a16z Podcast - a16z Podcast: Dell + EMC -- Why the Python Just Ate the Cow

Episode Date: October 16, 2015

We just witnessed the largest acquisition in tech history, and before Dell made it happen, it would have been hard to imagine. Not so much that the two companies would come together, but that the much smaller Dell would be buying its larger peer EMC. If he imagined anyone doing the acquisition it would have been EMC, says a16z’s Peter Levine, but the realities of being a public company and the pressure of activist shareholders are what made this an “upside down acquisition.” “Dell was able to do this deal because they were a private company and had no activists,” Levine says. “EMC could only do this deal because they had activists.” Levine is joined on this segment of the a16z podcast by Actifio Founder and CEO Ash Ashutosh, and Cumulus Networks Co-founder and CEO JR Rivers in a conversation examining the Dell/EMC deal. What were the technological forces that brought these two companies together, and what does that say about the future of enterprise technology and the people who buy it? Finally, what role did the public and private markets play in this deal, and what will Michael Dell need to do to pull it off? The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments and certain publicly traded cryptocurrencies/ digital assets for which the issuer has not provided permission for a16z to disclose publicly) is available at https://a16z.com/investments/. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.

The content here is for informational purposes only, should not be taken as legal business, tax, or investment advice, or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund. For more details, please see A16Z.com slash disclosures. Welcome to the A16Z podcast. I'm Michael Copeland. We just witnessed the largest tech deal in history when Dell bought EMC. But how does a much smaller private company, by a much larger public company, EMC. What are the technology forces at work? And what are the public and private market forces that work? And if you're a customer of EMC in particular, how are you supposed to view this? To help us unravel all of that,

we brought in A16Z general partner Peter Levine, co-founder and CEO of Cumulus J.R. Rivers and founder and CEO of Actifio Ash Ash Ashatosh. the Dell EMC merger on this segment of the A16Z podcast. Welcome, gentlemen. So let's break this down. Did it come as a surprise? And I know the sort of news was leaking out, and now the deal is public.

But when you see the forces at work, and what I'm talking about, the technological forces, you know, Dell had made this shift from longtime PC manufacturer. The margins get squeezed out of that. It's shifting gears to services. is, you know, Delgo's private with the help of Silver Lake. So now, as a private company, it's going after EMC, this large tech public company. What's driving this marriage, do you think? Ash, why don't we start with you?

Well, I think there has been a secular shift of enterprise, IT, and IT in general. As businesses start to become more about digital, more about information, fast becomes the new. big. And the old notion of building the three-tier architecture with boxes all over the place and large IT organizations running around managing these boxes became one of the biggest boat anchors for businesses. And the consumer market demonstrated that you could actually build a business where IT becomes an accelerator. And that adoption certainly led to a huge amount of commoditization and inevitably led to this consolidation. I think that is as simple as that.

It's an inevitability that happened 30 years ago with a whole new different architecture, and I think it's a result of this big shift that's happening now and happen for the next five for 10 years. Jay, you're nodding your head. Well, I think there's technology associated with this, but my perception is it is probably a little bit bigger than just technology. You know, I was just showing Peter, when Dell went private, their market cap was $24 billion. So tell me in what public market you're going to find a $24 billion company acquiring a $67 billion company.

Not going to freaking happen. Right. And so with Dell going private, it gave them the ability to manage their balance sheet in a obviously legal way, but out of the scrutiny of the public markets, come up with a situation, some creative financing that gives them access to something that they think they need. need. I mean, clearly, you know, Michael Dell didn't go off and spend all this money on EMC to make a mistake. That was not his goal. It might end up being a mistake, but that wasn't the goal. He had some business goal in mind, and because he's a private company, he can go off and do that. It's pretty phenomenal. Let's stick into that. I want to dig into the private versus public, but, you know, you're saying he went after something he needs. What does Dell need

and what does EMC get them? Look, I mean, Dell very much was looking to shift their business. It clearly, over the past five years, there was a clear indication moving from PCs, which is a very declining market into enterprise IT, right? And so a lot of what Dell had done up and, you know, and this sort of further, you know, sort of substantiates their strategic movement from a PC endpoint vendor to an enterprise vendor,

if you think about their core competency was developing servers for enterprises. And now the other missing part of the whole sort of server IT consolidation was the entire storage piece. So, you know, if you think about those two pieces to come together for data centers, makes a lot of sense. Dell's business moving from PC to server vendor. now server vendor to systems vendor makes a lot of sense.

