UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



(Mark One)

x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ~~April 29, 2011~~May 4, 2012
ORor
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number: 0-17017

Dell Inc.

(Exact name of registrant as specified in its charter)



Delaware		74-2487834
(State or ~~other jurisdiction~~Other Jurisdiction of ~~incorporation~~Incorporation or ~~organization)~~Organization)		(I.R.S. Employer Identification No.)

One Dell Way, Round Rock, Texas 78682

(Address of ~~principal executive offices)~~Principal Executive Offices) (Zip Code)

1-800-BUY-DELL

(Registrant’s ~~telephone number, including area code)~~Telephone Number, Including Area Code)

Indicate by check mark whether the ~~registrant:~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes R No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ~~(§ 232.405 of this chapter)~~ during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes R No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer R		Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No R

As of the close of business on May ~~19, 2011, 1,887,169,853~~24, 2012, 1,749,010,893 shares of common stock, par value $.01 per share, were outstanding.

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report includes “forward-looking statements.” The words “may,” “will,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “aim,” “seek” and similar expressions as they relate to us or our management are intended to identify these forward-looking statements. All statements by us regarding our expected financial position, revenues, cash flows and other operating results, business strategy, legal proceedings and similar matters are forward-looking statements. Our expectations expressed or implied in these forward-looking statements may not turn out to be correct. Our results could be materially different from our expectations because of various risks, including the risks discussed in “Part I - Item 1A - Risk ~~Factors"~~Factors” of our Annual Report on Form 10-K for the fiscal year ended ~~January 28, 2011.~~February 3, 2012. Any forward-looking statement speaks only as of the date as of which such statement is made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances, including unanticipated events, after the date as of which such statement was made.

Table of Contents



			Page
PART I - FINANCIAL INFORMATION
	Item 1.	Financial Statements
	Condensed Consolidated Statements of Financial Position at ~~April 29, 2011~~May 4, 2012 (unaudited), and ~~January 28, 2011~~February 3, 2012		14
	Condensed Consolidated Statements of Income for the three months ended May 4, 2012 (unaudited) and April 29, ~~2011(unaudited)~~ ~~and April 30, 2010~~2011 (unaudited)		25
	Condensed Consolidated Statements of Comprehensive Income for the three months ended May 4, 2012 (unaudited) and April 29, 2011 (unaudited)		6
	Condensed Consolidated Statements of Cash Flows for the three months ended ~~April 29, 2011~~ May 4, 2012 (unaudited) and April ~~30, 2010~~29, 2011 (unaudited)		37
	Notes to Condensed Consolidated Financial Statements (unaudited)		48
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2732
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4352
	Item 4.	Controls and Procedures	4452
PART II - OTHER INFORMATION
	Item 1.	Legal Proceedings	4552
	Item 1A.	Risk Factors	4552
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4553
	Item 6.	Exhibits	4654

	Signatures		4655
	Exhibit Index		4756

	Exhibits
	~~EX-3.1~~EX-10.1
	EX-12.1
	EX-31.1
	EX-31.2
	EX-32.1
	EX-101 INSTANCE DOCUMENT
	EX-101 SCHEMA DOCUMENT
	EX-101 CALCULATION LINKBASE DOCUMENT
	EX-101 LABELS LINKBASE DOCUMENT
	EX-101 PRESENTATION LINKBASE DOCUMENT
	EX-101 DEFINITION LINKBASE DOCUMENT

Table of Contents

PART I

ITEM 1 — FINANCIAL STATEMENTS

DELL INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in millions)


	April 29, 2011			January 28, 2011			May 4, 2012			February 3, 2012
	(unaudited)						(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	14,061		$	13,913		$	12,814		$	13,852
Short-term investments	418			452			901			966
Accounts receivable, net	6,196			6,493			6,289			6,476
Short-term financing receivables, net	3,205			3,643			3,200			3,327
Inventories, net	1,276			1,301			1,472			1,404
Other current assets	3,217			3,219			3,369			3,423
Total current assets	28,373			29,021			28,045			29,448
Property, plant, and equipment, net	1,987			1,953			2,119			2,124
Investments	762			704
Long-term investments							3,501			3,404
Long-term financing receivables, net	1,123			799			1,342			1,372
Goodwill	5,406			4,365			6,005			5,838
Purchased intangible assets, net	1,941			1,495			1,801			1,857
Other non-current assets	196			262			476			490
Total assets	$	39,788		$	38,599		$	43,289		$	44,533

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	816		$	851		$	3,186		$	2,867
Accounts payable	10,442			11,293			10,970			11,656
Accrued and other	3,590			4,181			3,076			3,934
Short-term deferred services revenue	3,282			3,158			3,582			3,544
Total current liabilities	18,130			19,483			20,814			22,001
Long-term debt	6,794			5,146			5,813			6,387
Long-term deferred services revenue	3,608			3,518			3,837			3,836
Other non-current liabilities	2,886			2,686			3,468			3,392
Total liabilities	31,418			30,833			33,932			35,616
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock and capital in excess of $.01 par value; shares authorized: 7,000; shares issued: 3,381 and 3,369, respectively; shares outstanding: 1,899 and 1,918, respectively	11,900			11,797
Treasury stock at cost: 1,007 and 976 shares, respectively	(29,154		)	(28,704		)
Common stock and capital in excess of $.01 par value; shares authorized: 7,000; shares issued: 3,407 and 3,390, respectively; shares outstanding: 1,761 for each period presented							12,313			12,187
Treasury stock at cost: 1,171 and 1,154 shares, respectively							(31,745		)	(31,445		)
Retained earnings	25,689			24,744			28,871			28,236
Accumulated other comprehensive loss	(65		)	(71		)	(82		)	(61		)
Total stockholders’ equity	8,370			7,766			9,357			8,917
Total liabilities and stockholders’ equity	$	39,788		$	38,599		$	43,289		$	44,533

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

DELL INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share ~~amounts;~~amounts; unaudited)


	Three Months Ended						Three Months Ended
	April 29, 2011			April 30, 2010			May 4, 2012			April 29, 2011
Net revenue:
Products	$	12,059		$	12,086		$	11,423		$	12,059
Services, including software related	2,958			2,788			2,999			2,958
Total net revenue	15,017			14,874			14,422			15,017
Cost of net revenue:
Products	9,436			10,385			9,330			9,436
Services, including software related	2,149			1,973			2,025			2,149
Total cost of net revenue	11,585			12,358			11,355			11,585
Gross margin	3,432			2,516			3,067			3,432
Operating expenses:
Selling, general, and administrative	2,025			1,830			2,009			2,025
Research, development, and engineering	195			167			234			195
Total operating expenses	2,220			1,997			2,243			2,220
Operating income	1,212			519			824			1,212
Interest and other, net	(42		)	(68		)	(32		)	(42		)
Income before income taxes	1,170			451			792			1,170
Income tax provision	225			110			157			225
Net income	$	945		$	341		$	635		$	945
Earnings per share:
Basic	$	0.50		$	0.17		$	0.36		$	0.50
Diluted	$	0.49		$	0.17		$	0.36		$	0.49
Weighted-average shares outstanding:
Basic	1,908			1,961			1,759			1,908
Diluted	1,923			1,973			1,774			1,923

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

DELL INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~COMPREHENSIVE INCOME

(in millions; unaudited)

Three Months Ended
April 29,
2011 April 30,
2010
Cash flows from operating activities:
Net income $ 945 $ 341
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 216 247
Stock-based compensation 99 76
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies — 30
Deferred income taxes (63 ) (31 )
Provision for doubtful accounts — including financing receivables 47 122
Other (5 ) —
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable 471 (119 )
Financing receivables 21 (208 )
Inventories 38 (132 )
Other assets 110 69
Accounts payable (925 ) 22
Deferred services revenue 191 72
Accrued and other liabilities (680 ) (251 )
Change in cash from operating activities 465 238
Cash flows from investing activities:
Investments:
Purchases (240 ) (350 )
Maturities and sales 222 169
Capital expenditures (137 ) (46 )
Proceeds from sale of facility and land 12 —
Collections on purchased financing receivables 67 —
Acquisitions, net of cash received (1,473 ) (133 )
Change in cash from investing activities (1,549 ) (360 )
Cash flows from financing activities:
Repurchase of common stock (450 ) (200 )
Issuance of common stock under employee plans 10 7
Issuance of commercial paper (maturity 90 days or less), net — 234
Proceeds from debt 1,930 268
Repayments of debt (323 ) (566 )
Other 3 3
Change in cash from financing activities 1,170 (254 )
Effect of exchange rate changes on cash and cash equivalents 62 (4 )
Change in cash and cash equivalents 148 (380 )
Cash and cash equivalents at beginning of the period 13,913 10,635
Cash and cash equivalents at end of the period $ 14,061 $ 10,255



	Three Months Ended
	May 4, 2012			April 29, 2011
Net income	$	635		$	945

Other comprehensive income, net of tax
Foreign currency translation adjustments	(8		)	74

Available-for-sale investments
Change in unrealized gain or loss	—			1
Less: reclassification adjustment for net (gains) losses included in net income	(2		)	(1		)
Net change	(2		)	—

Cash Flow Hedges
Change in unrealized gain or loss	(25		)	(235		)
Less: reclassification adjustment for net (gains) losses included in net income	14			167
Net change	(11		)	(68		)

Total other comprehensive income (loss), net of tax benefit (expense) of $(9) and $0, respectively	(21		)	6
Comprehensive income, net of tax	$	614		$	951

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

DELL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions; unaudited)



	Three Months Ended
	May 4, 2012			April 29, 2011
Cash flows from operating activities:
Net income	$	635		$	945
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	248			216
Stock-based compensation expense	95			99
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies	(10		)	—
Deferred income taxes	47			(63		)
Provision for doubtful accounts — including financing receivables	63			47
Other	(5		)	(5		)
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable	161			471
Financing receivables	71			21
Inventories	(68		)	38
Other assets	48			110
Accounts payable	(671		)	(925		)
Deferred services revenue	33			191
Accrued and other liabilities	(785		)	(680		)
Change in cash from operating activities	(138		)	465
Cash flows from investing activities:
Investments:
Purchases	(673		)	(240		)
Maturities and sales	640			222
Capital expenditures	(142		)	(137		)
Proceeds from sale of facilities and land	—			12
Collections on purchased financing receivables	55			67
Acquisitions, net of cash received	(245		)	(1,473		)
Change in cash from investing activities	(365		)	(1,549		)
Cash flows from financing activities:
Repurchases of common stock	(324		)	(450		)
Issuance of common stock under employee plans	38			10
Issuance (repayment) of commercial paper (maturity 90 days or less), net	13			—
Proceeds from debt	596			1,930
Repayments of debt	(863		)	(323		)
Other	8			3
Change in cash from financing activities	(532		)	1,170
Effect of exchange rate changes on cash and cash equivalents	(3		)	62
Change in cash and cash equivalents	(1,038		)	148
Cash and cash equivalents at beginning of the period	13,852			13,913
Cash and cash equivalents at end of the period	$	12,814		$	14,061

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 — BASIS OF PRESENTATION

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements of Dell Inc. (individually and together with its consolidated subsidiaries, "Dell") should be read in conjunction with the Consolidated Financial Statements and accompanying Notes filed with the U.S. Securities and Exchange Commission ("SEC") in Dell's Annual Report on Form 10-K for the fiscal year ended ~~January 28, 2011~~February 3, 2012 ("Fiscal ~~2011"~~2012"). The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of Dell and its consolidated subsidiaries at ~~April 29, 2011,~~May 4, 2012, the results of its operations and corresponding comprehensive income for the three months ended May 4, 2012, and April 29, 2011, and its cash flows for the three months ended May 4, 2012, and April 29, ~~2011, and April 30, 2010.~~2011.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in Dell's Condensed Consolidated Financial Statements and the accompanying Notes. Actual results could differ materially from those estimates. The results of operations and corresponding comprehensive income for the three months ended May 4, 2012, and April 29, 2011, ~~and April 30, 2010,~~ and the cash flows for the three months ended May 4, 2012, and April 29, 2011, ~~and April 30, 2010,~~ are not necessarily indicative of the results to be expected for the full fiscal year or for any other fiscal period.

Dell's fiscal year is the 52 or 53 week period ending on the Friday nearest January 31. The fiscal year ending February ~~3, 2012~~1, 2013 ("Fiscal ~~2012"~~2013"), will be a 5352 week period.

In the first quarter of Fiscal 2013, Dell made certain segment realignments in order to conform to the way Dell now internally manages segment performance. Dell has recast prior period amounts to provide visibility and comparability. None of these changes impact Dell's previously reported consolidated net revenue, gross margin, operating income, net income, or earnings per share. See Note 14 of the Notes to the Condensed Consolidated Financial Statements for more information.

Recently Issued ~~and Adopted~~ Accounting Pronouncements

~~Credit Quality of Financing Receivables and the Allowance for Credit Losses~~Comprehensive Income— In ~~July 2010,~~June 2011, the ~~Financial Accounting Standards Board ("FASB")~~FASB issued a new ~~pronouncement that requires enhanced disclosures regarding~~guidance on presentation of comprehensive income. The new guidance eliminates the ~~nature~~option to present components of ~~credit risk inherent in an entity's portfolio~~other comprehensive income as part of ~~financing receivables, how that risk is analyzed, and~~ the ~~changes and reasons for those~~statement of changes in ~~the allowance for credit losses. The~~stockholders' equity and requires an entity to present either one continuous statement of net income and other comprehensive income or two separate, but consecutive statements. This new ~~disclosures require information for both the financing receivables and the related allowance for credit losses at more disaggregated levels. Disclosures related~~guidance relates only to ~~information as~~presentation. Dell began presenting a separate Condensed Consolidated Statement of ~~the end of a reporting period became effective for Dell in Fiscal 2011. Specific disclosures regarding activities that occur during a reporting period are now required for Dell beginning~~Comprehensive Income in the first quarter of the fiscal year ending February ~~3, 2012. As these changes relate only~~1, 2013.

Intangibles- Goodwill and Other — In September 2011, the FASB issued new guidance that simplified how entities test goodwill for impairment. After assessment of certain qualitative factors, if it is determined to ~~disclosures, they~~be more likely than not that the fair value of a reporting unit is less than its carrying amount, entities must perform the quantitative analysis of the goodwill impairment test. Otherwise, the quantitative test becomes optional. Dell adopted this new guidance in the first quarter of the fiscal year ending February 1, 2013. Goodwill is tested for impairment on an annual basis in the second fiscal quarter, or sooner if an indicator of impairment occurs. The adoption of this guidance did not ~~have an~~ impact on Dell's ~~consolidated financial results. See Note 5 of Notes to~~ Condensed Consolidated Financial ~~Statements~~Statements.

