Dell's results were upbeat, HP's flat, but investors still worried over supply chain

HP Inc and Dell both raised concerns over ongoing component shortages when they reported their July quarters yesterday, with the Palo Alto firm citing "unprecedented demand that is way ahead of supply right now" and Round Rock saying "demand was ahead of revenue growth as we managed supply constraints."

Dell's PC biz saw growth in its enterprise rather than consumer segment for its fiscal Q2, with revenue from its client-solutions group, which mainly sells PCs, up 27 per cent to $14.3bn.

HP's PC results, by contrast, were flat, with its Personal Systems unit pulling in $10.4bn, more or less level with the $10.36bn of the same quarter last year, with consumer buying up slightly and corporate sales down 1 per cent.

HP CEO Enrique Lores blamed the firm's trouble securing components for its Q3 ended 31 July on several factors. These included an ERP upgrade that affected order allocations and the business's ability to forecast, "COVID-related factory lockdowns in Southeast Asia", "congested ports and transportation disruptions".

Finally, the firm's outsource model, where "the majority of our production is managed by original design manufacturers." Lores said HP was now signing "direct supply agreements" in an attempt to mitigate the channel problem. 

"When I say backlog is close to one full quarter, this gives you the magnitude of the orders that we are not able to fulfill," HP CEO Enrique Lores told analysts.

He added: "Usually our business is demand-driven. And therefore there ... is some seasonality. Today, our business is totally driven by supply."

Dell, which had strong sales and profit [PDF], nonetheless echoed HP's position, with chief financial officer Tom Sweet citing "unprecedented demand that is way ahead of supply right now" on a call with investors yesterday. He added: "Despite industry supply shortages, we shipped a record number of PCs and displays in the second quarter."

And revenue for Dell's second quarter ended 31 July was a Q2 record: at $26.1bn, up 15 per cent, driven by growth in all three business units, with a 3 per cent growth to $8.4bn in the Infrastructure Solutions Group and VMware revenue at $3.1bn, up 8 per cent.

Analysts at Tech Market View said: "Dell has been a key beneficiary of the demand for PCs resulting from remote working requirements. It expects global economic recovery to drive demand in Q3 and, despite ongoing supply challenges, forecasts Q3 revenue to be up mid to high teens year-on-year."

HP closed its $425m deal to acquire Kingston Technology's gaming division, HyperX, in June 2021. Just weeks ago, the company signed a deal to acquire remote PC specialist Teradici. Both acquisitions should serve as a boost to HP's Personal Systems category.

Shares of both companies declined today. ®

https://www.theregister.com/2021/08/27/dell_hp_results/