Q4 2020 Earnings Call

February 27, 2020

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Good afternoon, and welcome to the fiscal year 2024th quarter in here in the financial results Conference call Wardell technologies Inc. I'd like to inform all participants. This call is being recorded at the request of Dell technologies.

This broadcasters the copyrighted property of Dell technologies Inc. any rebroadcast of this information in whole or part without the prior written permission of Dell technologies is prohibited.

Following prepared remarks, we will conduct a question and answer session to ask a question simply press Star then one on your telephone keypad at anytime during the presentation I'd now like to turn the call. It for two Rob Williams head of Investor Relations Mr. Williams you may begin.

Thanks, everyone for joining us with me today, as our Vice Chairman and Chief Operating Officer, Jon Clark, Our CFO, Tom Suite, and our Treasurer Tyler Johnson.

During this call unless we indicate otherwise all references to financial measures refer to non-GAAP financial measures, including non-GAAP revenue gross margin operating expenses operating income net income EBITDA adjusted EBITDA and adjusted free cash flow a record.

Silly Asian of these measures to their most directly comparable GAAP measures can be found in our web deck and press release.

Please also note that all growth percentages refer to year over year change unless otherwise specified and that Vmware historical segment results have been recast to include pivotal results. Finally, I'd like to remind you that all statements made during this call that relate to future results and events are forward looking statements based on current expectations.

Actual results and events could differ materially from those projected during I'm, sorry from those projected due to a number of risks and uncertainties, which are discussed in our web deck and FCC reports, we assume no obligation to update or forward looking statements now I'll turn it over to Jeff.

Thanks, Rob.

As Dell technologies begins our fourth year as a combined company.

Never been better position to help our customers unlock the potential of all the data coming their way.

No one stores processes moves and protect more data than we do across any environment.

No competitor enjoys are advantaged positions across physical and virtual infrastructure, our investment in talent innovation and breadth of capabilities gives us an advantage starting position as we head into the data decade.

I am optimistic get I know, we have some hills decline that is evident in RF why 20 results.

And that's why 20, we delivered revenue of $92.5 billion and EPS of $7.35 revenue grew modestly at 1%, we delivered strong profitability with operating income up 15%.

I know you want to understand what is going on with infrastructure solutions group results. So let's start there and I as chief RF, why 20 revenue was down 7% to $34 billion.

But up 10% versus F 18, as large enterprises that a large enterprise customers digested F. way 19, Capex investments and China slowed.

Server and networking revenue declined and Thats why 20, a profitability was up as we Didnt Chase unprofitable server deals in a down market.

Our long term server share trajectory remains strong.

We are winning in the consolidation.

Beginning approximately 590 basis points of share over the last three years and we have been number one and mainstream server revenue for seven quarters. According to ITC.

And that's why 21, we're planning for both the overall server market and our server revenue to return to growth driven by higher value workload servers.

Increasingly more robust AI and machine learning solutions, and a distributed I and distribute to achieve requirements at the edge.

According to ITC.

Mainstream server revenue is expected to grow at 3.3% in calendar year 2020, and we plan to grow did premium to the ITC forecast.

Shifting to storage roughly two and a half years ago, we began to take actions to stabilize the business and lay the foundation for growth, we have or claimed over 300 basis points of share since 2017.

One action, we have invested approximately $1 billion on a run rate basis into sales coverage capacity and marketing, including critical investment in storage specialists.

This year. These specialists will reach full full productivity earlier. This month, we combined into one sales organization and we will realize the next level of synergies and cross sell opportunities like selling more storage and data protection to our server customers.

We've made considerable progress simplifying our storage portfolio moving from over 80 products two years ago to roughly 20 today, including our new midrange storage solution being evaluated now by dozens of customers.

And by del Technology World in May we will have refreshed our entire storage product lineup under the power brand completing a two and a half year journey of moderate modernizing our entire I USG portfolio.

We have never been more competitive from top to bottom we're planning to grow F. why 21 storage revenue at a premium to the market with growth strongest and H.C. I, followed by course storage and data protection.

Our team is tenured and ready to sell the business has simplified and stabilize and the portfolios is the best it's ever been F. Why 21 is the year of EISG.

That's why 20 was an outstanding year for the client solutions group with a record revenue of $45.8 billion up 6% was commercial up 11%.

We shipped a record 46.5 million units during the calendar year, we executed well taking advantage of Tailwinds from the Windows 10 refresh cycle declining component cost, while navigating through CPQ shortages and a dynamic tariff environment.

What's more we're winning in the consolidation taking share and growing at a premium to the market. We have gained share for seven years in a row. According to ITC and the plan is to continue this momentum as the market consolidates further.

And that's why 21, we expect the PC market to remain solid through the first part of the year before declining in the second half.

This means we're facing a tougher compares the windows 10 refresh planes.

I'd see PC units excuse me ITC forecast PC units to be down 7.1%. This year the results as a slowing CSG revenue, making growth and I ISG that much more important but thats the advantage of our diversified business, including Vmware.

Our Vmware business unit had another strong year with F., why 20 revenue of $10.9 billion up 12% another year of double digit revenue growth and the business is well positioned going forward.

For example, we have hundreds of thousands of VM, where customers today and that combined workloads running on the volume were installed base are bigger than all of the public clouds combined.

And more customers have decided multi cloud is the answer.

Couple Vmware Cloud Foundation, and NSX with our leading dealt AMC infrastructure and we had the Industrys best multi cloud solution.

The advantage of the Dell technology cloud as an operating models that provides consistency across the entire ecosystem.

And application development, we strengthened and simplified our approach with Vmware as acquisition of pivotal combining critical IP and go to market capabilities with project Pacific Vmware is integrating embedding kubernetes into these sphere.

And with Tansu. They are building in enterprise grade container based development platform and it runs anywhere.

Insecurity carbon black is integrated into our commercial PC security offering and we are seeing promise promising attach rates already.

Going forward I expect us to continue to innovate across the portfolio.

We put together a model that allows us to work across Dell technologies to do joint product planning and development collaborative and collaborative innovation integration to deliver better end to end solutions for our customers.

We're also seeing.

Increasing customer traction with our co engineered first and best solutions, including del Technology Cloud Unified Workspace, VX rail with Bcf and smart fabric director with NSX. This is especially true when we collaboratively go to market as one unified Dell technologies sales team to help our customer.

Yes on their digital transformation journey, we do this with our largest customers today and it is a unique customer experience that only Dell technologies can provide customers love it and it's driving differentiated growth for this set of customers. We saw F. Why 20 revenue grow in every major line of business and 9% in total.

Looking at the rest of our customer segment performance enterprise preferred accounts orders revenue grew 6% our current our commercial business orders revenue, excluding China grew 9% and Fytwenty.

Investments, we have made and small and medium business have both delivered strong double digit orders revenue growth and Thats. Why 20. This segment is especially valuable to Vmware as we work together to reach downstream and growth of vian work customer base with cells direct reach and Didnt end market.

And the good news is the volume of room, Vmware deals going through Delis, increasing across the board as we simplify and streamline our go to market for example, and DFS Vmware originations grew 15% to $1.4 billion enough why 20.

And one of Vmware transaction includes a DFS payment solution the transaction is more profitable.

Is significantly larger in size longer in duration and includes more services.

We're still in the early innings are realizing our full go to market synergies with significant cross sell opportunities.

For example, we have approximately 30000 server customers every quarter and only half of them by storage from Dell technologies.

To address this opportunity we've rolled out our new global power up program across all segments to enable selling across our lines of businesses, providing additional incentives incentives and marketing programs to sell new lines of business to existing customers do not purchase them today.

While there was more work ahead I'm confident in our strategy and we are increasingly well position for the long term our job is clear ignite SG growth manage the win 10 transition and drive Dell technologies synergies Dell technologies has no ceiling on the potential in the data era, we remained focus on Max.

Amazing value for our aligned shareholders and now I'll turn it over to Tom.

Thanks, Jeff.

We are focused on maximizing value for all aligned shareholders across five levers current operations synergies new opportunities in our corporate and capital structures and we have made significant progress in each of these areas. Since 2017, our first full year as a combined company we have gone.

Our own revenue at a roughly 77% compound annual growth rate.

We have reinvested between four and $5 billion per year in R&D.

And since the DMC transaction, roughly $5.5 billion and M&A primarily through Vmware.

At the same time, we're simplifying our solutions portfolio corporate structure.

Including the our Assai transaction announced last week, we will have divested approximately $9 billion of non strategic assets on a gross basis.

We have paid down 19.5 billion gross debt since that you'd see transaction, while continuing to optimize the amount of debt due in any one given calendar year.

Today, we are increasing our previously announced fiscal 21 debt paydown target from $4 billion to product to approximately $5.5 billion using the proceeds from the our say divestiture.

We remain committed to achieving investment grade ratings and are confident in reaching a three times a core debt leverage ratio by the end of the fiscal year.

We are also announcing a share repurchase program of up to $1 billion over the next 24 months effective immediately.

Share repurchase provides an additional levered to help maximize value for our shareholders as we opportunistically take advantage of what we believe is a significant discount in our stock price.

Our overall capital allocation framework and financial policy remains unchanged and we'll continue to principally focused on debt paydown.

Turning to Q4, we continue to balanced revenue and profitability through challenging market conditions, particularly in large enterprise and in China.

Q4 revenue was $24.1 billion up 1%.

Thanks remained a headwind this quarter impacting growth by approximately 100 basis points.

Our deferred revenue balance grew 16% to 27.8 billion driven by the sales of software maintenance maintenance and services.

Recurring revenue, which is the combination of deferred revenue amortization utility and as a service models is now approximately $6 billion or 24% of our quarterly revenue.

And we will continue to focus on growing these offerings.

Gross margin was up 4% to 8.4 billion and was 34.7% of revenue up 120 basis points, driven by lower component cost pricing discipline mix shift to software.

Operating expenses were 5.6 billion up 4% due in part to investments we have made in sales coverage to broaden solution sales capabilities and target specific customer segments, including small and medium business.

Operating income was up 4% to 2.8 billion or 11.5% of revenue.

Our consolidated net income was 1.7 billion up 6% benefiting primarily from operating improvements and a reduction in interest expense, our EPS was $2 for the quarter.

