UPDATED 09:49 EDT / MARCH 30 2017

INFRA

EMC drives most of Dell’s growth as PC and server revenues flatten

Dell Technologies Inc. said it’s growing market share in all of its key markets as synergies between its new EMC subsidiary and other federated companies kick in.

The Round Rock, Texas-based company early today reported $20.1 billion in fiscal fourth-quarter revenues, up 58 percent from a year ago and 24 percent from the previous quarter. Full-year revenue of $61.6 billion was up 21 percent from a year ago. But the company reported a quarterly net loss of $236 million, or 66 cents a share, and an operating loss of $1.7 billion after adjustments for onetime gains and costs.

The integration of storage giant EMC and its federated businesses makes year-to-year comparisons almost meaningless, but Dell significantly noted that its revenue growth was primarily in the areas in which the EMC Federation is strong, including hyperconverged servers, all-flash arrays and data center infrastructure. In contrast, Dell’s legacy business of personal computers and traditional servers was basically flat with a year ago. The company also said it is making good progress in servicing the debt it incurred for the EMC acquisition, having paid down its loans by $7 billion in the last six months.

PC unit sales grew for the 16th straight quarter, showing resilience in light of an overall weak market. “Fourth-quarter PC sales were the were the highest since the same quarter in 2011, a time when the ‘end of the PC era’ fervor stoked by the iPad was at its peak,” said Charles King, president and principal analyst at Pund-IT Inc.

In early trading today, the tracking stock for Dell, which is privately held but reports quarterly results, was up nearly 2 percent.

David Goulden - EMC World 2016

Dell President David Goulden (Photo: SiliconANGLE)

Executives expressed confidence about the strength of EMC’s product line has brought to the company’s enterprise presence. The Infrastructure Solutions Group gained market share in all-flash arrays, integrated infrastructure, hyperconverged servers and services, said David Goulden (pictured), president of Dell EMC. “In servers we outgrew the market to regain the No. 1 share position,” he said.

Overall, Dell’s message was that the EMC acquisition was delivering on the synergies that were expected, and that the company is growing in all the right places. The fourth quarter saw a record demand for all-flash arrays, which are currently on a $4 billion annual run rate, Goulden said. “We believe were nearly the size of the next three largest competitors combined as the market shifts to all-flash,” he said.

Pund-IT’s King said Dell’s financial position looks sound. He noted that the company has paid down about $7 billion in debt and repurchased $824 million of Class V Common Stock since it closed the EMC acquisition last September, while also adding $287 million to its cash and investment holdings to bring the total to a healthy $15.3 billion. “Overall, with the combined Dell EMC organization executing well and gaining additional financial strength, the view ahead looks bright,” he said.

The Infrastructure Solutions Group booked $8.4 billion in revenues in the quarter, up 120 percent from a year ago. Gross margins slipped, however, reflecting price cuts Dell made to boost market share. The core personal computer business brought in $9.8 billion in the quarter, up 11 percent from a year ago, although margins slipped there as well.

“We believe that in a consolidating market you need to take share, and that’s our focus,” said Chief Financial Officer Tom Sweet. Dell boasted that it has gained market share in PCs for sixteen consecutive quarters. Mobile workstations saw unit growth of more than 50 percent.

Dell said its hyperconverged solutions have also grown strongly, led by the VxRail appliance, which Goulden said is on a $400 million run rate basis just 10 months after introduction. Dell expects momentum to grow in the first quarter with the introduction of a version of VxRail for hybrid cloud deployments.

The EMC Federation companies held their own. VMware Inc.’s revenue for the fourth quarter was $1.9 billion, flat from a year ago, but operating income of $565 million was up significantly. Pivotal Inc. booked more than $240 million in business in 2016, up 130 percent from the previous year. Pivotal’s Cloud Foundry platform-as-a-service is now used by more than a third of Fortune 100 companies, Dell said.

Photo: Dell

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