Dell Technologies Inc. (DELL) Earnings Call Transcript & Summary

Good day, everyone. I'm Katy Huberty, IT, hardware analyst at Morgan Stanley. As many of you know, over the past couple of quarters, we've become increasingly bullish on long-term PC demand, driven by increased PC penetration in the home, faster refresh cycles as notebooks grow and mix as well as the investments that will be required as companies return to the office and adjust to more hybrid work models. While investors have been skeptical on this call around sustained PC strength, Dell is similarly constructive, and I'm looking forward to hosting a discussion on the PC renaissance with Sam Burd, EVP of Dell's Client Solutions Group. Sam is responsible for the success of Dell's commercial and consumer client portfolio. And his team is hard at work developing the next wave of solutions that will enable productivity, both in the office and at home. Now before we begin the discussion, let me just mention that Dell Technologies' statements that relate to future results and events are forward-looking statements and are based on Dell Technologies' current expectations. Actual results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors, including those discussed in Dell Technologies' periodic reports filed with the SEC. Dell Technologies assumes no obligation to update its forward-looking statements. I would also just point you to Morgan Stanley research disclosures at morganstanley.com/researchdisclosures. So with that behind us, Sam, thank you so much for spending the time with us today. I'm going to turn the floor over to you for some initial remarks, and then I'll moderate Q&A. For those listening in, please submit your questions via the webcast. I'll monitor those and weave your questions in with some of my own. So Sam, over to you.

