Welcome to squawk alley for your wednesday morning im Carl Quintanilla with julia bore steen, mike san tolely with us for the hour dow is lagging down 60 jackson hole tomorrow, of course, were watching hurricane laura, the retailers but mike, crm, continues to astound. We thought 20 gain was impressive its now at session highs of 27 today alone on what bloomberg called the best revenue surprise in a decade. Yeah. Its pretty remarkable obviously the results themselves are emboldening people to say that this was as expensive as the stock has always looked undervalued or misvalued or didnt appreciate the durability of what theyre doing on the market share side of things for the longterm. What is interesting, too, if you look at it compared to some of the other software bell weathers over the last couple years, as big as todays move is, its kind of a catchup if you look at how microsoft and adobe in particular their anointing crm into that class inpenetrable areas that seem like theyre going to grow forever. You dont want to make it seem like its a laggard. Its always been a good performer. And expensive stock. But it is interesting this market willing to just pay up more for this select class of companies that its decided just are going to own the future. Its not really that much of an exaggeration to say that the big question is theyre dragging analysts to raise price targets. Theyre changing the way the street is being forced to approach valuation the question is are they you know, overplaying this hand in this shortterm at this point. Well, your point about it being anointed to a rarefied error is a good one, mike, especially on the heels of the addition of the dow which takes effect on monday mark talked to jim cramer last night on mad money about the companys astounding growth rate take a listen. I never thought, you know, when we started this company, jim, now more than 21 years ago that we would create a company thats worth more than 200 billion, that, you know, this year well do more than 20 billion in revenue and here we are. Its amazing look at this growth rate were still growing this year at 22 at 20 billion. Thats faster than any Enterprise Software company so well continue to watch the price action today, julia, on salesforce, even as we learn more about new Companies Like palentere. Absolutely. Just for salesforce, carl, so important to note that the guidance for the full year was stronger than expected its not just the growth weve seen so far. Interesting that Current Quarter guidance was a little soft but when it comes to full year, they do absolutely expect these trends to continue pretty powerful stuff there now well learn more about palentere. Interesting stuff in those companies numbers there in that s1 josh, what do you got . So, julia, it took 17 years but palantir now looks ready to make its Public Market debut remember this company was cofounded by peter teal back in 2003 its mission providing software that customers use to integrate volumes of data from images to spreadsheets into a central platform where it can then be securely analyzed and interpreted. Palantir is best known for its work with the u. S. Government. Ceo told me his software is very useful and sometimes deadly. Referring to palantirs work with the America Military and war fighters revenue grew 25 in 2019 and the First Six Months of this year nearly 50 but its still not making a profit, posting a net loss of 165 million now, carp and his company clearly enjoy staying apart from the crowd. In that filing, carp ripped into his tech peers, writing the engineering elite of Silicon Valley may know more than most about building software, he says but they do not know more about how society should be organized or what justice requires our company was founded in Silicon Valley, but we seem to share fewer and fewer of the Technology Sectors values and commitments. Having said that, the company does seem to share at least some of big techs values palanti rerks has two class of stock, class a and class b and also plans to introduce class f shares too meant to give the founders just below 50 of total voting power. Echoing steps taken by tech giants like facebook and alphabet carl, back to you. Wow what a story, josh thanks for that. Good place to start with our next guest as well joining us is capital founder and managing partner low tony joining us for the first time good to have you with us thank you. Thanks for having me. I would love to get your thoughts on palantir, sort of the color behind the s1 yesterday. The business model, karp himself what do you think investors should know . What surprised you yet on that filing i dont think there was anything that necessarily surprised me palantir is an Amazing Company its been around for quite a while, as was noted earlier in your segment i think whats most interesting to me is the fact that its taking the direct listing approach, which were seeing more and more companies at least explore. I think theres a lot of innovation that happens in Silicon Valley and now that same mindset is being applied to the process of realizing liquidity for investors. It will be interesting to watch this we have seen a couple other high profile direct listings with spotify and slack. So i think this combined with the trend towards the special purpose acquisition company, is spaks, this is something that i think is an interesting trend, kind of trying to hack the process of getting a Company Listed right no believe me, its gotten so many peoples attention the risk factors in the filing were really interesting, as im sure you are aware they sort of point to i wont call it reputational risk, but they included in the risk factors the degree