00:00Flex shares are rising after it beat expectations and issued strong 2027 guidance. The company also planning to spin off
00:08its AI focused infrastructure business into a new public company Spinco. I think it's called for now. Probably that's not
00:15the name for the long term. But let's ask the CEO of Flex Ravati Advaiti who joins us right now
00:21set to lead Spinco. Ravati great to get some time with you. Talk to us about this this new business.
00:30What it encompasses and what it will be called in the future. Great. Thanks for having me again. Well, we
00:38don't have a name. You're right. And Spinco is not the name. So hopefully we'll come up with a cooler
00:42name in the near future. Just as a quick reminder, Mike, you know, Flex is a contract manufacturing company, world's
00:50largest manufacturer. We make a little bit of something for everybody.
00:54What we announced last week was the spin off of our cloud and infrastructure power infrastructure business. I would say
01:02five, six years ago, what we started building was a business that focused purely on power within the rack for
01:10a data center, distributed power across the data center, all the way up to a utility, cooling and compute everything
01:18put together.
01:18And that was well before the whole chat GPT moment in AI became a thing.
01:25And as power becomes super constrained, cooling is a challenge. Putting these three technologies together as a complete solution for
01:34our customers is pretty significant.
01:37We announced this business last year has been around a little over six and a half billion is going to
01:43grow 65 to 75 percent this year and then 80 plus percent the next year.
01:48So that is what we're putting together. And that's the spin off that I'm going to lead. And then I'll
01:53remain as chairman of Flex.
01:55That feels telling in itself, Ravati, that you're now going to be the CEO of the Spinco yet to be
02:01named.
02:03Why is this the business that you want to bet your next chapter on? Why not remain the CEO of
02:08Flex and let someone else take that one over?
02:10Tani, because it's my baby. My history is I've led Eaton's electrical business.
02:16I have been in the energy space for the past 20 years.
02:20I have walked to every utility company in the last 20 years asking them to invest in the grid for
02:27the U.S. grid to be more self-reliant.
02:29And so six years ago, when I got Flex to start investing in power, we've built up that business from
02:37scratch and really put together a technology infrastructure that puts compute power and cooling together.
02:43So it's my history, my lineage. It's the business I enjoy a lot.
02:47I've been fortunate that Flex has done so well and we've been able to build this business.
02:52And we've done a spinoff before, right? We spun off NextTracker, which is a $17 billion market cap company today.
03:00So that's kind of why I'm going to go lead the spinoff, because I'm really deep in the power infrastructure
03:07technology space.
03:09Which are the companies that are going to sustainably build revenue and margins on this?
03:18Because we've been talking so much today about this huge build out.
03:21And once it happens, right, we won't need as much of or it doesn't look like we'll need as much
03:27of the CapEx as we're putting in in the initial stages.
03:31Certainly that was the case when we laid fiber in 1999 and 2000.
03:35Which companies do you think, Ravati, are going to be the longer term beneficiaries of this revolution?
03:40You know, that's such an important conversation to have, because what we're talking about today is just the AI CapEx
03:47cycle.
03:48And what is being invested in data centers today.
03:51But what is happening is a transformation of the grid and the electrical infrastructure itself, which needed to happen a
03:59long time, but hasn't happened yet.
04:01What do I mean by that?
04:03The traditional kind of AC to DC power infrastructure is what is deployed today.
04:08And we can't sustain the grid that way.
04:11So my view is today we're focused on the AI infrastructure.
04:15We're going to have to deal with the power density and the availability of power issue, which is going to
04:22really lead to a technology change in the utility infrastructure, solid state infrastructure, 800 volt DC.
04:30So my focus is today we're focused on AI.
04:34We're going to continue to move into utility.
04:37And that electrical grid transformation is going to be what comes next.
04:41And I'm really focused on that's going to be a long-term thing, Mike.
04:44So I don't see this as a few years of CapEx investment and it goes away.
04:49It's going to be all the way to the grid that we're going to have to change over a period
04:52of time.
04:53And the opportunity there is huge.
04:57But I wonder in the meantime, it does look like AWS, Google are big users and big parts of your
05:04huge earnings assumptions to come.
05:07And again, it is clear why that is there.
05:09But I wonder what do you need to put in place just to make sure that you don't have a
05:13situation where the hyperscalers all of a sudden decide that they're going to spend less on this?
05:17Are there certain contractual commitments?
05:19What are the details on how you make sure that there isn't that risk that you tie your fortunes to
05:25just a few and they decide to pull back?
05:27Yeah, and that's important, Dani, because we're not just deploying compute.
05:32We're deploying power, which also means that we're deploying the power that powers the chip, the cooling infrastructure, the 800
05:40volt DC, 400 volt DC power infrastructure, all of that together.
05:45So while hyperscaler spend is concentrated because they're what, $700 billion of the $1 trillion spend, we also supply all
05:54the way to the utilities.
05:55So the last two acquisitions we did are focused on really deploying large pods into utilities, and that's the business.
06:04So we've been diversifying the business from hyperscalers all the way to utilities.
06:10So we also do a lot for colos, enterprise spend, and utilities, and we'll continue to diversify the business that
06:17way so that as you come out of the compute cycle over who knows how many years, four or five
06:23years, the business continues to diversify into the entire electrical infrastructure grid.
06:29So let's get started.
06:29.
06:29.
06:29.
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