Dell Technologies Inc. revenues surged 21 percent in its fiscal third quarter, led by strong growth in its server business, another blowout quarter by its VMware Inc. subsidiary and continued solid performance of desktop personal computers.

But storage revenues were flat, and officials conceded that competitors have taken advantage of the complex merger of Dell and EMC Corp. to steal some market share.

Dell today reported a net operating loss of $533 million on revenue of $19.6 billion. However, excluding certain costs such as stock compensation, Dell earned an operating profit of $2 billion. Cash flow from operations was $1.6 billion and the company said it paid down an additional $1.7 billion of its total debt, which now stands at $52.5 billion. That’s up from the previous quarter thanks to a recent $4 billion bond offering by VMware.

Gross margins improved to 26 percent, from 24 percent a year ago, while both operating and selling, general and administrative expenses fell, indicating that Dell is improving its cost management. “We are generally pleased with our cash flow situation and remain focused on debt repayment,” said Chief Financial Officer Tom Sweet. Dell shares rose nearly 2 percent in early trading on the New York Stock Exchange.

Dell’s core PC market continued to strengthen, delivering the 19th consecutive quarter of year-over-year unit growth. Revenue in the consumer- and desktop-driven Client Solutions Group rose 8 percent from a year ago, to $10 billion.

Revenue in the enterprise-focused Infrastructure Solutions Group grew 26 percent from a year ago, to $7.5 billion, but performance was bogged down by flat sales in the storage market. Server and networking sales grew 32 percent year-over-year to $3.9 billion, led by triple-digit growth in Dell’s hyperconverged portfolio. Storage sales of $3.7 billion were up 19 percent over the previous year, but flat from the previous quarter.

Dell is taking steps to address the slowdown in its storage business, said Jeff Clarke, Dell’s recently appointed vice-chairman of products and operations. “We have lost share [in storage]. That’s undeniable,” he said. Clarke praised rival NetApp Inc., which reported strong earnings in its most recent quarter, for its “extreme focus and clarity,” and said Dell EMC needs to bring some of those same qualities to the market.

“We’re going to invest in more sales specialists.” he said. “We’re going to build out more sales capacity in the midmarket. We’re tweaking sales compensation with more bias toward storage. We have a big opportunity to grow in this market with our 30 percent share.”

Many of the questions from analysts on the company’s earnings call related to operational efficiency and progress in repaying the massive debt Dell assumed to acquire EMC. Sweet said the company is firing on all cylinders in those respects, with good growth across its subsidiary businesses and continue progress on cost control.

“We’ve paid down $9.7 billion in debt and maintain our commitment to de-leveraging the balance sheet,” he said. Dell’s next challenge in that respect is to pay off $3 billion in debt that will come due in the first quarter of fiscal 2019. However, with nearly $18 billion in cash and investments on its balance sheet, the company should have no problem meeting those obligations, Sweet said.

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