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AUGUST 28, 2019 / 4:00PM, VMW - VMware Inc Financial Analyst “Bus-tour Style” Q&A Meeting at VMworld

C O R P O R A T E P A R T I C I P A N T S

Patrick P. Gelsinger VMware, Inc. - CEO & Director

Paul Ziots VMware, Inc. - VP of IR

Rajiv Ramaswami VMware, Inc. - COO of Products & Cloud Services

Rangarajan Raghuram VMware, Inc. - COO of Products & Cloud Services

Ray O’Farrell VMware, Inc. - CTO & Executive VP

Robert C. Mee Pivotal Software, Inc. - CEO & Director

Sanjay J. Poonen VMware, Inc. - COO of Customer Operations

Shekar G. Ayyar VMware, Inc. - Executive VP and GM of Telco & Edge Cloud

Zane C. Rowe VMware, Inc. - CFO & Executive VP

Patrick Morley Carbon Black, Inc. - CEO, President & Director

Robert C. Mee Pivotal Labs, Inc. - Founder, CEO and President

P R E S E N T A T I O N

Paul Ziots - VMware, Inc. - VP of IR

Good morning, everyone. We’re going to go ahead and get started. We want to welcome everybody here to what you can see clearly on our slide is our strategy and product-oriented bus-tour style Q&A session here at VMworld.

So just a few comments to start this off. The format is going to be similar to prior years, with short verbal summaries from our executives, followed by interactive Q&A. We’re going to do as much Q&A here as possible. Except this year, we’re joined by Rob and Patrick, the CEOs of Pivotal and Carbon Black. As usual, Pat will start us off. He’ll do an overview. Then Raghu will make a brief summary of any of the VMworld announcements that Pat may not have covered. From there, we’ll have both Rob and Ray — don’t leave anything out, Pat. Raghu will be short. From there, we’ll have Rob and Ray talk about Pivotal. Then we’ll go into a Pivotal-specific Q&A. And then we’ll have Sanjay and Patrick cover Carbon Black and do a Q&A on Carbon Black.

Then, we’re going to bring up Pat, Zane, Raghu, Ray, Sanjay for a comprehensive Q&A, which will be the longest piece of the event today. But before we start, I have a fun statement here from our legal team. Statements made in these discussions today, which are not statements of historical fact, are forward-looking statements based on current expectations. These forward-looking statements include statements regarding VMware’s proposed acquisitions of Carbon Black and Pivotal. Actual results could differ materially from those projected due to a number of factors related to our ability to consummate the acquisitions as planned as well as additional risks, including those referenced in VMware’s most recent SEC filings on Forms 10-Q, 10-K and 8-K.

***

All right. With that, Pat is going to kick us off.

Patrick P. Gelsinger - VMware, Inc. - CEO & Director

Thank you, Paul, and thank you all for being here.

***

I think there has been extraordinary resonance to the things that we’ve talked about this week. And clearly, we’ll dig into the specific announcements, but the idea that we are with the Pivotal announcements and the Pacific and Tanzu announcement being able to deliver such a profound statement that all of the people, these hundreds of thousands of customers, these millions of operators, are now going to become Kubernetes. That’s a such powerful statement, right, that they’re going to be able to deliver and reinforce that unique position that in our strategy we said, any app and any cloud. This almost like blurs those together as never before, being able to satisfy the infrastructure, right, requirements of operationalize hard core at scale, while also being able to have the developer become the layer that they can actually be provisioning, managing, building their applications directly into the infra that they’re going to be operationalizing on at scale. And all of a sudden, these millions of VMware advocates, many of these people having built their careers on VMware are now able to reach across efficiently and deliver that developer environment for all of their crazy developers and their groups, companies, et cetera, superpowerful.

***

Obviously, with the Carbon Black acquisition, we believe that we are now in a position to meaningfully extend the intrinsic security inside of the platform. And for us, we’re excited, passionate about the ability to cement VMware’s position, because if you can combine security with infrastructure, while the value proposition that we deliver to customers dramatically goes up and they ain’t ever taken us out. And you become so sticky in the underlying infrastructure, I’ll say that while many aspects of what we do have great sustainability to customers, the idea of, I’ll say, networking and security are the 2 stickiest ones of them all. And those are the ones where you just become a fundamental piece of their infrastructure. So any cloud, any application and great expansion of the — any device, pieces of our strategy, a number of nice incremental announcements compared to the mega announcements, still good product improvements in terms of the management intelligence that are coming as part of those areas.

***

But the real thing that we’ve done is add, build and protect. So we’d say these 5 terms, build, run, manage, connect and protect, are the things now that we can walk into a enterprise business CIO and say, “We just do those for you.” And while we are not trying to be the app player, we’re not trying to be consumer, we’re not trying to be hardware, you need these things. You need a build partner, somebody who can help you build those next-generation of applications at scale. Then you have to operationalize those. You’ve have to run them. Of course, you need a rich set of management tools to provision, automate, diagnose them to be able to be connected in a multi-cloud world where those connection layers become more and more intrinsic to the applications themselves. And finally, building in protection as part of that solution set.

So those pieces taken together, we think, establish us in a very unique sustainable position. Of course, we have a lot of work to do. I think we’ve laid out now a complete and comprehensive vision, but one that — there was also a lot of things that we sort of say, “Yes, we’re going to do that,” and there is a whole lot of work to deliver against that. So we’re not confused and in some of the conversations, “Well, Pat, you’ve gone on a bit of a acquisition spree. Is this going to continue?” And my simple answer is, “Hey, we’re not saying we’re not going to do any acquisitions, but we got plenty to digest for a while.” So we’re going to really have our focus over the next period of time, very focused on integrating these. We have very powerful and aggressive use of how both Pivotal and Carbon Black get deeply integrated into the VMware capabilities. We do not view these as piece parts. Our customers are looking for us to integrate them into the

management planes, into the data planes, into the integrated solution offerings that we’re providing and that’s very much going to be our focus for quite a number of quarters into the future.

***

Rangarajan Raghuram - VMware, Inc. - COO of Products & Cloud Services

***

All right. So Pat laid out this framework of build, run, manage, connect and protect. These are all driven by clicking one level higher, right, and many of you talk to many enterprise CIOs as well as we do. And the conversation starts with the what, right, before we get here and the 3 or 4 whats that we hear most frequently about, one is, what kind of applications do I need going forward? The second is, what do I do with my existing application of state? Third is, what I do with my data centers? And then fourth is, what do I do about securities scares the hell out of me?

So if you look at our strategy, not just with these acquisitions in the last couple of years, it has been progressively making ourselves more and more relevant to each of these strategic what questions of these customers the CIOs are facing. And by the way, these are secularly questions. It’s not like just it’s for — it’s not like Y2K, it’s for a short period of time and it’s going to go away. These are questions that are going to be with the enterprises for the next decade or for the better part of next decade.

So when you think about why are we focusing on these things, it’s really trying to address these big what questions for the customers. And these turned to be the how. And then comes the question of where. And where is, again, depending on different customers, where could be AWS, it could be Azure, it could be on-prem, it could be at the Edge, it could be some combination of all of the above. And that’s why when we think about our mission, we say, look, if you can help our customers think about how they’re going to get their job done with respect to new applications, what are they going to do with respect to transforming their applications, transforming their data center, transforming their security regardless of any location meaning wherever this thing runs, then we’ll be in a very sound position. So that’s what led us to this strategy, and the build and the protect of the newest aspects of this where we want to directly own it.

So let me quickly walk through the key announcements on these — on each of these sections, starting with build.

Our build journey has been about now, I would say, the better part of 2.5, 3 years. And actually even beyond that when it was clear our vCA strategy was not working and Pat called a bunch of us and said, “Figure out what are we going to do about cloud and containers are intimately tied to cloud.” And so that’s been when we really started thinking about different ways of tackling this problem. But specifically, with respect to modern applications, many of you might remember we had an approach to embed some version of Docker and vSphere that didn’t work very well for some technical reasons. And by that time, it became clear to us that Kubernetes is becoming more and more relevant. As it was at the time to Rob and the Pivotal team as well as, which is why we started the PKS joint collaboration effort. And as we dug deeper and deeper into the Kubernetes domain, it was pretty clear that it was becoming the standard way by which you could run infrastructure across any cloud — applications in a consistent way across any clouds. It was becoming the foundation of infrastructure for modern apps. And then the question becomes — became a little management, which is why we acquired Heptio. Heptio was a company created by the founders of Kubernetes. And at the same time, Rob and team have been pivoting their product strategy to be more native Kubernetes as well. So the synergy was very strong.

And since we have decided Kubernetes was core to us, just like NSX is core to us and vSphere is core to us, Kubernetesis is core to us for the next decade. We want to own an end-to-end stack there, and the end-to-end stack in our view is to be able to help our customers build modern applications, run them and manage them.