Adjusted EBITDA was 3.2 billion or 13.3% of revenue and a record 11.8 billion for the year.

Over the last two years, we have generated over $22 billion of adjusted EBITDA.

We generated 3.8 billion of adjusted free cash flow in Q4 up 49% driven by strong profitability in working capital discipline.

And our full year adjusted free cash flow was a record 8.9 billion up 31%.

We repaid approximately 1.5 billion of gross debt in the quarter or $5 billion for the year inline with our fiscal 20 commitment.

Shifting to our business unit results client solutions group delivered strong Q4 revenue growth and profitability revenue was 11.8 billion up 8% as the team did a nice job working through CPQ shortages commercial revenue was 8.6 billion up 10%, including double digit growth and commercial desktop.

Ops and workstations.

Consumer revenue was 3.2 billion up 4% as we continue to prioritize gpus to our commercial business.

CSG operating income was 624 million or 5.3% of revenue.

Profitability was driven primarily by component cost declines pricing discipline in our commercial consumer mix.

As Jeff said, we have work to do in the infrastructure solutions group I have three revenue was 8.8 billion down 11%.

Storage revenue was 4.5 billion down 3% with strong double digit demand growth in HCR offset by softness in core storage.

Servers and networking revenue was 4.3 billion down 19% due in large part to a soft market, particularly in China.

And in certain large enterprise customers in the us in Europe.

Hi, SG operating income was 1.1 billion or 12.7% of revenue.

Our volume were business unit had another solid quarter revenue was 3.1 billion up 12% with operating income of 1 billion or 32.8% of revenue.

And NSX Vsan and you see product bookings grew over 20% mid teens in over 30% respectively.

Dell financial services originations were a record 2.8 billion up 30% with record managed assets of 11.6 billion up 19%.

With DFS, we facilitate solution sales across Dell technologies, driving incremental recurring revenue and operating income.

Across the portfolio, we're offering our customers choice with industry, leading as a service and flexible consumption solutions through del financial services.

With our datacenter utility flex on demand and PC as a service offerings. We now have approximately $3.5 billion and flexible consumption model assets under management.

And our flex in RF, why 20 flexible consumption billings totaled nearly $900 million.

Turning to our balance sheet and capital structure, we ended the quarter with 10.2 billion of cash and investments for total debt ended the year at 52.7 billion.

Because our total debt includes vmwares debt obligations GFS funding, where the majority is non recourse to Dell and the over collateralized margin loan we feel core debt is more representative of the core del debt service obligations.

Our core debt ended the year at 33.8 billion down 5.5 billion in fiscal 20.

Our.

Core leverage ratio ended F. why 20 at 3.2 times down a full turn from 4.2 times at the beginning of the year.

Core dead excludes our GFS related debt, which has grown with the increase in our financing on originations.

The majority of or 9.3 billion of DFS related debt is non recourse to the company inspect by high quality receivable streams.

It is important to note that it does not require cash flow from operations to pay down.

Moving to guidance, we continue to monitor the macroeconomic and is spending environment, including current softness in large enterprise in China.

We also monitor the impact of Cobot, 19 owners sales and supply chain.

We expect a win 10 refresh to continue into the first half of fiscal 21, while GPU shortages have improved we expect them to continue through at least the first half of the year.

And as discussed in our Q3 earnings call, we expect to component cost environment to be inflationary fiscal 21, a headwind to margins. We also talked about our operating income percentage trending closer to fiscal 19 levels on the Q3 recall.

Because of the because of these factors in assuming the Rs a sale closes in Q3, we expect fiscal 21 GAAP revenue of 91.8 billion to 94.8 billion.

Operating income of $3.4 billion to $4 billion in EPS of 37 cents to one dollar seven.

We expect our non-GAAP revenue range for the current fiscal year to be 92 billion to 95 billion.

Our non-GAAP operating income range to is 8.9 billion to 9.5 billion and our non-GAAP EPS guidance range as $5 in 90 cents to $6 in 60 cents.

Our non-GAAP tax rate, it's expected to be 18.5% plus or minus 100 basis points.

This full year guidance does not factor in any potential co bid 19 impact like our customers are top priorities, ensuring the health and safety of our employees in communities. We do anticipate a negative impact on our normal Q1 seasonality driven by softness in China, our second largest market.

We will manage the supply chain related dynamics with extended lead times for certain products, particularly in client.

In closing last year, we leaned on CSG growth with PC demand driven by when 10 refresh and CSG margin expansion given the favorable component cost environment.

This year, we will lean on ice sheet growth and share gains as Jeff said fiscal 21 is the year by ESG.

We see great potential and possibilities at Dell technologies as we entered the data decade, we will continue to focus on winning in the consolidation in our core hardware markets and delivering differentiated value by innovating and integrating across the business for our customers are investors in our employees.

Our motto is focused on long term profitable growth in his advantage given our ability to adjust as needed based on market conditions. We are focused on growing faster than competitors in the industry growing operating income in EPS faster than revenue over the long term generating strong cash flow.

With that I'll turn it back to Rob to begin queuing.

Thanks, Tom Let's go to Q in May we ask that each participant ask one question to allow us to get to as many of you as possible. Erica can you. Please introduce the first question.

We'll take our first question from Rod Hall with Goldman Sachs.

Yes, hi, guys that good question I guess I wanted to focus on the DFS expansion and just see if you could give us a little bit more color in terms of white hot expanded faster this quarter and is that a signal that you guys intend to use DFS more aggressively as we look forward into the next fiscal year.

Thanks.

Hey, Rod it's Tom So Hey look I think we've been very pleased with the GFS growth and their ability to facilitate the selling of our solutions across our customer base and provide the necessary financing capabilities and we've seen great receptivity of the flex on demands in the flexible assumption.

Models when the utility models that we've been driving through the business. We're very pleased with the what we saw in Q4 in terms of the family of Dell technologies, principally Vmware utilizing the financing capabilities to help drive sales and obviously you saw that in the origination numbers and so no I think we're in the.

Year with roughly over $11.8 billion, a managed assets our pleased with that you know rod obviously that we finance of the DFS business using the securitized debt for the most part.

Securitized by the financing receivables and so.

That that structure works very efficiently so relatively inexpensive cost of capital and we're going to continued to drive it it's proven to be up facilitator of some of our selling.

People are team members I should say and we think that we can continue to grow originations and continue to drive solutions and with the demand that we're seeing around flexible consumption models and as a service models.

I think we're excited by that economic framework in the ability of our.

GFS to continue to provide that type of capability.

Hey, Rob I would add to that I mean, so much so that we launched a program called Dell technologies on demand last November.

It should packages are consumption, our various as a service our metering usage capabilities and look at some modern away customers want to digest or ingest ITC.

And I think you're going to see us continue to build upon the programs that will allow us to give our customers the flexibility they need to consume ITM a variety of ways, whether its pay as you grow flex on demand some of the data center utility that Tom mentioned, we think it is the wave of the future. We think we have.

Very differentiated offering that you're able to consume it from us without being forced to use our managed services or various service as you can pick and choose as you. Please and we offer this capability across the entire portfolio from our Pcs to our servers all the way to our infrastructure here and then earlier this week.

I might have seen.

On the Dell technology Cloud RPX rail plus Vmware Cloud Foundation, we added a subscription service capability along with that.

Look I think as Tom said this is a key component, it's it's sticky with our customers and it's how they want to increasingly want to consume it.

All right. Thanks, Robbie Thanks, Scott.

We'll take our next question from Darrin on eight with Evercore.

Yes. Thanks for taking my question guys I'll I guess to start off with can you just talked about Jeff I think you mentioned fiscal 21 to be the euro infrastructure segment on something thereabouts can you just help me understand what does that really mean for Dell is there a growth full year revenue bogey that you haven't you made that statement or how do you think of operating margins, maybe that's a but I'm trying to understand what.

As the Europe infrastructure segment mean for the company.

Oh look I think Tom I'll kind of Ham and egg this together, but if you step back and you look at our business and the fact that we think the Windows 10 transition on the CSG side last year. The first half of the year and then we'll be facing tougher comparison for us to hit the revenue guidance that Tom mentioned.

Earlier, our is GE has to performed better than it did an f. why 20, it's that simple.

And then if you think about a core constructs of the strategy that company as to when they consolidation in this case when in the consolidation of the core server market when in the consolidation of the core storage market, we have to outperform the market network acquires us to growth to grow yes, we have growth focus for our business.

We have a gain share plan on a revenue share gain.

Im not going it give those numbers out it's implied in the guidance that Tom gave and we have to see the SG perform on a year over year basis SV dramatic improvement.

And you heard the numbers that we talked about where the whole business was down over the year and our Q4 performance wasn't or Tom and I would've liked it. So as we think about what will change because of I would guess your next question is what will be different why will it be the year Elias G.

And I think you have to look at it from maybe two components the server side in the storage side.

I'll start with storage.

We have invested a lot in capacity and coverage that capacity and coverage is increasingly more tenured legal head into F. why 21 with the most tenured productive capacity, we've had in our storage sellers period.

You couple that with the completeness of the product portfolio or if you prefer the overhaul of the product portfolio that we spent the last two and a half years modernizing that stack. It's completed by mid year. So our belief is and why it's part of the gain share planned in storage is a.

A modern competitive portfolio best in class in many areas with the most tenured salesforce that we haven't storage that's our growth plan.

Hey, Jeff I would add on the storage comment just that as we looked at the opportunity to cross sell in the synergy opportunity there between our server buyers and those buyers that by storage.

It's it's roughly.

Three to one ratio or something like that of servers to stores, there's an opportunity there to cross sell with the more tenured sales organization with the coverage expansion that we're driving I think we're we're feel good about the opportunity to go mine that customer base and expand their customer base for storage I think thats the other thing.

As we think our way through what's different about fiscal 20 versus fiscal 21, that's going to be important for for for the folks on the phone to to think about.

You want to Tetra Tech's servers.

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I'm happy to add services on top of that as well.

When you think about servers and our performance this year.

Back in.

Over the last three years I think we mentioned in our remarks, roughly 590 basis points of share gain we've added $4 billion of server revenue left over the last three years.

