Dell Technologies demonstrates that spending on network infrastructure is robust

Dell Technologies demonstrates that spending on network infrastructure is robust

Hardware and infrastructure solutions provider Dell Technologies (NASDAQ: DELL) is a diversified technology company comprised of two major segments, Infrastructure and Client Solutions. The segment that manufactures and sells PCs, monitors, accessories, and gaming hardware is the Client Solutions segment. The acquisition of storage solutions provider EMC over a decade ago helped shape the storage and networking solutions segment known as the Infrastructure Solutions Group. While the Client Solutions Group (CSG) reported a decline in revenue due to the pandemic-driven 2021 compounding normalization, its Infrastructure Solutions Group (ISG) continues to post record revenues. The company also includes Alienware gaming systems, SecureWorks cybersecurity and cloud computing management software company Virtustream. Dell also divested its 81% stake in virtualization company VMWare (NASDAQ: VMW). The company has continued to gain commercial PC market share in 35 of the past 39 quarters and has been able to reduce its quarterly operating expenses by more than $300 million since the first quarter of 2022. Although the strong US dollar has had an impact by 500 basis points, Dell easily beat its third-quarter 2022 EPS estimates and, like rival HP Inc. (NYSE: HPQ), could indicate that the normalization process for PC sales may have been achieved.



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The pandemic strengthens the APEX as-a-service solutions model

The pandemic has also been a boon for Dell’s infrastructure business, as companies have reduced significant infrastructure capital expenditures due to the unpredictability of the COVID pandemic and budgetary constraints due to lockdowns. This caused more companies to consider subscription plans as-a-service (IE: Software-as-a-Service, Storage-as-a-Service, Hardware-as-a-Service, etc.) which allowed for costs less at coping with uncertainty while gaining greater flexibility, value, and capability. For Dell and other as-a-service (aaS) vendors, it meant consistent, predictable, and consistent cash flows. Dell’s APEX enabled businesses to purchase hardware, storage, software, security and cloud in a single offering with full end-to-end maintenance and management, making it scalable and affordable with no subscription overages hybrid and pay-as-you-go billing plans. This has been particularly useful for companies employing a growing remote workforce and well suited for the “new normal” of hybrid work and the elastic office.

Strong pace but still…

On November 21, 2022, Dell released its fiscal 2022 third quarter results for the quarter ended October 2022. The company reported earnings per share (EPS) of $2.30 excluding non-recurring items versus estimates analyst consensus for a $1.61 profit, a beat of $0.69 a share. Revenue decreased (-6.4%) year over year (YoY) to $24.72 billion, topping analyst consensus estimates by $24.61 billion. Comparisons to 2021 were stark as it was a banner year for the client services segment as PC and consumer hardware sales hit record highs driven by the pandemic. Jeff Clarke, COO of Dell, commented: “Taking a step back, the short-term market remains challenged and uncertain. On the one hand, we’re seeing some customers delaying IT purchases. More customers continue to move forward with Dell given the technology’s criticality to their long-term competitiveness and a growing need to drive short-term productivity across IT. The world continues to digitally transform, data continues to grow exponentially, and customers continue to look to technology to drive their business forward, regardless of the economic climate.” On November 16, 2022, Dell also announced a $1 billion deal dollars in a class action lawsuit regarding its return as a public company.Insurers can pay part of the settlement, but still need final approval from a Delaware Chancery Court judge.

Dell Technologies demonstrates that spending on network infrastructure is robust

DELL Weekly cup and handle pattern

The weekly candlestick charts illustrate the break of the triangle that occurred in August 2022, setting the stage for a plunge below the $45 level, taking the stock to a swing low at $32.90. The shares managed to stage a rally after forming a rounded bottom leading to a break of the weekly market structure low (MSL) through the $36.98 trigger led by the weekly stochastic bounce through the 20 band. The stock cleared the weekly resistance of the 20-period exponential moving average (EMA), which has now become support at $41.22 as the stock heads towards the 50-period weekly resistance at $47.01. The rally is causing the shares to form a potential weekly cup and handle the peak formation in the lip area between $45.40 and $46.73, which was also the triangle’s previous top and breakout level. A slight pullback towards the $40 low and a breakout through the 50-period weekly MA would trigger the pattern. Since the Weekly Stochastic is only in the 50 band, there is the potential for a move higher. Support levels of the pullback are found at the weekly MSL trigger of $41.18, $39.90, $38.32, $36.98, $34.80 and the weekly swing low of $32.90.

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