Dell gains after beating sales estimates on demand for tech services

DELL Technologies reported quarterly results that beat analyst estimates, signalling that demand for technology infrastructure remains strong even as computer sales have sharply declined.

Sales slipped 6 per cent to US$24.7 billion in the period ending Oct 28, the Round Rock, Texas-based company said on Monday (Nov 21) in a statement. Analysts, on average, projected US$24.4 billion, according to data compiled by Bloomberg. Profit, excluding some items, was US$2.30 a share, compared with analysts' average estimate of US$1.60.

Dell "combated slower demand and drove record profitability" in the quarter, co-chief operating officer Chuck Whitten said. "We anticipated the changing landscape and responded quickly." Dell also managed its supply chain by reducing its backlog, which also helped boost results, said co-chief operating officer Jeff Clarke.

The sales decline was due to an ongoing slump in demand for personal computers, which generate about 55 per cent of Dell's total revenue. That segment slipped 17 per cent in the fiscal third quarter, in line with estimates, led by a 29 per cent plunge in consumer sales.

Dell shares gained about 2 per cent in extended trading after closing at US$41.07 in New York. The stock has declined 27 per cent this year. "Investors expected PC shipments to fall, so a lot of bad news was already baked in," said Bloomberg Intelligence analyst Woo Jin Ho.

Dell isn't alone in seeing falling computer demand. Global PC shipments dropped more than 19 per cent in the third quarter, according to Gartner, the steepest decline since the industry analyst began tracking the metric in the mid-1990s. As economic and political uncertainty has made companies more selective with information technology spending, computer upgrades haven't been high priorities, wrote Mikako Kitagawa, a Gartner analyst.

Meanwhile sales from Dell's Infrastructure Solutions Group, which includes its technology services, increased 12 per cent to US$9.6 billion from a year earlier. Server and networking sales climbed 14 per cent to US$5.2 billion, while storage revenue gained 11 per cent to US$4.4 billion. BLOOMBERG