Ding dong Dell, servers in the well. Who pulled them out? Little PC stout

Client solutions to the rescue as infrastructure shrinks 7%

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After all those costly company takeovers, Dell has reported that yet again good old-fashioned PCs came to its rescue to offset the continued slump in its server and storage business.

The Texan tech outfit last night filed a 1 per cent year-on-year rise in Q4 revenue for the period ended 31 January to $24bn. Operating profit came in at $717m versus a loss of $191m, Dell's first positive income figure since it returned to the stock exchange in 2018.

The Infrastructure Solutions Group (ISG) was down 11 per cent to $8.756bn: servers and networking crashed by almost a fifth (19 per cent) to $4.5bn; and storage down down 3 per cent to $4.3bn.

Jeffrey Clarke, Dell vice-chairman and chief operating officer, said on an earnings call the server decline was primarily caused by lower demand in China, which was down 35 per cent amid global tensions. He claimed Dell "didn't chase unprofitable server deals in a down market".

"We're planning for both the overall server market and our server revenue to return to growth, driven by higher value workload servers, increasingly more robust AI and machine-learning solutions and distributed IT requirements at the edge," Clark added.

On storage, the exec revealed Dell had consolidated its storage portoflio over the past two years from 80 to 20 products and it refreshed the mid-range line in May.

He said Dell had invested $1bn into "sales, coverage, capacity and marketing, including critical investment in storage specialists" and this will be seen in ISG results in this new fiscal year - assuming online rivals don't come and eat Dell EMC's breakfast, lunch and dinner.

"Earlier this month, we combined into one sales organisation, and we will realise the next level of synergies and cross-sell opportunities, like selling more storage and data protection to our server customers."

You can read more about the storage segment over at Blocks and Files, here.

However, it was the revival in the PC market - the place where Dell started in the 1980s - that helped prop up group numbers as the Windows 10 refresh continued to bring home the bacon for the business.

The Client Solutions Group (CSG) grew 8 per cent in Q4 to $11.77bn: commercial PCs climbed 10 per cent to $8.563bn; consumer was up a more modest 4 per cent to $3.2bn.

"We executed well," said Clarke, "taking advantage of tailwinds from the Windows 10 refresh cycle, declining component cost while navigating through CPU shortages and a dynamic tariff environment."

For the year, Dell's revenue edged up 2 per cent to $92.154bn: ISG was down 7 per cent to $34bn, with servers and networking sliding 14 per cent to $17.127bn and storage flat at $16.84bn. CSG was up 6 per cent to $45.8bn: commercial grew 11 per cent to $34.27bn, and consumer down 6 per cent to $11.56bn.

Dell's majority-owned Virtualization juggernaut VMware, acquired in the EMC-Dell borg back in 2016, also helped keep the business afloat with a 12 per cent jump in annual revenues to $10.9bn. Last year, the virty giant inked deals with Microsoft and Google to support its services, on top of a more extensive collaboration with AWS since 2017.

Having said that, VMware's stock is down 10 per cent after it missed its own revenue guidance, and said America's financial watchdog, the SEC, had "requested documents and information related to VMware’s backlog and associated accounting and disclosures. VMware is fully cooperating with the SEC’s investigation and is unable to predict the outcome of this matter at this time."

Dell said it paid $5bn in gross debt for the year, largely thanks to its recent offloading of infosec arm RSA Security for $2.07bn. It has now paid off $19.5bn of debt from its $67bn megadeal to buy EMC.

Unlike competitors Microsoft and HP, Dell did not say that the coronavirus outbreak would have an affect on its fiscal 2021. Last year, Nikkei reported that both HP and Dell would move a third of their notebook production out of China as trade tensions escalated. ®

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