Dell’s revenue growth is hinges on enterprise hardware sales
As Dell Technologies continues to struggle with a heavy decline in PC sales, green shoots are the appearing in its servers and storage and networking business.
Although the company’s revenue for the last year was recorded at $102.3 billion dollars, up to 1% year-on-year, fourth quarter revenue declined at 11% to $25 billion. Dell’s commercial and consumer units are hit the hardest during the quarter, with revenue for those segments declining 17% and 40%, respectively.
However, revenue in the company’s infrastructure solutions group (ISG), which includes servers, storage devices and the networking hardware, rose 7% in the fourth quarter. At $9.9 billion in revenue, the ISG unit drove in about 40% of overall sales for Dell during the quarter.
While underlying demand in PCs and servers remained weak, the company is seeing robust growth in its ISG unit, said Chuck Whitten, Dell’s co-CEO, on a call with analysts after the results had been published.
“Specifically in ISG, we delivered record storage revenue of $5 billion, up 10% including demand growth in PowerFlex, VxRail, Data Protection and PowerStore,” Whitten said. “We grew servers and networking 5% in a challenging server demand environment by optimizing server shipments, along with strong attach and growing ASPs, a clear indication that we continue to sell deeper into customers’ digital agendas.”
PC sales continue to decline
PC sales decreased by more than 25% year over year in the last quarter of 2022, according to figures from Gartner, IDC, and Canalys. Prices for the gear that did sell decreased as well.
According to all three reports, sales of laptops and desktop computers declined by roughly 16% in 2022 as compared to 2021. A virtually record year for PC sales in 2021, with an increase of about 15% year over year, helped to at least partially offset the decrease of the previous year.
The decline in device sales has financially hurt other PC manufacturers besides Dell. HP announced a 19% revenue decline for its most recent quarter earlier this week, with business revenue declining by 18% and consumer PC revenue declining by 36%.
John-David Lovelock, a vice president and analyst at Gartner, stated that due to the present inflationary economic environment, device sales are likely to remain flat for some time after Gartner published its IT spending prediction in January 2023.
He explained that while Gartner had anticipated a decline in device spending as a result of the impact of inflation on consumer purchasing power, the refresh cycle had actually been longer than expected. As a result, businesses like Dell and HP’s consumer and commercial business units are unlikely to soon experience a recovery.
According to Lovelock, “people are discovering that they can hang onto a device longer and still be satisfied.” This trend is anticipated to continue through 2023 and into 2024, when Gartner anticipates some of the backlog in purchases to pick up.
Whitten agreed that these challenges would probably continue into the upcoming fiscal year. Considering that context, we anticipate that financial year 2024 will be difficult at least in the beginning.