Disclosures about Offsetting Assets and Liabilities — In December 2011, the FASB issued new guidance that will enhance disclosure requirements about the nature of an entity’s right to offset and related arrangements associated with its financial instruments and derivative instruments. This new guidance requires the disclosure of the gross amounts subject to rights of offset, amounts offset in accordance with the accounting standards followed, and the related net exposure. This new guidance will be effective for Dell for the first quarter of the fiscal year ending January 31, 2014. Early adoption is not permitted. ~~more information on~~Other than requiring additional disclosures, Dell does not expect that this new guidance will impact Dell's ~~disclosures relating to the credit quality of its financing receivables.~~Condensed Consolidated Financial Statements.

~~NOTE 2 — INVENTORIES~~

April 29,
2011 January 28,
2011
(in millions)
Inventories:
Production materials $ 731 $ 593
Work-in-process 171 232
Finished goods 374 476
Total $ 1,276 $ 1,301

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 2 — INVENTORIES



	May 4, 2012		February 3, 2012
	(in millions)
Inventories, net:
Production materials	$	785	$	753
Work-in-process	312		239
Finished goods	375		412
Total	$	1,472	$	1,404

NOTE 3 — FAIR VALUE MEASUREMENTS

The following table presents Dell's hierarchy for its assets and liabilities measured at fair value on a recurring basis as of ~~April 29, 2011~~May 4, 2012, and ~~January 28, 2011~~February 3, 2012:


	April 29, 2011								January 28, 2011								May 4, 2012								February 3, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1^(a)		Level 2 ^(a)		Level 3		Total		Level 1 ^(a)		Level 2 ^(a)		Level 3		Total
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs				Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs				Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs				Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
							(in millions)																(in millions)
Assets:
Cash equivalents:
Money market funds	$	9,579	$	—	$	—	$	9,579	$	6,261	$	—	$	—	$	6,261	$	9,246	$	—	$	—	$	9,246	$	8,370	$	—	$	—	$	8,370
Commercial paper	—		1,390		—		1,390		—		2,945		—		2,945		—		—		—		—		—		2,011		—		2,011
U.S. government and agencies	—		16		—		16		—		1,699		—		1,699
Debt Securities:
U.S. government and agencies	—		27		—		27		—		79		—		79
U.S. corporate																	—		—		—		—		—		5		—		5
Debt securities:
Non- U.S. government and agencies																	—		153		—		153		—		94		—		94
Commercial paper																	—		314		—		314		—		434		—		434
U.S. corporate	—		524		34		558		—		464		32		496		—		2,803		—		2,803		—		2,668		—		2,668
International corporate	—		466		—		466		—		457		—		457		—		1,006		—		1,006		—		1,055		—		1,055
Equity and other securities	—		113		—		113		—		109		—		109		2		111		—		113		2		105		—		107
Derivative instruments	—		60		—		60		—		27		—		27		—		84		—		84		—		140		—		140
Total assets	$	9,579	$	2,596	$	34	$	12,209	$	6,261	$	5,780	$	32	$	12,073	$	9,248	$	4,471	$	—	$	13,719	$	8,372	$	6,512	$	—	$	14,884
Liabilities:
Derivative instruments	$	—	$	159	$	—	$	159	$	—	$	28	$	—	$	28	$	—	$	19	$	—	$	19	$	—	$	17	$	—	$	17
Total liabilities	$	—	$	159	$	—	$	159	$	—	$	28	$	—	$	28	$	—	$	19	$	—	$	19	$	—	$	17	$	—	$	17

____________________

^(a)Dell did not transfer any securities between levels during the three months ended May 4, 2012 or during the twelve months ended February 3, 2012.

The following section describes the valuation methodologies Dell uses to measure financial instruments at fair value:

Cash Equivalents -— The majority of Dell's cash equivalents in the above table consists of money market funds and corporate commercial paper, ~~including corporate and asset-backed commercial paper, and U.S. government and agencies,~~ all with original maturities of ~~less than~~ 90 ~~days~~ days or less and valued at fair ~~value which approximates cost.~~value. The valuations of these securities are based on quoted prices in active markets for identical assets, when available, or pricing models whereby all significant inputs are observable or can be derived from or corroborated by observable market data. ~~When quoted prices are not available,~~ Dell ~~utilizes a~~reviews security pricing ~~service to assist in obtaining fair value pricing. Dell conducts reviews~~and assesses liquidity on a quarterly ~~basis to verify pricing, assess liquidity, and determine if significant inputs have changed that would impact the fair value hierarchy disclosure.~~basis.

Debt Securities -— The majority of Dell's debt securities consists of various fixed income securities such as U.S. ~~government~~corporate, international corporate, and ~~agencies, and U.S. and international corporate. Dell utilizes a pricing service to assist management in measuring fair value pricing for the majority of this investment portfolio.~~commercial paper. Valuation is based on pricing models whereby all significant inputs, including

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

benchmark yields, reported trades, broker-dealer quotes, issue spreads, benchmark securities, bids, offers, and other market related data, are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset. Inputs are documented in accordance with the fair value measurements hierarchy. Dell ~~conducts~~ reviews security pricing and assesses liquidity on a quarterly ~~basis~~basis. See Note 4 of the Notes to ~~verify pricing, assess liquidity, and determine if significant valuation inputs have changed that would impact~~ the ~~fair value hierarchy disclosure. The Level 3 position as of~~ ~~April 29, 2011, and~~ ~~January 28, 2011~~, represents a convertible debt security that Dell was unable to corroborate with observable market data. The investment is valued at cost plus accrued interest as this is management's best estimate of fair value.Condensed Consolidated Financial Statements for additional information about investments.

Equity and Other Securities -— The majority of Dell's investments in equity and other securities consists of various mutual funds held in Dell's Deferred Compensation Plan. The valuation of these securities is based on pricing models whereby all significant inputs are observable or can be derived from or corroborated by observable market data. The Level 1 position consists of an equity investment which began trading during Fiscal 2012. The valuation is based on quoted prices in active markets. This investment was previously accounted for under the cost method.

~~Table of Contents~~

~~DELL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

Derivative Instruments -— Dell's derivative financial instruments consist primarily of foreign currency forward and purchased option contracts and interest rate swaps. The fair value of the portfolio is determined using valuation models based on market observable inputs, including interest rate curves, forward and spot prices for currencies, and implied volatilities. Credit risk is factored into the fair value calculation of Dell's derivative instrument portfolio. For interest rate derivative instruments, credit risk is determined at the contract level with the use of credit default spreads of either Dell, when in a net liability position, or the relevant counterparty, when in a net asset position. For foreign exchange derivative instruments, credit risk is determined in a similar manner, except that the credit default spread is applied based on the net position of each counterparty with the use of the appropriate credit default spreads. See Note 7 of the Notes to the Condensed Consolidated Financial Statements for a description of Dell's derivative financial instrument activities.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis -— Certain assets are measured at fair value on a nonrecurring basis and therefore are not included in the recurring fair value table above. ~~The~~These assets consist primarily of investments accounted for under the cost method and non-financial assets such as goodwill and intangible assets. Investments accounted for under the cost method included in equity and other securities ~~approximate~~approximated $1613 million and $1512 million, onas of ~~April 29, 2011~~May 4, 2012, and ~~January 28, 2011~~February 3, 2012, respectively. Goodwill and intangible assets are measured at fair value initially and subsequently when there is an indicator of impairment and the impairment is recognized. ~~No impairment charges of goodwill and intangible assets were recorded for the three months ended~~ ~~April 29, 2011~~. See Note 9 of the Notes to the Condensed Consolidated Financial Statements for additional information about goodwill and intangible assets.

610

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 4 — INVESTMENTS

The following table summarizes, by major security type, the fair value and amortized cost of Dell's investments. All debt security investments with remaining maturities in excess of one year and substantially all equity and other securities are recorded as long-term investments in the Condensed Consolidated Statements of Financial Position.


																			May 4, 2012										February 3, 2012
	April 29, 2011									January 28, 2011									Fair Value		��	Cost		Unrealized Gain		Unrealized (Loss)			Fair Value		Cost		Unrealized Gain		Unrealized (Loss)
	Fair Value		Cost		Unrealized Gain		Unrealized (Loss)			Fair Value		Cost		Unrealized Gain		Unrealized (Loss)			(in millions)
	(in millions)
Investments:
U.S. government and agencies	$	7	$	7	$	—	$	—		$	58	$	58	$	—	$	—
Non- U.S. government and agencies																			$	30		$	30	$	—	$	—		$	24	$	24	$	—	$	—
Commercial paper																			314			314		—		—			434		434		—		—
U.S. corporate	252		252		—		—			254		253		1		—			394			393		1		—			336		335		1		—
International corporate	159		159		—		—			140		140		—		—			163			163		—		—			172		172		—		—
Total short-term investments	418		418		—		—			452		451		1		—			901			900		1		—			966		965		1		—

U.S. government and agencies	20		20		—		—			21		20		1		—
Non- U.S. government and agencies																			123			123		—		—			70		70		—		—
U.S. corporate	306		306		1		(1		)	242		243		—		(1		)	2,409			2,395		15		(1		)	2,332		2,322		12		(2		)
International corporate	307		306		1		—			317		317		—		—			843			838		5		—			883		880		4		(1		)
Equity and other securities	129		129		—		—			124		124		—		—			126			126		—		—			119		119		—		—
Total long-term investments	762		761		2		(1		)	704		704		1		(1		)	3,501			3,482		20		(1		)	3,404		3,391		16		(3		)
Total investments	$	1,180	$	1,179	$	2	$	(1	)	$	1,156	$	1,155	$	2	$	(1	)	$	4,402		$	4,382	$	21	$	(1	)	$	4,370	$	4,356	$	17	$	(3	)

Dell's investments in debt securities are classified as available-for-sale. Equity and other securities primarily relate to investments held in Dell's Deferred Compensation Plan, which are classified as trading securities. ~~Both of these classes of~~The remaining equity and other securities ~~are reported at fair value using the specific identification method. All other investments~~ are initially recorded at cost and reduced for any impairment losses. Security classes reported at fair value use the specific identification method. The fair value of Dell's portfolio iscan be affected ~~primarily~~ by interest rate movements, ~~rather than~~ credit, and liquidity risks.~~Most of~~ Dell's investments in debt securities have contractual maturities of three years or less ~~than five years~~.

711

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 5 — FINANCIAL SERVICES

Dell Financial Services ~~L.L.C.~~

Dell offers or arranges various financing options and services for its business and consumer customers in the U.S. and Canada through Dell Financial Services ~~L.L.C.~~ (“DFS”)~~, a wholly-owned subsidiary of Dell.~~. DFS's key activities include the origination, collection, and servicing of customer receivables primarily related to the purchase of Dell products and services. In some cases, Dell may originate financing activities for its commercial customers related to the purchase of third-party technology products that complement Dell's portfolio of products and services. New financing originations, which represent the amounts of financing provided by DFS to customers for equipment and related software and services, ~~through DFS,~~including third-party originations, were approximately $~~800~~812 million and $~~900~~855 million, for the three months ended ~~April 29, 2011~~May 4, 2012, and April ~~30, 2010~~29, 2011, respectively. The results of DFS are included in the business segment where the customer receivable was originated.

Dell's financing receivables are aggregated into the following categories:

Revolving loans — Revolving loans offered under private label credit financing programs provide qualified customers with a revolving credit line for the purchase of products and services offered by Dell. These private label credit financing programs are referred to as Dell Preferred Account (“DPA”) and Dell Business Credit (“DBC”). The DPA product is primarily offered to individual customers, and the DBC product is primarily offered to small and medium commercial customers. Revolving loans in the U.S. bear interest at a variable annual percentage rate that is tied to the prime rate. Based on historical payment patterns, revolving loan transactions are typically repaid within 12 months on average. Revolving loans are included in short-term financing receivables. From time to time, account holders may have the opportunity to finance their Dell purchases with special programs during which, if the outstanding balance is paid in full by a specific date, no interest is charged. These special programs generally range from 6 to 12 months. As of May 4, 2012, and February 3, 2012, receivables under these special programs were $295 million and $328 million, respectively.

Fixed-term sales-type leases and loans — Dell enters into sales-type lease arrangements with customers who desire lease financing. Leases with business customers have fixed terms of generally two to four years. Future maturities of minimum lease payments at May 4, 2012, were as follows: Fiscal 2013 - $936 million; Fiscal 2014 - $833 million; Fiscal 2015 - $411 million; Fiscal 2016 - $73 million; Fiscal 2017 and beyond - $8 million. Dell also offers fixed-term loans to qualified small businesses, large commercial accounts, governmental organizations, educational entities, and certain individual customers. These loans are repaid in equal payments including interest and have defined terms of generally three to four years.

Customer receivables include revolving loans and fixed-term leases and loans resulting primarily from the sale of Dell products and services. Based on how Dell assesses risk and determines the appropriate allowance levels, Dell has two portfolio segments, (1) fixed-term leases and loans and (2) revolving loans. Portfolio segments are further segregated into classes. During the first quarter of Fiscal 2013, Dell re-aligned the presentation of these classes based on products, customer type, credit risk evaluation, and whether the receivable was owned by Dell since its inception or was purchased subsequent to its inception. Prior to the first quarter of Fiscal 2013, portfolio classes were based on operating segment and whether the receivable was owned by Dell since its inception or was purchased subsequent to its inception. This change in presentation during the first quarter of Fiscal 2013 affected disclosures only and had no impact on how credit risk is assessed or on reserve rates.

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table summarizes the components of Dell's financing receivables segregated by portfolio segment as of May 4, 2012, and February 3, 2012:



	May 4, 2012									February 3, 2012
	Revolving			Fixed-term			Total			Revolving			Fixed-term			Total
	(in millions)
Financing Receivables, net:
Customer receivables, gross	$	1,956		$	2,415		$	4,371		$	2,096		$	2,443		$	4,539
Allowances for losses	(169		)	(23		)	(192		)	(179		)	(23		)	(202		)
Customer receivables, net	1,787			2,392			4,179			1,917			2,420			4,337
Residual interest	—			363			363			—			362			362
Financing receivables, net	$	1,787		$	2,755		$	4,542		$	1,917		$	2,782		$	4,699
Short-term	$	1,787		$	1,413		$	3,200		$	1,917		$	1,410		$	3,327
Long-term	—			1,342			1,342			—			1,372			1,372
Financing receivables, net	$	1,787		$	2,755		$	4,542		$	1,917		$	2,782		$	4,699

The following table summarizes the changes in the allowance for financing receivable losses for the respective periods:



	Three Months Ended
	May 4, 2012									April 29, 2011
	Revolving			Fixed- term			Total			Revolving			Fixed- term			Total
	(in millions)
Allowance for financing receivable losses:
Balance at beginning of period	$	179		$	23		$	202		$	214		$	27		$	241
Principal charge-offs	(49		)	(2		)	(51		)	(58		)	(2		)	(60		)
Interest charge-offs	(9		)	—			(9		)	(11		)	—			(11		)
Recoveries	12			1			13			19			1			20
Provision charged to income statement	36			1			37			27			—			27
Balance at end of period	$	169		$	23		$	192		$	191		$	26		$	217

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table summarizes the aging of Dell's customer receivables, gross, including accrued interest, as of May 4, 2012, and February 3, 2012, segregated by class:



	May 4, 2012								February 3, 2012
	Current		Past Due 1 — 90 Days		Past Due > 90 Days		Total		Current		Past Due 1 — 90 Days		Past Due > 90 Days		Total
	(in millions)
Revolving — DPA
Owned since inception	$	1,188	$	135	$	39	$	1,362	$	1,249	$	148	$	49	$	1,446
Purchased	240		38		12		290		272		47		18		337
Fixed-term — Non-Commercial
Owned since inception	37		1		—		38		29		1		—		30
Purchased	54		4		1		59		61		5		1		67
Revolving — DBC^(a)	267		30		7		304		272		33		8		313
Fixed-term — Small Commercial^(a)	250		13		1		264		234		12		4		250
Fixed-term — Medium and Large Commercial^(a)	1,942		107		5		2,054		1,946		136		14		2,096
Total customer receivables, gross	$	3,978	$	328	$	65	$	4,371	$	4,063	$	382	$	94	$	4,539

_________________

^(a)Includes purchased receivables that are not significant to any portfolio class.

