We are Live! Talking Salesforce, Microsoft, Altera, HPE, HP, Pure Storage, Dell

By Patrick Moorhead - March 5, 2024

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. Microsoft Finance AI
  2. Salesforce Earnings and Trailblazer DX
  3. Altera Spin-out and New Mid-range
  4. HPE Earnings
  5. HP Earnings
  6. Dell Technology Earnings
  7. Pure Storage Earnings

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.

Transcript:

Patrick Moorhead: The Six Five is live here on a Saturday morning, making up for a Friday morning miss. We are back from Barcelona, Spain, Mobile World Congress. In fact, Dan landed his helicopter at his daughter’s soccer game yesterday, and he literally is just back. Dan, how are you feeling, buddy?

Daniel Newman: Hey, so the problem with that, Pat, is that now, everybody’s going to be looking to figure out whether it is true or not that I have a helicopter. And listen, I can’t really speak to this, I can’t speak to the location, I can’t speak to , you know.

Patrick Moorhead: How about we do this though? Dan, true or false? Dan has ridden in a helicopter in the last three months. True or false?

Daniel Newman: You know what? Listen, I’m going to plead no contest.

Patrick Moorhead: Okay, there we go. True or false, Dan lives on the top of a mountain where theoretically, you could land a chopper.

Daniel Newman: I once, again, am going to plead no contest.

Patrick Moorhead: All right.

Daniel Newman: People do when they don’t want to be accountable. Listen, it’s been a great week. I’m back. I’m feeling good to be back. I’m glad that we got this in, buddy. I know you’re actually on your way out to do a really tough week of spring break where… Well, listen, in fairness, you’re going to go on spring break, and then I so rudely said, “Pat, I need to ask you to leave your spring break, go to Las Vegas and Six Five your little heart out at the HP event this week at APC.” But then you go right back. And it’s not so bad. You get to hang out with me for a day, and we’re going to have a great week. But yeah, Pat, Barcelona is great. Listen, I could do it in three days instead of six, and I’d be happier. But it was a really good event this week.

Patrick Moorhead: I know. It’s good. Hey, we have a very extensive show for you. It’s the Seven Five. We’re going to be talking Salesforce earnings, TrailblazerDX show that’s coming up. Microsoft has a new finance AI chatbot.

Daniel Newman: Did you say it’s the Seven Five? Did you say that?

Patrick Moorhead: The Seven Five.

Daniel Newman: What does that mean, we’re Seven Five? Are you meaning we’re doing an extra topic? Is there a bonus topic?

Patrick Moorhead: Oh, we did put a bonus topic. And we could have put 10 topics, but we can’t be the Ten Five. We already talked for an hour, and it is Saturday at 7:15 AM Central. I don’t know who wants to be listening to this.

Daniel Newman: You mean there’s not thousands and thousands? There probably will be.

Patrick Moorhead: Probably will be.

Daniel Newman: Our audience spans the world.

Patrick Moorhead: We are definitely global.

Daniel Newman: You’re the world’s best moderator here.

Patrick Moorhead: I appreciate that. And you’re the world’s best everything else.

Daniel Newman: No, I was talking about me about all of it.

Patrick Moorhead: I love it. Hey, we’re talking the Altera spin out. They got a new mid-range FPGA as well. We’re talking HPE earnings, HP earnings, Dell Tech earnings, Pure Storage earnings. That’s a good segue to say, we obviously talk about publicly-traded companies. Don’t take anything we say as investment advice. You should probably just do the opposite. Or if you know typically the analysis we do doesn’t actually align with valuations because Wall Street is just nutty. Nutty, nutty, nutty. By the way, NVIDIA is $2 trillion dollars as of yesterday.

Daniel Newman: Yeah, NVIDIA had $2 trillion.

Patrick Moorhead: AMD is over $300 million –

Daniel Newman: AMD Supermicro was added to the S&P 500. And by the way, a couple other little stories just to tease these out ahead of time. Grok had a huge acquisition and that is now creating the next wave of Grok cloud. Let’s talk a little about that. This AI momentum is creating a strong wave, Pat. And then, I I shared a really funny story. There’s a bunch of stuff going on about OpenAI, but Elon Musk is suing them, which is super-interesting. You got to go back in the history, the Elon, Sam Altman history, they were friends, they were buddies along the way, so it’s getting contentious there. We have to follow that one. Maybe even talk about it sometime on this show. And I had a really funny tweet. There’s a tweet, they got about 2 million views, about a Starbucks store in San Francisco that had a roundup for a local charity, a local non-for-profit that non-for-profit was?

Patrick Moorhead: OpenAI.

Daniel Newman: OpenAI. And I don’t know if this is real. So I want to be very, very clear. I don’t know if this story is real, but if this is real, that is epic.
It’s factual though. It’s factual. They are local. They are a non-for-profit. I don’t think they need everybody’s 40 cents on their Starbucks cup of coffee. I do think that’s a little bit misleading. But you know what, Pat? I think we should put a similar thing going on at the Starbucks here in Austin.

Patrick Moorhead: A little bit misleading. It’s a lot misleading.

Daniel Newman: Round up to a local business. “Moorturum”

Patrick Moorhead: I love “Moorturum Insights and Strategy”.

Daniel Newman: Maybe that’ll be our non-for-profit. Where we do things for small companies that need great advice.

Patrick Moorhead: Yeah, let me be very clear. We are not a non-for-profit. In fact, there is a dollar mark that gets me out of bed these days, and it’s a lot higher than it was a decade ago. Anyways, man, we are drifting like a fricking tugboat.

Daniel Newman: People love that. That’s their favorite part of our show. Nobody wants to hear this stuff about these topics. They like when we banter. This should just be the banter hour. All right, we’ll do it. Whatever.

Patrick Moorhead: Dive in. Dan, I’m calling your number. Microsoft brought a new finance AI chatbot. This is not the first. There has been AI inside of Excel as an example for a long time. What’s new here?

