Large Language Models to create more compelling real-time presentations that can be used on PowerPoint in sales, being able to put together a price quote and do these things in an almost automated way.

And you start to see the way this integrates, you start to see, “Oh, a Teams meeting. I talked to a customer in that meeting, we talked about what the proposal would be.” Being able to extract that and then instantly drop it into the Dynamics 365 Sales Copilot, Sales Copilot then creates a PowerPoint presentation with the proposal, creates a written proposal, drops it into the CRM, puts it into a different stage depending on where it’s been delivered. And then out it goes, trackable, automatic updates, you can schedule follow-on emails to come out of this thing. That’s what they’re really doing with Sales Copilot.

And it’s a pretty compelling set of capabilities and tools that every company on the planet is going to want. They’re doing a similar service copilot, which can do things like automating chatbots, sending messages back and forth, being able to answer questions, tapping into ERP and CRM to be able to get real-time data. “Where’s my delivery? Well, where’s my service ticket? I need a technical support agent. My product’s not working.” Things like that. So you’re seeing it in sales, you’re seeing it in service. This is a big focus for Microsoft right now.

And now, having said that, I’m going to be really clear. This is a big focus of every company that’s doing CRM and ERP solutions. If it’s CX companies like Zendesk, if it’s Salesforce, their CRM and service cloud, they launched a fairly significant AI capability. If it’s going to be, you’re going to see some of this in business AI, we talked about SAP, you’re going to see some of this in NetSuite and in the tools in Oracle. But really the question isn’t going to be if a company does this, the expectation is every technology company that has an enterprise software suite is going to do this.

The question is, one is for each company it’s about A, protecting your moat, meaning having it be the customers you have, feel that the AI tools that are being made available are going to be good enough that you don’t need to consider a different AI tool and to take your business elsewhere. The second thing is then going to be, it’s going to be competing on the quality, Pat. We saw Google also in workspaces introduced their generative AI capabilities to do PowerPoints, to do sales proposals.

Now, Google doesn’t have a CRM per se, but you could start to see how, well, Salesforce doesn’t really have an office unless you consider Quip that, and I would say it’s not. But all of a sudden you see, well, could a Salesforce and Google pair up to do something that looks a lot like what Microsoft’s doing? So that’s kind of going to be the interesting thing to watch is there’s going to be the debate on how that all comes together.

I’m going to quickly talk here about AIM, because the company also did come up with what’s called Accelerate, Innovate, Move. It’s a new program that the company put out to help businesses get into the cloud. And the reason they’re doing that is because until companies move into the cloud, they can’t take advantage of the Dynamics 365 Copilot. So AIM is a migration tool and it’s not just a tool, it’s a tool and set of services capabilities that helps people move more quickly from prem or from traditional dynamics solutions into the cloud.

And so all the Copilot capabilities, just to be quick, are required that you’re running in the cloud. So seeing customers move from prem to cloud so they can gain access to these features is going to be something that’s important. So this is kind of a new thing, Pat. My big hope and consideration is historically migration offerings from companies have felt like, “This is really hard so we’re building these programs and tools to make it easier.”

What I’m hoping Microsoft is really thinking about is, “Migration to our cloud is easier than others and we’re building a program to make it even easier.” And I’m saying this not cynically, but Pat, when you hear migration program, doesn’t it kind of just make the hair in the back of your neck standup? You’re like, “Ooh, that’s stressful.”

Pat Moorhead: Well, it’s high risk, it’s stressful, it takes incremental people, but I got to tell you, it’s just as much work to bring in a new package.

Daniel Newman: Yeah, absolutely.

Pat Moorhead: I mean, you and I have both been through that.

Daniel Newman: Yeah. So I’ll close this one out real quickly, Pat-

Pat Moorhead: Are you sure you don’t want to talk another 10 minutes, Dan?

Daniel Newman: No, let’s keep going. Let me talk about enterprise… No, I’m kidding. I want you to talk about enterprise search even though I want to, but I want to leave a little oxygen on this one.

Pat Moorhead: No, I appreciate it. Yeah, I wasn’t even briefed by Microsoft on Sales Copilot AIM, so I’m going to stick to what I was briefed on and I wrote a Forbes article along with Melody Brue. It’s up on forbes.com, you can check it out. But listen, this is another one of these, this capability had been announced previously and this one isn’t GA, this one is in preview. Now, like Daniel, I want this thing now, I want to start using it mistakes and all, but I did feel like it was important to pull some things out.

