3/12/24- Revenue Drivers,❄️Snowflake Update☃️, Meta's CTO Boz
"Sridhar is really driven. And he is very much about -- his big focus is we need to get product to market quicker."⚡
Welcome back. In a busy world we can be distracted with the trivial many things or we can focus on The Vital Few.
Something that I am thinking about
Large Company Revenue Drivers
The driver(s) of a company’s revenue is complex, more dynamic then we usually think. As Costco just released earnings, lets use them as our example, but this reasoning below applies to most medium, large and mega sized companies.
What drive’s Costco’s revenue? Unit prices (ASPs) x Units sold. Increase the prices or increase the units sold and Costco’s revenue goes up. Right. That is a good first level understanding, but the actual make up of revenue and directionality is 2X or 10X more complicated.
Here is a longer set of some of the drivers of revenue (but this is still not and exhausted list)-
Unit prices (ASPs), Units sold, Product offering, Product mix, New locations, Customer retention rate, Customer adoption/penetration, Marketing effectiveness, Distribution channels, Seasonality and trends, New geographies, Foreign exchange rates, Product/service quality, Market growth, Market share, M&A, Economic conditions….
I like the visual below. It is a Fourier Transform and each of the little circles are different variables. You can also think about the visual as multivariable calculus if you like. We think about corporate revenue as the GIANT blue circle in the middle… and that generally works. But the reality is that all the little drivers, like each of the smaller and smaller circles serves to create the final image of revenue.
When I am projecting revenue for a company in order to value it, I use a version of the GIANT blue circle in the middle, but I have to acknowledge all these other drivers. Little circles of Humility are constantly bonking me on the head to remind me of how little precision I command.
Investing, Companies, Market Past/Future
(I invest in Companies, not in stocks.)
Interesting companies that hosted earnings results or information sessions since my last edition that I reviewed-
Technology- SPLK 0.00%↑ , AVGO 0.00%↑ , MDB 0.00%↑ , CRWD 0.00%↑
Housing & Banking - LOW 0.00%↑ , GRBK 0.00%↑
Others- COST 0.00%↑
(With data and charts it is not what you look at, it is what you see that matters.)
Broadcom has closed its acquisition of VMware. CEO Hock Tan is going to work his magic🪄to maximize value for Broadcom.
Podcasts
1 hr 40 min- Andrew Bosworth—or Boz, as most people know him—is the chief technology officer at META 0.00%↑ and head of Meta Reality Labs, the company’s augmented reality/virtual reality (AR/VR) organization, which he created in 2017. Boz joined Facebook in 2006 as their approximately 10th engineer. He is brilliant and thoughtful. 🎧Podcast link here.
Boz said one of his favorite questions that he always asks an employment interview candidate:
What would a former boss or coworkers say was your greatest strengths and weaknesses?
That question is 2 levels deep. Not what would you say…, no. What would THEY say about you… In CS parlance, this is one OS virtualizing another OS and communicating on its behalf.
Videos
Excellent 20 Minute introduction to Snowflake’s new CEO Sridhar, below. I am impressed by him.
Books and Articles since my last edition
(Books are like loading software on your brain. If I get bored of a book I quit and move on.)
The Price of Time by Edward Chancellor Economics, Finance, History.
The Naturalist by Andrew Mayne Fiction, Mystery, Thriller.
Here is a link to many of the books I have read and my 1-5 star rating- Goodreads Books Read
Wild Card🃏
ICYMI,📰 Slootman retired at Snowflake❄️ and Sridhar is now CEO-
Mike Scarpelli, CFO, attended the JMP Securities Technology Conference on 3/4/2024, several days after SNOW’s earnings release. The Q&A was so signal rich📶📡, I wanted to pull some of my favorite observations.
We have a lot of new products coming on board. And I think the guidance is appropriate coming into a new year with all the change that we have. And we'll see where we are at the end of the quarter.