I mean, that logic there does hang together. Servers and storage kind of make up and networking make up the bulk of the data center. If you look at the dances that were occurring in the market prior, you had Dell's foyeres in various forms of storage, whether it was EMC partnerships, homegrown partners, all kinds of different variations of storage on the Dell side. you look at EMC and their forayes into the server world. So they actually, most people don't know this, but there are EMC branded servers you can buy. They have VCE that they acquired, you know,

wholly owned from Cisco. So they have, you know, exercises in that. Just prior, about three or four months ago, they announced using Qantas servers in the context of VCE to sell V-Blocked enterprises. So these people have been dancing around each other for a long time. And, you know, obviously the technology folds in. But another thing to look at is,

You know, count on your hands how many people have, like, well-vetted, truly undeniably world-class enterprise sales forces. There aren't that many, right? And I think you have to say EMC's got one of them. IBM, Microsoft, EMC. I mean, I know when I was at Cisco, I was the VP of Systems Architecture for UCS, the unified computing system for Cisco. And the number one goal was to get EMC to help sell UCS because we weren't quite sure Cisco

Salesforce could pull it off. Right. Well, okay, so you say that they're down. around each other for a long time. And I guess my question is, are they even dancing at the right party? Where does this business shift, and how are you seeing it shift in the enterprise landscape? Well, I think it's certainly a great question. You know, data centers, so notwithstanding the intent of Dell to expand to become a systems company,

the question is where the puck is going on a forward-looking. basis and what's happening to the data center. Now, I've been saying, and sort of the evidence is out there, that a lot of the new data center architectures are more going to look like Facebook, Google, and Amazon, and less like older, you know, sort of wall, I call them Wall Street data centers. There was a time when Wall Street was the blueprint for the next gen data center. And that was, you know, kind of Cisco and EMC and Oracle data. databases and some microsystems servers. And that was kind of the blueprint, you know, 10, 15 years ago.

What we see now is the blueprint is coming from the likes of Facebook, Google, and Amazon. And in those environments, incumbent hardware in particular, and in the case of, you know, whether it's Cisco, EMC, Dell, HP, there's not a lot of that hardware that exists in these new architectures. So the question is, is what is this merger, how forward looking is the merger? Clearly, there is plenty of spend going on, and these companies have plenty of existing customer segment. But there's now the shift into hyperscale deployments where hardware gets commoditized. The software part of the stack becomes a much more important ingredient. And the question is, is how does this merger leverage into that? and that's probably a future strategic thought that, you know, these companies will need to deal with.

Right. Yeah. I'm pretty sure you're going to find that a lot of those thoughts were vetted and considered during the course of this decision. I think you're right as to where the puck's going. What I would argue is, you know, well, you might have a Google or an Amazon that wants to kind of build their own. A lot of people write the next step down, they don't want to build their own, but they want it to look, feel like they built the round. Correct. Right. Right. And look like those architectures.

Same architecture, build your own. And so, you know, Dell happens to be a partner's of ours, and their aspiration is to satisfy that need. Yeah. There still is a whole other set of people that want, they actually want to go the next, the other shift over, which is, you know, I don't, I don't want to buy Cisco EMC, blah, blah, blah. I want to buy fee blocks. Right. Right. And so EMC can help you out with that.