Calendar 19 fiscal 20 was a year of digesting the large capital investments at the two previous years surveying of customers. The ITC outlooks are vastly improved for the demand profile in calendar 20, when they were last year at this time.

So we're optimistic that the demand comes back we have historically ran at a premium being run at a premium to the point, where we've taken share.

Pretty significant share as I mentioned over that three year period of become the number one server provider in the marketplace and we think thats a catalyst for growth.

Thats, how we built our plan this year.

And just to remind everybody we have for most of the year. This year talked about quite frankly, the the challenges we've seen in the server space principally around China and around.

North America enterprise that large bid business and we chatted about that over the over the last calls that we've done. So you think about the fact book I mean overall server server revenues down roughly 14% year over year.

You dissect that and you look back at our our demand our orders velocity and while server revenue was down 14% on a ship basis. If you you dissect that China demands down roughly 35%.

And the rest of the world's down roughly 5%. So what does that translate to a really means that we saw above market growth in areas like North America commercial medium business small business in Latin America.

We saw market growth our market rate growth in April Jane EMEA.

And the softness was in China, and within that North America Enterprise space, which was roughly down.

Double digits, there and so look I think we understand where theyre at this soft spots have been China will continue to navigate.

Situationally, we're focused on expanding the buyer base there were focused on changing that business model to make sure that we expand the server buyer base over time and derive lifetime value or further customers that we acquire and obviously there's dynamics there through with the Corona virus thats going on now, but we're going to worker, we'll continue to work.

Our way on the business model in China.

So we're really focused on how do we drive velocity back into the business, while while being thoughtful about profitability.

Okay, all right. Thanks.

We'll take our next question from Tony from Kennedy with Bernstein.

Yes. Thank you.

I was just wondering if you can comment on.

Sort of your longer term outlook I think before he became public you talked about 4% to 6% revenue growth at the analyst day in the fall, you said, 4% plus or minus one which is 3% to 5% topline growth and if I look at here four years last four years your revenue growth has been one.

123, and 13, so you've been one or two for three of the four years and XP and where you really you havent grown and.

And essentially three of the four years.

So it does feel like you've become increasingly cautious about your long term outlook.

And I'd like if you could explain why that is and should we be thinking about.

Core Dell Xps, where sort of flattish on a go forward basis and the topline given the historical track record.

And sort of given the navios commentary, a wrong or around longer term growth.

Provided in your slide deck. Thank you.

Hey, Tony It's Tom So look I would think about elect to us I think over the last three years, we've had our compound growth rate at the top around 7%.

And yes, there has been variability by year and much of that has been situation on where the market is uneven but saw if you're in a down market and you are growing at a premium.

No. It's still a their growth rates continued to have been under some some pressure to to your point.

But our model is built on long term growth and consolidation of the market in share gain.

I think what you've seen us do as navigate our way through the the environment that we've been.

So fiscal 18 in fiscal.

Fiscal 19 was clearly the year of velocity, where we added roughly $11 billion or revenue to the business fiscal 20 has clearly been one where we've had to navigate through what I would call a tough sort of infrastructure spend environment and we leaned into the client business, you know and so and that same point into.

Times generated extra no I think strong profitability and cash flow as we navigated through the business. So your points valid in the sense of yet we've had to navigate through it look I think longer term what we've talked about is the fact that we'd like we think our growth is sort of going to mirror GDP.

You know and so the range. We gave you for next year sort of has through has the GDP range as it exists today.

That upper end of the range, obviously, we're trying to be thoughtful around the dynamics in the environment right now, although our guidance Doesnt specifically.

Include Corona virus, but.

Again, you're looking at a market in F wide 21 for us our fiscal 21 that's.

You've got to Nikes ITC forecast of negative I think seven or negative eight in the client business. So we're going to greider premium there you've got a ITC forecast that essentially says.

You know low single digit growth in mainstream server revenue and you've got an idea to forecast that essentially is relatively flat on external storage and so even with the growth premiums were driving to create does create a bit of.

Growth dynamics that we're going have to work our way through but but I think we're bullish in the long term on on on the overall business. Yes, Vmware has been clearly been a positive from a growth story.

And we have driven a lot of synergies would be somewhere in the context of driving velocity for Vmware and we'll continue to do so so look we have been I think tried to be thoughtful about how we're guiding the business in the context of the environment. We're in I think we're bullish on the long term, but we're going to have to navigate through some of the short term dynamics.

What we're seeing.

Alright, thanks, Tony Thanks.

We'll take our next question from Shannon Cross with Cross research.

Thank you very much need Tom can you talk a bit about the comfort level with cash generation.

Given some of the puts and takes Smith.

The weakness in Pcs, that's coming theoretically because the credit virus, but there may be getting back toward the end of the year.

And then also just in terms of the amount of investment you need to make.

Then just below the line question do you could talk a little bit about some of the puts and takes casino interest in the equity line and all of that just so we can make sure we're well on the same camp in terms of.

Larry should be for fiscal 2021. Thank you.

Great. Thanks, Shannon, let me start on the cash and then Tyler Sears, So I've upsell ex ultra we'd like to enter comment on any additional insights look I think we feel good about with what we know today about our cash flow forecast.

We did appear given the RF say, our and our did up the debt repayment given the RF say transaction that scheduled to close in I think we're estimating Q3 timeframe at this point.

You know.

Yes, the Corona viruses has created some level of uncertainty if you will and we signaled in the guidance conversation that I had in my prepared remarks that we did expect our sequentials or normal sequentials from Q4 to Q1 to be.

Softer as result of the Corona virus impact.

We are not looking at that at this point with what we know that that is.

Vetted effects the full year. The question that we've been thinking our way through as as we look at the impact of the Corona viruses Theres two principal impacts right no. One is in our domestic China business.

Which has been obviously with the Chinese.

Economy softening and given the the.

They're going through to try to contain the virus. We do expect an impact in Q1 in the China business itself and then the question becomes to the extent that theres.

Tom supply chain or lead time dynamics, how do you think about job.

Demand as a perishable does it differ I think Doug are thinking right now is that to the extent that it's the only demand that we see that is perishable at this point is that consumer demand where.

They want to buy a product now and if you don't have the right product or lead times don't work and perhaps they move elsewhere now, we'll obviously continue to refine that as we move forward and learn more about impacts.

But you know I do think for the full year, we feel good about our cash forecast at this point in time, we've got a very efficient working capital model.

I think if you look the amount of debt coming due I think it's very very manageable this year and our whole goal was to get ahead and try and drive some of the.

Future.

Maturity stacks down in a toddler, maybe comment on the Hey, Shannon just maybe a couple of additional points. One obviously were where if you look at the balance sheet and where we ended cash right. We're ending at very healthy levels. So so so I feel good about that and then Tom talked about some of the dynamics in China, and if you think about where.

Our cash is generated in which we at what we actually use to really run the company. The cash the cash in China is not always immediately accessible so from a liquidity perspective, it's not necessarily an impact in terms of what I'm using kind of four day to day liquidity.

And then the global ending.

Question, Oh, yes, so patients I think if I'd point, you to the slide deck, where we lay out the in I think it's like page 26, or slide 26 in the deck, where we talk about.

The ethanol impact if you look at that this year.

You what you essentially see is about $2.8 billion below the line principally made up of interest expense and some FX costs.

The way I think about it is if you. If you chose roughly think about the fact that for F. Why 21, we should have reduced interest expense at the.

At the Dell level Dell AMC levels. If you will have roughly a couple hundred million dollars. We are getting Vmware has additional debt and less interest income so you've got an offset of that.

A couple of hundred million by say 100 million or so and then you got FX and we don't forecast.

The gains coming out of the venture portfolio that will happen as that happens or not.

So we think the right number to be thinking about as between roughly two six to two seven at the ethanol line. It's in that range Shannon and I would think from a share count perspective, you ought to be in sort of that seven sixtyish $760 million range given some of the dilution we're seeing under the equity program. So that's sort of rough math.

You know that share count will fluctuate, depending upon obviously share price and none of exercises, but that sort of the number that we've been modeling.

All right. Thanks Shannon.

Okay.

We'll take our next question from Katy Huberty with Morgan Stanley.

Thank you Tom first deal. So we think about the share repurchase that was announced today as potentially this started a bigger capital return program. Once you get to investment grade and then just wanted to ask a follow up for job given the important important.

So storage the ice tea business can you can you just talk about what happened to delay the midrange stored launched whether you think there is a revenue impact from that delay. Thank you.

Hey.

Hey, Kt, it's Tom let me talk a little bit about the share repurchase which as we've always thought about at the appropriate time, a shareholder value shareholder return.

Program I think as we thought about it and given where we were on our debt repayment schedule and our ability to continue to pay down debt.

We thought it was appropriate and timely if you will to put in a share repurchase program plan now obviously, it's a $1 billion over two years, and we're going to be thoughtful about and a bit opportunistic we think our stock as you know is trading at a discount that doesnt quite make sense to us and so.

No so we're going to read into.

To take advantage of that I do think too to answer your second part of the question, which is I think we have in the past said once we hit investment grade we would have an view the capital allocation framework would adjust and changed so that we are creating having some type of a shareholder value creation.

An opportunity for our shareholders and so yes I think this is.

The first step in that journey, we're obviously focused on making sure that we hit our commitments around debt repayment no that is a primary use of our capital at this point in time.

As we work go way back to investment grade and job, but I do think that a shareholder return or shareholder value rich.

Framework makes sense as we move forward.

Midrange endurance Katy So let me tell you where we're at what we've done and then you can ask a follow up question if I'm not clear enough. So first of all lead delivered a number of arrays to our beta program quite honestly the largest beta program that we've ever run in the history of the company in Q4.

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We have dozens upon dozens of customers that have the product in their hands today and we're really pleased to feedback has been overwhelmingly positive.

From the flexibility of the platform to the absolute performance of the platform. So we're excited with what we're hearing today. It is late I committed to be done by the end of year. It didn't get done by the end of the year.

Thats on me and the reason that it's late is get being the quality and reliability leader in the marketplace.

I was pushing us to really drive on the customer experience side and learn from the last Mega launches that we've done in storage.