DFS Acquisitions

In ~~April 2011,~~Fiscal 2012, Dell ~~announced its intent~~entered into a definitive agreement to acquire ~~Dell Financial Services Canada Limited. from CIT Group Inc. ("CIT"), as well as~~ CIT Vendor Finance's Dell-related financing assets portfolio and sales and servicing functions in Europe. The acquisition of these assets will enable global expansion of Dell's direct finance model. Subject to customary closing, regulatory, and other conditions, Dell expects to ~~close~~complete this transaction in Fiscal 2014.

Purchased Credit-Impaired Loans

During the ~~acquisition in Canada in the second~~third quarter of Fiscal 2011, Dell purchased a portfolio of revolving loan receivables from CIT Group Inc. Prior to the acquisition, it was evident that Dell would not collect on all contractually required principal and interest payments. As a result, these receivables met the definition of Purchased Credit-Impaired (“PCI”) loans. At May 4, 2012, the outstanding balance of these receivables, including principal and accrued interest, was $388 million and the ~~acquisition~~carrying amount was $156 million.

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table shows activity for the accretable yield on the PCI loans for the three months ended May 4, 2012, and April 29, 2011. Dell expects the remaining balance of the accretable yield as of May 4, 2012 to accrete over the next three years, using the effective interest method.



	Three Months Ended
	May 4, 2012			April 29, 2011
	(in millions)
Accretable Yield:
Balance at beginning of period	$	142		$	137
Accretion	(20		)	(21		)
Prospective yield adjustment	—			35
Balance at end of period	$	122		$	151

Credit Quality

The following tables summarize customer receivables, gross, including accrued interest by credit quality indicator segregated by class, as of May 4, 2012, and February 3, 2012. For DPA revolving and fixed-term loans to individual customers, Dell makes credit decisions based on propriety scorecards, which include the customer's credit history, payment history, credit usage, and other credit agency-related elements. For commercial customers, an internal grading system is utilized that assigns a credit level score based on a number of considerations, including liquidity, operating performance, and industry outlook. These credit level scores range from one to sixteen for medium and large commercial customers, which includes governmental customers. The credit level scores for DBC and small commercial customers generally range from one to six. The categories shown in ~~Europe~~the tables below segregate customer receivables based on the relative degrees of credit risk. The credit quality categories cannot be compared between the different classes as loss experience in each class varies substantially. The credit quality indicators for DPA revolving accounts are primarily as of each quarter-end date, and all others are generally updated on a periodic basis.

For the receivables shown in the below table, the higher quality category includes prime accounts which are generally of a higher credit quality that are comparable to U.S. customer FICO scores of 720 or above. The mid-category represents the mid-tier accounts that are comparable to U.S. FICO scores from 660 to 719. The lower category is generally sub-prime and represents lower credit quality accounts that are comparable to FICO scores below 660.



	May 4, 2012								February 3, 2012
	Higher		Mid		Lower		Total		Higher		Mid		Lower		Total
	(in millions)
Revolving — DPA
Owned since inception	$	199	$	387	$	776	$	1,362	$	220	$	412	$	814	$	1,446
Purchased	$	24	$	71	$	195	$	290	$	28	$	80	$	229	$	337
Fixed-term — Non-Commercial
Owned since inception	$	2	$	19	$	17	$	38	$	2	$	14	$	14	$	30
Purchased	$	4	$	29	$	26	$	59	$	4	$	32	$	31	$	67

For the receivables shown in the table below, the higher quality category includes receivables that are generally within Dell's top two internal credit quality levels, which typically have the lowest loss experience. The middle category generally falls within credit levels three and four, and the lower category generally falls within Dell's bottom two credit levels, which experience higher loss rates. Although both fixed-term and revolving products generally rely on a six-level internal rating system, the grading criteria and classifications are different as the loss performance varies between these product and customer sets. Therefore, the credit levels are not comparable between the small commercial fixed-term and DBC revolving classes.

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)



	May 4, 2012								February 3, 2012
	Higher		Mid		Lower		Total		Higher		Mid		Lower		Total
	(in millions)
Revolving — DBC	$	105	$	95	$	104	$	304	$	111	$	98	$	104	$	313
Fixed-term — Small Commercial^(a)	$	95	$	73	$	96	$	264	$	91	$	74	$	85	$	250

_________________

^(a) During the first quarter of Fiscal 2013, ~~subject~~Dell re-defined its internal scoring categorization for its small Commercial fixed-term customers. In connection with this change, Dell has re-categorized existing customers and has recast prior period credit quality categories for these customers to ~~customary closing conditions.~~conform to the current year's classification. This change has no impact on Dell's allowance for loss rates.

For the receivables shown in the below table, Dell's internal credit level scoring has been aggregated to their most comparable external commercial rating agency equivalents. Investment grade generally represents the highest credit quality accounts, non-investment grade represents middle quality accounts, and sub-standard represents the lowest quality accounts.



	May 4, 2012								February 3, 2012
	Investment		Non-Investment		Sub-Standard		Total		Investment		Non-Investment		Sub-Standard		Total
	(in millions)
Fixed-term — Medium and Large Commercial	$	1,430	$	396	$	228	$	2,054	$	1,504	$	363	$	229	$	2,096

Asset Securitizations

Dell transfers certain U.S. customer financing receivables to ~~special purpose entities~~Special Purpose Entities (“SPEs”). which meet the definition of a Variable Interest Entity ("VIE") and are consolidated into Dell's Condensed Consolidated Financial Statements. The SPEs are bankruptcy remote legal entities with separate assets and liabilities. The purpose of the SPEs is to facilitate the funding of customer receivables in the capital markets. These SPEs have entered into financing arrangements with multi-seller conduits that, in turn, issue asset-backed debt securities in the capital markets. Dell's risk of loss related to securitized receivables is limited to the amount of Dell's right to receive collections for assets securitized exceeding the amount required to pay interest, principal, and other fees and expenses related to the asset-backed securities. Dell provides credit enhancement to the securitization in the form of over-collateralization. ~~These~~Customer receivables funded via securitization through SPEs ~~meet~~were $536 million and $499 million during the ~~definition of a variable interest entity~~first quarters Fiscal 2013 and ~~Dell has determined that it is~~Fiscal 2012, respectively.

The following table shows financing receivables held by the ~~primary beneficiary of these SPEs and has~~ consolidated them in Dell's condensed consolidated financial statements. The primary factors in this determination were the obligation to absorb losses due to the interest Dell retains in the assets transferred to the SPEs in the form of over-collateralization, and the power to direct activities through the servicing role performed by Dell.VIEs:



	May 4, 2012		February 3, 2012
	(in millions)
Financing receivables held by consolidated VIEs, net:
Short-term, net	$	1,117	$	1,096
Long-term, net	455		429
Financing receivables held by consolidated VIEs, net	$	1,572	$	1,525

Dell's securitization programs are generally effective for 12 months and are subject to an annual renewal process. These programs contain standard structural features related to the performance of the securitized receivables. ~~These~~The structural features include defined credit losses, delinquencies, average credit scores, and excess collections above or below specified levels. In the event one or more of these criteria are not met and Dell is unable to restructure the program, no further funding of receivables will be permitted and the timing of Dell's expected cash flows from over-collateralization will be delayed. At~~April 29, 2011, these criteria were met.~~

~~Financing Receivables~~

~~The following table summarizes the components of Dell's financing receivables segregated by portfolio segment:~~

April 29, 2011 January 28, 2011
Revolving Fixed-term Total Revolving Fixed-term Total
(in millions)
Financing Receivables, net:
Customer receivables, gross $ 2,200 $ 2,031 $ 4,231 $ 2,396 $ 1,992 $ 4,388
Allowances for losses (191 ) (26 ) (217 ) (214 ) (27 ) (241 )
Customer receivables, net 2,009 2,005 4,014 2,182 1,965 4,147
Residual interest — 314 314 — 295 295
Financing receivables, net $ 2,009 $ 2,319 $ 4,328 $ 2,182 $ 2,260 $ 4,442
Short-term $ 2,009 $ 1,196 $ 3,205 $ 2,182 $ 1,461 $ 3,643
Long-term — 1,123 1,123 — 799 799
Financing receivables, net $ 2,009 $ 2,319 $ 4,328 $ 2,182 $ 2,260 $ 4,442

816

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

~~Included in financing receivables, net, are receivables that are held by consolidated variable interest entities ("VIEs") as shown in the table below:~~

April 29,
2011 January 28,
2011
(in millions)
Financing receivables held by consolidated VIEs, net:
Short-term, net $ 936 $ 1,087
Long-term, net 437 262
Financing receivables held by consolidated VIEs, net $ 1,373 $ 1,349

~~The following table summarizes the changes in the allowance for financing receivable losses for the respective periods:~~

Three Months Ended
April 29, 2011 April 30, 2010
Revolving Fixed-term Total Revolving Fixed-term Total
(in millions)
Allowance for financing receivable losses:
Balance at the beginning of period $ 214 $ 27 $ 241 $ 224 $ 13 $ 237
Incremental allowance due to VIE consolidation — — — — 16 16
Principal charge-offs (58 ) (2 ) (60 ) (49 ) (6 ) (55 )
Interest charge-offs (11 ) — (11 ) (6 ) — (6 )
Recoveries 19 1 20 5 — 5
Provision charged to income statement 27 — 27 82 6 88
Balance at end of period $ 191 $ 26 $ 217 $ 256 $ 29 $ 285

~~Table of Contents~~

~~DELL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

~~The following table summarizes the aging of Dell's customer receivables, gross, including accrued interest, as of~~ ~~April 29, 2011~~ ~~and January 28, 2011 segregated by class:~~

April 29, 2011 January 28, 2011
Current Past Due 1 — 90 Days Past Due > 90 Days Total Current Past Due 1 — 90 Days Past Due > 90 Days Total
(in millions)
Revolving — Consumer
Owned since inception $ 1,254 $ 118 $ 40 $ 1,412 $ 1,302 $ 153 $ 48 $ 1,503
Purchased 389 58 23 470 447 88 35 570
Revolving — SMB
Owned since inception 253 20 5 278 246 26 5 277
Purchased 32 6 2 40 34 9 3 46
Fixed-term —
Large Enterprise

Owned since inception 1,154 25 6 1,185 1,077 47 7 1,131
Fixed-term — Public
Owned since inception 423 17 2 442 463 12 1 476
Fixed-term — SMB
Owned since inception 395 7 2 404 371 11 3 385
Total customer receivables, gross $ 3,900 $ 251 $ 80 $ 4,231 $ 3,940 $ 346 $ 102 $ 4,388

~~The following tables summarize customer receivables, gross, including accrued interest by credit quality indicator segregated by class as of~~ ~~April 29, 2011~~ and January 28, 2011. For revolving loans to consumers, Dell makes credit decisions based on propriety scorecards which include the customer's credit history, payment history, credit usage, and other FICO-related elements. For Commercial customers, an internal grading system is utilized that assigns a credit level score based on a number of considerations including liquidity, operating performance and industry outlook. These credit level scores range from one to sixteen for Public and Large Enterprise customers, and from one to six for small and medium ("SMB") customers. The categories shown in the tables below segregate between the relative degrees of credit risk within that segment and product set. As loss experience varies substantially between financial products and customer segments, the credit quality categories cannot be compared between the different classes. The credit quality indicators for Consumer accounts are as of each quarter end date. Commercial accounts are generally updated on a periodic basis.

April 29, 2011 January 28, 2011
FICO 720+ FICO 660 to 719 FICO < 660 Total FICO 720+ FICO 660 to 719 FICO < 660 Total
(in millions)
Revolving — Consumer
Owned since inception $ 229 $ 397 $ 786 $ 1,412 $ 251 $ 415 $ 837 $ 1,503
Purchased $ 43 $ 108 $ 319 $ 470 $ 50 $ 127 $ 393 $ 570

For the revolving consumer receivables in the above table, the FICO 720+ category includes prime accounts which are generally higher credit quality, FICO 660 to 719 includes near-prime accounts and represents the mid-tier accounts, and FICO scores below 660 are generally sub-prime and represent lower credit quality accounts.

~~Table of Contents~~

~~DELL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

April 29, 2011 January 28, 2011
Investment Non-Investment Sub-Standard Total Investment Non-Investment Sub-Standard Total
(in millions)
Fixed-term —
Large Enterprise

Owned since inception $ 874 $ 189 $ 122 $ 1,185 $ 806 $ 166 $ 159 $ 1,131
Fixed-term — Public
Owned since inception $ 402 $ 32 $ 8 $ 442 $ 438 $ 30 $ 8 $ 476

For the Large Enterprise and Public commercial receivables shown above, Dell's internal credit level scoring has been aggregated to their most comparable external commercial rating agency equivalents. Investment grade accounts are generally of the highest credit quality, non-investment grade represents middle quality accounts, and sub-standard represents the lowest quality accounts.

April 29, 2011 January 28, 2011
Higher Mid Lower Total Higher Mid Lower Total
(in millions)
Revolving — SMB
Owned since inception $ 105 $ 85 $ 88 $ 278 $ 108 $ 85 $ 84 $ 277
Purchased $ 14 $ 21 $ 5 $ 40 $ 16 $ 24 $ 6 $ 46
Fixed-term — SMB
Owned since inception $ 40 $ 128 $ 236 $ 404 $ 62 $ 129 $ 194 $ 385

For SMB receivables in the above table, the Higher category includes Dell's top two internal credit quality levels, which generally have the lowest loss experience, Mid includes credit levels three and four, and Lower includes Dell's bottom two credit levels, which experience higher loss rates. The revolving product is sold primarily to small business customers and the fixed-term products are more weighted toward medium-sized businesses. Although both fixed-term and revolving products rely on a six-level internal rating system, the grading criteria and classifications are different as the loss performance varies between these products and customer sets. Therefore, the credit levels are not comparable between the SMB fixed-term and revolving classes.