Thank you very much, Katy. Great to be here today. Very excited to be able to talk with all of you about Dell's Client Solutions Group, or CSG business as we call it, basically our PC business and more at Dell. I do have a few slides I was going to flip through in some upfront remarks. And if you want copies of the slides, I just note they're available on our Investor Relations site for download. So if I start and just take a look at the PC space and our business today, a couple of takeaways that I have around why I'm excited to be talking to you and thinking about the opportunity that we have, there are really 3 things that stand out. Number one, which I'll get into in a little bit more depth is -- and Katy, you touched on some pieces of this, but we really believe we have a business that's in a unique position and a differentiated position to capitalize on the opportunity ahead of us in PCs and client technology. Number two, when we look at the business, we see long-term good dynamics around this business. We see a new work from anywhere, learn from anywhere, play from anywhere kind of environment, that if you look at industry forecasts, we believe it bodes well for the future and opportunity in this business. And then third area that's interesting and exciting to me is our Dell business and the role we play inside the bigger Dell Technology business. We are a significant contributor in revenue and profitability to the business. We're a great place for us to have entry and engagement with new customers to bring them into the family for people to see them the opportunity they have to transform, change their business with technology from Dell and our different divisions and companies inside Dell. We've delivered good revenue and profit growth, and we've delivered good cash flow growth to the company. So 3 kind of quick takeaways around my excitement on this business. If you then take a look at areas that were different and how we go do things differently with a unique competitive advantage in the industry, there's 4 things I'd flag. Number one is a world-class go-to-market team. We operate in 180 countries. We have the largest sales force in our industry and a complementary channel that adds to that coverage that we have of our customers with our sales force. So that's a great way to grow the business. You think about being able to engage our customers, understand their needs and deliver against it. We have people in our company who are doing that at a unique scale in our industry. We couple that with an unmatched services organization, global, more than 34,000 employees, 2,500 service centers, 760 parts depots. So whether a company is looking to get their technology fixed or they're looking to transform their business, we have a services organization that is broad and can engage customers and get the job done for them. That kind of approach builds loyalty and really a great experience with Dell when you couple that with the products that we're delivering. We've got a supply chain organization in our company that is renowned in our industry and across the industry. More than $70 billion of purchases, 25 manufacturing locations. We have a global operation that's nimble, can ensure we get products to customers when we commit and we achieve the kind of cost and efficiencies that are important to be successful in our business. And you add all those 3 up with a global financing arm, nearly $12 billion in assets adds flexibility to our ability to service customers, let them engage us by technology in the way that they want. So some really good different things we do in our business. And then, Katy, we put that together with -- if you think about just my PC business, but all of Dell Technologies, when companies are transforming, they want to talk about the total solution for their business. And we're also very unique in being able to bring to bear a great set of assets, a leadership position in PCs, in servers, in storage, in software. So we can really solve companies' needs, and we can deliver best-in-class solutions in different spaces that get them what they're looking for. So really good competitive advantages. What does the market dynamic look like then? And what do we see as we go forward? If you take a look at IDC and IDC's view of the industry, we see a really good growth trend. If you look at 2016 to 2019, there were 262 million PCs sold on average. Last year, we were over 300 million. This year, IDC projecting more than 350 million PCs. If you look at the next 5 years, IDC projecting an average of 340 million PCs. So seeing growth in our industry in the PC space. And those units come with revenue. It was $190 billion TAM in the PC space. It was $233 billion last year. We see that growing and projections are from IDC that it gets to $260 billion in the future. So there's growth in revenue. And it's not just the PC that we're focused on, but you think about how systems and technology are being used today. It's about delivering an experience to customers that allow them to get their job done, get what they want to get done. That involves peripherals, it involves software, it involves services. And if you look at all those spaces together, they more than double the TAM available to us from when you're thinking about just a system TAM. And we look at that as a good -- we believe the future is bright. And some of the reasons you see those forecasts for growth are because the world is going to look different in the future. Our research shows that more than half of employees would like to work from home more than 3 days a week. So -- and if you look at the experience they have with technology, 42% of people say they would quit or leave a job if they had inferior technology. So people are going to be remote. Technology is going to be important like it has been in this past year, and people want great technology to get their job done. We still haven't reached a PC per person. You think it's an individual device. That's how you're productive, that's how you learn, that's how you game and enjoy yourself when you're not working and learning. And we're not yet at that level. We still have tens of millions of students around the world who are not using a PC device when they're at school. So think about us in the greatest data error and error where intelligence and capability are really important for education and people are growing up without a PC. So we could see continued opportunity to bridge that digital divide and get the leaders and the adults of tomorrow enabled with technology. We see more notebooks being sold. Notebooks on average we see have about 1.5 years faster refresh cycle. So all of those things combining to say the dynamics around the industry point to opportunity in the future that we'll want to go and grab. If you look at our business in that space, we've performed well on a revenue basis. We're in our 37th year of being a founder-led technology company. We started with PCs. We're now so much more, and we've added to that portfolio. But we've had a passion in this. Michael Dell has had a passion for this space from the day he started it of being focused on customers and the need -- understanding that any need and value of technology and helping enhance human and personal productivity. And it's still true today, just like it was 37 years ago. We've seen 7% revenue CAGR over the last 5 years. The industry has been consolidating. The top 3 players have gained 20 points of share over the last decade. And we're more indexed to commercial in our business. We're about 70% of our revenue coming from the commercial space. If you look at our performance there, we've gained 560 basis points of share in the last 5 years. And we were the only top 3 vendor to gain share in the commercial space last year. So good dynamics around our revenue growth and a track record of delivering there. You can also match that up with profitability. If you look at profitability, we've delivered really nice margin expansion over the last 5 years. We have had differentiated performance versus our top 2 competitors. And if looking at the last 2 years, we've had favorable tailwinds in the industry, whether it's component cost declines or supply constraints that have helped ASPs. But we still see -- when you look at our performance versus competitors, we still see some really key trends that help us have a differentiated, structural approach that leads to better results. We tend to sell more direct and engage our customers directly. It lets us talk to them really understand their solution and deliver that total solution to our customers. So think about more loyalty, higher ASPs from that kind of approach with a direct mix that is 2x the industry average. We're focused more on commercial, which I talked about earlier, and commercial tends to have higher ASPs. It tends to buy more of a total solution. Commercial customers think about the ROI of a technology investment, and that ROI has been really good. So they invest in that space. In the consumer space that we do play in, we go after the higher end customers with our XPS product line, considered best in the industry for a number of years or our Alienware gaming systems. We're a leader in that space. So places people are investing, systems that are really meaningful and important to people and a space in the high end and online where we saw the world shift in the last year. So you look at our last year, and we grew 64% on an orders basis in our online business. And we're able to take all those areas and then sell the full set of services, peripherals, software to those customers, which help us have happier customers, and it helps us on the revenue growth and profitability. So Katy, that was a kind of a quick overview of our competitive advantage, what we see around some of the industry trends coming up that you hit on some of those trends and then how we do things differently and how we have performed. And I see those trends look positive. We're absolutely leaning into some of the areas of growth that we see and that you've highlighted in this space that we see coming up right in front of us. And then we're proud of -- I look at the performance that we've had in our business. We're proud of a heritage of strong operating performance and of doing things in a differentiated way that we believe produces better results.

