Dell Technologies bets on PC biz for $16.2 bn revenue

Dell Technologies today reported revenue of $16.2 billion and operating loss of $1.5 billion in third quarter of 2016.

Dell Technologies said its fiscal 2017 third quarter results reflect the impact of the EMC merger and include 52 days of financial results from EMC and VMware.

“We remain focused on enabling customers’ digital transformation initiatives. This customer-first focus is also driving our near-term priorities, which include successfully integrating our salesforce and channel partner programs and seizing top-line synergies through cross-selling opportunities,” said Tom Sweet, chief financial officer of Dell Technologies.

Dell Technologies revenue

Client solutions $9,197 million (+3%)

Commercial — $6,400 million (–1%)
Consumer — $2,787 million (+12%)

Infrastructure business $5,989 million (+61%)

Server and networking — $2,910 million (–8%)
Storage — $3,079 million (+462%)

VMware business — $1,289 million

Client Solutions Group revenue for the quarter was $9.2 billion (+3 percent) with operating income of $634 million.

Infrastructure Solutions Group revenue was approximately $6 billion with operating income of $897 million.

Dell Technologies achieved strong growth in all-flash portfolio and Enterprise Hybrid Cloud solutions in Q3.

In addition, Dell Technologies achieved strong performance in the hyper-converged infrastructure portfolio, including triple-digit year-over-year revenue growth for XC hyper-converged infrastructure products.

There was softness in standalone hybrid storage arrays and servers, said Dell Technologies in a statement issued on Thursday.

VMware revenue during the 52-day operations period from the close of the EMC merger (Sept. 7) to the end of Dell Technologies’ fiscal third quarter 2017 (Oct. 28) was $1.3 billion, with an operating income of $548 million.

Krista Macomber, senior analyst at TBR, said Dell Technologies’ revenue rose a reported 28 percent year-to-year to $16.3 billion in Q3 2016.

This performance was predominantly a result of inorganic inflation due to the inclusion of heritage EMC assets. However, the company’s $9.2 billion Client Solutions Group (CSG) also posted revenue growth of 3 percent, driven by its ability to align its portfolio with consumer demand and leverage its XPS premium PC brand across its other PC families. This emphasizes the ongoing importance of PCs to Dell Technologies, despite the company’s heavily data center-focused long-term initiatives.

Dell Technologies posted an increase of 720 basis points year-to-year to gross margin, which climbed to 24 percent during Q3. EMC’s richer mix of services and software revenues augmented Dell’s focus on refining its supply chain, manufacturing processes and pricing with agility to maximize its profitability.

Operating losses of Dell Technologies deepened from 0.6 percent to 9.3 percent ($1.5 billion) during the quarter — a significant threat considering the ongoing R&D and SG&A funding required for Dell Technologies to fuel its ongoing evolution. This is underscored by the heavily mixed financial performance reported by the company’s data center-focused Infrastructure Solutions Group (ISG), which is comprised of the heritage EMC storage and Dell Enterprise Solutions Group organizations.

Though Dell Technologies reported ongoing revenue growth in crucial, future forward data center infrastructure markets including flash storage and hyper-converged platforms, the company also indicated that its revenue was negatively impacted by the formal integration of the heritage Dell and EMC teams — which compounded the top-line impact of customers’ quickening transitions from legacy compute and storage technologies.

Baburajan K
[email protected]

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