Dell revenues down 20% on weak PC demand
'Demand environment remains challenged, and customers are staying cautious,' says COO Chuck Whitten
Dell revenues took a 20% hit year over year on the back of soft demand in its commercial PC unit as well as the infrastructure business, which had buoyed earnings in previous quarters, the company announced in an after-the-bell earnings call last Thursday.
The company's first quarter 2024 revenue came in at $20.9 billion -- $700 million more than the $20.2 billion consensus estimate by analysts at Zacks -- but $5.19 billion off the same time frame last year.
"The demand environment remains challenged, and customers are staying cautious and deliberate across their IT spending," Dell's co-COO Chuck Whitten told investors. "We continue to see softness across our major lines of business, all regions, all customer sizes, and most verticals."
Dell's commercial business took the steepest dive, down 23%, which Whitten said is now the fifth quarter of soft demand in the PC market. He said the PCs that are currently in the market are beginning to age to the point of renewal which, historically has come between the fourth and sixth quarters of downturn. Whitten said the exact timing of that turnaround is unknown.
"We at Dell have shipped over 160 million PCs over the last three years. All of our telemetry data says those devices are still in use," he said. "So you have a commercial PC install base that's at the highest levels that we've seen since 2014. All of that points to improving sequential growth as the year progresses. When and how fast that recovers? To be determined."
See also: Lenovo income takes a hit as PC market slumps
On the infrastructure side, revenue fell 18% year-on-year, dropping to $7.5 billion. The heaviest blow hit servers and networking, which tumbled 24%, while storage fell 11% as a category, making up $3.75 billion of Dell's revenue compared to $4.23 billion in the same period last year.
"In storage we saw continued demand growth in PowerStore, our marquee mid-range offering, and in PowerFlex, our leading software-defined storage solution," Whitten said. "PowerStore has grown for 11 consecutive quarters."
That said, Dell said it is not going to budge on pricing in the infrastructure unit, and if it were to show flexibility on pricing, it would likely affect consumer PCs.
During the earnings call, Dell's chief financial officer Tom Sweet updated investors on APEX and Dell Financial Services, which he grouped together.
"Turning to DFS and APEX, customer interest remains high in consumption and financing models that provide flexibility and predictability... During the quarter we continued to see APEX momentum, including an increase in the number of APEX customers that have subscribed to our as-a-service solutions," Sweet said.
Whitten was pressed by an analyst to give an update on the size of Dell's APEX business and its profitability. While he offered details about the new APEX product announcements, Whitten declined to offer more information around financials.
"We're not disclosing financial parameters around the APEX business, as we said. We'll do that periodically when we have meaningful milestones to report as we did last year in Q2," Whitten told investors.
He said Dell has executed on a sound APEX strategy and the company is pleased with its performance.
"We're seeing really healthy customer interest and growth, particularly in this economic environment, where customers are looking to stretch every dollar, and they're looking to optimize cloud spend. As we have highlighted in the past, our focus is on trying to offer our customers choice across the portfolio, and steadily building the customer base and our ARR, while building technical milestones," Whitten said.
"We're getting a lot of clients and customer interest in that offering. We're going to continue to focus on customers. We're going to continue to provide periodic updates on our progress like we did last year in terms of the size of the business."
This article was first published on CRN.