And what we learned during that studying of how do we enable a quick launch with our sales force. We wanted to do the broadest at scale system test we've ever done that's what we did quite honestly I underestimated how long it would take.

And as a result, we've been late as.

As sort of the byproduct of that decision that I've made to do a larger the most comprehensive at scale system test.

But it gave us an opportunity to address what we've learned in the beta program. It gave us an opportunity to keep our salesforce focus on year end of the last fiscal year.

Two weeks ago, we stood up in front of the entire Salesforce, we train them on the mid range that next platform.

There are excited about it and we will begin selling the product before the end of this fiscal quarter in Q1, and there is no material impact to our revenue plans in storage or the midrange.

We're actually quite excited when we think about the midrange Tom mentioned earlier the F. The calendar 20 storage forecast is actually slightly down but the mid range is expected to grow about 4.5%.

It's the area, where we've been most challenged and with this product we really Chris spin up the mid range. The mid to the high end of the mid range portfolio and with our Unity X T platform, which is performing quite well we have a really comprehensive coverage of the mid range storage marketplace, which is the larger.

And we're pretty excited about.

The prospects there we need to get the product on it will be done we will be taking orders and delivering before the end of the quarter.

Alright, Thanks, Jeff and before we go to the next question. Just a reminder looked saw its purchase my one question. Please we'd get to as many people as possible.

America next question.

We'll take our next question from Wamsi Mohan and Bank of America.

Hi, Thank you I was wondering if you can talk a little bit about where you are wed portfolio. We organization clearly you had a decision to sell our I say.

Wondering what luxoft prompted that from a timing first back then and then I mean, historically MC had done a ton of acquisitions. There was a lot. That's done buried in there that I don't know how core values that are not so any color on where you think the portfolio changes if there if there are more to go.

Well and magnitude of those and and the uses potentially of that would that be more towards capital return if that were to happen. Thank you.

Hey, Wamsi, it's Tom So you know.

I think what we have said consistently over the last year or two has been that we've continued to look at the corporate structure and the capabilities in the assets that we have within the family.

And as you recall shortly after we combined the companies we did sell the services the legacy Dell's services business.

The software business and the.

Mhm.

Yes.

BCD business. Thank you.

And so look we continue to look additive were triggered the our state decision was essentially as we continue to look at our security strategy.

We are increasingly focused on intrinsic security how do we build security into the core of the products.

Our assays a nice asset.

I think our perspective was that if it wasn't going to be core to our security platform in strategy that there was probably better to do something different with that asset and put it in the hands of.

I have an ownership structure that was going to.

Was going to.

Optimize the platform and optimize the asset and so that was the decision to sell.

I think the team did a nice job running the process as we're going to continue to evaluate the rest of the portfolio and.

You know and can is assumed to be thinking through the alignment of assets the alignment of capability with where we're headed strategically in a number of areas, including security and data management data data services. So all of those areas are of interest to us obviously I don't want to get over my skis here so but.

Our commitment to use that we'll continue to think about whereas the right.

What capabilities to mean to own what capabilities to we partner for what capabilities should should not be part of the family and we will continue to simplify their corporate structure. Because that's been continued to bid continues to be feedback around the complexity of the Dell technologies portfolio and obviously we will.

One of think our way through thoughtfully, where we are what capabilities belong in the family and what capabilities are better off upside in the family.

I think Tom to add to that maybe more of a product offer an IP point of view, we've made a tremendous amount of progress simplifying the portfolio.

Solid aiding IP changing the way that we've built integrated products across the Dell technologies companies. If you think about the work we've done now with carbon black unified workspace, Vmware Dell Pcs Dell services and building an integrated plan.

At form that we can sell a modern PC experienced by Youre going to see us consolidate more of our technology that way by point, the Dell technology cloud the work that we've done with Vmware with.

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Being more cloud Foundation Dx rail now a series of offers that were building around that and the multi hybrid cloud ruled that we operate in yet another form of consolidation of portfolio and simplifying our offers chart our customers remember the second component of our strategy I mentioned in the first one was all about when in the consolidation.

And the other one is to go build deeply integrated solutions that drive incremental value for our customers, which is really about simplifying the individual products across the portfolio and building integrated solutions and we spent a great deal. The time, there you'll see us do more of that going forward.

All right appreciate it next question please.

Our next question from Jerry along with Deutsche Bank.

Yep. Thanks for let me ask the question everyone. So it seems I want to kind of.

Maybe.

This picture a little bit and think about highest GE, there's little more bullishness in IC for the year and I think you've kind of painted your storage picture in terms of than having products. The midrange et cetera. Thank you guys see your point of view there, but on the service server networking side. It seems like the year on year growth is kind of decline.

More and more with each passing quarter. So what gives you confidence in that trending around and contributing to growth for the full year.

Well I think I'd point back to the earlier question and comments that Tom and Tom and I made it you're clearly right. When we look at the performance over the fourth quarters. There was a deceleration of the store of the server business. If I recall correctly minus nine minus 12 minus 16 minus 19 for.

The annual number that Tom represented minus 14.

If you look break that down it really is concentrated in greater China, Greater China was down 35% on an order spaces over the year.

The rest of the world was minus five.

Inside that minus five that the what slowed down was our North America enterprise business.

In other words, we actually grew in small business medium business, North America commercial and Latam.

We grew at market in a p. J and in EMEA and the too hot spots are the ones that we've called out consistently in China in North America Enterprise.

Tom talked about the China market in the dynamics, it's going on there. So I think the real follow up question is what do we doing differently in North America enterprise to change our performance.

And as we think about that.

We're driving a.

If you will a different coverage alignment we are going back through the coverage models, we're enhancing that because at the core we have to grow the buyer base.

And if I think about the number of PC customers that we have across our enterprise accounts and the number of server customers that we have in our enterprise accounts. There is a big drop off between the two.

And we need to cross sell or already in those accounts, yes. They are different buyers inside those different customers, but we have to bring our end to end capability across the customer set and cross sell and expand.

What we sell in each of those customers and changed the coverage Matt. So we can bring on new customers to the fold. That's fundamentally it'll work that's underway we have some new programs inside the corporation a.

You would not know about it but we've trained our salesforce two weeks ago on this a power up program, which is essentially allowing us to go build cross sell build the buyer base, putting seed units in marketing programs and incentives for us to expand the buyer base across the various segments. In this case North America enterprise our largest customers.

We're pretty.

I'm pretty optimistic there we see that our salesforce is more tenured again, bringing back that notion of a more tenured salesforce is a more productive salesforce and we're going to lean on that as we head into this fiscal year, so that which that's what is changing the markets better too.

Depending on how you look at into the ex 86 markets.

Forecasted to be up 1%, that's five points better than the same time last year.

Mainstream place space, where we predominantly operate is projected to be are forecasted to be up 3.3%, we're going to grow at a premium.

Content rates up.

Our exposure to high value workloads is increasing.

Let's drive higher TR use and out we're pretty optimistic about our ability to take share and outperform the marketplace broadly across the server market.

And that.

No I would just also comment on the fact that with that higher content and with.

The commodity cost inflation, that's being forecasted you would see a positive impact on TR use as you think about how you're just you'll you'll adjust pricing as you go through the year. So thats also benefit to topline exactly.

Thanks, Sheryl I appreciate that thank you so much.

Youre Welcome next question.

We'll take our next question from.

With Wells Fargo.

Yes, thanks for taking the question one of the comments I was made during the prepared remarks was.

The three to one ratio as far as your server customers that actually purchase.

The storage portfolio I'm curious if you could help us understand how that's evolved over the past 12 or 24 months, what does that look like call. It.

A year or two ago, and how do you think about driving that what kind of initiatives have you put in place and how would you define success.

In that ratio looking looking forward.

Well in the prepared remarks, I believe I said, we have roughly 30000 server customers at quarter end less than half by our storage.

I didn't say that that's certainly what I meant to say, yes, you did.

Good.

Look if you look at the long term trend there the server component of that buyer base is modestly growing and the storage one isn't that that has been our challenge in the capacity and coverage that we put in place is intended to change that director to change that trajectory.

It takes longer for a sales person a sales maker, a sales specialists and storage to come up the productivity ramp.

So I think Tom and I have made reference throughout the session. This afternoon.

That tenured productivity of our storage sellers is the greatest it's been as we head into fiscal 21.

That's important to us.

That is a driver. So if you think about more tenured productivity broad coverage of the marketplace a more competitive product line from top to bottom thats. The lever that we are going to drive our source business with and that I just made reference in the previous question to a program that we've put in place.

Called power up which isn't again, an internal program centered around driving cross sell and up sell of our portfolio winning new customers. It really is about seed units promotional offers we're putting sales incentives in place in fact, Tom and I improved day sales compensation plan that incense.

Our sales force to sell multiple lines of business in an account.

So if you start with we have the most customers and our PC Division.

The next most customers in servers in the next most customers in storage cross selling incenting, our salesforce to sell more lines of business as we move down the stack is certainly where weve tilted the compensation plan. This year in just the other thing I think it's important to comment on as we talk about storage in storage velocity is.

The velocity of the VX rail capability and product solution set right I mean thats growing.

Plus 60% year over year, and so there's great velocity and our HCR solution capability that will continue.

You know where its appropriate for the workloads, we're clearly focused on driving that and then I think as part of this you've mentioned on the more tenured sales organization, but also we need would call out. The fact is since we have combined the selling organizations we have.

Adjusted coverage models to reach farther into the customer population and freed up capacity engine to drive a selling motion that touches more customers and so you're going to be theres no. One magic bullet here, who is going to be a combination of.

In the mid range capability, we're bringing online.

The coverage model expansion to the marketing programs and the tenure of our capacity so selling capacity. So those combined coupled with.

Great velocity on our VX rail capability, I think all point to opportunities for us to grow.

Right. Thanks next question.

We'll take our next question from Simon Leopold with Raymond James.

Hi, guys. Thanks for taking the question. Thanks for the color that you gave around your vision for IC for fiscal year 21, that's pretty helpful. But I guess my question is given that you've been making these investments.

Around capacity and coverage and commentary from competitors that.

Slide that they're seeing more aggressive this from Dell I guess I would've expected fiscal fourq results to have trended a bit more towards stable I guess to better reflect that so can you just help us understand maybe if there were some specific puts and takes that that we need to this quarter or if you know the headwinds that you saw in North America, where incremental.