Daniel Newman: So Microsoft has worked on this theme of various Copilots throughout the company. They’ve had Copilot for sales, Copilot for service, and now they are introducing Microsoft Copilot for finance. And the truth is that within every function of the business, there are very specific applications that can be more efficient, more productive, easier, and can be integrated with Copilot. This is the next step, the next phase. Pat, you and I, we’ll just use ourselves as an example. There’s a lot of reports that we ask from our team.

And as our companies have grown and our teams have grown and we now have our systems, we have ERP, we have CRM. But of course you’ve got usually in most companies, financial analysts are working through piles of CSVs, right? They’re doing collections, they’re data reporting, they’re doing AR data reporting receivables, they’re doing payables analysis. They’re doing just different kinds of workflows that are critical to a business performance.

And a lot of it’s being done by hand. You got to either extract the data out of your system or you’re working out of these spreadsheets and it takes time to make decisions. What if you could make it easier? You could connect to your financial system. By the way, Dynamics SAP, I think over time you might see that extend into others. You can build workflow automations, you can build guided actions. You can basically get through a number of different reporting capabilities. What about a cashflow forecast for instance? How would you want to work on that? And by the way, I got to see the demonstrations here. You can basically use a Copilot, it can have a number of pre-canned capabilities. And then, of course you can trigger and ask it different questions to get an idea. How can you look at certain business behaviors right now, like the inflow of sales orders versus the outflow of project work, and then, be able to deterministically know, will we be creating more cash or less cash?

It has to then take into consideration typical pay cycles. These are a lot of things that people don’t think about. Oh, we sold, so the business is going to be fine. Well, what if you’ve got to do X amount of work, but your average receivable comes in 120 days, but your average payable is in 30 days? After a certain period of time, that discrepancy is hard. First of all, I love this for smaller companies. Because smaller companies tend to have a lack of resources to even do these kinds of evaluations. Bigger companies have so many of these evaluations to do, that it also is very useful to potentially be able to pull these together.

But this goes back, Pat, to more of just finance is one more tentacle in what Copilots are doing to enable businesses, finance, sales, service. And I really like that. Look, this is a step in the right direction. You got to be able to streamline your processes. You want to be able to use these tools. You want to be able to do a generative query so you can talk to your system.
Ask it a question in a natural language and then be able to get highly valuable insights. And even generate something like an email out to make a collection or to notify someone in your org of what collection needs to be made. These are just little examples. But this is what really is to me, it’s a number of small financial capabilities all strung together to help a company run more effectively.

Patrick Moorhead: Wow, Dan, that was some smooth analysis there.

Daniel Newman: Was I a smooth operator?

Patrick Moorhead: It’s interesting. As I was looking through this, I tried to delineate between whether this is a new category or doing something a lot better. And it’s almost both, right? I think you said it well that we’re doing a lot of this by a spreadsheets. We’re also doing this with executive dashboards as well. Through either Tableau or NetSuite or Microsoft 365, things like that. But I think that this could be a new category, an incremental service that you would want to pay Microsoft for.

And I think it’s right in their sweet spot of productivity, which I think is good. I like the ingest from external sources like SAP and things out of the Microsoft Copilot studio. I wish the company would’ve talked a little bit more about data. About how it can pull in data, how it can protect data that they pull in. As we’ll talk, Salesforce’s data cloud. I wish they had talked more about that. And maybe they expect you to know how that data is pulled into Microsoft Copilot studio. But I don’t think a lot of people do that.

And I guess if you were serious about it and you were a large company, you would get there. But it was a little bit of a question. Now, Microsoft Copilot studio, consider it as a clearing house for APIs. They’ve got over a thousand prebuilt connectors and plugins. Workday’s in there, SAPs in there. But how do you pull in custom data? But then again, Dan, like you said, maybe this is more of a small and medium business solution where you’re thinking less about that. Now medium businesses do. They have an IT staff. They do worry about this. Maybe this is more of a small business-

Daniel Newman: And obviously you can see SD data outside of an ERP system and drop it into a spreadsheet, use it for things like FP&A, different planning necessities. Of course, it’s another Copilot they’ve worked on as financial planning analysis. But also for just finance collections, accounts reconciliation. Pat, this stuff takes tons and tons of time and brain matter. And you’ve got an efficiency thing, Pat, I call it the whisper of the street that no one talks about. Is companies are looking to reduce staff. And this is not anything at Microsoft said.

Patrick Moorhead: Dan, did you say this out loud? Did you say it out loud, Dan?

Daniel Newman: Listen, listen. I’m not saying they’re saying this here or in this case, anything to do with Microsoft.

Patrick Moorhead: Listen, Microsoft would never say that here. I would say augmenting.

Daniel Newman: Well, what I say, Pat, is you got to prune the tree for it to grow healthily.

Patrick Moorhead: Yeah, it’s so funny. I said that same thing. I don’t know if I copied you on that. It could have been a tweet the other day.

Daniel Newman: You probably did. I’ve been running around town saying that for the last couple of months. It’s become my ethos about business is, healthy plants grow, right? When you prune them. And I know it sounds somewhat cynical, but the fact of the matter is it’s how you create a fast growth culture. But this is where the comments from IBM’s Arvind Krishna and others that got reamed for saying AI would reduce. It’s not a permanent reduction.

But if you have the exact same roles right now, and you look at those in the future, a certain percent of those roles will be eliminated by AI. And guess what? Industrial revolution it’s going to happen here. The question is what gets created. And that’s still a bit more of a mystery. We’re not going to go kick another wormhole to go down. But I like talking about these things. It’s interesting.

Patrick Moorhead: No, it is interesting. And I think our audience appreciates us going off the record.

Daniel Newman: Pat, I want to let you know I got to let you go. I’ve created Danbot 2. I’m going to pod with myself because I’m awesome.

Patrick Moorhead: I love it.

Daniel Newman: I’m awesome. And by the way, you can be the third bestie from time to time.

Patrick Moorhead: Did you say I’m awesome?

Daniel Newman: I said you’re awesome. I said it could be Dan, Danbot and you can join periodically when Danbot is sick.

Patrick Moorhead: I don’t know, my son might be creating the Patbot.

Daniel Newman: He did?

Patrick Moorhead: Pico did actually create a Patbot. I’m not kidding you. Based on all my Twitter stuff.

