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Business Segments of Dell Technologies.

Dell Technologies (NYSE: DELL) is a leading global brand of laptops, desktops, and peripherals. However, the company offers a comprehensive range of products and services including multi-cloud solutions. Dell has continued to grow its brand through acquisitions and diversification.

In the recent four to five years, Dell has experienced sharp growth in its net revenue. Its net income has also grown sharply in 2020 compared to the previous several years. Dell generated a positive net income in fiscal 2020 compared to the net loss it has been incurring over the past several years. 

The tech industry has undergone a rapid transformation in recent years driven by the heavy digitalization across various industries. Nearly every industry is focusing on digitalization in order to cater to the evolving needs of customers with higher efficiency. The cloud industry is also evolving faster and growing at an enormous rate driven by growing use of cloud based apps and security solutions worldwide. 

The pandemic has brought some lasting changes to consumer behavior whose impact is driving rapid digitalization across industries. People have swiftly adopted digital solutions and more and more businesses are turning to digital operating models to avoid losses caused by the Coronavirus pandemic. 

 In fiscal 2020, Dell’s net revenue grew by around 2% compared to the previous fiscal. The company generated $92.15 billion in net revenue in 2020 compared to $90.6 billion in 2019. While the revenue from sales of products accounted for 75.9% of the company’s entire net revenue in 2020, services revenue accounted for around 24.1% of the company’s annual net revenue. Dell’s net income grew by 354% in 2020 compared to 2019 reaching $5.53 billion compared to a net loss of $2.2 billion in the previous fiscal (Dell Annual report 2020). 

Dell technologies have divided its business into three main segments that include the Infrastructure Solutions Group, Clients Solutions Group, and VMWare.

Here is a detailed description of each of the three business segments of Dell Technologies:

Infrastructure Solutions Group:

The Infrastructure Solutions Group (ISG) segment of Dell Technologies is the second largest business segment of the company based on revenue. This segment offers multi cloud and big data solutions built upon a modern data center infrastructure. It also offers a comprehensive array of storage solutions including traditional and modern storage solutions. The next generation storage solutions offered by Dell Technologies include all flash arrays, scale out file, object platforms, and software defined solutions. Customers from diverse industries have different storage needs. In order to cater to their needs efficiently, the company has simplified its storage solutions portfolio. Apart from these things, the company also offers servers and networking solutions. 

Dell’s server portfolio includes high performance rack, blade, tower, and hyperscale servers. These servers are optimized for artificial intelligence and machine learning workloads.  The networking portfolio of the company offers services that enable the customers to transform and modernize their infrastructure, mobilize and enrich end user experiences and accelerate business applications and processes. Dell offers leading converged and hyper converged solutions that the customers can use to accelerate their IT transformation. They can use the scalable integrated solutions provided by Dell instead of building inhouse capabilities.  Apart from that Dell also offers related products and services to make its customers’ tasks easier and offer a seamless experience. The ISG segment also offers software, peripherals and services, including support and deployment, configuration, and extended warranty services.  

Recently, Dell released Dell Technologies Cloud. It is a set of cloud infrastructure solutions that allows the customers to deploy and manage hybrid cloud environments without any difficulty.

The Dell Technologies Cloud Portfolio includes the Dell technologies Cloud Platforms as well as Dell Data Center-as-a-Service offering (also referred to as VMWare Cloud on Dell EMC). These solutions offer the customers higher flexibility in terms of management and operations of their hybrid clouds. The ISG segment mainly generates its revenue from the Americas (around half of the entire revenue).  

The ISG group generated a net revenue of $34 billion in 2020 compared to $36.7 billion in fiscal 2019 (according to Dell’s annual report for fiscal 2020). There was a decline of 7% in the net revenue of the company in the latest fiscal (2020) compared to the previous, mainly due to the declining sales of servers and networking. ISG group generates its revenue from two sources mainly. The first is the sales of servers and networking and the second is storage. While the revenue of Dell technologies from servers and networking declined by around 14% in 2020 compared to the previous year, the revenue from the sales of storage remained flat.

During fiscal 2020, the demand for Dell’s power edge servers remained lower compared to the previous year. Some competitive factors also affected the sales of PowerEdge servers since the company’s focus remained mainly on profitability instead of revenue growth. In certain regions of the world increased competition led to lower prices of servers. While the net revenue of the group declined by 7% operating income also declined by 4% in 2020 compared to the previous year. ISG group’s net revenue from the server and networking segment remained $17.13 billion in 2020 compared to $19.95 billion in 2019. Its net revenue from the storage segment remained $16.8 billion in 2020 (same as the previous fiscal). The ISG group’s operating income was $4 billion in 2020 compared to $4.15 billion in fiscal 2019.

The ISG group’s revenue from the storage products remained flat compared to the last year. The demand for hyper converged products remained strong whereas that for the  core storage products softened compared to the previous fiscal. ISG group’s revenue declined across all the geographic regions and mainly across the Asia Pacific. 

