Dell Storage Sales Explode As Infrastructure Business Innovation Pays Off

Dell Technologies’ storage business grew double digits for the second straight quarter to $4.2 billion as the company's "refuse to lose" and product simplification strategy paid off big time in its second fiscal quarter.

"If you step back and look at the progress we've made in the last year of simplifying the portfolio, improving the competitiveness of product lines, crisping up our marketing campaigns, which you'll see in full flair during the second half of this year, and announcing new products -- there's been a tremendous amount of improvement," said Jeff Clarke, vice chairman, products and operations at Dell, during the company's second fiscal quarter earnings call Thursday.

"We've made a lot of changes in our primary storage business over the past year. The product line is far more competitive today," said Clarke. "Demand was up in file-based arrays, high-end storage and data protection offerings. Our focus remains on driving velocity in the midrange as this is a key area of growth in the array segment."

Clarke, who is Dell Technologies CEO Michael Dell's right-hand man, has been the driving force around Dell's storage, server and networking business after taking control of the company's Infrastructure Solutions Group (ISG) last year.

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For its second fiscal quarter, Dell reported revenue of $9.2 billion for its ISG business with year-over-year storage sales up 13 percent to $4.2 billion, while server and networking revenue increased 34 percent to $5.1 billion.

In addition, Dell reported that sales of its hyper-converged flagship offerings, VxRail and VxRack, increased by triple digits year over year. VxRail is now above a $1 billion annualized run rate.

"We're are advancing our strategy in ISG; specifically, innovation is accelerating as we simplify the portfolio and focus our investments across fewer solutions to better serve our customers as they look to modernize their IT infrastructure to drive better business outcomes through data-driven artificial intelligence and machine-learning technologies," said Clarke.

Dell's Client Solutions Group, which includes PCs, displays and workspace offerings, also had a stellar quarter, with revenue increasing 13 percent year over year to $11.1 billion. The company reported 14 percent growth in its consumer business with sales of $3 billion, while commercial revenue grew 13 percent to $8.1 billion year over year.

For PCs, Dell hit its highest share position to date for total worldwide units and for commercial units sold at 18.2 percent and 22.8 percent, respectively, according to Clarke.

"We had some impressive numbers this quarter. Record shipments. Record revenue," said Clarke. "There's a lot of momentum behind it. When we're selling commercial PCs, there's a lot of drag around that with financing, software and peripherals and our services attachments, which is uniquely something we do over our competition. … We're going to continue to grow in that marketplace and outperform."

Overall, Dell Technologies reported total revenue of $22.9 billion for its second fiscal quarter 2019, up 18 percent year over year. During the quarter, Dell generated an operating loss of $13 million, down 98 percent compared with the $665 million operating loss it reported during the same quarter one year ago.

Second-quarter revenue from Dell Technologies other businesses, including Pivotal, SecureWorks, RSA, Virtustream and Boomi, was $574 million, an increase of 6 percent year over year.

Dell adjusted the upward revenue guidance range it previously provided July 2 for its current fiscal year 2019 due to positive sales momentum. The company previously expected revenue guidance of $86.5 billion to $88.5 billion, but now projects revenue to hit between $90.5 billion and $92 billion for this fiscal year. The company also raised net income guidance for fiscal year 2019 from previous projections of $4.5 billion to $4.8 billion to between $4.9 billion and $5.3 billion.

"We have a unique value proposition, which is from the edge to the core to the cloud," said Clarke. "We are a one-stop shop that provides a full set of solutions for our customers. That's particularly important as our customers are transforming their business through digital transformation."