Initially, when Microsoft talked about these capabilities, they weren’t as clear as I thought they needed to be related to, we are going to use, if you want, enterprise data to make the experience better. And what I mean by better is accurate, because if you look at OpenAI, it’s the brain and it’s been tested on called world data, which is the public internet, and then Microsoft applies it its own filter to it mostly for security and recency called, I believe it’s called Andromeda.

And then what you do for enterprises is you do prompt engineering at scale, you’re not retraining the entire model. Again, that would cost a hundred million dollars. What you’re doing is you are putting en masse, and by the way, I think Salesforce does a great job explaining this, to be able to keep your data secure in a SaaS environment. And some of the new stuff that came out was that each one of the responses in the prompts when you go to Microsoft Bing search is it tells you the source of the data. It also tells you it’s internal data only, like you can see that. It’s not the first time Microsoft has done this. If you use Bing search many times like I do and you connect your Azure AD and your corporate, it will tell you, “You’re the only one to see this.”

Google does the same thing with workspace when you do a search and it’s sprinkles in your enterprise data if you’ve uploaded that. So I really, really do appreciate that because a system like this has to provide trust. And that’s trust, not just in the trust, is it giving me garbage back? Which is obviously important, but really having trust in where it came from. And as we like to say, sometimes trust and verify, labeling these links with results with where it pulled the data from will increase that trust over time.

Now, long term, I don’t know if you’re going to need that. Once people get trust, those links just might go away. Now, you still have to have that on the public, the consumer side, because you need to send links back to advertisers and stuff like that. But it is very, very smart in how they introduced this AI. When it does come to trust, I mean people trust Microsoft. If you’re using Office 365, if you’re using Microsoft 365, if you’re using Dynamics 365, you basically are entrusting Microsoft already with your data.

And yes, generative AI is a little bit different than machine learning and deep learning and analytics, but you are still exporting your data out there. The one nuance with generative AI is that it tries to improve itself over time. It’s this living organism, it’s this living brain. And Microsoft is very clear that it’s not going to use data that it trained off your corporate data to make the overall borg that’s available to everybody else smarter. And that’s going to take a while for enterprises to get comfortable with that.

Daniel, like you, give me this now, I want to take my Word documents and turn them into presentations. I want to take my PowerPoint and turn them into Word documents. Just give me that now, would you? Come on, Microsoft. I’m not an E5 licensee, but I sure would like to try this out. So check out the Forbes article from Melody and I. And let’s move on. Second to the last topic, Lenovo storage and data management announcements.

Daniel Newman: AI announcements, Pat.

Pat Moorhead: Well, I think I’m reading data management announcements. So I just read what the script people give me, Dan. No, I’m just kidding. Everybody wants to be the AI play. I get it, I get it. By the way, so Lenovo brought out a bunch of cool announcements. They brought out two storage arrays, they brought out two hyper-converged servers, and they updated their Unified Complete Software. So first off, they brought out what’s called the DG Series Enterprise Storage Array, uses QLC, which is less expensive than DLC, but doesn’t necessarily have the right capability, which by the way makes it really good from a cost standpoint and a performance to replace hard drives. It could be used in AI workloads, particularly when you look at the read capabilities.

So there you go, Dan. AI, I said it, it’s in there. It was in the headline, I saw it in the press release. So then there was a new thick system array targeted at median business, the DM 3010H scaled-out model, a wider array of workloads, more balanced reads and writes. Third thing that was announced, new HCI systems. It’s all about Azure Stack Hub, so therefore it’s a hybrid cloud solution that you can load applications on top of. And one of the benefits of Azure Stack and Azure Stack Hub is you can leverage the connectivity between Azure Stack Hub and the big Azure up in the public cloud. So it’s a hybrid cloud solution.

Third thing they brought out was, it’s called Unified Complete Software. Don’t know if I love that name. I don’t hate that name, but it’s kind of a double entendre, like it’s unified and it’s complete. Okay. So, Dan, you and I cover data protection and things like ransomware and there’s a lot of companies out there right now. It is a frothy place given all the risk of the bad guys coming in and stealing your data, locking it down. And what this is this software comes with DG and DM arrays to provide data protection, replication, snapshots, S3 replication, but also like I said, ransomware protection that you would normally pay extra for.

I want to end with two things. I’ve been talking a lot, Dan, I’m taking a lot of the oxygen here, but I’m not talking 10 minutes. When I think of data management, so when I think of data management, I think of things that companies like Cloudera does, like CDP, where you have consistent metadata security, encryption, control, and governance. It’s hard for me to think of, I’ve been programmed, Dan, and I might need to be deprogrammed, but here’s the reality. Storage companies are moving up the stack to data management. Heck, you see vast data in what they’re doing. They’re combining multiple stacks too. So everybody wants to get in everybody’s business here. Last point, I want to make-

Daniel Newman: You sure?

