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'Totally driven by supply': Dell, HP talk of backlogs and shortages as big PC-makers turn in their numbers

Dell's results were upbeat, HP's flat, but investors still worried over supply chain

"Today, our business is totally driven by supply." These were the words of HP Inc CEO Enrique Lores as both HP and Dell - two of the biggest PC-makers in the world - raised concerns over ongoing component shortages when they reported their July quarters yesterday.

The Palo Alto firm cited "unprecedented demand... ahead of supply" and Round Rock said demand outstripped sales due to "supply constraints."

Dell's PC biz saw growth in its enterprise rather than consumer segment for its fiscal Q2, with revenue from its client-solutions group, which mainly sells PCs, up 27 per cent to $14.3bn.

HP's PC results, by contrast, were flat, with its Personal Systems unit pulling in $10.4bn, more or less level with the $10.36bn of the same quarter last year, with consumer buying up slightly – from $628m to $720m –and commercial revenue down 1 per cent from the same period last year. Total units were flat, with Notebooks units up 2 per cent and Desktops units down 7 per cent. Printing was a bright spot, however, with net revenue at $4.9bn, up 24 per cent year over year.

Problems in the channel... the tech channel

Grilled by investors in a Q&A after the results, HP CEO Enrique Lores blamed the firm's trouble securing components for its Q3 ended 31 July on several factors. These included an ERP upgrade that affected order allocations and the business's ability to forecast; "COVID-related factory lockdowns in Southeast Asia"; and "congested ports and transportation disruptions".

Finally, he said the firm's outsource model was an issue, with "the majority of our production ... managed by original design manufacturers." Lores said HP was now signing "direct supply agreements" in an attempt to mitigate the channel problem.

"When I say backlog is close to one full quarter, this gives you the magnitude of the orders that we are not able to fulfill," HP CEO Enrique Lores told analysts on the call.

He added: "Usually our business is demand-driven. And therefore there ... is some seasonality. Today, our business is totally driven by supply."

Dell, which had strong sales and profit [PDF], nonetheless echoed HP's position, with chief financial officer Tom Sweet citing "unprecedented demand that is way ahead of supply right now" on a call with investors yesterday. He added: "Despite industry supply shortages, we shipped a record number of PCs and displays in the second quarter."

And revenue for Dell's second quarter ended 31 July was a Q2 record: at $26.1bn, up 15 per cent, driven by growth in all three business units, with a 3 per cent growth to $8.4bn in the Infrastructure Solutions Group and VMware revenue at $3.1bn, up 8 per cent.

Analysts at Tech Market View said: "Dell has been a key beneficiary of the demand for PCs resulting from remote working requirements. It expects global economic recovery to drive demand in Q3 and, despite ongoing supply challenges, forecasts Q3 revenue to be up mid to high teens year-on-year."

HP closed its $425m deal to acquire Kingston Technology's gaming division, HyperX, in June 2021. Just weeks ago, the company signed a deal to acquire remote PC specialist Teradici. Both acquisitions should serve as a boost to HP's Personal Systems category.

Shares of both companies declined today. ®

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