Strong consumer demand for PCs, notebooks and other devices continues to fuel growth for Dell Technologies, even as the coronavirus pandemic and global chip shortage are causing unpredictability in the technology sector.
Dell continues to see strong revenue and business growth, as the Round Rock-based technology giant had $26.1 billion in revenue in its fiscal second quarter, which ended July 31. That was a 15% jump from the same quarter in the previous fiscal year.
Dell’s client solutions business unit — which includes PCs, notebooks and tablets — was among the best-performing sectors, as sales rose 27% from a year ago to $14.3 billion. Dell’s commercial PC segment alone grew 32%, according to the company.
The strong quarter continues a trend from the company’s fiscal year 2021, when Dell Technologies saw its revenue surge to $94.2 billion as the number of people working and learning from home caused demand for the company’s products to skyrocket.
“In this incredibly unpredictable environment, we delivered our best second quarter ever,” said Dell Technologies’ chief operations officer, Jeff Clarke. “That’s because whether we are re-opening or re-closing, eating in restaurants or ordering out, returning to the office or staying at home… the one constant has been an unprecedented demand for technology. Another constant is our ability to execute against our stated strategy and deliver consistent performance no matter the market dynamics.”
A technology industry analyst and founder of Austin-based consulting firm Moor Insights and Strategy, Patrick Moorhead said that when the pandemic started the consumer PC market saw the first spike in demand, while many businesses held back. But once it was apparent we’d be working from home for a while, businesses started to buy up devices, a trend that has continued.
Dell shipped a record number of PCs and displays in the quarter. The strong demand comes amid a global shortage of semiconductors, which are the computer chips used to operate everything from your laptop to your car. Dell’s competitors such as HPE have reported supply shortages and seen flatter revenue as a result.
Moorhead said the big difference-maker right now is whether a business can get the materials it needs to meet demand.
“Dell has a very large PC business, and the PC market is absolutely taking off. They’re also more centered on commercial solutions vs. consumer solutions.” Moorhead said. “They have both, but they’re indexed more to commercial, and businesses are still buying a tremendous amount of PCs. So we’re in a growing market, and they’re competitive and they’re able to get supply, which is just amazing.”
Clarke, the Dell Technologies executive, credited the company’s “differentiated supply chain” for helping navigate the pandemic.
“We continue to work through it. I think we are working through it reasonably well,” Clarke said in a call with investors. “The execution of our supply chain team is, I think, quite impressive with record shipments for the quarter for PCs, and record shipments for displays.”
An analyst with Endpoint Technologies Associates, Roger Kay said the global chip shortage has hit hardest in specialty chips like those used in the automotive industry. He said some processors and memory chips used in Dell’s products might have the potential to mix and match.
Dell also likely was paying attention to the potential for the shortage and may have been able to buy extra chips, he said.
Dell has historically had a strong supply chain strategy and organization, Moorhead said. That, coupled with being one of the largest buyers of electronic components on the planet, puts them at an advantage when negotiating with suppliers, he said.
“Dell took a bet on growth,” Moorhead said. “That means making big commitments with suppliers.”
In a call with investors this week, Clarke said the company’s longstanding relationships and partnerships have helped it navigate the situation. Still, he cautioned, the semiconductor industry is constrained and needs more capacity. He predicted the industry will continue to see problems well into next year.
Moorhead said the chip shortage is not likely to get better anytime soon as the demand for products continues to grow. It’s also not possible to increase production on a large scale without building new fabrication facilities which can take several years.
Moorhead said he expects Dell’s strong growth is here to stay, at least in the near term, as people continue to buy up PCs and other technology.
“You have businesses that are continuing to buy equipment. Because of this work from home, and interestingly enough, buying new equipment when workers have to go back to the office because their equipment is a year and a half old. You also have people who bought Chromebooks or a used PC because they couldn’t buy anything else.” Moorhead said. “Now they’re actually able to get more supply, they’re buying up buying the PCs that they actually want.”
Kay said many of the changes and demand brought on from work from home are permanent and predicted that demand for PCs, as well as firewalls, routers and software will continue.
