Dell Projects Sales Growth Will Slow in Fiscal 2020

(Bloomberg) -- Dell Technologies Inc., issuing a forecast for the first time since re-entering the public markets in December, said sales growth will slow over the next year, signaling that global economic struggles may dent corporate demand for the hardware giant's products.

Revenue will be $92.7 billion to $95.7 billion in fiscal 2020, Chief Financial Officer Tom Sweet said Thursday on a conference call with analysts. That suggests sales growth of 2.3 percent to 5.6 percent compared with fiscal 2019, when the company's revenue jumped 15 percent. Annual profit, excluding some costs, will reach $6.05 to $6.70 per share.

Chief Executive Officer Michael Dell's technology empire generated consistently strong hardware sales over the last year amid the company's transition back to the public markets after five years of being private. The move was meant to simplify a tangled corporate structure and give Dell more flexibility to pay down its massive debt. The company said it paid down about $200 million in gross debt in the three-month period ended Feb. 1.

Analysts and investors have raised concerns that technology companies relying on hardware, such as Dell, may be affected by a global economic slowdown. Server rival Hewlett Packard Enterprise Co. last week reported falling revenue because of weaker demand.

But Sweet said Dell's revenue in the current year will reflect more typical demand compared with the booming performance in fiscal 2019.

“We're expecting more normalized growth this year versus what we saw in fiscal 2019, which was a strong market and a strong investment cycle,'' he said in an interview.

Annual operating income, excluding some expenses, is projected to be $9 billion to $9.6 billion. Adjusted revenue will be $93 billion to $96 billion.

Dell's shares were little changed in extended trading after closing at $55.82 in New York. The stock has gained about 25 percent since the company became public again.

Earlier, Dell reported revenue of $23.8 billion in the fiscal fourth quarter, compared with $21.9 billion a year earlier. Sweet pointed to consistent sales “and profitable share gains” across the major business units.

“Dell is in a market that everyone says is a dinosaur,'' said Glenn O'Donnell, an analyst at Forrester Research Inc. “If you don't execute well, yes it is. But Dell is executing well. ”

The quarterly loss widened to $287 million, under traditional accounting rules, from $133 million a year earlier, the Round Rock, Texas-based company said in a statement. Adjusted earnings before interest, taxes depreciation and amortization gained 11 percent to $3 billion. Dell didn't report earnings per share because the transaction that brought it back to the stock market occurred in the middle of the quarter, complicating the company's share count.

Sales in Dell's infrastructure business unit, which includes servers and storage hardware, gained 10 percent to $9.9 billion in the period, led by a 14 percent increase in server sales. Revenue from the personal computer unit grew 4 percent to $10.9 billion, with corporate PC sales growing 9 percent and revenue from consumer PCs falling 6 percent. Dell notches a higher profit margin from corporate devices.

Dell also reported adjusted revenue of $24 billion in the quarter. Both reported revenue figures were in line with analysts' average estimate, according to data compiled by Bloomberg.

VMware Inc., a publicly traded software maker that's majority owned by Dell, reported sales that rose 17 percent in the most recent period to $2.6 billion, which was ahead of the $2.5 billion average estimate of analysts polled by Bloomberg. Profit, excluding some items was $1.98 per share, above the $1.88 average estimate.

The maker of software used by many companies to cut costs and consolidate corporate network workloads is trying to carve out a role as more companies move to the cloud through a partnership with Amazon Web Services and increasing support for Microsoft Corp.'s rival Azure cloud.

VMware shares rose about 3 percent in extended trading after closing at $171.81 Thursday. The company's stock has gained 25 percent this year.

--With assistance from Dina Bass.

To contact the reporter on this story: Nico Grant in San Francisco at ngrant20@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack, Alistair Barr

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