00:00welcome to the a 16z podcast I'm Michael
00:02Copeland we just witnessed the largest
00:04tech deal in history when Dell bought
00:07EMC but how does a much smaller private
00:10company Dell by a much larger public
00:13company EMC what are the technology
00:16forces at work and what are the public
00:18and private market forces at work and if
00:21you're a customer of EMC in particular
00:24how are you supposed to view this to
00:27help us unravel all of that we brought
00:28in a 16 ZJ neural partner Peter Levine
00:31co-founder and CEO of cumulus J are
00:34rivers and founder and CEO of actifi oh
00:38gosh Ashutosh the Dell EMC merger on
00:42this segment of the a 16 Z podcast
00:45welcome gentlemen so let's break this
00:48did it come as a surprise and I know
00:51this sort of news was leaking out and
00:52now the deal is public but when you see
00:56the forces at work and I'm and what I'm
00:58talking about the technological forces
00:59you know Dell had made this shift from
01:02longtime PC manufacturer the margins get
01:04squeezed out of that it's shifting gears
01:07to services you know Dell goes private
01:10with the help of Silverlake so now as a
01:13private company it's going after EMC
01:15this large tech public company what's
01:18driving this marriage do you think ash
01:22why don't we start with you well I think
01:24there has been a circular shift of
01:27enterprise IT and IOT in general as
01:32businesses start to become more about
01:34digital more about information fast
01:37becomes a new big and a the the whole
01:41notion of building the three-tier
01:44architecture with boxes all over the
01:46place and large IT organizations running
01:49around managing these boxes became more
01:53the biggest boat anchors for businesses
01:55and the consumer market demonstrated
01:58that you could actually build a business
01:59where IT becomes an accelerator and that
02:03adoption certainly led to huge amount of
02:07commoditization and inevitably led to
02:10and the thing that is as simple as that
02:13it's a it's an inevitability that
02:15happened 30 years ago with a whole new
02:18different architecture and I think it's
02:20a as a result of this big shift that's
02:22happening now and we're happening for
02:24the next five or ten years yeah you're
02:27nodding your head well I I think there's
02:30technology associated with this but my
02:32my perception is it it's probably a
02:35little bit bigger than just technology
02:37you know I was just showing Peter when
02:39Dell went private their market cap was
02:41twenty four billion dollars so tell me
02:43in what public market you're gonna find
02:45a twenty four billion dollar company
02:46acquiring a sixty seven billion dollar
02:48company not gonna freaking happen right
02:50and so with Dell going private it gave
02:54them the ability to manage their balance
02:56sheet you know in a obviously legal way
02:58but out of the scrutiny of the public
03:00markets come up with a situation some
03:03creative financing that gives them
03:04access to something that they think they
03:06need I mean clearly you know Michael
03:10Dell didn't go off and spend all this
03:11money on EMC to make a mistake that was
03:14not his goal that might end up being a
03:16mistake but that wasn't the goal he had
03:18it's some business goal in mind and
03:19because he's a private company he can go
03:22off and do that it's pretty phenomenal
03:24let's dig into that I wanted to get into
03:25the private versus public but you know
03:28you're saying he went after something he
03:30what does Dell need and what does EMC
03:33get them look I mean Dell very much was
03:38looking to chef their business it
03:40clearly over the past five years there
03:43was a clear indication moving from PCs
03:45which is a very declining market into
03:47enterprise IT right and so a lot of what
03:51Dell had done up and you know and this
03:54sort of further you know sort of
03:58substantiates their strategic movement
04:00from a PC endpoint vendor to an
04:04enterprise vendor if you think about
04:06their core competency was developing
04:08servers for enterprises right and now
04:12the other missing part of the whole you
04:16know sort of server IT consolidation was
04:19the entire storage piece so you know if
04:21you think about those two pieces to come
04:24for data centers makes a lot of sense
04:27Dells business moving from PC to server
04:30vendor now server vendor to systems
04:33vendor makes a lot of sense I mean that
04:35logic there does hang together servers
04:38and storage kind of makeup and
04:39networking make up the bulk of make up
04:42the bulk of the data center if you look
04:45at the dances that we're occurring in
