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Dell Technologies (DELL) Q4 Earnings and Revenues Up Y/Y

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Dell Technologies (DELL - Free Report) reported fourth-quarter fiscal 2019 non-GAAP net income of $1.6 billion, up 26% year over year.

Revenues increased 8% year over year to $24.01 billion and surpassed the Zacks Consensus Estimate of $23.46 billion. The increase in revenues was driven by double-digit growth in servers, VMware and expanding commercial client user base.

Notably, this was the first quarterly earnings results Dell reported after it returned to the public market on Dec 28, 2018.

Quarter in Details

Infrastructure Solutions Group (ISG) (41.2% of total net revenues) revenues for the reported quarter increased 10% year over year to $9.9 billion. This was driven by a 14% increase in servers and networking revenues and 7% increase in storage revenues year over year.

Client Solutions Group (CSG) (45.4% of total net revenues) revenues was $10.9 billion, up 4% year over year. While Commercial revenues grew 9% year over year to $7.8 billion, Consumer revenues were down 6% year over year to $3.1 billion.

Moreover, the company witnessed year-over-year worldwide PC share growth in the reported quarter.

VMware (VMW - Free Report) revenues were $2.6 billion (10.8%) in the quarter, up 17% year over year. Notably, Dell has a majority stake in VMware. The company also own stakes in Pivotal Software (PVTL - Free Report) and SecureWorks.

VMware and Pivotal announced availability of the new VMware PKS Solution Competency in the reported quarter. Moreover, Dell EMC PowerMax and Dell EMC Unity qualified as external storage arrays with VMware Cloud Foundation.

VMware witnessed strength across its product portfolio in all three major geographies, which is a positive.

Revenues from other businesses, including Pivotal, Secureworks, RSA Security, Virtustream and Boomi, increased 5% year over year to $593 million.

The company also won customers. VxRail combined Dell EMC compute and storage with VMware software in an industry leading HCI solution in the reported quarter.

Dell Technologies Inc. Price, Consensus and EPS Surprise

Operating Details

Non-GAAP gross margin increased 100 basis points (bps) from the year-ago quarter to 33% driven by higher gross margins in ISG and CSG products.

Adjusted EBITDA increased 11% year over year to $3.03 billion and EBITDA margin increased 100 bps year over year.

Non-GAAP operating expenses increased 13% year over year to $5.38 billion. Moreover, operating expenses, as a percentage of revenues, increased 100 bps year over year to $5.38 billion. Dell continues to invest in sales capacity, which fueled the increase in operating expenses in the reported quarter. 

ISG and VMware operating income increased 21% and 4% year over year to $1.27 billion and $872 million, respectively. However, CSG operating income declined 1% year over year to $555 million.

Non-GAAP operating income was $2.66 billion, up 12% from the year-ago quarter. Operating margin remained flat year over year.


Non-GAAP revenues for fiscal 2020 are expected in the range of $93 billion and $96 billion. Non-GAAP operating income is anticipated between $9 billion to $9.6 billion

The company expects first-quarter fiscal 2020 operating expenses to decline sequentially.

For fiscal 2020, Dell Technologies expects to repay approximately $4.8 billion of debt through the combination of balance sheet cash and free cash flow.

Zacks Rank & Stocks to Consider

Currently, Dell has a Zacks Rank #3 (Hold).

A better-ranked stock in the broader computer and technology sector is Symantec Corporation (SYMC - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

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