To what you've been seeing so maybe you just help us.

Such that a little better.

Yes look I think on.

Our philosophy here as we have navigated through the year. This year has been.

To where we think it's appropriate to be aggressive to when customer business that we think as longer term value then we'll be appropriately aggressive.

In terms of acquisition prices through to win that business.

As we went through the end so I don't really think were and where we're quite frankly, it doesn't make sense or where we don't see long term value when.

Good for competitive dynamics of the competitive pricing environment Hasnt made sense to US you have seen a stepped back from some of that business.

Hi, guys I think essentially we saw a couple of things as it relates to servers in the North America Enterprise large enterprise space for instance, the number of bids is down and the price aggressiveness on most of those.

Contracts or a bid opportunities of has been quite.

Quite aggressive and so we have.

Good and selective and where we have chosen to participate and you get into decisions around do you have other lobs.

Got you are selling to that customer wants to customer overall profitability look like do you have the opportunity to recover some of that aggressive pricing over time.

And that's the balance in the needle that we've been threatens we've gone through the year in as a result of that you saw softness in North America enterprise.

Ill talk to China and the second.

And so look job did we do see anything incremental in Q4, I think the trends that we've talked about have have essentially continued in Q4 in terms of the aggressiveness of the pricing to the cycle time on on opportunities is clearly longer.

And so thats been a dynamic that we just had to work our way through and and so as you think then on pivot into fiscal 21, you said well what's different while the market supposed to be better we've got better coverage I think the dynamics around.

Our our reach into selling organizations to cross sell opportunities are all going to be positive scores in the coming year and on the storage side. It's been of it's been the we've had great success with our VX rail product, we've seen softness in the core array again that infrastructure space has been soft.

We've taken share.

From 272 to 300 basis points of share over the last three years, we've been navigating through what I think has been a challenging environment, there, but I think as we step into July 21.

I think we're better positioned from a coverage model from a solution perspective, and so look I think it's a so those are the navigation. We've had to do as a result of that we're under there was some revenue pressure clearly in the EISG space for yet we drove great profitability across the business and strong cash flow and so it's all about how do you balanced the model given the mark.

I get that that we see in that we participate in.

Alright, well good hope thanks, Simon we're going to wrap up there just as a reminder will be at Morgan Stanley next week in San Francisco, and we will be hosting an IR track at Dell technologies World will begin that the evening have made third and continue on the fourth so hopefully we'll see many of you there and there'll be additional information in the coming weeks on that event. So thanks for joining.

Today.

This concludes today's conference call.

We appreciate your participation you may now disconnect at this time.

Yeah.

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No.

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Good afternoon, and welcome to the fiscal year, 2024th quarter and year end financial results conference call or Dell technologies, Inc. I'd like to inform all participants. This call is being recorded at the request of Dell technologies.

This broadcast as the copyrighted property of Dell Technologies, Inc.

Any rebroadcast of this information in whole or part without the prior written permission of Dell technologies is prohibited.

Following prepared remarks, we will conduct a question and answer session to ask questions simply press Star then one on your telephone keypad at anytime during the presentation I'd now like to turn the call over to Rob Williams head of Investor Relations Mr. Williams you may begin.

Thanks, everyone for joining up with me today, as our Vice Chairman and Chief Operating Officer, Jon Clark, Our CFO, Tom Suite, and our Treasurer Tyler Johnson.

During this call unless we indicate otherwise all references to financial measures refer to non-GAAP financial measures, including non-GAAP revenue gross margin.

Operating expenses operating income net income EBITDA, adjusted EBITDA and adjusted free cash flow.

A reconciliation of these measures to their most directly comparable GAAP measures can be found in our web deck and press release.

Please also note that all growth percentages refer to a year over year change unless otherwise specified and that Vmware historical segment results have been recast to include pivotal results. Finally, I'd like to remind you that all statements made during this call that relate to future results and events are forward looking statements based on current expectations.

Actual results and events could differ materially from those projected during.

From those projected due to a number of risks and uncertainties, which are discussed in our web deck. NFCC reports, we assume no obligation to update or forward looking statements now I'll turn it over to Jeff.

Thanks, Rob.

Dell technologies begins our fourth year as a combined company, we've never been better positioned to help our customers unlock the potential of all the data coming their way.

No one stores processes moves and protect more data than we do across any environment.

I am optimistic get I know, we have some hills decline that as evidenced in RF why 20 results.

And that's why 20, we delivered revenue of $92.5 billion any EPS of $7 in 35 cents revenue grew modestly at 1%, we delivered strong profitability with operating income up 15%.

I know you want to understand what is going on with infrastructure solutions group results. So let's start there.

And I SG RF, why 20 revenue was down 7% to $34 billion.

But up 10% versus F 18, as large enterprises that large enterprise customers digested Fynineteen capex investments in China slowed.

Server and networking revenue declined and Thats why 20, a profitability was up as we Didnt chase on profitable server deals in a down market.

Our long term server share trajectory remains strong.

We are winning in the consolidation.

Beginning approximately 590 basis points of share over the last three years and we have been number one and mainstream server revenue for seven quarters. According to ITC.

And that's why 21, we're planning for both the overall server market and our server revenue to return to growth driven by higher value workload servers.

Increasingly more robust AI and machine learning solutions, and a distributed and distributed requirements at the edge.

According to ITC.

Mainstream server revenue is expected to grow at 3.3% in calendar year 2020, and we plan to grow at a premium to the ITC forecast.

Shifting to storage roughly two and a half years ago, we began to take actions to stabilize the business and lay the foundation for growth we ever claimed over 300 basis points of share since 2017.

One action, we have invested approximately $1 billion on a run rate basis into sales coverage capacity and marketing, including critical investment in storage specialist.

We have made considerable progress simplifying our storage portfolio moving from over 80 products two years ago to roughly 20 today, including our new midrange storage solution being evaluated now by dozens of customers.

And by del Technology World in May we refreshed our entire storage product lineup under the power brands completing a two and a half year journey of moderate modernizing our entire I SG portfolio.

We have never been more competitive from top to bottom we're planning to grow F. why 21 storage revenue at a premium to the market was.

The strongest and HC, followed by core storage and data protection.

Our team is tenured and ready to sell the business has simplified and stabilize and the portfolios is the best it's ever been F. Why 21 is the year of is cheap.

That's why 20 was an outstanding year for the client solutions group with a record revenue of $45.8 billion up 6%.

Commercial up 11%.

And that's why 21, we expect the PC market to remain solid through the first part of the year before declining in the second half.

This means we're facing a tougher compares to windows 10 refresh planes.

I'd see PC units excuse me I'd see forecast PC units to be down 7.1%. This year the results as a slowing CSG revenue, making growth and is that.

We are important but thats the advantage of our diversified business, including Vmware.

Our Vmware business unit had another strong year with S., why 20 revenue of $10.9 billion up 12% another year of double digit revenue growth and the business is well positioned going forward. For example, we have hundreds of thousands of Vmware customers today and that combined workloads running on that.

And were installed base are bigger than all of the public clouds combined.

And more customers have decided multi cloud is the answer.

Couple Vmware Cloud Foundation, and NSX with our leading Delta AMC infrastructure, and we have the industry best multi cloud solution.

The advantage of the Dell technology cloud as an operating models that provides consistency across the entire ecosystem.

And application development, we strengthened and simplified our approach was vmwares acquisition of pivotal combining critical IP and go to market capabilities.

Project Pacific Vmware is integrating embedding kubernetes into these here.

And with Tansu, they are building and enterprise grade container based development platform and it runs anywhere.

Insecurity carbon black is integrated into our commercial PC security offering and we are seeing promise promising attach rates already.

Going forward expect us to continue to innovate across the portfolio.

We've put together a model that allows us to work across Dell technologies to do joint product planning and development collaborative and collaborative innovation integration to deliver better end to end solutions for our customers.

We're also seeing.

Increasing customer traction with our co engineered first and best solutions, including del Technology Cloud unified workspace.

Yes railway Bcf and smart fabric director with NSX. This is especially true when we collaboratively go to market as one unified Dell technologies sales team to help our customers on their digital transformation journey.

We do this with our largest customers today and it is a unique customer experience that only Dell technologies can provide customers love it and thus driving differentiated growth.

This set of customers. We saw why 20 revenue grow in every major line of business and 9% in total.

Looking at the rest of our customer segment performance enterprise preferred accounts orders revenue grew 6% our climate, our commercial business orders revenue, excluding China grew 9% and that's why Tony.

The investments, we have made and small and medium business have both delivered strong double digit orders revenue growth and Thats why 20, this segment, especially valuable to Vmware as we work together to reach downstream and grow the vian work customer base with cells direct reach into the end market.

And the good news is the volume of Liam Vmware deals going through Delis, increasing across the board as we simplify and streamline our go to market for example, and DFS Vmware originations grew 15% to $1.4 billion enough why 20.

And one of Vmware transaction includes a DFS payment solution the transaction is more profitable.

Is significantly larger in size longer in duration and includes more services.

We're still in the early innings are realizing our full go to market synergies with significant cross sell opportunities.

For example, we have approximately 30000 server customers every quarter and only half of them by storage from Dell technologies.

To address this opportunity we've rolled out our new global Powerup program across all segments to enable selling across our lines of businesses, providing additional incentives incentives and marketing programs to sell new lines of business to existing customers do not purchase them today.

While there was more work ahead I'm confident in our strategy and we are increasingly well positioned for the long term our job is clear ignite SG growth manage the win 10 transition and drive Dell technologies synergies Dell technologies has no ceiling on the potential in the data era, we remained focus on Max.

I'm missing value for our aligned shareholders and now I'll turn it over to Tom.

Thanks, Jeff.

We're focused on maximizing value for all aligned shareholders across five levers current operations synergies new opportunities in our corporate and capital structures and we have made significant progress in each of these areas.

Since 2017, our first full year as a combined company, we have grown revenue at a roughly 77% compound annual growth rate.

We have reinvested between four and $5 billion per year R&D.

And since the DMC transaction, roughly $5.5 billion and M&A primarily through Vmware.

