10-QPeriod: Q3 FY2018

Dell Technologies Inc. Quarterly Report for Q3 Ended Nov 3, 2017

Filed December 12, 2017For Securities:DELL

Summary

Dell Technologies Inc. reported its quarterly results for the period ending November 3, 2017. The company experienced a significant increase in net revenue, up 21% year-over-year, largely driven by the integration of EMC Corporation. While the company incurred a net loss from continuing operations, this was primarily due to significant costs associated with the EMC merger, including amortization of intangibles and purchase accounting adjustments. The company is actively managing its debt and has refinanced several credit facilities to optimize its capital structure. Dell Technologies is focusing on extending its market leadership in client and infrastructure solutions and leveraging its VMware segment for growth. The company's financial strategy emphasizes innovation, customer relationships, and disciplined capital deployment. Despite ongoing integration efforts and market challenges like component cost increases, Dell Technologies remains committed to its long-term growth strategy, aiming to enhance shareholder value through operational efficiency and strategic investments.

Key Highlights

  • 1Total net revenue increased by 21% to $19.61 billion compared to the prior year period.
  • 2Gross margin increased by 32% to $5.16 billion, with a gross margin percentage of 26.3%, an improvement from 24.0% in the prior year.
  • 3Operating loss improved to $533 million from $1.51 billion in the same period last year, driven by higher revenue and gross margin.
  • 4The company incurred a net loss from continuing operations of $941 million, impacted by significant transaction and integration costs related to the EMC merger.
  • 5Cash provided by operating activities was $3.68 billion for the nine months ended November 3, 2017, a substantial increase from $1.57 billion in the prior year period.
  • 6Total debt increased to $52.52 billion, primarily due to financing activities related to the EMC merger transaction.
  • 7The company is strategically managing its business across three reportable segments: Client Solutions Group (CSG), Infrastructure Solutions Group (ISG), and VMware, with VMware showing strong revenue growth.

Frequently Asked Questions

Dell Technologies reported a significant increase in net revenue, up 21% year-over-year to $19.61 billion. However, the company incurred a net loss from continuing operations of $941 million, primarily due to substantial costs associated with the EMC merger, including amortization of intangible assets and purchase accounting adjustments.

The EMC merger, completed in September 2016, significantly contributed to the revenue growth in this reporting period. However, it also led to substantial expenses, including purchase accounting adjustments and amortization of acquired intangible assets, which negatively impacted reported net income and operating income.

Dell Technologies' total debt increased to $52.52 billion. This was largely due to the debt financing required to complete the EMC merger. The company has been actively refinancing its debt facilities to optimize its capital structure and reduce interest costs.

The company's net revenue increased across all three reportable segments: Client Solutions Group (CSG), Infrastructure Solutions Group (ISG), and VMware. VMware, in particular, showed strong revenue growth. CSG revenue grew by 8%, ISG revenue by 26%, and VMware revenue by 52% year-over-year for the quarter.