Great. Thank you, Sam. That's a perfect foundation for the discussion. As I said earlier, please submit your questions via the webcast. I'm just going to weave those in with my questions. Some of you may see that Rob Williams is also on the company does go into quiet period later this week. So he'll jump in if the questions become too forward-looking. So I want to start, Sam, with following up on some of your comments around demand drivers that I also outlined in the beginning because this is really the core debate in the market. Is the old 260 million shipments a year, where we -- the market returns to? Or is this new 340 million, 350 million shipment level a new normal and a higher structural level of demand? And I guess the follow-up would be, you mentioned some of the drivers increased home penetration. So instead of one PCs per home, multiple PCs in the home, you talked about the office refresh that would be required as people return to the office, the adoption of notebooks and the faster replacement cycle that, that drives. When you think about those factors, are there 1 or 2 that are particularly contributing to this higher level of unit demand and contributing to your more constructive outlook around the size of the market going forward?

Yes. Well, Katy, I think a big overall factor is people and companies are looking at PCs differently today. They've really, in the past year, showed they were critical to keeping the world connected. So that's a good reason why we saw a whole lot of growth. And if we look at the future, we see the way companies are going to operate is not just go back in time a year ago and kind of hit their hit the play button, and then we're just -- we'll kind of edit this part out, and we're just on the same course. Like we think about and we call it this kind of future of work model and being in a hybrid operating model. So think about how you take the good things we've learned in the past year, put it with stuff we did before being face-to-face with people and being able to collaborate. And then it goes -- technology is going to be really important in that environment. I'm going to be from a -- working from a home office or a remote office somewhere multiple days of the week. I'll be collaborating other days. I need an ecosystem around me. Maybe I'll carry my device between those locations, maybe I won't. But like that technology, when you think about how we got stuff done, it matters. And then put all that together, and I love the class of problem we're talking about of exactly how big the market is. Because I remember back, we had this debate like 10 years ago, people said, "Hey, the PC market is going to be dead." We just celebrated fastest growth in a decade. We're looking at a year that could be among the best year that the PC has ever seen. And if I go back to prior high watermarks, there's about 0.5 billion more people in the world technology is more important than ever that we -- I talked about getting it in the hands of students, I see that on the consumer space, I'd live it in my house and my kids. It's like a one-to-one kind of relationship to go have a PC and be connected with their friends. If they're having to share devices, it just doesn't -- it doesn't work. And that's a wonderful problem to have, but it's a great opportunity for us to put those devices in people's hands. And then we've seen the commercial space. Commercial demand, if you look at core commercial and companies, I think there's opportunity that you hit on as people go back to the office. It was a little harder for companies that hadn't fully modernized over the past year to keep customers up-to-date or keep their employees up-to-date on technology. They were more like go grab something, send them home with the PC, have them at least be able to be partially productive. As people are back in the office, IT, it's easier to go touch that technology, the companies are going like, "Hey, I realize having a better experience equals, people are more productive in their jobs, they're happier, which means they stay with me, and I've got to get people up-to-date. So I think we'll see demand around help me modernize my process of getting PCs in my employees' hands and then let me get this refresh that I kind of paused on over the past year back on track." So people have systems that work great on Zoom, Teams, whatever kind of environment you're sitting in today. So I think it's not exactly one thing, Katy, but it's that combination of things. And the PC being in different space that to us as some of these projections you see by IDC and others are very real, and there's opportunity ahead of us.

