Dell Technologies said Thursday that sales stemming from its PC division grew by 6 percent, to $9.1 billion, in its fiscal first quarter.
Though Round Rock-based Dell Technologies is now a tech conglomerate that sells a lot more than computers, the PC side of the business remains 50 percent of the company’s overall revenue, and an area where the company is doing better than the market.
But Dell’s operating income for its PC division -- which is basically earnings before interest and taxes -- actually declined 3 percent from a year ago to $374 million. The company largely blamed increased component costs for this decline.
“We're pleased with overall results in the first quarter of our new go-to-market structure and the demand velocity we saw in a challenging component cost environment,” said Tom Sweet, the chief financial officer of Dell Technologies, in a written statement.
Sweet noted that the PC industry is looking healthier, with the tech research firm IDC reporting that PC shipments grew for the first time since the first quarter of 2012. And he noted that Dell out-performed both the overall commercial and consumer markets.
For the quarter, which ended May 5, Dell reported revenue of $17.8 billion and a loss of $1.3 billion, or $2.57 cents a share.
When adjusted for one-time costs and gains, Dell had $18.2 billion in revenue and a profit of $581 million, or $1.12 a share.
One reason for the difference between these two figures is that Dell’s results are still heavily impacted by costs and accounting adjustments related to the EMC Corp. transaction and from when it went private in 2013.
It's difficult to compare Dell’s financial results from the previous year because those results were before the company's acquisition of data storage company EMC. Only Dell’s financial results from its PC division are easily compared to the year before.
The company’s “infrastructure” division, which includes servers and storage, brought in $6.9 billion in sales, which is down 18 percent from the fourth quarter, David Goulden, who is president of that division, said sales typically dip in the first quarter.
Goulden also cited higher component costs as a headwind for the infrastructure group. He said the company is trying to figure out how much to raise prices to offset higher component costs, while also remaining competitive on price.
“In an environment where component costs are increasing and continuing to increase, there is clearly a balance here in trying to push as much as that into the channel and raise prices and making that stick,” Goulden said during a conference call with financial analysts.
“Customers don’t like paying more this quarter than they did last quarter,” he added, saying that they had to go back to some customers that had existing orders and try to re-negotiate price.
Dell Technologies is still a privately held company but is publicly reporting its financial results because of a special stock the company created when it purchased EMC. Known by the ticker symbol DVMT, the stock was designed to track Dell's economic interest in VMware.
Its share price dropped 4 percent on Thursday, hovering at $65.10.
Analysts in particular are watching Dell's debt payments because the company took on significant amounts of debt to pay for the EMC deal. The company said on Thursday it had $50.7 billion in total debt, which is actually a $300 million increase from the quarter before.
Tyler Johnson, who is a senior vice president and treasurer at Dell, assured analysts on the conference call that Dell was committed to paying down its debt. “We’re going to take more debt out,” he said. “You’ll see this come off at a regular pace over time.”
Dell Technologies' purchase of EMC for $58 billion last September was designed to accelerate a transformation Dell began years ago when it expanded beyond personal computers into servers and other IT operations.
The company is increasingly focused on being an end-to-end IT provider to its customers. This means providing everything from servers and storage to computers, and associated services.