04:47the market prior you had you know Dells
04:49Foy's and various forms of storage
04:51whether it was EMC partnerships
04:53homegrown partners all kinds of
04:55different variations of storage on the
04:57Dell side you look at EMC and therefore
05:00EA is into the server world so they
05:02actually most people don't know this but
05:03there are EMC branded servers you can
05:05buy they have VCE that they acquired you
05:08know wholly owned from Cisco so they
05:10have you know exercises than that just
05:12prior about three or four months ago
05:13they announced using Qantas servers in
05:15the context of VCE to sell V blocks to
05:17enterprises so these people have been
05:19dancing around each other for a long
05:21time right and you know obviously the
05:24technology folds in but another thing to
05:26look at is you know count on your hands
05:28how many people have like well vetted
05:32truly undeniably world class enterprise
05:35sales forces aren't that mean right and
05:39yeah I think you have to say MCS got one
05:40of them IBM Microsoft EMC I mean I know
05:43when I was at Cisco I was the VP of
05:45systems architecture for UCS unified
05:47computing system francisco and the
05:49number one goal was to get emc to help
05:51sell UCS because we weren't quite sure
05:53Cisco Salesforce could pull it off right
05:55well okay so you say that they're
05:57dancing around each other for a long
05:59time and I guess my question is are they
06:01even dancing at the right party where
06:03does this business shift and how are you
06:06seeing it shift in the enterprise
06:08landscape yeah well I think it's it's
06:13certainly a great question as you know
06:16data centers so notwithstanding the
06:19intent of Dell to expand to become a
06:22systems company the question is is where
06:25the puck is going on a forward-looking
06:27basis and what's happening to the data
06:29center now I've been saying and sort of
06:32the evidence is out there that a lot of
06:35the new data center architecture
06:38are more going to look like Facebook
06:41Google and Amazon and less like older
06:44you know sort of wall stock called them
06:46Wall Street data centers there was a
06:48time when Wall Street was the blueprint
06:51for the next-gen data center and that
06:53was you know gonna Cisco and EMC and
06:57Oracle databases and Sun Microsystems
06:59servers and that was kind of the
07:01blueprint you know fifteen fifteen years
07:03ago what we see now is the blueprint is
07:06coming from the likes of Facebook Google
07:07and Amazon and in those environments
07:11incumbent Hardware in particular and in
07:14the case of you know whether it's cisco
07:15EMC Dell HP there's not a lot of that
07:20hardware that exists in these new
07:21architectures so the question is is what
07:24is this merger how forward-looking is
07:27the merger clearly there is plenty of
07:29spend going on and these companies have
07:31plenty of existing customer segments but
07:34there's now the shift into hyper scale
07:37deployments where Hardware gets
07:39commoditized the software part of the
07:42stack becomes a much more important
07:44ingredient and the question is is how
07:47does this merger leverage into that and
07:49that's probably a future strategic
07:51thought that you know these companies
07:53will need to deal with right yeah I'm
07:55pretty sure you're gonna find that that
07:57a lot of those thoughts were vetted and
07:58considered during the course of of this
08:01decision I think you're right as to
08:04where the pucks going what I would argue
08:06is you know well you might have a Google
08:09or an Amazon that wants to kind of build
08:10their own a lot of people write the next
08:13step down they don't want to build their
08:14own but they want it to look the feel
08:16like they built around correct right
08:17well and look like those architectures
08:20the same architecture build your own and
08:22so you know what you know Dell happens
08:24to be a partners of ours and their
08:25aspirations is to satisfy that need
08:28yeah there's still there still is a
08:30whole nother set of people that want
08:32they also you want to go the next the
08:34other shift over which is you know I
08:36don't I don't want to buy cisco EMC blah
08:39blah blah I want to buy vblocks
08:41right right right and and so EMC can
08:44help you out with that
08:45now it's video ironic two weeks ago
08:49at the very same week in the very same
08:51week there were two events going on no
08:53one was in a previous reinvent in Vegas
08:57where you had a bunch of anarchists
08:58asking for freedom from operations right
09:02and and that exact same week there was
09:05an event in Orlando gardener event where
09:088500 CIOs from the world wearing the