Pat Moorhead: Yeah, I can go longer.

Daniel Newman: Just keep going, dude.

Pat Moorhead: Hey, no, I mean, you picked this topic, Dan.

Daniel Newman: I want you to find that 10-minute segment where I talked for 10 minutes. We’re going to pull that out because I think it was like two, but you’re so eager to talk that it felt like 10.

Pat Moorhead: Probably, Dan. You know me well, so big market share gain. I mean, listen, up until a few years ago, and I’m a little embarrassed, I didn’t even know that that Lenovo was really a player in storage, but they are. In 2015 they started off at number 11 and they’re now number four in worldwide market share. They’re number one in that less than $25,000 storage range. So huge growth. I mean, very similar to the run in servers where they’re now the number four server provider, really close to getting to number three. And they were back at like number eight after the IBM acquisition and sales tanked. And props to Kirk and his team. Okay, that’s it. That’s all I have.

Daniel Newman: Well, you covered it pretty well and pretty in depth. Didn’t leave a lot for me. I guess I’ll speak a little bit more broadly though about some thoughts. One is Lenovo is doing a very good job of picking its spots and positioning here. There’s going to be needs for what I would call some of these next level, bring the data to the compute storage capabilities like what you’re seeing with VAST, high-frequency trading applications. That’s not as much what I see going on here. What I see going on is there are a massive number of enterprises that have very traditional data storage needs.

And what Lenovo has done so well is just kind of saying, “This is what we are. We are efficient, we are cost-effective, we are power efficient, we can handle your mass storage, we can integrate with your public cloud. We don’t care which one, we’re not going to try to have a service sprawl that is going to match what AWS does. We’re going to have a handful of services that make your prem work the way you need it to and you’re going to be able to connect up whether it’s through VMware, whether it’s through Red Hat, whether it’s going to be through an AWS or Azure.”

And I like that about them because there’s a lot of storage market to be had, and this is kind of how they’ve done it in servers, Pat. It’s kind of how Kirk and his team have just grown is like it’s not too confusing what they are. “We’re going to be aggressive on price, we’re going to be able to manage the supply chain, we’re going to get you the hardware you need, we’ve got the right connectivity and partnerships, and we’ve got enough software that you are able to do what you need to do as a business.”

I think that’s a lot of what we’re seeing here is that the company’s really understanding what it is, it’s how it’s gotten from 11th to top five. And I wouldn’t be surprised to see the company continue to climb because in every area of its ISG business, it’s been able to do that. So the AI play is an underpinning of this, the AI play is storage. Nobody wants to make storage cool and sexy, but you got to have storage and data to have AI running in your enterprise, period.

So the way that storage sits, the way data sits in memory, the way data sits, hot, cold, or somewhere in between can vary depending on the kind of workload, the speed in which you need to be able to get data back. But we’re not necessarily talking about overclocked super microprocessors that are being used for high frequency here, we’re talking about lots of businesses, industry capabilities that need storage, need data, need some AI capabilities. And Lenovo’s saying, “We can do it, we can deliver it, we can hit price, and we’ve got the integrations that you need. “So that’s what I see here. It’s progress, it’s solid. Congratulations, Kirk and team.

Pat Moorhead: More growth from Lenovo ISG. Okay, let’s move the final topic. Broadcom gets CMA approval right on the fricking heels of EU approval.

Daniel Newman: I know, I feel like we’re talking about this every week. Do you think next week they’ll get China?

Pat Moorhead: I don’t know. They need SAMR and they need FTC.

Daniel Newman: Yeah, you know what? I got called on that a little bit because I said the CMA was like, “This is a good one.” Someone’s like, “Well, do they have China yet?” And I’m like, “Eh.” So here’s the thing. I don’t know if I’ve taken this as a pass or the fact that maybe my fundamental belief is China has procured exactly one license of VMware ever. There’s a story behind this.

Pat Moorhead: I’m listening.

Daniel Newman: China copies everybody’s software and then it’s just like I don’t think they buy any of it. I’m being a little tongue in cheek, but what I’m saying is, unlike things like certain cloud or certain semis or certain real, what I would call SEPs, things that are standard, essential that they feel like they need to compete on a global level, I don’t think China’s going to be a problem with this one, just holding out. Now, Lina Khan could be a problem. She just can’t win. She literally can do nothing but lose. The courts have pretty much not supported any of her cases so far, and so does she want to raise a case here? It seems like there’s a threshold and it seems to be anything over like $10 billion, she’s going to try to stop.

