Dell’s COO has asserted that the PC market is “ripe for a refresh” after the vendor giant registered an unexpected slowdown in Q3 PC sales.
On an earnings call, Jeff Clarke admitted that large PC deals slowed during the three months to 3 November 2023, confounding Dell’s upbeat outlook issued just 90 days ago.
The NYSE-listed giant saw total revenues for the quarter fall 10% year on year to $22.3bn.
That compares to the 6% and 7% year-on-year declines registered by rival duo HP and HPE in their latest quarterly results last week.
From Dell’s booming AI-optimised server sales, to the opportunity it sees around PC refresh, here we round up the key talking points from the results.
1. ‘What happened in PCs’? ‘Things changed’
90 days ago, Dell predicted that its Q3 would see a recovery ramp in PC demand.
Clarke faced questions on the call about what had changed in the intervening period as sales at its Client Solutions Group (CSG) fell 11% year-over-year and 5% sequentially in Q3.
“Through August – the first month of the quarter – our PC business was up year over year, and then things changed,” he responded.
“The business started to slow. It slowed in September and it slowed more in October.
“The big change was the number of large deals. They slowed over the course of the quarter as our customers became more cautious and selective.”
2. ‘300 million PCs will be turning four years old next year. That’s a tipping point’
Dell also forecast that CSG revenue will be down low single digits sequentially in Q4.
Clarke, however, saw this as a positive as he predicted that the embattled PC space is “ripe for a refresh” as AI makes its way to the edge.
“We expect the [PC] market to close in Q4 being down – it will be eight quarters of negative growth in the PC industry. That’s the longest I can recollect,” he said.
“There will be 300 million PCs turning four years old next year. That’s typically a tipping point for upgrading in commercial.
“And we have the opportunity with new architectures from Intel, AMD and Windows on ARM to really begin to see AI make its way out to the edge. It’s a pretty exciting time. I’ve used this notion of [AI] being the next great application, the next great use case, of the greatest productivity device on the planet – and it’s becoming real next year.
“Eight quarters of decline, an ageing install base of greater than 1.5 billion units, 750 million of which are four years old and 300 million of which will be becoming four years old next year. None of those are capable of running the new AI workloads coming out to the edge in the PC.”
3. ‘Encouraging sign’ for servers
AI is already generating big sales for Dell in its server business, however.
It revealed that it shipped over $500m of GenAI-optimised servers during the quarter, with its pipeline tripling.
On the call, Clarke said that this “new category” is set to grow to around $120bn within four years and – crucially – will not cannibalise Dell’s traditional server business, which is also returning to growth.
“What we saw for the first time this year was that the pipeline actually grew in-quarter for traditional servers. That’s a very encouraging sign,” he said.
“At the same time, there’s a whole new category of AI-optimised computing that’s fed by all the market momentum around GenAI. That says there’s a big opportunity for both.”
Dell’s wider Infrastructure Solutions Group (ISG) saw revenues fall 12% year on year to $8.5bn, as storage revenues fell back 8% sequentially to $3.8bn. Servers and networking revenue grew 9% sequentially.
Trends in storage spending typically hit two quarters later than servers, Dell noted.
On a bright note, Dell said it expects revenues to grow in its fiscal 2024 as tailwinds including AI take effect.
‘We’re really optimistic about FY25 and really excited about return to growth,” Dell CFO Yvonne Mcgill said.
Doug Woodburn is editor of IT Channel Oxygen