At the same time, we're simplifying our solutions portfolio corporate structure.

Including the RF say transaction announced last week, we will have divested approximately $9 billion of non strategic assets on a gross basis.

We have paid down 19.5 billion gross debt since the M.C. transaction, while continuing to optimize the amount of debt due in any one given calendar year.

Today, we are increasing our previously announced fiscal 21 debt paydown target from $4 billion to product to approximately $5.5 billion using the proceeds from the our say divestiture.

We remain committed to achieving investment grade ratings and are confident in reaching a three times core debt leverage ratio by the end of the fiscal year.

We're also announcing a share repurchase program of up to $1 billion over the next 24 months effective immediately.

Share repurchase provides an additional lever to help maximize value for our shareholders as we opportunistically take advantage of what we believe is a significant discount in our stock price.

Overall capital allocation framework and financial policy remains unchanged and we'll continue to principally focused on debt paydown.

Turning to Q4, we continue to balance revenue and profitability through challenging market conditions, particularly in large enterprise and in China.

Q4 revenue was $24.1 billion up 1%.

Thanks remained a headwind this quarter impacting growth by approximately 100 basis points.

Our deferred revenue balance grew 16% to 27.8 billion driven by the sales of software maintenance maintenance and services.

Recurring revenue, which is the combination of deferred revenue amortization utility and as a service models is now approximately $6 billion or 24% of our quarterly revenue.

And we will continue to focus on growing these offerings.

Gross margin was up 4% to 8.4 billion and was 34.7% of revenue up 120 basis points, driven by lower component costs pricing discipline and mix shift to software.

Operating income was up 4% to 2.8 billion or 11.5% of revenue.

Our consolidated net income was 1.7 billion up 6% benefiting primarily from operating improvements any reduction in interest expense, our EPS was $2 for the quarter.

Adjusted EBITDA was 3.2 billion or 13.3% of revenue and a record 11.8 billion for the year.

Over the last two years, we have generated over $22 billion of adjusted EBITDA.

We generated 3.8 billion of adjusted free cash flow in Q4 up 49% driven by strong profitability in working capital discipline.

And our full year adjusted free cash flow was a record 8.9 billion up 31%.

We repaid approximately 1.5 billion of gross debt in the quarter or $5 billion for the year inline with our fiscal 20 commitment.

Tops and workstations.

Consumer revenue was 3.2 billion up 4% as we continue to prioritize gpus to our commercial business.

CSG operating income was 624 million or 5.3% of revenue.

Profitability was driven primarily by component cost declines pricing discipline in our commercial consumer mix.

As Jeff said, we have work to do in the infrastructure solutions group I assume revenue was 8.8 billion down 11%.

Storage revenue was 4.5 billion down 3% with strong double digit demand growth and HCR offset by softness in core storage.

Servers and networking revenue was 4.3 billion down 19% due in large part to a soft market, particularly in China.

And in certain large enterprise customers in the us in Europe.

Hi, SG operating income was 1.1 billion or 12.7% of revenue.

Our view on where business unit had another solid quarter revenue was 3.1 billion up 12% with operating income of 1 billion or 32.8% of revenue.

And NSX Vsan and you see product bookings grew over 20% mid teens in over 30% respectively.

Joe Financial services originations were a record 2.8 billion up 30% with record managed assets of 11.6 billion up 19%.

With DFS, we facilitate solution sales across Dell technologies, driving incremental recurring revenue and operating income.

Across the portfolio, we're offering our customers choice with industry, leading as a service and flexible consumption solutions through del financial services.

With our datacenter utility flex on demand and PC as a service offerings. We now have approximately $3.5 billion and flexible consumption model assets under management.

And our flex in RF, why 20 flexible consumption billings totaled nearly $900 million.

Turning to our balance sheet and capital structure, we ended the quarter with 10.2 billion of cash and investments for total debt ended the year at 52.7 billion.

Our core debt ended the year at 33.8 billion down 5.5 billion in fiscal 20.

Our.

Core leverage ratio ended F. why 20 at 3.2 times down a full turn from 4.2 times at the beginning of the year.

Core dead excludes our GFS related debt, which has grown with the increase in our financing on originations.

The majority of or 9.3 billion of DFS related debt is non recourse to the company is backed by high quality receivable streams.

Is important to note that it does not require cash flow from operations to pay down.

Moving to guidance, we continue to monitor the macroeconomic and spending environments, including current softness in large enterprise in China.

We also monitor the impact of Cobot, 19 owners sales and supply chain.

We expect a win 10 refresh to continue into the first half of fiscal 21, plus GPU shortages have improved we expect them to continue through at least the first half of the year.

And as discussed in our Q3 earnings call, we expect to component cost environment to be inflationary in fiscal 2001, a headwind to margins. We also talked about our operating income percentage trending closer to fiscal 19 levels on the Q3 call.

Because of the because of these factors in assuming the Rs a sale closes in Q3, we expect fiscal 21 GAAP revenue of 91.8 billion to 94.8 billion.

Operating income of $3.4 billion to $4 billion in EPS of 37 cents to one dollar seven.

We expect our non-GAAP revenue range for the current fiscal year to be 92 billion to 95 billion.

Our non-GAAP operating income range to.

8.9 billion to 9.5 billion and our non-GAAP EPS guidance range as $5 in 90 cents to $6.60 or.

Our non-GAAP tax rate, it's expected to be 18.5% plus or minus 100 basis points.

This full year guidance does not factor in any potential cobot 19 impact like our customers are top priorities, ensuring the health and safety of our employees in communities. We do anticipate a negative impact on our normal Q1 seasonality driven by softness in China, our second largest market.

We will manage the supply chain related dynamics with extended lead times for certain products, particularly in client.

In closing last year, we leaned on CSG growth with PC demand driven by when 10 refresh in CSG margin expansion, given the favorable component cost environment.

This year, we will lean on ice sheet growth and share gains as Jeff said fiscal 21 is the year by ESG.

We see great potential and possibilities at Dell technologies as we entered the data decade, we will continue to focus on winning in the consolidation in our core hardware markets in delivering differentiated value by innovating and integrating across the business for our customers are investors in our employees.

Our motto is focused on long term profitable growth in this advantage given our ability to adjust as needed based on market conditions. We are focused on growing faster than competitors in the industry growing operating income in EPS faster than revenue over the long term generating strong cash flow.

With that I'll turn it back to Rob to begin QNX.

Thanks, Tom Let's go to Q in a we ask that each participant ask one question to allow us to get to as many of you as possible. Erica can you. Please introduce the first question.

We'll take our first question from Rod Hall with Goldman Sachs.

Assumption models in the utility models that we've been driving through the business.

We're very pleased with the what we saw in Q4 in terms of the family of Dell technologies, principally Vmware utilizing the financing capabilities to help drive sales and obviously you saw that in the origination numbers and so no I think we're ending the year with roughly over $11.8 billion a managed assets.

We're pleased with that you know rod, obviously that Weve finance of the DFS business using securitized debt for the most part securitized by the financing receivables and so.

That that structure works very efficiently so relatively inexpensive cost of capital and we're going to continue to drive it it's proven to be up facilitator of.

Of our selling.

Oh boy our team members I should say and we think that we can continue to grow originations and continue to drive solutions and with the demand that we're seeing around flexible consumption models and as a service models.

I think we're excited by that economic framework in the ability of our.

GFS to continue to provide that type of capability.

Right I would add to that I mean, so much so that we launched a program called Dell technologies on demand last November.

Which packages are consumption, our various as a service our metering usage capabilities.

And look at some modern away customers want to digest or ingest.

We think we have a very differentiated offering that you're able to consume it from us without being forced to use our managed services or various services you can pick and choose as you. Please and we offer this capability across the entire portfolio from our Pcs to our servers, all the way to our infrastructure year and then.

Earlier. This week you might have seen on the Dell technology cloud, our VX rail plus via more cloud Foundation, we added a subscription service capability along with that.

Well I think as Tom said this is a key component its and sticky with our customers and it's how they want to increasingly want to consume ITC.

Alright, Thanks, Robbie Thanks, Scott.

We'll take our next question from Darrin on eight with Evercore.

Yes. Thanks for taking my question guys I guess to start off with can you just talked about Jeff I think you mentioned fiscal 21 to be the euro infrastructure segment of something that about can you. Just help me understand what does that only mean for Dell is there a growth full year revenue bogey that you haven't you made that statement or how do you think of operating margins, maybe thats, a but I'm trying to understand what does that.

Europe infrastructure segment mean for the company.

Look I think Tom I'll kind of Ham and egg this together, but if you step back and you look at our business and the fact that we think the Windows 10 transition on the CSG side last year. The first half of the year and then we'll be facing tougher comparison for us to hit the revenue guidance that Tom mentioned array.

Earlier, our is GE has to perform better than it did an f. why 20, it's that simple.

And then if you think about a core constructs of the strategy that company as to when they consolidation in this case when in the consolidation of the core server market when in the consolidation as a core storage market, we have to outperform the market and network Flyers us to growth to grow yes, we have growth focus for our business we.

Have eight Gainshare plan in our revenue share gain.

Im not going to give those numbers out it's implied in the guidance that Tom gave and we have to see the SG perform on a year over year basis SV dramatic improvement.

And you heard the numbers that we talked about.

For the whole business was down over the year and our Q4 performance wasn't or Tom and I would have liked it. So as we think about what will change is that I would guess your next question is what will be different why will be the year by SG.

And I think you have to look at it from maybe two components the server side and the storage side.

I'll start with storage.

We have invested a lot in capacity and coverage that capacity and coverage is increasingly more tenured we will head into F. why 21 with the most tenured productive capacity, we've had in our storage sellers period.

A modern.

Imperative portfolio best in class in many areas with the most tenured salesforce that we haven't storage that's our growth plan.

Hey, Jeff I would add on the storage comment just that as we looked at the opportunity to cross sell in the synergy opportunity there between our server buyers and those buyers that by storage.

It's it's roughly.

I feel good about deal opportunities you go mine that customer base and expand their customer base for storage I think thats. The other thing that as we think our way through what's different about fiscal 20 versus fiscal 2001, that's going to be important for for the folks on the phone tied to think about.

You want to Tetra Tech's server.

