Dell Technologies says its Infrastructure Solutions Group delivered "mixed" performance in the company's most recent quarter, the company -- essentially reinforcing the fact that the data center hardware business faces intense pressure from public clouds.
Dell's overall business performance is a bit tricky to track since the results now include a blend of Dell, EMC and VMware information. Revenues for Q3 ended Octmber 28, 2016 were $16.2 billion -- up 28 percent from $12.7 billion in Q3 last year. Dell shared the results this morning.
Still, the figures can be a bit misleading since they include include 52 days of financial results from EMC and VMware. The company generated an operating loss of $1.5 billion in the quarter, with a non-GAAP operating income of $2 billion.
Dell Strengths and Challenges
CFO Tom Sweet called it a "solid quarter," and emphasized Dell's focus on such near-term priorities as "successfully integrating our salesforce and channel partner programs and seizing top-line synergies through cross-selling opportunities.”
Within Dell's business units:
- Client Solutions Group business revenue for the quarter was $9.2 billion, up 3 percent versus the third quarter of last year. The company continues to tout market share wins in PCs and workstations amid that industry's overall lackluster performance.
- Infrastructure Solutions Group performance was "mixed" in the quarter, with revenue of approximately $6 billion and operating income of $897 million, the company said. Predictably, Dell pointed to strong performance in growth segments (all-flash, hyperconverged infrastructure) and softness in standalone hybrid storage arrays and servers.
Question Mark: Recurring Revenue Opportunities
The results reinforce one of Dell's biggest challenges. The company remains heavily focused on hardware sales and doesn't have much of a recurring revenue story for channel partners.
Yes, there are some potential cloud opportunities, especially since Dell essentially owns VMware and Virtustream. The VMware Cloud for AWS effort should yield some results later this year. And Virtustream is building out a partner program for its cloud infrastructure business.
Asked about the industry shift from CapEx to OpEx IT spending, Michael Dell offered ChannelE2E these thoughts in October 2016 (see video):Video link
The short answer: He pointed to Dell's financing business as a way for partners to more aggressively embrace OpEx opportunities. But he didn't have a specific killer cloud application in mind for partners and customers.
Dell and its major hardware rivals -- Cisco, Hewlett Packard Enterprise, IBM, Oracle -- all face that similar hardware CapEx to software OpEx business model shift.