Dell Rises After Strong Computer Demand Fuels Rosy Forecast

Dell raised its annual profit forecast after reporting quarterly sales and earnings that topped Wall Street estimates on strong corporate demand for computers and software, according to Bloomberg.

Profit, excluding some items, will be $6.95 to $7.40 a share in the current fiscal year, executives of the company said during a conference call. In February, Dell projected $6.05 to $6.70 a share for fiscal 2020. Analysts on average estimated $6.42 a share, according to data compiled by Bloomberg.

CEO Michael Dell has diversified his technology empire to make it a one-stop shop for large companies upgrading their hardware and software. That broad product lineup helped the company in the most recent period, when growth in corporate sales of desktops and laptops overcame weakness in Dell’s server and storage business. Competitors HPE and NetApp both reported disappointing sales because of falling demand for data-center hardware.

“We’ve tried to position the company to be successful in any economic environment,“ Tom Sweet, Dell’s chief financial officer, said in an interview. “While we think long technology-spending cycles hold up, what we have seen this year is a softening of demand in the server space.“

Dell reported revenue gained 2% to $23.4 billion in the fiscal second quarter. Earnings, excluding some items, were $2.15 a share in the period ended Aug. 2, the company said in a statement. Analysts, on average, projected profit of $1.50 a share on sales of $23.3 billion.

Companies have been upgrading their personal computers to get Microsoft Corp.’s Windows 10 software, bolstering demand for Dell’s PCs. The company’s PC division grew 5.8% in the quarter, with commercial sales rising 12%.

Revenue from Dell’s data-center hardware fell 6.6% to $8.6 billion. While sales of storage hardware were little changed from the period a year earlier, server and networking gear revenue declined 12%, a turnaround from last year, when the company saw unprecedented demand for the products.

VMware, Dell’s largest software investment, helped the company with quarterly revenue growth of 12% year over year, bolstered by its partnerships with public-cloud providers, including Amazon Web Services and Microsoft Azure. Dell said it repaid about $2 billion of gross debt in the most recent period. The company has paid off $17 billion of debt since the 2016 close of its acquisition of EMC, the largest deal in tech industry history when it was announced at $67 billion. Dell said it expects to repay $5 billion of gross debt this fiscal year.