Right. Yes. I would just follow on and say that we've heard from many CIOs that they're thinking about investing to upgrade their PCs, so spend more per device in order to drive employee productivity, but also employee satisfaction, to your point. And another data point I would point to investors is we recently ran the math on the number of PCs per household even in a market like the U.S. that's quite developed, and it's still in the -- just above 1 PC per house range. And so when you think about 1 person working from home at least a day a week and at least 1 kid needing to turn in their homework and be ready for remote school, that number still has quite a ways to expand. I guess you said this at the end of your last answer, Sam, referencing the IDC data. There's a question on the webcast from a client asking specifically whether Dell underwrites the IDC forecast, not just for 2021, but do you agree with the trend that it will then decline off the 2021 peak next year and then sort of slowly grow off that base? Does that trend make sense for you? Or is there not enough visibility yet to know?

Yes. The one thing I've learned about forecast, Katy, is like the moment you make a forecast, you're absolutely going to be wrong. So if you ever get it exactly right, you should celebrate. We -- I think it's the best thing that I can see out there in terms of looking into the future. I think all these dynamics we talked about will come together in kind of different ways, and we'll see how it ultimately plays out. I think the big trend that we would see is going from what you mentioned of a 260-ish million unit market to a 340-ish million unit market over the next 5 years. So we think that opportunity is there. And when you play out, like you mentioned the PC per household, when you look at refresh cycles changing, it's not an insignificant thing to see a shift to notebooks and have refresh cycles on notebooks, be about 1.5 years shorter than a desktop and we've seen that play out in other industries. When they stretch out, the growth goes down. When they pull in and you give people a reason to refresh, the growth rates go up. So you put all those pieces together, and I think that forecast is as good as we can see in the future. I am sure it will absolutely be wrong, but it takes into account those kind of drivers that we see out there. And like you said, the exciting thing to me has also been seeing that interest from companies at the CIO level, at the CEO level. I've seen also in customers, I work with, I've seen the partnership between IT and other leaders in the business stronger than ever before because companies have started to realize exactly what you said of like if I get people a great system, it starts getting people on a level playing field on a Zoom or a Teams call. I can get the most out of them. I need performance from these systems so people can go do their job. We did some surveys where it's like PCs, more valued than volleyball courts and foosball tables and everything else, and it became even more so during this pandemic. Employees generally want to contribute to a company if you give them a great tool and think about the cost of a PC over 3 years of salary, you're going to pay to someone, it is very small. Even our most expensive PCs like workstations, we find have fast refresh cycles because you're giving them to the designers and engineer -- like your most creative people in the company, you think most expensive asset that would take the longest to replace. Well, it actually has the fastest ROI because if you can make people more productive, you get more out of them. It's worth that small investment for the kind of return that you get. So I think you put all that together, that's where we can't -- we don't have any better forecast, but I think it's reasonable given what we see with those different drivers.

Right. And when I have this conversation with investors, the one of the follow-on questions is about the handoff from the consumer to the commercial market with the consumer having been very strong over the last year, people were stuck in their houses. They were having to spend more time on their PC. In some cases, through government stimulus. They had excess money to spend, plus they were saving on travel and eating out. And so will the consumer demand fall off before the commercial demand picks up? And I guess my question there is, should we assume that consumer demand is going to fade? Or is there an argument that it may remain elevated for longer?