So the build is why we’ve made the acquisition. In terms of the run, PKS is a tremendous product, it’s already gotten 250 customers. It’s multi-platform, meaning you can put it in native EC2 instances or Azure wherever you want, not just vSphere. But at the same time, obviously, the majority of our customers want a great solution on vSphere and our engineers came up with what’s now called Project Pacific, and Project Pacific is a fundamental architectural innovation on vSphere, what I would compare it to is vSAN, right. vSAN was a fundamental architectural innovation on vSphere that allows us to do storage in a very different way than conventional storage. We believe the same thing applies here with Kubernetes. So Kubernetes takes vSphere and turns it into a native — sorry, well, Project Pacific takes vSphere and turns it into a native Kubernetes platform. So in other words, you can — today most of our customers look at vSphere and they have APIs and user interfaces that allow them to deploy VMs and manage VMs and deliver high availability and resource management and so on and so forth. Now they can look at the same thing — if they can bring the Kubernetes expert into the room, the Kubernetes expert will look at this as a complete end-to-end Kubernetes system. And so Kubernetes system not just for managing containers, but also for managing VMs. And as we all know, most customers want to manage applications that are a combination of these. So Project Pacific is going to be very unique because it will be a platform that allows customers to manage at the application level, right.

VMs, containers, it doesn’t matter. And because it’s done in the very guts of vSphere, we are able to optimize vSphere for running containers like even better than bare metal, as Pat showed in his opening day keynote. This is due to a number of intrinsic architectural advantages that vSphere has, especially around its schedulers, around its device model, around the data path and so on and so forth. And we’re bringing all that to bare — the containers which is why it’s now 8% faster than bare metal. And then thirdly, this is the big, big operational benefit of doing Project Pacific is customers they want infrastructure. They don’t have a container infrastructure, the VM infrastructure for management and high availability and security and whatnot. So Project Pacific, as you can expect in this conference, has been a huge hit. All 20,000 people that are showing up here are vSphere experts. And so they’re eating it up. So the basis of our strategy though is not just Project Pacific, and vSphere, like I said, we want to help our customers wherever they choose to build modern applications. So PKS will be our cross-platform solution, and solution for pre vSphere next generation. And Project Pacific will be for future generations of vSphere.

AppDefense is a piece of software running in the hypervisor. Think of it as a one-way mirror looking into what is happening in the application. Every process, every port that is open, what is the normal behavior, what is abnormal behavior, et cetera. And then it collects all of that, applies a lot of machine learning against it and understands what the normal pattern of applications are. Here is what AppDefense — the AppDefense team struck a partnership with Carbon Black. They use some of the white listing technology. But AppDefense, again, is very, very useful for vSphere administrators because, while the security teams decide upon the security products, the infrastructure team still has to implement them. So having a security capability that is very native to vSphere, makes it dramatically easier for companies to enforce protection on their applications.

And we’re taking this model not only to wherever VMware Cloud Foundation runs, but in the future we’ll be taking it to the cloud as well. The other huge part of our security strategy, of course, is — sorry, is Carbon Black. Our theory on endpoint is different than the conventional wisdom on endpoint. The conventional wisdom on endpoint is, “Hey, this is a legacy technology, protected — protect your Windows laptops and devices on it.” We don’t take that view. So if you think about where endpoints are today, there is a massive universe of endpoints that are outside of your traditional Windows. Clearly, there are millions of Windows laptops and device desktops, but there is a massive universe that are not those and those need to get protected on the edge of the network.

Equally importantly, there is a massive number of applications endpoints that are living on infrastructure that you fundamentally do not have control over, notably, in the cloud. And then if you think about the multiplicative effect that containers has on the number of endpoints, there’s going to be an insane number of endpoints, literally to use the Cosmos language, billions and billions of endpoints. No how are you going to protect that? And those will be the places where security breaches will first start from. And so we think it’s a massive opportunity that’s completely underestimated by conventional industry analysts. And you need to have a unifying way of dealing with it. The unifying way we’re dealing with it and this is why — not we are dealing with it, the unifying way Carbon Black is dealing with it, that’s why we are super excited is they instrument all of these sensors today. And then they collect the data into a massive data lake and then they reason over it. This is a well understood technique. And then they reason over it from a threat point of view, just like Workspace ONE reasons over it from a manageability point of view.

Now the big issue for a small company like Carbon Black is, how do get their sensors into every endpoint in the world, okay. And that’s a big problem for them, but not anymore. So if you look at VMware, with our watch, we have tens of millions of endpoints, all right, and we continue to advance that even more and more. And I’m sure you guys will have questions for Shekhar who is taking over responsibility for our edge, IoT as well as telco and that’s going to add us — add the — as we put our platform there, they’ll give us the ability to put a lot more sensors there. In the data center, we have 60 million, 70 million workloads running on vSphere and we control the endpoint — we control the ability to just automatically instrument a sensor in there. We already do that with AppDefense, we’ll continue to do that. And as we extend our Kubernetes and cloud footprint, we’ll be able to put sensors there as well. So we think we can dramatically expand the scale of data collection from a security point of view.

The second thing that we can uniquely do in combination with Carbon Black is I talked about network security. So we have visibility into literally every network flow and we’re extending it all the way to the edge of the network with our SD-WAN deployments. So we can combine all of the network infrastructure with the endpoint information to get a 360-degree view of what’s happening.

And then if we apply the machine learning against it, all of you know that the more data you have, the better your machine learning models work.

We think we will have insurmountable advantage in this as we collect all of this data and we learn from this data.

The last part of this, of course, is over time we’ll — Dell will carry more and more of our Carbon Black solution and that’ll give us even further distribution. So that’s why we are super excited by the combination of Carbon Black and our security interest. And like I said before, the fundamental principle here is intrinsic security building into the platform, okay.

Paul Ziots - VMware, Inc. - VP of IR

Yes. Thank you. We’re now going to bring up Rob and Ray to talk about Pivotal from the VMware and the Pivotal perspective. Please don’t hesitate to repeat some of the things Professor Raghuram had has mentioned. Some of this stuff takes a little while to sink in. After we finish this overview, we’ll do a Pivotal-specific Q&A. And then, of course, after this we’ll tackle security with Patrick and with Sanjay. So your mic should be working. So maybe we can start with Rob? Okay, go ahead.

Robert C. Mee - Pivotal Software, Inc. - CEO & Director

Yes, I’m going to start off and then Ray is going to take it away. So I’m going to talk about this combination from 3 perspectives: One from the build perspective; one from the technology perspective; and one from reach, okay, 3 concepts that I think are worth discussing here. If you think about from the build perspective, right, Pat and Raghu, both highlighted the importance of the movement that VMware has made toward build. And Pivotal’s mission has been, for many years, transform how the world build software. So clearly we fit in well in that place.

And Pat also, in his keynote, on Monday, talked about the number of developers that have increased tremendously over the last decade or so, the number of applications workload that have increased tremendously over the last decade. And the growth that we all anticipate we’re going to see over the next decade is going to be even more spectacular. And this is all about building applications, right. And I think just to go back to basics, it’s interesting to understand why that’s happening and why that’s so important. And the answer to that is that across the world, most organization, businesses and governmental entities are essentially having to rebuild their business models in software. And software becomes ubiquitous as we all use it more business models are being reborn as software. And so when you think about all of these workloads, applications and developers, that’s not because we’re outsourcing somewhere. It’s not because we’re buying packaged software. It’s because companies across industries are actually building their own strategic differentiation in software. So they have to get really good at building it. And the way you do that is you provide them technology that makes it very productive to build applications and you train them to enable them to become top-notch software developers like you’d have at Google, like you’d have at VMware. And this is what Pivotal has been doing for a number of years.

So we’re helping people build software that way. If we think about what we did with the Air Force, the U.S. Air Force, really had almost no software capability. And the adversaries that they would potentially face in the future are very large countries with extraordinarily good universities, taking the best students and having them work on military and intelligence software. And the Air Force realized we can’t let this situation continue. And they actually worked with Pivotal to learn how to build software at a cutting-edge level. So they did things that they previously did on whiteboards, logistics and planning for war fighting and they put that into software, very sophisticated software running on a platform with continuous delivery, machine learning built in, all of that kind of thing. And the Air Force is a really stark example of going from almost no capability to several hundred developers now working in a lab much the way that Pivotal works. But that kind of transformation is happening across industries and across companies as they reinvent themselves in software. So it’s really critical to have this build capability and that’s what Pivotal has been about. And I think it fits really well into the build strategy that Pat and Raghu laid out.

So in terms of technology, Pat also mentioned on Monday that Pivotal has been working on containers since before Docker exist and Pivotal has been working on container orchestration since before Kubernetes existed. But with Pivotal trying to build the container for everybody, did we think that the world wanted a container or the world wanted a container or the world wanted a container orchestrator? No. We were working on those technologies in order to build higher-level abstraction Platform as a Service, which we call Pivotal Cloud Foundry and we wanted to provide that to make developers highly productive, very, very efficient.