09:11suits and but controlling the budgets
09:12were wringing their hands wondering okay
09:15what do I do with all this in Arcis
09:16asking for freedom and that is the
09:19reality the reality is all those CIOs
09:22are basically now but you know
09:24responding to the fact that when JR was
09:26hinting to that they are responding to
09:28the fact that my customers need the
09:31capability that that these cloud winners
09:33are provided they want operations out of
09:35the hair they want speed they want
09:38simplicity they want api's they want
09:40platforms and what that means is
09:42infrastructure becomes even further a
09:44commodity in fact at the Gardner event
09:46what is fascinating was the entire floor
09:49there was not a single hardware vendor
09:51except a small booth by EMC and even
09:55small booth by pure storage because I
09:57guess they were going public and they
09:58had a token show that there was not a
09:59single hardware vendor right and that is
10:03I think the evidence of and if we took
10:04the same example a year ago or two years
10:06ago some of these infrastructure vendors
10:09were predominant because that's what the
10:10CIO folks you know spend all out of
10:12their time and so I think that right
10:14there is an evidence of you have a
10:16customer the application people asking
10:18for freedom asking for platforms asking
10:20for api's and you have the supplier
10:22which is all the CIO saying I need to go
10:24transform IT and I need to go fill this
10:27you know quote unquote my private cloud
10:28and the way you build private cloud is
10:31focus on outcomes and commoditize the
10:33heck out of infrastructure and I think
10:35this is evidence and back to your point
10:37about you know where where does Dell you
10:41have to be the biggest Walmart around
10:43you cannot be you cannot be in a
10:46boutique store selling commodity stuff
10:48you have to be the largest organization
10:52driving volume to truly become effective
10:56supplier to to these you know large
10:58organizations trying to consume and and
11:00the put together a cloud infrastructure
11:03is the puck going towards driving
11:05efficiency or is it going towards
11:08driving innovation as far as that market
11:12is concerned I think you know you end up
11:13having a CFO baby the leader of them I
11:17guess the question also is is how fast
11:19is that puck moving I mean you talk
11:21about those 8,000 people in Orlando with
11:24this huge amount of spend that spends
11:27not going to shift overnight yeah I mean
11:29I was gonna bring that up I was I was at
11:31the Jaypee MC Tech symposium right
11:33across the street from here yesterday
11:35and they had a data center
11:36infrastructure breakout session two
11:39people stood up right after each other
11:41worth working on the same team both set
11:43of set goals both own different types of
11:45infrastructure both want api's both are
11:48servicing application developers one of
11:50them for the near future is going to be
11:52using Vblock the other one is using like
11:56we'll call it Google like infrastructure
11:58you know it's all commodity gear you
12:01know latest and greatest and everything
12:03else like that at some point in time
12:04those two groups both they both said
12:06we're gonna converge someday right yep
12:09but that day is not today yeah we
12:12believe enterprise cloud is hybrid
12:15enterprise cloud is not public cloud I
12:17think Peter was mentioning this earlier
12:19nobody is taking lift and shift and
12:21saying okay I'm done with my data center
12:23it's the reality is they will leverage
12:26whatever resources are available on sale
12:28and there's a ton of resources available
12:30on sale right now Amazon has got a ton
12:32of resources on sale
12:33Microsoft has got a you know huge vacuum
12:36that they're sucking out all office in
12:39exchange and SharePoint for sale they're
12:42giving an in fact we predict that the
12:44number one enterprise cloud in the next
12:46two years is probably going to be a zero
12:47and not not a double yes just because
12:49they are sucking up a tremendous amount
12:51of footprint of applications and number
12:54two actually might be IBM and not AWS
12:56that's what his enterprises concern so I
12:59think it's very it's very interesting
13:01from a from CIOs perspective they are
13:04looking at the fact that there is this
13:06is a buyers market I can sit here and
13:09have all these guys give me free
13:11infrastructure for the next 2-3 years
13:13meanwhile as JR was pointing out I've
13:17two years to figure out what my cloud
13:18strategy is because these same guys who
13:21took my my data and my applications the
13:23next two years are going to hold me
