Dell Technologies, renowned for its personal computers (PCs), has disclosed a noteworthy shift in its business landscape. The company has announced that its data center equipment division has now become its most lucrative segment, outpacing its traditional PC business. This revelation came as the company shared its expectations with investors, revealing a modest long-term revenue increase of approximately 2.5% from PCs, while anticipating substantial growth of around 7% in the division responsible for selling servers, data storage, and related infrastructure.
The driving force behind this significant growth is the burgeoning interest in artificial intelligence (AI). AI applications necessitate more powerful and specialized hardware, including servers equipped with graphics processors and high-capacity storage solutions. Dell’s Chief Operating Officer, Jeff Clarke, emphasized that AI is additive and poised to stimulate overall technology spending.
Dell’s position in the AI market
Dell’s confidence in the AI market is further underlined by the fact that it has reported a backlog of orders exceeding $2 billion for servers specifically designed to meet the demands of AI workloads. This demonstrates the company’s strong foothold in a market hungry for high-performance computing infrastructure.
While Dell’s foray into the data center equipment sector has yielded impressive results, the company is not without its challenges. A global shortage of high-power chips is currently affecting the entire technology industry, causing significant supply chain disruptions. The demand for servers, graphics processors, and other critical hardware components has surged, outpacing supply, and contributing to this industry-wide bottleneck.
Despite these challenges, Dell remains optimistic about its future prospects. The company has increased its long-term profit growth forecast and has plans to initiate a stock buyback program. Dell aims to achieve an annual growth rate of at least 8% in adjusted earnings per share, demonstrating its commitment to delivering value to its shareholders.
Michael Dell, the company’s founder and CEO, has reaffirmed Dell Technologies’ commitment to remaining a publicly traded entity. This statement underscores the company’s long-term vision and dedication to transparency in its operations.
In August, Dell faced a legal setback when it was ordered by Australia’s Competition and Consumer Commission (ACCC) to pay over $6.4 million. The ACCC found Dell guilty of misleading practices related to “strikethrough prices” that were displayed on its websites from August 2019 to December 2021. According to court documents, Dell allegedly employed the tactic of displaying higher prices with a strikethrough, giving the false impression to customers that they were enjoying significant discounts when purchasing from the company.
