00:01 Speaker A
What’s remarkable to me, not just Dell, is that these companies that have been around for a while, like the moment we’re in, do business a certain way. I thought I understood the changes in their business and the increase in demand, but it feels like a punch in the face when it becomes clear that it’s much more than that.
00:26 Speaker B
yes.
00:26 Speaker A
And Dell is kind of the latest example, with sales up 88% and down 23% in the first quarter.
00:36 Speaker B
Yes, so I did some stuff with Dell here. The first thing I found very interesting was looking at their results over the past few years. Here are the results for fiscal year 2024. So this is a result published in the spring of 2023. Infrastructure Solutions Group’s net revenue was $7.6 billion. Yesterday, the company reported $29 billion in revenue for its Infrastructure Solutions group. The company’s overall revenue for the first quarter of fiscal 2024 was $20.0 billion, or $20.9 billion. Of course, this is smaller than just the infrastructure group announced yesterday. So in the latest quarter, the company’s sales were $43.8 billion, which now stands at $167 billion. Oh, or, well, 167 is the midpoint of the teaching range. But I did this exercise because I was thinking about the conversations I had with Micron about valuation and what we’re doing here. Therefore, Dell’s GAAP EPS for this year is expected to be $17.31. Coming into the quarter, the company was trading at 24 times sales.
01:54 Speaker A
Yeah.
01:54 Speaker B
Multiplying 1731 by 24 gives you 415. The stock is trading at 423 this morning. So this isn’t an accusation, but it does state your point.
02:08 Speaker A
Hmm.
02:11 Speaker B
I think the whispering numbers were a little surprising as we weren’t expecting a raise like this or a guide like this. But this is simply a 40% increase in the stock price of such a large company, keeping pace with the company’s believed earnings, or business multiples. They’re literally just saying, well.
02:40 Speaker A
Yeah.
02:40 Speaker B
Listen, if I’m going to value EPS that high, I have to write EPS, and I have to put a higher stock price on that EPS. But yeah, this has been a recurring theme for so many companies over the past few months that it’s surprising that many of these companies, uh, didn’t have that happen.
02:42 a
yes. yes.
02:53 a
Another thought I had when looking at these numbers: I know it’s apples and oranges, but I’ll make my point right away. Yesterday, we were talking about how Salesforce touted $1.2 billion in AI-related revenue on an annual basis. And Dell came out and said, “We booked $24.4 billion in AI orders in this quarter alone, compared to $1.2 billion in annual AI orders for Salesforce.” Again, I know it’s apples and oranges. We’re talking about sales, we’re talking about software and infrastructure. This is still an infrastructure role. But it’s like, if you’re thinking about where you want to put your money as an investor, do you want to put your money into that infrastructure business or even if SaaS isn’t going away, okay, we get that.
03:22 B
Yeah.
03:49 Speaker A
But where do you want to put your money? Where is the growth happening now and perhaps in the coming years?
03:57 Speaker B
Yeah, and also, is it better to have $100 billion or $1 billion? right? Because 24 is a $100 billion run rate versus a $1 billion run rate. And I think that also makes sense, and I’m going to collaborate here in terms of bringing this back to SAS. However, the apples and oranges are like the money that is out there in terms of the investments that are being made and therefore the opportunities available to companies. Again, companies like Dell say they have $100 billion in AI orders. So other companies that are trying to take on this theme come along and say, oh, ARR is $1 billion, we’re achieving this here. That’s cool, but it’s like Dell has $100 billion in orders a year. Dell just announced a quarter in which its business had nearly $50 billion in revenue, compared to a quarterly revenue of nearly 20 three years ago. In other words, you’ve multiplied your overall revenue by 100. AI-related revenue has increased by nearly 200%. So, oddly enough, it seems like the challenges for companies other than Dell are getting even tougher. That’s not the case with this memory deal, it doesn’t directly participate in compute or infrastructure. It’s like literal energy, but it’s because there’s so much energy being spent, like the energy intensity of the investment. As CFOs say to the occasion, if you don’t post, it will become increasingly difficult to not have a better path to finding your way.
