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Dell posts revenue jump ahead of voting on VMware offer

Dell posts revenue jump ahead of voting on VMware offer

Results come ahead of voting on offer to buy back shares tied to VMware

Michael Dell (Dell Technologies)

Michael Dell (Dell Technologies)

Credit: Dell Technologies

Dell Technologies has reported a 15 per cent rise in quarterly revenue, as businesses were forced to upgrade their systems running on older Windows technology and on strong performance by VMware.

The results come ahead of voting on the company's offer to buy back shares tied to its 81 per cent economic stake in VMware, which would allow Dell a return to public markets without going through the rigours of a traditional initial public offer process.

Dell earlier this month sweetened its cash-and-stock offer to US$23.9 billion, winning backing from shareholders including Carl Icahn, who had opposed the initial bid, as well as from Elliott Management and Canyon Partners.

"We expect the transaction to close in this calendar year, with the projected close date and first day of trading for the Class C common stock on the NYSE under the ticker symbol 'DELL' on December 28," Dell's head of investor relations Robert Williams said on a conference call with analysts.

The offer is scheduled to be voted on 11 December.

Dell reported an 11 per cent jump in revenue from its Client Solutions Group, which includes products such as desktop PCs, notebooks and tablets, and branded peripherals, for the third quarter ended 2 November.

The gain was largely due to businesses looking to replace their older machines following Microsoft’s decision to stop all support for its Windows 7 operating system early in 2020.

"The market has reached a state of stabilisation so far this year, primarily driven by strong commercial demand driven by Windows 10 upgrades, being linked to end of Windows 7 support," said Ishan Dutt, an analyst with research firm Canalys.

Dell held 17 per cent of the global PC market share year-to-date, behind HP’s 23 per cent and Lenovo’s 21 per cent share, according to data from Canalys.

HP reported an 11 per cent rise in revenue in its personal systems business, which also topped analysts' estimates.

On the call, Dell executives said the company has successfully navigated the current list of tariffs.

"Where we have incurred in higher cost with tariffs, we can pass that through to end users," Dell COO Jeffrey Clarke said.

For fiscal year ending 2019, the company expects total adjusted revenue in the range of US$90.5 billion and US$92 billion.

The company had reported adjusted revenue of US$79.9 billion for the fiscal year ended 2 February, 2018. Total revenue rose 15 per cent to US$22.48 billion in the quarter, while net loss attributable widened to US$876 million.

VMware posted robust results, beating on both profit and revenue estimates on strong demand for its software to boost cloud computing efficiency.

The company's shares, up about 30 per cent this year, rose nearly eight per cent to US$174.65 after the bell.

VMware

Meanwhile, VMware reported a 13.5 per cent jump in third-quarter revenue, as the company benefited from strong demand for its software used by customers to boost cloud computing efficiency. Revenue rose to US$2.20 billion from US$1.94 billion.

However, VMWare's net income fell to US$334 million, or 81 cents per share, in the three months ended 2 November, from US$395 million, or 96 cents per share, a year earlier.

Dell Technologies is looking to buy back shares tied to its 81 per cent economic stake in VMware and earlier this month sweetened its cash-and-stock offer to US$23.9 billion.

The higher offer, which is scheduled to be voted on 11 December, has now be backed by shareholders including Carl Icahn, who had opposed the initial bid, as well as Elliott Management and Canyon Partners.

(Reporting by Vibhuti Sharma in Bengaluru; Editing by Sriraj Kalluvila)


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