I think, Katy, we'll certainly see consumer demand will have more things to compete with as things open back up. So you think about a vacation or a trip postponed, there will be other things competing with discretionary spending. I look at our business, and I see -- do see good opportunity in the space that we're in, especially on the PC side. So we're -- I think I touched on, we're about 70% in commercial, 30% in consumer. We're more indexed to the premium spaces in consumer. I still -- I see when I look at whether a gaming space or a high end PC that someone put in place, we still see opportunity both to grow in that space and then to have those systems be replaced by customers who have a really good experience with us. So I think more competition coming for PCs. They were maybe 1 of -- there were 5, 6 different categories that people spent on a home. Like it still had to compete with improving my house, suddenly people were painting everything, changing their house because they were around that house. So it still had competition in this past year. Those dynamics will change in the future. And then we're more oriented towards commercial where I see some of the trends are positive that you highlighted. We saw education spending, good in commercial, we saw corporate a little slower. And we think that changes as people get in the office, we think the high end -- higher end consumer space continues to be resilient. We've seen that grow over the last 5 years, and that's been a positive trend and a good opportunity for us.

I'm glad you brought up the education market because that was a clear area of strength within commercial last year. But we're still hearing about governments around the world that are funding, equipping students with PCs. And I see data points like in China, only 12% of K-12 students have access to a PC at home because that's a market that skipped the PC and win straight to smartphones. It feels like there may be a longer runway in the education market. Is that a fair characterization? Or how long do you think it takes for the world to get the right number of PCs in the hands of students?

Yes. We still do see space in the education around the world, Katy. So that's right. We look at it, I look at it, and there's tens of millions of students around the -- like you look even in the U.S., there's about 10 million students. There's about more than 10 million students in Europe. So you look around the world, and it starts adding up to a very large number whether it's in very developed countries or more developing countries, that -- those statistics hold true. And you think about the world that people are jumping into post education, it's going to be technology enabled. So having someone start if a country looks and goes, I want to have a successful, talented workforce, they're going to arm them with the PC. So we see more runway in that space. We also see students are some of our greatest testers of PCs because they are among the hardest users of PCs. So I think there's space of getting a PC in every student's hands. And then there's also a repurchase cycle where those systems get broken. They need to be replaced for the next generation of students. And students then start buying PCs for home, a gaming PC to go with their system at home. I saw people doing video conferencing, had pictures of some of our customers who were sitting with their workpiece -- sorry, their school PC on their desk, and then doing homework at the same time on another device. So there's a really good -- there's a good capability of as soon as you're around technology, it breeds more ways technology can help you be productive. So more space in education, for sure. I think it's a critical component of how people are going to learn going forward, and it equals not only just building up to every student getting a PC, but those systems will need to be replaced in the future.

That's great. So we talked about consumer and education. The last market is corporate. What do you think the office PC investment cycle looks like given a hybrid environment? You mentioned that 50% of consumers want to work from home a few days a week. So is this going to be a desktop refresh? Is it going to be a notebook investment cycle? Is it going to be a combination of the 2? And if so, does it actually look more robust than past corporate refresh cycles that we've seen that have been driven more by operating system upgrades than anything else?

Yes. I think, Katy, it's a combination probably of both from what we see. You looked at last year and the -- you could draw a desktop trend line that seemed like desktops were going to disappear. We have certainly seen a strong shift to notebooks. I think people who got a notebook, like that's not going to change. People are going to see the flexibility there. IT will remember and companies will remember what happened in the past year and go, I want my workforce arm to be able to be flexible and nimble and really capable. But then when you put that together with working in different environments, whether that's a system that you move between environments, a system sitting in different, 1 system in 1 environment, 1 system in other environments, we see that kind of workspace playing out. Collaboration spaces with technology there for employees set up by customers. We also see the ecosystem around devices has become even more important in the past year of, like we look at internal studies that show big increases in productivity. If you are people with a laptop with a simple stuff, like a big screen, a keyboard and mouse, so they can get more data around them, be able to process that data. It's stuff that's worked forever on trading floors around the world. People want that in a world where the data is coming at you, you're on a conference call, trying to look at a presentation that someone put together and look up another data point online, ability to do that all at one-time equals someone can be a lot more effective and efficient. So we see this kind of dual hybrid world with people working in different places, equals the more systems per person for IT in an environment and then that ecosystem around how people operate. It became -- I think it was always important, but it became clearer when we had the COVID pandemic and people had to work at home that people with those environments were a lot more productive. And suddenly, IT said, "Hey, I've got to go do this to get my company enabled, so we can work smarter, work better and be ahead in our industry." So I think all those trends equal a good opportunity in the commercial space. I'm also seeing commercial customers really rethinking how they put technology in place. And they've been happy for a while on the old approach we have of largely IT -- sneaker-based IT of people coming around. You want a new system, we need to reimage that system. If you need help, there's someone to provide help for you on a call or at a help desk somewhere. And going, how do you get that when we had so many people working from home, how do you get that modernized and more simple and take advantage of the -- think about the processing power we have, the software capability of today, telemetry and AI machine learning. We can start to do things radically differently, and we are on how people experience technology in a corporate environment. So investing in modernizing how people deploy, manage, update PCs has suddenly gotten higher on the list of many companies. So they just have the flexibility that they want in the future. And they start being a lot more efficient and quicker with how they're getting technology in employees' hands, which equal the employees happier. It's lower cost once you get over the investment you make upfront and your employees are happier. So that's a really good thing to go do.

