Analyst Note | Nov 25, 2020
No-moat Dell Technologies' 3% year-over-year revenue growth and adjusted EPS of $2.03 solidly exceeded CapIQ consensus estimates for the third fiscal quarter. Benefiting Dell in the quarter, notebook computers are in high demand as employees and students shelter in place during the pandemic. Dell had record shipments, revenue, and profitability for its computer division, helping make up for weakness experienced within the server and storage business unit. While the pandemic may only be a temporary gusty tailwind for computer demand, we believe Dell's hybrid-cloud offerings can provide it with a sustainable presence in the IT infrastructure stack for customers. We are maintaining our $65 fair value estimate and see shares as fairly valued.
Compared with the prior year, infrastructure solutions group, or ISG, revenue declined by 4%; client solutions group's, or CSG's, grew by 8%; and VMware's expanded by 8%. Within ISG, servers and networking declined by 2% and storage shrank by 7%. Hyperconverged infrastructure was a highlight for ISG, but servers and storage are performing weaker than management expected, especially within the midrange. For CSG, commercial grew by 5% year over year and consumer expanded by 14%. Notebook orders were up 24% year over year, and results were fueled by strong demand in education, government, and consumers. VMware's results were driven by strong subscription and SaaS demand.
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