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Dell Technologies Q4 2018 Results: Revenue Grows, But…

Dell Technologies’ latest quarterly results show solid revenue growth, which is great news for partners — but Wall Street apparently can’t agree on the hardware company’s overall performance.

The company reported $2.39 earnings per share (EPS) for the fourth quarter, which was enough to top the consensus estimate according to one report. However, SeekingAlpha say Dell’s overall Q4 revenues were about $450 million short of Wall Street’s expectations.

What’s the reality? Perhaps it starts with the top-line, where revenues were a record $21.9 billion for Q4, up 9 percent from the corresponding quarter last year. That’s good news for Dell and channel partners, especially since the company still leans heavily on traditional hardware sales rather than as-a-service offerings.

Dell’s strong revenue results — coupled with impressive quarterly results from HP Enterprise and HP Inc. in recent weeks — suggest that the hardware market continues to have some strong niches and refresh cycles.

Dell saw additional growth through its subsidiary VMware, with revenue up 20 percent from the previous year to $2.3 billion and a 48 percent rise in operating income to $834 million.

Dell Technologies Product Performance

Dell also pointed to momentum across its product portfolio. For instance:

  • Client Solutions Group revenue was $10.6 billion, up 8 percent. Commercial revenue grew 9 percent and consumer revenue was up 6 percent to $3.3 billion. The company also reported that year-over-year worldwide PC share grew for the 20th consecutive quarter.
  • Infrastructure Solutions Group revenue was $8.8 billion for the fourth quarter, a five percent increase. Dell attributes this success by $4.6 billion in servers and networking and $4.2 billion in storage. Revenue for the full year was $30.7 billion. Servers and networking attributed for slightly more than half of that, with storage revenue contributing the rest.

Bright Spots: Dell saw double-digit growth for both its PowerEdge and Cloud servers — fueled record server revenue for the third consecutive quarter. Dell was the worldwide leader in x86 servers in the four quarter both in units and revenue, according to IDC’s Worldwide Quarterly Server Tracker.

Also according to IDC, Dell can currently boast of a Number One  market share position in all-flash arrays, with demand for all-flash offerings exiting fiscal 2018 at a nearly $5 billion run rate, the company claims.

Dell Technologies Bottom Line

Dell CFO Tom Sweet

Despite the top-line revenue growth, Dell Technologies still reported a net loss for the fourth quarter, widening to $511 million from $236 million the previous year.

Still, net loss from continuing operations was down to $0.51 per share from the $2.68 per share in the previous year.

Tom Sweet, chief financial officer for Dell Technologies, said he was pleased with the company’s fiscal 2018 results. “We drove velocity at or above market rate in multiple areas of the business and generated strong operating cash flow as we brought the full capabilities of Dell Technologies together,” he said. “In fiscal 2019 we’ll continue to execute our long-term strategy, capitalizing on our broad portfolio of solutions for customers at every stage of the digital transformation journey.”

Dell-VMware Reverse Merger Speculation

In some ways, the earnings news was overshadowed by continued speculation about a potential Dell-VMware reverse merger — whereby VMware may actually purchase the larger Dell. The move would allow Dell Technologies to be traded publicly without going through a formal listing  — but VMware shareholders and Wall Street analysts appear nervous about the speculation.

Michael Dell and his advisors may require a month or more to reach a decision about the potential VMware reverse merger scenario, according to CNBC.

Both Michael Dell and VMware CEO Pat Gelsinger are scheduled to keynote Dell Technologies World on Monday, April 30. If a reverse merger or another major Dell-VMware move occurs, we suspect confirmed details or deeper information will surface at that time.

In the meantime, Dell point to top-line revenue growth — which likely means the company’s channel partners gained momentum in Q4 2018.

Additional reporting by Joe Panettieri.

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