Daniel Newman: Your son’s a rockstar. That’s why all the big tech companies are lining up to bring him in. But I think he’s going to become an analyst.

Patrick Moorhead: I don’t know if he can afford to take the pay cut to be an analyst to be honest.

Daniel Newman: I got an idea. We’ll get around it.

Patrick Moorhead: We’ll talk. I’ll have my people talk to your people.

Daniel Newman: Have his people talk to my people.

Patrick Moorhead: Totally. That’s so good. I love that. Oh man, we are just drifting all over the place. Hey, let’s hit the next topic. Salesforce had their earnings and it was also a preview of the TrailblazerDX Conference. You know what? I’m going to let you hit the numbers. I think what I want to hit is the sermon that CEO Mark Benioff gave on the call. It truly was incredible. And listen, I’m not like a million view go viral, but I had 60,000 people, actually, I guess 80,000 people between LinkedIn and X come in and read this. But it was a sermon.

Daniel Newman: Benioff read it. I’m just saying.

Patrick Moorhead: I know Benioff liked it by the way, right after you. I’m pretty sure that you motivated Mark Benioff after you liked it, for him to like it. But a lot of his senior staff, his chief of staff, a lot of great… I must have said something of interest. And I don’t recommend, hey, you’ve got to go and look at this. But I would recommend going in and listening to this and reading the transcript. It was one of the things that really hit a sweet spot, Dan. What have you and I have been talking about forever about AI, is that you’ve got to get your data platform in order.

And what’s new about generative AI that’s different about machine learning, is you’re co-mingling data types more than ever. And true Salesforce spirit, they talk about the customer needs, and not just the customers, with what CEOs were looking through AI. And Dan, I’ve heard there’s a lot of alignment with which you’ve been saying on shows which is productivity, higher customer value. And that’s something that I hit on a lot. I call it stickiness.

And finally increasing margins, which really is a result of customer proximity and lowering costs. And it was good. But we went right after what he characterized as all amalgamated stolen public data sets without saying, how do you say OpenAI and Gemini from Google without saying Google and Gemini?

Daniel Newman: Just real quickly, there is a truth to it. There’s two sets. There’s the data that all these companies have used that they’ve taken every publicly piece of available data that they could scrape off the net, and they’ve used that as a training set. And then, there’s companies that are building things based on proprietary training sets. And who have we not from the very beginning said where the real value of this is going to lie?

Patrick Moorhead: Yeah, the real value is just what Mark said, right? And the only two models I’m aware of that actually cite their data sources or those from IBM and those from Salesforce. I had my AI model expert Paul dig into is this legit? But Salesforce actually has their own models. You want to bring your own model, you can bring your own model. You want to use the Salesforce model, you can do that too. It was good.

And even made a pretty funny comment about hallucinations are not a feature. And he talked about that airline’s chatbot story when the chatbot actually made up some offerings that didn’t exist. And the end user took him to court, and the airlines apparently had to actually pay what the chatbot offered. The company liability from-

Daniel Newman: Remember the free truck?

Patrick Moorhead: I remember the truck, I don’t remember the airline that he went through. He didn’t name names on this one. But it was pretty good. And then, he talks about the ecosystem. Essentially trapped data inside of Snowflake, Databricks, Microsoft, Amazon, Google. He said, put your hands up if you’re using Snowflake every day out there. It was just absolutely hilarious and true. And Dan, what did you and I say two weeks ago on the Cloudera stage? Which was essentially, we didn’t use the word trapped data.

But we said having data that’s spread across on-prem, colo, private cloud that’s on-prem somewhere, and public cloud and SaaS. And that’s trapped data and it’s trapped data gets back to the co-mingling of different types of data with GenAI. Hey, did I love this just because he’s affirming what you and I have been talking about all the time? I don’t know.

Daniel Newman: Well, you know, Pat, it’s not a topic without a victory lap.

Patrick Moorhead: Totally, totally.

Daniel Newman: It never makes sense.

Patrick Moorhead: Possibly my favorite, which is what he said about NVIDIA, he essentially characterized NVIDIA as being the Levi’s jeans of the gold rush and who’s the gold? It’s Salesforce. Then he said, “I love NVIDIA, by the way.”

Daniel Newman: Yeah.

Patrick Moorhead: So it was classic. Getting down to brass tacks here. Data Cloud is the punchline, right? Data Cloud is the data and metadata service that is, by the way, the fastest growing product ever in history. I didn’t get the stats on if that’s a percentage, dollar, what it is. 25% of fourth quarter deals over a million dollars had Data Cloud in it, 7 trillion records ingested in the fourth quarter. It’s a big deal. And again, you think of Salesforce as CRM, they’re going for it. They want Salesforce Data Cloud to be the data cloud for all of your data.

Now, what they could be doing better, which again, I don’t think they do a good job at, they don’t do a very good job explaining that Data Cloud is irrespective of where your data is. How do I get this on-prem? MuleSoft has a lot to do with this. There’s APIs. But I really think they need to go the extended the extra mile and do better talking about how you can leverage on-prem data. Because what is the biggest question that we get from enterprises, Dan? How do I activate my on-prem data in this generative AI world, right? Is it RAG? Is it something different? Is it some API? Is it metadata that I have to create on-prem that I ship to the cloud? It’s a big question.

The end of the sermon, Benioff said, “Hey, there’s nobody else out there that has anything like this. Text me or email and tell me what you think.” And let me read this. “Because if you see anyone else being able to deliver on the promise of enterprise AI at the level of quality and scale capable of Salesforce, I’ll be very surprised.” Anyways, check out TrailblazerDX. I’ve got my data analyst Robert Kramer attending and I’m looking forward to it.

Daniel Newman: Well, that was a sermon.

Patrick Moorhead: It was my sermon on the sermon.

Daniel Newman: I appreciate it very much. I maybe even cited him a few times in calls we had with some other CEOs. Because we talked to a lot of the CEOs of these companies this week that reported, and especially in the infrastructure side, and on some of the AI hardware side. And asking those questions. Pat, NVIDIA’s 80 to 85% of these AI project bombs. They’re controlling the entire margin and keeping all that margin.

