Dell, HP results top Wall Street estimates on Covid-19 PC demand

NEW YORK (BLOOMBERG) - Dell Technologies and HP Inc reported results that topped Wall Street estimates, in a sign of strong demand for personal computers from students and workers stuck at home during the coronavirus pandemic.

Quarterly revenue from Dell's consumer devices jumped 18 per cent to US$3.2 billion (S$4.37 billion), while HP said it shipped a record 18 million PCs in its fiscal third quarter.

"We saw strength in the government sector and in education, with orders up 16 per cent and 24 per cent, respectively, as parents, teachers and school districts prepare for a new frontier in virtual learning," Jeff Clarke, Dell's chief operating officer, said.

HP chief executive officer Enrique Lores said his company's notebooks have proved essential during the pandemic. "Rather than having one PC per home, it's having one PC per person," he added in an interview.

The spread of Covid-19 has forced millions of people to stay home. That's given the PC industry an unexpected boost. After several years of stagnation, 72.3 million desktop computers, notebooks and workstations were shipped in the second quarter, up 11 per cent from a year earlier, according to research firm IDC.

On Thursday, Dell said sales were US$22.7 billion in the period that ended July 31. Analysts, on average, projected US$22.5 billion, according to data compiled by Bloomberg. The hardware giant reported earnings, excluding some items, of US$1.92 a share, easily beating estimates of US$1.38 a share. Dell shares rose about 4 per cent in extended trading after the results.

Chief executive officer Michael Dell is once again looking to revamp the structure of his technology empire, this time to generate more value from his namesake company's 81 per cent stake in publicly traded software maker VMware Inc. Dell said in a July filing that it may look to spin off VMware. Any deal wouldn't happen before September 2021 at the earliest, for a tax-free transaction, the company said.

In the meantime, the company has been contending with the pandemic-fueled recession, which has reduced corporate demand for its data-center hardware. But Dell's efforts to refresh its PC lineup as consumers work, study and entertain themselves from home have paid off.

Revenue from consumer devices rose 18 per cent, while PC sales to business clients dropped 11 per cent. Server and networking sales fell 5 per cent to US$4.2 billion. Storage hardware revenue declined 4 per cent to US$4 billion. VMware's revenue climbed 10 per cent to US$2.9 billion.

Dell's flexible buying options have struck a chord with business clients who want to adopt new technology without paying for all of it upfront. The company's recurring revenue came in at US$6 billion in the last quarter, up 15 per cent from a year earlier.

HP said sales came in at US$14.3 billion in the period ended July 31 Analysts, on average, projected US$13.3 billion, according to data compiled by Bloomberg. Excluding some items, profit was 49 cents a share, beating estimates of 43 cents.

The company also projected that profit in the fiscal fourth quarter will be 50 cents to 54 cents a share. Analysts were looking for 50 cents.

Free from a hostile takeover attempt by Xerox Holdings, HP's Lores has tried to navigate through the pandemic, first by resolving manufacturing challenges so the company could meet PC demand from students and workers stuck at home. With corporate offices empty, HP's commercial printing business has cratered, but the company has used ink subscriptions to support printing revenue. That service that will soon have 8 million subscribers.

Revenue from personal systems, mostly computers, climbed 7 per cent to US$10.4 billion. Revenue from consumers jumped 42 per cent while business sales declined 6 per cent. Printing revenue dropped 20 per cent to US$3.9 billion.