Dell Technologies posted stronger quarterly results due to increasing sales of commercial PCs and workstations
Nearly a decade ago, Apple founder Steve Jobs declared the PC era over, as the dinosaurs of the desktop were being displaced by smartphones and tablets. Today, Dell Technologies founder Michael Dell is reveling in increasing commercial PC and workstation sales that drove the company’s quarterly revenue higher despite trade war tensions.
The Lowdown: For its second quarter that ended Aug. 2, Dell posted gross revenue of $23.4 billion – beating the Wall Street estimate of $23.24 billion. The company’s net income is $4.51 billion, compared to a loss of $461 million for the same period last year. The strong quarterly results prompted Dell to raise its full-year performance forecast despite growing concerns of an economic slowdown and issues caused by the ongoing Sino-American trade war.
The Details: The bright spot in the Dell quarterly report came from the client solutions business unit, which is largely desktop PCs, notebooks, tablets, and branded peripherals. A large part of the lift in revenue is a result of increasing sales of commercial desktops and workstations, as well as gaming PCs. Revenue for the unit is up 6%, while operating income doubled over the same period in 2018, with revenue coming in at $982 million.
While server sales are up nearly 1% in regions outside China, Dell reported overall sales of servers and other products in China are down. Through aggressive selling to high-value accounts in Asia, Dell pulled out a slight uptick in server business. Supply chain issues and the impact of the ongoing trade war are having an effect, Dell says, and will likely result in price increases across the board.
The Impact: Dell is not alone in seeing PC sales increase. HP Inc. and Lenovo both reported healthy PC sales as demand for commercial PCs among businesses continues to increase. A large part of the PC demand is a result of Microsoft discontinuing support for the Windows 7 operating system, forcing commercial users to upgrade to Windows 10 or continue with the legacy version without support.
The continued Windows 10 migration will likely provide Dell and other PC vendors aircover for increasing prices to offset the increased costs resulting from the trade war tariffs and shifting supply chains away from China.
Channelnomics Point of View: The contributions of channel partners cannot be overlooked in the Dell quarterly earnings report. Commercial desktops and workstations are popular products in the Dell channel. While Dell doesn’t break out the channel contribution in the earnings report, a significant piece of the company’s growth in this segment is likely due to the efforts of its channel partners.