We are Live! Talking Zoho, Arm, Cohesity & Veritas, Apple, Google, Intel

By Patrick Moorhead - February 13, 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. Zoho Day 2024
  2. Arm Q3 FY24 Earnings
  3. Cohesity & Veritas Deal
  4. Apple Vision Pro First Impressions
  5. Google Goes Gemini
  6. Intel IFS – NVIDIA Tie-up?

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.

Watch the episode here:

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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: We are live again, it’s Friday for The Six Five Weekly Podcast. Dan and I are sporting the merch, and I am hearing through some meetings and meetings and planning and meetings that we’re actually going to have a merch store. Pretty excited about that, and since I’ve lost half a human being and weight, our clothes just fit a little better, but you know what hasn’t changed though, Dan? My really short torso. This fricking vest goes down to the middle of my-

Daniel Newman: It goes down the middle of your thighs. It’s funny besides the fact that I’m the host this week and you kicked us off, but you know what I really appreciate that, is that the other day when you and I were sitting with Sridhar, my wife said to me, she goes, “Did Pat get shorter?” Just saw that picture. I said to her, I said, “This is actually the perennial, persistent, pervasive debate you and I have,” and that’s all about how do we make ourselves look more even in height when you have 80% of your height in your legs and I have 80% of my height in my torso, and I said, “I think I’m just better for TV because I always-”

Patrick Moorhead: You are, and we should be working on my exit package from The Six Five because of that.

Daniel Newman: I’ll give you the eject button, buddy. By the way, the merch is looking good. I’m sorry about the down … Actually, for a number reasons, this particular brand of us just is very, very long. So I guess it’s that question mark of style. If you tuck your shirt in, it’s weird, but since I always wear my shirt out, sometimes it’s good to have it a little longer so the shirt doesn’t come out the bottom, but, hey, this isn’t a fashion show, is it? This isn’t a fashion show.

Patrick Moorhead: I don’t think so. By the way, sorry for kicking this thing off.

Daniel Newman: No, it’s fine. You know what? This gave me a new thing for us to squabble about. I hear a lot that people really don’t come to the show for the analysis, they come to hear us banter. So whether you’re here to hear us banter or you want to get the best insights and advice and analysis, not financial advice, by the way, on what’s going on in the tech industry, Patrick and I are here for you almost every Friday, and if it’s not Friday, it’s some other time during the week. We like to pick the six most important technology stories, at least those that we think are the most important, and we like to talk about them for five to 15 minutes each, just depending on our mood. That’s actually why it’s The Six Five, six topics, five minutes. Sometimes I have to tell that story over again. So periodically, I feel like it’s important to drop it in. Episode 203, we’re dropping that back and so people understand the origin story of The Six Five.

Listen, we got a great show this week, a lot to talk about. You and I made a quick jaunt to the southern border. We weren’t there for political reasons. We were there because transnational localism, and we’re going to talk about Zoho Day 2024. We’re also going to talk about a incredible earnings report from Arm that led to a … I don’t know, I’m not going to tell you because if you don’t know, we’re going to tell you in a little bit. Then we’re going to talk about a pretty substantial tie-up of two mega players in the data protection space. We’re going to talk Apple Vision Pro, and this is going to be a good one because I don’t think we’re going to talk about anything but Pat’s use and how Pat is using the Vision Pro. I’m very interested in this. I’ve been following Pat around with my GoPro to watch him use his Vision Pro and we’re going to make a documentary about this. We might put it out on The Six Five Connected with Diana Blast. It’s going to be a lot of fun. Then we’re going to talk a little bit about some updates from Google on its Generative AI. Something’s happening to Bard. Bard. Bard? Bard.

Patrick Moorhead: Bard was always a terrible name.

Daniel Newman: Since this was a lighter news week for whatever reason, we’re going to end up talking rumors. We’re talking a little bit about a rumor, but it’s a rumor that’s coming to … It seems to be coming to fruition. You hear it once, you hear it twice, you hear it three times, you hear it 300 times, and you start to go, “There might be something to that rumor.” We’re going to explore whether or not there is in fact something to that rumor. So Pat, that’s the longest introduction I’ve ever done on our six topics. Usually I just name the companies we’re going to talk about and then I get right after it.

Listen, we got to keep iterating and innovating on this show, and if it’s banter you want, it’s banter you shall get, but if it’s advisory and analysis and insights, then listen to Pat. He’s got all the good stuff. All right.

Patrick Moorhead: What’s up Ron Westfall? Coming in, baby. Coming in hot. What’s up buddy?

Daniel Newman: We call him Wreck-It Ron. Sometimes we call him the fall guy, but whatever we call him, we call him when we need to know all things 5G, telco networks, IoT. Resident smart guy, follow all his insights over the future and group it on The Six Five. All right. Pat, quick disclosure, disclaimer. I’m sorry I got to do this. This show is for information and entertainment purposes only. While we will be talking about publicly traded companies, we will not be giving buy ratings and we will not be setting price targets and we will not be offering financial advice. So please just let us talk about this stuff. Listen to what we have to say. We’re bringing it from an industry perspective. We are not equities analysts, don’t claim to be, don’t pretend to be, but we both did go on TV this week to give our technology insights and we’ll talk about that in the show.