So if we agree that PC shipments, they're going to land longer term, somewhere in that 340 million range, how should investors think about Dell's market share? You've taken about 70 basis points of unit and revenue share consistently since 2013. You started out in your slide deck, walking through some of the advantages around sales and supply chain and financing and services. Should investors expect that you can continue to take share even with the top 3 vendors accounting for about 60% of revenue dollars today, which is up over the last decade from 40% already?

Yes. We're certainly coming at it with the view of the investments we're making in the industry are so that we can deliver on what customers are looking for and win and gain share. We've done that -- you hit on. We've done that for our 37-year history. We have been customer-obsessed from the beginning, focused on operating really effectively, getting great technology in our customers' hands. And we're going to keep doing that. We've cared about the PC from day 1. We believe it's very important in the future. We continue to invest in the products that we're putting out there to have them be best-in-class. We're investing in the experience around the product. So you think about what we can do with our service arms, with work that we do with VMware, with different partners to bring software and intelligence to bear on that life cycle. Those are things that we are uniquely capable of doing, and we think they matter to customers. And if you invest in the space, deliver great products, make a difference on stuff that matters to them, then that for us equals a recipe of gaining share. So that's certainly the goal we have in our business. It's a competitive business. I'm sure our competitors are trying to do the same thing. We have a heritage of making that work, and our intention is to continue to do that.

There's a question here on the webcast about incorporating security in the endpoints, but it touches on a bigger conversation that you mentioned earlier that there's 2x the spend on peripheral, software and support relative to the PC hardware. Just talk about where some of the pockets of opportunity are to grow your wallet share through driving into -- more into peripherals and software and the services around the client devices.