New Products for 2024- Streamlit, Snowpark Model Registry, Snowpark Python, Cortex search, Snowpark Container Services, Iceberg Tables, Unistore, Dynamic Tables, Document AI, Snow Copilot, Marketplace Search
And when we acquired Neeva last May, I remember telling Frank, you've got to spend some time with Sridhar, and Frank quickly did. And we brought Sridhar onto our executive staff, and he quickly was running all of our AI and ML initiatives and the more time Frank and the Board spent with him, we realized that he could be a successor to Frank.
And then talking about timing. The reality is, is good people don't sit around. They have other options. And if we -- if Sridhar were not the CEO here, I would just tell you, he'd be working at a very large company, maybe running all their AI Initiatives, so.
[..] Sridhar is a driven individual. He's a -- first of all, he's a super nice human being and humble, but don't mistake that with being soft. He is really driven. And he is very much about -- his big focus is we need to get product to market quicker. Why? Sales needs more product and he's all about sales enablement, is making sure our sales team, our SEs really are up to speed on our new products and know how to sell them.
A lot of people mistake that he's a technologist and doesn't have operational chops. He ran a very, very, very large team at Google. It had, like, 12,000 people in it. And he scaled that business to $120 billion in revenue when he left.
Q- And did you feel that the way the market -- or did the Board feel that the way the market is evolving, it's important to have someone with those kinds of technical chops at the helm?
We felt, with where the company is and where it's going, you need to have someone with strong technical background to be able to run the company to help be able to attract good people as well too. He's very, very good at attracting the top technical talent. Without him, we wouldn't have got the 5 people out of Microsoft, the DeepSpeed team that he hired to come and help with our AI initiatives.
Q- So demand is not the problem. Were they not -- were you guys not getting them to market fast enough before? And what were the roadblocks?
[..]You see Unistore, we announced Unistore two years ago, and we're just going to deliver that now. We need to shorten that time frame. Snowpark, there was a lot of stuff we've learned. Even though we went into GA, we've learned a lot of stuff with the migrations we were doing that we had to do more work on the product.
So Cortex is one of the main things that Sridhar and his team really delivered. They delivered that into private preview in 7 months from the start. It will go into -- it's going to public preview right now and will be GA by Summit. That's a lot faster. That's what he's trying to do without sacrificing quality.
[..]Q- Losing Frank's fairly awesome set of go-to-market execution skills, when you balance it all out, how do you feel about it?
What I would say is everyone has this perception that Frank is driving all the sales. So when Frank joined the company, there were maybe 1,000 people and the whole go-to-market had to get it realigned, and he was instrumental in doing that. But we have a team of people that are intimately involved in the selling. And yes, Frank talks to a lot of CEOs and stuff, but he's actually not selling.
There are many, many, many people who are doing that. So I'm actually excited about Sridhar coming, because he is so driven. He's actually in the office every day. He's interacting with people, and Frank wasn't in the office as much as what people think, so.
🤔👍🏽😎
Investors really seem to like Frank, but just like me and -- we're just 1 person out of many on the team. It's a big organization. And I do think -- I personally think the selection of Sridhar as the CEO is the right choice for what the company really needs.
[..]And Frank, when we started talking about succession, he was adamant it had to be someone that was deep in technical chops and that with operational skills and Sridhar, from everyone we saw, is the right person. And we whiteboard-ed many of the top technology people in the world when we were kind of planning out who is the right person to go after.
I thought these selections above were valuable and meaningful. In addition, CFO Mike Scarpelli signed a 3 year employment extension to work with Sridhar. I am excited to see what the 2 can accomplish together. SNOW 0.00%↑ ❄️☃️❄️
After talking about the CEO and CFO above, I wrote about the talented Snowflake CRO Chris Degnan in my 12/4/23 post, link here.
PS- Sridhar’s PhD is in databases. (Of course.)
You can listen to the entire Mike Scarpelli interview here, link.
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Disclaimer: All of my posts are for informational purposes only. I might own some of the companies discussed in these posts. This is NOT a recommendation to buy or sell securities discussed. Please do your own work before investing your money.