You know, it's very ironic two weeks ago, at the very same week, in the very same week, there were two events going on. One was AWS reinvent in Vegas, where you had a bunch of anarchists asking for freedom from operations. Right. And that exact same week, there was an event in Orlando, Gardner event, where 8,500 CIOs from the world, wearing the suits and but controlling the budgets, were wringing their hands, wondering, okay, what, do I do with all these anarchists asking for freedom? And that is the reality. The reality is all those CIOs are basically now responding to the fact that, and JR was hinting to that. They are responding to the fact that my customers need the capability that these cloud vendors have provided. They want operations out of the hair. They want speed. They want simplicity. They want

APIs. They want platforms. And what that means is infrastructure becomes even for their commodity. In fact, at the Gardner event, what is fascinating was the entire floor. There was not a single hardware vendor except a small booth by EMC and even small booth by pure storage because I guess they were going public and they had a token show that there was not a single hardware vendor. Right. And that is, I think, the evidence of it. And if we took the same example, a year ago or two years ago,

some of these infrastructure vendors were predominant because that's what the CIO folks, you know, spent a lot of their time. And so I think that right there is an evidence of you have a customer, the application people, asking for freedom, asking for platforms, asking for APIs, and you have the supplier, which is all the CIO, saying, I need to go transform IT, and I need to go build this, you know, quote, unquote, my private cloud. And the way you build private cloud is focus on outcomes and commoditize the heck out of infrastructure. And I think this is the evidence. And back to your point about, you know, where does Dell, you have to be the biggest Walmart around. You cannot be in a boutique store selling commodity stuff. You have to be the largest organization driving volume to truly become effective supplier to these, you know, large organizations trying to consume and put together a cloud infrastructure.

So the question is, is the puck going towards driving efficiency or is the puck going towards driving innovation? As far as that market is concerned, I think, you know, you'll end up having a CFO be the leader of Dell. I guess the question also is, is how fast is that puck moving? I mean, you talk about those 8,000 people in Orlando with this huge amount of spend, that spend's not going to shift overnight.

Yeah, I mean, I was going to bring that up. I was at the JPMC Tech Symposium right across the street from here yesterday, and they had a data center infrastructure breakout session. Two people stood up right after each other. We're working on the same team. Both set of goals. Both own different types of infrastructure. Both want APIs.

Both are servicing application developers. One of them, for the near future, is going to be using Vblock. The other one is using, like, we'll call it Google-like infrastructure. You know, it's all commodity gear, you know, latest and greatest and everything else like that. At some point in time, those two groups both, they all said, we're going to converge someday. Right. Yep. But that day is not today.

Yeah. Yeah. And I think that is true. We believe enterprise cloud is hybrid. Enterprise cloud is not public cloud. I think Peter was mentioning this earlier. Nobody is taking lift and shift and saying, okay, I'm done with my data centers. The reality is they will leverage whatever resources are available on sale.

and there's a ton of resources available on sale right now. Amazon has got a ton of resources on sale. Microsoft has got a huge vacuum that they're sucking out all office and exchange and SharePoint for sale. In fact, we predict that the number one enterprise cloud in the next two years is probably going to be Azure and not AWS, just because they are sucking up a tremendous amount of footprint of applications. And number two actually might be IBM and not AWS, as far as enterprise is concerned.

So I think it's very interesting from a, from CIO's perspective, they're looking at the fact that this is a buyer's market. I can sit here and have all these guys give me free infrastructure for the next two, three years. Meanwhile, as J.R. was pointing out, I've got two years to figure out what my cloud strategy is because these same guys who took my data, my applications for the next two years are going to hold me hostage and jack up the prices. And at that time, I better bring my application. back. So this hybrid cloud is definitely, our thesis is very simple. Enterprise cloud is absolutely hybrid. And, you know, the very notion that information that I have to run my business on is more than what's inside my data center. And I have to leverage, you know, a whole bunch of stuff around social media, around weather, around traffic, and all kinds of stuff. Inevitably

makes it a platform that spans way beyond my data center. Look, I think that this note, of the hybrid data center, one thing I would add is that there still is this trend right now. If you think about sort of the, I would say the near immediate transformation of the data center, even though things, even though data centers may be hybrid, the architecture of this new data center still looks very much like Facebook or Google and looks like a public cloud data center. So when we talk about hybrid, it's a greenfield new type of data center that may be on-prem or hosted somewhere. It's not the old data center.