All right. First one, first topic, first thing, Zoho Day, not a publicly traded company, but it was a lot of fun. We heard from the CEO, Sridhar Vembu, who we brought, we were the first to sit down with him in a Six Five interview, and you’re going to have to click the link. We’ll drop that later when it goes live. Great conversation. Sridhar does not come to Zoho Day to talk all that much about Zoho itself. After doing this for a couple of years, I can tell you Sridhar likes to focus on these bigger, broader, mega topics trends. He likes to talk macroeconomy, geopolitics.

This year one of his big focuses was transnational localism. Last year, it was privacy, which is still top of mind for Sridhar, but what I really loved about the conversation, Pat, we had our teams there. They spent multiple days and it wasn’t a big launch event. It was a focus on the Zoho business, Zoho One, the distribution of products. This company really is set out and designed to be that one-stop shop for small to mid-size companies and over the years has grown into larger and larger enterprise use cases, whether it’s ERP, CRM, supply chain, AI, silicon. This company, data management, privacy, web browsers, collaboration, they have a tool for everything, very unique business approach.

Sridhar really spent a lot of his time talking about two things, how the economy is going to continue to grow with a significant amount of the cash creation and business valuation all going into a few companies, splashed a really interesting slide about the daily cash flow created by just I think a couple of companies. Maybe it was like Google, Microsoft, and Apple. Ironically, he made the call that the two companies last year, that one were Microsoft and Apple or something, you and I screamed out, “NVIDIA!” I don’t know what happened, but we both thought that was interesting, but I guess maybe, again, from a different seat, different perspective, different place.

In the sit down, the interesting mega theme that he chose this year, this transnational localism, Pat, was all about bringing economic value to economies that can support lower wage earners, lower cost of living, lower real estate valuations, and he was pointing to the fact that Zoho was making substantial investments to be in McAllen, Texas. So McAllen, just for anybody that isn’t familiar, is like the southernmost point in Texas. It’s a border city. It’s a good size. It had pretty much everything, restaurants, shopping, that you would need. It’s not what you’d probably see on an average CNN clip about the border. You didn’t see the border wall, you didn’t see a line of people crossing, you didn’t see all the craziness that you’re seeing in the news right now, but what you did see is a city that you can probably live in, Pat, for 20% of the cost of living in Austin to buy a home.

Sridhar was really focused on as the ability to buy a home continues to become harder, you’re seeing reproduction rates go down. That was a correlation that he made that was very, very interesting. People aren’t having kids. They’re not sure they can afford a place to live. These are the things that he’s thinking about sharing and what he’s trying to do with Zoho, whether it’s the work they do in Southern India outside of Chennai, the farming that he likes to talk about or it’s the bringing the Zoho often is in events into these smaller cities is connecting technology and the growth of the technology is going to bring to smaller economies to make work more affordable.

Pat, I guess I’ll just say the correlation that’s really interesting is you think about Texas itself, we are a microcosm of that same concept because moving from Silicon Valley to Texas, even though Austin now has become very, very expensive, still has a proportional income effect that seems very substantial to most people that make that transition. Now, go from Austin to McAllen, I think what he’s trying to say is the distribution of workforce with lower cost of living, it is very possible to put work into these economies, employ lots of people.

I think one of the things that stuck with me the most, Pat, was when he talked about in India for $100 a month you can get workers that probably operate at a similar capability and quality people that here might make 60 or $80,000 a year. So that disproportion creates this gap that we still societally have no opportunity or no idea of how to solve. I thought Sridhar was really interesting. So the company also went into its continued focus privacy, AI, ERP, CRM, and that was a big part of it, Pat, but I always love the Sridhar conversation. I’m going to wrap there, but I always love just listening to his broader strokes of things going on in the world that most people just don’t talk about.

When a CEO of a tech company goes up in front of a room full balance, usually it is a big, “This is our big vision of our new products and technology.” Pat, I don’t know that that’s wrong. I think that makes a lot of sense, but it’s also different, fun, and interesting. By the way, Zoho has built itself into probably around a billion dollar company on annual revenue by being a little bit quirky, a little bit different and solving problems for a very unique audience, and it’s working. So a lot of credit to them. Check out the conversation when we post. It’ll go live.

Patrick Moorhead: Zoho is one of the most unique companies out there from my point of view. The conversation with their CEO is very unique, reminded me if I could pick a CEO that whose conversations are closer, I’d probably pick Michael Dell, Michael Dell and Jeff Clark, the one two punch. Jeff really hits products hard and Michael is the statesman and he’s talking economics, he’s talking culture and things like that. Now, Michael does love the products, and if you ask him, he has an incredible amount of detail around it and, like I said, unique. Here we have most companies and I’ll say Zoho’s biggest competitors who would probably be Salesforce, NetSuite, and SAP, folks like that, and their propping up, standing up big outposts in major metropolitan areas.

This transnational localism, I think a great example was nearly a decade ago when Zoho set up shop in Austin when it wasn’t this behemoth of a city, and the way that I read McAllen is, Austin might be the US headquarters, but McAllen is likely going to be where all of the action will happen. You get the community excited. Who knows? You might get some tax breaks. Cost of labor is a lot less and that doesn’t mean that people aren’t going home with less money. It just means the cost of living might be 50 to 60% lower than a major metropolitan area. So it totally makes sense.

