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Dell braces for sales slowdown: Blames China spending, trade tariffs and whatever 'macro dynamics' are

Near double-digit top line bounce for fiscal '19 but less expected for current year

The lumbering giant Dell Technologies has highlighted numerous hurdles in the year ahead including the ongoing trade tariff war with China as it warned sales will slow.

In the first set of financials since it went public again, the umbrella brand for the operating groups in the Dell family reported a 9 per cent year-on-year leap in revenue to $23.8bn for Q4 of fiscal '19 ended 1 February.

The Infrastructure Solutions Group (ISG) was up 10 per cent year-on-year to $9.9bn, including $5.3bn in servers and networking, up 14 per cent, and $4.6bn generated in storage sales, up 7 per cent.

CFO Tom Sweet said the business was patting itself on the back with regard to "our server velocity", with average sales prices up due to "higher value workloads" necessitating systems packed with "more memory and storage content".

He said Dell has taken the "right actions" to up growth in the storage unit: since Dell merged with EMC the portfolio has been confusing and cluttered for customers and the salespeople trying to sell to them. It is consolidating the mid-range portfolio.

Over in the Client Solutions Group, turnover for Q4 was up 4 per cent to $10.9bn; commercial revenue up 9 per cent to $7.8bn; and consumer was down 6 per cent to $3.1bn. Dell and other PC makers benefited from a corporate refresh in Windows 10.

"We shifted our focus toward high-end notebooks and gaming given supply chain dynamics," said Sweet. He was referring to the Intel CPU shortages that have forced PC and server makers to prioritise where they use the chip components they do receive.

Profitability in CSG was also on the up helped by the "mix, pricing and component costs". DRAM is now much cheaper than it has been in the past 18 months.

VMware, inherited when Dell bought EMC, was up 17 per cent to $2.6bn. Licence bookings for NSX jumped 50 per cent and were up 60 per cent for vSAN.

Other business including Pivotal, Secureworks, RSA, Virtustream and Boomi grew 5 per cent to $593m.

For the year, Dell Technologies grew 15 per cent to $90.62bn but the company forecast growth to reduce to between 2 to 5 per cent.

Vice chairman of products and operations, Jeff Clarke said: "We believe the global macroeconomic environment heading into fiscal year 2020 remains positive, that we will need to navigate potential headwinds such as tariffs, IT spending in China and other macro dynamics. We are expecting commodity costs continue to be deflationary in aggregate to the first half of fiscal year 2020.

"IDC expects IT spending to grow more than twice GDP over the next few years and our market opportunity is promising. We will continue executing on our strategic focus areas which include growing above the market and driving share gains."

In terms of the bottom line, Dell reported an operating profit of $331m, versus a $69m operating loss in the prior year's quarter. Interest payments on its debts came in at $606m, leaving Dell nursing a net loss of $299m, compared to a net loss of $100m the year before.

The net loss for the year shrank to $2.31bn from $2.849bn in fiscal '18. ®

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