Growth in Dell EMC all-flash storage is one of the bright spots in what remains a tough slog for legacy array vendors.
Dell Technologies on Thursday reported consolidated revenue of $19.6 billion for the last quarter. That’s up 2% on a quarterly basis and 21% year over year. Gross margin as a percentage of revenue was $6.4 billion, or 32.2%. Operating losses widened to $530 million, largely a result of debt related to the Dell-EMC acquisition in September 2016.
Dell EMC storage is part of the Dell Infrastructure Solutions Group (ISG), which also encompasses servers and networking. ISG generated $7.5 billion in revenue last quarter. Servers and networking sales jumped 32% year over year to $3.9 billion.
Storage was a different story. In a continuing industry trend, Dell acknowledged that demand for traditional networked storage continues to drop. Storage revenue of $3.7 billion remained flat. Increased demand for Dell EMC all-flash storage and hyper-converged infrastructure were offset by a softening market for legacy systems, Dell Technologies CFO Tom Sweet said.
Sweet said Dell EMC all-flash and Isilon scale-out NAS increased by double digits. HCI saw triple-digit growth, spearheaded by VxRail adoption. He declined to provide specific revenue breakdowns for those product categories
Dell EMC achieved “better pricing and better mix in storage, even (though) volume wasn’t quite where we wanted it,” Sweet said.
This was the first Dell EMC earnings call to include a full quarter of results for EMC and VMware products. In February, VMware moved to the Dell Technologies’ fiscal calendar after previously reporting results on a calendar-quarter basis. VMware virtualized storage software contributed $1.9 billion on operating income of $638 million.
Dell closed the quarter with $18 billion of cash and equivalents on the books, including the proceeds of VMware’s recent debt issuance. Dell debt maturities of about $3 billion start becoming due in April.
Dell has paid down $9.7 billion of the gross debt it used to acquire EMC. That includes $1.7 billion in debt satisfaction during the third quarter.
Sweet said flexible consumption models are expected to account for an increasing percentage of Dell revenue. Consumption-based services realize recurring revenue incrementally across the length of a multiyear customer contract.
“These tend to have better profitability, but it does change the timing and pattern of when (revenues) are recognized,” Sweet said.
Jeff Clarke, a Dell vice chairman of products and operations, said Dell EMC midrange storage is receiving increased attention as a way to shore up sagging storage growth. The focus involves reshaping sales incentives and expanding product features of Dell EMC all-flash and hybrid Unity, SC Series and PS Series arrays.
“We increased our go-to-market capacity by adding storage specialists and are ensuring our sales compensation plan spurs the appropriate behavior to drive long-term strength in our results,” Clarke said.
Dell EMC all-flash SC Series array models launched in November. Due out soon are software enhancements for midrange Dell EMC Unity arrays, including the addition of inline data deduplication, synchronous file replication and in-place storage controller upgrades.
Dell also has launched an Internet of Things division to coordinate development of products and services across its business lines.