I thought the AI conversation was interesting, Daniel, for nothing other than it didn’t seem very impressed with the capabilities and that, again, again, I talk about Zoho being the … I’ve never heard a company with that point of view. My first read, Daniel, is that it’s maybe because they haven’t figured out how to do it cost-effectively. Their pricing approach is very interesting, and you will not pay more money to get AI-infused results, very similar to a Zoho, sorry, not a Zoho model, but a Zoom model. I think Zoom and Zoho are one of the only two companies I’m aware of, I’m sure there are more who isn’t charging more. SAP does, Salesforce does, Microsoft, Google, as we’re going to talk about a little bit later.

I would’ve liked a little bit more product like new product discussion and announcements, but that’s just me. I’m a product guy, wanted to see what was coming out, but my guess is that Zoholics is going to be the big place where they’re going to do that. Stay tuned for Zoholics. The Six Five will be broadcasting from that show.

Daniel Newman: Yeah, we will. Yeah, maybe.

Patrick Moorhead: I know, in our backyard.

Daniel Newman: Hey, Pat. Yeah, I do like when shows are here. My goal is to go nowhere next year.

Patrick Moorhead: Can you imagine that? I couldn’t even imagine that. I think it’d be life-changing. I know it would be life-changing for me and my health. I am not as healthy doing all the travel that I do. My ring tells me that. My watch tells me that. You can see it. I turn into angry Pat, mourning Pat most of the time.

Daniel Newman: By the way, do you ever just feel that you don’t feel well? Are you 100? So I wonder if we’re going to turn … You know how GPS has societally turned us into idiots, useful idiots behind the wheel? I’m like, “There’s the restaurant. In the entrance right there, it says enter,” but the GPS said turn a block ago. So I’m riding on the wrong street because it’s like, “No, the GPS has to know. There’s no possibility that sign right in front …” My point is, and I’m funny because I’m a manual watch guy, I don’t have an Oura ring. I do love the tech and I played with it all, but I actually preferred and not, it’s like I don’t always want to know. You know how you and I are the opposite. It’s like you know your stressed in the moment, you’re like, “Dan, look at my stress level right now,” and I’m like, “Pat, I can see it on your face. You look fricking pissed. I know you’re stressed.”

It’s like weight. It’s like I don’t weigh myself a lot because I tell when I’m eating well and feeling well, and if I weigh myself and it doesn’t tell me what my body’s feeling, but every so often you need that truth bomb, and that’s where the data’s so valuable. So it’s interesting, we can become hyperdependent, we can completely decouple from it. Somewhere in the middle is balance, and just please don’t wear a Vision Pro around that’s got a weight scale so you can watch your realtime weight.

Patrick Moorhead: Hang on. No, I’m just kidding.

Daniel Newman: Don’t put it on. Don’t put it on yet.

Patrick Moorhead: All right.

Daniel Newman: Can you do a segment with it though?

Patrick Moorhead: Dan, I looked at that, I looked at it on my countertop and I looked at how ridiculous the case is, and I just left it right on there. It’s like a fricking giant marshmallow.

Daniel Newman: Oh, my God, it is. All right. Pat, talk about an explosion. So Arm, you and I both got to talk to Rene Haas on earnings day. I don’t think I could have expected what came next.

Patrick Moorhead: It was an absolute just explosion. Let me give you the data, but we talk about somebody does a beat, beat for the quarter, beat top line, beat on the bottom line. They did a beat, beat raise, raise. They raise for the quarter and they raise for the year. They absolutely categorically crushed it. After hours, they were up 20 some percent, which was like, “Oh, my gosh, this is amazing,” and then yesterday ran up 50%. Just crazy.

A little bit of background. Listen, we’re not equities analysts, we’re industry analysts, but I feel like we have a much better view about a company’s long-term prospects market fit, what they can do to go in and grab profitable market share. Therefore, I was very bullish on its growth opportunities of what the company could do that they came out, people were like, “There’s no way they can stay in this.” Stock went down. I feel vindicated at this point for the amount of growth that I knew that they had in them.

It’s a really simple story. You have all of the markets that Arm is in getting an overall lift from AI. So the water line is going up across data center, across networking, across PCs, across smartphones. Then don’t forget, I called the PC super cycle in the fourth quarter in January. Then you have segment share gain. So they’re gaining market share, they’re gaining market share and infrastructure. AWS, you’ve got Azure doing their custom Cobalt. You’ve got some folks overseas doing that and they’re gaining market share in automotive. It’s split between Intel and Arm, but right now, the basis is some custom chips that were MIPS-based architectures. It’s weird, but work with me on this.

Then you’ve got content gains in areas like smartphones. Well, what do you mean by that? Well, you have some people, you have small cores and you have big cores, and then you’ve got v8 version cores and v9 cores. Bigger cores, look at MediaTek, they’re putting these giant big cores in there. You pay more for the big cores than you do for the small cores. The other thing is that Arm isn’t just CPUs, it’s GPUs, it’s memory controllers, it’s interfaces, it’s buses, it’s all that great stuff.