And so these companies are talking about AI, but it’s like how well are they doing from selling AI servers? It’s clearly, we’ll get to Dell later, it can help when you report it correctly. But when you’re talking about operation and contribution margin, there’s a pretty large gold rush to be made on the inference side of things. And the inference is going to be done on the data that’s going to be coming out of the enterprise.

So we had a great conversation this week with the CFO of SAP. We’ve had some conversations with folks at Salesforce, a number of conversations with the leadership at ServiceNow. By the way, we’re going to have an announcement around that, something there pretty soon. And they’re building the software that is going to be enabling companies to be really profitable and productive and there’s a lot of profit in that path. The profit scale in software is huge.

And by the way NVIDIA gets this. Sometimes to Mark, like he doesn’t get, is I actually said a long time ago that NVIDIA’s valuation was trapped in its software, its systems, and its frameworks. And the hardware is just the thing that goes out the door. The biggest risk that they have besides margin contraction from competition is margin contraction from competition that builds frameworks and software that allows people to develop applications for AI that don’t require their really, really expensive hardware.

Patrick Moorhead: Are you thinking about more like ServiceNow?

Daniel Newman: Well, that was what I said. ServiceNow is a for instance. They’re certainly partnering with NVIDIA deeply. Everybody is. But there hasn’t really been an alternative. But Mark is on the right track with what he’s saying. But unfortunately, like my op-ed about NVIDIA, it’s going to depend more on how it ages than how it sounds right now. Because right now it’s provocative. Longer term though, the truth is if growth does contract and slow, and then dollars in AI starts to move to Salesforce, for instance, where the money that’s being made on the margin is, hey, we’ve added all this data cloud business and all this GD revenue, and our customers are spending 35% more on average.

They’re bringing in tons and tons of data into the data cloud, running all these applications expanding to use more of our application. So it goes back to the Copilot for finance. It’s an application of AI, but how does Microsoft make money? And we know that it’s $10 per, $35 per for Copilot. But when you have hundreds of millions of users, that can be a really, really attractive business model for these other software companies. That’s where it’s, hey, how quickly can they ramp revenue, add to margin, et cetera. Oh, by the way, they beat. They beat.

Patrick Moorhead: Yeah, I think the-

Daniel Newman: I’m not going to dive too much into the earnings. Because you know what, I think this was a way more interesting conversation that everybody can read. But they beat on the top, they beat on the bottom. I believe it was a muted guidance. It was a softer guidance. And I think that’s why the company didn’t get a huge boost from it. One of the things I said in one of my comments to the press was basically I expect a little bit of talk about the AI contribution to revenue.

It sounds like he got around it a little bit, Pat, I didn’t get to listen to the whole call, with his comment about the fastest growth. But again, my thing has been fastest growth is one thing. Fastest growth plus very specific like Azure added 3%, 6%. Dell, 40%. Order book, really specific numbers. I don’t think we quite got there yet, but it’s getting closer.

Patrick Moorhead: He didn’t. And they got got some really good questions on that. And that is a question. Like, wait a second Mark. If the AI is so great, why are you still in 10 x percent growth range? And I loved his answer. And it makes a lot of sense. What do we always say? You’ve got to get your data platform in order before you light these things up. And that’s exactly what I think his customers are doing, is getting your data lined up first, and then activating it. Great conversation, man. We are going to be off for the next two hours.

Daniel Newman: Yeah. All right, dude. I know you’ve got to run soon.

Patrick Moorhead: No, no, no, no. And anyways, let’s-

Daniel Newman: I woke up early for this. I want to ramble a bit. You’ve kept me on-

Patrick Moorhead: Dude, I am not asking you to not ramble.

Daniel Newman: I’m kidding. I’m kidding.

Patrick Moorhead: But hey, let’s jump into Intel’s Altera did a spin out and brought new mid-range product out. What’s with all the excitement of FPGAs now?

Daniel Newman: Look, Pat, there’s a couple of things going on. This is a reminder. Altera was a company that Intel acquired years back. Became their PSG group. And now just this last what, was about a year ago, they announced that they were going to spin the FPGA business back out a little bit in the style of what they did with Mobileeye. Where they spun it out but yet still track and hold the majority of the stock. The way it’s pronounced is Altera and Intel Company, but it is standing alone.

It is being run by Sandra Rivera. Sandra is someone that we’ve worked very closely with. Most recently ran the DCAI business for Intel. She’s at the helm. They are planning to, it was pretty clear from the onset of this that this will be another public company. I think a lot of this comes down to, Pat, the desire. Let’s talk about a company like Lattice Semiconductor, which 13, 14 of the last 15 quarters has shown remarkable growth, high margins and has operated really in the low to mid-end range.

So all these other companies like Xilinx and Altera played a little bit higher up in the range. And I think Altera sees the opportunity. Pat Gelsinger sees the opportunity, Sandra Rivera sees the opportunity. That the field programmable, which is the FP, is an important design right now as companies… The ASIC, sorry, there’s so much to talk about, man, my brain is running all over the place.

Patrick Moorhead: Dude, its great.

Daniel Newman: It’s this really sexy topic right now. The Rockchip, the Inferentia chip, the SambaNova chip, and then, of course you’ve got the TPUs, you’ve got the suspected NVIDIA getting into some of this themselves. You’ve got Microsoft doing it and peers partnering it. And the thing about the ASIC is it’s really hard to do, takes a long time, and if you make a mistake, it’s not very forgivable. Not to mention Intel, what they’re doing with Geti.

The field programmable isn’t going to be necessarily the replacement of that, but for certain workloads it is an incredibly robust way to build something that has some flexibility. Think about the in-between, the full programmability of a TPU, think about something that’s more like a more specific chip use case that still leaves an amount of programmability into it. The opportunity to do this, at the high end, you can do almost anything you want with this.

It’s very expensive. Xilinx was a $40 billion acquisition for AMD. This is a very valuable type of technology. But in the mid and the lower range, being able to do a number of different of programmable things, easy to incorporate AI, be able to play in that segment, be able to operate on top of open frameworks like PyTorch and TensorFlow, being able to work against standards, whether you’re building for connectivity and ethernet, or memory and CXL.