It's some of the new, and things like applications like data analytics and new classes of distributed applications are being built on those types of architectures. And a lot of spend is going into that right now. So in my mind, where the data center is located is a little less, relevant to me than the architecture of the data center, which to me represents commoditized hardware and very sophisticated software that links together all of these underlying hardware components. Yeah, I think we all agree there. And that's kind of where I was getting at. If you look at this merger, which is kind of the thesis of this discussion, Dell has a root

in understanding that hardware effectively is a commodity and that everything else on top of that is how you move that commodity into mass market. And so if Del wants to get in the enterprise, one of the best ways to do it is to say, you know what, let's play a totally different game. Let's change the way hardware is priced and sold and everything else like that. Let's make it available and let's make people, give people great ways to use it. And, you know, now they have full stack, trusted, you know, broad customer base. Enterprise Salesforce. Enterprise Salesforce and a revenue stream that came along with it. And they have VMware. So, I mean, besides having a revenue, I mean, realistically,

How much did Dell really pay for EMC? About $20 billion. Because the rest of it, I mean, if they took VMware and spun it out, they'd make back at least 40. Right, right. From all of you, it sounds to me like this is not, this was a pretty good idea. I mean, or at least it was,

and I want to get to the sort of public-private market dynamics, but this is what Dell had to do. Or what EMC had to do. What EMC had to do. Yeah, I think it's a win-win, win, right? Number one, it's a great win. for the customers because, you know, you have another big player that I can go get the best prize across the board.

You know, you have HP and others. There's a choice. It's a win for EMC because I think they were definitely cresting and having a tough time trying to figure out what next. And then it's a great win for Dell in the sense that it gives them the ability to come back and be this big store, the mega super store, versus being a small. all boutique store. I think we can all rationalize how this is one plus one equals three.

But you could paint a lot of other scenarios where the tables might have been different. EMC is a huge technology company and arguably they could have been the ones out buying companies. And you could imagine them putting together a class of companies around them that would have, we could have been sitting here and say, boy, the EMC plus XYZ acquisitions totally makes sense, right? Big Salesforce, new technology, all of that. And it was a bit of a surprise to see Dell eat EMC. I mean, it was 24 billion by 67 billion.

It was, you know, it's like the Python eating the cow, right? It's just like, it's a very, very, it's sort of a reverse, an upside down acquisition in my mind because I had always imagined EMC eating the ecosystem around itself and I think that they were very hamstrung into their own options not because EMC didn't necessarily know what to do but because of the dynamics of their board and the notion of activist shareholders being involved Okay, well, let's get into this because, J.R., you brought it up, too, that, you know, look, there's this much smaller company buying up, you know, this larger, much smaller private company buying up this much larger public company. Peter, activist shareholders, how does that play into it? And then, J.R., I want to get to you on, on, you know, the value, what public markets value and why EMC didn't really have the option.

I believe that EMC didn't have the option because activists limited their optionality. And if you think about activists coming to many large-scale tech companies, a lot of the argument is that's in the best interest of the shareholder. That's the activist position. The fundamental issue, however, is the time horizon by what's in the best interest of the shareholder. Activists are very short-term focus, i.e., sell the company. distribute cash to shareholders, and management teams tend to be more long-term focused. And those are very much in conflict with one another. A long-term focus in a company may be that I invest in R&D or that I do M&A.