And so as you look at where technology is going today and you see that Kubernetes becoming the standard, Pivotal moving on to Kubernetes, because we don’t have to build those layers of technology ourselves anymore. VMware standardizing on Kubernetes is really leaning into that. You can see Pivotal and VMware converging on this technology in a way that makes a lot of sense, right. And as we converge on a technology, well, it kind of makes sense to converge as organizations, and work on that and utilize our respective strengths as VMware infrastructure company par

excellence and ourselves who have always yearned to work at a high-level abstraction where the developers are, we can bring our Cloud Foundry capability, we can bring our spring development framework, we can bring Pivotal Labs in which we codevelop with customers around the world to work on those higher-level things, while our — the folks at VMware are building up from below. And we combine those and align really nicely there in one organization. So that’s a very natural combination for me. So that’s build and that’s technology. And I think finally, the answer is reach. And if I go back to our mission again, I said Pivotal’s mission is to transform how the world build software. And as we’ve talked, we’ve begun to talk about this combination internally to Pivotal, Edward Hieatt who leads all of our services coined a phrase, he said, “We’re actually going to transform how more of the world build software,” which makes a lot expense, right. VMware has got reach. We have hundreds of customers, VMware has tens of thousands, hundreds of thousands of customers. And so that allows us to bring the technology that we work on, to bring the techniques, the way that we build software in a much broader scale and that’s something that we’ve always wanted to do. So from those perspectives, I think this makes a lot of sense.

Ray O’Farrell - VMware, Inc. - CTO & Executive VP

Yes. Thanks, Rob. So I think Rob mentioned the world — the word transformation several times. And this looks real when we go into customers and we talk to those customers about we start maybe talking about a cloud story or what is the best way to secure infrastructure but very quickly that conversation moves into, what will make this business successful, these customers and that echoes exactly what Rob has said. They’re coming to a strong realization that says, they must embrace these technologies because it’s like a competitive imperative. If they fail to do that, then somebody else is going to do it. And they see the industry around them doing that and that means they must transform. So it’s a very much an urgency in their mind. And you can see that simply by walking into those meetings where you see not just an infrastructure person sitting there, but more and more a line of business person sitting there. So you’re beginning to see this need that these companies are seeing to say, “How do I bring these 2 worlds together in a way that is at the very heart of business success?” So that’s what we’re encountering.

So obviously we’ve been working with Pivotal for many years, and most recently in depth on the products that you see around PKS, where we’ve been bringing some of those technologies together and say, “What is the best way to go in and meet those customers?” As we do that, we’re both walking in there together and we’re seeing this same discussion taking place. VMware made a decision about 18 months ago, and you see it very much in the acquisitions that came through with Heptio and so on, that we believe that Kubernetes is a key way to allow these organizations to leverage these new modern apps. And in some ways we view it as a way of saying, “I’ve got a lot of infrastructure and that infrastructure now consists of multiple cloud, consists of converged infrastructure, consists of all these new ways of accessing this ability to run,” and Kubernetes is giving us this layer, which is saying now we can bridge that into how the apps above it are all orchestrated and managed and so on in that.

What we — as Pivotal are going through that same decision to say, “We too are going to look at Kubernetes as this underlying factor.” That really is the incentive to say, “Why not do this together?” VMware is able to bring all the strength, all this reach that Rob has referred to. Pivotal is able to bring an experience both with how customers build those apps, but even more importantly, how those customers will have to transform themselves and we bring that together to produce this new way of helping customers do this at scale.

I should comment a little bit about the VMware side of the same story, you will notice VMware has an organization which we call the Cloud Native Applications business unit. Our plan is to say, how can we bring the strengths of both Pivotal and this organization together, that is where our Kubernetes organization lives. So moving forward, our goal is to say how can we get the best of those world. I think, as Robert said, we’re seeing very, very similar experiences with our customers and we think those customers feel an urgency to solve this problem. By us coming together, we think we can solve that problem faster than we may have been able to do as independent — as separate companies and that’s our goal.

Paul Ziots - VMware, Inc. - VP of IR

Thank you, Ray. Thank you, Rob. We’re going to bring Pat up now and do a Q&A on Pivotal. So I’ll pull this chair up over here for Pat.

Q U E S T I O N S A N D A N S W E R S

Paul Ziots - VMware, Inc. - VP of IR

Okay. So any questions regarding Pivotal? Please, Brad.

Brad Alan Zelnick - Credit Suisse AG, Research Division - MD

Brad Zelnick with Credit Suisse. Congrats on the deal and thanks everybody for having us here today. This is great. I just wanted to talk about how you might envision the partner strategy. I think Pivotal’s partner strategy was very different versus the typical VMware channel that we think of and as well how does Pivotal Labs fit into the equation and how you might see Pivotal Labs fitting in with the broader — in a broader VMware

context?

Patrick P. Gelsinger - VMware, Inc. - CEO & Director

Maybe I’ll start and then let Ray and Rob take the Pivotal Labs piece of it. Some of this, as you know, Pivotal was very focused on the highest end customers. Obviously, a big piece of this is, we’re going to broaden this and with plays like Pacific, where we’re bringing in the core vSphere. Our objective, as I said in my opening comments, is every VM, every VMware customer becomes Kubernetes capable. So obviously, the much broader VAR strategy and partner strategy that VMware has, we will see that coming into play. And on Sunday, we had our partner summit, which precedes VMworld. And we have 7,000 people at that event on Sunday, and huge interest in how we’re going to bring this forward. Now we have a lot of work to do, right, the enablement of materials and so on, but we’ll definitely bring this into the much broader partner strategy for us. We also see that there’s new class of partners that we need to build. ISVs, others that we need to be reaching that we don’t have today, some of those Pivotal is already doing, some of those Heptio. But overall, there’s just way more work for us to do in that space as we expand it, but we already have pretty high velocity, broad reach that we’re going to build on. And on Pivotal Labs, Ray and Rob, which one?

Ray O’Farrell - VMware, Inc. - CTO & Executive VP

So I think we’ve already been working with Pivotal Labs in the context of PKS. And just over the years, as 2 companies partnering together. So we have seen or we already have quite of lot of what I would say a unified view of what some of that ecosystem is. I think the opportunity from a VMware point of view is to be able to say how to become more relevant to the partnerships that Pivotal has right up at this application developer layer. And I think also the opportunity that we both have is more and more of those customers are demanding open source, open systems and we’ve got a lot of opportunities to build a broad story around that as well. I think the combination of the 2 gives us a unique strength there.

Robert C. Mee - Pivotal Software, Inc. - CEO & Director

And also, in terms of the partner strategy with Pivotal Labs, one of the things that, Brad, you’re very familiar with this, Pivotal Labs works in conjunction very tightly with our partners, close collaboration with our customers and we enable them to build things the way that we build by building things with them. And so many of our customers build out labs that are huge banks, the military, insurance companies and so on that are patent on Pivotal Labs and they’re able to operate at scale that way very successfully. And in terms of scaling out that capability, part of it is scaling Pivotal Labs, but part of it is scaling partners that want to do that too. And we’ve already been doing that over the last couple of years. Accenture was really the first - I mean, it’s great, they’re the biggest, right, but they are the ones who really leaned in and built a Pivotal Labs capability in Columbus, Ohio. One of the first places where we’ve actually been able to take global SI and say, “they actually can do things just like Pivotal Labs, they can codevelop with you. They can do that digital transformation with you very successfully.” And I know that Pat is interested and certainly I’ve been interested. The more that you can get more folks working in these ways, the more impact you can have. If you also look at application modernization, right, there is another area where we’ve had tremendous success with our SI partners so far who have built practices around app modernization, using the techniques that the Pivotal has been forging ahead with as we’ve done a lot of that ourselves. So again, I see that expanding. I think Pat would agree with me on that. There’s a lot of scaling up that we can do with partners using our enablement capabilities to enable them.

Patrick P. Gelsinger - VMware, Inc. - CEO & Director

Yes. And we’d just also say, hey, the Pivotal Labs and that whole helping customers develop software and this co-development and really teaching them how to do it is one of the hallmarks of the Pivotal success. So we — and every aspect plan to build on that expanded. And it’s pretty interesting, almost every SI that they’re strong with are ones that we are not and vice versa. So we actually see that we can actually can approach many of the system integrators in particular much more holistically and many of the VMware programs with the SIs. They’re just more developed at this point. Just natural maturity. So we see this being very complementing, accelerating what both Pivotal Labs is already doing very well.

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Ittai Kidron - Oppenheimer & Co. Inc., Research Division - MD

A couple of questions. First for you Ray. The more I hear about your container strategy and how you’re bringing all these pieces together. Would it be right to basically think about cloud foundry and PKS as temporary technologies that will disappear over the next 2, 3 years before Project Pacific really gets going. And if that’s the case, why should I as a customer even invest a time in it. Why not just wait a couple of years, go Pacific and be done with this kind of gap stop technology? And then, Pat, the question for you, Pivotal does bring some developer exposure that you need because you’re very ops-driven. You don’t have much of the developer ecosystem, but it brings very little developer exposure, not a lot. How do you solve the problem that you have right now that you’re still — there’s a half of IP that’s becoming more influential that you have very little impact or engagement with.

Ray O’Farrell - VMware, Inc. - CTO & Executive VP

So to the question on the PKS and Pivotal cloud foundry and the relationship back into Pacific, remember that our goal is to be — is to solve the problem for developers, Kubernetes users, those who want to build applications, whether or not they are on the vSphere or not. Our goal is to say we are going to solve this application problems across multi-cloud, across vSphere, et cetera.

