Dell Technologies, a company that has become one of the pioneers in the historical space of the era of personal computers, said that currently, the most promising business is the activity of selling equipment for data centers.
This manufacturer of electronics products, headquartered in Round Rock, Texas, expects that in the foreseeable future, the decline in sales in the PC market will end, after which this brand will be able to achieve long-term revenue growth of approximately 2.5%. At the same time, the company’s unit, which sells servers and devices defined as office infrastructure goods, expects that in its case, the growth of this indicator will be about 7% over the next few years. These expectations, in terms of predicted revenue increase, are almost twice as high as the positive financial dynamics contained in the forecast for 2021. The company informed investors about its vision of the future in the economic aspect last Thursday, October 5.
Dell Chief Operating Officer Jeff Clarke says that the large-scale interest in artificial intelligence in the space of the new economy is a positive trend since the development of AI implies the need for powerful machines. This statement should be perceived and interpreted in the context of the company’s commercial interest within the framework of modern technological realities.
Jeff Clarke also stated that machine intelligence is additive. According to him, this fact is evidence that the total costs of technology development will show growth. In this context, he mentioned the increased demand for servers equipped with graphics processors, manufactured, including Nvidia. He also noted that at present there is a dynamic growth of consumer interest in high-capacity storage.
In August, the company announced that the total amount of orders for servers intended for use in artificial intelligence systems exceeded the $2 billion mark. In this case, the orders received by Dell are meant. At the same time, Jeff Clarke said that the company was faced with the problem of a shortage of powerful chips, which is relevant for the entire industry of advanced technologies. According to him, there is currently a situation where demand exceeds supply.
Due to Chuck Whitten’s resignation in August, Jeff Clarke is the sole Dell No. 2 representative after the company’s founder and chief executive officer Michael Dell.
The past year has been difficult for PC manufacturers. The negative state of affairs is due to the fact that after the coronavirus pandemic, the volume of purchases of products in this category showed a historic drop. Bloomberg Intelligence analyst Woo Jin Ho says that against the background of negative trends in the PC market, investors have turned their attention to Dell’s server business. In this case, the most important issue is the degree of the company’s ability to benefit from the active spread of artificial intelligence.
Dell does not abandon the production and sale of PCs. This line of activity of the company generates revenue of $58 billion per year. The mentioned financial indicator is about half of the total annual earnings of the manufacturer. Jeff Clarke says that there is less potential for growth in the PC market. It can be assumed that in this case, a comparison with the prospects that are observed in the AI industry is implied.
Jeff Clarke, at the same time, believes that a new cycle of purchases may begin in the PC market. He justifies his position by the fact that many devices bought during the coronavirus pandemic are beginning to become obsolete. Another factor testifying in favor of the realism of the assumption of the representative of Dell No. 2 is that Microsoft in different ways is pushing consumers to use a new version of the Windows operating system, which provides higher requirements for the technical characteristics of the PC.
Dell has raised its long-term profit growth forecast. The company announced its intention to buy back more shares. Adjusted profit on the securities will grow by at least 8% per year. The company plans to use more than 80% of its cash flow to buy back shares or pay dividends. Dell’s chief financial officer, Yvonne McGill, told investors that small and incremental acquisitions would be prioritized over large deals.
The value of the company’s shares decreased by 1.5% on October 5, amounting to $66.19 at the close of trading in New York. Since the beginning of this year, the mentioned figure has grown by 65% amid enthusiasm for the data center business. Last month, the company’s share price reached its highest level since the manufacturer returned to the public markets five years ago after going private in 2013. Michael Dell announced intention to continue participating in public bidding.
As we have reported earlier, Intel CEO Says About Central Role of Chipmaker’s Technology in AI Boom.