Our Experts Comment the Times Series

See All the Comments

Brand New PCs

30 August 2019 by jbchevrel

Dell Inc (DELL) was the best performer in CDX HY. The 5y CDS today tightened by 53bp or 22% of the spread, after they raised their full-year profit outlook. Allegedly with more confidence. Indeed, DELL narrowed its annual revenue projection to [$92.7B,$94.2B]. It seems that companies have been upgrading their personal computers to get Windows 10, boosting demand for PCs. The stock also gained 8% on day as I write. Still down c28% from May peak. The PC division grew +6% in the quarter alone, with commercial sales +12%. More generally, sales growth was strong. Indeed, reported revenue gained 2% to $23.4B. The negative outlier was the revenue from data-center hardware -7% to $8.6B as server/networking gear revenue fell -12%, reverting from last year. That was coupled with a significant improvement in operating margins. DELL has $53B total debt outstanding and $10B cash. However core debt (total principal debt less unrestricted subsidiary debt, DFS related debt and other) is $36B. So net core debt is closer to $30B than $40B. Noteworthy that >50% of out debt is maturing by end-24. The picture will improve, on the paper, as DELL plans to pay down $5B debt due this fiscal year (FCF generation, cash on hand, additional borrowing). Elsewhere, it was a bit of a reversal in CDS world, with spreads widening across Europe and the US. The CDX HY s32, which contains DELL, widened by +bp, now just above 340 mark, ahead of the three-day weekend there.