Dell CFO Sweet: Positive Impact Of Tax Reform Should Offset Any Negatives In The Long Term


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Dell Technologies CFO Tom Sweet said Thursday he is "reasonably optimistic" that the federal Tax Cuts and Jobs Act bill passed by Congress in December will have a positive impact on the company's business throughout 2018. The company reported that the tax reform helped generate $316 million for Dell during its fiscal fourth quarter, which ended Feb. 2, 2018.

"Given what we know today, our expectation is that tax reform will not materially change our effective tax rate as the positive impacts should roughly offset the negative impacts when fully implemented," said Sweet during Dell's fourth fiscal quarter earnings call Thursday morning.

"We're reasonably optimistic some of the immediate expensing around the Capex will have a helpful impact on our business as we go through the year. It's a complex calculation," said Sweet. "It's very manageable. We're continuing to evaluate it because the environment and regulatory guidance continues to get issued."

[Related: 8 Things You Need To Know About Dell Technologies' Potential IPO/VMware Merger]

During Dell's fourth fiscal quarter, the Round Rock, Texas-based company recorded a benefit of $316 million on the net impact of tax reform, driven by a benefit of $1.3 billion related to the re-measurement of deferred tax assets and liabilities, said Sweet. This was offset by current and future income tax expenses of approximately $1 billion related to the transition tax in the bill. "The cash tax impact of the repatriation toll charge will be substantially offset by other tax attributes," said Sweet.

Last month, Dell confirmed that it was exploring strategic options that include going public or merging with VMware. The news comes as Dell and VMware are driving tighter alignment in an effort to make it easier for channel partners to sell combined Dell-VMware offerings.

During the earnings call, the company said it would not address or take questions from analysts regrading going public or merging with VMware. However, Rob Williams, senior vice president of investor relations at Dell, said the decision to review possibly going public or merging with VMware is part of its "ongoing, multiyear strategic planning."

"We are doing this from a position of strength," said Williams. "We are in solid financial condition with strong cash flow generation and we have made significant progress in paying down debt."

Williams said Dell has now paid down $10 billion in debt since completing its $67 billion acquisition of EMC in 2016. The final decision of Dell either merging with VMware, going public or not making any changes is expected to be disclosed in April.

For its fourth fiscal quarter, Dell reported revenue of $21.9 billion, up 9 percent year over year.

Dell's Client Solutions Group generated sales of $10.6 billion, up 8 percent compared with the same quarter one year ago. The company's commercial segment increased 9 percent to $7.3 billion and consumer revenue increased 6 percent to $3.3 billion.

The company's Infrastructure Solutions Group, which includes servers, networking and storage, grew 5 percent to $8.8 billion year over year. Networking and servers increased 27 percent to $4.6 billion, while storage sales dropped 11 percent to $4.2 billion.

"We have work to do in storage," said Jeff Clarke, vice chairman, products and operations, at Dell. "It is without question something Tom [Sweet] and I have tremendous focus on in the organization to change the performance of our storage business."

VMware revenue for the quarter hit $2.3 billion, an increase of 20 percent year over year. Dell's other businesses, including Pivotal, RSA, SecureWorks and Virtustream, captured a total of $492 million in revenue, up 3 percent year over year.

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