Well, and the activist shareholder thesis typically, at least publicly, is usually like, well, but I have no faith that management can actually get to that path down the road. So if you look at EM, let me argue this point. EMC arguably did what I think is one of the best, the best enterprise acquisitions, probably in the history of computing when they bought VMware. So if there's any argument about EMC being somehow stupid and not knowing what next to go do, that acquisition was the most interesting acquisition in the history of enterprise computing. Point one.

because activists were involved with current EMC, if EMC were now, it was 15 years ago and EMC were faced with buying VMware and they had activist pressure on their board, they would not be allowed to buy VMware because of the argument that, well, you guys don't know what you're doing and it's a risk and all that stuff. Look, in our world, innovation is risky. And, you know, a lot of the now activist board control is limiting the risk by which companies can take. And so I think that this, it's interesting. Dell was able to do this deal because they had no active. They were private company and had no activists.

EMC could only do this deal because they had activists. And I'm, you know, I'm concerned now about the broader implication in the tech ecosystem about large companies having very little options. In terms of their strategic, you know, kind of go forward planning, if I can't invest in it in innovation through R&D investment and I can't do M&A, what does that leave for me? I mean, the public markets are ones that are based, they work really well when you're growing. And it's effectively it's a gambler's den. We all know that, right? They work really well when you're growing.

As soon as you hit any place slightly stagnant, everybody's kind of looking around saying, well, if I own 7% of the company, I start selling my shares, then my first percent might get out where it's at, the price is at now, but my seventh percent is going to add a much, much lower price, right? Because everybody's going to start selling out from underneath me as well. This is going to be a run on the market. It's not going to work. So the only way a large shareholder can get out is through some sort of a big privatization type activity, right?

And when you look at a company like EMC with so much profit coming out, Dell can pick them up, pay off a bunch of the debt, figure out how to right size and normalize operations, you know, assuming they do it well, I mean, there's a lot of opportunity for them to screw this up is, you know, mergers are hard. Yeah. And I don't know how they're going to go about it, but they can go through and start making this thing, the spend go down, the cash flow look, you know, it's already positive, continue to look good and make out.

But it's their balance sheet. They're managing it themselves. Correct. So I think one of the things we've noticed, Michael, here, as we talked to some of the larger enterprises, of a customer's perspective, there is a very interesting dynamic of a chasm that's been created unlike ever before. There is a perception that some of these gun-to-the-head acquisitions that have become very sudden have left customers.

So most of these customers rely on companies like EMC and Dell to make that slow transition to the cloud, and suddenly they feel very vulnerable that, on one hand, something fell off the cliff, and I cannot depend on any of the product portfolio. Yesterday, we had one of our large customers come into the office, a very loyal EMC customer. They went to EMC for an ABC, and they came to us for another day, a day and a half with us. And you could literally see that from a strategic perspective, they had no idea how they should depend on their planning of them. Because now you got, you're a large company who's, you know, who was planning a transit. now you don't know if any of these products that I'm buying are going to be around or are they

going to be canceled or are they going to be cut down from R&D perspective? And meanwhile, the newer ecosystem, companies like us haven't grown fast enough, haven't grown big enough that they can pet the entire company and make the transition. And that's a very, very interesting place that these people are finding themselves in. I think Ash brings up this really. I hadn't thought about that particular point. think about a customer, again, dependent on EMC, and they sort of view EMC as being vulnerable in the fact that, you know, a company like Dell can acquire EMC.

Like EMC is like the foundation of the tech industry. And here it can simply be bought, and the vulnerability of that is like, who else is vulnerable and how should I think about this? And, you know, that is a very, very interesting point. And I can definitely see where customers would then be like, wow, you know, how can I bet my company on a company that is perceived to be vulnerable? Well, that was my next question. I mean, maybe who is vulnerable? There's still some large public tech companies out there.

What there aren't are large private folks that may or may not want to buy them. My sense is you're going to start seeing a more casual relationship between consumers and their suppliers in this changing space. You know, a lot of us have been at large enterprise companies. You'll always remember there was this product where you went out and you promised to the customer, here's what we're going to deliver today. And then, you know, next roadmap is we're going to have this. And the customer bought it and you never delivered on the second phase of the five phase plan, right? it just stopped.