13:24hostage and jack up the prices and at
13:27that time I better bring my the
13:28applications back so this hybrid cloud
13:30is definitely our this is a very simple
13:32enterprise cloud is absolutely hybrid
13:35and you know the very notion that
13:39information that I have to run my
13:42business on is more than what's inside
13:44my datacenter and I have to leverage you
13:46know a whole bunch of stuff around
13:47social media around weather around
13:49traffic and all kinds of stuff
13:51inevitably makes it a platform that that
13:54spans way beyond my days I look I think
13:57that this notion of the hybrid data
13:59center one thing I would add is that
14:02there still is this trend right now if
14:05you think about sort of the the I would
14:09say the near immediate transformation of
14:12the data center even though things even
14:15though data centers may be hybrid the
14:18architecture of this new data center
14:20still looks very much like Facebook or
14:22Google or and looks like a public cloud
14:25data center so right when we talk about
14:27hybrid it's a greenfield new type of
14:32data center that may be on prem or
14:34hosted somewhere it's not the old data
14:38center it's some of the new and things
14:41like applications like data analytics
14:44and new classes of distributed
14:47applications are being built on those
14:49types of architectures and a lot of
14:51spend is going into that right now so in
14:53my mind where the data center is located
14:57as a little less relevant to me than the
15:00architecture of the data center which to
15:02me represents commoditized hardware and
15:05very sophisticated software that links
15:08together all of these underlying
15:10hardware components yeah I think we all
15:12agree there and that's that's kind of
15:14where I was getting at if you look at a
15:16company this this merger which is kind
15:18of the thesis of this discussion Dell
15:20has a root in understanding that
15:23hardware effectively is a commodity and
15:25that the the that everything else on top
15:28of that is how you move that commodity
15:30you mass-market and so if they don't
15:33wants to get in the enterprise one of
15:34the best ways to do it is to say you
15:36know what let's play a totally different
15:37game let's change the way hardware's
15:39prices sold and everything else like
15:41that let's make it available and let's
15:43make people give people great ways to
15:44use it and you know they had now they
15:46have full stack trusted you know broad
15:49customer base salesforce enterprise
15:51Salesforce and a revenue stream that
15:53came along with it and and they had
15:55vmware so I mean this size having
15:56revenue realistically how much did Dell
16:00really pay for EMC about twenty billion
16:02dollars because arrested I mean if they
16:05took VMware and spun it out they'd you
16:08know they'd make back at least 40 right
16:10right right from from all of you it
16:12sounds to me like this is not this was a
16:14pretty good idea I mean or at least it
16:16was and I want to get to the sort of
16:18public-private market dynamics but this
16:20this is what Dell had to do or what do
16:22you MC had to do I mean she had to do
16:24yeah I think it's a win-win number one
16:27it's a great win for the customers
16:29because we know you have you have a
16:31another big player that I can go get the
16:34best prize across the board know you
16:37have HP and others there's a choice it's
16:41a win for EMC because I think they were
16:43they were definitely cresting and having
16:46a tough time trying to figure out what
16:48next and then it's a great win for Dell
16:51in the sense that it gives them the
16:53ability to come back and be this big
16:54store or the mega super store versus
16:57being a small boutique store uh-huh the
17:02I think we can all rationalize how this
17:05is one plus one equals three but you
17:08could paint a lot of other scenarios
17:09where the tables might have been
17:12EMC is a huge technology company and
17:18arguably they could have been the ones
17:20out buying companies and you could
17:22imagine them putting together a class of
17:26companies around them that would have we
17:29could have been sitting here and say boy
17:30the EMC plus XYZ acquisitions totally
17:35makes sense right big salesforce new
17:38technology all of that and it was a bit
17:41of a surprise to see dell
17:43see I mean billions by cohn eating the
17:49cow right it's just like it's a very
17:52very it's sort of a reverse and upside
17:56down a position in my mind because I had
17:59always imagined EMC eating the ecosystem
18:03around itself and I think that they were
18:06very hamstrung into their own options