Then you add on top of that this turnkey white glove offering that they do that says, “Hey, we’re not just going to throw some IP over the wall. We’re going to offer you IP that has been taken all the way down and qualified in a specific fab on a specific process, and we’re going to do some of the software testing and validation on this for you.” It was very clear that what Microsoft Azure was doing with Cobalt was exactly that. I will bet that AWS Graviton has a certain element of turnkey as well.

So here we are. I don’t know where they opened today. Pretty dramatic. They asked me on Yahoo Finance, Julie, “Hey, is this real?” I said, “Listen, it’s rich, okay? Investors have to be putting in their products that don’t exist yet, maybe some new markets that I am unaware of to maintain that.” I only say that when I look at the market cap of let’s say a company like Qualcomm or a company like AMD, and I’ll end with this. They asked me, “Hey, Pat, what are some of the next AI chip plays?” and my comment was, “Look directly. If you want to make it simple, let’s look directly at the companies who are Arm’s customers, and Qualcomm is Arm’s biggest customer. So I would look there for potential growth.”

Daniel Newman: You called it out, I called it out. It was really, really interesting. I’m not a revisionist history person, but I think Arm, when it first came out, was maybe trying a little too hard to have an AI story and this was right around the IPO, but of course, it was appropriate given what was going on in the market to try, but I think in the back and up their sleeve, they knew that this was going to happen. So ’23 was a really GPU-centric year.

The thing about the GPU-centric year was there were some plays for CPU. It was substantial because, again, the GPU, it’s not running the application. You still got to have those big CPU cores. That’s the whole Grace Hopper. If you wanted a proof point, NVIDIA gave you a proof point. They chose an Arm-based architecture for the CPU side of their high-performance computing offerings that they were developing.

Having said that though, the obvious part is that what’s the killer app? When we get to get to the Vision Pro, and we could talk about this some more. God, it’s dumb. All right. Sorry, but the killer app for AI is not training. Training is the enabler of killer apps for AI. So you need all this horsepower in the data center so you can train all these models. We’re going to see the continuation of both these large models. God, did you see the news this morning, that Sam Altman wants to go get 5 to $7 trillion? So he does apparently want to build patterns because there’s no way you need 7 trillion for chip design, but anyways, God, I love going on these tangents.

Patrick Moorhead: Our audience expects us to as long as we’re not droning and being stupid.

Daniel Newman: Well, I can’t promise all of that, but some of it, but the point is you see where all this heading. Well, the killer app of inference basically is heavily run on the CPU. It’s heavily going to be delivered on ASICs. It’s going to be heavily delivered on CPU. By the way, this isn’t new. Intel has been talking DL Boost for years running on Xeon AI. You’ve seen all the ASIC development from AWS, you’ve seen it coming out with Microsoft. There are some training chips, but a lot of these are inference chips. A lot of these are focused on running applications, Pat. So Arm has a really big role to play in all the computer horsepower that’s going to run side by side. So you’ve got this really, really positive growth engine sitting behind it.

You got content, Pat. You got content in every device. You got content in every vehicle that’s growing. By the way, that’s all more Arm. You’re talking billions and billions, of course, of Arm-based product content going into all these different devices. Pat, you called the AIPC surge, but I don’t think people even realize how big this is going to be in terms of expanding the amount of spend with Arm.

So they’ve got this multifaceted tailwind that’s going to be more content per device, higher pricing on royalties because they’re going to be doing more of the service delivery, and on top of what you talked about with the additional subsystems, the CSS stuff that they’re doing, which is also another revenue stream. So of course, Rene was lit up and glowing when we talked to him because he’s like, “We’re just getting to the beginning of this tailwind,” but just to confuse people, this isn’t like an Arm instead of NVIDIA thing. This is like Arm is the end play.

By the way, this tailwind is holistic because it’s going to be good for x86 too. I know people want it to be like one or the other, but when this AIPC boom goes, it’s going to go on all fronts. It’s going to go where x86 PCs are going to have an AIPC and an NPU and going to run these same apps, and so are the Arm-based versions. You mentioned Qualcomm, one of the biggest winners, Apple, one of the biggest winners. I know, I know it’s hard to say it.

By the way, all these vendors that are creating different systems and the cloud providers, Pat, AWS, Microsoft, Ampere, and Google, Ampere and Oracle, they’re all going to be winners too. So the market, by the way, I got one prediction, final note on this topic. The one reason people loved this was because for the very first time, these analysts could actually put something in their spreadsheet and start to figure out how much money Arm is going to make from AI. There’s no other reason the stock goes up 50% or more in a debt, except for the fact that people can now say, “Oh, my gosh, let’s see how they’re going to make money,” which was the question mark when Arm came out was they don’t make a lot on their licensing and their royalties. Well, they’re changing their business model.

By the way, every company that comes out IPO, you can be sure probably has about six to eight quarters that they see in their forward-looking mirror that they know they can hit targets. It’s not always the case, but you can be sure SoftBank and Arm had a good idea of how they were going to make this run and they picked a good time to come out.