to which theyre shrouded in secrecy, some argue the degree to which they might be reported on from time to time given their client base. How significant is that to someone like you i think the way that i look at it is you have to really focus in on the fundamentals theres always going to be some extra baggage that comes along with certain types of companies, especially high profile companies, companies that are not very transparent but i think the materials well outline the risks. And i think its prudent for an investor to take that into account. But again the focus has to be on the fundamentals in this case just looking at the path to profitability, also thinking about the cash thats on the Balance Sheet to be able to support the company, kind of going back to the direct listing process. Most times when a Company Goes Public through the normal ipo process, capital is raised as well because shares are sold in this sense and direct listings, capital typically isnt raised but theres another hack which is doing a financing prior to the direct listing to kind of have this hybrid approach of being able to raise some capital and then turn around to the direct listing so i think those are some of the fundamentals to look at. Another interesting thing which might be the reason that palantir decided to stay private for so long is just the fact that theres a lot of integration and customization that often happens with their work and so i think part of this was the ability to be able to provide more of a True Software solution so then the company could get valued much more like a Software Company as opposed to a services company. Lo, julia bore stin here. You mentioned some of the hacks that palantir is doing in the way its going public. Interesting two of your top holdings, spacex and sofy expected to have eventual ipos im wondering how as you look at what palantir is doing in terms of their approach to going public, how do you think that will impact those two companies and some of the other major startups, Major Private Companies as they think about offering their shares . Yeah. This is something thats been interesting to look at over the past 20 years or so because you look at some of the companies that are in the Technology Space like google. You know, google was only private for about five years so from the time it was founded until the time it reached the Public Markets, it was actually only five years, which is amazing in hindsight to look at how long these companies are deciding to stay private today so, i think theres a lot of things that factor in. You know, number one, companies are staying private longer because theyre able to realize their dream while not being in the eye of the Public Markets and under the scrutiny of all the filings that are required and trying to manage to the expectations of analysts so thats a positive in that were seeing these Companies Come public in a much stronger financial position the ability to have a Solid Customer base and to be able to kind of chart their own path moving forward so i think that a lot of companies are exploring this as an option. I think theres also a lot of regulatory process thats required to go a traditional ipo where as its a little lighter with direct Listing Technology already exists obviously theres also the talk about the pop on an ipo and whether or not that is money being left on the table. You know, is it the case when the ipos are priced by the bankers, you know, is this pricing actually reflective of the demand that exists in the market and the company doesnt really realize any of that additional ipo pop. So i think thats another consideration. Yeah. No, thats a great point in fact right now the s. E. C. Is on the tape voting, Commission Voting to ease rules on the disclosure of risk factors maybe in some ways responding to the trend that direct listings had become the other big topic for us this morning is this etsy piece on amazon this new blog post in which Josh Silverman argues that amazon is trying to wipe out its competitors by backing californias Consumer Protection bill and says amazon supported the bill as an abuse of market play amazon, lo, is one of your top holdings how much leash do you give etsy on Something Like this well, theres the process of thinking of marketplaces as a way to connect buyers and sellers. And so i think what etsy and josh is saying and josh is an ebay alum and ebay was the inventor of this model i was an ebay alum as well and there are already laws in place to be able to protect buyers from sellers that are selling fraudulent goods, counterfeit goods. And this particular bill, the way that i read it, it really is focussing on Online Marketplaces and kind of carving Online Marketplaces out from some of the other methods that connect consumers directly to sellers in a gathering. Think about an antique shop. Think about even a flee market those are the same types of dynamics its just that these marketplaces do it online. So, you know, look, we all have to realize that amazon is in the business of trying to sell as many products as possible. Amazon started selling directly to consumers and then the technology was so good and it built out such robust infrastructure it made sense to open that up and allow third parties to be able to access that infrastructure and process as well. And i look at the ability for these other marketplaces, like etsy, that are competing on a different level. You know, theyre bringing more homemade and craft types of goods. Historically those have been able to compete kind of showing that even going back to ebay the originator of the model, there were these certain vertical needs. But, you know, i think, look, its tough