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Dell Technologies Q4 mixed amid strong commercial PC sales, but soft server market


Dell Technologies delivered mixed fourth quarter results as earnings fell short of expectations and sales were in line.

The company reported fourth quarter revenue of $24 billion, up 1% from a year ago, with earnings of $416 million, or 54 cents a share. Non-GAAP earnings were $2 a share.

Wall Street was expecting Dell to report fourth quarter revenue of $24 billion with non-GAAP earnings of $2.02 a share.

For fiscal 2020, Dell Technologies reported revenue of $92.2 billion, up 2% from a year ago with net income of $5.5 billion, or $6.03 a share.

Jeff Clarke, chief operating officer of Dell Technologies, said that it simplified its business and is poised to capitalize on “the next digital decade.” Dell Technologies announced that it was selling its RSA unit.

Dell Technologies ended the quarter with cash and investments of $10.2 billion and paid $5 billion in gross debt in fiscal 2020. Dell ended the quarter with $44.3 billion in long-term debt.

By unit, Dell’s PC unit delivered fourth quarter revenue of $11.8 billion, up 8%, due to the enterprise PC upgrade cycle and end of life for Windows 7 systems. Operating income for the fourth quarter was $624 million.

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Dell’s infrastructure unit struggled in the fourth quarter with revenue of $8.8 billion, down 11%. Storage revenue fell 3% while servers and networking revenue fell 19%. Operating income was $1.1 billion. The company said the server market was soft in China and among large enterprises in US and Europe.  VMware also performed well for Dell TechnologiesDell Technologies makes VMware linchpin of hybrid cloud, data center as a service, end user strategies

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On a conference call with analysts, CFO Thomas Sweet gave a somewhat sour outlook based on server demand, component costs and other moving parts. He noted that the fiscal 2021 guidance doesn’t include any impact from the coronavirus.

Sweet said assuming the sale of RSA closes in the third fiscal quarter annual revenue will be between $91.8 billion and $94.8 billion with non-GAAP earnings between $5.90 a share and $6.60 a share. Wall Street was looking for fiscal 2021 revenue of $93 billion. 

He added:

This full year guidance does not factor in any potential COVID-19 impact. Like our customers, our top priority is ensuring the health and safety of our employees and communities. We do anticipate a negative impact on our normal Q1 seasonality driven by softness in China, our second largest market. We will manage the supply chain-related dynamics with extended lead times for certain products, particularly in client.

Sweet also noted that there are some parts of the guidance that are solid and others that are more wild cards.

As we look at the impact of the coronavirus is there’s 2 principal impacts right now. One is in our domestic China business, which has been, obviously, with the Chinese economy softening, given the — what they’re going through to try to contain the virus. We do expect an impact in Q1 in the China business itself. And then the question becomes to the extent that there’s supply chain or lead time dynamics, how do you think about demand as a perishable, or does it defer. I think our thinking right now is that, to the extent that it’s the only demand that we see that is perishable at this point is that consumer demand, where they want to buy a product now. And if you don’t have the right product or lead times don’t work, perhaps they move elsewhere.

Now, we’ll obviously continue to refine that as we move forward and learn more about impacts. But I do think for the full year, we feel good about our cash forecast at this point in time. 

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