“We’re going to do everything we can to minimize the impact, but the fact is, the cost basis is going up across all products. No one more unique than others. Everything uses a CPU, has DRAM, and has storage in it,” Dell Technologies Chief Operating Officer Jeff Clarke told investors.
Dell Technologies Chief Operating Officer Jeff Clarke said while the memory shortage that’s gripping the technology hardware market is “unprecedented,” this isn’t the Texas company’s first time navigating the issue.
“We have a lot of experience with this. This isn’t our first DRAM cycle. There have been seven, I think, in the last 40 years,” Clarke told investors on the company’s third-quarter earnings call Tuesday. “(Founder, chairman and CEO) Michael (Dell) and I have been here, navigating the organization in various ways through that time.”
Clarke said the company is focused on mitigating the looming memory shortage, which he sees impacting its product pricing across the board. This includes reworking product configurations, product availability, and “adjust mix” in the coming quarters.
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“We’re in a very unique time. It’s unprecedented. We have not seen costs move at the rate that we’ve seen. And by the way, it’s not unique to DRAM, it’s NAND. It is hard drives, leading edge nodes across the semiconductor network,” he told analysts. “I’d categorize it as demand is way ahead of supply, and as we wade our way through that, we’re going to lean on the things that we’ve always done.”
He said the last cycle “of this magnitude” was 2016 through 2017. In these circumstances, Dell’s first rule is to get the parts. He said supply matters, and the company learned lessons from supply chain constraints during the COVID-19 pandemic that have prepared Dell for this moment.
“We’re going to do everything we can to minimize the impact, but the fact is, the cost basis is going up across all products,” Clarke said. “No one more unique than others. Everything uses a CPU, has DRAM, and has storage in it.”
Clarke said as AI token growth accelerates, customers around the world are demanding more computational memory, while server consolidation is driving denser configurations with more DRAM, and the company is in the midst of a PC refresh that also relies on the availability of memory from suppliers.
While he said price increases are inevitable at some point, Dell in the near-term doesn’t anticipate those hitting customers.
“I don’t see how this will certainly not make its way into the customer base. We’ll do everything we can to mitigate that,” he said. “As we mentioned earlier, our cost outlook for Q4 is largely unchanged, and we believe that you’ll see sequential profitability improvement in our company across the broad portfolio, while managing an increase in our cost basis. That’s what we’re going to do. That’s what we know how to do, and we have all of the tools in our company to be able to do that effectively and fast.”
Dell Technologies scored a record third quarter with sales of $27 billion on the back of its AI servers, which surged 37 percent year over year, and its commercial PC business, which grew five percent.
The company’s storage top line revenue dipped one percent, but Clarke said Dell’s own intellectual property in storage has grown for seven consecutive quarters, with double-digit growth. Earlier this month, CEO Michael Dell told CRN when it comes to the double-digit growth in Dell PowerStore “the first digit is not a one.”
Net income at the Round Rock, Texas-headquartered company grew 32 percent year over year to $1.54 billion for non-GAAP earnings per share of $2.59, up 17 percent.
In PCs, the company’s commercial business grew five percent to $10.6 billion, while its consumer business shrank 7 percent to $1.8 billion compared with the quarter a year ago.
In its guidance for the next 90 days, the company expects massive sales to close out the year with a $31.5 billion fourth quarter, which will see it set record annual revenue of $111.7 billion, for annual growth of 20 percent.
Dell shares surged on Wednesday 7 percent to $134.78.