Dell Might Be Tech’s Cheap Dark Horse

No one expects much from Dell DELL -2.55%

these days. That could be a good thing for the 38-year-old tech giant.

Dell is one of only six US-listed technology companies that currently generate more than $100 billion in annual revenue. It’s also the cheapest by miles, trading with six times less forward earnings than the Apple 20x average.,

Microsoft and the parent companies of Google and Facebook (Amazon is still a 65 times larger company.). Dell is now even offering a significant discount to close rival HP as news of a major investment by famed value investor Berkshire Hathaway has spared that company much of a brutal tech sell-off. happened afterwards. HP shares have lost just 1% since Berkshire shares were reported in a stock exchange filing early last month while Dell shares have fallen 15% in that time.

Much of the market’s lackluster view of Dell can be attributed to the company’s growth as a behemoth in the huge but mature market for technological hardware such as personal computers, servers, and systems. data storage system. After completing a split of its ownership stake in VMware late last year, about two-thirds of Dell’s revenue now comes from PCs and related peripherals like monitors and webcams. These have been enjoying a boost from the pandemic in a business sector that is often slow and non-growing. According to market research firm IDC, global PC shipments on average fell 1.4% annually over the 10-year period before the pandemic broke out in early 2020.

PC shipments have grown to double-digit year-over-year growth over the past two years, but that is now fading. However, while Dell has long been the third-place player in the personal computer space in terms of market share, its strong exposure to the volatile enterprise versus consumer market has demonstrated. is a benefit. IDC says global PC shipments fell 5.1% year-on-year in the first quarter, but Dell’s shipments grew 6% during the same period while Lenovo and HP fell 9% and 18% respectively. . Dell is also one of only three to gain market share by 2021, according to IDC data.

PCs have clearly gone through their pandemic boom. But with most companies transitioning to hybrid work environments — with employees dividing their time between the office and working from home — sales of computers and peripherals are likely to increase. capacity is still up from pre-pandemic levels. Simon Leopold of Raymond James said commercial PC demand “remains good” even as consumer demand has cooled.

The short-term outlook for Dell’s server and data storage business looks a bit more bleak than Cisco Systems’ most recent quarterly results. The networking equipment giant posted a rare level of revenue for the fiscal quarter that ended in April and issued an even worse forecast, largely to blame for the Covid-19-related lockdowns. in China has limited the company’s ability to obtain the necessary components to ship its products. That report casts a shadow over other companies in the IT hardware sector; Shares of Dell, HP and Hewlett Packard Enterprise have lost an average of 8% since the Cisco report.

But the sell-off could also set a low threshold for Dell’s own results scheduled for release on Thursday. Bernstein’s Toni Sacconaghi estimates Dell’s backlog of orders for its Infrastructure Solutions business grew by $1.2 billion in the fiscal quarter ended January, and he added in a note on Wednesday. Six that the company “has more control over the supply chain than others”. That won’t keep Dell completely immune from the problems it’s causing its colleagues. In this market, however, the absence of even worse news may be good enough.

Write letter for Dan Gallagher at

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