2024-04-30 19:13:53 ET
Summary
- Management attributed revenue decline to market weaknesses in PC and server segments but highlighted recovery in the latter half of 2023 and emphasized AI servers, storage, and PCs for future growth.
- We analyzed Dells AI developments across all three of its segments to identify any competitive advantages that could give it an edge in the respective markets it competes in.
- Notably, Dell's AI servers, exemplified by PowerEdge XE9680, exhibit strength, while PowerScale F900 enhances AI workloads, positioning Dell competitively in the market.
In a previous analysis of Hewlett Packard Enterprise Company ( HPE ) vs HP Inc. ( HPQ ), we emphasized Dell Technologies Inc.'s ( DELL ) strategic move to consolidate its PC and server businesses through the acquisition of EMC in 2016. Notably, Dell emerged as a leader in both the server and storage vendors market and stands as the third-largest PC maker globally. However, despite its diverse portfolio, Dell experienced a 14.3% decline in revenue growth in 2023 compared to the previous year. During its latest earnings briefing from February 29th, management attributed this decline to market weaknesses in the PC and server segments, although highlighted that there was a notable recovery in all segments during the latter half of 2023. Furthermore, the company emphasized the significance of AI servers, AI storage, and AI PCs as key drivers for future growth. Consequently, we delved into the growth prospects of each of Dell's segments, analyzing the impact of AI on each market and evaluating Dell's competitiveness against its competitors, resulting in our Buy rating.
Revenue Breakdown by Segment ($ mln) | 2019 | 2020 | 2021 | 2022 | 2023 | 5-Year Average |
Servers and networking | 17,127 | 16,497 | 17,901 | 20,398 | 17,624 | |
Growth (%) | -14.2% | -3.7% | 8.5% | 13.9% | -13.6% | -1.8% |
Storage | 16,842 | 16,091 | 16,465 | 17,958 | 16,261 | |
Growth (%) | 0.4% | -4.5% | 2.3% | 9.1% | -9.4% | -0.4% |
Total Client Solutions Group | 45,838 | 48,355 | 61,464 | 58,213 | 48,916 | |
Growth (%) | 6.1% | 5.5% | 27.1% | -5.3% | -16.0% | 3.5% |
Total | 79,807 | 80,943 | 95,830 | 96,569 | 82,801 | |
Growth (%) | -0.1% | 1.4% | 18.4% | 0.8% | -14.3% | 6.9% |
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Dell: AI Competitiveness Could Strengthen Market Leadership