There’s just a lot of capabilities top to bottom in this. I think they see the big opportunity in the business. They see the growth in the category. They actually see the fact that there isn’t a known large competitor in the wild. There’s large competitors that are business units inside of businesses now, but now they can be a 100% FPGA-focused company in the wild that’s putting mega resources.

And I don’t think this is so much shots fired at our friends at Lattice Semiconductor, but I do think that this is a clear signal of intent that they see them coming up the stack and how successful the company’s been able to perform and saying, we’ve got great assets, we’ve got great historic research, we’ve got a strong go-to-market sales force, and we see value in programmability.
And I think it’s also just showing that the category as a whole has a lot of upside, like I said, across many things. Low power, networking, communications. And then of course I mentioned AI. I’ll leave the launch of new products to you in the mid-range, Pat, leave you with that and of course whatever you want to add about the overall launch of the business.

Patrick Moorhead: So just stepping back here, what are FPGAs used for? Two things. They’re the on-ramp to ASICs, meaning a lot of the time, or a CPU design. Before you harden something and you go from simulation to creating an FPGA to then creating hardened silicon. For instance, when I was at AMD and we did Opteron, we created an FPGA design, which was gigantic by the way, to get closer in off of simulation before you spend a ton of money hardening that silicon. FPGAs are also used as the main brain. It can be used as compute, it can be used as IO, it can be used in many different AI applications.

And then when you add on top of that putting an FPGA plus some hardened silicon like for IO or an AI block, it gets even more interesting. And the trick has always been to come up with the right software because it was hard to program these things. And sorry, the other application can be when you have a standard that’s midstream, like all the initial 5G silicon that went into Wireless Edge were all FPGAs.

And then after the standard got fully baked, all those chips got, most of those chips got transferred to an ASIC. But that’s where it sits in. It’s a lot more programmable than an ASIC. And its also time to market is probably a year quicker than an ASIC. But it’s not as, sorry about that folks, not as programmable as a-

Daniel Newman: No sneezing on the air.

Patrick Moorhead: … as a CPU. But anyways, with that background, I’m going to give hats off to Lattice who really I think kicked off all of this competitive action. And I don’t think we would’ve seen this activity from Altera without it. Because Lattice came in with brand new designs on the low power, low compute capability, and they also launched a brand new mid-range that they’re getting a ton of designs on.

So I think that really motivated the rest of the industry to move here. Altera has four different layers. They’ve got 9, 7, 5 and coming soon is 3. Agilex 3 competes directly with what Lattice has today at their low power. And the Agilex 5, which is mid-range, is now broadly available. Competition is good and they’ve got 3, 5, 7, and 9 for all these. I guess the question is how quickly can Altera get refocused on this and wake up every morning that this is all they do?

And the reason I bring this up is because Altera for many years inside of Intel, the thesis was we were going to put FPGAs inside of Xeon processors. And that didn’t end up panning out very well. How quickly can the company get focused on this? We’re going to have to see and then, by the way, AMD Xilinx, what do you have up your sleeve, and are you going to focus and bring out some new designs on modern manufacturing techniques? Who thought, who knew FPGAs would be so exciting?

Daniel Newman: I don’t know.

Patrick Moorhead: Hey, let’s go into an earnings barrage here. An earnings cornucopia. We’re going to get HPE HP, Dell and Pure, so stay tuned. HPE, it was pretty mixed. And in fact, I appreciate the company acknowledging that. But some very bright spots on earnings per share where they beat, they had record gross margin percent and some really great progress on ARR. There were some hiccups here. Challenged quarter on quarter comparisons, that was one. They were blowing it out on the edge for so many quarters, right? 50% growth, 40% growth. And that’s tough.

And we saw with Cisco slowing, well, actually let me turn that back. Cisco had booming edge network and HP talked about slowing campus network demand. I don’t know if it’s share shift, I don’t know exactly what’s going on here, but I need to do the double click on there. And we heard from Dell limited GPU supply availability.

Anyways, this doesn’t change my long-term prognosis on the company. This timing of large AI system acceptances is a challenging thing. Essentially what that means is either they can’t get it to work or they can’t get it to work correctly. I think this is the second or third quarter that this has come up. HPE has some of the, well it has the top performance, high performance computer system, but it has a bunch of them in the top five. A lot of good but pretty mixed as well and very muted response from the street.

Daniel Newman: Yeah, look, the new normal for this quarter has been revenue deceleration with good bottom line management. And that’s what solid leadership teams are doing right now. They’re working against the backdrop of a still complex macro. Let’s be very clear. It also works against the backdrop that guidance has been adjusted. When we miss right now, we’re not missing against what were higher expectations that came from a few years past.

The last year or especially most of early ’22 or sorry, early ’23 and late ’22, was the beginning of what I’d say an adjusted guidance period. It’s funny, I saw something on Twitter and it was Brian Sozzi from Bloomberg. No, I think he’s from Yahoo Finance.

Patrick Moorhead: Yahoo Finance, yeah.

Daniel Newman: And he put this out there and shared, it’s interesting. He said there’s Mag 7 stocks, and then, there were the other 493 doing something about the S&P 500. So he looked at earnings growth at the end of Q4. And so it was Alphabet up 51%, Amazon up 304%, Apple up 13%, Meta up 197%, Microsoft up 26%, NVIDIA up 489%, Tesla is actually down. The magnificent seven on average at 56% earnings growth, the entire index had an 8% growth. And if you took the seven out of the index, it didn’t grow. They were negative.

Why I’m saying that is that’s the 493 companies doing something else. So they actually did good on earnings overall by being able to beat, but the lack of earnings growth is actually the standard now. That’s why you’re seeing only a very small number of companies pop. This is not a widespread rally. This is a very narrow rally. You’ve got Supermicro, you’ve got NVIDIA, you’ve got Microsoft, there’s like 10 companies. It feels like they go up and everything else is just floating.

Here’s what I liked about the earnings. I’m just going to be a broken record. Every quarter, I say, look, the ARR order book and GreenLake business to me is everything. Three years ago, four years ago now, and I talked to Antonio on earnings day, CEO Antonio Neri, and he pointed out too. You’re shifting the business. You’re moving from more big iron to more subscription. That’s always going to be a top line offset. And you’re trying to get very, very quickly to strong ARR numbers.