[music].

I'm happy to add services on top of that as well.

When you think about servers and our performance this year.

Back in.

Over the last three years I think we mentioned in our remarks, roughly 590 basis points a share gain we've added $4 billion of server revenue left over the last three years.

So we're optimistic that the demand comes back we had historically ran at a premium being run at a premium to the point, where we've taken share.

Pretty significant share as I mentioned over that three year period will become the number one server provider in the marketplace and we think thats a catalyst for growth.

That's how we've built our plan this year.

Yes, just to remind everybody we have for most of the year. This year talked about quite frankly, the the challenges we've seen in the server space principally around China and around.

North America enterprise that large bid business and we've chatted about that over the over the last calls that we've done. So you think about the fact book I mean overall server server revenues down roughly 14% year over year.

And you dissect that and you look back at our our demand our orders velocity and while server revenue was down 14% on the ship basis, if you dissect that China demands down roughly 35%.

We saw market growth our market rate growth in a few Jane EMEA.

And the softness was in China, and within that North America Enterprise space, which was roughly down.

Double digits, there and so look I think we understand where they are this soft spots of Ben China will continue to navigate.

Situationally, we're focused on expanding the buyer base there were focused on changing that business model to make sure that we expand the server buyer base over time.

Drive lifetime value or further customers that we acquire and obviously theres dynamics thereafter with their Corona virus thats going on now, but we're going to worker, we'll continue to work our way on the business model in China.

So we're really focused on how do we drive velocity back into the business, while while being thoughtful about profitability.

Okay, all right. Thanks.

We'll take our next question from Tony from Kennedy with Bernstein.

Yes. Thank you.

I was just wondering if you can comment on.

123, and 13, so you've been one or two for three of the four years and XP and where you really.

We haven't grown and.

And essentially three of the four years.

So it does feel like you've become increasingly cautious about your long term outlook.

And I'd like if you could explain why that is and should we be thinking about.

Core Adele ex VM were sort of flattish on a go forward basis and the topline given the historical track record.

And sort of given the nebulous commentary around around longer term growth.

Provided in your slide deck. Thank you.

Hey, Tony It's Tom So look I would think about elect to us I think over the last three years, we've had our compound growth rate at the top around 7%.

And yes, there has been variability by year and much of that has been situation on where the market is uneven solve you're in a down market in your growing at a premium.

It's still a their growth rates continued to have been under some some pressure to to your point.

But our model is built on long term growth and consolidation of the market and share gain.

I think what you've seen us do as navigate our way through the the environment that we've been.

So fiscal 18 in fiscal.

Im generated extra.

I think strong profitability and cash flow as we navigated through the business. So your points valid in the sense of yet we've had to navigate through it look I think longer term what we've talked about is the fact that we'd like we think our growth is sort of going to mirror GDP.

You know and so the range. We gave you for next year sort of has two has the GDP range as it exists today.

That upper end of the range, obviously, we're trying to be thoughtful around the dynamics in the environment right now all of our guys doesn't specifically.

Include Corona virus, but.

Again, you're looking at a market in F. Why 21 for us our fiscal 21 that's.

You've got to Nikes ITC forecast of negative I think seven or negative eight in the client business. So we're going to greider premium there.

Got a I'd see forecast that essentially says.

You know low single digit growth in mainstream server revenue and you've got an I'd. Some fourq asset essentially is relatively flat on external storage and so even with the growth premiums were driving crude does create a bit of.

Growth dynamics that we're going to have to work our way through but again, but I think we're bullish in the long term on on the overall business. Just Vmware has been clearly been a positive from a growth story.

And we have driven a lot of synergies with Vmware under contract with driving velocity for Vmware and we'll continue to do so so look.

We have been.

I think tried to be thoughtful about how we're guiding the business in the context of the environment. We're in I think we're bullish on the long term, but we're going to have to navigate through some of the short term dynamics that we're seeing.

Alright, Thanks, Tony Thank you.

We'll take our next question from Shannon Cross with Cross research.

Thank you very much.

Tom can you talk a bit about the comfort level with cash generation.

Given some of the puts and takes with with the weakness in Pcs, it's coming theoretically because the credit virus that that may be getting back towards the end of the year.

Then also just in terms of the amount of investment you need to make and then just below the line question do you can talk a little bit about some of the puts and takes interest in the equity line and all of that just so we can make sure where well in the same camp in terms of.

For fiscal 2020 line. Thank you.

Great. Thanks, Shannon, let me start on the cash and then Tyler's here so as upsell, while it's also would like in or comment on any additional insights look I think we feel good about with what we know today about our cash flow forecast.

We did appear given the RF say, our and our did up the debt repayment given the RF say transaction that is scheduled to close in.

I think we're estimating Q3 timeframe at this point.

You know.

Softer as result of the Corona virus impact.

We are not looking at that at this point with what we know that that is.

Got it.

Affects the full year question that we've been thinking our way through as we look at the impact of the Corona viruses Theres two principal impacts right now one isn't our domestic China business, which has been obviously with the Chinese.

Economy softening and given the the.

What they're going through to try to contain the virus. We do expect an impact in Q1 in the China business itself and then the question becomes to the extent that theres.

Supply chain, our lead time dynamics, how do you think about.

Demand as a perishables does it differ.

I think our thinking right now is that to the extent that it's the only demand that we see the.

Perishable at this point is that consumer demand where.

They want to buy a product now and if you don't have the right product or lead time start working perhaps they move elsewhere now, we'll obviously continue to refine that as we move forward and learn more about impacts.

No I do think for the full year, we feel good about our cash forecast at this point in time, we've got a very efficient working capital model.

I think if you look the amount of debt coming due I think it's very very manageable this year and our whole goal was to get ahead and try and drive some of the.

Future.

Maturity stacks down then Tyler maybe comment on the Hey, Shannon just maybe a couple additional points. So one obviously were where if you look at the balance sheet and where we ended cash right. We're ending at very healthy levels. So so so I feel good about that and then Tom talked about some of the dynamics in China and if you think about.

Where cash is generated in which we had what we actually use to really run the company. The cash the cash in China is not always immediately accessible so from our liquidity perspective, it's not necessarily an impact in terms of what I'm using kind of per day to day liquidity.

And then the global on.

Question, Oh, yes, so pace I think if I'd point, you to the slide deck, where we lay out the in I think it's like page 26, or slide 26 in the deck, where we talk about.

The ethanol impact if you look at that this year, what you what you essentially see is about $2.8 billion below the line principally made up of interest expense and some FX costs.

The way I think about it is if you if.

Roughly think about the fact that for F. Wide 21, we should have reduced interest expense at the.

At the gel level Dell AMC levels. If you will have roughly a couple hundred million dollars. We are getting Vmware has additional debt and less interest income so you've got an offset of that.

A couple of hundred million by say 100 million or so and then you got FX and we don't forecast.

The gains coming out of the venture portfolio that will happen as it happens or not.

So we think the right number to be thinking about as between roughly two six to two seven at the ethanol line. It's in that range Shannon and I would think from a share count perspective, you ought to be in sort of that 760 ish $760 million range given some of the dilution we're seeing under the equity program. So that's sort of rough math.

You know that share count will fluctuate, depending upon obviously share price and none of exercises, but that sort of the number that we've been model.

All right. Thanks Shannon.

We'll take our next question from Katy Huberty with Morgan Stanley.

Thank you Tom first deal should we think about this share repurchase that was announced today as potentially this start a bigger capital return program. Once you get to investment grade and then just wanted to ask a follow up for job given the importance.

Important sense storage the ice tea business can you can you just talk about what happened to delay the midrange store at launch and whether you think there is a revenue impact from that delay. Thank you.

Hey.

Hi, Kt, it's Tom let me talk a little bit about the share repurchase which as we've always thought about at the appropriate time, a shareholder value shareowner return.

Program I think as we thought about it and given where we were on our debt repayment schedule and our ability to continue to pay down debt.

We thought it was appropriate and timely if you will to put in a share repurchase plan now obviously, it's a billion dollars over two years and we're going to be thoughtful about in a bit opportunistic we think our stock as.

This trading at a discount that doesnt quite make sense to us and so.

So we're going to read into.

And opportunity for our shareholders and so yes I think this is.

The first step in that journey, we're obviously focused on making sure that we hit our commitments around debt repayment no that is a primary use of our capital at this point in time.

As we work our way back to investment grade and.

But I do think thats, a shareholder return or shareholder value rich.

Framework makes sense as we move forward.

Midrange endurance Katy So let me tell you where we're at what we've done and then you can ask a follow up question, if I'm not clear enough. So first of all.

We delivered a number of a raise to our beta program quite honestly the largest beta program that we've ever run in the history of the company in Q4.

So we have dozens upon dozens of customers that have the product in their hands today and we're really pleased the feedback has been overwhelmingly positive.

Thats on me and the reason that it's late is good being the quality and reliability leader in the marketplace I was pushing us to really drive on the customer experience side and learn from the last Mega launches that we've done in storage.

And what we learned during that studying of how do we enable a quick launch with our Salesforce. We wanted to do the broadest add scale system test we've ever done that's what we did quite honestly I underestimated how long it would take.

And as a result, we've been late as.

As sort of the byproduct of that decision that I've made to do a larger the most comprehensive at scale system test.

But it gave us an opportunity to address what we've learned in the beta program. It gave us an opportunity to keep our salesforce focus on year end of the last fiscal year two.

Two weeks ago, we stood up in front of the entire Salesforce, we train them on the midrange Dot next platform.

They're excited about it and we will begin selling the product before the end of this fiscal quarter in Q1, and there is no material impact to our revenue plans in storage or the midrange.

We're actually quite excited when we think about the mid range. Tom mentioned earlier the F. The calendar 20 storage forecast is actually slightly down but the mid range is expected to grow about 4.5%.

It's the area, where we've been most challenged and with this product we really Chris spin up the mid rented the mid to the high end of the mid range portfolio and with our Unity X T platform, which is performing quite well we have a really comprehensive coverage of the mid range storage marketplace, which is the large.

And we're pretty excited about.

The prospects there we need to get the product on it will be done we will be taking orders and delivering before the end of the quarter.