And so the FTC’s really interesting. But, Pat, the thing about the CMA that’s I guess just worth noting was they said they were going to do a deeper probe. People thought maybe this is going to be the one that was going to be the big holdup. Just like last week, the EU, the CMA said they looked, they took a peek under the hood. They decided, “No, it’s not an enough deal.” We did talk about this last week, so I don’t think we need to spend a ton of time on it, but just on a quick note, there are going to be concessions, there will be probably a few more before this thing’s all done.

And I wouldn’t even be surprised if some things get spun off quickly in businesses, whether that’s at Broadcom or VMware. Hock has a plan. We know that. If you don’t know his plan, he’s actually shared it with you and I at The Six Five Summit as our opening keynote speaker. You need to check out that video if you haven’t already.

Pat Moorhead: Is that it?

Daniel Newman: Do you want me to talk for 10 minutes?

Pat Moorhead: If you don’t mind. No, I’m just kidding. Dan, those were great adders. So we have SAMR, which is China, and we have the FTC coming up. One note on CMA approval, it was without conditions. So unlike EU related to the Marvell stuff, by the way, I don’t know how you jockey back and forth where one regular later tells you one thing that by the way would make no sense to do in global.

The other comment I’ll make is VMware virtualization, some analyst firms are claiming up to 70% market share. I just don’t even believe it to be honest with you. If I look at all the state-based institutions out there that rejected 10 years ago, pretty much all US technology, I’m pretty sure that’s KVM-based, open source. But anyways, Israelis analysts don’t get everything right. I mean, we do, right?

Daniel Newman: I’m wondering if I got the one license right, but it was really funny to me.

Pat Moorhead: No, it was funny.

Daniel Newman: China copies and steals everything.

Pat Moorhead: I virtually patted you on the back.

Daniel Newman: Thank you.

Pat Moorhead: So anyways, yeah, this thing’s going through and unlike Activision, Microsoft, unlike what we saw with Qualcomm and NXP, you have a hardware, mostly a hardware company buying a software company. And sure, if you smoke enough or drink enough, you can come up with some ways.

Daniel Newman: Smoke what?

Pat Moorhead: You can come up with some ways that this could be abused, but that would also mean nothing about business and where the motivation comes from. So Broadcom makes a whole lot more money off of VM licenses and soon to be multi-cloud than can make off a $100 NIC. So anyways. Good show, Dan. Man, great to see you. We covered a lot. We definitely turned this into the Six Nine.

Daniel Newman: The Six Ten. Hey, I want to know what they’re smoking and drinking. Can we talk about that because you were very elusive, like Red Bulls or are we talking something better?

Pat Moorhead: Well, Dan, I don’t want to get beep. I don’t want to get beep.

Daniel Newman: I think I said the S word early in the show. Just as a heads-up.

Pat Moorhead: No, that’s okay. We’ll call it explicit.

Daniel Newman: Do we need to bleep that out? Are we an explicit show?

Pat Moorhead: Possibly. Sometimes we are, but we try not to be. Anyways.

Daniel Newman: A family oriented show, but PG+.

Pat Moorhead: Yeah.

Daniel Newman: PG+? Can we go there?

Pat Moorhead: Possibly. Hey, folks, I want to thank you for tuning in. I’m off to Korea all next week. I’m going to be at the Samsung Galaxy Unpacked Event. I’m going to be meeting with multiple Samsung executives. I’m really looking forward to it. I’m going to be eating a lot of kimchi. I love that. And I will be back on Friday, probably won’t do the podcast until later.

Daniel Newman: I’m going to miss you, buddy. I think you’re going to need to figure out how to do the podcast. I don’t want to hear that crap. There’s no excuses. Do you think people out there care where you are? Get a connection on your plane, that big, what do you have, the BBJ? The Big Boeing Jet that you fly around in?

Pat Moorhead: Yeah, my own personal BBJ.

Daniel Newman: You know what? You are the world’s most prolific analyst. Now, having said that, I will be at the AWS Gen AI launch and then the AWS Summit, and I’ll be doing a media tour because Futurum Group is announcing its new AI market sizing intelligence data, and I’m hoping everybody out there is going to be tuning in. So keep your eye on the tube. If you see this ugly mug, it’s me. It really is me.

Pat Moorhead: How about that? And be sure to check out all the episodes we did at Splunk .conf 2023. I think you’ll find them educational and just have a lot of fun because Dan and I really are fun guys, or we tell ourselves. Anyways, thanks for tuning in. Have a great morning, afternoon, night, wherever you are on the planet. Take care.

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.