Recession fears only stoking enterprise tech spending for Dell, others

Staving off entropy with digital transformation, hybrid office, and automation projects

Enterprises are still kitting out their workforce with the latest computers and refreshing their datacenter hardware despite a growing number of "uncertainties" in the world.

This is according to hardware tech bellwethers including Dell, which turned over $26.1 billion in sales for its Q1 of fiscal 2023 ended 29 April, a year-on-year increase of 16 percent.

"We are seeing a shift in spend from consumer and PCs to datacenter infrastructure," said Jeff Clarke, vice-chairman and co-chief operating officer. "IT demand is currently healthy," he added.

"However, there are a number of uncertainties out in the broader macro that we continue to monitor: geopolitical issues, inflation, ongoing supply chain challenges, chip constraints and COVID shutdowns," he added.

CFO Chuck Whitten, added: "despite the macro uncertainty that is out there right now, what we don't see is an immediate move to go after a reduction in IT budgets."

Networking kingpin Cisco last week worried Wall Street when it warned lockdowns in Shanghai had disrupted its local manufacturing facilities and weaker supplies could hurt sales in its current quarter by up to $8 billion. Cisco also said underlying demand was strong, but meeting it was the challenge.

Clarke confirmed that Dell experienced a "wide range of semiconductor shortages" that was felt across its Client Solutions Group (CSG) and Infrastructure Solutions Group (ISG) in its Q1, meaning the order backlog remains "elevated."

"We expect backlog to remain elevated through at least Q2 due to current demand and industry-wide supply chain challenges. Q1 component costs were deflationary across key commodities, but logistics spend remained elevated due to higher rates and a mix of expedited parts."

ISG grew to $9.285 billion: servers and networking jumped 22 percent to $5.048 billion; and storage was up 9 percent to $4.237 billion. CSG was up 17 percent to $15.587 billion, including a 22 percent rise in commercial PCs and a 3 percent rise in consumer. Dell recorded an operating profit of $1.06 billion from continuing operations, up from $659 million.

Dell says digital transformation and automation projects are coming through thick and fast, and enterprises are still buying PCs for employees working at home and in the office.

The same can't be said for the consumer space, which is "slowing down," said Clarke. As we've highlighted before, Chromebooks look to be the biggest casualty in that sector.

Whitten said: "Despite economic uncertainty, digital transformation and automation efforts are being used to solve the pressing challenges at the moment as technology and business strategies emerge, benefiting our infrastructure business."

Lenovo, which this week filed bumper profit and loss accounts for Q4 of its fiscal 2022, noted a slowdown in China, but said generally outside of the country commercial demand was "strong." ®

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