Dell Earnings Preview: 5 Biggest Things To Focus On
From storage drops and PC growth to Apex and VMware’s new CEO, here are the five biggest things to watch for during Dell Technologies’ first quarter 2022 financial earnings report tomorrow.
Dell Technologies Q1 Financial Earnings Is May 27
Dell Technologies is set to deliver its financial earnings report tomorrow that will answer many questions about the company’s strategy around PCs, storage and VMware.
The Round Rock, Texas-based infrastructure and PC giant is coming off the best sales year in its history after capturing a record $94.2 billion in revenue during fiscal year 2021. Dell is also currently transforming itself by selling or spinning off its businesses such as VMware, Boomi and RSA to focus on high priority market segments, while it also pushing a new as-a-service sales motion with Apex.
With its transformation underway, Dell is set to report financial results from its first fiscal quarter 2022, which ran from Feb. 1 to April 30, on May 27 at 5:30 p.m. ET.
CRN breaks down the five biggest and most interesting areas to watch for during Dell’s financial earnings report tomorrow.
VMware Spin-Off And VMware New CEO
Before getting into revenue expectations and key market segments to watch during Dell’s first quarter financial earnings report tomorrow, one of the biggest areas to look at is what the company says regarding VMware, which Dell owns a majority stake in along with one of the strongest IT partnerships in the industry.
VMware this month selected Raghu Raghuram (pictured) as its new CEO, effective June 1. Raghuram is an 18-year VMware veteran who is currently chief operating officer of products and cloud services. It will be interesting to hear what Dell executives have to say about Raghuram as the new CEO as it relates to its partnership ahead with VMware.
Additionally, Dell confirmed that it will spin off its 81 percent stake in VMware to Dell Technologies shareholders in the fourth quarter of calendar year 2021. Although Dell’s CEO Michael Dell will still be chairman of VMware and hold the largest stake in VMware following the spin-off, the transaction will make VMware a standalone company for the first time in over 15 years.
It will be interesting to hear any updates or potential changes Dell has on the VMware spin-off as well as their comments on Raghu Raghuram.
VMware is also set to report its first fiscal quarter 2022 results just one hour before Dell on May 27 at 4:30 p.m. ET.
Zacks Consensus Estimate: $23.33 Billion
In February, Dell Technologies said it expected first quarter 2022 revenues to grow in the mid-single-digit rate year over year. Dell generated $21.9 billion in first quarter 2021.
If Dell’s revenue guidance in February is accurate, a 5 percent year-over-year sales growth would mean Dell captured roughly $23 billion in revenue in first quarter 2022.
This is inline with Zacks Consensus Estimate that Dell will generate $23.33 billion in its first quarter, representing a 6.5 percent sales increase year over year. It is key to know that Dell has beaten Zacks consensus estimate in all of the past four quarters.
Dell’s stock will likely climb over $100 per share if the company generated upwards of $24 billion during its first quarter.
Can Dell’s Storage Sales Ever Rebound?
Dell Technologies is the worldwide market leader in storage. However, the company hasn’t reported year-over-year storage revenue growth since its third fiscal quarter 2020, which ended Nov. 1, 2019.
Dell’s storage business was down 2 percent in fourth quarter 2020, while falling 7 percent in third quarter 2020 on a year-over-year basis. Although the storage market as a whole has felt pressure due to many businesses pausing large IT hardware spending due to economy uncertainty because of the global pandemic, Dell has something big to prove here with PowerStore.
PowerStore is Dell’s biggest storage launch in years with executives saying it’s one of the fastest growing and most important products in the company’s history. PowerStore is Dell’s midrange all-flash storage platform that is a scale-up, scale-out container-based architecture with built-in future-proof technology. The storage solution is expected not only to drive storage refreshes and competitor take-outs, but also attract net new customers.
“One in five of the customers are new to Dell’s storage business,” said Tom Sweet, executive vice president and chief financial officer of Dell Technologies in February. “We’re still not satisfied with where we ended in Q4 and the year. It improved over Q3, but we have greater expectations in fiscal year 2022. … We’re going to run the business to take storage share in fiscal year 2022.”
With so much riding on PowerStore and increasing storage sales, Dell might have to rethink its strategy if storage revenues fall once again.
Dell’s CSG Sales Likely To Reach $12.8 Billion
Dell’s Client Solutions Group (CSG) – which includes desktop PCs, Chromebooks, notebooks, thin clients, printers, monitors and accompanying software and security – is coming off a record fourth quarter 2021. Dell generated a record breaking $13.8 billion in fourth quarter CSG revenue, up a whopping 17 percent year over year.
Dell’s massive success in the PC space stems from global demand skyrocketing during the global COVID-19 pandemic, which created a remote learning and work surge. However, as more schools and offices open back up for in-person, the question remains if the pace of global PC demand will continue.
In an interview with Michael Dell in March, the CEO said he expects PC demand to continue for the foreseeable future.
“There still are millions of children around the world who still need PCs, we estimate 16 million in the United States alone don’t have either the right device or right kind of access. Right now, there’s a lot of focus on infrastructure at the federal government level and that includes broadband infrastructure, particularly rural broadband. There will be great opportunities continuing this year and beyond,” Dell told CRN. “We believe the PC demand environment will continue to improve, it’s already off to a strong start.”
In February, Dell Technologies projected its CSG business to show continued “solid” demand with industry demand potentially outpacing supply. Dell expected CSG revenue growth to be in the mid-teens year over year. In first quarter 2021, Dell’s CSG business generated $11.1 billion, meaning a 15 percent increase would put CSG sales at nearly $12.8 billion.
Information On Dell Apex Wins
Dell Technologies is transforming itself -- from recently selling or spinning off key brands like VMware, RSA and Boomi, to changing how it wants to sell technology moving forward with Apex.
Dell officially launched Apex this month, the company’s new as-a-service portfolio of offerings that changes how customers and channel partners can buy, sell, deploy, manage and maintain Dell’s vast IT infrastructure products and services. The pay-per-use public cloud-like sales motion Apex is bringing to Dell will change how the company develops and markets products ahead.
Although Apex only officially became general available this month, Dell has been selling as-a-service and pay-per-use offerings for years mostly through its financial arm Dell Financial Services. However, Apex is the company’s biggest market push in as-a-service in Dell’s history.
It will be interesting to see if Dell executives highlight any big Apex wins during its earnings call. It should be even more interesting if Dell releases any financial sales relating to Apex or the number of customers currently using Apex.