18:10not because EMC didn't necessarily know
18:14what to do but because of the dynamics
18:16of their board and the notion of
18:19activist shareholders being involved ok
18:21well let's get into this case because
18:23jr. you brought it up to that that you
18:24know look there's this much smaller
18:26company buying up you know this larger
18:29much smaller private company buying up
18:31this much larger public company
18:32Peter activist shareholders how does
18:35that play into it and then jr. I want to
18:37get to you on you know the value what
18:39what public markets valuing and why EMC
18:43didn't really have the option
18:45I believe that EMC didn't have the
18:47option because activists limited their
18:51optionality and if you think about
18:53activists coming to many large scale
18:56tech companies a lot of the argument is
18:58that's in the best interest of the
19:00shareholder that's the activist position
19:03the fundamental issue however is the
19:07time horizon by what's in the best
19:09interests of the shareholder activists
19:11are very short term focus ie
19:13sell the company distribute cash to
19:16shareholders and management teams tend
19:18to be more long-term focused and those
19:21are very much in conflict with one
19:24another a long term focus in a company
19:27maybe that I invest in R&D or that I do
19:30M&A well an activist shareholder thesis
19:33typically at least publicly is usually
19:35like well but I have no faith that
19:37management can actually get to that path
19:40down the Risso so if you look at iam let
19:43me argue this point EMC arguably did
19:47what I think is one of the best the best
19:50enterprise acquisitions probably in the
19:53history of computing when they bought
19:57right so if there's any argument about
19:58EMC being somehow stupid and not knowing
20:03what next to go do that acquisition was
20:07the most interesting acquisition in the
20:09history of enterprise computing point
20:11one but costs activists were involved
20:15with current EMC if if EMC were now it
20:20was fifteen years ago an EMC were faced
20:22with buying vmware and they had activist
20:25pressure on their board they would not
20:27be allowed to buy vmware because of the
20:30argument that well you guys don't know
20:31what you're doing and it's a risk and
20:33all that stuff look in our world
20:35innovation is risky and you know a lot
20:40of the now activists port control is
20:43limiting the risk by which companies can
20:45take and so I think that this it's
20:48interesting Dell was able to do this
20:50deal because they have no active they're
20:52a private company and had no activists
20:55EMC could only do this deal because they
20:58had activists and I'm you know I'm
21:01concerned now about the broader
21:03implication in the tech ecosystem about
21:06large companies having very little
21:09optionality in terms of their strategic
21:12you know kind of go forward planning if
21:14I can't invest in it in innovation
21:17through R&D investment and I can't do
21:20M&A what does that leave for me I mean
21:23the the public markets are ones that are
21:26based they work really well when you're
21:27growing and it's effectively it's a
21:30gambler stand we all know that right
21:31they work really well when you're
21:32growing as soon as you hit any place
21:34slightly stagnant everybody's kind of
21:36looking around saying well if I if I own
21:38seven percent of the company and I start
21:39selling my shares then the my first
21:42percent might get out on where it's at
21:45the price is that now but my seventh
21:46percent is gonna add a much much lower
21:48price right because everybody's gonna
21:49start selling out from underneath me as
21:51well this is gonna be a run on the on
21:53the mark it's not gonna work so the only
21:54way a large shareholder can get out is
21:57through some sort of a big privatization
21:59type of activity right and when you look
22:05at a company like EMC with so much
22:06profit coming out they all can pick them
22:09up pay off a bunch of the debt figure
22:12out how to right-size and normalize
22:13operations you know you know if assuming
22:16they do it well I mean there's a lot of
22:17opportunity for them to screw this up
22:18you know mergers are hard yeah and I
22:21don't know how they're gonna to go about
22:22it but they can go through and start
22:23making this thing that the spend go down
22:25the cash flow look you know it's already
22:27positive continue to look good and make
22:30out but they it's their balance sheet
22:32they're managing it themselves correct
22:34so I think one of the things we've
22:35noticed Michael here
22:36as we talk to some of the larger
22:39enterprises our customers perspective
