00:00So this is our annual user conference, but we also combine it with our partner conference.
00:04So we resell through system integrators, through value-added resellers, through ISVs,
00:11and they're here as well.
00:13They come with their customers, they come with our customers.
00:15And this is an event where not only do we train a lot of the people that work with our
00:22products,
00:23but really we come out with all of our new innovations over the year,
00:26and very importantly our thoughts and our predictions on where both the data storage market is
00:33but where the data market is going.
00:36So where is the data market going?
00:38Well, I think we're really at an interesting transition point.
00:42You know, tech every now and then and over a period of decades, there are major architectural changes, right?
00:49And a major architectural change, for example, was the introduction of the Internet.
00:52They completely changed the way IT was structured, right?
00:55Mobile was another one of these, right?
00:58Well, for the last 25 or 30 years, we've also been living in an app market.
01:04I mean, it was said not too long ago that software was eating the world, right?
01:08And, well, what it really was was applications were eating the world.
01:12Now, if you go back that 25 years, it really started, in a way, with enterprise resource planning, ERP, right?
01:21That was a big transformation, and everybody wanted to get all of their data, all of their processes into ERP,
01:27and it was going to be the one application that would run all of the corporation.
01:32Well, over the last 25 years, though, applications have multiplied tremendously.
01:38I mean, we're roughly a $4 billion company.
01:41We have almost 1,000 applications running in our IT environment.
01:45You get to larger companies, they have many thousands, if not tens of thousands, applications.
01:51So applications have grown tremendously.
01:53Well, the way that those applications work is they create data, and they run off the data.
01:59And now, every time you run another application, an AI, in a sense, or an AI agent is another application,
02:06analytics is another application, it gets its own version of data.
02:10And so data has fragmented during this entire environment, right?
02:15And part of the challenge for enterprises wanting to use AI, or actually even just wanting to run their business
02:21right now,
02:22is there's no single source of truth.
02:24There are all these applications that, let's take customer as an example.
02:27You know, a customer relationship management like a Salesforce, right?
02:35It has a definition of a customer.
02:37Well, guess what?
02:37The definition of the customer in the financial organization may be different.
02:40It's the person who pays the bills, not the person that makes the decision.
02:43And then the customer in your support organization is a different definition.
02:47It's the person who calls you with a problem, not necessarily the person who made the purchasing decision.
02:53And then you go to the shipping department, and the customer is who they ship to, which may be entirely
02:58different.
02:59So just that one example, but expand that over your products, your assets.
03:04Different systems have different definitions of exactly the same thing.
03:07So what happens when you feed that into AI?
03:09What's the source of truth?
03:11AI doesn't know.
03:12It interprets.
03:13It hallucinates.
03:15It doesn't hallucinate.
03:16It makes errors because the data is not consistent.
03:19And so, you know, so this then is really setting up what we believe will be a new major transition
03:26in how IT is built.
03:29It's app-centric today.
03:31Right.
03:31The apps, the data wraps around the apps.
03:34It gets replicated by the apps, fragmented by the apps.
03:37We think that in the future, it's got to be data-centric.
03:42That data has to be primary, and the apps have to revolve around the single source of truth, which enterprises
03:48need to control, which is the data.
03:49So what does that mean, then, for all these app-centric companies?
03:53Yeah.
03:53Like, how does that change, really, the structure that we've all been living on for the last few years, and
03:58that has created some behemoths in the tech world?
04:01Well, let me describe it from the customer first, and then we'll go there.
04:04From the customer first, it means they need to take control of their data.
04:07They may still want to use the apps for what the apps do, which is workflow, right?
04:12They have just fantastic workflow.
04:14They understand that, you know, how their users want to be able to use the environment, how they want to
04:21be able to interact with other systems.
04:23But right now, the apps are controlling the data.
04:26From the customer's standpoint, that fragments how they operate.
04:29So if the customers now control the data, meaning they create sources of truth, and they also control the understanding
04:37of that data, then the apps will work off of the customer's data rather than owning their own.
04:42This is going to be a major theme for us over the next two hours with the executives from Everpure,
04:47who we talk to.
04:48Another major theme over the next two hours is going to be memory pricing.
04:51Yes.
04:51I mean, that is the fundamental backdrop and the fundamental question for your business and so many businesses.
