Dell: We and our customers understand the supply constraints now. The 'wildcard is logistics'

Over at rival HP, the story is more about building too many Chromebooks and watching demand for them ebb away

The humble PC continues to bring home the bacon for Dell, with shipments to corporate customers going through the roof, in spite of previous worries about shortages and price hikes. But things are less rosy at HP, which has been caught out by the recent collapse in Chromebook orders.

Dell reported a 21 per cent year-on-year jump in group revenues to $28.394bn for its Q3 ended 29 October. Within this, the Client Solutions Group booked in $16.5bn of sales, up 35 per cent, including $12.3bn from biz PC sales (up 40 per cent) and $4.3bn from Consumer (up 21 per cent).

"Approximately 80 per cent of the industry's revenue and nearly all of the industry's revenue growth has come from commercial PCs and premium consumer PCs, and that is where we are focused," said Jeff Clarke, co-chief operating officer.

He also pointed out Dell's relatively limited exposure to consumers, and more specifically Chromebooks – a segment of the market took a dive in recent months due to market saturation, particularly among US consumers and student buyers.

The work from home and learn from home set-ups, the "usage pattern of hybrid workers", the "re-entry of workers back into the office", along with the "addition of Windows 11 [and] an aged installed base means the "demand environment we're seeing today, we believe, continues into next year", said Dell's Clarke.

That's not to say that component shortages won't continue to be a massive hurdle for all tech manufacturers. The COO highlighted Dell's scale and length of relations in the supply chain.

The demand dynamics are "well understood" by customers, he said: "We just went through our largest quarter-over-quarter cost increase that we have seen."

Dell is tracking 27 categories across its portfolio, including codecs, audio amplifiers, power ICs, sensor ICs, microcontrollers, FPGAs, and so on. Although supplies will remain a challenge, freight seems to be more of a headache.

"The wildcard for us is the costs that we are continuing to work on in logistics. The logistics cost environment today is pretty challenging. Inbound freight, the next guided freight, the fact that we're expediting more things, we've shifted from less ocean to more air. That combination of things, making sure that we understand those input costs into our pricing models, I think, is clearly the challenge that we look to in Q4," said Clarke.

Dell's Infrastructure Solutions Group – the other major portion of business – grew 5 per cent to $8.4bn: Storage was up 1 per cent to $3.9bn, and Servers and Networking grew 9 per cent to $4.5bn. VMware reported its last quarter under Dell Tech's ownership – those results are here.

At HP, which reported [PDF] numbers for its Q4 of fiscal 2022 ended 31 October, revenue grew at a comparatively more measured 9.3 per cent to $16.7bn. Personal systems were up 13 per cent to $11.795bn and printing up was 1 per cent to $4.879bn.

"Our disciplined execution and pricing strategy allowed us to effectively manage cost and component headwinds," said CEO Enrique Lores. "A big part of our success is the improved mix we are driving given our leadership in the commercial PC market. As more offices reopen, we led our shift toward Windows based commercial products where we saw the strongest demand and highest profitability.

"We expect component shortages, particularly in IC, to persist into at least the first half of '22," he added. "We continue to increase our direct engagement with Tier 2 and Tier 3 suppliers. We have expanded long-term agreements to secure capacity."

The North American PC market declined in calendar Q3, in large because of the drop-off in Chromebooks. HP is one of the major suppliers of these devices and as such saw its US business shrink. As a result, although HP made more money from the premium units it shifted, volumes were down across its PC division in its Q4 by 9 per cent.

For the current quarter, HP's Q1, CFO Marie Myers said: "We expect the component shortages, as well as manufacturing port and transit disruptions, will continue to constrain revenue due to the ongoing pandemic in many parts of the world." ®

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