Dell Technologies Posts Q3 Sales Increase, Growth Outlook That Contrasts Sharply With Competitors

Citing strong growth in all-flash and hyper-convergence solutions, as well as better-than-expected results from its Client Solutions Group, Dell Technologies posted dramatic sales growth for the first earnings report since the landmark merger between Dell and EMC.

"The storage trend is the move to all-flash, and for the calendar quarter demand for our all-flash portfolio is in very high double-digit growth with a nearly $2.5 billion run rate," David Goulden, president of Dell EMC's Infrastructure Solutions Group, said during a conference call to discuss the Round Rock, Texas-based company's third-quarter results. "The whole portfolio is shifting to all-flash and growing exceptionally well -- two, three, four times bigger than our competitors."

Dell Technologies' non-GAAP sales for its fiscal third quarter ended Oct. 28 hit $16.8 billion, a 28 percent increase over the same period a year ago thanks in large part to the inclusion of EMC assets, and sufficient to put considerable distance between itself and its chief competitors. Dell Technologies reported a $1.5 billion operating loss for the quarter on merger-related expenses.

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In contrast, Hewlett Packard Enterprise reported a 7 percent sales decline for its fourth quarter ended Oct. 31, coming in at just less than $12.5 billion. HP Inc.'s fourth-quarter sales increased 2 percent to $12.5 billion.

Lenovo reported declines across its business units for its second quarter, which ended in early November. Sales at the company's Data Center Group were down 8 percent. Mobility sales fell 12 percent and PCs, where Lenovo typically dominates, were down 8 percent.

Meanwhile, Dell Technologies' Client Solutions Group, including its PC business, posted $9.2 billion in sales, up 3.2 percent year over year, a result CFO Tom Sweet called "better than expected."

The Infrastructure Solutions Group reported mixed results, with servers and networking revenue down 8 percent, storage up 3 percent and increasing demand for newer technologies. "Legacy EMC was soft as the market moves to all-flash, converged and hyper-converged," Goulden said. "Q3 demand grew high double digits with strong momentum in VxRail. We have orders for more than 3,700 nodes since launch in February."

In the 52 days since the Dell EMC merger, VMware booked $1.3 billion in sales and $548 million in operating profit.

Partners say Dell Technologies is clearly riding a wave of market momentum.

"We've had very good volume," said Dan Serpico, president of FusionStorm, a large Dell EMC solution provider based in San Francisco. "New orders are higher, billings are higher, our backlog is as big as it's ever been. We're feeling good about that. We'll probably buy $150 million of Dell this year. We're selling a lot of services. Our services portfolio is a bigger piece of [gross profit] than they've ever been in the history of the company."