Reality Sets in for Dell EMC with $1.7 Billion Q4 Earnings Loss

The company generated an operating loss of a whopping $3.3 billion for FY 2017, not exactly ideal for anybody--especially investors and potential investors.

Dell.EMC

Reality is setting in for the new Dell EMC, whose mission in life is to supply as much hardware to the world's IT systems as possible. This contrasts to the fact that the world is moving more and more to subscription cloud services and away from building data centers that use such hardware.

While the newly conjoined mega-corporation on March 30 reported Q4 2017 revenue of $20.1 billion, with full-year revenue of $61.6 billion, it also had to report a non-trivial Q4 operating loss of $1.7 billion.

The company generated an operating loss of a whopping $3.3 billion for FY 2017, not exactly ideal for anybody--especially investors and potential investors.

It costs a lot of money to make major-league acquisitions, as Dell knows firsthand. This one turned out to be the largest in IT history, and with it came a lot of transition headaches that turned out to be costly on the bottom line.

Despite the negative numbers reported March 30, the company kept an official stiff upper lip, pointing out that trends are moving toward continued growth.

"I'm pleased with our overall fiscal 2017 performance, with growth in our client business and positive momentum from investments we're making in our infrastructure business," Dell Technologies CFO Tom Sweet said in a press statement. "In our fiscal year 2018, we'll drive that momentum forward, beginning with our new sales go-to-market capabilities, and continue to target identified revenue and cost synergies while investing in our broad portfolio of solutions."

The company ended the year with a cash and investments balance of $15.3 billion, an increase of $287 million from the third quarter.

Breaking Down Company Segment Performance

Dell EMC's Client Solutions Group continued to outgrow the market worldwide for units in both commercial and consumer product categories on a calendar year basis, the company reported. Revenue for the fiscal fourth quarter was $9.8 billion, up 11 percent versus the fourth quarter of last year, and revenue for the full year was $36.8 billion, up 2 percent year over fiscal year 2016.

Other calendar fourth quarter highlights include:

--PC shipments of 11 million, representing the largest volume of products shipped since the fourth quarter of 2011;

--8.2 percent year-over-year PC shipment increase, the best among the top seven PC vendors, with 16 consecutive quarters of year-over-year PC unit share growth and 150 basis points of unit share gained for the calendar year; and

--No. 1 share position worldwide for displays, gaining unit share year-over-year for the 16th consecutive quarter.

Dell EMC's Infrastructure Solutions Group generated $8.4 billion of revenue in the fourth quarter, which includes $3.6 billion in servers and networking and $4.8 billion in storage, and an operating income of $1 billion.

Infrastructure division highlights included:

--Regained the No. 1 worldwide server unit share position driven by strength in the mainstream PowerEdge business;

--No. 1 market share position in all-flash arrays, which exited 2016 at a more than $4 billion demand run rate; and

--The industry's fastest growing hyperconverged infrastructure vendor during the calendar fourth quarter with more than 300 percent demand growth.   

VMware revenue for the fourth quarter was $1.9 billion, with operating income of $565 million, or 29.2 percent of revenue.

Since closing the EMC transaction on Sept. 12, Dell Technologies has paid down approximately $7 billion in debt and repurchased $824 million of Class V Common Stock under the previously announced Class V Common Stock repurchase programs, the company said.

Dell EMC also announced that its board has approved an amendment to its existing group stock repurchase program for up to an additional $300 million over six months. The amount will be funded solely through a new VMware Class A Stock Purchase Agreement with VMware, Dell EMC said.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor of Features & Analysis at eWEEK, responsible in large part for the publication's coverage areas. In his 12 years and more than 3,900 stories at eWEEK, he...