Patrick Moorhead: I had to throw in a truth bomb on Yahoo Finance, basically backing up what you said. Actually, most inferences is run on a CPU, and I’m not saying on an SOC that has an NPU. That’s what nobody talks about, but the problem is is nobody can measure that. Intel can’t say X percent of this is run on this because a CPU is the most diverse piece of silicon you can have and you can’t measure it. Anyways.

Daniel Newman: Maybe we will. Measures of merit are important. We should ask Brian Shrout, President of Signal 65.

Patrick Moorhead: No, I actually think this is more in the line of your data business, to be honest.

Daniel Newman: Well, I just mean we should have some fun testing and competing all these different AIPCs and data center workloads, but we got something for everybody. You want the data? We got that too. All right. So let’s jump into a mega deal, Pat. You and I had the chance to sit down-

Patrick Moorhead: Huge.

Daniel Newman: … with Cohesity’s CEO, Sanjay Poonen, and we got to hear the inside skinny of a mega deal, Pat, in data protection tying up two of the largest players in the space and creating a, what, $1.6 billion revenue per year company, Veritas and Cohesity, and 1.3 billion of ARR. So some key early points, this is going to take some time, it’s going to take approval. This wasn’t an overnight sign deal, not like maybe in the future group buy as a company and then here we grow again. This is a serious moment of growth. There’s been a lot of competition. You’ve got Rubrik, you’ve got Cohesity, you’ve got Commvault, you’ve got Veritas, you’ve got Dell, mega player, and there’s more. This particular space has been somewhat fragmented. This was a super interesting deal. I give Sanjay Poonen a lot of credit for creativity because in many ways it was a reverse merger. They’re calling it a combination or a tie-up. Listen-

Patrick Moorhead: It’s an acquisition, baby.

Daniel Newman: It’s an acquisition. Sanjay is going to be the CEO. He’ll be guided by Veritas’ CEO, Greg Hughes, who will be a part of the board and he’ll be an advisor to Sanjay, but you’re talking about a mega company now that serves, what, well over 90% of the Fortune 100 are working with either Veritas or Cohesity, I think 96 pack of the 180% of the Global 500, a mega ecosystem, a substantial set of bars, integrators, and partnerships with companies like NVIDIA and others that they work with. Really good moment for the company, Pat. Gives them size and scale.

You know where I think it’s heading. I can’t speak to where they think it’s heading, but I think it’s Veritas private company, through its last go private effort, Cohesity definitely was on the trajectory. We heard rumors rumbling or news rumbling this last week about Rubrik going public. I think this is going to go public. I think this was the step one, do this tie up. Step two, find all the synergies. Step three, announce an IPO and, of course, make sure you get your AI story in line, get your synergies and costs in line, get your customers in line, use the best innovation. I think Cohesity had a lot of their front end speed and innovation for data protection. Veritas had a lot of that deep, long-term customer relationships, and they were deeply rooted inside of the customers.

This is a really good way to unearth a whole bunch of business. They do have overlapping products. There will be some, it looks like, spin off, divesting of certain parts that aren’t going to make sense for this tie up, and we’re going to keep an eye on how they do that with those different business units, but, Pat, cybersecurity is on the rise. That’s why I launched Cybersphere this week. We are going to start focusing much more not just on data protection, but cybersecurity as a whole. Cohesity tied up with Veritas has a good story to tell.

Great quote, by the way, in the press release. I never liked seeing analyst quotes in press releases unless they’re mine, but you really did do a good job. I think that for the 10,000 customers and 3,000 partners of this combined venture is going to be able to support. There’s a good story here. It’s always exciting to see some very strategic consolidation, and appreciated Sanjay giving us some time and let’s go.

Patrick Moorhead: The combined company size is impressive. You’re looking at 1.6 billion in revenue. You’re looking at 1.3 billion in ARR, 27% EBITDA margins. God, I love EBITDA margins and I love EBITDA cash. It’s big. What it does, it catapults Cohesity really up the chain in terms of market share as it relates to data protection. So that’s not going to be on day one when it combines.

The things that I’ll be looking out for, Daniel, integration is everything on this, and in particular, I think in this case, the technological integration of the architectures. How do you do that? Because there can really only be one architecture if you want to scale, otherwise, you’re not going to get any of the benefits of the combined companies. Then you’ve got the idea of opex integration. I’m not just talking about layoffs, I’m talking about who runs sales, who’s running finance, who’s running customer operations. These things have to get worked through very quickly.

I do have confidence in Sanjay when I look at his background and talking. He’s definitely aware that it needs to happen. His goal, obviously, is to do this as quickly and painlessly as possible on the technology side. He actually told me this in a side conversation that we had. What I like about this the most, Daniel, is it just shakes it up. We’ve already seen Commvault come out and basically AstroTurf this, by the way, exactly what I would’ve expected from Commvault or even that matter, Rubrik, talking about the integration and what it means to customers. I consider that basic selling techniques to go after your competition. So I think it’s going to be interesting. I’ll be interested to hear what Rubrik has to say, Dell, IBM, folks like that.