Yes. Like Katy, like you hit on there. It's an opportunity that more than doubles the addressable market around the PC space. So we see that broader solution being important. Security that you touched on in your question here has become -- if it's possible to become an even hotter topic. It's a hotter topic in the past year. You think about a CIO going my attack surface. His or her attack surface has now expanded from an office environment to everyone's home environment and systems all over the world. We build intrinsic security into our devices. So you think about things like all POST/BIOS verification. There are some things that we see customers want us to lead in and we provide leadership capabilities so they can have a secure environment. We -- on our PC devices, we partnered with Carbon Black that's part of VMware and have a great AI machine learning capability that people can buy and have preinstalled in our systems. We do that across the software stack for other areas our customers are looking at. We have a leadership position in displays, which 10 years ago, people thought the desktop was going away. And then the desktop was going away and the display was going away. Well, visualizing your data is really, really important. And we've seen a huge amount of creativity in displays, performance, front of screen, how you get that information presented to you really matters. And people want that, whether they're using a desktop, a laptop or any other device, that bigger screen is really valuable. And think about the peripherals that go around the system, from simple IO devices to how people go operate and collaborate today with cameras, with headsets, with microphones. So our goal is to really understand what our customers are looking for, understand the problem they're trying to solve, the advantage of having such a large sales force as we can really help people figure out where they are today, where they want to get to and then we can bring that full opportunity to bear with customers. And it's good, fair margin business. We can package that all up for people. We can get them what they want. They're happier when they get that full solution rather than having to piece it together themselves. And then we can expand the size of business that we have with them. And the other thing they look at is like bigger business, more engagement with us is really good because then they have a partner that they can help used to plot their strategy. And you touched on how -- it's like the companies that are transforming and figuring out how to be digital are the most successful in their industry, whether it's an upstart, transforming an industry or an established company that's enlightened and thinking about how they go get ahead. And what better partner to have when you think about the capability we have across different spaces than Dell. So our customers see that as a real asset of, I get my problem solved, I get a deeper relationship, I get a real strategic partner who can help me plot a course that I need to be successful in my business. And as I touched on, they have world-class things in each area. So it's not a company with one really good thing, trying to sell you for other things that are not so good. It's like world-class offerings across each of those spaces. So I know I'm getting something that's really good, and I'm getting great advice because they don't -- it's not a one-trick thing. It's a really broad technology company, and they're going to point me in the right way for my business. So that's how I see those different pieces really coming together.

And that attach opportunity comes at higher margins. You showed a slide that margins have expanded to 6% plus. Is that a sustainable level of profitability? And there was a question that came on through the webcast. How do you think about incremental margins in your business? If we're now at a higher level of shipments and revenue, should investors be thinking about a higher level of profitability?

We -- those other -- the businesses we talked about come at a higher level of margin, especially if you think about services and peripherals. So that's been a good opportunity. It's been something we did from the beginning in our business and something that really makes us different of selling -- I talked about selling direct with the complementary channel. And as we sell direct, we can -- we're really good. Our team is very good at putting those other pieces as part of the sale. The thing I would -- I flagged, and I think I talked about, Katy, is you have to look at the last 2 years also with the eye to -- we had very favorable component cost declines, we had an environment where we're now on -- going on 3 years of different shortages in different spaces in the industry. So that's helped on the ASP side. So I don't know exactly how all those pieces settle out. But I think that eye is important. We've had a good approach of adding to our operating profit, but we've also been helped in the past 2 years as have other people in the industry with some of those other external dynamics going on.

Yes. And you bring up an important question around this supply chain dynamic where there is tightness, and there has been tightness for a couple of quarters. The industry has generally, at least today, been able to pass those higher costs through. Just give us a high-level view as investors are thinking through the supply chain environment, how is Dell equipped to manage through that maybe differently than some of your competitors or the rest of the industry.

We've seen, Katy, shortages that it was almost 3 years ago, started on the CPU side as an industry. We've seen that in panels. We've seen that more recently in ICs. And it's both the demand for technology that's out there in PCs, plus if you think about the whole world, there's a lot higher technology content in many of the other products that people buy. Now all that said, I look at our capability in our supply chain. We talked about the level of spend that we have. The expertise we've had in supply chain from really day 1 of the company being started and we feel we have, with that buying power and consistency of our -- you think about our management, whether it's Michael, Jeff Clarke, our CEO, our leadership team that has really been in this space for a long time and worked with some of these partners from when they started their businesses, we've been a good partner. We've grown in the industry, and we have the kind of relationships that we need to, I think, deliver and get products out there when we need to get products to our customer. So we're not immune to any challenges that happen in the world space. But we have a lot of capability in our supply chain that we can bring to bear to ensure we're able to deliver as we need to.

That's great. And that brings us to the end of the 45 minutes. So I'm going to wrap there. I really want to thank you, Sam, for spending the time today. Lots of helpful information. If anybody has any follow-up questions, don't hesitate to reach out to myself or the Dell IR team, and I want to ask each of you to please be well. Look forward to seeing you in person, hopefully, in the not-too-distant future. Have a good day, everyone.

Thanks, Katy.

Thank you.