Channel helping Dell to navigate supply constraints

Dell has expressed the view that, with its channel at its side, it is in a strong position to keep navigating through the ongoing supply challenges that are plaguing the market.

The vendor issued its fourth-quarter (Q4) and full-year numbers on 24 February, and its executives told analysts that it had seen growth despite shortages and was working hard to navigate through the current market conditions.

“Supply is constrained right now. But [we’re] working with our selling organisation, working with our customers to try to capture demand and bring demand in-house and make sure we’re selling the configurations that we believe we have component availability for,” said Tom Sweet, executive vice-president and CFO at Dell Technologies, in an analyst call.

“I think the team does a great job with that. And if you think about our model being roughly 50% direct and 50% through the channel, we have the opportunity to shape demand,” he added.

“That said, there are supply constraints throughout the industry that are [affecting] us and are causing incremental cost,” he added. “Parts are arriving late and we’re having to move product around, so there has been some pressure on gross margin – [as evident] in Q4.”

Shortages have been a feature of the market throughout the firm’s past fiscal year, and many observers anticipate that the situation will not ease until the second half of the year at the earliest.

“The global supply chain shortage of semiconductors and global logistics challenges for goods and components continues to impact just about every industry. We are still experiencing shortages of integrated circuits across a wide range of devices, including network controllers and micro controllers that go into our products and solutions. The result we are seeing an impact across client systems, servers and storage,” said Jeff Clarke, vice-chairman and co-chief operating officer at Dell.

Despite those challenges, the vendor managed to break records with its fiscal year, ended 28 January, with revenues rising by 17% to break through the $100bn barrier to $101.2bn. Operating income was also up to $4.7bn, a 26% increase year on year. Fourth-quarter revenues improved by 16% to $22bn.

PC sales were particularly strong, which helped the client services group deliver revenues of $61.5bn (up 27%), and operating income of $4.4bn (or 7.1% of revenue), with unit shipments of 59.3 million in calendar 2021.

Dell also saw growth on the infrastructure side of the business, with revenues in its ISG operation up by 4% to $34.4bn. The vendor reported that storage sales grew in all geographies and orders had grown at the fastest rate since the EMC acquisition.

The vendor has also underlined that it views its Apex-as-a-service offering as a major growth engine, and it has established the proposition and has already been engaging with managed service providers (MSPs) and customers.

“In particular, we saw a rapid acceleration of our Apex Flex on Demand subscription offering as the year progressed, an important market indicator that our Apex strategy is resonating with customers,” Dell’s co-chief operating officer Chuck Whitten told analysts.