Daniel Newman: There you have it, everybody. There’s the news. There’s the tie up. There’s the story. Now, speaking of tying up and the news and the story, I had the chance to spend the last two days following Patrick around while he wore his Vision Pro 24×7. I even saw him driving his car with it on. It was really incredible. No, I’m just kidding. That’s an absolute farce. I have no interest in following Patrick around all day, nor do I … People might think I do though, and nor do I have interest in knowing what it would be like when you’re driving the car with that in front of your eyes, but I did have the chance to put your headset on. I have not run out to be one of the first glass holes to wear this thing, but how could we possibly do this segment and give both our positive and fruitful critique and then our typical Apple banter if we didn’t at least have one amongst the two of us. So Pat, tell everybody about what you’ve been doing on your Vision Pro.

Patrick Moorhead: So I’ve been spending a lot of time on Vision Pro here, but I want to rewind for one second. So first of all, VR and AR are not new. In 2012, Google Glass came out. I laid down, I think, 2500 bucks in totality. The whole glass hole thing blew up. They were kicking people out of bars for recording people. It actually was a very elegant design and it worked. I thought the killer app was Maps as well when you’re driving and even some cool shopping stuff when you go to a store. Then HoloLens came out from Microsoft, heavy duty AR, big capabilities in 2015, so nine years ago.

Then we’ve seen a lot of stuff from Meta big time. Meta is Zuck turn the entire supertanker around to do this for a while, and then that didn’t go great. I think realization set in that this is a long-term thing and he cruised into back into Generative AI, and I think his stock’s up 50% this year. Heck, even Berkshire Hathaway was saying, “Never bet against Zuck.” I love that statement. I can’t imagine two dramatically different worlds between Meta and Berkshire Hathaway. So it was pretty cool.

So getting in here, let me give you the pluses and the minuses. I would say the pluses are when you’re watching a video, it’s the best experience on a 2D video that I’ve ever seen, and you make it look like a 75 or 100-inch TV. I think that’s pretty cool potentially for airplanes or something like that or I think you’re still going to buy a TV, maybe, but maybe you don’t need to get one as big. I think that’s a plus.

I think as it relates to getting through it, meaning the pinching and doing what you need to do to navigate, they added eye tracking, plus some pretty snazzy finger control. I didn’t feel like it was any better though than anything that Meta with the Quest had brought to the table, and that was a little bit disappointing.

On the video side, I do think that, and then we’ll see, Apple has their own studio. This does drive a different type of media, one that is more interactive and one that’s surrounding. I can imagine watching. Again, this is nothing new. You could do this with the first augmented, sorry, virtual realities. You could watch a sports event. It’s a lot clearer, but I’d like to see the ability to maybe get on the field, maybe get closer in, and that’s going to require a pretty heavy lift of cameras and investments from all of these companies that actually produce the content.

There was a dramatic darth of apps out there. I think my favorite one, and maybe it’s on its way that I think would just be killer, would be the Calm app. This is an app to get your stress under control. The panorama, think of it as your wallpaper for Vision Pro, is stunning and it’s calming. They have one on Lake Mead that you can just chill and you can hear the birds and you’re fully immersed.

One of the negatives though, Dan, and this is really weird, AirPods Pro are not compatible and I can’t believe it. All I can think of is it was a safety thing so you wouldn’t get too immersed and you could hear a car coming to hit you maybe, I don’t know, but true VR immersion is getting more of the sensor.

Daniel Newman: Would sensors be able to tell if you’re in danger? Shouldn’t they be able to actually use all those cameras and sensors to tell if the audibility would be putting you in danger and then it could actually do a shutdown down because we could see you’re walking down a busy street and we are turning AirPods function? You would think that-

Patrick Moorhead: Dan, that’s an amazing, amazing observation. When I was thinking through this, there’s no … By the way, there’s cameras everywhere on the bottom and the top of it, but there’s no cameras directly on the side.

Daniel Newman: Do you want some lidar?

Patrick Moorhead: No, no. I know, maybe. Put a Luminar lidar on your head or something. That’s a good one, Dan, but I got to tell you, I used it once or twice to surf the web, maybe watch a video or two, and I don’t even want to go back. Again, N equals 1 here, folks, but Apple-

Daniel Newman: Where’s an idea? Give it to Pico, that’s Patrick’s son in case you don’t know, and let him play with it and give his assessment because you think they made it for us old farts or do you think we’re going to make-

Patrick Moorhead: We always go through that, Dan, but I got to tell you, the people I see who buying this, buying this and putting it up there are in their 30s and some of them are in their 40s. How many 20-year-old kids can afford $3500 worth of gear? Some. Anyways, my early read on this is that this is a development vehicle. Have you guys seen the battery? The battery’s bigger than my S24, thicker, twice the thickness of an S24 phone, and you got to stick it in your pocket. I just can’t imagine Steve Jobs ever green lighting a product like that. I’ve read Armand is the second autobiography and I just don’t think there’s any way he would ever let this pass scrutiny. So hey, if you want to find a friend who has it and use it, go into the Apple store and get a demo before you lay any money down on this. Anyways, that’s where I am, dude.

