The US$92 billion worldwide IT infrastructure leader is set to report its fiscal 2021 third quarter earnings on Tuesday with many questions to be answered about the ongoing impact of the COVID-19 pandemic on Dell Technologies around PCs, storage and server sales, as well as VMware.
During Dell’s most recent fiscal 2021 second quarter, which ended July 31, the Round Rock, Texas-based company generated US$23.73 billion in revenue, representing a sales decline of 3 percent year over year. Dell has continued to launch new products and channel partner incentives throughout 2020 in moves to increase its market share in key segments such as servers, storage and hyperconverged infrastructure.
Dell Technologies is scheduled to report its third quarter earnings on Nov. 24 at 5:30 pm (USEST). CRN breaks down the five most important things channel partners, customers and investors need to watch for when Dell unveils its sales results.
Zacks estimates Dell revenue at US$21.93 billion
According to Zacks Consensus Estimate, Dell is on pace to generate US$21.93 billion in total revenue during its fiscal third quarter, representing a roughly 4 percent sales decline year over year. However, note that Dell has surpassed Zacks Consensus Estimate in three of the past four quarters.
Although enterprise spending is sluggish around IT hardware due to the COVID-19 pandemic, which has caused economic uncertainty across the globe, many hyperscale data center operators such as AWS, Google and Microsoft are spending heavily on IT equipment due to a spike in demand for cloud services. These hyperscale vendors should help Dell Technologies offset any spending slowdown from the enterprise market segment.
During Dell’s fiscal second quarter earnings report, when the company reported US$23.73 billion in revenue, Dell executives said they expect negative sequential sales growth in its third quarter.
Did Dell compete better against HP and Lenovo on PCs?
With PC competition from Hewlett Packard Co. (HP) and Lenovo increasing during the COVID-19 era, it will be interesting to see if Dell’s overall PC sales grew year over year in the third quarter.
Both Lenovo and HP increased the number of PCs shipped worldwide in the third calendar quarter, while Dell’s global PC unit shipments fell 5 percent year over year from 11,343,000 in Q3 2019 to 10,827,000 in Q3 2020, according to Gartner. The IT research firm said the third quarter of 2020 ended Dell’s streak of 17 consecutive quarters of year over year growth. Dell’s mobile PC sales grew, but a steep decline in desktop PC sales offset the growth, Gartner said.
In Dell’s second fiscal quarter, revenue generated by the company’s Client Solutions Group -- which includes desktop PCs, notebooks, tablets and monitors -- dropped to US$11.2 billion, down 5 percent year over year. Although consumer client sales were up 18 percent to US$3.16 billion, commercial client revenue fell 11 percent to roughly US$8 billion.
Dell’s PC results on Tuesday could provide hints about what’s in store for Dell in 2021.
Can server sales turnaround?
Although Dell and Hewlett Packard Enterprise continue to battle it out for global server market share supremacy, Dell has fallen on hard times during the age of COVID-19 in terms of server infrastructure sales. Dell has faced stiff competition on a global basis from server competitors like Inspur, which has been increasing its worldwide market share significantly over the past several quarters.
Dell has reported steep declines in server and networking sales over the past several quarters, including a nearly US$1 billion revenue drop year over year during the company’s fourth fiscal quarter 2020. Dell’s server and networking sales during its fiscal 2021 second quarter were down 5 percent year over year to US$4.2 billion. For Dell’s fiscal 2021 first quarter, server and networking sales dropped 10 percent year over year to US$3.75 billion. In Dell’s fiscal 2019 third quarter, server and networking sale fell 16 percent to US$4.24 billion year over year.
If Dell reports a significant drop in server sales in its fiscal 2021 third quarter, HPE could soon become the clear No.1 server market leader on a global basis.
Will Dell storage innovation improve sales?
In 2020, Dell arguably had its biggest storage innovation refresh in years, launching several new flagship storage offerings including PowerStore and PowerScale. PowerStore is Dell’s new midrange all-flash storage platform that offers a container-based architecture with built-in future-proof technology. The new PowerScale file and object storage product line allows businesses to capture and leverage unstructured data across public clouds and on-premises in a compact 1U footprint.
It will be interesting to see if all of this innovation improves Dell’s storage sales, which hasn’t shown positive growth in a year.
In Dell’s fiscal 2021 second quarter, the company’s storage sales fell 4 percent to approximately US$4 billion. Dell’s storage sales also dropped 5 percent year over year to US$3.81 billion during its fiscal 2021 first quarter. In the fiscal 2020 fourth quarter Dell storage sales dropped 3 percent year over year to US$4.49 billion. The last time Dell showed positive storage sales growth was in the third quarter of fisal 2019 when storage revenue grew 7 percent from US$3.88 billion to US$4.15 billion year over year.
Dell Technologies is the majority share holder of VMware, owning an 81 percent stake in the virtualization and hybrid cloud software superstar. The two companies have a strategic technology go-to-market partnership and continue to double down on integrations on multiple fronts, including in emerging markets such as the edge and 5G.
Palo Alto, Calif.-based VMware is scheduled to report its fiscal 2021 third quarter earnings on Tuesday at 4:30pm EST – just one hour before Dell’s earning call. VMware has been growing overall sales, quarter after quarter, throughout 2020. For VMware’s second fiscal quarter, revenue climbed 10 percent year over year to US$2.91 billion, with massive growth in subscription and Software-as-a-Service (SaaS).
Dell investors and channel partners should tune into VMware’s earnings results on Tuesday as Dell and VMware have one of the closest strategic partnerships in the industry.