Dell tackling hard drive shortage; affirms plan is 'adaptable'

Dell tackling hard drive shortage; affirms plan is 'adaptable'

Summary: Dell is trying to maintain a positive front in the face of a hard drive shortage.

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TOPICS: Hardware, Dell
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Dell delivered decent earnings on Tuesday after the bell, but there are certainly some problems standing in its way for the next quarter.

See also: Dell's Q3, outlook a mixed bag amid weak demand, hard drive shortage Dell's third quarter: All eyes on the supply chain

Desktop and notebook revenue streams are down, and Dell's consumer sector is also rocky as Europe has stabilized, and the Asia Pacific region grows while the U.S. declines.

But the biggest concern on the horizon: a hard drive shortage following tragic flooding in Thailand.

Jeff Clarke, Dell's vice chairman of global operations and end user computing solutions, addressed the topic during the company's quarterly investors call on Thursday:

As all of you know, the flooding has significantly impacted the hard drive supply chain, but the complexity of the issue and the current state of affairs in Thailand where the flood waters are still receding makes it very difficult for the industry to pinpoint the magnitude or duration of shortages. So that puts the industry in an allocation environment at least through Q1. Last month, we made strategic purchases of inventory and pulled in supply from our hubs. This drove an increase in our end of quarter DSI.

We also have teams working with the impacted suppliers to manage our hard drive supply chain and qualify new sources of supply. Our goal is to mitigate any impact to our customers in Dell, and our teams will be working throughout the quarter to do just that. We have worked through various forms of industry supply shortages in the past, and each brings different variables into play. But we have found our operating model has proven to be very adaptable and effective.

Although Dell executives repeatedly asserted that the PC maker has everything under control, they didn't discuss many alternative options -- with the exception of one: solid state drives.

Citing that it would be "pretty obvious," Clarke thinks that the industry will pick up on this route, at least as a temporary band-aid in some situations:

SSD attach rates will go up. They are low single digits today, so I don't expect that to be a huge aid in solving the shortages that are in the disk drive industry today, and we will have an Ultrabook that will later arrive late in the fiscal year.

When asked during the Q&A portion of the call about how the HDD shortage is really going to affect the outlook, Dell senior vice president and CFO Brian Gladden responded that "outlook that we provided fully contemplates what we know now." Related:

Topics: Hardware, Dell

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