They had their fastest or second fastest growth of ARR since 2019. They saw their order book growing substantially. They’re still obviously spending and investing and returning to shareholders. And they also added 3,000 customers on the quarter over quarter to GreenLake. So that density of customers for GreenLake is really, really important. So some good things in it. Look, when we get to Dell at the end, you are going to see about why the difference can be in the margins. And it depends just a little bit on what you say on your earnings call, and how much you’re specifically able to articulate your AI story right now and the value it’s creating.

And the companies that are getting really prescriptive here are getting a big result. HPE has a big influence on networking, a big influence on compute in private cloud with AI. But I’m not sure the market’s fully appreciating the AI play. And beyond the slower revenue, because I don’t think Dell was actually up on a year-over-year basis revenue. They just beat.

Patrick Moorhead: That’s right.

Daniel Newman: We’ll get back to that. But they were very prescriptive on the AI part and people were able to back that in out of the order book. All right, let’s keep going. We’re going to do the 628 today, the 725 today.

Patrick Moorhead: Well, let’s jump into earnings.

Daniel Newman: Real time, Pat.

Patrick Moorhead: Yeah, where both you and I had the opportunity to talk to CEO, Enrique Lores. We were in Spain in a hotel. I don’t know, what was it, like a conference room or something?

Daniel Newman: Yeah, like a little conference room.

Patrick Moorhead: End of the day.

Daniel Newman: It was a little conference room. Yeah, we were hiding in a conference room. Pat, we don’t like to miss these calls. This stuff’s important to us. Hey, here’s a quick rundown similar to what we just talked about with HPE. HP no longer related really in any way except history. Now they had a met the street on earnings number and they fell a little bit short on the PC number. There’s an interesting inflection here, and we asked about this, and I think you and I have the right assertion to what’s going on. The PC correction in getting back to growth based on the longer term macros, but also based on the shorter term sell-in is real.

The sell-in has been substantial. We saw big client growth numbers from AMD from ARM, from Intel, that are indicative that this cycle for HP, the client computing spend is coming back, but it hasn’t fully returned. We’ve seen the inventory burn off. This was a big part of the trend line was these companies got socked with inventory when the slowdown happened and they spent a lot of their time trying to sell off. So they had to sell out before they could sell in again.

So we’re in the phase right now where you can believe new designs are being built, chips are being shipped, that’s creating momentum. But that’s not necessarily leading to recognizable revenue in the short term. It’s leading to either A, an increase in order books for some of these companies, or B, just a more optimistic tone from these CEOs that are saying the selling is coming, because they’re having to buy the silicon, which is why all those chip companies are seeing momentum.

He did say they gained share in certain parts of this PC, which is really important. Despite the fact that they didn’t even hit their revenue, that means they still outperformed in the category somewhat significantly. Now there’s a range of ASPs and of course different companies will tell you different things. Dell will tell you they may be seeding some share because they’re focused on higher end ASPs, selling prices on units.

But I tend to believe that every company wants to win at every ASP. It’s just deciding how badly you want to win and what margin, how much cash you want to be creating. My overall take, or maybe my most interesting inflection from the conversation was you and I think have this second half, 24 thing with AIPCs that we’ve both been talking about. I think maybe what’s come to my conclusion after these conversations, because we also spoke to Dell. I had some conversations with Dell as well. I think you did. We’ve been talking with Lenovo, others.

Is when that cycle becomes bigger for the OEMs, versus when it becomes big for the chip makers. I’m beginning to believe the second half of ’24 is going to be a chip-maker boom for PCs. But that the actual sellout that’s going to be required for an HP, Lenovo, Dell, Samsung and these others to see big growth, might not happen quite as quickly. And that’s just from these CEOs. What did Enrique Lores, CEO of HP, he really sees it be more of a ’25, ’26 tailwind for the company.

Patrick Moorhead: Yeah, trying to piece this together, and I’m going to focus on the PC group, not hit the printing group. It was just pluses and minuses. Both Dell and HP saw declines. Lenovo had gains. And while Lenovo didn’t come right out and say that PCs were up because IDG or phones, tablets. The size of the phone and the tablet businesses inside of Lenovo is very small. Lenovo had a 7% growth. Lenovo seems to be gaining market share and they seem to be gaining revenue share, which is fascinating to me.

The good thing for HP though, if you’re losing unit share and you’re losing revenue share, that’s a really sad place to be, but at least they gained a unit share. What I’m still just, I can’t figure out yet is how Intel was up 30%, AMD was up 60% in PCs, and most of the PC makers were down. And I know it’s not a one-for-one. But max, you’ve got about a six-week delay. And then you would expect the forecast to be up if all these chips are coming in. It could be just a mix shift.

Daniel Newman: Channel stuffing?

Patrick Moorhead: Possibly.

Daniel Newman: I don’t know, because like you said-

Patrick Moorhead: I’ve asked this question to every one of the companies and I haven’t gotten an answer yet from anybody other than it is an offset. I’m almost thinking that AMD and Intel might be stuffing the channel with it.

Daniel Newman: The prediction of growth or buying ahead? Risk reduction.

Patrick Moorhead: But wouldn’t that be coming out in the forecast, the PC makers? Anyways, I have more questions than answers here and to put a spotlight on the AI numbers… Wonderful, I missed or my bookmark here. Yeah, Antonio said, “Hey, three years after launch, AIPCs will be something between 40 and 60% of sales.” I got to tell you, that seems just so conservative to me. But then I step back and if you look at, I think most all of notebooks will be in AIPC. It’s the desktops that are a TBD because the processor makers are vacillating on do I put this capability into my silicon?

Which by the way might pretend to an opportunity for NVIDIA to come in here and put in cards or add-on cards to do that. But it just seems very, very conservative to me. Enrique did say it would start making the impact at the end of ’24, which this makes sense, because you’re going to see Qualcomm will be in there, and then you’ll have Lunar Lake and AMD there. But I know folks more questions than answers I have provided. I normally like to be the answer guy, but I’m still doing research on this.