Project Pacific gives us a unique capability to do so on vSphere. But the broad spectrum of how we’re going to support across the board, that still remains the key thing to what we will to. Now whether those products will be called PKS, whether it will be called Project Olympus, and so on, and so on in the future, we need to work through that as part of we figure out what is the best way to bring components together. But we have a broad strategy that would go beyond vSphere. And while vSphere is obviously key to many of our customers, our goal is to expand as much as possible across the multi-cloud environment. And so I wouldn’t make the assumption that says, just wait for vSphere. If you’re just waiting for vSphere, you’re only waiting for a small part of the overall story.

Robert C. Mee - Pivotal Software, Inc. - CEO & Director

And can I actually say, if I can jump in there on the PCS part of the equation there, that’s not a transitional technology or the stopgap in any way. It’s — those are higher level abstractions that we’ll live and run on Kubernetes, they’ll run on PKS, they’ll run on Pacific, they can run on — they’ll be able to run on Kubernetes elsewhere. All of those higher-level abstractions are things that developers want and need, and VMware is going to be investing in that. We’re all going to be investing in that to make sure that those abstractions can be run now and they can be run in the future on whatever the technology platform evolves to. So I don’t think those will be going away in any sense of that word.

Patrick P. Gelsinger - VMware, Inc. - CEO & Director

And we view some of those lower levels like PKS, there’s a long tail of infrastructure that will not become Kubernetes native for a long time, right? And that — I mean, we still have customers wanting vSphere 4, right? That’s some 8-year-old product now. So that tail is very long. And that’s the picture I showed in the keynote, right, of PKS and I’ll say some of the Bosch components, et cetera. They’re playing key transitional strategies until we build a full Kubernetes compliance stack. And obviously we want to get customers there as fast as we can. But hey, we do a lot in the infrastructure world, that’s a 5-year journey.

Second, on the developer space, I think you understate Pivotal’s footprint there. And obviously the spring community, in particular, is a very strong community, 3-plus million developers in that community. The Bitnami community, 2-plus million developers there. So as we said, we have 5 million-plus developers of the approximately 13 million developers in the world. So between these 2, we have 2 high-capacity reaches in the developer community. So those are important for us, but we clearly need to have more, right, developers and more things into the developer community, and that will be a key piece of our go-forward strategy. But I think you understate, right, the significance of the reach that we’ve now gotten just over the last 6 months, right? And as these build out, our developer relevance, the transition to Kubernetes, remember, this is all in flux, right? Everything in this space is in flux because everybody is sort of saying Kubernetes is here, but it’s not mature yet. We’re still in this Java stuff, or these are middle-ware. There are also some higher thing is going into motion, and we see this as a decisive move to say, here is the stack that the world will land on in the future, and we’re the best partner to deliver that at the developer level and the infrastructure level, and we uniquely bring those together. I think it’s going to be pretty compelling. And you’re going to see us market more, we’re going to be investing more in the open source community to, I’ll say, get our open source creds, right, which we’ve been working on for several years now because that’s very important to that developer community as well. So we have plans in all of those areas, but lots to work to get done.

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Karl Emil Keirstead - Deutsche Bank AG, Research Division - Director and Senior Equity Research Analyst

Karl Keirstead at Deutsche Bank. Maybe, Pat, for you. I think even for investors that get the strategic fit, some of the questions they had aren’t related to that so much, and it has more to do with the VMware independence question. So I want to give you an opportunity maybe to address that because this was an interfamily transaction. There was concerns about your independence in making this decision to combine with Pivotal. How much influence Michael Dell may have had? Do you want to just hit that head-on, Pat?

Patrick P. Gelsinger - VMware, Inc. - CEO & Director

Sure. And this is a VMware strategy. Period. We were looking to move and expand our developer activities. Obviously, it’s discussed with the Board, just like you expect, and Michael happens to be sitting at the Board, but this is a Board-level conversation as they’re supporting the VMware strategy.

Secondly, we looked at every alternative strategy that we could, right? Buying GitLabs and GitHubs and HashiCorp and all these other — we thoroughly looked at every other potential play that we could, just like you’d expect the good, right, diligence process to do. And what we found is, we could spend far more and we would get far less, right, in the process.

Also if you look at any acquisition, in some ways, you know your cousins too well, right, because essentially, you’ve been doing diligence on them, right, for the last several years, right? And you have all the unknowns right here. Well, we know the integration challenges that we’re going to have. We know, right, the differences and all of those kind of issues far better. So essentially, we’ve been de-risking this acquisition, which as the Board looks at, this is, right — I mean, what’s the probability of success? How are you going to go and make this successful as well? And then we put the appropriate independence process in place with our respective independent committees to go negotiate a good deal, right? At the end of the day, that’s exactly why they’re in place and we’ve demonstrated, I think, good governance processes throughout. And obviously, yes, it’s a family deal, and it also happens that the family had the best assets. And we think we have a very, I’ll say, cost-effective strategic deal that strengthens both VMware’s position and really leverages the unique assets of Pivotal.

One other related thing that I’ll just add to the answer as well, it’s not that simple. If that’s the case, why just spin it out in the first place, right? And that was 6 years ago before Kubernetes. That was 1.5 years before the first Kubernetes come in, right? So essentially, as I think Rob articulated pretty articulately, they had to build a lot of that infrastructure stuff because it wasn’t there yet. It’s only now that they’re starting to emerge.

Also think about the things that we’ve done over the 6 years since Pivotal was formed. And NSX and VSAN and cloud management, our cloud strategy, if Rob would have been inside of VMware, we had a couple hundred people we moved into Pivotal at the time, I would have given him like 2 incremental heads and a dog, right, because we’re putting all of our energies into NSX and VSAN and HCI and all of those stuff, we simply didn’t have the bandwidth and it was still a very turbulent market of where and how is the technology going to emerge. So I think, while everyone of these things you can look back and say, well, maybe, I think we played this one super well and we’re quite thrilled with the outcome that we expect to be consummated shortly as the deal completes.

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Keith Frances Bachman - BMO Capital Markets Equity Research - MD & Senior Research Analyst

Keith Bachman from Bank of Montréal. Karl, I also think you look fine. I have 2 questions. Pat, I think I’m going to direct them for you. Or actually one question is. How do you improve the financial performance of Pivotal? And I’ll break it into the 2 parts. A, I think the stock would tell you the revenue has been very disappointing to investors. And so how do you improve the revenue profile? You mentioned some things like reach. Is there also product rationalization that probably perhaps seeps in there as well? And then part B is, VMware still trades a lot on free cash flow and the operating profits and the free cash flow of Pivotal relative to what you post are, frankly, pretty disappointing. So if there is an integration rationalization process, how do you tackle both the revenue performance as well as the profitability performance at the same time?

Patrick P. Gelsinger - VMware, Inc. - CEO & Director

Yes. And on it, and I think, Rob, if you just say Rob’s framework reach, a lot of how we’re going to improve the profitability is just being able to leverage the VMware footprint to get more sales, more apps, more places more rapidly. And having been — and again, this is a hometown crowd this week here at VMworld, but many customers, and I’ll say many, and I probably had 20 customer meetings over the last 2 days, many of those, they, we were thinking about Pivotal, we’re sort of early in this, okay, we’re not satisfied, right? So I think we started the acceleration of Pivotal last week, right? So I do think that we’re going to start to see that in deal flow commitments larger because they’re looking for that enterprise scale, that enterprise brand to go deliver it.

Obviously, we’re making some rationalizations, right, of the products because, now, when we come together, like Pivotal, they had a small little networking effort. Okay, cool. That’s done, right? It’s going to be part of the NSX team and what we’re doing with Service Mesh, right? There were some metrics things. They were in a boom. That’s going to become all leveraged in the work that we’re doing. So there are some modest areas there. There clearly is some G&A synergies, right, as well that we’re immediately going to take, some of that’s going to be in REW and other places where we start bringing real estate and some leverage. And out of that is what we said that we expect between the 2 will be op inc positive next year. Today, both are op inc negative. So we’re going to be taking some clear steps to bring them to profitability, accelerate the top line growth.

And I think what you’ll really see happen is Tanzu and the family of vSphere, the Tanzu Mission Control and this, I’ll say, refactoring of the Kubernetes-centric developer services, right, that are going to be industry world-class as those pieces come together next year. And I do think we have a lot of work. But by

this time next year, all of those pieces are there, right? And we expect the velocity that starts to emerge as a result. We’re expecting good revenue acceleration, top line acceleration. These are very profitable segments to be in. If we get modest uplift on vSphere, nothing of that’s built into the plan or any of the financials, but if we’re able to get modest pull in vSphere, start being the developer layer of choice, the opportunities for us to see top line accelerations, I think, become very meaningful as well.