And with big exercises like this, there's even more fear in the market. And I think what you're going to start seeing is customers realizing whatever's on the table today is one thing I can count on. And I can't count on it tomorrow, but I can count on it today. So what I need to do is make sure that I make my plans for today and I have my plans for tomorrow, my plans for six months. Which is interesting because, you know, Peter was bringing up, you know, Google-like IT. When you work with the large megascale, you know, web companies, they do these

rollouts, like some of them are annual, some of them are every two years or whatever, but they basically, they reinvent their architecture every year, and they roll it out. And that's the way they go about it. Whereas, you know, if you look at the enterprises, what did you call it, the Wall Street, the Wall Street blueprint, which I think I love, that phrase, in that world, they would kind of add to it a little bit of a go. So this is, you know, it's like a yeast ball or something like that, right? And I think what you're going to start seeing is the enterprises are going to realize that they have to approach it more in this incremental. This is what

I've got today. I'm going to make it work for me. I'm going to recognize it's likely to change. Yeah. And how do I want it to change next? Yeah. And that's where I think the rise of platforms, rise of APIs, rise of open standards and open source absolutely becomes one of the critical part of enterprise strategy. I mean, you're seeing that.

You're seeing, you know, Git as as a predominant place where people go back and standardized on that saying, hey, that's a platform that nobody can acquire. No SQL databases are open source where nobody can acquire. I think this is becoming more and more a way to think about APIs and platforms as the new IT and infrastructure is just something that supports it. It's ironic, 18 months ago, I still recall, as we were sitting with a CIO of one of the largest

banks, he spends 15 minutes with us, I absolutely understand what are you going to do for me. This is going to be incredible, but I'm going to have EMC acquire you because I can't trust that you'll be around. And he sent me an email on Tuesday saying, he says, hey, sorry I said that. You know, it's phenomenal. I want to know what he said later. Look, you guys, you guys sound like this is, you know, Dell's making the right mood. And EMC had no choice. But mergers have a long history of not working. You know, what could go wrong in this particular merger? So it's often said that, um, big mergers are like the collision of two garbage trucks and a lot of big mergers

really don't go well like they come together garbage all over the street yeah there's crap everywhere and you know what I find it's not about the technology and not about the logic coming into it one could make a strong case that we're gonna in in this particular example and we just mentioned this they'll becomes a systems company they have servers and storage these things get integrated together, but most of these mergers fail because the go-to-market is muddled and the sales organization is muddled after the merger, you know, after the merger happens. So if you think about this, what could go wrong? Dell is amazingly good at selling commodity components and EMC

is amazingly good at selling high margin components. Well, if you think about intermixing, you know, a EMC sales rep selling a commodity Dell server like where's the money in it for the rep? Yeah, how much money? Not much, right? Like I make a penny on it.

So that sales organization selling that will have a hard time and on the flip side a Dell channel or a Dell telesalesperson selling a complex EMC storage device may not happen as well.

Because it's hard. It's complicated and requires a lot of customer touch. I mean, to buy a server doesn't require a lot of customer touch. To buy a sophisticated storage device has to date required a lot of customer touch. And so the question is, is what happens to the sales organization over time? And do you really get customer leverage out of this? Or do things continue to be separate, in which case there's no one plus one equals three kind of a creation?

I'm like dying here in my seat because I'm going to jump in here. Because I agree with you, but one of the things that I don't know, maybe I'm a little bit enamored. but I think the opportunity happens to be really good in that you're right about the EMC sales force, but I would say they actually sell highly engineered systems. Yeah, right? So they don't just sell the symmetrics array. They sell the sand or it lives around it,

the qualification of the sand. They sell a complete storage experience to their customers. You can love it or hate it, but that's what they sell, right? And that's what customers are paying a lot of money for every year. They have the opportunity now of continuing that, using Dell components, these commodity type components as part of parts of those solutions, switching over to modern technologies like IP away from Fiber Channel. And so when they sell those highly engineered systems, they can be kind of more cost-effective,

and they can continue to solve real customer problems. And you can leave the current Dell sales force kind of to some degree alone selling into a different place using the same components. So it's a way of kind of creating multiple markets for the same pieces of technology and owning a much broader set of the customer base. It's an opportunity of success. I mean, I'm sure they have thought about this. Yeah, I'm imagining.

