Dell projects sales growth will slow in fiscal 2020

A Dell Inc. XPS 13″ laptop computer is displayed before the company’s press conference during the 2018 Consumer Electronics Show in Las Vegas, Nevada, US. (Bloomberg pic)

SAN FRANCISCO: Dell Technologies, issuing a forecast for the first time since re-entering the public markets in December, said sales growth will slow over the next year, signalling that global economic struggles may dent corporate demand for the hardware giant’s products.

Revenue will be US$92.7 billion to US$95.7 billion in fiscal 2020, Chief Financial Officer Tom Sweet said Thursday on a conference call with analysts.

That suggests sales growth of 2.3% to 5.6% compared with fiscal 2019, when the company’s revenue jumped 15%.

Annual profit, excluding some costs, will reach US$6.05 to US$6.70 per share.

Chief Executive Officer Michael Dell’s technology empire generated consistently strong hardware sales over the last year amid the company’s transition back to the public markets after five years of being private.

The move was meant to simplify a tangled corporate structure and give Dell more flexibility to pay down its massive debt.

The company said it paid down about US$200 million in gross debt in the three-month period ended Feb 1.

Analysts and investors have raised concerns that technology companies relying on hardware, such as Dell, may be affected by a global economic slowdown.

Server rival Hewlett Packard Enterprise last week reported falling revenue because of weaker demand.

But Sweet said Dell’s revenue in the current year will reflect more typical demand compared with the booming performance in fiscal 2019.

“We’re expecting more normalised growth this year versus what we saw in fiscal 2019, which was a strong market and a strong investment cycle,’’ he said in an interview.

Annual operating income, excluding some expenses, is projected to be US$9 billion to US$9.6 billion.

Adjusted revenue will be US$93 billion to US$96 billion.

Dell’s shares were little changed in extended trading after closing at US$55.82 in New York.

The stock has gained about 25% since the company became public again.

Earlier, Dell reported revenue of US$23.8 billion in the fiscal fourth quarter, compared with US$21.9 billion a year earlier.

Sweet pointed to consistent sales “and profitable share gains” across the major business units.

“Dell is in a market that everyone says is a dinosaur,’’ said Glenn O’Donnell, an analyst at Forrester Research.

“If you don’t execute well, yes it is. But Dell is executing well.”

The quarterly loss widened to US$287 million, under traditional accounting rules, from US$133 million a year earlier, the Round Rock, Texas-based company said in a statement.

Adjusted earnings before interest, taxes depreciation and amortisation gained 11% to US$3 billion.

Dell didn’t report earnings per share because the transaction that brought it back to the stock market occurred in the middle of the quarter, complicating the company’s share count.

Sales in Dell’s infrastructure business unit, which includes servers and storage hardware, gained 10% to US$9.9 billion in the period, led by a 14% increase in server sales.

Revenue from the personal computer unit grew 4% to US$10.9 billion, with corporate PC sales growing 9% and revenue from consumer PCs falling 6%.

Dell notches a higher profit margin from corporate devices.

Dell also reported adjusted revenue of US$24 billion in the quarter.

Both reported revenue figures were in line with analysts’ average estimate, according to data compiled by Bloomberg.

VMware, a publicly traded software maker that’s majority owned by Dell, reported sales that rose 17% in the most recent period to US$2.6 billion, which was ahead of the US$2.5 billion average estimate of analysts polled by Bloomberg.

Profit, excluding some items was US$1.98 per share, above the US$1.88 average estimate.

The maker of software used by many companies to cut costs and consolidate corporate network workloads is trying to carve out a role as more companies move to the cloud through a partnership with Amazon Web Services and increasing support for Microsoft’s rival Azure cloud.

VMware shares rose about 3% in extended trading after closing at US$171.81 Thursday.

The company’s stock has gained 25% this year.