November 23, 2022
Dell Technologies financial results were slightly better than expected during its most recent fiscal quarter. But the company continues to forecast weakness.
During the third quarter of its fiscal year, ending Oct. 29, Dell reported revenues of $24.7 billion. While that exceeded consensus estimates of $24.37 billion, it’s a 6% decline compared to the same period last year.
Operating income for the period was $1.76 billion. But revenues were near the high-end of the $23.8 billion-$25 billion range Dell had forecast in August. Nevertheless, the company had lowered its revenue forecast by 8% at the time.
Based on the current demand environment, CFO Tom Sweet warned that fourth quarter revenue would fall between $23 billion and $24 billion. At the midpoint, that would amount to a 16% decline, Sweet noted. Offsetting the declines, he said Dell is lowering costs and benefiting from improvements to its supply chain.
Dell’s Tom Sweet
“As we continue to navigate through supply chain dynamics, improving working capital efficiency and reducing inventory remains a priority,” Sweet said during Dell’s earnings call.
Weak PC and Server Demand
Dell’s Infrastructure Solutions Group (ISG) revenues rose 12%, to $9.6 billion. Officials said that stronger demand for storage helped offset a sharper-than-expected decline for servers.
Dell’s Chuck Whitten
“We reduced server backlog consistent with our Q2 commentary and delivered strong profitability as our model allowed us to access component cost deflation faster than the rest of the industry,” said co-COO Chuck Whitten. “And we stayed focused on relative performance in the most profitable segments of the market.”
Noting the industry-wide falloff in PC demand, Whitten claimed that Dell had gained market share.
“Despite some expected distortions in the PC market given elevated competitor backlog, we continued to gain commercial PC unit share in Q3 and have now gained share in 35 of the last 39 quarters,” Whitten said.
Revenues of Dell’s Client Systems Group (CSG) ($13.8 billion) declined 17% year-over-year. Given the lower PC demand, Dell expects average selling price (ASP) pressure to continue.
“Obviously, in a declining demand environment, there is a little bit of ASP pressure, which we would expect that we might see next year,” Sweet said. “However, I do think that if you look at our mix of products and where we’re focused on in market, whether it’s due to configuration or tax rates in the client space, or the fact that our servers that we’re shipping have a thicker content rate from a memory perspective, those should all be helpful as well.”
Project Alpine: Dell PowerFlex for AWS
Whitten noted the release on Tuesday of the first deliverable from its new Project Alpine. Whitten emphasized that Dell’s ISG has launched more than 30 products during the past 13 weeks. Among them were six Dell Apex multicloud and edge-as-a-service solutions. Launched at Dell Technologies World earlier this year, the Dell PowerFlex is a software-defined storage solution that provides block storage.
“With a cloud-first design point, PowerFlex on AWS is the first of Dell’s … storage offerings available in the public cloud as part of Project Alpine,” Whitten said. “Our efforts to bring our … storage software to public cloud is to provide multicloud data mobility and simplify data management. It will enable customers to use Dell storage software capabilities and APIs wherever their data resides, without the need for purpose-built or specialized public cloud infrastructure.”
The block storage services provide data mobility, snapshots, migrations of storage volumes and security. According to Dell, PowerFlex can manage millions of IOPS with sub-millisecond latency and can scale to thousands of instances. The company designed it to create a fault-tolerant block storage services layer by spanning AWS regions and availability zones.
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