Breaking analysis: An analyst's take on Dell's post-VMware future

INFRA

The recent story of Dell Technologies Inc. is one part spellbinding and other parts fraught with uncertainty. From owning a highly coveted industry prize in VMware Inc. to losing it, and the financial turbulence in between, Dell is weathering past uncertainty to plan a future with the products and services it does control.

“CSG is the Client Solutions Group, and it accounts for nearly 60% of Dell’s revenue and about half of its operating income,” said Dave Vellante (pictured), industry analyst and host of theCUBE, SiliconANGLE Media’s livestreaming studio. “ISG accounts for the bulk of the remainder of Dell’s business, and it’s the most profitable from a margin standpoint. It comprises the EMC storage business, as well as the Dell server business and Dell’s networking portfolio.”

As part of his opening analysis of the Dell Technologies Summit event, Vellante analyzed the company’s current performance and product plans for the future, including its Apex cloud services solution and Project Frontier edge platform. (* Disclosure below.)

Leaning on its strengths

Dell still boasts a hardware portfolio that stands as the “broadest in the industry,” according to Vellante. So although it operates in the traditionally low-margin business of hardware, the company still managed more than $26 billion in revenue in addition to an especially stellar 9% growth rate, given its size.

“Dell’s free cash flow over the trailing-12-month period is $3.7 billion, but that’s only 3.5% of trailing-12-month revenue,” Vellante explained. “Dell’s Apex and of course its hardware maintenance business is recurring revenue, and that is only about $5 billion in revenue, and it’s growing at 8% annually.”

But, reality check: Dell Technologies is still only valued at $28 billion, or 26% of its $100 billion revenue. And although this number trails the likes of HPE, at 60%, among others, Dell’s all-around performance relative to its competition remains strong — thanks largely to its adept go-to-market strategies, according to Vellante.

“Despite the fact that Dell doesn’t have a huge software revenue component since spinning out VMware, and it doesn’t own a cloud, it plays in virtually every part of the hardware market,” Vellante pointed out. “And, it can provide infrastructure for pretty much any application in any use case, in pretty much any industry, and in pretty much any geography in the world.”

Here’s the complete video interview, part of SiliconANGLE’s and theCUBE’s coverage of Dell Technologies Summit:

(* Disclosure: TheCUBE is a paid media partner for Dell Technologies Summit. Neither Dell, the sponsor of theCUBE’s event coverage, nor other sponsors have editorial control over content on theCUBE or SiliconANGLE.)

Photo: SiliconANGLE