04:56Apple.
04:57Was it Apple that recently?
04:58Yeah.
04:58Yesterday or the day before.
04:59Yeah, so Apple shares are higher because Tim Cook told the Wall Street Journal yesterday that they're raising prices.
05:04And analysts say, okay, well, people are going to actually pay more.
05:07Yeah.
05:08How are you guys navigating this environment?
05:11Well, we've had to raise prices.
05:13So, you know, it's the semiconductor manufacturers that are seeing this unbelievable demand, right, that has far outstripped the total
05:21semiconductor fab capacity of the entire world.
05:24Okay.
05:24And therefore, it's not only affected like the, you know, the NVIDIA chips and, you know, the high performance memory
05:31and all of that.
05:32Right.
05:32Because the semiconductor manufacturers have shifted their wafer starts to the more complex parts, the higher margin parts, it's also
05:41reduced capacity for the 10-cent parts.
05:43So everything has gone up.
05:45I got an email from, like, a supplier of small electronic equipment for a consumer, and they said, yeah, we
05:54have to raise our prices.
05:55You know, they don't, the whole thing they sell for 50 bucks, and they have to raise their prices.
06:01So we have to realize that it is a worldwide, a complete semiconductor situation.
06:08You know, we're an equipment manufacturer.
06:12We buy semiconductors.
06:14We put them, we put it into equipment, wrap our software around it, and sell it.
06:18So in a sense, we're a middleman for this.
06:21So, you know, so let's talk about what we've seen.
06:25Memory prices up almost a factor of 10.
06:29Storage chip prices up between 6 to 8x.
06:33This has happened in, like, eight months.
06:35All right?
06:36I mean, it's not like, you know, we're used to seeing things go up or down 10, even maybe a
06:42really serious environment, 20% a quarter.
06:45You know, this is 8x.
06:47Great for a company like Micron.
06:48Challenging for a company like you.
06:50Challenging.
06:50Well, and frankly, I want to put the focus where it really should be, is on the customers.
06:57All right?
06:57I mean, this has been really difficult, you know, for our customers because not only are the prices higher, but
07:04you have to realize it's completely unmoored them.
07:06Because as an individual customer, if your price goes up by 100%.
07:11You're blowing your budget.
07:12You're blowing your budget.
07:13And also, is it a good price?
07:15Is it not a good price?
07:16How do I compare it?
07:17What do I compare it to?
07:18I don't know.
07:19Well, there's no choice.
07:20They have to pay it.
07:21And there's no choice.
07:22I mean, it's really put them in a very difficult position.
07:25So a decision we made, a decision we made in December was that we were going to raise prices slower.
07:34We were going to raise prices less.
07:37And we were going to share in the burden.
07:39So we made a conscious decision.
07:41We announced it at our Q4 call.
07:44And we had our Q1 call now.
07:47We announced that we were going to operate at the lower end of our traditional gross margin range, where for
07:52years we had been operating at the high end.
07:54And we chose to help our customers.
07:58One thing, and unfortunately, we have to wrap up, but just got about a minute or so left.
08:01Where do you think corporates are in terms of AI deployment, based on your conversations that you're having with them?
08:06I mean, does AI storage demand eventually inflect like we've seen with cloud?
08:11Or is the uptake kind of more measured, Charlie?
08:14Like, what are you hearing?
08:16So one of the reasons why AI has grown so much in the cloud and why there are these gigawatt
08:24data centers being built is because the corporations are spending a ton of energy right now experimenting with AI.
08:31And if you're experimenting, you're going to the cloud.
08:33Because you don't know what the ROI is.
08:35You don't exactly know what is the specific application you're going to use it for that scales.
08:39Right.
08:40And so there's only been, I'd say, relatively small experimentation in traditional enterprise.
08:47Now, where there has been activity is in sovereign clouds, right?
08:51And sovereign clouds in even relatively small countries, as well as large countries, of course.
08:58In traditional areas of AI, such as, you know, health care, pharmaceutical, self-driving cars, automotive, big banks, hedge funds,
09:10you know, that is certainly growing.
09:12I'd say traditional enterprise is holding back until they really find the breakthrough areas of AI that they know will
09:18scale.
09:19The ROI?
09:19The ROI.
09:19The ROI.
09:20Why?
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