Partners on the eve of the online Dell Technologies World 2020 conference this week are finding themselves buffeted by many of the same macroeconomic forces that Dell is struggling to navigate.
In its most second recent quarter, Dell posted revenues of $22.8 billion, a 3% decline over the prior year. Historically, the third quarter has always been the weakest for Dell. However, given the state of the global economy as the COVID-19 pandemic continues to rage coupled with increased component costs and customers brought on by shortages and customers awaiting the outcome of a presidential election it’s far from business as usual for Dell and its partners.
At the same time, Dell is trying to pay down $34.1 billion in debt incurred long before the COVID pandemic. Dell is committed to paying down an additional $2.3 billion in debt this fiscal year, is spinning out RSA and has publicly said it may spin out VMware.
Making matters more interesting for partners, Dell has a new channel chief and is pushing more aggressively into managed services. Total deferred revenue was $28.8 billion, which includes $6 billion of deferred revenue covering amortization, utility and as-a-service models that Dell has already signaled will be core to its future strategy.
Meanwhile, the Dell Client Solutions Group delivered revenue of $11.2 billion, down 5%, in the second quarter. Commercial client sales were $8 billion, down 11%, as double-digit growth in Latitude notebooks and commercial Chromebooks was offset by reduced demand in commercial desktops.
Infrastructure Solutions revenue was $8.2 billion, a 5% decline. Servers and networking revenue totaled $4.2 billion, down 5% year-over-year, while storage revenue was $4 billion, down 4% year-over-year. On the bright side, Dell is reporting double-digit orders growth for data protection and VxRail in the second fiscal quarter and mid-single-digit orders growth for high-end storage. The company also reports its recently launched PowerStore portfolio to gain traction in the second half. There are already hundreds of customers, with Dell claiming 20% of which are new to the company.
The brightest spot continues to be VMware, which $2.9 billion of revenue in the second quarter, a 10% increase. Subscription and as-a-service revenue grew 44% and comprised 22% of total revenue. The largest revenue contributors included the VMware Cloud Provider Program, Modern Applications, End User Computing and Carbon Black. VMware Cloud on AWS also saw triple-digit revenue growth.
Partner also accounted for 63% of the new customers that Dell acquired in the second quarter, says Cheryl Cook, senior vice president of global partner, embedded and edge solutions marketing for Dell.
Overall, Dell continues to see partners that sell multiple product lines enjoying higher levels of profitability, says. Partners that sell VMware are 138% more profitable than partners that only sell a single product line, notes Cook.
“Partners need to continue to cross-sell and upsell,” says Cook.
The good news is more organizations than ever in the wake of the pandemic are simultaneously revisiting their IT strategies as they begin to embrace digital business transformation in the so-called new normal era. The challenge partners face is finding the organizations that actually have the financial resources required to fund those projects.
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