Dell COO says “pain” of price hikes will continue
“We're repricing, it feels like, every day"
Dell will continue to reprice servers and other hardware, said COO Jeff Clarke – three months after saying the supply environment “is as tight as we have ever seen” – amid soaring prices for memory and other components.
“We're repricing, it feels like, every day,” he told analysts late Friday. “I'm sure our customers feel that pain.
“Unfortunately, I don't see that changing.”
(As Futurum Group’s Alex Smith said on May 26, “partners across the industry are navigating… structural uncertainty, including order cancellations, sudden price shocks, and massively elongated lead times.”)
“Whether it's fuel, whether it's raw materials, whether that's DRAM… we are living in an inflationary environment that is changing at a rate that, obviously, we've never seen before,” Clarke said on Dell’s Q1 earnings call.
Dell channel partner or customer and want to talk about what you are seeing around supply and lead times? Get in touch. We're happy to talk in confidence, or on-the-record.
Supply pressure is most acute around CPUs, DRAM, and NAND “then hard drives and then ultimately, the basket of goods that sit around that.”
(The previous quarter Clarke had pointed to memory chip spot market pricing volatility as an example of the kind of supply chain challenge it was facing: “The spot market for a gigabit of DRAM over the last six months is up nearly five and a half times at $2.39 a gigabit. If you were to look at NAND, the cost is $0.20 a gigabyte. That is up nearly four times over six months.”)
Some customers will “wait it out”
Rampant demand has been great news for OEMs, broadly. And Dell’s CFO Dave Kennedy had extraordinary numbers to boast after a record quarter.
He told investors it was “a strong start to the year: $16.1 billion of shipments, $24.4 billion of orders. Our backlog now sits at $51.3 billion. Just 90 days into the quarter, we're raising our full year guide by $10 billion…”
Dell’s Infrastructure Solutions Group record numbers alone were startling:
- Revenue of $29.0 billion, up 181% year-on-year
- AI servers revenue of $16.1 billion, up 757% year-on-year
- Servers and networking revenue: $8.5 billion, up 92% year-on-year
It’s not just GPU-centered “AI servers” that are selling like hot cakes, but traditional ones too as enterprises, neoclouds and sovereigns alike buy big.
See also: The Big Interview with GEICO's infrastructure SVP Rebecca Weekly
Enterprise efforts to build up agentic workflows are set to be a strong driver too, Clarke suggested: “You have all of this wonderfulness that a GPU drives.
“But you have this work that has to be done around I/O, around branch, retries, managing state. They're very sequential. They're very serial in nature as a result of that. That's a workload that's for the CPU… if you think about that harness, the CPU runs it. It's going to make those calls. It's going to manage memory. And it's in-loop in every decision that an agent makes.
“We didn't know this in October. This is a completely new marketplace that's being driven by putting intelligence in every workflow and every part of knowledge work on the planet today, and we're just beginning.”
But, he reiterated, “I’m the problem.”
“ We have a supply issue. We are supply constrained in the second half.”
“Everything that we see suggests that continues. There'll be a point where some customers, it's enough and they'll wait it out. We're seeing that in some cases. In other cases… folks are trying to secure that supply now and over multiple years because it's going to be more constrained,” he added.