Dell Technologies Inc. (DELL) Credit Suisse 26th Annual Technology Conference (Transcript)

Summary of Dell Technologies Inc. Conference Call Company Overview - Company: Dell Technologies Inc. (NYSE: DELL) - Event: Credit Suisse 26th Annual Technology Conference Call - Date: November 30, 2022 - Participants: Chuck Whitten (Co-COO), Shannon Cross (Credit Suisse IT Hardware Analyst) Key Points Financial Performance - Q3 Earnings: Reported record operating income of $2.4 billion and EPS of $2.30, up 39% despite a revenue decline of 6% [6][10] - Operating Expenses: Sequential decline in OpEx by 3% from Q1 to Q2 and 6% from Q2 to Q3, totaling a $300 million reduction since Q1 [9][12] - Gross Margins: Achieved gross margins of 23.7%, an increase of 200 basis points [9] Business Segment Performance - PC Business: Experienced a 17% decline, with consumer PCs more affected than commercial [6][8] - Server Business: Revenue growth of 14% driven by backlog reduction, but performance moderated more than anticipated [6][20] - Storage Business: Grew by 11% with strong demand across various storage types, particularly high-end hyper-converged infrastructure and PowerStore [6][22] Market Dynamics - Customer Sentiment: Customers are cautious, revisiting IT budgets and prioritizing digital transformation investments [8][9] - Geographic Performance: China faced a challenging environment, while sectors like energy and U.S. government showed strength [8] - PC Industry Outlook: Long-term bullish on commercial PC market despite short-term pressures, with a shift towards hybrid work driving demand for richer configurations [16][15] Guidance and Future Outlook - Fiscal 2024 Guidance: Revenue trajectory expected to be below normal sequentials, with Q4 guidance of $23 billion to $24 billion, down 16% at midpoint [11] - Free Cash Flow: Historically generated about $6 billion in free cash flow annually, but current environment has led to declines [12][14] Strategic Initiatives - Project APEX: Focus on flexible consumption models and infrastructure as a service, with significant growth in annual recurring revenue (ARR) [28][29] - M&A Strategy: Ongoing interest in strategic acquisitions, particularly in multi-cloud and telecommunications sectors [38][39] - Channel Strategy: Maintains an omni-channel approach, balancing direct sales and channel partnerships [33] Product Development - PowerStore: Strong performance with 24% of customers being new to Dell and 45% repeat buyers, indicating successful market penetration [24][26] - Software Integration: Emphasis on the importance of software in driving margins and enhancing product offerings [42] Telco Opportunity - Telecommunications Market: Investing in modernizing networks and open architectures, with a focus on reducing costs for operators [44] Conclusion - Overall Positioning: Dell Technologies is positioned to outperform in various market conditions, with strong profitability, market share gains, and growth opportunities across its core markets [46]