Dell Technologies Reports Mixed Q1 2021 Results

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Dell Technologies Reports Mixed Q1 2021 Results

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Dell Technologies (NYSE: DELL) announced the result for first quarter of 2021 on 28th May 2020. Period of this quarter ended on 1st May 2020. Company managed to beat the estimates of the analyst, but revenue remained flat in Q1 2021 over a year.

Financial Highlights of Q2 2021 result are:

  1. Revenue: Dell was able generate revenue of $21,897 million Q1 2021, compared to $21,908 million generated in Q1 2020.
  2. Gross Profit: Gross Profit earned by the company in Q1 2021 was $6,853 million, down by 1% from $6,797 million in Q1 2020.
  3. Gross Margin: Gross Margin for first quarter 2020 and 2021 remained same, that is 31%.
  4. Selling, General and Administrative Expense: Selling, general and administrative expense of dell in Q1 2021 was $4,886 million, down by 4% from $5,071 million earned in same period 2020.
  5. Research and Development Expense: Dell has spent $1,265 million in Q1 2021 for research and development, up by 8% from $1,176 million spent in Q1 2020.
  6. Operating Income: Company’s operating income in first quarter of 2020 was $702 million, increased by 28% from $550 million earned in first quarter of 2019.
  7. EBITDA: Dell’s EBITDA in Q1 2020 was $2,018 million, down by 7% from $2,166 million reported in Q1 2019.
  8. Cash and cash Equivalents: Cash and cash equivalents at the end of first quarter 2021 was $12,229 million.
  9. Net Profit: Net Profit reported by Dell in Q1 2020 was $182 million, declined by 45% from $329 million earned in Q1 2019.
  10. Diluted EPS: Diluted EPS reported by the company in Q1 2020 was $0.19.

Response to COVID-19

For health and safety of the employees, company has restricted the travel and all the events are conducted virtually. 90% of 165,000 employees of the company are working from home. For the employees who are required to work on site, company is following all the protocols set by the government for health and safety. IT team is helping small businesses and multi-national corporates by providing solution for work from home.

In New York, company is helping health care officials and first responder by providing technology such as PC, storage, server, VMware along with its implementation. As lockdown order was imposed, so company directly shipped PC, monitor, notebook and other accessories to the people at home. Dell has launched Payment Flexibility Program, where customer can get access to the technology which they require and payment can be deferred by 180 days.

Segment Information

Dell operates business in three different segments. Client solution and VMware witnessed increase in revenue, but Infrastructure solution saw decline in revenue.

  1. Infrastructure Solution: Revenue generated in this segment in Q1 2021 was $7,569 million, decline by 8% from $8,202 million in Q1 2019. Server and networking declined by 10% and storage declined by 5% over a year. As customer are working from the remote location. Company has launched Powerstore, which has CloudIQ storage monitoring and analytics software. Dell has also announced Cloud OneFS for Google Cloud, which will help in ease of file sharing in google cloud and private cloud.
  2. Client Solution: This segment was able to generate revenue of $11,104 million in first quarter of 2021, up by 2% from $10,910 million generated in first quarter of 2020. Revenue in commercial segment was up by 4% and in consumer segment is was down by 5%. Double digit unit and revenue growth in commercial notebook and high single digit growth in mobile workstation has helped this segment to report positive revenue growth. In commercial PC, company has gained 26.2-unit share and occupies second position worldwide.
  3. VMware: In Q1 2021, this segment was able to generate revenue of $2,755 million, increased by 12% from $2,457 million generated in Q1 2020. Dell is the majority shareholder in VMware. VMware sell diversified products in cloud computing and virtualization software, which has helped the company to boost its revenue. VMware Cloud Foundation 4 has been released, which delivers intrinsic security and lifecycle management across software-defined compute, storage and networking, and hybrid cloud environments.

Notes Offering Worth $2.25 Billion

On 3rd April 2020, Dell technologies announced offering of the notes worth $2.25 billion. Notes will be issued by Dell International L.L.C. and EMC Corporation, who are the co-owner of this notes. Notes of 1 billion has interest rate of 5.85% and will get matured on 15th July 2025. Notes of 500 million has interest rate of 6.1% and will get matured on 15th July 2027. Notes of 750 million has interest rate of 6.2% and will get matured on 15th July 2030. Amount received from these notes will be used by the company for corporate restructuring such as payment of debt.

Dell and Orange Partnership

Dell technologies and Orange started working together for developing new platform for cloud-based mobility one year ago. On 21st February 2020 Dell technologies and Orange build an agreement to work together in 5G technology. Dell’s Latitude notebook becomes the first PC to pass 5G test in orange network. Speed on 5G network was 20 times faster then 4G. Both the companies feel that working together, they can create new business opportunity in bandwidth-intensive applications.

Final Take

Dell has not provided the guidance for next quarter due uncertainty caused by COVID-19. In Q2 2021, Infrastructure solution segment may report weaker revenue growth as demand has decline due shutdown of offices. As some company wants its employees to work from home for longer period, client solution segment and VMware segment can boost revenue due to increase in sales of Laptop and SaaS.

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