Client Solutions Group:

The Client Solutions Group is the largest business unit of Dell Technologies. The CSG group sells branded hardware and peripherals as well as third-party software and peripherals. Dell’s computing devices including workstations, desktops, and notebooks are included in this group. The company designs its computing devices with the needs of its individual and business customers in mind. Its devices offer optimized performance, reliability, manageability, design, and security. Apart from its traditional hardware business, Dell has a portfolio of thin client offerings, designed to benefit from the growth in the use of cloud computing globally by businesses and individual clients. Dell also offers PC as a Service that combines hardware, software, lifecycle services, and financing together and provides predictable pricing per seat per month through Dell Financial Services. Apart from these things, CSG also offers attached software, peripherals, and services including support and deployment, configuration, and extended warranty services. 

Around half of the CSG group’s revenue comes from sales to the customers in the Americas. CSG is the largest business segment of Dell Technologies and accounted for around half of its net revenue in 2020. Dell’s net revenue from the CSG segment grew by around 6% in 2020 compared to the previous fiscal.  The Windows 10 Operating System refresh cycle drove most of the CSG segment’s revenue growth in 2020.  The CSG segment is further divided into two units, including commercial and consumer.  

CSG net  revenue from the commercial segment grew by 11% in 2020 compared to the previous fiscal due to stronger demand for the commercial products of the company. However, CSG net revenue from  the consumer segment decreased by 6% in 2020 compared to the previous fiscal since demand for consumer products remained lower as the company mostly remained focused on the commercial products. However, the average selling prices across the consumer segment grew, offsetting the impact due to the decline in demand partially. CSG revenue from the commercial segment was $34.3 billion in 2020 compared to $30.9 billion in 2019. CSG revenue from the consumer segment was down to $11.6 billion in 2020 compared to $12.3 billion in 2019. Total revenue of Dell Technologies from the CSG segment was $45.84 billion in 2020 compared to $43.2 billion in 2019. CSG segment’s operating income in 2020 remained $3.14 billion, compared to $1.96 billion in 2019, yoy growth of 60%.  

VMWare: 

VMWare is a separate reportable segment that reflects VMWare Inc.’s operations within Dell Technologies Inc. VMware works with customers in areas including hybrid and multi-cloud, modern applications, networking, security, and digital workspaces, helping customers manage their IT resources across private clouds and complex multi-cloud, multi-device environments. Its portfolio supports and addresses customers’ key IT priorities: accelerating their cloud journey, modernizing their applications, empowering digital workspaces, transforming networking, and embracing intrinsic security. Companies’ business needs are constantly evolving, and VMware enables its customers to digitally transform their operations as they ready their applications, infrastructure, and employees to meet the changing requirements. 

VMWare acquired Carbon Black, Inc. (“Carbon Black”), a developer of cloudnative endpoint protection in the third quarter of 2020. It also completed its acquisition of Pivotal Software Inc on December 30 2019.

VMWare generates around half of its revenue from sales to the customers in the United States. VMware net revenue (including Pivotal) mainly includes the revenue from the sale of software licenses under perpetual licenses for subscriptions and SaaS, related software maintenance services, and support, training, consulting services, and hosted services. Its net revenue in fiscal 2020 grew by 12% compared to 2019, mainly because of a growth in subscriptions and SaaS, as well as an increase in sales of software maintenance services. Strong renewals of VMware enterprise agreements, revenue recognized from maintenance contracts sold in prior periods, and additional maintenance contracts sold in conjunction with new software license sales led to higher software maintenance revenue. Around half of the VMWare revenue was generated from sales to customers in the United States. Apart from that, VMware revenue benefited from growth in sales in the United States as well as international markets. In 2020, VMware generated a net revenue of $10.9 billion compared to $9.74 billion in 2019. VMware’s operating income was $3.1 billion in 2020 compared to $2.93 billion in 2019.

Brands Owned by Dell Technologies Inc.

Dell technologies Inc owns five brands that include Dell, Dell EMC, Virtustream, secureworks, and VMware. 

Dell:

Dell makes and sells desktops, laptops, 2-in-1s and thin clients, powerful workstations and rugged devices made for specialized environments, as well as monitors, docking and endpoint security solutions and services. The wide portfolio of Dell offers workers all they need to accomplish a large variety of tasks.

Dell EMC:

Dell EMC offers products that allow organizations to modernize, automate, and transform their data center using industry-leading converged infrastructure, servers, storage, and data protection technologies. Offerings by Dell EMC enable organizations to transform their IT and develop new and better ways to work through hybrid cloud, creating cloud-native applications and big data solutions.

Virtustream:

Virtustream offers cloud solutions for business enterprises that enable business organizations to run their most complex and critical web applications whether private, public, or hybrid with a focus on performance, security, and efficiency.

Secureworks:

Cyber breaches and cyber attacks are now common across the industry. Secureworks creates data-driven security solutions for business organizations that detect and prevent breaches and cyber attacks.

VMware:


Software by VMware powers the world’s complex digital infrastructure. Businesses can use VMware’s compute, cloud, mobility, networking, and security offerings to deliver apps that power business innovation. VMware offers digital solutions, including app modernization, digital cloud, digital workspace, virtual cloud networking, intrinsic security, etc.

Written by Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.

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