22:42there is a very interesting dynamic of a
22:44chasm that's being created unlike ever
22:47before there is a perception that some
22:50of these you know gun to the head
22:52acquisitions that have that have become
22:55very sudden I have left customer so most
22:59of these customers rely on companies
23:00like EMC and Dell to make that slow
23:03transition to the cloud and suddenly
23:05they feel very vulnerable that on one
23:08hand something fell off the cliff and I
23:10cannot depend on you know any of the
23:12product portfolio yesterday we had one
23:14of the one of our large customers come
23:15into the office a very loyal EMC
23:17customer they've been to EMC for an ABC
23:19when they came to us for another day and
23:22a half with us and you could you could
23:24literally see that from a strategic
23:27perspective they had no idea how they
23:30should depend on their planning of
23:33because now you got your AB large
23:35company who's who's you know who was
23:38planning a transition now you don't know
23:40if any of this products that I'm buying
23:41are going to be around or they're gonna
23:43be cancelled or they're gonna be cut
23:45down from all ready perspective and
23:46meanwhile the newer ecosystem the
23:49companies like us haven't grown fast
23:51enough haven't grown big enough that
23:53they can pet the entire company and make
23:56the transition that's a very very
23:58interesting place that these people are
23:59finding themselves in I think ash brings
24:01up this really I hadn't thought about
24:03that particular point think about a
24:06customer again dependent on EMC and they
24:11sort of view EMC is being vulnerable in
24:14the fact that you know a company like
24:17Dell can acquire EMC it like EMC is like
24:20the foundation of of the tech industry
24:24and here it can simply be bought and the
24:27vulnerability of that is like who else
24:29is vulnerable and how should I think
24:30about this and you know that is a very
24:34very interesting point and I can
24:36definitely see where customers would
24:38then be like wow you know how can I bet
24:41my company on a company that is
24:45perceived to be vulnerable well that was
24:47my next question I mean maybe who is
24:49vulnerable there's still some large
24:51public tech companies out there what
24:53there aren't are large private folks
24:55that may or may not want to buy them my
24:58sense is you're gonna start seeing a
25:01more casual relationship between
25:05consumers and their suppliers in the in
25:08this changing space you know a lot of us
25:13have been in large enterprise companies
25:14you know always remember there was this
25:15product where you went out and you
25:16promised the customer
25:17here's what we're gonna deliver today
25:19and then you know next road map we're
25:21gonna have this and the customer bought
25:22it and you never deliver it on the
25:24second phase of the five phase plan
25:25right it just stopped
25:26and with big exercises like this you
25:30there's even more fear in the market and
25:32I think what you're gonna start seeing
25:33as customers realizing I can whatever is
25:35on the table today it's one thing I can
25:37count on yeah and I can't count on it
25:39tomorrow but I can count on it today so
25:41what I need to do is make sure that I
25:42make my plans for today and I had my
25:44plans for tomorrow my plans for six
25:46months and which is interesting because
25:48you know Peter was bringing up you know
25:50Google like I T when you work with the
25:52large mega scale you know web companies
25:55they do these rollouts like some of them
25:57are annual somewhere every two years or
25:59whatever but they basically they
26:00reinvent their architecture every year
26:02and they roll it out and that's the way
26:04they go about it whereas you know if you
26:06look at the enterprise's you know I
26:08think what did you call it the wall
26:09street the wall street blueprint which I
26:11think I love that the phrase in that
26:14world they would they would kind of add
26:15to it a little bit ago so this is you
26:18know it's like you know a yeast ball or
26:20something like that right and I think
26:23what you're start seeing is the
26:24enterprise's are gonna realize that they
26:25have to approach it more in this
26:27incremental this is what I've got today
26:28I'm gonna make it work for me I'm gonna
26:30recognize it's likely to change yeah and
26:32how do I want it to change next
26:34yeah and that's where I think the rise
26:36of rise of platforms rise of api's rise
26:39of open standards and open source
26:42absolutely becomes one of the critical
26:44part of enterprise strategy I mean you
26:45see that you're seeing you know gate as