Look, I mean, you know, there's a lot of well-laid plans that when executed, and I'm not arguing with you. That's a great story. I would do the merch like, hey, that's awesome. We sell these integrated systems. We become the next-gen sort of on-prem cloud vendor as a result of this. Cloud in a box. You know, you can put together all of these ideas.

these mergers are very, very difficult, so who's going to go put together that system? And then once we do it, like, is it really the same sale or do we need a separate sales organization? And so I have seen, I've been involved personally with a number of these where the, what I'll call the industrial logic of why to go do a deal by investment bankers and the management teams, it's all like crystal clear. and then the two garbage trucks collide and there's crap everywhere and things don't happen like you originally thought so what could go wrong when you have a massive sort of you know combination like this there are a tremendous number of moving pieces tactical and strategic that all need to come together and that that is the to me that's the complexity of it entropy is that the word um is there a danger that Dell squeezes too hard on the EMC, you know, jewels that they just bought?

EMC spun off, what, $6 billion of profit last year and returned like a billion to shareholders. So, and you've got the VMware machine behind it as well. So it's not clear to me that they actually have to squeeze. I mean, Peter, I agree with your concerns because I've luckily or unluckily been involved in similar experiences, both good and bad mergers. The interesting thing about this particular one is it's to a private company. company. Right. So the pressure, I mean, I agree. I think they have time. They have time to go figure it out. Right. So look, you have time to go figure it out. The question is, can they figure it out? Right. They're two very, let me also point out in these organizations, and I know them

both quite well, they're very different cultures, right? One is, you know, very different backgrounds of sort of the founding teams, the leadership, how they think about solving problems. And, Yes, they have the benefit of time, but culturally can you bring together these organizations, whether it's engineering or sales, you know, how do you think about that and what's the resulting sort of right sort of blend of these two very different organizations coming together? And I can tell you that all of the mergers in the, you know, kind of history of tech all surround this culture and go to market and how people are integrated and, you know, kind of all the pieces that. only unfold in time, and even if you have infinite time, I mean, look at Symantec and Veritas. They had time, they never figured it out. Now Veritas is an independent company again, right?

So it's like, so we'll see. I mean, on paper, you could argue a lot of it makes sense, and on paper you could argue a lot of it may not make sense. It'll come down to, I mean, clearly now it's done, so it'll come down to execution and the cultural aspects of what happens within the organization. Do you think then other large public tech companies are going to look at this private world that Dell has built and be wistful and say, geez, I wish I had that latitude? If it works, they'll say yes. And if it doesn't work, they'll say, thank God we didn't do that.

Exactly. I mean, come on. It's always like in the rearview mirror. It's either going to look great or it's going to look like it'll look like the smartest merger or acquisition of all time or it'll look like the dumbest. And, you know, we'll see. Activist shareholders, I mean, how do you manage this going forward if you're a public company or even an investor in a public tech company? Well, I think for large tech companies, the relationship between management and the existing board

and activist shareholders has become quite toxic. And, you know, I think it, you know, I think it's a very shallow argument that they're in it for the activists are in it to protect shareholder value. Tech has been built on innovation. There's a lot of smart management teams out there who understand what could be done. And, you know, limiting innovation and limiting M&A in favor of short-term results, I think, really, is going to have a big impact on, you know, large public companies and their ability to, I would say, do the right thing. and we'll see what happens. It's a very complex issue, of course.

Yeah, for sure. And we will see what happens. J.R., Peter, Ash, thank you guys so much. Thank you, Michael. Thank you, Michael. Thank you, Peter. Thanks, Sarah.