Dell, HP Results Top Wall Street Estimates on Pandemic PC Demand

Nico Grant (Bloomberg) -- Dell Technologies Inc. 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% to $3.2 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% and 24%, respectively, as parents, teachers and school districts prepare for a new frontier in virtual learning,” Jeff Clarke, Dell’s chief operating officer, said.

Dell 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. 

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.

Earlier this week, Hewlett Packard Enterprise gave an outlook for earnings that was better than Wall Street was projecting, signaling that the server maker’s extensive cost cuts are paying off.

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% from a year earlier, according to research firm IDC.

Dell’s Numbers

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

Revenue from consumer devices rose 18%, while PC sales to business clients dropped 11%. Server and networking sales fell 5% to $4.2 billion. Storage hardware revenue declined 4% to $4 billion. VMware’s revenue climbed 10% to $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 $6 billion in the last quarter, up 15% from a year earlier.

HP Results

HP said sales came in at $14.3 billion in the period ended July 31 Analysts, on average, projected $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 Inc., 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% to $10.4 billion. Revenue from consumers jumped 42% while business sales declined 6%. Printing revenue dropped 20% to $3.9 billion.

HP projected free cash flow in fiscal 2020 will total $2.5 billion to $3 billion.