As the business achieved record quarterly sales and operating profitability, executives jobs at Dell Technologies downplayed concerns about the impact of supply chain restrictions on the IT industry as a whole.
“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, Dell Technologies, based in Texas, during his prepared remarks on the company’s quarterly financial conference call. Dell, according to Clarke, is successfully navigating the challenges posed by unprecedented demand that is currently far outstripping supply.
When discussing Dell’s future prospects, Chief Financial Officer Tom Sweet stated that the global economic recovery is driving broad demand across multiple sectors, including IT. According to Sweet, this has resulted in a high demand for integrated circuits and components, which are fundamental building blocks of today’s modern IT, automotive, industrial, and home appliances.
“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 how component shortages have affected Dell’s PC business, Clarke stated that the company took a share in both total PC and commercial PC sales in the second fiscal quarter 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.”
Dell, according to Clarke, expects semiconductor constraints to continue into the next year, particularly for semiconductors built on 8-inch wafers, where manufacturers are investing 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.”
Dell reported total revenue of $26.12 billion for its second fiscal quarter 2022, which ended July 30, up 15% from the $22.73 billion 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, a 27 percent increase over the previous year. According to the company, commercial client device sales increased by 32% to $10.6 billion, while consumer client sales increased by 17% to $3.7 billion.
Dell’s Infrastructure Solutions Group, or ISG, was also included in the total revenue figure, with total sales increasing 3 percent year on year. In terms of revenue breakdown, Dell reported server and networking revenue of $4.5 billion, up 6%, and storage revenue of $4.0 billion, down 1%.
Dell also reported $3.1 billion in VMware sales, up 8%, and $288 million in revenue from other businesses, down from $457 million last year. Dell’s GAAP net income for the quarter was $880 million, or $1.05 per share, down from $1.10 billion last year. Dell announced a non-GAAP net income of $1.9 billion, or $2.24 per share, up from $1.6 billion last year, or $1.92 per share.
Looking ahead, Dell forecasts above-normal sequential revenue growth in the third fiscal quarter of 2022, with revenue increase in the middle to high teens, according to Sweet. According to him, the company forecasts high single-digit sequential growth in the Client Solutions Group and low-digit sequential growth in the Infrastructure Solutions Group. Overall, revenue could increase by the mid-single digits on a sequential basis, rather than the usual 2% fall, he said.