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Dell’s Storage Sales Continue To Fall, Client Sales Hit Record High

“Our storage business was down 7 percent for the quarter, we were disappointed in that result,” said Dell Technologies Vice Chairman Jeff Clarke during Dell’s fiscal 2021 first quarter earnings report.

 

Dell Technologies generated solid total sales growth during its fiscal 2021 third quarter with client device sales hitting an all-time high of $12.3 billion. But Dell’s storage business continued to struggle through the economic fallout of the COVID-19 pandemic.

“Our storage business was down 7 percent for the quarter, we were disappointed in that result,” said Jeff Clarke, chief operating officer and vice chairman of Dell Technologies during the company’s third quarter earnings call with media and analysts. “Our midrange [market] is shrinking. It’s why PowerStore is so important. PowerStore is the catalyst to change our share trajectory in the midrange.”

Dell generated $3.86 billion in storage revenue during the fiscal third quarter, which ended Oct. 30, representing a 7 percent decline year over year. Dell’s storage business hasn’t witnessed year over year sales growth in more than a year. Clarke said Dell is banking on its new midrange all-flash PowerStore platform to boost storage system sales, while also noting that the COVID-19 pandemic is negatively effecting storage system sales as business’ infrastructure budgets are “under pressure.”

[Related: Goldman Sachs Star Lemkau To Be CEO Of Michael Dell’s Firm]

“We’re encouraged by the first two quarters of PowerStore. It was up nearly twice the revenue in Q2 and Q3, and 15 percent of the customers are new storage buyers to the company. That makes us feel very good that we’re on the right trajectory with PowerStore,” said Clarke. “We expect it to continue to ramp up in Q4 and all through next year, and that ramp is the key to our success in growing our storage business.”

During the quarter, orders for Dell’s hyperconverged infrastructure solution VxRail and enterprise storage platform PowerMax grew by double-digits, according to Clarke.

Although Dell underperformed in storage, the Round Rock, Texas-based company’s Client Solutions Group -- which includes Dell PCs, notebooks and tablets -- flourished in the fiscal third quarter thanks to high demand for Dell’s remote work and learning products.

Dell’s Client Solutions Group (CSG) generated record revenue of $12.3 billion, up 8 percent year over year, with operating income of $1 billion.

CSG consumer revenue jumped 14 percent year over year to $3.5 billion in sales, up roughly $500 million compared to the same quarter one year ago. Dell’s commercial client sales increased 5 percent to $8.8 billion.

“Our client solutions group had an outstanding quarter delivering record shipments, revenue and operating income,” said Clarke.

“Our wide range of PCs, including Chromebooks, are providing students everywhere with the essential learning tool they need. The pandemic has expanded consumer use of online purchasing, which is a big area of focus for us,” Clarke said.

Dell generated $23.48 billion in total revenue during the fiscal third quarter, up 3 percent year over year from $22.84 billion in the third quarter of fiscal 2020. Net income for the quarter reached $881 million, up 60 percent from $552 million one year ago.

The company’s Infrastructure Solution Group, which includes storage, server and networking sales, fell 4 percent year over year to $8.02 billion. Dell’s server and networking revenue dropped 2 percent year over year to $4.16 billion.

Dell’s recurring revenue sales, which include as-a-service offerings, hit $6 billion in the quarter, increasing 13 percent year over year.

“In the past year, we’ve seen increases in as-a-service and flexible consumption offerings,” said Clarke. “This type of transformation expands recurring revenue, providing even more stability. … The accelerated digital transformation we’re experiencing today plays directly to the thesis we had in creating Dell Technologies. We are No. 1 in everything, all in one place. We have the breadth and diversity to lean into pockets of growth when and where they happen.”

Dell Technologies owns an 81 percent stake in VMware, which also reported financial results Tuesday night. VMware generated a total of $2.9 billion in revenue, up 8 percent compared to the same quarter one year ago.

Dell stock is up less than 1 percent in after-hours trading at $70.35 per share.

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