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Philip Alan Winslow - Wells Fargo Securities, LLC, Research Division - Senior Analyst

Phil Winslow, Wells Fargo. Jump to off for the team, I guess. I was thinking about the build side of the equation here. Rob, you said, one of the questions is you help me build sort of what my applications of the future going to look like? Wanted to ask about serverless and PFS from — on Pivotal, and how sort of PFS fits in with PKS, with cloud, the full cloud foundry, just legacy applications fitting in? How do you see sort of the — maybe an update on PFS first off, and then how do you see sort of that fitting into the spectrum?

Patrick P. Gelsinger - VMware, Inc. - CEO & Director

Rob, do you want to start there?

Robert C. Mee - Pivotal Software, Inc. - CEO & Director

Yes. I mean, PFS is coming along looking, we’re looking at — we’ve been moving it through alpha and the beta and getting toward GA. And we’ve been building that on Knative, which is a Kubernetes technology that we’ve been intimately involved with since it was introduced. And so it’s not yet GA. So I think we need to get it there and get that major customer feedback and look at where it’s going. But I think we feel like we’re playing in the right space with that and we got the right abstractions. And it’s going to become an integral part of the platform. I don’t know, Ray, you want to...

Ray O’Farrell - VMware, Inc. - CTO & Executive VP

The only comment I would make is that serverless in general is still very much at the tip of how applications is going to use it, how enterprises are going to use it. So it’s very early days. And with PPS — PFS, I’m sorry, and how we will begin to even integrate into that some of the other things we do, I think there’s lots of opportunities there, but it’s very, very new.

Robert C. Mee - Pivotal Software, Inc. - CEO & Director

Very early.

Patrick P. Gelsinger - VMware, Inc. - CEO & Director

And we don’t see it as replacing anything that we’re doing, right? This will be another set of services and capabilities that layer naturally on top of what we’re already building. It’s not like people are going to stop doing containers and Kubernetes and go over here and do functions, right? It’s going to be functions overlaid on top of this as another class of services that they’re going to be able to benefit from.

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Kasthuri Gopalan Rangan - BofA Merrill Lynch, Research Division - MD and Head of Software

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My question is maybe it is more of a Sanjay question. Clearly, the technology synergies exist and you’ve been pragmatic about how much of this build opportunity is a function of the present versus the future. I think you’ve done a nice job balancing the pragmatism versus the future. Question is on go-to-market side, how do you dumb the Pivotal message down to a point where 500,000 customers can understand? And more importantly, how do you take this high ASP, low volume, very strategic value proposition and flip it completely the VMware way?

Patrick P. Gelsinger - VMware, Inc. - CEO & Director

Well, I think we took a big step forward this week and exactly that, right, where it’s simply Tanzu, right? Tanzu is the family. That’s the message, right? And we’re going to Tanzu to run your applications, we’re going to Tanzu to help you build the applications and we’re going to have Tanzu to help you manage your applications. I think those concepts, and by the way, I mean, we’ve been sort of wrestling over that exact question the last several months as we pulled together the materials for launch today.

Obviously, we’re going to be from the sales to deliver it, we’re going to be bringing Rob, the Pivotal Labs team, their sellers together with the VMware sellers, right? So we have work to do there as that collapses together. And also the Heptio team that we have here, so that’s going to become one go-to-market force as we forward. We have to turn that then into this broader channel, per the earlier question, of how we deliver

that through our partners as well. But this is an area where I think the market is going to quickly resonate around the simplicity of the Build, Run, Manage Tanzu strategy that we laid out this week.

So I think we’re launch it. Response from analysts has been super positive this week. I mean the analysts, they’re negative on every — I mean, the industry, not you guys, right? Sorry, sorry, I won’t, right. But they’re super negative on everything. And they’re actually pretty positive on this, right, giving us very good response this week. And maybe when Sanjay is up here a little bit more, we should talk a little bit just about the broadening because we’ve now added a protect and, right, a build thing and we should probably just have a few words on the bigger go-to-market message as well. Maybe when Sanjay is up here, we’ll just ask him to cover some of those broader messages also.

Sanjay J. Poonen - VMware, Inc. - COO of Customer Operations

I must say, I’m getting a little bit of the customers turn to VMware and there are many circumstances to say I want to make these changes, I want to leverage these technologies, but I want to work with a partner who recognizes I’m an enterprise. You mentioned the word pragmatic several times, right, and so I think there’s an opportunity for us to be able to go in there to those customers and say, Tanzu is the answer to help you deal with what right now can feel a little bit chaotic or scary even to some degree. And that’s the huge opportunity for us in that to be that pragmatic enterprise trusted partner to take them on that journey.

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Mark Ronald Murphy - JP Morgan Chase & Co, Research Division - MD

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Mark Murphy with JPMorgan. So Pat, given what you were saying earlier, is it reasonable to think that you can smooth out the lumpiness of the megadeal flow for Pivotal as it kind of joins up with the broader VMware distribution? And is that something that you think could happen pretty naturally or do you need sort of a product strategy to try to thin down that offering a bit and make it a little bit more consumable? In other words, to kind of get to really proliferate it outside the Fortune 500?

Patrick P. Gelsinger - VMware, Inc. - CEO & Director

Yes. I think, VMware, we already have lumpiness, right, in our megadeals and so on. I mean, there’s already an aspect to this that we — as we’ve communicated so on as well. So I will say there’s a math function that occurs here where their lumpiness combined with our lumpiness, I mean, yes, it’s going to smooth out just because we do more big deals, more big ELAs, we’re already creating more of this breadth into the industry already. And in many cases, their lumpy deals will become part of our bigger ELAs. So I think it’s an aspect simple of math, but there’s a smoothing function that will occur because of a much larger entity.

Also, I fully expect that this is going to — their big deals will naturally fold into our ELA process. That’s just going to be — happen almost immediately, right, through the sales teams because most of their big accounts are also our big accounts, right? And we’re going to start transacting those, it’s going to include other VMware products. It’s going to fall into ELA renewal cycles as well, right? So I expect that to occur also. And, right, as the last piece of your question implies, hey, as we broaden the product strategy, hey, it’s going to become much broader in the marketplace. It’s not going to be hanging on just the biggest deals with the top 50 customers, right? It’s going to become a much broader play. And we’re already starting to see that with PKS as we’re getting more velocity of deals to a broader set of customers that aren’t the megadeals, it’s the smaller transactable deals as well. So in all 3 dimensions, I think, yes.

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Walter H Pritchard - Citigroup Inc, Research Division - MD and U.S. Software Analyst

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So I guess, just maybe this is a Sanjay question, but the high level, I think, would be helpful in terms of — I mean, you’ve

had really, really simple pricing and packaging as a company, and I think it’s part of the way you’ve gotten to over 500,000 customers where you have sort of standard and plus and enterprise. And it’s just — it’s like check boxes and what’s in each one. How do we think about, can all of this that we have here sort of be put into something that looks like that as we get a couple years out with all the products flushed out of what needs to happen with the execution here, but just curious how you think about that. And then just from how they can — the customers then consume it, will they still consume it the way they’ve been consuming it, which is largely a license and a maintenance?

Patrick P. Gelsinger - VMware, Inc. - CEO & Director

Yes, so there’s — like normal, Walter, there’s a lot tied up in your simple questions. We are already on a journey to move from product to solutions, right? VMware Cloud Foundation, the full suite, right? And we’re selling that, it’s a bigger deal. We’re selling a full software data center for customers. When you buy VMC, you get the full VCS suite as a complete solution. We’ll increasingly be positioning NSX that way. The full networking solution, right, moving away from data center or load — it’s going to become the full solution. Workspace ONE is already well under that path. We need to do the same with our developer solution, right, as we deliver Tanzu to really bring that full package of what we sell, right, as that complete solution. It’s similarly for the security. So I believe that has to become part of how we deliver this scale for our customers, right? Sell the solution. And even if they buy the product, all of our sales motion is positioning that complete solution and the roadmap and the value proposition at a much higher levels. So that’s what we’re already underway. And I think some of the biggest go-to-market challenges we face is how we refactor our sales and sales motion to do that at scale.

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Patrick P. Gelsinger - VMware, Inc. - CEO & Director

Yes, thank you.

Paul Ziots - VMware, Inc. - VP of IR

And Sanjay and Pat, please stay up here. We’re going to have next up, Ray, Rhagu and Zane will join us. And if we have any questions, we still have Patrick here with us. And we have Rob here with us. We have Scott Yara from Pivotal. Thank you, Scott. We also have Rajiv, and we have [Shaker]. So all can participate in this. It’s more general, more comprehensive Q&A session. Brad, you want to start us on this, too?

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Brad Alan Zelnick - Crédit Suisse AG, Research Division - MD

Project-specific, which seems to raise a lot of eyebrows this week was the highlight announcement. But as Pat said, your play — you have a home-field advantage with this audience. And I think while it seems natural as peanut butter and chocolate or whatever combination you might think of, as I think of product strategies, many of them are customer-driven. But then on the other hand, there are other product strategies where if it weren’t for Steve Jobs and the iPhone, I don’t think we would be holding these devices today or perhaps not driving an automobile. Can you maybe just take us back to what led to the formulation of this strategy and the proof points that give you confidence that bringing together Kubernetes containers and VM’s make sense, and that this is actually what the world is going to demand?

