Dell beats profit estimates on higher desktop sales; shares rise 9%
(Reuters) – Dell Technologies Inc (DELL.N) beat Wall Street profit estimates on Thursday, helped by higher demand for desktops, as well as a focus on more profitable contracts within its server unit in China, sending the company’s shares up 9% in extended trading.
FILE PHOTO: The logo for Dell Technologies Inc. is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 10, 2019. REUTERS/Brendan McDermid
The PC maker is seeing declining demand across industries in China amid an escalating Sino-U.S. trade war, but the company’s focus on selective large deals in the Asian country helped it earn “higher-margin dollars” in a slow market.
That helped the company forecast full-year adjusted earnings per share in a range of $6.95 to $7.40, above analysts’ estimate of $6.42, according to IBES data from Refinitiv.
The company said it was working to raise prices of products including desktops and workstations to offset the impact of additional 5% tariffs effective Sept. 1 on Chinese goods.
“Our costs are going to go up and we will have to move price,” Chief Operating Officer Jeffrey Clarke said on a conference call with analysts.
Sales fell 7% in the company’s servers business to $8.6 billion, but operating income rose 4% to $1.05 billion.
Dell said server orders outside China were up 1% in the second quarter and the company expects to gain market share in the current quarter in North America, and Europe, the Middle East and Africa (EMEA).
The company reported a 6% jump in revenue in its client solutions business, which makes desktop PCs, notebooks and tablets, and branded peripherals. Operating income in the unit more than doubled to $982 million.
Dell is benefiting from an increase in sales of workstations to corporations and higher-end personal computers for gaming.
The company returned to the stock market following a hiatus of six years in December last year after it bought back interest in software maker VMware (VMW.N), in which it currently holds a majority stake.
Dell posted net income of $4.51 billion for the second quarter ended Aug. 2, compared with a loss of $461 million a year earlier.
Excluding items, the company earned $2.15 per share, above the average analyst estimate of $1.47 per share.
Total revenue rose 2% to $23.37 billion, beating the average analyst estimate of $23.24 billion.
Reporting by Neha Malara in Bengaluru; Editing by Maju Samuel and Shailesh Kuber