Hey, let’s move to one that’s I think even more straightforward and that is Dell Tech. What can I say? Dell stock was up over 30% yesterday and Michael Dell got put in the $100 billion net worth club. It is a good day to be at Dell. And here’s the thing, it did not come from a big revenue boost because revenue was actually down year over year. It was a huge EPS beat, $2.20 cents versus $1.73. Revenue, they met expectations with a slight beat. They did increase their dividend by 20% for the year. But more than anything, it was the affirmation of the impact from AI and the communication that they could have done even more.

They shipped 800 million in AI optimized servers in the quarter and their backlog doubled quarter over quarter to $2.9 billion waiting on those pesky GPUs. Congratulations to everybody at Dell. You guys crushed it. You wake up and on a Saturday and you’re worth 30% more than you were two days ago. That’s got to be a good feeling. I had that feeling a few times when I was at AMD, but I don’t directly trade in any of these stocks, so I haven’t had that in a long time.

Daniel Newman: Yeah, so great day for the company. Michael joined the $100 billion club this week on the growth. I shared when it was up 15% after hours thinking what a pop. Only to see, I could have been more provocative at 1,000 or what, sorry, at a 30% just a little bit later. Pat, have you ever, I got to say it felt very 1999 to me. The internet’s here and there’s an infrastructure company and we’re going to. Listen, Dell’s doing some really good things, but it does have a diversified business. It didn’t actually grow on a revenue basis.

Patrick Moorhead: I know.

Daniel Newman: And so the excitement, the exuberance, people wanting another trade, maybe filling another company that’s going to benefit from this. No question Dell is going to be a very important company. Dell also has, they have the opportunity to be silicon-diverse. They’re going to be clearly partnering with AMD as AMD comes out with product. I think they will be of course one of the biggest resellers of the hardware. You saw that GPU number, and the fact is it was very easy to look at the order book and back out at the order book growth margin as availability comes down. And Pat, there has to be an indicator, right? We’ve seen the H100 timeline from 11 months to three to four months, which is indicative of the fact that they are going to be able to shorten that cycle to filling those orders.

Patrick Moorhead: I totally don’t believe it, by the way. I don’t believe-

Daniel Newman: I am not convinced. But I’m telling you, if I was trying to figure out why the exuberance came off these numbers, remember good numbers against what they committed to the street. These were adjusted guidance. They beat on revenue. They always, always, always figure out how to beat on profit. They skinnied the company this quarter. Again, not really a popular topic, but a real topic. There have been some substantial cost cuts. People love that though. Look, Meta’s stock exploded when the company showed that it was willing to do what it needed to do to beat earnings.

Now there’s always the very human element. You and I have talked about this now twice on the show. And I’m not addressing that. But I’m addressing the fact that why do investors get excited? Investors get excited when a company shows it can figure out how to perform even in a tough macro path. Here’s the other thing. They did what their peers didn’t do, they beat. Even if it was an adjusted number, they beat. They beat the adjusted number on the top while the others couldn’t beat a revenue number. Even after a guide down, they were able to do that, so that matters.

They were the best performer of their class against the expectations that were set. And Pat, they were able to show very prescriptive data on their AI. It’s simple. And look, the profitability per unit on those GPUs can be calculated and tabulated and figured out. And as they move the units and if they can move more units and move them faster, which is rumor, but there is some speculation that this cycle is being shortened and they can diversify across silicon.

This AI hardware business can grow. I just don’t know if this is going to be going back to the Benioff comments. Is this margin rich enough that people can really stay excited about selling AI servers? I think the complete set of Dell services and consumption-based private cloud, and by the way, selling into enterprises. All these servers are still so much of it’s cloud, so much of it’s just going to the 5, 10 companies that are buying.

Patrick Moorhead: I think it’s Supermicro, they are 100% box pushers, okay? That’s all they do. And they’re up 20 fold in two years, and 100% of what they do is slam infrastructure into cloud providers. And interesting exercise, go do the five-year stock valuation of Dell, and look at its appreciation, and then compare it to their contemporaries. Dell’s up 370% in the past five years and their competitors aren’t nearly there.

Daniel Newman: Well, let’s keep on going Pat, because we are running the 6-600 today. The 7-600. We got a lot to say. Do you feel like maybe we had some pent up?

Patrick Moorhead: We did. We could have added three or four more. Synopsys added some really cool networking IP.

Daniel Newman: We’ll talk about that next week if it’s not too busy.

Patrick Moorhead: Yeah, we should. Hey, let’s get this last one here. Pure Storage. How’d they do, Dan? Storage is, well, NetApp was way up. How’d Pure do?

Daniel Newman: Yeah, Pure had a solid result. What are you looking at? Well, their revenue growth slowed. They were 3%. So their growth, at least they’re up year over year. With Pure, there’s a certain subset of numbers I tend to look at based on its business and where it’s seeing growth, and that’s been one, the ARR focus of Pure Storage. Two, has been their continued focus on being the most liked company in the industry, which has been solid for its customer growth. And then, of course, I’ve been watching their cloud product growth. Which is the Evergreen product. Those are the three numbers I came into this really looking at, Pat. ARR 25% growth. They’ve now hit $1.37 billion in subscription revenue, which is just a slight bit higher than Moor Insights advisory contracts. I had to do that. Sorry.

Patrick Moorhead: Dan, don’t undersell me, Dan.

Daniel Newman: Sorry, I didn’t mean to doubt you. Then the Evergreen one business saw $400 million TCV and the contract value of the cloud business. And Pat, here’s the more important thing. They’re 100%. So they’re seeing their new product, their new cloud product, getting strong adoption on a year-over-year basis, and their net promoter score stays at 82. Highest in the industry, Pat. And I don’t know if people fully appreciate how hard it is to have a net promoter score over 80. And so a lot of companies just don’t talk about it. I’ve got 100, but very likable. But in all serious, these are the three critical metrics that I’m paying attention to. What else? I do think that they’ve been very busy talking about performance, Pat. This is something you and I are very interested in. As we pay attention to Signal65 business that we have and the overall testing. The company put a bunch of outcome-related data in their presentation of performance.