Ray O’Farrell - VMware, Inc. - CTO & Executive VP

Yes. I mean, I think I’ll start, and others can — the fundamental observation is that if we look at enterprise applications today, right, and they say, “Look, as companies build these modern applications, they’re going to close this with the current applications, number one. And number two, these modern applications themselves are not the simple, stateless applications that characterize additional generational containers, but complex applications where there are things that would deliver in VMs, things that would; deliver in containers, things that are going to be in services, right?”

So we started with an understanding of the modern application landscape in an enterprise, and it was pretty clear you needed a single platform that did it both, right? That was observation number one. Observation number two was that as we are all familiar with the IaaS trend for the last 10, whatever, number of years, right, and as we also saw what happens to IaaS, it’s pretty clear that Kubernetes is becoming the new IaaS, right? And so if we’re going to be a modern infrastructure platform, then you’ve got to be on a Kubernetes platform and point it at real estate — modern application real estate, enterprise application real estate, which consists of modern and traditional applications, right? So that is a problem that we’re going to try to solve for. So Rajiv, do you have anything else to say?

Rangarajan Raghuram - VMware, Inc. - COO of Products & Cloud Services

Yes. I think I’d go back to my earlier comment. I walk into to customers, and this relationship between the applications and — applications as part of that customer and the — let’s call it the infrastructure supplier within the customer. And they look to each other, and there’s a clear sense from the application or the line of business saying help this guy help me. And that is exactly what we’re seeing. We’re seeing that there is demand for both of those are occurring. I think also, realistically, you are going to have the mixed applications. And the vast majority of containers today run in VM, so we don’t see that suddenly changing anytime soon. So the ability of a unified approach managing that infrastructure just seems to make sense to when you think about companies going through a digital transformation like that while I leverage this new app.

Patrick P. Gelsinger - VMware, Inc. - CEO & Director

Yes. I would just add one little point. We had Joe Beda onstage on Monday, the first Kubernetes — or 1 of the 3 guys that invented it. And one of the magic moments I’ll say in this progression is we did the Heptio acquisition. We now have 2 of the 3 the creators of it, the architects of it, the people who are carefully curating this process of standardizing in and its evolution in the industry. And then these things are very fragile in this embryonic state, right, because they can become like sworn for Docker, right? Both gone, right? The Tablea, right? It’s all history. Or they become so, I’ll say, commercialized. The open source community goes away and developers and then never become standards. So in this embryonic phase, Joe and Craig in particular really represent that for the Kubernetes community. And they came in, and (inaudible), the guy leading the architectural work in part of this vSphere and this work as well, they spent a couple of months just crawling through every intimate detail of Pacific, right? Made a bunch of adjustments, right, on how to better align with the spirit and architectural direction of Kubernetes. And as that finished, there was a big thumbs up, right? They came out of something that we believe uniquely satisfies the infra and the developer view of how Kubernetes will be embodied. Now obviously, hey, the community got to believe that as well. But as we’ve been engaging with them, we think we’ve got it right, right? And that’s really sort of the Goldilocks comment that you heard on stage, not too hot, not too cold, not too developer, not too infra. And if we get that right, that’s magic.

Rangarajan Raghuram - VMware, Inc. - COO of Products & Cloud Services

The only thing I would say is if you look at ISVs, I mean they were the leading edge data point for us. The ISVs are not writing to the EC2 API or the OpenStack API anymore. They are writing to the Kubernetes API, right, for an operations model of their software. And so that tells you clearly that there’s a fundamental — so it’s going to be a player in infrastructure. That is the platform that they represent.

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Kasthuri Gopalan Rangan - BofA Merrill Lynch, Research Division - MD and Head of Software

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And a question for you, Sanjay. You’ve got 2 major acquisitions. The selling cycles are going to change dramatically. How are you going to approach the next fiscal year go-to-market motion, marketing quota, hiring salespeople? That’s really a big, big, big task. How are you approaching the job differently as you go into next year?

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Sanjay J. Poonen - VMware, Inc. - COO of Customer Operations

On your second part of your question, Kash, I would say it’s early, but we have a playbook, pending close, that we’ve been sort of humble and hungry as to how we have handled acquisitions with offering Boards, raise the executive sponsor for Pivotal and the executive sponsor for Carbon Black. And we seek to keep those reasonably intact with their own go-to-markets as opposed to just pulling the piece parts of the various side and integrating them into VMware. And we’ll follow that similar playbook in terms of how we’ve made AirWatch and some of the other ones successful.

But I think from the solution perspective, which was what Pat talked about, our team has been asking for clarity on containers. And I think the messaging now, I mean, it was confusing to customers because we were saying PKS and Heptio and PCF and PaaS, and our customers were confused. And what happens when there’s confusion between VMware and Pivotal? OpenShift or MPLS comes right in. So to just have everything under Tanzu is beautiful because the marketing simplification of being able to say, “We have a single name now that move piece parts, and Ray’s going to organize underneath it.” And that road map will come, but this is — Tanzu’s a Japanese word for containers, this is our play. It just gives the sales teams who — we have one of our plays today called modern apps, which is sort of partially what #1 is. We — I mean the sales teams were confused as to what they should sell. And going into next year, we’ll have tremendous clarity around that. On the protect part, very quickly, we have a play today around networking and security. We say, call it transforming network and security. And I would say we would probably break that out. I think there’s a necessity for both the connect part of it, which is transforming networking. We could probably create a new one, which is the fifth model there, transforming security. And what we will do there since that’s newer for us, I would say the container — and although you might think — our folks have been thinking a lot about VMs and containers.

In the security part, if we can build synergies with the EUC team and, over time, the networking team and then, really, into the Dell client team, it will make Carbon Black’s job much easier than having to just do it on their own, because the beginning of the average VMware rep [script], you’re not going to get security. But I want the core rep of VMware to do is if you heard the word security, if you hear one of the competitors going down on a deal, CrowdStrike, Symantec, McAfee, bring these guys in, and then have the EUC team and then really sort of turbocharge each other while we keep them separate.

So I think that these are the ways that we have some early thoughts as to how we simplify, with marketing move toward solutions. You’ve seen us doing big ads at the airports, okay, in San Francisco and New York that say containerware. We’ve been doing that leading up to this. We’re not changing the name of the company, okay? It will still be VMware. But we’re trying to say as the company who over 21 years spawned the notion of VMs being so fundamental, why not we also become the de facto container platform? And that’s what we’ll do in marketing. Air cover, drive to solutions and then sales protect the go-to-market specialist teams.

Ashley Melissa Ellis - Cross Research LLC - Research Analyst

Ash Ellis from Cross Research. I’m not sure who wants to take this. But a lot of the solutions you’ve showcased this week have been highlighting technologies you’ve acquired, Bitnami, Heptio, CloudHealth. And obviously, you have a lot of technologies you’re going to be integrating from Carbon Black and Pivotal. How do you go about the decision of investing organically versus going out and buying that technology? And as you’re integrating these 2 larger companies, does that change your mindset at all in the coming quarters?

Patrick P. Gelsinger - VMware, Inc. - CEO & Director

Yes, I think you’ve seen — I think we’re doing a pretty healthy job of organic and inorganic innovation. Like we announced NSX Intelligence, that was all organic, right? We’re also combining inorganic and organic. AppDefense was all organic. And we’re now layering Carbon Black into that as inorganic. The telco platform was all organic, and we’re layering Uhana into that.

So for these areas, you’re acquiring sometimes because we just aren’t got it done ourselves. We ran out of budget, right? Zane shackled me from spending more. Or there was innovation that — there’s clever people — there’s more clever people outside of VMware than inside. And in the case of Avi, for instance, we had a load balancer in NSX. I think Rajiv and I — I don’t know. How many years have we talked about doing more on the load balancer R&D side?

Rajiv Ramaswami - VMware, Inc. - COO of Products & Cloud Services

3 years.

Patrick P. Gelsinger - VMware, Inc. - CEO & Director

3 years. And when we got done with NSX-V to -T and doing the Layer 7 firewall capabilities and doing the Intelligence thing, I gave him like the 3 engineers and 2 cats, right, to work on the incremental load balancer. So we just didn’t get it done. And in that case, it was a pretty easy decision to, okay, we got to go acquire because people want a load balancer and slap top of their SDN.

So we’re working — it’s always better if we can do it organically. But in many of these cases, we’re investing aggressively, we’ve kept a very healthy R&D budget in at 17%, 18% range, we haven’t moderated that one bit, and I don’t expect that we ever will, right, as a company even as we go forward. And then as we go look into the industry between our investments, between our ecosystem, the Dell investments, we have a tremendous fan-out of being able to look at the inorganic ecosystem, right? And in that sense, we feel quite — part of the reason I feel like we’ve gotten a much higher success rate on our inorganic play is we’re looking better, we have a good strategy, we do aggressive diligence, we look at it from the cultural aspect, the ability to accelerate those companies. So all those taken together, I think we’ve done a better job in the organic as well as the inorganic play than most others in the industry.

