Dell Technologies reported 3 percent increase in revenue in the first quarter of 2019 as its server business fell for the first time in 10 quarters amid economic conditions weighing on demand in China.
Revenue from Dell’s servers unit, its second largest business, fell about 8.8 percent to $4.18 billion in the first quarter.
Revenue in the Infrastructure Solutions Group, host to the server business, fell 5 percent to $8.20 billion for its fiscal 2020 first quarter ended May 3, 2019.
The latest IDC report in March said Dell has increased its server market revenue share to 18.7 percent in Q4 2018 from 17.5 percent in Q4 2017. Dell Technologies generated server revenue of $4.426 billion from server business in Q4 2018. Dell led the worldwide server market in terms of unit shipments, accounting for 19.4 percent of all units shipped during the quarter.
HPE was the second largest sever supplier with 17.8 percent share in Q4 2018 by clocking server revenue of $4.199 billion.
Dell Technologies Chief Financial Officer Thomas Sweet said on Thursday that the computer maker has been planning for a potential fourth round of U.S. tariffs on Chinese goods that could impact notebooks and monitors.
5% drop in Infrastructure Solutions Group revenue to $8.2 billion
1% decrease in storage revenue to $4 billion
9% decrease in server and networking revenue to $4.2 billion
6% increase in Client Solutions Group revenue to $10.9 billion
13% increase in Commercial revenue to $8.3 billion
10% decrease in Consumer revenue to $2.6 billion
13% increase in VMware revenue to $2.3 billion
Thomas Sweet said on a post-earnings call that the company would adjust its global supply chain to minimize impact on customers, Reuters reported.
“Clearly the U.S.-China trade tensions are a bit of overhang on the servers business,” Dell’s chief financial officer, Thomas Sweet, told investors in a post-earnings call.
Dell has been planning for a potential fourth list of tariffs on Chinese products that could include notebooks and monitors, and will adjust its global supply chain as needed.
Dell’s total net revenue rose 2.6 percent to $21.91 billion in the three months ended May 3. “Dell felt the impact from softness in the server market while also favoring profitability over revenue in China and some larger opportunities that became too price sensitive,” Mark Cash, an analyst at MorningStar, said.
Dell posted net income of $293 million in the first quarter, compared with a loss of $636 million a year earlier.
The server business also overshadowed a 13 percent increase in revenue from commercial customers, which was largely due to Microsoft Corp’s decision to end support for Windows 7 in early 2020.
Separately, Dell’s VMware unit reported a 13 percent increase in revenue to $2.28 billion.