Daniel Newman: All right. Listen, I’m going to keep this short. I don’t have one. I appreciate you sharing your use and how you were using it. I did get to try yours for a few minutes. I thought it was really immersive to have the content up in your face like that, be able to watch. Sounds like I’m doing something wrong. I’m not. Listen-

Patrick Moorhead: No, I was reading something, sorry.

Daniel Newman: You have a movie and it’s just full, but, Pat, I got to … Are you okay? So you have a movie on and it’s like, do you get …. You’re talking about the Calm app and I’m thinking to myself the neck pain that you’re going to have of where … Because it’s 10 pounds. I don’t think it’s actually-

Patrick Moorhead: You can, you can actually kick back and you can put the display content anywhere by hitting the bar in the bottom and-

Daniel Newman: Yeah, but I’m just saying you’re sitting there, you do feel this thing. This is not-

Patrick Moorhead: It’s heavy. It’s heavy.

Daniel Newman: This is inconsequential.

Patrick Moorhead: By the way, it’ll fall apart, the magnetic part… No, no, I know.

Daniel Newman: I can start to see how it could make sense. Pat, here’s the thing, I could not believe it took this long to create something this large. Now, again, the one big difference is looking through versus looking, and I think I’m sure that was harder, but remember, Google Glass was a decade ago. How long ago was it? It was 10 years ago. They were a relatively lightweight pair of glasses with … So what I’m saying is we spent another decade to end up getting something that is the size of an Oculus Quest that’s designed for full immersive view. I see some of these videos of people using it, and I get it, it’s cool, it’s Apple, but are you really going to wear this thing, drive with thing … This is not a lightweight augmented experience. This is a full-on like you’re carrying a battery pack that’s the size of an iPhone max or a large iPhone.

Patrick Moorhead: Huge. Huge.

Daniel Newman: I see that people shoving it in the back to put it all … I don’t know, man. Listen, I think Rowan Trollope said something really interesting. Rowan’s a former Five9, CEO of Redis now, and he says something along the lines of people keep making the comparison to iPhone 1. He said, “iPhone 1 I started using at that time, and I’ve used it every day of my life since iPhone 1.” He said, “I just don’t see the same thing here. This is not something that people will use all day every day for forever. There’s something missing here.” My point is the utility and the weight is too much.

All right, dude, we’ve gone way too slow, way too long today. We are going to run. Do you have a few minutes to go long because we’re not going to get through-

Patrick Moorhead: I do.

Daniel Newman: All right.

Patrick Moorhead: I have a few minutes.

Daniel Newman: Let’s take a breath and talk about Google. Let’s talk about Google. Let’s talk about Bard or let’s not talk about Bard. February 8th 2024, Bard becomes Gemini. So Bard, which had a mixed beginning, launched that brought some ire, but eventually seemingly turned around and Google caught up and I was impressed with a lot of work they did with Vertex and in the cloud and, of course, the models, but a few, what, about a month and a half, two months back, Pat, they came out with Gemini. They came out with a big … Oh, good, Jesse Coulter, Ram D. said Pat has a few minutes. She agreed.

Basically, it was like a rebirth, rebrand, and that, of course, got met with some scrutiny because they highlight sizzle reel was done in a way that they wanted everybody wanted to throw a fit about, but I saw right through that. That was fine. What’s really happening here, Pat, is Google’s moving on to the next model of Google. You’re talking about a multi-decade mass investment between with Brain and all the things that Google has been doing. DeepMind. This company is far along. While OpenAI has gotten a lot of the acclaim, Google has some serious muscle here to offer.

Now, Bard has basically become Gemini, and now Gemini Advanced is the new cool. Some people might compare it to the GPT-4 Turbo or whatever you want to call it. This is the Google version of that. Now, they’re offering this to be it can be your personal tutor, your assistant, it can help you ideation, creating content. By the way, it costs, what, 20 bucks a month to get access to this. So there’s the free product, which is Bard became Gemini. Now there’s Gemini Advanced, which is the 4.0 Turbo, which is the paid thing that people can use on their mobile device and it’s available now, Pat.

Also though, Sundar Pichai, CEO of Google, came out and talked a little bit about where this all is heading. By the way, I don’t know if you know this, Pat, but since it’s public information on Twitter, I’ll just go ahead and share it. I am a Gemini and I was born on May 26th. I appreciated Google considering my personal experiences in life and naming their product after my birthday. When you have the number two analyst, according to some list somewhere, you got to think about them when you’re naming your products, but here’s the thing is this is going to evolve into another area, Pat, that I think is really important.

Two areas. One, workspace. Microsoft rules the roost here for activities. Let’s be very clear, but actually, I pervasively use Google Docs, Google Drive or not Drive. What do they call it now? It’s not Drive anymore or is still Drive? I don’t know, but I use Docs, I use Sheets, I use the presentations tool. Workspace, Pat, the ability to put Duet AI into Workspace is going to make it a more compelling product. Now, of course, Copilot is going to be the counter to that and say, “Are people going to leave?” I don’t know, Pat, but I think it’s a growing business. I think this is a chance for Google to differentiate with Workspace.