to be able to compete against amazon it feels like amazon is coming after every particular type of industry that sells goods directly to consumers. So i can certainly understand the frus tlags and viewing this as potential play for amazon to be able to further its depth into the consumers as the place to turn. More broadly, lo, along those lines, though. We have this Public Market that has given trillion dollar plus valuations to five or six of these massive entrenched incumbents that now potentially could be it could be argued are antiinnovation or theyre basically exploiting their advantages of scale in a way that maybe make them targets of regulators or other competitors. How do you think of that as you look at your own investments and how you think it will play yeah. Were investing at a much earlier stage when companies are just Getting Started but these are actually the questions that we have to assess when deciding whether or not to go after a particular opportunity. These are the types of questions that entrepreneurs and investors are asking themselves as Companies Get started. Will this ultimately lead a company down the path to being in the crosshairs of one of these larger Companies Like a facebook or a google or an amazon and so i think when theres that level of wanting to understand whether or not this is going to be something that a company can do to achieve or will it just get wiped out by one of the Larger Companies, thats going to open the eyes for anyone especially on the regulatory side who want to really understand if there is a level Playing Field for companies to be able to compete so i dont think well see a slow down. You know, what were seeing is the recognition that technology is woven into the fabrics of our lives. I think in this post covid environment, one of the things that weve seen aside from the unfortunate effects on our human lives is that we have a dependence on technology its interwoven into our lives in every aspect. And so we want to continue to see the innovation that happens from these early staged companies. I think its fine for the Larger Companies to want to partner, potentially acquire, but we want to make sure these Young Companies are able to compete. Right lo, that was fantastic we really hope youll come back because theres a lot more to talk about that we didnt get to today. Thanks very much thank you take care. Lo toney, plaxico capital manager Founding Partner julia . Carl, a lot more to discuss there, especially as we see the regulatory piece of this. Now, as we go to break, take a look at shares of hpe after beating on the top and bottom line shares up about 6 well discuss with Ceo Antonio Neri next. Dont go away. Good morning, mr. Sun. Good morning, blair. [ chuckles ] whoo. Im gonna grow big and strong. Yes, you are. Im gonna get this place all clean. Ill give you a hand. And im gonna put lisa on crutches wait, what . Said shes gonna need crutches. She fell pretty hard. You might want to clean that up, girl. Excuse us. When owning a Small Business gets real, progressive helps protect what you built with customizable coverage. And im gonna eh, eh, eh. Donny, no. Oh. And our profit was up 33 and eps 45 . We feel we have stabilized the revenue, and we are on our way to see incremental improvement as we move to the quarters ahead. And all that hard work was due to the excellent result we got in our backlog and also the cash flow from operations, which in return return significant Free Cash Flow for the fourth quarter. To what degree would you attribute the strength of these large, cyclical waves that were getting as a result of the pandemic how much of that is playing into the new fundamentals of the company . Yeah. I think obviously we still navigating through the pandemic as well as micro uncertainty, but what i see when i speak to our customers and partners is the need to continue to Digital Transformation on the back of the explosion of the data. We continue to see and thats the demand in the areas that Hewlett Packard industry grew 82 , which is actually i believe is growing faster than any. And the reason why thats happened, carl, we provide a true hybrid experience from the edge to the cloud for all the apps and data. Thats also fueling our models in term of revenues with air growing 11 . But also what we see is the need to bring resiliency to the i. T. And their operations obviously powered these new remote work force and ultimately extract every bit of value from the data and thats what were doing. Our portfolio is unique. We have a Clear Strategy to become the Platform Service company and we are starting to see the momentum yeah. Question for you about your guidance i think its interesting that you declined to provide guidance last quarter, but now youre back to forecasting. How much insight do you have into what kinds of both consumer and corporate trends youre going to be seeing in the back half of the year yeah, julia so, we provided guidance for the year on eps of 1. 30 to 1. 34 the reason why we have good line of sight on the sequential improvements that we expect. And the fact that we delivered very, very Strong Performance in q3 we expect orders to continue to grow for the next quarter and we already saw that in month three of this past quarter and also lets remember that despite the fact that we clear a big portion of the backlog, we had more than 500 million in q3, we still have a portion of the backlog to continue to work on it. And also we have dig nif kant amount of what i call backlogging customer acceptances for the very complicated businesses when you bring it all together Strong Performance in q3, strong cash flow as well and the line to continue sequential impr