By Maria Armental
Dell Technologies Inc. and VMware Inc.'s shares rose Friday after both technology companies navigated through pandemic-related business disruption to post quarterly results ahead of expectations.
Dell gained 7% to $48.66 and VMware, which is majority-owned by Dell, climbed 8% to $153.25 in recent trading.
Computer giant Dell saw strong order growth in notebooks for the quarter ended May 1, particularly from large commercial and government customers, and pointed to data from technology market research firm International Data Corp. that found Dell was the only vendor in the top five to have positive year-over-year personal computer unit growth in the first three months of the year.
Dell easily beat consensus expectations by delivering the whole portfolio of client, infrastructure and VMware solutions to "solve the enterprise WFH pivot amidst Covid-19 disruption, leveraging virtual direct sales and a resilient global supply-chain," wrote J.P. Morgan. "This quarter separates Dell from its traditional competitors as a one-stop shop for enterprises."
J.P. Morgan analysts said Dell's liquidity position looks reassuring, if a bit stretched, with about $800 million of debt due this business year and about $18.6 billion available, including an undrawn $5.5 billion revolver, that should help the company cover any eventuality. The analysts noted Dell executives' statements that they remain focused on achieving investment-grade ratings and intend to pay down about $5.5 billion in core debt this year, in addition to debt repayment related to the first-quarter issuance.
J.P. Morgan maintained a price target of $60 a share.
VMware's first-quarter results included a 5.7% increase in billings, ahead of Wall Street projections.
Unearned revenue, which is sometimes referred to as deferred revenue and accounts for presales or contracted sales, came in at $9.22 billion, including $5.18 billion short term.
Wedbush Securities analysts said VMware will benefit from companies fast tracking digital transformation given the current work from home/remote workforce "new normal."
That would play well for VMware and Dell.
Wedbush maintained an outperform recommendation and raised its price target to $175 a share from $160.
VMware officials on Thursday said they wouldn't reinstate financial projections for the year, citing uncertainty about the business impact of the pandemic, and said they expected a challenging second and third quarters and progression after that.
This quarter, VMware forecast about $1.44 a share in adjusted profit and about $2.8 billion in revenue this quarter, which was roughly in line with analysts' projections at the time. Analysts have since boosted consensus projections to $1.48 a share in adjusted profit and $2.82 billion in revenue.
Write to Maria Armental at firstname.lastname@example.org