Then of course, Duet AI becomes Gemini. So that’s the updated name. So it’s Gemini for Workspace and it’s going to be Gemini is basically Duet AI. So it’s going to be a support tool in the cloud for developers to speed up coding, data protection in cyber attacks, and then of course other things that Google Cloud will build around this new Gemini. It’s really a little bit of a branding exercise, Pat, and it’s really the announcement of its next LLM. Now available 20 bucks a month, come get some. I’ll let you try it first for pay. You tell me how it goes and then I’ll pay for it.

Patrick Moorhead: Dan, that was a great rundown, basically everything I was planning on saying.

Daniel Newman: That’s fine. When you let me go first, you know you’re screwed.

Patrick Moorhead: Well, here’s the thing is that it’s not … I haven’t used it, and quite frankly, very few people in the press have used it. If you remember the previous two versions of Bard got pretty much panned and shot down, not necessarily what it could do, but how the demos were taken and they were presented to folks. So Google is going to be a player in Generative AI 110%. The only question is how much of that AI goodness and consumer love will be taken by either Apple or Microsoft.

My back end for productivity is Workspace as well, but my front end is very much, very much Microsoft at this point. I haven’t found a graceful way to do it. In fact, you and I were both working on a presentation. It lost its fidelity. It was a PowerPoint presentation being edited inside of slides. It lost its fidelity and there were some font challenges and you just can’t have that. Very successful in spreadsheets and also Word and stuff like that, but anyways, I just don’t feel like there’s anything definitive coming out of Gemini other than the paid version. The advanced version is going to be better than Bard, which is now called Gemini, and that’s it. That’s all I can add. That’s all I know right now.

Daniel Newman: There we have it, Pat. So that takes us to the last and final topic. We’re going to do a little rumor mongering because rumors are fun. So I think I shared, Pat, and this was the third or fourth time that I basically saw the deal is inked or the ink hasn’t dried or there’s a deal to be made or that basically Intel is going to be doing a whole lot of foundry work for NVIDIA. Pat, I won’t take any oxygen on this one. I’m going to let you go straight into it.

Patrick Moorhead: So I wouldn’t be surprised at all, and I put a 95% chance of this happening, and it’s not what TSMC might not be doing with COAS, which is their packaging technology for these multi-tile and anything that has to do with HBM. It’s just that they don’t have the capacity. NVIDIA is already a RAMP-C partner with Intel. So if you need to get, the defense department will buy something, it has to be part of the RAMP-C program and it can’t be coming from TSMC. So I think there is a 95% chance that this is going to be the case and hats off to the IFS folks and NVIDIA for hopefully increasing the amount of output that it can get.

Daniel Newman: Listen, Pat, I don’t think we need to spend a whole lot of time. We don’t like to spend a ton on rumors. We prefer to deal in facts, but as analysts, some of our work is to try to prognosticate and understand what’s happening and what’s going to happen in the future. I think sometimes when you see and you hear something enough, you just need to get some feedback of, “Is this real?” Well, this could be real volume. Basically, from a packaging standpoint, the rumor was could be 300,000 H100 GPUs per month. So I wrote up in a MarketWatch piece with the bull case for Intel.

Look, it’s funny how, like I said, everybody always wants things to be … It’s like an exclusivity thing. If I say Intel is doing okay, it means I’m saying everyone else is going to do badly, and it’s not that. It’s that in the world of AI, in the world of compute, all tech companies are going to grow. The market’s going to grow, cloud is going to grow. You see cloud accelerating. AWS grew 14%. Microsoft grew 30%. Google grew 26. They all calculated slightly differently. The point is is cloud is accelerating. Well, cloud’s accelerating because AI is accelerating. AI is accelerating means there’s going to be more chip manufacturing. AIPC is more chip manufacturing. Automotive, more chip manufacturing.

Intel’s IFS is a big headline in my bull case. The point is we’ve got geopolitical issues with the East. You’ve got TSMC having a lot of trouble getting people here to the US, and then what they’re building is not at the very leading edge here either in the United States. So Intel has the chance with what it’s doing. I heard that even today that the chipsack and the money is supposed to come as soon as next four to eight weeks was the rumor today. Again, we’ll see, but that we need this here. We need this here. The US needs to be manufacturing, needs to be doing packaging, needs to be part of the foundry ecosystem and needs to be helping to deliver at the leading edge.

This is good news. We want strong Intel. Of course, we want competition. Of course, we want to see Arm and AMD and all the others succeed, but Intel being strong, especially in the foundry, is good for the world, good for the technology ecosystem. Pat, we’re a little bit over, so I’m going to call it there. Great show. Had a lot of fun today.

Patrick Moorhead: It was good.

Daniel Newman: Tell everybody what you’re going to watch next on your new Vision Pro. Are you going to watch funny movies, you’re going to do the Calm app? What are you going to do?

Patrick Moorhead: If I could get the Calm app, I would do that, but I think I’m going to do an action-

Daniel Newman: It’s doable.

Patrick Moorhead: I do Google TV. If I can get that going on in the browser, then maybe that’ll be the case because Google does not have an app on there and my guess is license issues, but hey, I got a wrap.

Daniel Newman: There we go. So hey everyone, hit that subscribe button. We appreciate you joining us this week and every week, but for this episode, it’s time to say goodbye. We’ll see you all later.

Patrick Moorhead: Bye-bye.

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.