~~Customer Receivables~~

~~The following is the description of the components of Dell's customer receivables:~~

~~Revolving loans~~ — Revolving loans offered under private label credit financing programs provide qualified customers with a revolving credit line for the purchase of products and services offered by Dell. Revolving loans bear interest at a variable annual percentage rate that is tied to the prime rate. Based on historical payment patterns, revolving loan transactions are typically repaid within 12 months on average. Revolving loans are included in short-term financing receivables. From time to time, account holders may have the opportunity to finance their Dell purchases with special programs during which, if the outstanding balance is paid in full by a specific date, no interest is charged. These special programs generally range from 6 to 12 ~~months. At~~ ~~April 29, 2011~~May 4, 2012, ~~and January 28, 2011, receivables under~~ these ~~special programs~~criteria were ~~$340 million~~ ~~and~~ ~~$398 million, respectively.~~

~~Sales-type leases~~ ~~— Dell enters into sales-type lease arrangements with customers who desire lease financing. Leases with business customers have fixed terms of generally~~ ~~two~~ to ~~four~~ ~~years. Future maturities of minimum lease payments at~~ ~~April 29, 2011~~ ~~were as follows: Fiscal 2012 -~~ ~~$724 million; Fiscal 2013 -~~ ~~$696 million; Fiscal 2014 -~~ ~~$332 million; Fiscal 2015 and beyond -~~ ~~$61 million. Fixed-term loans are offered to qualified small businesses, large commercial accounts, governmental organizations, and educational entities.~~

~~Table of Contents~~

~~DELL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

~~Purchased Credit-Impaired Loans~~ met.

Purchased Credit-Impaired (“PCI”) loans are acquired loans for which it is probable that Dell will not collect all contractually required principal and interest payments. During the third quarter of Fiscal 2011, Dell purchased a portfolio of revolving loan receivables from CIT Group Inc. that consisted of revolving Dell customer account balances that met the definition of PCI loans as Dell does not expect to collect all contractually required principal and interest payments. At ~~April 29, 2011, the outstanding balance of these receivables, including principal and accrued interest, was~~ ~~$489 million~~ ~~and the carrying amount was~~ ~~$294 million~~.Structured Financing Debt

The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is accreted into interest income using the effective yield method based on the expected future cash flows over the estimated lives of the PCI loans. Due to improved expectations of the amount of expected cash flows and higher recoveries, Dell increased the accretable yield associated with these PCI loans by ~~$35 million~~ ~~during the first quarter of Fiscal 2012, which will be amortized over the remaining life of the loans.~~

~~The following table shows activity for the accretable yield on the PCI loans for the three months ended~~ ~~April 29, 2011~~:

Three Months Ended
April 29,
2011
(in millions)
Accretable Yield:
Balance at beginning of period $ 137
Additions/ Purchases —
Accretion (21 )
Prospective yield adjustment 35
Balance at end of period $ 151

~~Residual Interest~~

Dell retains a residual interest in equipment leased under its fixed-term lease programs. The amount of the residual interest is established at the inception of the lease based upon estimates of the value of the equipment at the end of the lease term using historical studies, industry data, and future value-at-risk demand valuation methods. On a quarterly basis, Dell assesses the carrying amount of its recorded residual values for impairment. Anticipated declines in specific future residual values that are considered to be other-than-temporary are recorded in earnings.

~~Asset Securitizations~~

~~During the first quarters of Fiscal 2012 and Fiscal 2011,~~ ~~$499 million~~ ~~and~~ ~~$496 million~~ ~~of customer receivables, respectively, were funded via securitization through SPEs. The programs are effective for~~ 12 ~~month periods and subject to an annual renewal process.~~

The structured financing debt related to the fixed-term lease and loan programs and the revolving loan securitization ~~programs~~program was $~~1.2~~1.4 billion and $~~1.0~~1.3 billion as of ~~April 29, 2011~~May 4, 2012, and ~~January 28, 2011~~February 3, 2012, respectively. The debt is collateralized solely by the financing receivables in the programs. The debt has a variable interest rate and an average duration of 12 to 36 months based on the terms of the underlying financing receivables. ~~The~~As of May 4, 2012, the total debt capacity related to the securitization programs ~~is $~~was $1.4 billion. Dell's securitization programs are structured to operate near their debt capacity. See Note 6 of the Notes to the Condensed Consolidated Financial Statements for additional information regarding the structured financing debt.

~~During Fiscal~~ ~~2011~~, Dell ~~entered~~enters into interest rate swap agreements to effectively convert a portion of the structured financing debt from a floating rate to a fixed rate. The interest rate swaps ~~qualified~~qualify for hedge accounting treatment as cash flow hedges. See Note 7 of the Notes to the Condensed Consolidated Financial Statements for additional information about interest rate swaps.

1217

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 6 — BORROWINGS

The following table summarizes Dell's outstanding debt atas of the dates indicated:

April 29,
2011 January 28,
2011
(in millions)
Long-Term Debt
Notes
$400 million issued on June 10, 2009, at 3.375% due June 2012 (“2012 Notes”) with interest payable June 15 and December 15 (includes impact of interest rate swap terminations) $ 400 $ 400
$600 million issued on April 17, 2008, at 4.70% due April 2013 (“2013A Notes”) with interest payable April 15 and October 15 (includes impact of interest rate swap terminations) 608 609
$500 million issued on September 7, 2010, at 1.40% due September 2013 (“2013B Notes”) with interest payable March 10 and September 10 499 499
$500 million issued on April 1, 2009, at 5.625% due April 2014 (“2014A Notes”) with interest payable April 15 and October 15 500 500
$300 million issued on March 28, 2011, with a floating rate due April 2014 (“2014B Notes”) with interest payable January 1, April 1, July 1 and October 1 300 —
$400 million issued on March 28, 2011, at 2.10% due April 2014 (“2014C Notes”) with interest payable April 1 and October 1 400 —
$700 million issued on September 7, 2010, at 2.30% due September 2015 (“2015 Notes”) with interest payable March 10 and September 10 700 700
$400 million issued on March 28, 2011, at 3.10% due April 2016 (“2016 Notes”) with interest payable April 1 and October 1 400 —
$500 million issued on April 17, 2008, at 5.65% due April 2018 (“2018 Notes”) with interest payable April 15 and October 15 499 499
$600 million issued on June 10, 2009, at 5.875% due June 2019 (“2019 Notes”) with interest payable June 15 and December 15 600 600
$400 million issued on March 28, 2011, at 4.625% due April 2021 (“2021 Notes”) with interest payable April 1 and October 1 398 —
$400 million issued on April 17, 2008, at 6.50% due April 2038 (“2038 Notes”) with interest payable April 15 and October 15 400 400
$300 million issued on September 7, 2010, at 5.40% due September 2040 (“2040 Notes”) with interest payable March 10 and September 10 300 300
Senior Debentures
$300 million issued on April 3, 1998 at 7.10% due April 2028 with interest payable April 15 and October 15 (includes the impact of interest rate swap terminations) ("Senior Debentures") 388 389
Other
Structured financing debt 402 250
Total long-term debt 6,794 5,146
Short-Term Debt
Structured financing debt 815 850
Other 1 1
Total short-term debt 816 851
Total debt $ 7,610 $ 5,997



	May 4, 2012			February 3, 2012
	(in millions)
Long-Term Debt
Notes
$400 million issued on June 10, 2009, at 3.375% due June 2012 (“2012 Notes”)^(a)	$	400		$	400
$600 million issued on April 17, 2008, at 4.70% due April 2013 (“2013A Notes”)^(a)(b)	604			605
$500 million issued on September 7, 2010, at 1.40% due September 2013 (“2013B Notes”)	499			499
$500 million issued on April 1, 2009, at 5.625% due April 2014 (“2014A Notes”)^(b)	500			500
$300 million issued on March 28, 2011, with a floating rate due April 2014 (“2014B Notes”)	300			300
$400 million issued on March 28, 2011, at 2.10% due April 2014 (“2014C Notes”)	400			400
$700 million issued on September 7, 2010, at 2.30% due September 2015 (“2015 Notes”)^(b)	701			701
$400 million issued on March 28, 2011, at 3.10% due April 2016 (“2016 Notes”)^(b)	401			401
$500 million issued on April 17, 2008, at 5.65% due April 2018 (“2018 Notes”)^(b)	501			501
$600 million issued on June 10, 2009, at 5.875% due June 2019 (“2019 Notes”)^(b)	603			602
$400 million issued on March 28, 2011, at 4.625% due April 2021 (“2021 Notes”)	398			398
$400 million issued on April 17, 2008, at 6.50% due April 2038 (“2038 Notes”)	400			400
$300 million issued on September 7, 2010, at 5.40% due September 2040 (“2040 Notes”)	300			300
Senior Debentures
$300 million issued on April 3, 1998, at 7.10% due April 2028 ("Senior Debentures")^(a)	384			384
Other
Long-term structured financing debt	969			920
Less: current portion of long-term debt	(1,547		)	(924		)
Total long-term debt	5,813			6,387
Short-Term Debt
Commercial paper	1,188			1,500
Short-term structured financing debt	448			440
Current portion of long-term debt	1,547			924
Other	3			3
Total short-term debt	3,186			2,867
Total debt	$	8,999		$	9,254

____________________

~~During~~^(a) Includes the ~~first quarter~~impact of ~~Fiscal 2012, Dell issued the 2014B Notes, the 2014C Notes, the 2016 Notes and the 2021 Notes (collectively, the “Issued Notes”)~~ ~~under an automatic shelf registration statement that was filed in November 2008 and subsequently amended in March 2011. The net proceeds from the Issued Notes, after payment of expenses, were approximately~~ ~~$1.5 billion~~. The Issued Notes are unsecured obligations and rank equally in right of payment with Dell's existing and future unsecured senior indebtedness. The Issued Notes effectively rank junior to all indebtedness and other liabilities, including trade payables, of Dell's subsidiaries. ~~The Issued Notes were issued pursuant to a Supplemental Indenture dated March 31, 2011,~~

~~Table of Contents~~

~~DELL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

~~between Dell and a trustee, with terms and conditions substantially the same as those governing the Notes outstanding as of January 28, 2011~~ ~~(such outstanding Notes, together with the Issued Notes, the "Notes").~~interest rate swap terminations.

^(b)Includes hedge accounting adjustments.

The estimated fair value of total debt at ~~April 29, 2011~~May 4, 2012, was approximately $~~7.8~~9.5 billion. The fair values of the structured financing debt and other short-term debt approximate their carrying values as their interest rates vary with the market. The carrying value of the ~~senior debentures,~~Senior Debentures, the 2012 Notes and the 2013A Notes includes an unamortized amount related to the termination of interest rate swap agreements, which were previously designated as hedges of the debt. See Note 7 of the Notes to the Condensed Consolidated Financial Statements for additional information about interest rate swaps. The weighted average interest rate for the short-term structured financing debt and other as of May 4, 2012, and February 3, 2012, was 0.25% and 0.28%, respectively.

Structured Financing Debt — As of ~~April 29, 2011~~May 4, 2012, Dell had $~~1.2~~1.4 billion outstanding in structured financing debt, which was related to the fixed-term lease and loan programs and the revolving loan securitization program. Of the $1.4 billion outstanding in structured financing related debt, ~~primarily through the fixed term lease and loan, and revolving loan securitization programs. The weighted average interest rate for short-term structured financing debt for the first quarter~~$991 million was current as of ~~Fiscal~~May 4, 2012 ~~was~~ ~~0.4%~~. See Note 5 and Note 7 of the Notes to the Condensed Consolidated Financial Statements for further discussion onof the structured financing debt and the interest rate swap

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

agreements that hedge a portion of that debt.

Commercial Paper — As of May 4, 2012, and February 3, 2012, there was $1.2 billion and $1.5 billion, respectively, outstanding under the commercial paper program. The weighted average interest rate on outstanding commercial paper as of May 4, 2012, and February 3, 2012 was 0.27% and 0.23%, respectively. Dell has $3.0 billion in senior unsecured revolving credit facilities, primarily to support aits $~~2.0~~2.5 billion commercial paper program. ~~As of~~ ~~April 29, 2011~~ ~~and January 28, 2011, there was~~ no ~~outstanding commercial paper.~~

~~On April 15, 2011, Dell replaced the five-year~~ ~~$1.0 billion~~Of these credit ~~facility expiring on June 1, 2011, with a four-year~~ ~~$2.0 billion~~ ~~credit facility that will expire on April 15, 2015. Dell's remaining credit facility for~~facilities, $1.0 billion will expire on April 2, ~~2013.~~2013, and $2.0 billion will expire on April 15, 2015. There were no outstanding advances under the revolving credit facilities as of ~~April 29, 2011~~May 4, 2012.

The indentures governing the Notes shown in the ~~senior debentures,~~above table, the Senior Debentures, and the structured financing debt contain customary events of default, including failure to make required payments, failure to comply with certain agreements or covenants, and certain events of bankruptcy and insolvency. The indentures also contain covenants limiting Dell's ability to create certain liens; enter into sale-and-lease back transactions; and consolidate or merge with, or convey, transfer or lease all or substantially all of its assets to, another person. The senior unsecured revolving credit facilities require compliance with conditions that must be satisfied prior to any borrowing, as well as ongoing compliance with specified affirmative and negative covenants, including maintenance of a minimum interest coverage ratio. Dell was in compliance with all financial covenants as of ~~April 29, 2011~~May 4, 2012.

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 7 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Derivative Instruments

As part of its risk management strategy, Dell uses derivative instruments, primarily forward contracts and purchased options, to hedge certain foreign currency exposures and interest rate swaps to manage the exposure of its debt portfolio to interest rate risk. Dell's objective is to offset gains and losses resulting from these exposures with gains and losses on the derivative contracts used to hedge the exposures, thereby reducing volatility of earnings and protecting fair values of assets and liabilities. Dell assesses hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative and recognizes any ineffective portion of the hedge, as well as amounts not included in the assessment of effectiveness, in earnings as a component of interest and other, net.

Foreign Exchange Risk

Dell uses a combination of forward contracts and purchased options designated as cash flow hedges to protect against the foreign currency exchange rate risks inherent in its forecasted transactions denominated in currencies other than the U.S. dollar. The risk of loss associated with purchased options is limited to premium amounts paid for the option contracts. The risk of loss associated with forward contracts is equal to the exchange rate differential from the time the contract is entered into until the time it is settled. The majority of these contracts typically expire in 12 months or less.

Dell assessed hedge ineffectiveness for foreign exchange contracts designated as cash flow hedges for the three months ended May 4, 2012, and April 29, 2011, and determined that itsuch ineffectiveness was not material. During the three months endedMay 4, 2012 ,and April 29, 2011, Dell did not discontinue any cash flow hedges related to foreign exchange contracts that had a material impact on Dell's results of operations, as substantially all forecasted foreign currency transactions were realized in Dell's actual results.

In addition, Dell uses forward contracts to hedge monetary assets and liabilities ~~primarily receivables and payables,~~ denominated in a foreign currency. These contracts generally expire in three months or less, are considered economic hedges and are not designated. The change in the fair value of these instruments represents a natural hedge as their gains and losses

~~Table of Contents~~

~~DELL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

offset the changes in the underlying fair value of the monetary assets and liabilities due to movements in currency exchange rates. Dell recognized gains of ~~$42 million~~ ~~and~~ ~~$17 million~~ ~~during the three months ended~~ ~~April 29, 2011~~ ~~and~~ ~~April 30, 2010, respectively,~~ for the change in fair value of these foreign currency forward ~~contracts.~~contracts for the three months ended May 4, 2012, and April 29, 2011, of $12 million and $42 million, respectively.