Zane C. Rowe - VMware, Inc. - CFO & Executive VP

We run a fairly rigorous process internally as we look at the ROIs, we look at the horizon and we think about risk. And even what you hear today is not only what we believe these companies will do within the portfolio but what the portfolio will do benefiting from the companies as we augment them. We go through the same process internally, and we think about the discipline around looking at that return profile. It’s worked very well so far.

Matthew John Swanson - RBC Capital Markets, LLC, Research Division - Senior Associate

Yes, this Matt Swanson from RBC. I think you’ve done a really good job today laying out some of the synergies from the strategy around Carbon Black and that whole protect vertical. Could you give us a sense, though, for how understood VMware is as a security provider within your customer base and just if there’s perception challenges that kind of go along with the technology capability challenges?

Sanjay J. Poonen - VMware, Inc. - COO of Customer Operations

Yes, I’d start. And Pat, feel free to add, or Raghu and Ray. I’d say we’re early. I mean when I talk to NSX customers, as Rajiv said, about half of them are using them in security use cases. So the CISO who likely had to sign off on that use case was aware of it, but we probably don’t have a relationship that’s key there. Increasingly, Workspace ONE, I’ve noticed the same thing when I talk to customers, I look at their business card and say who’s — who do you report into? Half of the time, AirWatch, now Workspace ONE, is being signed off by the CISO in that department but, again, probably don’t have a relationship with infosec teams. That changed with Carbon Black. They have a strong relationship, and it’s not just like 50 customers. We’re talking 5,600 customers. We use them internally, too. So it’s a sticking point. Is it as strong as the biggest company? It isn’t, but it’s not a small startup.

So we would take that there are other aspects of our partners that have also angles into the CISO. So like I mentioned Secureworks, they have a very strong CISO relationship. Dell has an entire solution play called security transformation that has complementary products to Carbon Black like RSA, like the Secureworks part. I hope that Carbon Black will be the top thing that the Dell reps talk about when they talk about security transformation because the integration we plan to do is with Dell laptops. So we can do that.

The combined aspect of what Carbon Black brings us in CISOs, the partners that we have, especially Dell, will establish your credibility. But is going to be a journey. I think we get a running start with this, which gives us a critical mass. And our goal is — tremendous relationship with CIOs, as I mentioned, okay? The CIO relationships with the top 5,000 companies, we probably among all infrastructure companies have the best. And if we don’t know somebody, probably, Dell knows them. So we’re very, very well positioned there.

The CIO so typically reports to that person, and we think we can use the CIO relationship and the starting point of the CIO’s relationship and get to build it. Our goal is to have as many CIO relationships, CTO relationships that do infrastructure and cloud and CISO relationships over the next several years.

Zane C. Rowe - VMware, Inc. - CFO & Executive VP

And I would just add one point, which is if you look back a couple of years ago, CISOs were kept out of the infrastructure side. And now increasingly, CISOs are being tasked with and mandated to figure out security for infrastructure. And so because of that, I think the opportunity that we have is to actually align with where customers are going to. And one of the core reasons that CISOs are getting pulled in is because the security spend is increasing so much that the CIO now is getting way more actively involved. And if I just look at my time horizon the Carbon Black and the security industry, CIOs in general today are much more involved because they’re trying to rationalize all the security spend, and they want to understand how do I take all these disparate components and pull them together and make sure that I’m optimizing my spend. So I think we align with where the industry is going.

***

Keith Weiss - Morgan Stanley, Research Division - Equity Analyst

This has been super helpful. A question that just sort of came to me in this entire day, and this isn’t meant to be provocative. But like, Salesforce.com has made some big acquisition, and investors kind of come back to me and say like, oh, no, they’re turning into Oracle, right? And you guys continue to build up the portfolio, and you have this big platform. You’re trying to get into your customers. And I could imagine investors coming to me and saying, are they going to turn into the next IBM? So the question to you is, how do you avoid that, turning into the next IBM or that, hey, listen, we’re a jack of all trades and master of none, and we’re all about the account control and stuffing more stuff into our accounts?

Thus far, you’ve done a really good job with acquisitions. Like, AirWatch was super successful, and Nicira was super successful. How do you keep that going? How do you keep the innovation engine going and don’t become that, hey, listen we account control so we could just shove whatever we want into that account.

Patrick P. Gelsinger - VMware, Inc. - CEO & Director

Yes. And I think one of the antidotes to that is culture. And I’ll just say we are maniac about the underlying culture of the company. And clearly, it’s easy to talk about culture, it’s hard to make it what you live, right, in that sense. And some of the things, tech for good, these innovation aspects, we put on RADIO, right, our Research And Development Innovation Offsite. It’s just a geekfest, right, a couple of thousand of our engineers together, right? Or our patent culture, right? Flings and just class A engineers hire class A engineers because they want to work together. If you have class B engineers, they higher class C, right? This huge focus on the top of the technical pyramid. Those kind of — so you’ve just got to keep building that culture all the time. And obviously, being a techie myself, hey, to me, a great day in the office is geeking out with some of our engineers and help getting into the bowels of it.

I think where we also have done well, but it isn’t acquiring, it’s acquiring, integrating and innovating on the things that we bring in. And the — we are going to paratroop, right, some of our best and brightest principal engineers into Carbon Black ASAP, right? Project Pacific, we took Craig, right, the integrator of Kubernetes and dropped him into the core team vSphere team, right, and just go architect a great product, right? It’s just that it has to be a great product or it isn’t VMware, right? And you’ve got to keep building — a mediocre product should never be part of our portfolio ever, right? We just got to keep making great world-class products.

We also have to be very clear about what we’re not, right? We’re not hardware. We’re not consumer. We’re not applications. This is our space, and our strategy has, I’ll say, the profit from the core mentality. Everything has an adjacency that we’re building on, either sales momentum, technology momentum, customer buying patterns. Everything is building on, and it makes the next one less risk, right, as well because none of these are jumping into radical other markets. They’re highly leveraging things that we’re already doing. But I think every company has this risk as it gets better as — I mean as it gets bigger, right, as we go forward.

And obviously, as you’re looking at the executives on today’s stage, hey, a lot of us are very technical right, as well. And — right? You can go to a lot of the top executive teams, right, and you’ve got to look 2 or 3 layers deep until you find deep technology. And that’s not who we are, right, at that level. And we’re pretty committed to be this deeply technical, product-oriented, innovative company at the highest levels and at the lowest levels of the company.

***

Patrick P. Gelsinger - VMware, Inc. - CEO & Director

Great. And hey, thank you for the time. And obviously, many of you, we know well for over long periods of time. Thank you for spending time with us learning more about our strategy and where we are and, as I say, a very exciting couple of weeks for us, acquisitions, earnings and now the biggest party we throw in the year.

Fundamentally, we are out to build a truly great company when I say that’s a company that has a great culture, right? And cultures last longer than any products or strategies do, right? Second, that’s — we’re able to be this ongoing innovative, disruptive company in categories and in industries that — and somewhat building on one of the later questions that fundamentally if a product is a little bit better than a competitive product, it isn’t interesting to us. We’re just out to do these radical, disruptive, change industry, category-defining kind of innovations over and over again, maniacally focused on delivering the right thing for customers, right? And if you do the right thing for the customers, everything else follows.

Good business fundamentals. We’re a growing, profitable business, right, that has solid economics behind it yet we’re still sort of old-fashioned. People should make money, right? And it has to be based on good business fundamentals. And we think we have a pretty good view of what we are, what we want to become as well as what we’re not, right, so a clear strategic sense of where we are. And for that, we certainly hope to well reward, right, our customers, our stakeholders, employees and shareholders.

So thank you for spending time with us today.

