Dell has cut its fiscal 2020 revenue forecasts after a Q3 in which server revenues steeply declined.
The vendor has downgraded its fiscal 2020 revenue forecast by as much as $2.7bn to between $91.5bn and $92.2bn - down from $92.7bn to $94.2bn.
On an earnings call transcribed by Seeking Alpha, Dell's CFO Thomas Sweet said that an increasing shortage of Intel CPUs will hamstring its PC business for the remainder of the year.
"The Intel CPU shortage is creating some dynamics that are causing us to be a little bit more cautious than perhaps we would have been say three to four months ago," said Sweet.
Answering analyst questions, Sweet added that the Intel shortage will likely affect Dell's revenues for fiscal 2021.
"History would suggest if we can't fulfil demand in the industry then we will see it spill over into the coming calendar year… given the continued increasing challenges within Intel supply. So that's how we've certainly look at it, we're certainly dealing with the information that we have in real time and we're making the adjustments accordingly." he said.
For Dell's fiscal Q3, net revenues grew by two per cent to $22.84bn, while non-GAAP operating income grew by 18 per cent to $2.44bn.
The vendor's Infrastructure Solutions Group (ISG) - which includes servers, networking and storage, suffered a six per cent revenue decline to $8.39bn, due to a steep 16 per cent drop in server and networking sales to $4.24bn.
Client Solutions Group (CSG) - which comprises desktop PCs, end-point security, software and peripherals such as monitors printers and projectors - saw better fortunes, with revenues growing five per cent to $11.41bn.
VMware meanwhile enjoyed an 11 per cent revenue growth to $2.48bn.
Dell claims that the decline in its server business stems from shortfalls in China, where the vendor is losing market share to cheaper competitors.
"We have lost server share in China and part of that was by design, most of it was by design, said Sweet.
"We continue to see macro headwinds in China and softening Client Solutions demand post the Windows 10 refresh. That coupled with the Intel's CPU supply constraints in the global macro environment leads a slightly more cautious view on fiscal 2021 growth."
A chip shortage from Intel caused widespread supply chain issues for hardware vendors throughout 2018. Intel claimed that the shortage would be over by mid-2019 and that supply would improve quarter by quarter.
But Jeff Clarke, Dell's vice chairman of products and operations, claims that Intel's chip issues have got worse quarter over quarter.
"Intel CPU shortages have worsened quarter-over-quarter. The shortages are now impacting our commercial PC and premium consumer PC Q4 forecasted shipments."
Clarke added that Dell is facing stiff competition on infrastructure bids, with macroeconomic pressures meaning deals are taking longer to close.
"It is a competitive market out there in the large bids. It's an aggressive marketplace from a pricing point of view. We're competing, but those bids are clearly competitive. And the other thing that is important to notice is they're taking longer to close. The caution that we're seeing with our large customers is certainly being seen and our ability to close transactions and how long it's taking to get that order closed would be another piece of colour that I would add," he said.
"Critical projects are still getting done, but they seem to be taking longer from a procurement cycle. And I think that's just a function of the macro dynamics that many companies see. They are trying to navigate what is a little bit of an uncertain macro political economic environment right now and so our perspective is there's a bit of caution out there."
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