Dell, PC and IT Hardware company recently issued forward guidance for the company post the impending spinoff of its majority stake in VMware. Company is projecting 3-4 % CAGR of revenue growth in the core Dell Business (PC and Server and Storage segments), with 6% CAGR in Non-GAAP diluted EPS.
Company also announced a $5 Billion share repurchase program effective November 2021. Company will also initiate a $1 Billion annual dividend starting from Q1 FY 2023 (April 2022). Company has paid down $ 5.5 Billion of debt till the end of Q2 of FY 2022. With the special dividend from VMware expected the company will pay down a total debt of $16 Billion this fiscal year and achieve Investment Grade Credit rating.
Company on the conservative end should be able to achieve a 3% CAGR. Company’s PC business saw impressive 27% growth in Q2, driven by 32% growth in commercial PC sales and 17% growth in consumer PCs. CFO said that sales could have been higher, had the issues with tight supplies of some low-end Integrated circuits not been present. Dell managed the supply chain issues well and it outpaced HP’s PC business performance in the second Quarter. Dell has relatively high exposure to Commercial PC sales which got a boost with the return to Office trend. HP on the other side has high exposure to Consumer PCs like Chromebooks which were impacted as schools suspended purchases with the back-to-school trend gaining traction. Dell correctly anticipated the shift of demand from consumer to commercial and navigated the supply chain issues efficiently.

With the recent Analyst meeting announcement company reaffirmed its Q3 guidance given during Q2 Earnings call on August 26, This means company is seeing strong PC demand and this should continue in coming few quarters at least till Mid – Q3 2022 CY.

In the Enterprise Hardware segment growth was relatively slow. Servers reported 6% growth and storage reported 1% dip in Q2. Management expects acceleration ahead as IT spending picks up.

Company’s share price trades at a discount on sum of parts basis. Considering VMWare share price of $145 at the time of spin off in November 2021. Value per Dell share based of the spin ratio of 0.44 would be around $63.80. With Core Dell Adjusted EBITDA of around $8.3 Billion and an above average EV-EBITDA multiple of…

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