Dell’s stock falls sharply on unexpected fourth-quarter loss

Computer and data center infrastructure giant Dell Technologies Inc. saw its stock fall hard in extended trading today after missing forecasts on earnings and posting a surprise fourth-quarter loss.

The company did beat expectations on revenue, at least, thanks to record-breaking personal computer shipments. However, investors couldn’t stomach the net loss of $29 million, sending Dell’s stock down more than 11% in the after-hours session, following a sharp drop in regular trading too.

For the quarter, Dell reported adjusted earnings of $1.72 per share on revenue of $27.9 billion, up 16% from the same period one year ago. Wall Street had been looking for earnings of $1.95 per share on sales of $27.5 billion.

Dell’s unexpected loss was a far cry from the $695 million profit it made in the same period one year ago. The company blamed it on a higher-than-anticipated effective tax rate for the lower than expected earnings, plus increase operating costs that spiked to $1.65 billion, up from $475 million a year ago.

On the other hand, Dell did at least generate record revenue for the entire year. For its fiscal 2022 year, the company reported sales of $101.2 billion, up 17% from a year ago.

Dell Vice Chairman and Co-Chief Operating Officer Jeff Clarke (pictured) chose not to dwell on the loss, highlighting the fiscal 2022 performance, which he said was the best year in its history to date.

“We reached more than $100 billion in revenue and grew 17% – a huge achievement and ahead of our long-term growth targets,” Clarke said. “For our customers, the biggest opportunity is to turn data into insight, action and progress, and they are prioritizing investments in technology.”

Chuck Whitten, Dell’s other co-COO, said the company benefited from widespread digital transformation that accelerated growth in tech spending throughout the year. “We also made strategic progress across multi-cloud, edge, as-a-Service and telecom and we launched solutions in these spaces, engaged customers, and made investments to position Dell for future growth,” he said.

Once again, the bulk of Dell’s revenue in the quarter came from its PC unit, the Client Solutions group. It saw sales of $17.3 billion, up 26% from a year ago. The increase was driven mainly by commercial PC sales, which jumped 30% to $12.9 billion, with consumer PC sales up 16% to $4.4 billion.

Dell’s other main business is its Infrastructure Solutions group, which accounts for the data center servers, systems, networking and storage gear it sells. It’s not as big as the PC business, but it still generated a hefty $9.2 billion in sales, up 3% from a year ago.

This was the first quarter in which Dell no longer had any formal relationship with its former subsidiary VMware Inc., meaning no more revenue from it either. Even so, Dell Chief Financial Officer Tom Sweet said the company had generated a nice return from spinning off VMware, adding $10.3 billion in cash flow and achieving an investment grade rating as a result of its debt reduction.

With the financial results out of the way, Dell said it has created a new dividend policy under which it will pay quarterly cash dividends on its common stock. The initial dividend rate has been set at $1.32 per share per year for fiscal 2023, or approximately $1 billion in aggregate, the company said. The first disbursements will be payable in April.

Photo: SiliconANGLE