Dell results: sales fall as demand for infrastructure and commercial PC drop

However, demand for PowerStore and PowerFlex remained strong

clock • 3 min read
Dell results: sales fall as demand for infrastructure and commercial PC drop

Dell Technologies revenues took a 20 per cent hit year over year on the back of soft demand in its commercial PC unit as well as the infrastructure business.

In an after-the-bell earnings call last week, the company announced its first quarter 2024 revenue came in at $20.9bn - $700m more than the $20.2bn consensus estimate by analysts at Zacks - but $5.19bn off the same timeframe last year.

"The demand environment remains challenged, and customers are staying cautious and deliberate across their IT spending," Dell's co-COO Chuck Whitten told investors.

"We continue to see softness across our major lines of business, all regions, all customer sizes, and most verticals."

Even so, Dell's stock price rose 4.29 per cent to $47.41 last Friday 2 June.

The results come as Dell announced over 6,000 layoffs earlier this year due to a heavy drop in PC sales in 2022.

The vendor's commercial business, in fact, took the steepest dive, down 23 per cent, which Whitten said is now the fifth quarter of soft demand in the PC market.

He said the PCs that are currently in the market are beginning to age to the point of renewal which, historically has come between the fourth and sixth quarters of downturn.

The exact timing of that turnaround is unknown, Whitten added. 

"We at Dell have shipped over 160m PCs over the last three years. All of our telemetry data says those devices are still in use," he said.

"So you have a commercial PC install base that's at the highest levels that we've seen since 2014.

"All of those points to improving sequential growth as the year progresses. When and how fast that recovers? To be determined."

On the infrastructure side, revenue fell 18 per cent year on year dropping to $7.5bn.

The heaviest blow hit servers and networking, which tumbled 24 per cent, while storage fell 11 per cent as a category, making up $3.75bn of Dell's revenue compared to $4.23bn in the same period last year.

Growth continues in storage

"In storage we saw continued demand growth in PowerStore, our marquee mid-range offering, and in PowerFlex, our leading software-defined storage solution," Whitten explained.

"PowerStore has grown for 11 consecutive quarters."

That said, Dell claimed it is not going to budge on pricing in the infrastructure unit and if it was to show flexibility on pricing, it would likely affect consumer PCs.

During the earnings call, Dell chief financial officer Tom Sweet updated investors on APEX and Dell Financial Services, which he grouped together.

"Turning to DFS and APEX, customer interest remains high in consumption and financing models that provide flexibility and predictability... During the quarter we continued to see APEX momentum, including an increase in the number of APEX customers that have subscribed to our as-a-service solutions," Sweet said.

Whitten was pressed by an analyst to give an update on the size of Dell's APEX business and its profitability.

While he offered details about the new APEX product announcements, Whitten declined to offer more information around financials.

"We're not disclosing financial parameters around the APEX business. We'll do that periodically when we have meaningful milestones to report as we did last year in Q2," Whitten told investors.

He stated Dell has executed on a sound APEX strategy and the company is pleased with its performance.

"We're seeing really healthy customer interest and growth, particularly in this economic environment, where customers are looking to stretch every dollar, and they're looking to optimise cloud spend.

"As we have highlighted in the past, our focus is on trying to offer our customers choice across the portfolio, and steadily building the customer base and our ARR, while building technical milestones," Whitten continued.

"We're getting a lot of clients and customer interest in that offering.

"We're going to continue to focus on customers. We're going to continue to provide periodic updates on our progress like we did last year in terms of the size of the business."

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