Interest Rate Risk

Dell uses interest rate swaps to hedge the variability in cash flows related to the interest rate payments on structured financing debt. The interest rate swaps economically convert the variable rate on the structured financing debt to a fixed interest rate to match the underlying fixed rate being received on fixed term customer leases and loans. The duration of these contracts typically ranges from 30 to 42 months. Certain of these swaps are designated as cash flow hedges. Hedge ineffectiveness for interest rate swaps designated as cash flow hedges was not material for the three months ended May 4, 2012, and April 29, 2011.

~~The amount of change in fair value recognized in interest and other, net, for interest rate hedges was not material for the three months ended~~ ~~April 29, 2011~~ ~~and~~ ~~April 30, 2010~~.

Periodically, Dell also uses interest rate swaps designated as fair value hedges to modify the market risk exposures in connection with long-term debt to achieve primarily LIBOR-based floating interest expense. As of May 4, 2012, Dell ~~did not have any~~had outstanding interest rate ~~contracts designated as fair value hedges at April 29, 2011. During Fiscal 2011, Dell had~~swaps that economically hedge a portion of its interest rate ~~swap agreements associated with~~exposure on certain tranches of its ~~2012 Notes and 2013A Notes, which were terminated in the fourth quarter of Fiscal 2011.~~long-term debt. Hedge ineffectiveness for interest rate swaps designated as fair value hedges was not material for the three months ended ~~April 30, 2010~~May 4, 2012. Dell did not have any interest rate contracts designated as fair value hedges at April 29, 2011.

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Notional Amounts of Outstanding Derivative Instruments

The notional amounts of Dell's outstanding derivative instruments are ~~summarized~~ as ~~follows:~~follows as of the dates indicated:


	April 29, 2011		January 28, 2011		May 4, 2012		February 3, 2012
	(in millions)				(in millions)
Foreign Exchange Contracts
Designated as hedging instruments	$	5,266	$	5,364
Designated as cash flow hedging instruments					$	4,230	$	4,549
Non-designated as hedging instruments	318		250		394		168
Total	$	5,584	$	5,614	$	4,624	$	4,717

Interest Rate Contracts
Designated as hedging instruments	$	643	$	625
Designated as fair value hedging instruments					$	800	$	650
Designated as cash flow hedging instruments					806		751
Non-designated as hedging instruments	130		145		142		132
Total	$	773	$	770	$	1,748	$	1,533

Derivative Instruments Additional Information

The ~~aggregate~~ unrealized net ~~gain or~~ loss for interest rate swaps and foreign currency exchange contracts, recorded as a component of accumulated other comprehensive ~~income, for~~loss in the ~~three months ended~~Condensed Consolidated Statement of Financial Position, as of ~~April 29, 2011~~May 4, 2012, and February 3, 2012, was $51 million and ~~April 30, 2010~~$40 million, ~~was a loss of~~ ~~$68 million~~ ~~and a~~ ~~$13 million~~ ~~gain,~~ respectively.

Dell has reviewed the existence and nature of credit-risk-related contingent features in derivative trading agreements with its counterparties. Certain agreements contain clauses under which, if Dell's credit ratings were to fall below investment grade upon a change of control of Dell, counterparties would have the right to terminate those derivative contracts ~~under which~~where Dell is in a net liability ~~position.~~position. As of ~~April 29, 2011~~May 4, 2012, there had been no such triggering events.

1521

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Effect of Derivative Instruments on the ~~Condensed~~ Consolidated Statements of Financial Position and the ~~Condensed~~ Consolidated Statements of Income



Derivatives in Cash Flow Hedging Relationships		Gain (Loss) Recognized in Accumulated OCI, Net of Tax, on Derivatives (Effective Portion)			Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)			Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)	Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)			Gain (Loss) Recognized in Accumulated OCI, Net of Tax, on Derivatives (Effective Portion)			Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)			Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)	Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)
(in millions)
For the three months ended May 4, 2012												For the three months ended May 4, 2012
																Total net revenue	$	(3	)
Foreign exchange contracts													$	(25	)	Total cost of net revenue	(11		)
Interest rate contracts													—			Interest and other, net	—			Interest and other, net	$	—
Total													$	(25	)		$	(14	)		$	—

For the three months ended April 29, 2011	For the three months ended April 29, 2011											For the three months ended April 29, 2011
					Total net revenue	$	(156	)								Total net revenue	$	(150	)
Foreign exchange contracts		$	(242	)	Total cost of net revenue	(18		)					$	(235	)	Total cost of net revenue	(17		)
Interest rate contracts		—			Interest and other, net	—			Interest and other, net	$	—		—			Interest and other, net	—			Interest and other, net	$	—
Total		$	(242	)		$	(174	)		$	—		$	(235	)		$	(167	)		$	—


For the three months ended April 30, 2010
					Total net revenue	$	46
Foreign exchange contracts		$	40		Total cost of net revenue	(18		)	Interest and other, net	$	1
Total		$	40			$	28			$	1

1622

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Fair Value of Derivative Instruments in the ~~Condensed~~ Consolidated Statements of Financial Position

Dell presents its foreign exchange derivative instruments on a net basis in the Condensed Consolidated Statements of Financial Position due to the right of offset by its counterparties under master netting arrangements. The fair value of those derivative instruments presented on a gross basis as of each date indicated below iswas as follows:


	April 29, 2011														May 4, 2012
	Other Current Assets			Other Non- Current Assets		Other Current Liabilities			Other Non-Current Liabilities			Total Fair Value			Other Current Assets			Other Non- Current Assets		Other Current Liabilities			Other Non-Current Liabilities			Total Fair Value
				(in millions)														(in millions)
Derivatives Designated as Hedging Instruments
Foreign exchange contracts in an asset position	$	26		$	1	$	49		$	—		$	76		$	151		$	—	$	24		$	—		$	175
Foreign exchange contracts in a liability position	(59		)	—		(224		)	—			(283		)	(111		)	—		(31		)	—			(142		)
Interest rate contracts in an asset position															—			9		—			—			9
Interest rate contracts in a liability position	—			—		—			(2		)	(2		)	—			—		—			(2		)	(2		)
Net asset (liability)	(33		)	1		(175		)	(2		)	(209		)	40			9		(7		)	(2		)	40
Derivatives not Designated as Hedging Instruments
Foreign exchange contracts in an asset position	101			—		59			—			160			51			—		3			—			54
Foreign exchange contracts in a liability position	(9		)	—		(40		)	—			(49		)	(16		)	—		(13		)	—			(29		)
Interest rate contracts in a liability position	—			—		—			(1		)	(1		)
Net asset (liability)	92			—		19			(1		)	110			35			—		(10		)	—			25
Total derivatives at fair value	$	59		$	1	$	(156	)	$	(3	)	$	(99	)	$	75		$	9	$	(17	)	$	(2	)	$	65

	January 28, 2011														February 3, 2012
	Other Current Assets			Other Non- Current Assets		Other Current Liabilities			Other Non-Current Liabilities			Total Fair Value			Other Current Assets			Other Non- Current Assets		Other Current Liabilities			Other Non-Current Liabilities			Total Fair Value
				(in millions)														(in millions)
Derivatives Designated as Hedging Instruments
Foreign exchange contracts in an asset position	$	81		$	1	$	34		$	—		$	116		$	266		$	—	$	2		$	—		$	268
Foreign exchange contracts in a liability position	(86		)	—		(59		)	—			(145		)	(140		)	—		(7		)	—			(147		)
Interest rate contracts in an asset position															—			8		—			—			8
Interest rate contracts in a liability position	—			—		—			(2		)	(2		)	—			—		—			(3		)	(3		)
Net asset (liability)	(5		)	1		(25		)	(2		)	(31		)	126			8		(5		)	(3		)	126
Derivatives not Designated as Hedging Instruments
Foreign exchange contracts in an asset position	52			—		15			—			67			67			—		1			—			68
Foreign exchange contracts in a liability position	(21		)	—		(15		)	—			(36		)	(61		)	—		(10		)	—			(71		)
Interest rate contracts in a liability position	—			—		—			(1		)	(1		)
Net asset (liability)	31			—		—			(1		)	30			6			—		(9		)	—			(3		)
Total derivatives at fair value	$	26		$	1	$	(25	)	$	(3	)	$	(1	)	$	132		$	8	$	(14	)	$	(3	)	$	123

1723

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 8 — ACQUISITIONS

During the three months ended ~~April 29, 2011~~,May 4, 2012, Dell completed ~~two~~its acquisitions of ~~Compellent Technologies, Inc. ("Compellent"), and SecureWorks Inc. ("SecureWorks"), and paid total purchase consideration~~all of ~~approximately~~ ~~$1.5 billion~~ ~~in cash for all~~ the outstanding shares of AppAssure Software, Inc. and Clerity Solutions, Inc. Cash used for acquisitions, net of cash acquired, which primarily consisted of AppAssure Software Inc. and Clerity Solutions, Inc.,was $245 million for the three months ended May 4, 2012.

Subsequent to May 4, 2012, Dell completed its acquisitions of SonicWALL Inc. (“SonicWALL”), Wyse Technology, Inc., ("Wyse Technology"), and Make Technologies Inc. The total estimated purchase price for all of the outstanding shares for all of these ~~companies. Compellent~~acquisitions, which primarily consists of SonicWALL and Wyse Technology, was approximately $2.2 billion. As of the date of issuance of these financial statements, the initial purchase accounting was not complete for these acquisitions. SonicWALL is a ~~provider of virtual storage solutions for enterprise~~global technology company that offers advanced network security and ~~cloud computing environments, and SecureWorks~~data protection. Wyse Technology is a global provider of ~~information security services. Both Compellent and SecureWorks~~client computing solutions designed to extend desktop virtualization offerings.

All of the above acquisitions will be integrated into Dell's Commercial segments.

Dell has recorded these acquisitions using the acquisition method of accounting and recorded their respective assets and liabilities at fair value at the date of acquisition. The excess of the purchase prices over the estimated fair values was recorded as goodwill. Any changes in the estimated fair values of the net assets recorded for these acquisitions prior to the finalization of more detailed analyses, but not to exceed one year from the date of acquisition, will change the amount of the purchase prices allocable to goodwill. Any subsequent changes to the purchase price allocations that are material to Dell's consolidated financial results will be adjusted retroactively. Dell recorded approximately ~~$1 billion~~ in goodwill related to these acquisitions, which primarily represents synergies associated with combining these companies with Dell to provide Dell's customers with a broader range of IT solutions. This goodwill is not deductible for tax purposes. Dell also recorded ~~$537 million~~ ~~in intangible assets related to these acquisitions, which consist primarily of purchased technology and customer relationships. In conjunction with these acquisitions, Dell will incur~~ ~~$99 million~~ ~~in compensation-related expenses that will be expensed over a period of up to four years.~~ There was no contingent consideration related to any of these acquisitions.

Dell has not presented pro forma results of operations for the foregoing acquisitions because they are not material to Dell's ~~consolidated results~~Condensed Consolidated Results of ~~operations, financial position,~~Operations, Statement of Comprehensive Income, Financial Position, or ~~cash flows~~Cash Flows on either an individual or an aggregate basis.

NOTE 9 — GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill allocated to Dell's business segments as of ~~April 29, 2011~~May 4, 2012, and ~~January 28, 2011~~February 3, 2012, and changes in the carrying amount of goodwill for the three months ended May 4, 2012, were as follows:


	Large Enterprise		Public		Small and Medium Business		Consumer		Total		Large Enterprise		Public		Small and Medium Business		Consumer		Total
	(in millions)										(in millions)
Balance at January 28, 2011	$	1,424	$	2,164	$	476	$	301	$	4,365
Balance at February 3, 2012											$	2,222	$	2,547	$	759	$	310	$	5,838
Goodwill acquired during the period	596		290		153		—		1,039		57		56		46		—		159
Adjustments	2		—		—		—		2		3		2		3		—		8
Balance at April 29, 2011	$	2,022	$	2,454	$	629	$	301	$	5,406
Balance at May 4, 2012											$	2,282	$	2,605	$	808	$	310	$	6,005

Goodwill is tested ~~annually~~for impairment on an annual basis during the second fiscal quarter, ~~and whenever events~~ or ~~circumstances indicate~~sooner if an indicator of impairment ~~may have occurred. If the carrying amount of goodwill exceeds its fair value, estimated based on discounted cash flow analyses, an impairment charge would be recorded.~~occurs. Based on the results of the annual impairment ~~tests,~~test, no impairment of goodwill existed at July 30, ~~2010.~~2011. Further, no triggering events have transpired since July 30, ~~2010,~~2011 that would indicate a potential impairment of goodwill as of ~~April 29, 2011~~May 4, 2012. Dell ~~does~~did not have any accumulated goodwill impairment charges as of ~~April 29, 2011~~May 4, 2012. ~~The goodwill adjustments are primarily the result of foreign currency fluctuations.~~

~~During the three months ended~~ ~~April 29, 2011, Dell recorded additions to intangible assets of~~ ~~$537 million~~ ~~related to Dell's Fiscal 2012 business acquisitions.~~

1824

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Intangible Assets

Dell's intangible assets associated with completed acquisitions at May 4, 2012, and February 3, 2012, were as follows:



	May 4, 2012							February 3, 2012
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
	(in millions)
Customer relationships	$	1,592	$	(552	)	$	1,040	$	1,569	$	(506	)	$	1,063
Technology	1,183		(548		)	635		1,156		(490		)	666
Non-compete agreements	71		(45		)	26		70		(42		)	28
Tradenames	84		(44		)	40		81		(41		)	40
Amortizable intangible assets	2,930		(1,189		)	1,741		2,876		(1,079		)	1,797
In-process research and development	34		—			34		34		—			34
Indefinite lived intangible assets	26		—			26		26		—			26
Total intangible assets	$	2,990	$	(1,189	)	$	1,801	$	2,936	$	(1,079	)	$	1,857

Amortization expense related to finite-lived intangible assets was approximately $110 million and $92 million for the three months ended May 4, 2012, and April 29, 2011, respectively. There were no material impairment charges related to intangible assets for the three months ended May 4, 2012, and April 29, 2011.

