Dell Technologies Inc and HP Inc on Thursday reported revenue and earnings that showed consumers and companies continue to buy personal computers even as COVID-19 pandemic lockdowns ease in some parts of the world.
The strong results did not help the stocks, which declined in extended trading.
Round Rock, Texas-based Dell said that fiscal first-quarter sales rose 12 percent to US$24.5 billion, compared with analysts’ average estimate of US$23.3 billion, data compiled by Bloomberg showed.
Photo: Reuters
HP reported revenue in its fiscal second quarter jumped 27 percent to US$15.9 billion, also topping estimates by US$1 billion. It also raised its annual profit target.
Despite the positive numbers, some investors are betting that PC growth is peaking and will not accelerate further, Cross Research analyst Shannon Cross said.
Dell shares fell about 1 percent and HP dropped more than 6 percent in extended trading following the reports.
Photo: Reuters
HP has experienced a surge in demand for laptops needed by people working and going to school remotely during the pandemic, and those sales are persisting, chief executive officer Enrique Lores said.
The drag on the company’s performance is a continuing shortage of computer chips, which means HP cannot match supply to the demand for its products, Lores said.
That situation will persist until the end of this year, he said.
Dell executives echoed the concern about chips, predicting component supply constraints will continue into next year.
The company will price into its products the higher costs of memory chips and displays while watching the impact that might have on demand for computers, HP chief financial officer Tom Sweet said.
“These are things we’re going to have to navigate through and they’ll be with us for a while,” Sweet said in an interview. “In the long term, we’re very optimistic about this space. If the pandemic did anything, it accelerated customers’ thinking that they need to invest in technology.”
Revenue in the second quarter typically increases about 6 percent sequentially, but will likely fall short of that this year, Sweet said.
HP’s PC-related sales rose 27 percent in the three-month period, which ended on April 30.
Dell reported a 20 percent revenue increase at its laptop and desktop unit.
Palo Alto, California-based HP said that notebook sales surged 47 percent from the same period a year earlier.
HP’s printer business had suffered from weak demand in the lockdown as companies held off on purchases of gear not needed in empty offices.
However, printing and supplies revenue rebounded strongly in the quarter, helped by more companies reopening their offices and stocking up again.
Margins were hurt by increasing costs, HP chief financial officer Marie Myers said.
“We do expect revenue to be driven by available supply rather than demand,” Myers said.
“Components and logistics costs are headwinds,” she said.
While Dell chief executive officer Michael Dell is trying to reduce the reliance of his company on one-time hardware sales in favor of subscription-based computer services, PC purchases still generate about half of revenue.
Sales from consumer PCs rose 42 percent to US$3.5 billion in the quarter, the company said.
That compares with a 19 percent expansion in the prior period.
PC sales to business and government agencies were up 14 percent to US$9.8 billion.
Server and networking sales rose 9 percent to US$4.1 billion from a year earlier.
Storage hardware revenue was US$3.8 billion.
Services revenue rose 10 percent in the quarter to US$6.45 billion.
Sales from VMware Inc, which is majority-owned by Dell, were US$3 billion, up 9 percent.
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