D I S C L A I M E R

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Forward-looking statements This presentation contains forward-looking statements including, among other things, statements regarding the proposed acquisitions of Carbon Black and Pivotal Software by VMware such as: the amount and type of consideration expected to be paid for each acquisition; the net cash and equity payouts and dilutive impact on VMware; the sources of funding for the acquisitions, including VMware's ability to access short-term borrowing; the expected timing for the acquisitions; the growth opportunities, acceleration and expansion of VMware's offerings associated with each acquisition and potential benefits to VMware and its customers; the expected impact on VMware's future financial performance and results of operations including revenue growth, subscription and SaaS revenues and operating margin. These forward-looking statements are subject to applicable safe harbor provisions under federal securities laws, such as the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors, including but not limited to: (1) the satisfaction or waiver of the conditions to closing the proposed acquisitions (including the failure to obtain necessary regulatory approvals) in the anticipated timeframe or at all; (2) uncertainties as to how many of Carbon Black's stockholders will tender their shares in the tender offer and the outcome of the vote by Pivotal stockholders to approve the Pivotal acquisition; (3) the possibility that either or both acquisitions do not close; (4) the possibility that competing offers may be made; (5) risks related to obtaining the requisite consents to each acquisition, including, without limitation, the timing (including possible delays) and receipt of regulatory approvals from various governmental entities (including any conditions, limitations or restrictions placed on these approvals and the risk that one or more governmental entities may deny approval); (6) risks related to the ability to realize the anticipated benefits of the proposed acquisitions, including the possibility that the expected benefits from the proposed acquisitions will not be realized or will not be realized within the expected time period; (7) the risk that the businesses will not be integrated successfully; (8) disruption from the transactions making it more difficult to maintain business and operational relationships; (9) negative effects of this announcement or the consummation of the proposed acquisitions on the market price of VMware's common stock, credit ratings and operating results; (10) the risk of litigation and regulatory actions related to the proposed acquisitions; (11) other business effects, including the effects of industry, market, economic, political or regulatory conditions; (12) other unexpected costs or delays in connection with the acquisitions; (13) adverse changes in general economic or market conditions; (14) delays or reductions in consumer, government and information technology spending; (15) competitive factors, including but not limited to pricing pressures, industry consolidation, entry of new competitors into the virtualization software and cloud, workspace and mobile computing industries, and new product and marketing initiatives by VMware's competitors; (16) changes to product and service development timelines; (17) VMware's relationship with Dell Technologies and Dell's ability to control matters requiring stockholder approval, including the election of VMware's board members and matters relating to Dell's investment in VMware; and (18) geopolitical changes such as Brexit and increased tariffs and trade barriers that could adversely impact our non-U.S. sales. These forward-looking statements are made as of the date of this press release, are based on current expectations and are subject to uncertainties and changes in condition, significance, value and effect as well as other risks detailed in documents filed with the Securities and Exchange Commission, including VMware's most recent reports on Form 10-K and Form 10-Q and current reports on Form 8-K that we may file from time to time, which could cause actual results to vary from expectations. VMware assumes no obligation to, and does not currently intend to, update any such forward-looking statements after the date of this release. vrnware• ©2019VMware, Inc. 6

Additional information about the Pivotal acquisition and where to find it This communication may be deemed to be solicitation material in respect of the proposed merger with Pivotal Software (the "Pivotal Merger"). This communication does not constitute an offer to sell or the solicitation of an offer to buy VMware securities or the solicitation of any vote or approval. The proposed Pivotal Merger will be submitted to Pivotal's stockholders for their consideration. In connection with the proposed transaction, Pivotal intends to file a proxy statement and other relevant materials with the Securities and Exchange Commission (the "SEC") in connection with the solicitation of proxies by Pivotal, the Company and Dell Technologies in connection with the proposed transaction. The definitive proxy statement will be mailed to Pivotal's stockholders. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED TRANSACTION, INVESTORS AND STOCKHOLDERS OF PIVOTAL ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT REGARDING THE PROPOSED TRANSACTION (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND OTHER RELEVANT MATERIALS CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The proxy statement, any amendments or supplements thereto and other relevant materials, and any other documents filed by Pivotal with the SEC, may be obtained once such documents are filed with the SEC free of charge at the SEC's website at www.sec.gov. In addition, Pivotal's stockholders may obtain free copies of the documents filed with the SEC through the Investors portion of Pivotal's website at investors.pivotal.io or by contacting Pivotal's Investor Relations Department via e-mail at ir@pivotal.io. Pivotal, VMware, Dell Technologies Inc. and certain of their respective executive officers, directors, other members of management and employees, may under the rules of the SEC, be deemed to be "participants" in the solicitation of proxies from Pivotal's stockholders in connection with the proposed transaction. Information regarding the persons who may be considered "participants" in the solicitation of proxies will be set forth in Pivotal's preliminary and definitive proxy statements when filed with the SEC and other relevant documents to be filed with the SEC in connection with the proposed transaction, each of which can be obtained free of charge from the sources indicated above when they become available. Information regarding certain of these persons and their beneficial ownership of Pivotal's common stock is also set forth in Pivotal's proxy statement for its 2019 annual meeting of stockholders filed on May 3, 2019 with the SEC, which may be obtained free of charge from the sources indicated above. vrnware· ©2019VMware, Inc. 7

Additional information about the Carbon Black tender offer and where to find it The tender offer referenced in this communication has not yet commenced. This communication is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell Carbon Black securities, nor is it a substitute for the tender offer materials that VMware and its acquisition subsidiary will file with the SEC. The solicitation and offer to buy Carbon Black stock will only be made pursuant to an Offer to Purchase and related tender offer materials. At the time the tender offer is commenced, VMware and its acquisition subsidiary will file a tender offer statement on Schedule TO and thereafter Carbon Black will file a Solicitation/Recommendation Statement on Schedule 14D-9 with the SEC with respect to the tender offer. THE TENDER OFFER MATERIALS (INCLUDING AN OFFER TO PURCHASE, A RELATED LETTER OF TRANSMITTAL AND CERTAIN OTHER TENDER OFFER DOCUMENTS) AND THE SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 WILL CONTAIN IMPORTANT INFORMATION. CARBON BLACK STOCKHOLDERS ARE URGED TO READ THESE DOCUMENTS CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION THAT HOLDERS OF CARBON BLACK SECURITIES SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING TENDERING THEIR SECURITIES. The Offer to Purchase, the related Letter of Transmittal and certain other tender offer documents, as well as the Solicitation/Recommendation Statement, will be made available to all holders of Carbon Black stock at no expense to them. The tender offer materials and the Solicitation/Recommendation Statement will be made available for free at the SEC's website at www.sec.gov. Additional copies may be obtained for free by contacting VMware or Carbon Black. Copies of the documents filed with the SEC by Carbon Black will be available free of charge on Carbon Black internet website at investors.carbonblack.com/financial-information/sec-filings or by contacting Carbon Black's Investor Relations Department at (617) 393-4700. Copies of the documents filed with the SEC by VMware will be available free of charge on VMware's internet website at ir.vmware.com contacting VMware's Investor Relations Department via email at IR@vmware.com. In addition to the Offer to Purchase, the related Letter of Transmittal and certain other tender offer documents, as well as the Solicitation/Recommendation Statement, VMware and Carbon Black each file annual, quarterly and current reports and other information with the SEC. VMware's and Carbon Black's filings with the SEC are available to the public on the SEC's website at www.sec.gov. vrnware• ©2019VMware, Inc. 8

Forward-Looking Statements

This communication contains statements relating to the proposed transaction and its timetable for completion, which are “forward-looking statements” within the meaning of the U.S. federal securities laws and by their nature are uncertain. Words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “plans,” and similar expressions are also intended to identify forward-looking statements. Such forward-looking statements are not guarantees of future performance, and you are cautioned not to place undue reliance on these forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements as a result of many factors, including but not limited to: (i) the ability to consummate the proposed transaction in the time frame expected by the parties or at all; (ii) any conditions imposed on the parties in connection with the consummation of the proposed transactions; (iii) the ability to obtain stockholder approval and the satisfaction of the other conditions to the consummation of the proposed transaction; (iv) the potential impact of the announcement or consummation of the proposed transaction on relationships, including with employees, suppliers and customers; (v) the ability of third parties to fulfill their obligations relating to the proposed transaction; and (vi) and the other factors and financial, operational and legal risks or uncertainties described in Pivotal’s public filings with the SEC, including the “Risk Factors” and “Forward Looking Statements” sections of Pivotal’s Annual Report on Form 10-K for the fiscal year ended February 1, 2019 and subsequent Quarterly Reports on Form 10-Q. All information set forth in this release is current as of the date of this release. These forward-looking statements are based on current expectations and are subject to uncertainties, risks, assumptions, and changes in condition, significance, value and effect as well as other risks disclosed previously and from time to time in documents filed by us with the U.S. Securities and Exchange Commission (SEC). Pivotal disclaims any obligation to, and does not currently intend to, update any such forward-looking statements, whether written or oral, that may be made from time to time except as required by law.

Important Additional Information and Where to Find It

This communication may be deemed to be solicitation material in respect of the proposed acquisition of Pivotal by VMware, Inc.

In connection with the proposed merger, Pivotal will file a proxy statement with the Securities and Exchange Commission (the “SEC”). STOCKHOLDERS ARE ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Stockholders may obtain a free copy of the proxy statement (when available) and any other relevant documents filed with the SEC from the SEC’s website at http://www.sec.gov. In addition, stockholders will be able to obtain, without charge, a copy of the proxy statement and other relevant documents (when available) at Pivotal’s website at www.pivotal.io/investors or by contacting Pivotal’s investor relations department via e-mail at ir@pivotal.io.

Participants in the Solicitation

Pivotal and its directors, executive officers and other members of its management and employees as well as VMWare and its directors and officers may be deemed to be participants in the solicitation of proxies with respect to the proposed transaction. Information about Pivotal’s directors and officers and their ownership of Pivotal’s common stock is set forth in the proxy statement for Pivotal’s 2019 Annual Meeting of Stockholders which was filed with the SEC on May 3, 2019. Stockholders may obtain additional information regarding the direct and indirect interests of the participants in the solicitation of proxies in connection with the merger, including the interests of Pivotal’s directors and executive officers in the merger, which may be different than those of Pivotal’s stockholders generally, by reading the proxy statement, which will be filed with the SEC, and other materials relating to the transaction filed with the SEC. Investors should read such materials carefully before making any voting or investment decision.