Estimated future annual pre-tax amortization expense of finite-lived intangible assets as of May 4, 2012, over the next five fiscal years and thereafter is as follows:



Fiscal Years	(in millions)
2013 (remaining nine months)	$	299
2014	376
2015	283
2016	237
2017	195
Thereafter	351
Total	$	1,741

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 10 — WARRANTY AND DEFERRED EXTENDED WARRANTY REVENUE

Dell records liabilities for its standard limited warranties at the time of sale for the estimated costs that may be incurred. The liability for standard warranties is included in accrued and other current liabilities and other non-current liabilities onin the Condensed Consolidated Statements of Financial Position. Revenue from the sale of extended warranties is recognized over the term of the contract or when the service is completed, and the costs associated with these contracts are recognized as incurred. Deferred extended warranty revenue is included in deferred services revenue onin the Condensed Consolidated Statements of Financial Position. Changes in Dell's liabilities for standard limited warranties and deferred services revenue related to extended warranties are presented in the following ~~tables:~~tables for the periods indicated:


	Three Months Ended						Three Months Ended
	April 29, 2011			April 30, 2010			May 4, 2012			April 29, 2011
	(in millions)						(in millions)
Warranty liability:
Warranty liability at beginning of period	$	895		$	912		$	888		$	895
Costs accrued for new warranty contracts and changes in estimates for pre-existing warranties^(a)(b)	293			310			283			293
Service obligations honored	(257		)	(295		)	(309		)	(257		)
Warranty liability at end of period	$	931		$	927		$	862		$	931
Current portion	$	620		$	626		$	558		$	620
Non-current portion	311			301			304			311
Warranty liability at end of period	$	931		$	927		$	862		$	931

	Three Months Ended						Three Months Ended
	April 29, 2011			April 30, 2010			May 4, 2012			April 29, 2011
	(in millions)						(in millions)
Deferred extended warranty revenue:
Deferred extended warranty revenue at beginning of period	$	6,416		$	5,910		$	7,002		$	6,416
Revenue deferred for new extended warranties^(b)	1,068			882			1,006			1,068
Revenue recognized	(895		)	(821		)	(964		)	(895		)
Deferred extended warranty revenue at end of period	$	6,589		$	5,971		$	7,044		$	6,589
Current portion	$	3,060		$	2,809		$	3,308		$	3,060
Non-current portion	3,529			3,162			3,736			3,529
Deferred extended warranty revenue at end of period	$	6,589		$	5,971		$	7,044		$	6,589

____________________


^(a)	Changes in cost estimates related to pre-existing warranties are aggregated with accruals for new standard warranty contracts. Dell's warranty liability process does not differentiate between estimates made for pre-existing warranties and new warranty obligations.


^(b)	Includes the impact of foreign currency exchange rate fluctuations.

1926

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 11 — COMMITMENTS AND CONTINGENCIES

Legal Matters — Dell is involved in various claims, suits, assessments, investigations, and legal proceedings that arise from time to time in the ordinary course of its business, including those identified below, consisting of matters involving consumer, antitrust, tax, intellectual property, and other issues on a global basis. Dell accrues a liability when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. Dell reviews these accruals at least quarterly and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other relevant information. To the extent new information is obtained and Dell's views on the probable outcomes of claims, suits, assessments, investigations, or legal proceedings change, changes in Dell's accrued liabilities would be recorded in the period in which such determination is made. For some matters, the amount of liability is not probable or the amount cannot be reasonably estimated and therefore accruals have not been made. ~~However, where a liability is reasonably possible and material, such matters have been disclosed.~~ The following is a discussion of Dell's significant ~~on-going~~ legal matters and other proceedings:

~~SEC Investigation and Related Settlements~~ - In August 2005, the SEC initiated an inquiry into certain of Dell's accounting and financial reporting matters and requested that Dell provide certain documents. The SEC expanded that inquiry in June 2006 and entered a formal order of investigation in October 2006. In August 2006, because of potential issues identified in the course of responding to the SEC's requests for information, Dell's Audit Committee, on the recommendation of management and in consultation with PricewaterhouseCoopers LLP, Dell's independent registered public accounting firm, initiated an independent investigation into certain accounting and financial reporting matters, which was completed in the third quarter of Fiscal 2008. Dell subsequently restated its annual and interim financial statements for Fiscal 2003, Fiscal 2004, Fiscal 2005, Fiscal 2006, and the first quarter of Fiscal 2007.

On July 22, 2010, Dell reached a settlement with the SEC resolving the SEC's investigation into Dell's disclosures and alleged omissions prior to Fiscal 2008 regarding certain aspects of its commercial relationship with Intel Corporation (“Intel”) and into separate accounting and financial reporting matters. The SEC agreed to settlements with both the company and Michael Dell, who serves as the company's Chairman and Chief Executive Officer. The company and Mr. Dell entered into the settlements without admitting or denying the allegations in the SEC's complaint, as is consistent with common SEC practice.

Under its settlement, the company consented to a permanent injunction against future violations of antifraud provisions, non-scienter (negligence) based fraud provisions and other non-fraud based provisions related to reporting, the maintenance of accurate books and records, and internal accounting controls under Section 17(a) of the Securities Act of 1933 (the “Securities Act”), Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rules 10b-5, 12b-20, 13a-1 and 13a-13 under the Exchange Act. The company also agreed to perform, and has initiated, certain undertakings, including retaining and working with an independent consultant, to enhance its disclosure processes, practices and controls. Pursuant to the settlement terms, the company expects to have completed or implemented these undertakings within 36 months after court approval of the settlement on October 13, 2010. In addition, the company paid into an escrow account a civil monetary penalty of ~~$100 million~~ ~~and discharged the liability during the second quarter of Fiscal 2011.~~

The SEC's allegations with respect to Mr. Dell and his settlement were limited to the alleged failure to provide adequate disclosures with respect to the company's commercial relationship with Intel prior to Fiscal 2008. Mr. Dell's settlement did not involve any of the separate accounting fraud charges that were settled by the company. Moreover, Mr. Dell's settlement was limited to claims in which only negligence, and not fraudulent intent, is required to establish liability, as well as secondary liability claims for other non-fraud charges. Under his settlement, Mr. Dell consented to a permanent injunction against future violations of these negligence-based provisions and other non-fraud based provisions related to periodic reporting. Specifically, Mr. Dell consented to be enjoined from violating Sections 17(a)(2) and (3) of the Securities Act and Rule 13a-14 under the Exchange Act and from aiding and abetting violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 under the Exchange Act. In addition, Mr. Dell agreed to a civil monetary penalty of ~~$4 million. The settlement does not include any restrictions on Mr. Dell's continued service as an officer or director of the company.~~

The independent directors of the Board of Directors unanimously determined that it is in the best interests of Dell and its stockholders that Mr. Dell continue to serve as the Chairman and Chief Executive Officer of the company.

~~Table of Contents~~

~~DELL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

~~The settlements with the company and Mr. Dell were approved by the U.S. District Court for the District of Columbia on October 13, 2010.~~

~~Securities Litigation~~ - Four putative securities class actions filed between September 13, 2006, and January 31, 2007, in the U.S. District Court for the Western District of Texas, Austin Division, against Dell and certain of its current and former directors and officers were consolidated as In re Dell Securities Litigation, and a lead plaintiff was appointed by the court. The lead plaintiff asserted claims under Sections 10(b), 20(a), and 20A of the Exchange Act based on alleged false and misleading disclosures or omissions regarding Dell's financial statements, governmental investigations, internal controls, known battery problems and business model, and based on insiders' sales of Dell securities. This action also included Dell's independent registered public accounting firm, PricewaterhouseCoopers LLP, as a defendant. On October 6, 2008, the court dismissed all of the plaintiff's claims with prejudice and without leave to amend. On November 3, 2008, the plaintiff appealed the dismissal of Dell and the officer defendants to the Fifth Circuit Court of Appeals. The appeal was fully briefed, and oral argument on the appeal was heard by the Fifth Circuit Court of Appeals on September 1, 2009. On November 20, 2009, the parties to the appeal entered into a written settlement agreement whereby Dell would pay ~~$40 million~~ to the proposed class and the plaintiff would dismiss the pending litigation. The settlement was preliminarily approved by the District Court on December 21, 2009. The settlement was subject to certain conditions, including opt-outs from the proposed class not exceeding a specified percentage and final approval by the District Court. During the first quarter of Fiscal 2011, the original opt-out period in the notice approved by the District Court expired without the specified percentage being exceeded. The District Court subsequently granted final approval for the settlement and entered a final judgment on July 20, 2010. Dell paid ~~$40 million~~ into an escrow account to satisfy this settlement and discharged the liability during the second quarter of Fiscal 2011. Certain objectors to the settlement have filed notices of appeal to the Fifth Circuit Court of Appeals with regard to approval of the settlement. While there can be no assurances with respect to litigation, Dell believes it is unlikely that the settlement will be overturned on appeal.

Copyright Levies ~~- In many~~— Dell's obligation to collect and remit copyright levies in certain European Union (“EU”) ~~member~~ countries ~~there~~may be affected by the resolution of legal proceedings pending in Germany against various companies, including Dell's German subsidiary, and elsewhere in the EU against other companies in Dell's industry. The plaintiffs in those proceedings, some of which are ~~requirements~~described below, generally seek to ~~collect and remit~~impose or modify the levies with respect to ~~collecting societies based on~~ sales of ~~certain devices. These levies apply to Dell~~such equipment as multifunction devices, phones, personal computers, and ~~others in~~printers, alleging that such products enable the ~~industry. The amount of levies is generally based upon the number of products sold and the per-product amounts of the levies. Levies are intended to compensate copyright holders for “fair use”~~ copying of copyrighted materials. ~~The collecting societies then distribute~~Some of the ~~levies to copyright holders. Some~~proceedings also challenge whether the levy schemes in those countries comply with EU law. Certain EU member countries that do not yet ~~have~~impose levies on digital devices are expected to implement ~~similar~~ legislation to enable them to extend existing levy schemes, while some other EU member countries are expected to limit the scope of levy schemes and their applicability in the digital hardware environment. Dell, other companies, and various industry associations have opposed the extension of levies to the digital environment and have advocated alternative models of compensation to rights holders. ~~As described below, there are multiple proceedings involving~~ Dell ~~or its competitors~~continues to collect levies in certain EU ~~member~~ countries where ~~plaintiffs are seeking to impose or modify~~it has determined that based on local laws it is probable that Dell has a payment obligation. The amount of levies ~~upon equipment (such as multifunction devices, phones, personal computers (“PCs”) and printers), alleging that these devices enable copying~~is generally based on the number of ~~copyrighted materials. Even if Dell is not a party to all these proceedings, the decisions could impact Dell's business~~products sold and the ~~amount~~per-product amounts of ~~copyright~~the levies, ~~Dell may be required to collect. These various proceedings also challenge whether the levy schemes in those countries comply with EU law.~~

~~There are multiple proceedings in Germany that could impact Dell's obligation to collect and remit levies in Germany.~~which vary. In July 2004, VG Wort, a German collecting society, filed a lawsuit against Hewlett-Packard Company (“HP”) in the Stuttgart Civil Court seeking copyright levies on printers. On December 22, 2004, the court held that HP was liable for payments regarding all printers using ASCII code sold in Germany. HP appealed the decision and after an intermediary ruling upholding the trial court's decision, the German Federal Supreme Court (“GFSC”) in December 2007 issued a judgment that printers are not subject to levies under the German copyright law that was in effect until December 31, 2007. Based upon the GFSC's ruling, Dell concluded there was no obligation for Dell to collect or accrue levies for printers sold by it prior to December 31, 2007. VG Wort filed a claim with the German Constitutional Court (“GCC”) challenging the GFSC's ruling that printers are not subject to levies. On September 21, 2010, the GCC revoked the GFSC decision and referred the case back to the GFSC to determine if the ruling gave due credit to the copyright owner's property rights under the German Constitution and whether the GFSC should have referred the case to the European Court of Justice (“ECJ”). The GFSC has indicated it will issue its decision in this case in July 2011. Dell believes that the GFSC can decide to refer the case to the ECJ, confirm its prior decision, or conclude that printers are subject to levies under German law. Dell has not accrued any liability in this matter, asother matters, Dell does not believe there is a probable and estimable claim.

~~Table of Contents~~

~~DELL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

Similarly, in September 2003, VG Wort filed a lawsuit against Fujitsu Siemens Computer GmbH ("FSC") in the Munich Civil Court in Munich, Germany seeking levies on PCs. On December 23, 2004, the Munich Civil Court held that PCs are subject to a levy and that FSC must pay ~~€12~~ plus compound interest for each PC sold in Germany since March 2001. FSC appealed this decision and after an intermediary ruling upholding the decision, the GFSC in October 2008 issued a judgment that PCs were not photocopiers within the meaning of the German copyright law that was in effect until December 31, 2007 and, therefore, not subject to the levies on photocopiers established by that law. VG Wort filed a claim with the GCC challenging that ruling. In January 2011, as in the HP case above, the GCC revoked the GFSC decision and referred the case back to the GFSC to determine if the ruling gave due credit to the copyright owner's property rights under the German Constitution and whether the GFSC should have referred the case to the European Court of Justice. Dell believes that the GFSC can decide to refer the case to the ECJ, confirm its prior decision, or conclude that PCs are subject to levies under German law. As such, Dell has not accrued any liability ~~in this matter, as Dell does not believe there is a probable and estimable claim.~~nor collected any levies.

~~In a separate matter, on~~On December 29, 2005, Zentralstelle Für private Überspielungrechte (“ZPÜ”), a joint association of various German collecting societies, instituted arbitration proceedings against Dell's German subsidiary before the Board of Arbitration at the German Patent and Trademark Office in Munich, and subsequently filed a lawsuit in the German Regional Court in Munich on February 21, 2008, seeking levies to be paid on each PCpersonal computer sold by Dell in Germany through the end of calendar year 2007. On December 23, 2009, ZPÜ and the German industry association, BCH, reached a settlement regarding audio-video copyright levy litigation (with levies ranging from €3.15 to €13.65 per unit). Dell joined this settlement on February 23, 2010 and has paid the amounts due ~~thereunder.~~under the settlement. However, because the settlement agreement expired on December 31, 2010, the amount of levies payable after calendar year 2010, as well as Dell's ability to recover such amounts through increased prices, ~~remain~~remains uncertain.

German courts are also considering a lawsuit originally filed in July 2004 by VG Wort, a German collecting society representing certain copyright holders, against Hewlett-Packard Company in the Stuttgart Civil Court seeking levies on printers, and a lawsuit originally filed in September 2003 by the same plaintiff against Fujitsu Siemens Computer GmbH in Munich Civil Court in Munich, Germany seeking levies on personal computers. In each case, the civil and appellate courts held that the subject classes of equipment were subject to levies. In July 2011, the German Federal Supreme Court, to which the lower court holdings have been appealed, referred each case to the Court of Justice of the European Union, submitting a number of legal questions on the interpretation of the European Copyright Directive which the German Federal Supreme Court deems necessary for its decision. Dell has not accrued any liability in either matter, as Dell does not believe there is a probable and estimable claim.