I’ve got to say, when we talked to Charlie Giancarlo, next week, I think we’re going to talk to him about these results. I got to ask about this. They put out a two to five time less power in space, 10 x versus existing hard disk systems, 50% lower TCO on a typical configuration, 10 x more reliable, 10 to 30 service visits less, five to 10 times less labor to operate.

Patrick Moorhead: Boy, it sounds like a Signal65 pressure.

Daniel Newman: Hey, Shrout, where you at, man? I know we got to test this stuff, but I love that they put this in their thing. In fact, then they went on to do more. They basically went on and said Pure Flash consumes 80% less power than traditional storage systems. Which again, there’s something to do there. But a lot to test here, Pat. But look, the company’s doing great. In 2024, they’ve seen their percent of the Fortune 500 customers rise. They’re up to 60% now and they added 349 new customers. Their trajectory is very good, strong company. We’ll probably have more after we talk to Charlie, but good week for Pure Storage.

Patrick Moorhead: Yeah, their stock is up 35% in the past five days, which is eerily similar to the advance that Dell got. I think this is all about AI. I like to call it a proof of life, right? Dan, you and I have talked to a ton of CEOs and CFOs lamenting on, hey, my AI is real. Why aren’t we getting credit for it? I’m an industry analyst, not an equities analyst, but I’m smart enough to know that the street is wanting a proof of life. Show me the numbers.

That comes into two forms. That’s one form that says, this is the percentage of my AI business today, and this is going to be my percentage of AI business. We saw big pops from companies like Broadcom and Marvell. What we saw here with Pure Storage was a great explanation of an eight-figure deal with Evergreen and one from a specialized GPU cloud provider. And that’s probably either CoreWeave or Lambda Labs, that was an end to end piece there. And AI was mentioned.

Actually this, let me scratch that, at least 14 times. The AI is picking up things like the AI and container, but if I look at just the AI, I think this was what investors wanted to see, to put this company in the AI category. I’m going to step back. I’m going to end on what I think is a masterclass in growth. I think Pure Storage, right? That they come out in a niche market when they started with a very radical concept of being very software-first and a bladed type of architecture that ended up to be very upgradeable. Where you didn’t have to upgrade the entire storage system. You just had to upgrade Blade or do a software upgrade. And over years, they’re now block, file, and object storage. They’re now on-prem as a service, and then even offering their software capabilities in the public cloud. And that’s Evergreen and Pure Fusion.

And then layering on top of what a lot of people are doing is they’re going after a data management play. Which is really interesting. And that’s from an acquisition that they made from PortWorx. I could very much see, and there’s been a little bit of talk on this, which is, hey, you’ve got the data there. Why don’t we do AI queries right there on the storage software itself?

And I think that’s going to be the next type of thing that you would expect. We’re seeing it from a lot of storage software plays like Rubrik and Cohesity. And here we’ve got Pure that’s operating, going from a different part of the stack into doing even more software. Anyways, I’ll end with really looking forward to our call next week with Charlie Giancarlo, CEO of Pure Storage. Dan, we did it an hour and three minutes.

Daniel Newman: It wasn’t as bad as when we started. We started out very wild. We could have gone three hours. Don’t you have a flight to catch?

Patrick Moorhead: I haven’t even packed yet, dude.

Daniel Newman: Did you decide which plane you’re going to take? Are you going to take the G or the Falcon or which one?

Patrick Moorhead: So no, I upgraded to a G650 as I’m waiting for my G700. I’m really excited about the 700. It’s the fastest production airplane ever. Us getting The Six Five across the country.

Daniel Newman: Yeah, I’m working with Lockheed right now to design something. I haven’t found anything that I can buy commercially that quite meets my standard.

Patrick Moorhead: What about, what’s it called? The Big Boeing Jet?

Daniel Newman: Yeah, the BBJ is big, but I need something faster. So I’m actually talking about building a fighter jet that has about a 12-seat capacity.

Patrick Moorhead: That’s cool.

Daniel Newman: Luxury on the inside, pace on the outside. It’s like, what would you call it? It’s like the Gotti of planes.

Patrick Moorhead: Be careful, buddy. The IRS is on the hunt.

Daniel Newman: On the hunt. Yeah. I’m going to have it labeled in the order as a touring bus.

Patrick Moorhead: It is a bus. Isn’t B in BBJ bus? One of them?

Daniel Newman: Big Boeing Bus.

Patrick Moorhead: Boeing Bus Jet. Boeing bus with a jet? With a jet engine?

Daniel Newman: I don’t know, buddy. But this is all good man. Listen, have a great trip. I’m glad that you’ve backed your trip up with a trip, with a trip, then a trip. You know what I mean?

Patrick Moorhead: Yeah, man. Hey, I appreciate everybody tuning in. Hit that you-know-what button. I can’t say it. We’ll get deprioritized. Connor, man. How you doing buddy?

Daniel Newman: Wait, would you sleep past 8:00 on a weekend?

Patrick Moorhead: I love we’ve got a Gen Z that gets up before 11:00.

Daniel Newman: I get up before 11:00.

Patrick Moorhead: Yeah, but you’re a millennial who wants to be a Gen X.

Daniel Newman: I’m kind of-

Patrick Moorhead: I got that.

Daniel Newman: I’m Gen Z though, I’m young.

Patrick Moorhead: I know you always want to call me a boomer, but I’m clearly, clearly well in the Gen X by eight years.

Daniel Newman: I just don’t want to be trapped in the same generation as you.

Patrick Moorhead: No, you want it. Dude, you’re so Gen X you can’t even stand it. You just don’t want to be the forgotten generation. I get that.

Daniel Newman: You’re triggering me, Pat. I need to go find a safe space.

Patrick Moorhead: No, I’m totally going to go find my safe space. I’ve got to get my luggage packed first, and then I’m going to crawl in my teeny-tiny airplane that I wish was a G700.

Daniel Newman: Yeah, gotcha. All right.

Patrick Moorhead: I hate flying Southwest, man. It’s terrible.

Daniel Newman: I fly SWA. Moral of the show. All right buddy. All right everybody.

Patrick Moorhead: Thanks everybody.

Daniel Newman: Bye now.

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.