Alright, Thanks, Jeff and before we go to the next question. Just a reminder, lets say its purchase my one question. Please we can get to as many people as possible.

America next question.

We'll take our next question from Ron theme with Bank of America.

Yes. Thank you I was wondering if you can talk a little bit about where you are with portfolio. We organization clearly you had a decision to sell our I say.

Wondering what luxoft prompted that from a timing first back then and then I mean, historically MC had done a ton of acquisitions. There's a lot. That's Dutch buried in there that I don't know how core values that are not so any color on where you think the portfolio changes if there if there are more to do.

Well and magnitude of those and and the uses potentially out that would that be more towards capital return. If there were to happen. Thank you.

Hey, Ramzi, it's Tom So you know.

I think what we have said consistently over the last year or two Hudson that we continue to look at the corporate structure and the capabilities in the assets that we have within the family.

And as you recall shortly after we combined the companies we did sell the services the legacy del services business.

The software business and the.

Mhm.

Yes.

BCD business. Thank you.

And so look we continue to look additive were triggered the our state decision was essentially as we continue to look at our security strategy.

We are increasingly focused on intrinsic security how do we build security into the core of the products.

Our assays a nice asset.

I think our perspective was that if it wasn't going to be core to our security platform and strategy that there was probably better to do something different with that asset and put it in the hands of.

Of an ownership structure that was going to.

Was going to.

Optimize the platform and optimize the asset and so that was the decision to sell.

I think the team did a nice job running the process as we're going to continue to evaluate the rest of the portfolio and.

You know and can.

Assuming that thinking through the alignment of assets the alignment of capability with where we're headed strategically in a number of areas, including security and data management data data services. So all of those areas are of interest to us obviously I don't want to get over my skis here, so, but our commitment to use that we'll continue to think.

About where's the right.

Capabilities to mean to own what capabilities do we partner for what capabilities should should not be part of the family and we'll continue to simplify their corporate structure. Because that's been continue to bid continues to be feedback around the complexity of the Dell technologies portfolio.

And obviously, we want to think our way through thoughtfully, where what capabilities belong in the family and what capabilities are better off outside of the family.

I think Tom to add to that maybe more of a product offer an IP point of view, we've made a tremendous amount of progress simplifying the portfolio.

Solid aiding IP changing the way that we build integrated products across the Dell technologies companies. If you think about the work we've done now with carbon black unified workspace, Vmware Dell Pcs Dell services and building an integrated plan.

Form that we can sell a modern PC experienced by Youre going to see us consolidate more of our technology that way by points at del technology cloud the work that we've done with Vmware with.

Being more cloud Foundation Dx rail now a series of offers that were building around that and the multi hybrid cloud ruled that we operate in yet another form of a consolidation of portfolio and simplifying our offers to our our customers remember the second component of our strategy I mentioned the first one was all about when in the country.

Validation. The other one is to go build deeply integrated solutions that drive incremental value for our customers, which is really about simplifying the individual products across the portfolio and building integrated solutions and we spent a great deal. The time, there you'll see us do more of that going forward.

All right appreciate it next question please.

Our next question from Jerry along with Deutsche Bank.

Yes. Thanks for let me ask the question everyone. So it seems I want to kind of.

Maybe.

Just picture, a little bit and think about.

SG there is little more bullish as an IC for the year and I think you've kind of painted your storage picture in terms of than having products. The midrange et cetera. Thank you guys see your point of view there.

On the service server networking side it seems like the year on year growth is kind of decline.

More and more with each passing quarter. So what gives you confidence in that turning around and contributing to growth for the full year.

Well I think I'd point back to the earlier question and comments that Tom and Tom and I made it you're clearly right. When we look at the performance over the four quarters. There was a deceleration of the store or the server business. If I recall correctly minus nine minus 12 minus 16 minus 19.

Team for the annual number that Tom represented minus 14.

If you look break that down it really is concentrated in greater China in greater China was down 35% on an order spaces over the year.

The rest of the world was minus five.

Inside that minus five the the what slowed down was our North America enterprise business.

In other words, we actually grew in small business medium business, North America commercial and Latam.

We grew at market in a PJ and in EMEA and then the too hot spots of the ones that we've called out consistently in China in North America Enterprise.

Tom talked about the China market in the dynamics, it's going on there. So I think the real follow up question is what do we doing differently in North America enterprise to change our performance.

And as we think about that.

We're driving a.

If you will a different coverage alignment we are going back through the coverage models, we're enhancing that because at the core we have to grow the buyer base.

And if I think about the number of PC customers that we have across our enterprise accounts and the number of server customers that we had on our enterprise accounts. There is a big drop off between the two.

What we sell in each of those customers and change the coverage Matt. So we can bring on new customers to the fold. That's fundamentally they'll work that's underway we have some new programs inside of the corporation.

We're pretty.

Depending on how you look at into the ex 86 markets.

Forecasted to be up 1%, that's five points better than the same time last year.

Mainstream place space, where we predominantly operate is projected to be are forecasted to be up 3.3%, we're going to grow at a premium.

Content rates up.

Our exposure to high value workloads is increasing.

Let's drive higher TR use and out we're pretty optimistic about our ability to take share and outperform the marketplace broadly across the server market.

And that.

No I would just also comment on the fact that with that higher content and with.

Thanks, Joe appreciate that thank you so much.

You're welcome next question.

We'll take our next question from.

With Wells Fargo.

Yes, thanks for taking the question one of the comments that was made during the prepared remarks was.

The three to one ratio as far as your server customers that actually purchase.

The storage portfolio I'm curious if you could help us understand how that's evolved over the past 12 or 24 months, what what does that look like call. It.

A year or two ago, and how do you think about driving that what kind of initiatives have you put in place and how would you define success.

In that ratio looking looking forward.

Well in the prepared remarks, I believe I said, we have roughly 30000 server customers at quarter end less than half by our storage.

I didn't say that that's certainly what I meant to say, yes, you did.

Good.

Look if you look at the long term trend there the server component of that buyer base is modestly growing and the storage one isn't that has been our challenge in the capacity and coverage that we put in place is intended to change that director to change that trajectory.

It takes longer for a sales person a sales maker a sales specialists in storage to come up the productivity ramp.

So I think Tom and I have made reference throughout the session. This afternoon.

That tenured productivity of our storage sellers is the greatest it's been as we head into fiscal 2001.

Thats important to us.

That is a driver. So if you think about more tenured productivity broad coverage of the marketplace a more competitive product line from top to bottom thats. The lever that we are going to drive our storage business with and that I just made reference in the previous question to a program that we've put in place.

Power up which isn't it again, an internal program centered around driving cross sell and upsell of our portfolio winning new customers. It really is about seed units promotional offers we're putting sales incentives in place in fact, Tom and I improve day sales compensation plan that in sense.

Our sales force to sell multiple lines of business in an account.

So if you start with we have the most customers and our PC Division.

The next most customers and servers in the next most customers in storage cross selling incenting, our salesforce to sell more lines of business as we move down the stack is certainly where weve tilted the compensation plan. This year in just the other thing I think it's important to comment on as we talk about storage in storage velocity is.

The velocity of the VX rail capability and product solution set right I mean thats growing.

Plus 60% year over year, and so there's great velocity and our HCM solution capability that will continue.

You know where its appropriate for the workloads, we're clearly focused on driving that and then I think as part of this you've mentioned the more tenured sales organization, but also we need would call out. The fact is since we have combine the selling organizations we have.

Coverage model expansion to the marketing programs and the tenure of our capacity so selling capacity. So those combined coupled with.

Great velocity on our VX rail capability, I think all point to opportunities for us to grow.

Thanks next question.

We'll take our next question from Simon Leopold with Raymond James.

Around capacity coverage and commentary from competitors that.

The headwinds that you saw in North America, where incremental to what you've been seeing so maybe you just help us.

That a little better.

Yes look I think.

Our philosophy here as we have navigated through the year. This year has been.

To where we think it's appropriate to be aggressive to when customer business that we think has longer term value then well be appropriately aggressive.

In terms of acquisition prices choose to win that business.

As we went through and so I don't really think were and where we're quite frankly, it doesn't make sense or where we don't see long term value in the competitive dynamics of the competitive pricing environment Hasnt made sense to US you have seen a step back from some of that business.

Hi, guys I think essentially we saw a couple of things as it relates to servers in the North America Enterprise large enterprise space for instance.

A number of bids is down and the price aggressiveness on most of those.

Contracts or a bid opportunities that has been quite.

Quite aggressive and so we have been selective and where we have chosen to participate and that you get into decisions around do you have other labs.

You are selling into that customer roadster customer overall profitability look like do you have the opportunity to recover some of that aggressive pricing over time.

And that's the balance in the needle that we've been threatening we've gone through the year and as a result of that you saw softness in North America enterprise.

Ill talk to China and the second.

So look up did we do see anything incremental in Q4, I think the trends that we've talked about have have essentially continued in Q4 in terms of the aggressiveness of the pricing to the cycle time on on opportunities is clearly longer.

And so thats been a dynamic that we just had to work our way through in and so as you think then on pivot into fiscal 21, you several whats different while the market supposed to be better we've got better coverage.

I think the dynamics around.

Our our region of selling organizations to cross sell opportunities are all going to be positive scores in the coming year and.

On the storage side, it's been of it's been the we've had great success with our VX rail product, we are seeing softness in the core array again that infrastructure space has been soft.

We've taken share.

From 272 to 300 basis points of share over the last three years, we've been navigating through what I think has been a challenging environment, there, but I think as we step into fly 21.

I think we're better positioned from a coverage model and from a solution perspective, and so look I think it's a so those are the navigation. We've had to do as a result of that we're under there was some revenue pressure clearly in the EISG space for yet we drove great profitability across the business and strong cash flow and so it's all about how do you have balanced the model given the market.

That that we see in that we participate in.

Well good hope thanks, Simon we're going to wrap up there just as a reminder will be at Morgan Stanley next week in San Francisco, and we will be hosting an IR track at Dell technologies World will begin that the evening have made third and continue on the fourth so hopefully we'll see many of you there and there will be additional information in coming weeks on that event. So thanks for joining us today.

Correct.

This concludes today's conference call.

We appreciate your participation you may now disconnect at this time.

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