Pat Gelsinger & Michael Dell
Pat Gelsinger, CEO, VMware (left), speaking with Michael Dell, CEO of Dell Technologies, on stage at VMworld 2016.

Dell Benefits in First Year After EMC Merger With Sales Up

Whittles debt, narrows operating loss from previous quarter; signs one of its largest non-government contracts with GE

Brian Womack (Bloomberg) -- On the one-year anniversary of its historic tie-up with EMC, Dell Technologies Inc. is showing that bigger can be better.

The company demonstrated surging demand for servers, networking equipment and computers and signed on 10,000 new business customers in the past year. On Thursday it announced a deal to become General Electric Co.’s primary IT infrastructure supplier, in one of Dell’s largest non-government contracts ever. Sales in the fiscal second quarter were up 48 percent from a year ago and prior to the merger, and 8.3 percent from the previous quarter. Operating losses also narrowed.

Michael Dell has assembled a massive company to help push back against the rising demand for cloud providers such as Amazon.com Inc. and Microsoft Corp. The deal with EMC brought together the leading provider of key computer storage products and one of the top makers of servers and personal computers, allowing Dell to become a one-stop shop for business customers and address competition from rivals in the cloud. Now Dell is investing in new products and partnerships to woo dollars away from the encroaching rivals while also keeping traditional competitors, such as Hewlett Packard Enterprise, at bay.

“We’ve got to continue to execute and improve. But I think the thesis that we put together as to why to do the deal has held true," Chief Financial Officer Tom Sweet said in an interview.

During the quarter that ended Aug. 4, sales were $19.3 billion, Dell said. It had an operating loss of $979 million. In the previous period, sales were $17.8 billion and the operating loss was $1.5 billion.

The unit that includes computers had revenue of $9.9 billion, an increase of 7 percent from the year-ago period, as operating income rose. That was also the highest sales quarter for the group since the second fiscal quarter of 2015.

The group encompassing servers and storage had sales of $7.4 billion, and an operating income of $430 million. Server and networking revenue was $3.7 billion, up 16 percent from the year-ago period.

Storage results were not as strong. During the last quarter, orders for that business declined, David Goulden, president of Dell EMC, said during the call. However, the company is hiring hundreds of sales specialists -- and shaking up incentives for its staff -- to help bolster results. Orders are expected to improve in the second half of the year, he said.

Since completing the EMC deal, Dell has paid down about $9.5 billion in gross debt, excluding Dell Financial Services debt.

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