Dell Technologies beat Wall Street profit estimates on Thursday, helped by higher demand for desktops, as well as a focus on more profitable contracts within its server unit in China, sending the company’s shares up 9 percent in extended trading.
The PC maker is seeing declining demand across industries in China amid an escalating Sino-US trade war, but the company’s focus on selective large deals in the Asian country helped it earn “higher-margin dollars” in a slow market.
That helped the company forecast full-year adjusted earnings per share in a range of $6.95 to $7.40, above analysts’ estimate of $6.42, according to IBES data from Refinitiv.
The company said it was working to raise prices of products including desktops and workstations to offset the impact of additional 5 percent tariffs effective September 1 on Chinese goods.
“Our costs are going to go up and we will have to move price,” Chief Operating Officer Jeffrey Clarke said on a conference call with analysts.
Sales fell 7 percent in the company’s servers business to $8.6 billion, but operating income rose 4 percent to $1.05 billion.
Dell said server orders outside China were up 1 percent in the second quarter and the company expects to gain market share in the current quarter in North America, and Europe, the Middle East and Africa (EMEA).
The company reported a 6 percent jump in revenue in its client solutions business, which makes desktop PCs, notebooks and tablets, and branded peripherals. Operating income in the unit more than doubled to $982 million.
Dell is benefiting from an increase in sales of workstations to corporations and higher-end personal computers for gaming.
The company returned to the stock market following a hiatus of six years in December last year after it bought back interest in software maker VMware, in which it currently holds a majority stake.
Dell posted net income of $4.51 billion for the second quarter ended August 2, compared with a loss of $461 million a year earlier.
Excluding items, the company earned $2.15 per share, above the average analyst estimate of $1.47 per share.
Total revenue rose 2 percent to $23.37 billion, beating the average analyst estimate of $23.24 billion.
© Thomson Reuters 2019