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Dell COO Clarke: ‘The Do-From-Anywhere World Is Here To Stay’

‘We believe the total addressable market is expanding as there are still millions of children around the world that need PCs, the number of PCs in a household continues to increase and, additionally, the refresh cycles are accelerating with the shift to notebooks. And we are on the cusp of widespread 5G connectivity driving real-time, automated and intelligent outcomes at the edge,’ says Dell COO Jeff Clarke.

For Dell Technologies’ fiscal fourth quarter 2021, a huge push in the company’s PC business, particularly on the mobile PC side, resulted in record revenue for the year that ended Jan. 29.

Before discussing the fiscal results, Rob Williams, head of Dell Technologies investor relations, said the company would not be addressing any plans related to the possibility that Dell might spin out its VMware business.

[Related: Michael Dell On Racial Injustice: “I‘ve Always Believed Diversity Is Power”]

“We continue to believe that a tax-free spin could drive significant shareholder value by simplifying our capital structures and enabling greater strategic flexibility while maintaining a strong commercial partnership between Dell and VMware,” Williams said. “Both companies continue to be engaged on key workstreams and, as VMware communicated earlier today, we are making progress in our discussions. However, there’s no assurance that we will reach a definitive agreement.”

Jeff Clarke, chief operating officer and vice chairman of the Round Rock, Texas-based company, said during Dell’s quarterly financial analyst conference call Thursday that the company “delivered record results.”

“Throughout FY21, we leveraged the depth and breadth of our portfolio to lean into the pockets of growth when and where they occurred,” Clarke said during his prepared remarks. “We executed with discipline, speed and precision. And, in what was an extremely dynamic environment, we delivered record results.”

Dell’s Client Solutions Group had an outstanding year, delivering record shipments, revenue and operating income, Clarke said. For the calendar year 2020, IDC said Dell shipped 50.3 million units, which was up 8 percent and the most ever in a year, he said. The company’s commercial PC results were even stronger with commercial unit growth of 11 percent, letting Dell gain the most commercial unit share of the top three vendors with share gain concentrated in notebooks, he said.

“Resilient demand was driven by the fast-growing technology-enabled world where consumers can do anything from anywhere,” he said. “Instead of going to work, school, entertainment, a restaurant or shopping, it all comes to us: The PC is the hub of this new economic model.”

Dell’s consumer direct business was up 51 percent on a revenue basis based on orders, and its consumer online business was up 64 percent for the year based on order revenue, Clarke said.

Revenue for the Infrastructure Solutions Group fell 4 percent during the full fiscal year, despite increased demand in the second half of the year and its best results in the fourth quarter, Clarke said. Server and networking revenue for the year was $16.5 billion, down 4 percent, despite growth in the fourth quarter, he said. However, storage revenue of $16.1 billion was down 4 percent year over year.

“But we did see demand growth in key areas,” he said. “PowerMax, hyperconverged infrastructure and PowerProtect Data Domain all saw solid growth during the year on an order basis,” he said. “Our midrange storage business returned to growth in the fourth quarter, driven by accelerated adoption of PowerStore.”

Fourth-quarter sales of Dell’s PowerStore midrange storage products, which were introduced in May 2020, grew four times those of the third quarter, Clarke said.

“In a challenging environment, PowerStore is ramping faster than XtremIO and VxRail, making it the fastest new architecture we have released,” he said. “Additionally, approximately 20 percent of our PowerStore customers are new to our storage business as we tripled the number of wins against key competitors quarter over quarter.”

During the question-and-answer period of the call, Clarke responded to an analyst’s question about the demand environment for PCs going forward by pointing out the company saw strong points of growth in the commercial PC business in such areas as education and the move to mobilize workforces.

“We think that continues to fuel growth as we move into [fiscal year 2022],” he said.

Furthermore, Clarke said, while customers will probably move back into their offices in fiscal 2022, the work-from-home trend is not expected to slow down.

“So we’ll continue to see people doing more and more work away from the office. ... I think the market continues to be strong,” he said.

After another analyst asked about the expected shape of the recovery as far as the Infrastructure Solutions Group, Clarke said while first-quarter storage growth is expected to be negative, the company’s server growth is encouraging, particularly in the high-value workload area.

