Dell Earnings: High Costs Overshadow Strong Product Demand

High component costs contributed to a first-quarter loss of $1.5 billion for Dell Technologies, despite strong product demand.

The company reported consolidated revenues of $17.8 billion during the quarter – a figure that includes the growth and impact of the EMC purchase that was finalized in September 2016.

Also during the quarter, Dell integrated its sales team with EMC’s to create a single go-to-market option for customers.

In a statement, CFO Tom Sweet said the company is pleased with the results, given that it was the first quarter of combined Dell EMC sales and given the “challenging” cost component environment.

“I’m encouraged by these achievements and excited about the opportunities ahead as we continue to provide a broad portfolio of solutions for customers’ digital transformations,” he said.

Dell Technologies ended the quarter with a cash and investments balance of $14.9 billion. Since the EMC transaction closed, the company has paid down approximately $7.1 billion in debt, which cuts annual interest payments by $200 million.

Client Solutions Group

Revenue in the first quarter for the client solutions operating segment was $9.1 billion, up 6 percent over the year.

PC shipments increased 6.2 percent year-over-year, and the company maintained its No. 1 market share position worldwide for displays. Dell Technologies was the only vendor to gain market share in both fixed and mobile workstation categories.

Dell’s financial reporting schedule is different than most companies, so all results are for the three-month period spanning February through April 2017, which is the company’s first quarter of the 2018 fiscal year.

Infrastructure Solutions Group

Revenue was $6.9 billion in this segment, including $3.2 billion in servers and networking and $3.7 billion in storage.

The company held onto its status as the worldwide market leader in x86 servers, with PowerEdge unit sales and revenue growth increasing by double digits in the quarter.

Hyperconverged products grew at a triple-digit rate, and demand for Virtustream Public Cloud was up 100 percent.

VMWare Results

VMWare segment revenue was $1.7 billion with operating income of $486 million, or 28 percent of revenue.

Dell acquired VMWare as part of the purchase of storage giant EMC, although VMWare remains an independent public company.

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