~~Additionally, there are proceedings~~Proceedings seeking to impose or modify copyright levies for sales of digital devices also have been instituted in courts in Spain ~~to which~~and in other EU member states. Even in countries where Dell is not a party ~~but that~~to such proceedings, decisions in those cases could impact Dell's ~~obligation to collect~~business and ~~remit levies across~~ the EU. In March 2006, Sociedad General de Autores y Editores de Espana (“SGAE”), a Spanish collecting society, sued Padawan SL ("Padawan"), a company unaffiliated with Dell, in the Commercial Court number four of Barcelona in Spain claiming that Padawan owed levies on the CD-Rs, CD-RWs, DVD-Rs, and MP3 players sold by Padawan. In June 2007, the trial court upheld SGAE's claim and ordered Padawan to pay specified levies. Padawan appealed the decision to the Audiencia Provincial de Barcelona, which stayed the proceedings in order to refer the case to the ECJ. The ECJ considered the interpretation of the term “fair compensation” under the European Copyright Directive (“Directive”). On October 21, 2010, the ECJ issued its decision and outlined how fair compensation should be considered under the Directive by the EU member states. The ECJ stated that fair compensation must be calculated based on the harm caused to the authors of protected works by private copying. The ECJ also stated that the indiscriminate application of the private copying levy to devices not made available to private users and clearly reserved for uses other than private copying is incompatible with the Directive. The matter was referred back to the Spanish court to determine whether the Spanish copyright levy scheme is compatible with the Directive based on the guidance provided by the ECJ. And in March 2011, the Appeals Court of Barcelona decided in the industry's favor, noting that the indiscriminate paymentamount of copyright levies ~~does not comply with EU law. The case can~~Dell may be ~~appealed~~required to ~~the Supreme Court~~collect.

Table of Spain. It is unclear at this time what the effect of this decision will be on copyright levies in Spain and the other EU member states. Dell continues to collect and remit levies in Spain and other EU countries where it has determined that based on local law it is probable that Dell has an obligation.Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The ultimate resolution of these ~~matters~~proceedings and the associated financial impact to Dell, if any, including the number of units potentially affected, the amount of levies imposed, and the ability of Dell to recover such amounts remains uncertain at this time. Should the courts determine there is liability for previous units shipped beyond ~~what~~the amount of levies Dell has collected or accrued, Dell would be liable for such incremental amounts. Recovery of any such amounts from others by Dell would ~~only~~ be possible only on future collections related to future shipments.

~~Sharp Corporation v Dell Inc.~~ - Sharp Corporation (“Sharp”) filed a suit against Dell in October 2008 for trademark infringement, unfair competition and dilution in the U.S. District Court in the State of New Jersey. Sharp alleges that it is the owner of the “SHARP” mark and that this mark and related marks are used in connection with Sharp's sale of a wide variety of electrical and consumer electronic products. Sharp alleges that Dell has infringed the “SHARP” mark by using the “UltraSharp” and “Dell UltraSharp” marks to promote, advertise and sell computer monitors and notebook computers, from 2002 to the present. Sharp alleges that Dell's use of “UltraSharp” has and will continue to

~~Table of Contents~~

~~DELL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

cause actual consumer confusion regarding the source of “UltraSharp.” In addition, Sharp has asserted a claim for dilution of its SHARP marks on the alleged ground that Dell's use of DELL UltraSharp and UltraSharp has weakened the distinctive value of its marks. Sharp seeks damages measured by Dell's profits made from the sale of DELL UltraSharp products, treble damages, punitive damages, costs and attorneys' fees. Sharp also seeks a permanent injunction precluding the use of Dell's allegedly infringing “UltraSharp” mark. Dell disputes the claims and is vigorously defending the case. Trial in this matter is currently scheduled for June 2011. The ultimate resolution of this matter and the associated financial impact to Dell, if any, remains uncertain at this time.

Chad Brazil and Steven Seick v Dell Inc. -— Chad Brazil and Steven Seick filed a class action suit against Dell in March 2007 in the U.S. District Court for the Northern District of California. The plaintiffs allege that Dell advertised discounts on its products from false “regular” prices, in violation of California law. The plaintiffs seek compensatory damages, disgorgement of profits from the alleged false advertising, injunctive relief, punitive damages and attorneys' fees. In December 2010, the District Court certified a class consisting of all California residents who had purchased certain products advertised with a former sales price on the consumer segment of Dell's website during an approximately four year period between March 2003 and June 2007. During the first quarter of Fiscal 2012, the plaintiffs and Dell reached a ~~classwide~~class-wide settlement in principle regarding the dispute on terms that are not material to Dell, and on October 28, 2011 the ~~company, however,~~District Court granted final approval of the settlement. Since the final approval, an objector to the settlement has filed a notice of appeal to the Ninth Circuit Court of Appeals with regard to approval of the settlement. While there can be no assurances with respect to litigation, Dell believes it is ~~still subject to submission and approval by~~unlikely that the ~~District Court.~~settlement will be overturned on appeal.

Convolve Inc. v Dell Inc. -— Convolve, Inc. sued Dell, Western Digital Corporation (“Western Digital”), Hitachi Global Storage Technologies, Inc., and Hitachi Ltd. (collectively “Hitachi”) on June 18, 2008 in the Eastern District of Texas, Marshall Division, alleging that the defendants infringe United States Patent No. 4,916,635 (entitled “Shaping Command Inputs to Minimize Unwanted Dynamics”) and United States Patent No. 6,314,473 (entitled “System for Removing Selected Unwanted Frequencies in Accordance with Altered Settings in a User Interface of a Data Storage Device”). Western Digital and Hitachi are hard drive suppliers of Dell. ~~This case is scheduled to go to trial in July 2011. Plaintiff seeks~~The plaintiff sought damages for each product with an allegedly infringing hard drive sold by Dell, plus exemplary damages for allegedly willful infringement. ~~Dell disputes the plaintiff's damages calculations and also disputes the validity of the patents. Dell further disputes~~On July 26, 2011, a jury found that ~~it infringes~~ the patents had been infringed and ~~will assert all of these defenses at trial.~~awarded the plaintiff an amount that is not material to Dell. The ~~ultimate resolution of this matter~~jury decision is subject to final approval and entry by the ~~associated financial impact to Dell, if any, remain uncertain at this time.~~judge.

Other Litigation -— The various legal proceedings in which Dell is involved include commercial litigation and a variety of patent suits. In some of these cases, Dell is the sole defendant. More often, particularly in the patent suits, Dell is one of a number of defendants in the electronics and technology industries. Dell is actively defending a number of patent infringement suits, and several pending claims are in various stages of ~~evaluations.~~evaluation. While the number of patent cases has grown over time, Dell does not currently anticipate that any of these matters will have a material adverse effect on Dell's business, financial condition, results of operations, or cash flows.

~~While~~

As of May 4, 2012, Dell does not ~~expect~~believe there is a reasonable possibility that a material loss exceeding the ~~ultimate outcomes in~~amounts already accrued for these or other proceedings or matters ~~individually or collectively, will~~may have ~~a material adverse effect on its~~been incurred. However, since the ultimate resolution of any such proceedings and matters is inherently unpredictable, Dell's business, financial ~~position,~~condition, results of operations, or cash flows ~~the results and timing of the ultimate resolutions~~could be materially affected in any particular period by unfavorable outcomes in one or more of these ~~various~~ proceedings ~~and matters are inherently unpredictable.~~or matters. Whether the outcome of any claim, suit, assessment, investigation, or legal proceeding, individually or collectively, could have a material adverse effect on Dell's business, financial condition, results of operations, or cash flows will depend on a number of variables, including the nature, timing, and amount of any associated expenses, amounts paid in settlement, damages or other remedies or consequences.

2328

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 12 ~~— COMPREHENSIVE INCOME~~

~~The following table summarizes comprehensive income for the three months ended~~ ~~April 29, 2011~~ ~~and April 30, 2010:~~

Three Months Ended
April 29,
2011 April 30,
2010
Comprehensive Income (in millions)
Net Income $ 945 $ 341
Change related to hedging instruments, net (68 ) 13
Change related to marketable securities, net — (1 )
Foreign currency translation adjustments 74 34
Comprehensive Income $ 951 $ 387

~~NOTE 13~~ — INCOME AND OTHER TAXES

Dell's effective income tax rate was ~~19.2%~~19.8% and ~~24.4%~~19.2% for the first quarters of Fiscal ~~2012~~2013 and Fiscal ~~2011,~~2012, respectively. The slight year-over-year ~~decrease~~increase in Dell's effective income tax rate for the ~~first quarter of Fiscal~~three months ended May 4, 2012, was primarily attributable to ~~an increase in the first quarter of Fiscal 2012, as compared to the first quarter of Fiscal 2011,~~a decrease in the proportion of taxable income attributable to lower tax jurisdictions. In addition, Dell's effective tax rate was impacted by the expiration of certain beneficial U.S. tax statutes that have not been extended. The differences between the estimated effective income tax rates and the U.S. federal statutory rate of ~~35.0%~~35% principally result from Dell's geographical distribution of taxable income and differences between the book and tax treatment of certain items. In certain jurisdictions, Dell's tax rate is significantly less than the applicable statutory rate as a result of tax holidays. Dell's significant tax holidays expire in whole or in part during Fiscal 2016 through Fiscal 2021. Many of these tax holidays and reduced tax rates may be extended when certain conditions are met or may be terminated early if certain conditions are not met. The income tax rate for future quarters of Fiscal ~~2012~~2013 will be impacted by the actual mix of jurisdictions in which income is generated.

Dell is currently under income tax audits in various jurisdictions, including the United States. The tax periods open to examination by the major taxing jurisdictions to which Dell is subject include fiscal years ~~1997~~1999 through 2011. As a result of these audits, Dell maintains ongoing discussions and negotiations relating to tax matters with the taxing authorities in these various jurisdictions. Dell believes that it has provided adequate reserves related to all matters contained in tax periods open to examination.

Dell's U.S. federal income tax returns for fiscal years 2007 through 2009 are currently under examination by the Internal Revenue Service (“IRS”). The IRS issued a Revenue Agent's Report for fiscal years 2004 through 2006 proposing certain assessments primarily related to transfer pricing matters. Dell disagrees with certain of the proposed assessments and has contested them through the IRS administrative appeals procedures. The IRS has ~~recently~~ remanded the audit for ~~the~~ tax years 2004 through 2006 back to examination for further review. ~~Dell believes that it has provided adequate reserves related to all matters contained in tax periods open to examination. However, should~~Should Dell experience an unfavorable outcome in the IRS matter, such an outcome could have a material impact on its results of operations, financial position, and cash flows.

Judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Dell's net unrecognized tax benefits, included in other non-current liabilities in its Condensed Consolidated Statement of Financial Position, were $2.6 billion as of May 4, 2012, and as of February 3, 2012. If recognized, these tax benefits would favorably affect Dell's effective tax rate. Although the timing of income tax audit resolutions and negotiations with taxing authorities is highly uncertain, Dell does not anticipate a significant change to the total amount of unrecognized income tax benefits within the next 12 months.

Dell takes certain non-income tax positions in the jurisdictions in which it operates and has received certain non-income tax assessments from various jurisdictions. ~~These jurisdictions include Brazil, where~~ Dell is in litigation with a state government over the proper application of transactional taxes to warranties related to the sale of computers. Dell has also negotiated certain tax incentives with the statebelieves that can be used to offset potential tax liabilities should the courts rule against it. The incentives are based upon the number of jobs Dell maintains within the state. Dell is currently on appeal for this case and has pledged its manufacturing facility in Hortolandia, Brazil to the government. Dell does not expect the outcome of this case to have a material ~~impact to its consolidated financial statements.~~

loss in these matters is not probable and it is not reasonably possible that a material loss exceeding amounts already accrued has been incurred. Dell believes its positions in these non-income tax litigation matters are supportable ~~that a liability is not probable,~~ and that it will ultimately prevail. In the normal course of business, Dell's positions and conclusions related to its non-income taxes could be challenged and assessments may be made. To the extent new information is obtained and Dell's views on its positions, probable outcomes of assessments, or litigation change, changes in estimates to Dell's accrued liabilities would be recorded in the period in which such determination is made.

2429

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 1413 — EARNINGS PER SHARE

Basic earnings per share is based on the weighted-average effect of all common shares issued and outstanding and is calculated by dividing net income by the weighted-average shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted-average number of common shares used in the basic earnings per share calculation plus the number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding. Dell excludes equity instruments from the calculation of diluted earnings per share if the effect of including such instruments is anti-dilutive. Accordingly, certain stock-based incentive awards have been excluded from the calculation of diluted earnings per share totaling ~~167~~106 million and ~~204~~167 million common shares for the ~~first quarters of Fiscal~~three months ended May 4, 2012, and ~~Fiscal~~April 29, 2011, respectively.

The following table sets forth the computation of basic and diluted earnings per share for the three months ended ~~April 29, 2011~~May 4, 2012, and April ~~30, 2010~~29, 2011:


	Three Months Ended				Three Months Ended
	April 29, 2011		April 30, 2010		May 4, 2012		April 29, 2011
	(in millions, except per share amounts)				(in millions, except per share amounts)
Numerator:
Net income	$	945	$	341	$	635	$	945
Denominator:
Weighted-average shares outstanding:
Basic	1,908		1,961		1,759		1,908
Effect of dilutive options, restricted stock units, restricted stock, and other	15		12		15		15
Diluted	1,923		1,973		1,774		1,923
Earnings per share:
Basic	$	0.50	$	0.17	$	0.36	$	0.50
Diluted	$	0.49	$	0.17	$	0.36	$	0.49

~~Table of Contents~~

~~DELL INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

NOTE 1514 — SEGMENT INFORMATION

The business segments disclosed in the accompanying Condensed Consolidated Financial Statements are based on information reviewed by Dell's management to evaluate the business segment results. Dell's measure of segment operating income for management reporting purposes excludes severance and facility closure expenses and acquisition-related charges, broad based long-term incentives, and amortization of intangible assets.

Dell's four global business segments are Large Enterprise, Public, Small and Medium Business (“SMB”), and Consumer. Large Enterprise includes sales of IT infrastructure and service solutions to large global and national corporate customers. Public includes sales to educational institutions, governments, health care organizations, and law enforcement agencies, among others. SMB includes sales of complete IT solutions to small and medium-sized businesses. Consumer includes sales to individual consumers and retailers around the world.

The business segments disclosed in the accompanying Condensed Consolidated Financial Statements are based on this organizational structure and information reviewed by Dell's management to evaluate the business segment results. Dell's measure of segment operating income for management reporting purposes excludes severance and facility closure expenses, broad based long-term incentives, acquisition-related charges, amortization of intangibles, and the settlements for the SEC investigation as well as the securities litigation class action lawsuit that were incurred duringIn the first quarter of Fiscal ~~2011.~~2013, Dell made certain segment realignments in order to conform to the way Dell now internally manages segment performance. These realignments affected all of Dell's operating segments, but primarily consisted of the transfer of small office business customers from its SMB operating segment to its Consumer segment. Dell has recast prior period amounts to provide visibility and comparability. None of these changes impact Dell's previously reported consolidated net revenue, gross margin, operating income, net income, or earnings per share.

