Dell reports upbeat first quarter; here’s what has boosted its fortunes

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Published: June 5, 2018 1:49:19 PM

Dell has fostered tighter product integrations with VMware that help manage customer workloads with Dell hardware and VMware software. The companies also each sell the other’s products to existing and new customers.

Dell Technologies Inc., the world’s largest private technology company, reported an upbeat first quarter, signaling the improving corporate IT spending environment has boosted its fortunes. (Reuters)

Dell Technologies Inc., the world’s largest private technology company, reported an upbeat first quarter, signaling the improving corporate IT spending environment has boosted its fortunes. Revenue climbed 19 percent to $21.4 billion in the period ending May 4, the Round Rock, Texas-based company said in a statement Monday. Adjusted earnings before interest, tax, depreciation and amortization jumped 33 percent to $2.38 billion. Net income excluding some items soared 54 percent to $1.17 billion from a year earlier.

Chief Executive Officer Michael Dell has been considering strategic options for the computer- and server-maker, such as a combination with software affiliate VMware Inc. or an initial public offering for Dell. The company tried to revamp itself as a cloud player by offering customers software from a suite of smaller companies in which it’s invested, in a bid to take back sales from Amazon.com Inc. and Microsoft Corp.

In April, Dell pursued an IPO for Pivotal Software Inc., a software and service company tucked into its empire. Some of its other investments also entered public markets last quarter.

This has helped boost Dell’s cash and investments balance, which stood at $21.7 billion at the end of the last quarter — an increase of $6.7 billion from a year earlier. The company paid down $3.1 billion of its $40 billion in debt so far this fiscal year, most of which stemmed from its 2016 purchase of EMC Corp.

Demand for Dell’s servers and networking rose 41 percent to $4.59 billion last quarter, and the company leads the market in server shipments, according to Gartner.

Dell has fostered tighter product integrations with VMware that help manage customer workloads with Dell hardware and VMware software. The companies also each sell the other’s products to existing and new customers.

Like rival Hewlett Packard Enterprise Co., Dell has prioritized high-end servers that offer more computing power — systems that often have greater profit margins per unit. The company has sought to position itself to support artificial-intelligence and internet-of-things applications, which it believes could boost demand for hardware to process more information at the so-called “edge,” away from central data centers.

Dell’s storage hardware business grew 10 percent to $4.08 billion. Less-specialized alternatives have struggled in the public-cloud era, when companies can keep data lodged with Amazon Web Services or Microsoft Azure, but analysts have seen Dell out-competing the market, which its EMC arm has competed in since the 1970s.

“Storage systems spending is forecasted to grow 9.8 percent year-over-year in the first quarter of 2018 and we expect, when IDC releases first-quarter market share, Dell EMC’s storage business will outperform the market and gain share,” said Matt Eastwood, an analyst at industry research firm IDC.

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