Clarke also said the company spent the past three years simplifying its storage business to focus on its Power portfolio, which now features 20 platforms compared with the 88 platforms it had in the past. That portfolio has helped Dell gain 1,300 basis points in market share in the past year, he said.

Dell’s biggest issue has been its midrange storage business, but that business grew 8 percent in the fourth fiscal quarter, the first time it has grown in eight quarters, Clarke said.

“It was on the back of PowerStore. ... It is clearly the vehicle on which we will take share,” he said.

One out of every five Dell storage customers in fiscal 2021 was new to Dell storage, giving the company big expectations for the future, Clarke said.

“I’m optimistic,” he said. “We’re looking for the market to continue to rebound. ... We’re not satisfied with where we were in the fourth quarter.”

Looking ahead, Dell expects the demand environment to show continued improvement, particularly in the company’s core PC, server and storage markets based on growth estimates for the industry from IDC and Gartner, Clarke said in his prepared remarks.

“The ‘Do-From-Anywhere World’ is here to stay,” he said. “We believe the total addressable market is expanding as there are still millions of children around the world that need PCs, the number of PCs in a household continues to increase and, additionally, the refresh cycles are accelerating with the shift to notebooks. And we are on the cusp of widespread 5G connectivity driving real-time, automated and intelligent outcomes at the edge. This will drive an estimated $700 billion in cumulative spend on edge IT infrastructure and data centers within the next decade.”

Dell is also looking at modernizing customers’ experience, and in particular is counting on its Apex as-a-service and cloud strategy, Clarke said.

“With Apex, we are extending our long history of offering IT-as-a-Service to deliver IT resources on demand [and] Dell managed infrastructure, enabling our customers to pay only for what they use, built on a foundation of trusted technology, at scale.”

Dell expects to bring its first Apex offers to market starting in May, with others to follow over the course of the year, Clarke said.

“This foundational work sets us up to respond to accelerating customer needs and capture market momentum, momentum towards a hybrid, distributed future fueled by data and analytics,” he said. “We are integrating and innovating with VMware and across our leading capabilities and partner ecosystems to create the automated, integrated infrastructure for 5G and the data era that is AI- and ML-enabled with intrinsic security throughout.”

For its fourth fiscal quarter 2021, Dell reported total revenue of $26.11 billion, up 9 percent over the $24.03 billion the company reported for its fourth fiscal quarter of 2020. That included Client Solutions Group revenue of $13.8 billion, up 17 percent year over year, and Infrastructure Solutions Group revenue of $8.8 billion, which was basically flat over last year. Dell Technologies also recorded revenue from its VMware business of $3.3 billion.

For the quarter, Dell reported net income of $1.23 billion, or $1.57 per share, up significantly from last year’s $416 million, or 54 cents per share.

On a non-GAAP basis, Dell reported net income of $2.29 billion, or $2.70 per share, up from last year’s $1.64 billion, or $2.00 per share.

For the year, the company reported total revenue of $94.22 billion, up 2 percent over the $92.15 the company reported for fiscal 2020. That included Client Solutions Group revenue of $48.4 billion, up 5 percent, and Infrastructure Solutions Group revenue of $32.6 billion. VMware delivered $11.9 billion in revenue for the quarter.

Net income for the year on a GAAP basis was reported at $3.51 billion, or $4.22 per share, down from last year’s net income of $5.53 billion, or $6.03 per share. On a non-GAAP basis, Dell reported net income of $6.76 billion, or $8.00 per share, up from last year’s $6.10 billion, or $7.35 per share.

For fiscal year 2022, Dell is expecting revenue to grow over that of 2021 in the low to mid-single-digit range. For the first fiscal quarter of 2022, the company expects year-over-year revenue growth in the mid-single-digit range.

For the quarter, non-GAAP earnings per share of $2.70 beat analysts’ expectations by 56 cents per share, while GAAP earnings per share beat expectations by 91 cents per share, according to Seeking Alpha.

The quarterly revenue of $26.15 billion beat expectations by $1.62 billion, Seeking Alpha said.

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