26:47a predominant place where people go back
26:50and standardized on that saying hey
26:52that's that's a platform that nobody can
26:53acquire no sequel databases that are
26:55open source and well nobody can acquire
26:57I think this is becoming more and more a
27:00way to think about api's and platforms
27:02as the as the new IT and infrastructure
27:05is just something that supports it and
27:07it's ironic you know 18 months ago I
27:09still recall as we were sitting with a
27:11CCI of one of the largest banks he
27:14spends 15 minutes with us I said I
27:16absolutely understand what are you gonna
27:18do for me this is gonna be incredible
27:20but I'm gonna have AMC acquire you
27:23because I can't trust and you'll be
27:25around and he sends me an email on
27:27Tuesday saying this is hey sorry I said
27:31you know it's phenomenal I want to know
27:34what he said later look you guys you
27:36guys sound like this is you know Dells
27:39making the right move and EMC had no
27:42choice but murders have a long history
27:46of not working you know what could go
27:48wrong in this particular merger so it's
27:51often said that big mergers are like the
27:55collision of two garbage trucks and a
27:59lot of big mergers really don't go well
28:02like there's close to garbage all over
28:04the street there's crap everywhere and
28:07you know what I find it's not about the
28:10technology and not about the logic
28:13coming into it one could make a strong
28:14case that we're gonna in in this
28:17particular example we just mention this
28:19they´ll becomes a systems company they
28:21have servers and storage these things
28:23get integrated together but most of
28:27these mergers fail because the
28:29go-to-market is muddled and the sales
28:33organization isn't is modeled after the
28:36merger you know after the merger happens
28:38so if you think about this what could go
28:40Dell is amazingly good at selling
28:42commodity components and EMC is
28:44amazingly good at selling high-margin
28:47if you think about intermixing you know
28:49AEMC sales rep selling a commodity del
28:53server like where's the money in it for
28:56the rep yeah how much right like I make
28:59a penny on it so that sales organization
29:02selling that will have a hard time and
29:04on the flip side a del channel or a del
29:09tell a sales person selling a complex
29:12EMC storage device may not happen as
29:16well and so because it's hard I mean
29:18it's complicated and requires a lot of
29:20customer touch I mean to buy a server
29:22doesn't require a lot of customer touch
29:23to buy a sophisticated storage device
29:26has to date required a lot of customer
29:28touch and so the question is is what
29:30happens to the sales organization over
29:32time and do you really get customer
29:33leverage out of this or do things
29:36continue to be separate in which case
29:38there's no one plus one equals three
29:40sign here my see cuz I agree with you
29:44but one of the things that I that I know
29:46maybe I'm a little bit enamoured but I
29:48think the opportunity here happens to be
29:50really good in that you're right about
29:54the EMCC Ellis horse but I would say
29:55they actually sell highly engineered
29:57systems yeah right so they don't just
29:59sell the symmetric server they sell the
30:01fire the santur lives around it there's
30:03a qualification of thus and they sell a
30:05complete storage experience to their
30:07customers you can love it or hate it but
30:09that's what they sell right and that's
30:10what customers are paying a lot of money
30:11for every year they have the opportunity
30:16now of continuing that using Dell
30:19components these commodity type
30:21components as part of the parts of those
30:23solutions switching over to modern
30:25technologies like IP away from fibre
30:27channel and so when they sell those
30:29highly engineered systems they can be
30:30kind of more cost effective they can
30:32stand they can continue to solve real
30:33customer problems and you can leave the
30:36current Dell sales force kind of to some
30:39degree alone selling into a different
30:41place using the same components so it's
30:44a way of kind of creating multiple
30:45markets for the same pieces of
30:47technology and owning a much broader set
30:49of the customer base it's an opportunity
30:51of success I mean I'm sure I'm sure they
30:55have thought about this and imagining
30:57what I mean you know there's a lot of
31:00that when executor and I'm not arguing
31:02with you yeah that's great that's a
31:05I would do the merge like hey that's
31:06awesome we sell these integrated systems
31:09we become the next-gen sort of on-prem
31:11cloud vendor as a result of this cloud
