Dell Technologies, Inc. (DELL) Presents at Raymond James Institutional Investors Broker Conference Call - (Transcript)

Dell Technologies, Inc. Conference Call Summary Company Overview - Company: Dell Technologies, Inc. (NYSE: DELL) - Date: March 8, 2022 - Participants: Yvonne McGill (CFO), Brian Alexander (Raymond James & Associates) Key Points Financial Performance - Record FY '22: Achieved record revenue of $101 billion, operating income of $7.8 billion, and EPS of $6.22 [10][11] - Cash Flow: Generated cash flow from operations of $7.1 billion [10] - Shareholder Value: Completed VMware spin-off, simplified capital structure, and announced a $5 billion share buyback program along with a $1 billion dividend for the year [10][11] Business Segments - Core Businesses: Dell's core businesses, Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG), operate in a combined market with a $670 billion Total Addressable Market (TAM) [8][9] - Growth Opportunities: New growth areas present an additional $650 billion market opportunity, expected to grow at an 8% CAGR through 2024 [9] Supply Chain Challenges - Supply Chain Constraints: Ongoing semiconductor shortages and logistics challenges impacting revenue and costs [14][15] - Freight Costs: Significant increase in freight costs, with chartering a plane rising from $400,000 to $2.5 million year-over-year [15] - Backlog: Record high backlog levels in ISG and storage, with expectations of semiconductor constraints continuing into fiscal '23 [16] PC Market Insights - Market Dynamics: The PC market reset baseline to 350 million units in 2021, with opportunities for refresh due to 550 million PCs over three years old [19][20] - Focus on High-End Segments: Dell is targeting high-end commercial PCs and gaming segments, which are historically more stable and profitable [20][21] Server and Storage Business - Server Market Leadership: Dell holds the 1 revenue share in mainstream servers, with a 560 basis points increase over the last five years [24] - Storage Growth: The storage portfolio is the broadest in the industry, with significant growth in midrange orders and a focus on innovative products like PowerStore [27][28] VMware Relationship - Post-Spin Strategy: Continued collaboration with VMware, particularly in hyperconverged infrastructure, while maintaining a flexible approach to partnerships [30][31] Capital Allocation Strategy - Shareholder Returns: Commitment to return 40% to 60% of adjusted free cash flow to shareholders, including dividends and share repurchases [32][33] - Debt Management: Plans for additional debt paydown while investing in core and new growth opportunities [33] Edge and Telecom Opportunities - Market Potential: Edge market estimated at $110 billion with a 17% CAGR; Telecom market at $114 billion with a 2% CAGR [35][36] - Positioning: Dell aims to modernize IT for Telecom and leverage existing relationships to expand its footprint in Edge and Telecom solutions [38] Future Outlook - Revenue Growth Projections: Expected revenue growth of 3% to 4% and EPS growth of 6% or better [40] - Valuation Upside: Current PE ratio below 8x, indicating potential for valuation improvement [40] Additional Insights - Diversity and Inclusion: Yvonne McGill highlighted her role in promoting diversity within the company and celebrated International Women's Day [4][5] - Long-Term Vision: Dell's strategy focuses on sustainable growth, shareholder value creation, and capital allocation flexibility [40]