Dell Dismisses Supply Constraint Concerns In Record Quarter

‘One of our durable advantages is our industry-leading scale and supply chain expertise. It’s been serving us well in this environment, and we are actively managing demand that is ahead of the industry’s ability to deliver ICs and components,’ says Tom Sweet, Dell’s chief financial officer.

Dell Technologies executives tamped down concerns about the impact of supply chain constraints impacting the IT industry as a whole as the company reported record quarterly revenue and operating income.

“Despite industry supply shortages, we shipped a record number of PCs and displays in the second quarter,” said Jeff Clarke, vice chairman and co-chief operating officer of Round Rock, Texas-based Dell Technologies, during his prepared remarks in the firm’s quarterly financial conference call. Clarke said Dell is using its industry-leading scale and differentiated supply chain to successfully navigate the challenges caused by the unprecedented demand that is currently way ahead of supply.

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Dell Chief Financial Officer Tom Sweet, when discussing Dell’s future outlook, said the global economic recovery is driving broad demand across multiple sectors including IT.

That, Sweet said, resulted in high demand for integrated circuits and components that are fundamental building blocks of today‘s modern IT, automotive, industrial solutions, and home appliances to be in tight supply.

“One of our durable advantages is our industry-leading scale and supply chain expertise,” Sweet said. “It’s been serving us well in this environment, and we are actively managing demand that is ahead of the industry’s ability to deliver ICs and components.”

When asked by an analyst about how component shortages have impacted Dell’s PC business, Clarke said the company in the second fiscal quarter took share in both total PC and commercial PC sales, and took more share than any of its competitors.

When it comes to component shortages, Clarke said it all comes down to semiconductors.

“The industry demand, and industry being IT, consumer electronics, automotive, industrials, electronics, [the demand] for semiconductors continues to be strong,” he said. ”That is the area that is challenged, certainly for us. We continue to work through it. I think we are working through it reasonably well. The execution of our supply chain team is, I think, quite impressive, with record shipments for the quarter for PCs, record shipments for displays.”

Clarke said Dell sees semiconductor constraints continuing into the next year, particularly semiconductors built off 8-inch wafers where manufacturers are investing in little if any new capacity.

“The path out of this is ultimately more capacity,” he said. ”It takes a long time to build these different fabs, anywhere from a couple of years to three years, depending on the process technology we‘re talking about,” he said. “And obviously, lots of capital is required to do that. That’s the environment we’re playing in. We’ve been directly managing our components for a very long time in this company. We have long-standing relationships and partnerships. We continue to let people know what our long-term demand is.”

For its second fiscal quarter 2022, which ended July 30, Dell reported total revenue of $26.12 billion, up 15 percent over the $22.73 billion the company reported for the second fiscal quarter 2021.

Included in that total revenue was $14.3 billion in sales for the company’s Client Solution Group, or CSG, which was up 27 percent over last year. Commercial client device sales reached $10.6 billion, up 32 percent, and consumer client sales reached $3.7 billion, up 17 percent, the company said.

Also included in the total revenue number was Dell’s Infrastructure Solutions Group, or ISG, where total sales rose 3 percent over last year. Breaking that down, Dell reported server and networking revenue of $4.5 billion, up 6 percent, and storage revenue of $4.0 billion, down 1 percent.

Dell also recorded $3.1 billion in VMware revenue, up 8 percent, and revenue for other businesses of $288 million, down from last year’s $457 million.

For the quarter, Dell reported GAAP net income of $880 million, or $1.05 per share, down compared to last year’s $1.10 billion. On a non-GAAP basis, Dell reported net income of $1.9 billion, or $2.24 per share, up from last year’s $1.6 billion, or $1.92 per share.

Looking forward, Sweet said Dell expects an above-normal sequential revenue growth pattern for its third fiscal quarter 2022, with revenue growth in the middle to high teens. The company expects high single-digit sequential growth for its Client Solutions Group business, and low-digit sequential growth for its Infrastructure Solutions Group business, he said. Altogether, revenue should rise on a sequential basis by mid-single digits vs. the normal 2 percent decline, he said.