31:14in the Box you know you can put together
31:15all of these ideas these mergers are
31:18very very difficult so who's going to go
31:21put together that system and then once
31:23we do it like is it really the same sale
31:26or do we need a separate sales
31:27organization and so I have seen I've
31:29been involved personally with a number
31:32of these where the what I'll call the
31:34industrial logic of why to go do a deal
31:37by investment bankers and the management
31:39teams it's all like crystal clear and
31:42then it always is and then the two
31:45garbage trucks collide and there's crap
31:47everywhere and things don't happen like
31:49you originally thought so right what
31:51could go wrong when you have a massive
31:53sort of you know combination like this
31:56there are a tremendous number of moving
31:59pieces tactical and strategic that all
32:02need to come together and that that is
32:03the to me that's the complexity of it
32:06entropy is that the word is there a
32:09danger that Dell squeezes too hard on
32:12the on the EMC you know jewels that they
32:15just bought EMC spun off was six billion
32:17dollars of profit last year and returned
32:19like a billion to shareholders so and
32:22and you've got the VMware machine behind
32:24it as well so it's not clear to me that
32:26they actually have to squeeze I mean
32:28Peter - I agree with you your concerns
32:30because I've luckily or unluckily been
32:32involved in similar experiences both
32:34good and bad mergers the interesting
32:36thing about this particular one is is
32:38it's of - a private company so I I think
32:44a better opportunity to go figure it out
32:47right so look you have time to go figure
32:50it out the question is can they figure
32:52it out right there - very let me let me
32:54also point out in these in these
32:56organizations and I know them both quite
32:58well they're very different cultures
33:00right one is you know very different
33:03backgrounds of sort of the founding
33:05teams the leadership how they think
33:07about solving problems and yes they have
33:10the benefit of time but culturally can
33:13together these organizations whether
33:15it's engineering or or sales you know
33:19how do you think about that and what's
33:20the resulting sort of right sort of
33:23blend of these two very different
33:25organizations coming together and I can
33:28tell you that all of the mergers in the
33:30you know kind of history of tech all
33:32surround this culture and go to market
33:35and how people are integrated and you
33:36know kind of all the pieces that only
33:40unfold in time and even if you have
33:43infinite time and look at Symantec and
33:45Veritas yeah that time they never
33:47figured it out now Veritas is an
33:49independent company again right so it's
33:52like so we'll see I mean it it on paper
33:56you could argue a lot of it makes sense
33:58and on paper you could argue a lot of it
33:59may not make sense it'll come down to I
34:02mean clearly now it's done so it'll come
34:04down to execution and the cultural
34:06aspects of of what happens within the
34:09organization do you think then other
34:11large public tech companies are gonna
34:13look at this private world that Dell has
34:16built and be wistful and say geez I wish
34:19I had that latitude if it works they'll
34:23say yes and if it doesn't work they'll
34:25say thank God we didn't do that exactly
34:27I mean come on it's always like in the
34:29rearview mirror it'll look like the
34:33smartest act merger or acquisition of
34:35all time or it'll look like the dumbest
34:36and you know we'll see activist
34:39shareholders I mean how do you manage
34:41this going forward if you're a public
34:44company or even an investor in a public
34:46temp tech company well I think I think
34:50for large tech companies the
34:52relationship between management in the
34:55existing board and activist shareholders
34:58has become quite toxic and you know I
35:01think it you know I think it's a very
35:04shallow argument that they're in it for
35:05they the activists are in it to protect
35:09Tech has been built on innovation
35:11there's a lot of smart management teams
35:14out there who understand what could be
35:17done and you know limiting innovation
35:23and limiting M&A in favor of short-term
35:26results I think really is going to have
35:28a big impact on you know large public
35:31companies and their ability to I would
35:33say do the right thing and we'll see
35:36what happens I it's a very complex issue
35:38of course yeah for sure and we will see
35:41jr. Peter Ashe thank you guys so much
35:44thank you thank you my thanks thank you
35:46Peter hey thanks dear
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