Dell Sets 3%-4% Growth Target, Launches Share Buyback Program

(Bloomberg) -- Dell Technologies Inc. laid out its vision for the coming years, forecasting annual revenue growth of 3% to 4% through 2026, and announced plans for a $5 billion share repurchase plan. 

In a statement ahead of a meeting with analysts Thursday, the computer hardware maker said its buyback program would be effective in November on the projected completion of the VMware Inc. spinoff. At that time, Dell expects to receive an investment-grade credit rating. 

The Round Rock, Texas-based company also said it plans to initiate a quarterly dividend in the fiscal 2023 first quarter, targeting an annual dividend of about $1 billion.

“At Dell Technologies, our core business is growing and thriving,” said Michael Dell, chairman and chief executive officer, in the statement.

The shares jumped 4.7% at 10:45 a.m. in New York. The stock had rallied 35% this year through Wednesday.

Dell is trying to provide a picture of what its business will look like once the effects of the pandemic and semiconductor shortage have played out. Last week, competitor Cisco Systems Inc. painted a more rosy outlook, predicting revenue will rise as much as 7% over the next five years. 

Dell was less bullish about sales Thursday but more optimistic about its earnings-per-share outlook, which, minus certain items, will grow about 6% annually through 2026. The company reiterated an earlier forecast for its fiscal 2022 third quarter, saying it expects revenue growth in the “mid to high teens” and operating income up 1% to 2% from the previous period.

Dell and its peers are trying to balance an unprecedented surge in demand for computer equipment needed to fuel working and studying from home during the lockdown against a shortage of components needed to produce that machinery. Semiconductor makers have been unable to fill all orders, forcing up prices and leading to delays.

The company is committing to giving some of the proceeds of its spin off of VMware to investors. 

VMware will distribute a special cash dividend of $11.5 billion to $12 billion to shareholders at the close of the deal, which is expected by the fourth quarter, Dell said in April. Dell, which owns 81% of VMware, will receive a payout of as much as $9.7 billion.
 

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