Strong Server, PC Demand Gave Dell Technologies a Boost in Q1

Dell Technologies’ results for the first quarter (ended May 5) were helped by strong demand for the company’s servers and PCs, it reported June 8.

“We were pleased with the overall results given some of the dynamics we worked through during the quarter,” CFO Tom Sweet said on an earnings call with analysts.

One challenge that the company faced in the quarter was higher components costs, especially with memory and solid-state drives (SSDs), he said. “There is a headwind out there in components cost,” he told analysts, noting memory costs were up about 100%, while SSD costs were up about 20%, he said. Sweet predicted that “cost environment is going to continue to be a bit of a headwind as we go through the rest of the year.”

Shares in the company were down 5.23% at $64.28 in afternoon trading June 8, after it reported its loss from continuing operations widened to $1.4 billion from $424 million, while its operating loss grew to $1.5 billion from $139 million.

Total revenue, however, grew 46% from a year ago, to $17.8 billion. The company’s server and networking division, the Infrastructure Solutions Group, generated $6.9 billion in revenue for the first quarter, including $3.2 billion in servers and networking and $3.7 billion in storage, with an operating income of $323 million, it said. Dell Technologies remained the global market share leader in x86 servers, with PowerEdge units and revenue growth up by double digits in the quarter, it said. Demand for its hyperconverged portfolio grew at a triple-digit rate, while demand for all-flash solutions grew at a very high double-digit rate, it said. There was also Increased demand for Virtustream Public Cloud for mission-critical applications by about 100%, it said.

The company’s Client Solutions Group division, meanwhile, continued to outgrow the market globally in unit shipments for commercial and consumer computer product categories on a calendar-year basis, it said. Revenue for the first quarter grew 6% from a year ago, to $9.1 billion, and the division had an operating profit of $374 million, which represented 4.1% of revenue.

Citing IDC data, Sweet told analysts “the overall market was better than expected” for PCs, with global shipments growing .8%, topping IDC’s forecast of a 1.8% decline. It was the first year-over-year growth quarter seen in the PC industry since the first calendar quarter of 2012, he said. Dell’s PC shipments grew 6.2% from a year ago, it said in its earnings release.

Dell gained PC market share for the 17th-straight quarter, with unit growth in every region, Sweet said, adding the company “outperformed” the global market in notebooks and desktops for the commercial and consumer segments. He predicted Dell would continue to “take share” from its rivals in the “consolidating” PC market, but would do so “while balancing growth and profitability.”

Dell maintained its No. 1 global market share position in displays as it gained unit share for the 17th-straight year in that category also, the company said in its earnings news release. It was also the only vendor to gain share year-over-year in both the fixed and mobile workstation categories, it said.

The company continues to make investments in areas including gaming, high-end notebooks and displays in its client business, Sweet also said on the call.

Dell Technologies hosted its second annual Dell EMC World conference in May in Las Vegas for 13,000 customers and partners. There, it introduced about 40 products and solutions, including what it said is “the world’s first artificial intelligence platform for women entrepreneurs.”