Dell’s third quarter improved on its already strong first half, with its channel business doing particularly well in core legacy areas like its server and client businesses.
Dell Technologies has followed up its strong first half of the 2021 fiscal year with an extremely strong third quarter, led by very strong channel sales. Many companies in the IT industry have credited COVID’s intensification of digital transformation initiatives as a major factor in recent success, and Dell is certainly no exception here. What is noteworthy about Dell’ recent quarter is particularly strong performance from the company’s historical legacy businesses, which they see as the bedrock infrastructure for transformation measures.
“We are seeing continued positive momentum,” said Cheryl Cook, SVP, Global Partner, Embedded and Edge Solution Marketing at Dell Technologies. “As unique as these circumstances are, we are finding demand to be exceptionally high – partners are standing up and delivering for our customers.”
Cook gave an overview of the key channel numbers for the quarter.
“In Q3, our global growth in orders through the channel was up 34%,” she said. “Distribution growth was up 38% globally. Client business was up 41%. Our server business was up 40%, and our storage business was up 12%. The VMware business was up 64%, which is record level growth.”
Cook emphasized that these numbers were translated into significant increases in partner compensation.
“Partners have been earning quite a lot more rebates, which are up 34% globally,” she said. “Our channel also continues to be a strategic in the acquisition of new buyers, as in Q3 it drove 62% of all new buyers for Dell Technologies. Deal registration volumes are up, to 130, 574 global deal registrations.” That’s an increase of about 9%.
“Global alliances are a key part of overall performances, and that business was up 34% in the quarter,” Cook added. “Global industries with its focus on key verticals like retail and health care was up 33%. Our OEM business was up 42%.”
Cook said that the traditional Dell businesses of clients and servers did so well because they are a necessary component of digital transformation initiatives.
“These categories of product are the underlying essential infrastructure that enable digital reform,” she stated. “They make possible initiatives from smart cities to curbside pickup for retail. All of those are digital transformation items. This robust demand in our traditional business is very much at the heart of new models and capabilities, particularly as trends move to the edge.”
The storage numbers are significantly lower, but are at least in double digits. Over the last several years, they have been more typically single digit, and have occasionally dipped slightly into the red, despite a series of strong partner incents. So by those standards, this performance was pretty good.
“Storage is a little more complex than client-server, but it continues to be a strategic focus area for us in the company – particularly in mid-range storage,” Cook said. “Our share in mid-range is still the largest, we have the highest growth in mid-range for the industry, and we have aspirations to grow at a premium to the market.”
While the longer-term plans for Dell’s as-a-service business are strong, Cook acknowledged that the company is feeling out its growth patterns as they go.
“We are still learning what the adoption curve is around as-a-service,” she said. “There is no question that we are seeing increased demand for as-a-service, because customers want new consumption models around infrastructure and storage. With APEX, we have a dedicated turnkey managed storage offering and custom offerings. In the next few quarters or year we will get more insight into the adoption curve.”
Cook also said that Dell has been pleased with its ability to navigate the present supply constraints which are impacting the IT environment.
“Our supply chain is executing well,” she stated. “We have some extended lead times on some critical components, but these are industry issues, not ones unique to Dell. We have a tremendous advantage in supply chain because of the scale of the company, and our longstanding relationships there. Because the supply challenges are more model and component level-dependent, our ability to standardize on certain configurations lets us execute a little better than our competitors.”
As is customary, Dell will be announcing its new channel programmatic initiatives at the start of their new fiscal year, which will be the week of February 7.