Table of Contents

DELL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table presents net revenue by Dell's reportable global segments as well as a reconciliation of consolidated segment operating income to Dell's consolidated operating income:


	Three Months Ended						Three Months Ended
	April 29, 2011			April 30, 2010			May 4, 2012			April 29, 2011
	(in millions)						(in millions)
Net revenue:
Large Enterprise	$	4,477		$	4,246		$	4,436		$	4,587
Public	3,767			3,856			3,466			3,621
Small and Medium Business	3,768			3,524			3,477			3,355
Consumer	3,005			3,248			3,043			3,454
Total	$	15,017		$	14,874		$	14,422		$	15,017
Consolidated operating income:
Large Enterprise	$	504		$	283		$	402		$	516
Public	370			298			271			352
Small and Medium Business	463			313			389			435
Consumer	136			17			32			170
Consolidated segment operating income	1,473			911
Severance and facility actions	(19		)	(57		)
Segment operating income							1,094			1,473
Broad based long-term incentives^(a)	(97		)	(87		)	(84		)	(97		)
Amortization of intangible assets	(92		)	(88		)	(110		)	(92		)
Acquisition-related costs^(a)(b)	(53		)	(20		)
Other^(c)	—			(140		)
Severance and facility actions and acquisition-related costs ^(a)(b)							(76		)	(72		)
Total	$	1,212		$	519		$	824		$	1,212

____________________


^(a)	Broad based long-term incentives includes stock-based compensation and other long-term incentive awards, but excludes ~~stock-based compensation~~any costs related to ~~acquisitions, which are included in acquisition-related costs.~~acquisitions.


^(b)	Acquisition-related costs consist primarily of retention payments, integration costs, and ~~other costs.~~consulting fees.


~~(c)~~	~~Other includes the~~ ~~$100 million~~ ~~settlement for the SEC investigation and a~~ ~~$40 million~~ ~~settlement for a securities litigation lawsuit that were both incurred in the first quarter of Fiscal 2011.~~

2631

Table of Contents

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

All percentage amounts and ratios presented in this management's discussion and analysis were calculated using the underlying data in thousands. Unless otherwise indicated, all changes identified for the current-period results represent comparisons to results for the prior corresponding fiscal periods. Our fiscal year is the 52 or 53 week period ending on the Friday nearest January 31. The fiscal year ending February 1, 2013 ("Fiscal 2013") will be a 52 week period. Unless the context indicates otherwise, references in this management’s discussion and analysis to “we,” “us,” “our” and “Dell” mean Dell Inc. and our consolidated subsidiaries. This management’s discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended ~~January 28, 2011,~~February 3, 2012, and the ~~consolidated financial statements~~Consolidated Financial Statements and related notes included in that report.

INTRODUCTION

We are a leading integrated technology solutions provider in the IT industry. We built our reputation through listening to customers and developing solutions that meet customer needs. We are focused on providing long-term value creation through the delivery of customized solutions that make technology more efficient, more accessible, and easier to ~~use. Customer needs are increasingly being defined by how they use technology rather than where they use it, which is why our businesses are globally organized.~~manage. Our four customer-centric, global business segments are Large Enterprise, Public, Small and Medium Business ~~(“SMB”~~("SMB"), and Consumer. We also refer to our Large Enterprise, Public, and SMB segments as “Commercial.” ~~Our globally organized~~

A key component of our business ~~units reflect the impact~~strategy is to continue shifting our portfolio to products and services that provide higher-value and recurring revenue streams over time. As part of ~~globalization on our customer base.~~

~~We are committed to delivering efficient and flexible IT solutions for the virtual era. Our focus is on three key solutions domains:~~

~~Next generation computing solutions and intelligent data management~~

~~Services, security and cloud computing, and~~

~~End user computing~~

~~Next generation computing solutions, intelligent data management, services, security and cloud computing are all part~~this strategy, we emphasize expansion of our enterprise solutions and services, which include servers, networking, storage, and services. We believe the most attractive areas for profitable growth include data center and information management as well as client and cloud computing. We believe software will enhance our enterprise solutions, and accordingly, in early Fiscal 2013, we launched our newly formed software group to expand our ability to execute in strategic areas that are important to our customers. We now have four solutions groups to support our global business segments: enterprise solutions, services, end-user computing, and software.

Emerging countries, which include a vast majority of the world's population, are attractive growth opportunities for technology expansion. In recent years, we have focused much of our investment in Growth Countries, which we define as non-U.S. markets excluding Western Europe, Canada, and Japan, with a particular focus on BRIC, which consists of Brazil, Russia, India, and China.

Our strategic transformation has contributed to significant improvements in our operating margins over time. We employ a collaborative approach to product design and development in ~~recent quarters. Our enterprise~~which our engineers, with direct customer input, design innovative solutions ~~products include servers, networking,~~ and ~~storage~~work with a global network of technology companies to architect new system designs, influence the direction of future development, and integrate new technologies into our products. Through this collaborative, customer-focused approach, we strive to deliver new and relevant products and services to the market quickly and efficiently. For our ~~services are grouped into three categories based~~client business, we have directed our development efforts towards streamlining our product portfolio and focusing on ~~similar demand, economic and delivery profiles: transactional; outsourcing; and project-based. We are also focused on end user computing~~product leadership by developing ~~higher valued capabilities for our client products, which include our mobility and desktop PC products.~~next generation capabilities. We ~~have been focusing on improving~~continue to invest in the ~~profitability~~enhancement of our ~~client products by creating a flexible value chain~~sales and marketing functions. Over time, we have added new distribution channels, such as retail, system integrators, value-added resellers, and distributors, to ~~improve execution and we will continue~~expand our access to focus on simplifying our product offerings. The majority of our products are now produced by contract manufacturers. We believe developing flexible and efficient IT solutions will provide higher recurring revenue streams and margin opportunities over time.more end-users around the world.

We supplement organic growth with a disciplined acquisition program targeting businesses that will expand our portfolio of higher-margin enterprise solutions ~~and services~~ offerings. We emphasize acquisitions of companies with portfolios that we can leverage with our global customer base and distribution. ~~During~~Since the beginning of Fiscal 2012, we have acquired several businesses that extend our core capabilities in a variety of enterprise offerings, including storage, networking, systems management appliance, virtualized server, data center, and desktop solutions, and software-as-a-service application integration, as well as enabled expansion of our customer financing activities. We completed five of these acquisitions in Fiscal 2013, including our acquisitions of SonicWALL and Wyse Technology. The comparability of our results of operations for the first quarter of Fiscal 2013 compared to the first quarter of Fiscal 2012 we acquired Compellent Technologies, Inc. ("Compellent"), a global provider of virtual storage solutions for enterprise and cloud computing environments, and SecureWorks Inc. ("SecureWorks"), a global provider of information security services. Seeis affected by these acquisitions, although the impact is not material. For further discussion regarding our acquisitions, see Note 8 ~~- Acquisitions in~~of the Notes to the Condensed Consolidated Financial Statements included in “Part I — Item 1 — Financial ~~Statements and Supplementary Data” for additional information about our acquisitions. In addition, during the first quarter~~Statements.”

Table of Fiscal 2012, we announced our intent to acquire Dell Financial Services Canada Limited, a CIT Vendor Finance and Dell partnership, as well as CIT Vendor Finance's Dell-related assets and sales and servicing functions in Europe.Contents

Presentation of Supplemental Non-GAAP Financial Measures

In this management's discussion and analysis, we use supplemental measures of our performance, which are derived from our consolidated financial information but which are not presented in our consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These financial measures, which are considered “non-GAAP financial measures” under SEC rules, include our non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share. See “Results of Operations — Non-GAAP Financial Measures” below for information about our use of these non-GAAP financial measures, including our reasons for including the measures, material limitations with respect to the usefulness of the measures, and a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure.

2733

Table of Contents

RESULTS OF OPERATIONS

Consolidated Operations

The following table summarizes our consolidated results of operations for the three months ended May 4, 2012, and April 29, 2011 ~~and April 30, 2010:~~:


	Three Months Ended										Three Months Ended
	April 29, 2011						April 30, 2010				May 4, 2012						April 29, 2011
	Dollars		% of Revenue		% Change		Dollars		% of Revenue		Dollars		% of Revenue		% Change		Dollars		% of Revenue
	(in millions, except per share amounts and percentages)										(in millions, except per share amounts and percentages)
Net revenue:
Products	$	12,059	80.3	%	—	%	$	12,086	81.3	%
Product											$	11,423	79.2	%	(5	)%	$	12,059	80.3	%
Services, including software related	2,958		19.7	%	6	%	2,788		18.7	%	2,999		20.8	%	1	%	2,958		19.7	%
Total net revenue	$	15,017	100.0	%	1	%	$	14,874	100	%	$	14,422	100.0	%	(4	)%	$	15,017	100.0	%
Gross margin:
Products	$	2,623	21.8	%	54	%	$	1,701	14.1	%
Product											$	2,093	18.3	%	(20	)%	$	2,623	21.8	%
Services, including software related	809		27.3	%	(1	)%	815		29.2	%	974		32.5	%	20	%	809		27.3	%
Total gross margin	$	3,432	22.9	%	36	%	$	2,516	16.9	%	$	3,067	21.3	%	(11	)%	$	3,432	22.9	%
Operating expenses	$	2,220	14.8	%	11	%	$	1,997	13.4	%	$	2,243	15.6	%	1	%	$	2,220	14.8	%
Operating income	$	1,212	8.1	%	134	%	$	519	3.5	%	$	824	5.7	%	(32	)%	$	1,212	8.1	%
Net income	$	945	6.3	%	177	%	$	341	2.3	%	$	635	4.4	%	(33	)%	$	945	6.3	%
Earnings per share — diluted	$	0.49	N/A		188	%	$	0.17	N/A
Earnings per share - diluted											$	0.36	N/A		(27	)%	$	0.49	N/A

Other Financial Information ^(a)
Non-GAAP gross margin	$	3,511	23.4	%	34	%	$	2,614	17.6	%	$	3,167	22.0	%	(10	)%	$	3,511	23.4	%
Non-GAAP operating expenses	$	2,135	14.2	%	19	%	$	1,790	12.0	%	$	2,157	15.0	%	1	%	$	2,135	14.2	%
Non-GAAP operating income	$	1,376	9.2	%	67	%	$	824	5.5	%	$	1,010	7.0	%	(27	)%	$	1,376	9.2	%
Non-GAAP net income	$	1,050	7.0	%	80	%	$	584	3.9	%	$	761	5.3	%	(28	)%	$	1,050	7.0	%
Non-GAAP earnings per share - diluted	$	0.55	N/A		83	%	$	0.30	N/A		$	0.43	N/A		(22	)%	$	0.55	N/A

_____________________

^(a)

Non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share are not measurements of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” below for information about these non-GAAP financial measures, including our reasons for including the measures, material limitations with respect to the usefulness of the measures, and a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure.

~~(a)~~Non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share are not measurements of financial performance prepared in accordance with GAAP. See “Non-GAAP Financial Measures” below for information about these non-GAAP financial measures, including our reasons for including the measures, material limitations with respect to the usefulness of the measures, and a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure.

Overview

For the first quarter of Fiscal ~~2012,~~2013, our total net revenue ~~increased 1% year-over-year with slight increases~~decreased 4%. Our sales force execution was below expectations, impacting our results this quarter. We have taken actions going into the second quarter of Fiscal 2013 to optimize our sales coverage and increase our focus on selling integrated offerings, and we are confident these actions will improve our sales efficiency as we move through Fiscal 2013.

Revenue from our Commercial segments decreased 2%, and represented approximately 79% of our total net revenue. The decrease in our Commercial revenue was due in part to delayed spending from our Large Enterprise customers and ~~SMB segments largely offset by decreases~~budgetary constraints that impacted our Public customers. Revenue in our ~~Public~~SMB segment increased, which was driven by revenue from our enterprise solutions and services offerings. Revenue from our Consumer ~~segments. The net revenue of our Commercial segments increased 3% year-over-year,~~customers decreased 12%, and represented approximately ~~80%~~21% of our total net revenue for the first quarter of Fiscal ~~2012. The recovery~~2013. We experienced a competitive pricing environment in ~~the economy during recent quarters helped maintain demand~~our Consumer business, and we limited our participation in low-value client products, particularly in Growth Countries. Overall, revenue from our ~~Large Enterprise~~enterprise solutions and SMB customers as the corporate refresh cycle continued. Our Public customers continue to be challenged by budgetary constraints on public spending, particularly in the U.S. and European regions. Demandservices increased 2%, while revenue from our ~~Consumer customers softened in~~client products decreased 6%. During the first quarter of Fiscal ~~2012, though profitability improved.~~

~~Our consolidated operating income increased 134% year-over-year, and all our segments reported increases in operating income. Operating income~~2013, revenue from our Commercial segments increased 50%, while Consumer operating income increased from $17 million to $136 million. The improved profitability of our Commercial business was largely driven by significant margin improvements from our client products, which include mobility and desktop products. Our Commercial segments also saw improved margin percentages for our enterprise solutions products, which include our servers, networking, and storage offerings. Our Consumer segment experienced improved profitability primarily from our client products. We will remain focused on profitability by continuing our efforts to provide IT solutions to our customers in areas such as enterprise solutions and services represented 31% of total revenue, and ~~will continue to utilize our flexible supply chain and pricing discipline in seeking to enhance the profitability~~gross margin from this area represented 50% of total gross margin.

2834

Table of Contents

During the first quarter of ~~all~~Fiscal 2013, our ~~products.~~ consolidated operating income as a percentage of net revenue decreased 240 basis points to 5.7%. Operating income as a percentage of net revenue from our Commercial segments decreased 200 basis points to 9.3% for the first quarter of Fiscal 2013, while our Consumer operating income percentage decreased 380 basis points to 1.1%. The decrease in operating income percentage for the first quarter of Fiscal 2013 was primarily driven by reduced product gross margin percentage, particularly for our client products, the effect of which was partially offset by higher gross margin percentage associated with our services offerings. Our operating expenses as a percentage of revenue also increased, which further reduced our operating income percentage.

As of May 4, 2012, we had $17.2 billion of total cash, cash equivalents, and investments, compared to $18.2 billion as of February 3, 2012. Cash used in operating activities was $138 million during the first quarter of Fiscal 2013, compared to cash flow from operations of $465 million during the first quarter of Fiscal 2012. As of May 4, 2012, we had $9.0 billion in total debt, compared to $9.3 billion in total debt as of February 3, 2012.

We are committed to our strategic transformation, and we will continue to make investments that improve our end-to-end solutions capabilities. In the long-run, we believe that we will profitably grow revenue and operating income through the expansion of our enterprise solutions and services, although this growth will not always be linear. We will continue to monitor the dynamics of our industry and adjust as necessary to optimize operating income and cash flow. We believe sequential revenue growth for the second quarter will be consistent with normal seasonality.

Revenue

Product Revenue — Product revenue ~~was flat year-over-year for~~decreased 5% during the first quarter of Fiscal ~~2012. Our product revenue performance was attributable to softening customer demand,~~2013. We experienced a competitive pricing environment during the first quarter of Fiscal 2013, particularly for our ~~Public and Consumer segments.~~client products. See "Revenue by Product and Services Categories" for further information regarding ~~the average selling prices of our products.~~product revenue.

Services Revenue, including software related — Services revenue, including software related, increased ~~year-over-year~~ by 6%1% for the first quarter of Fiscal ~~2012.~~2013. Our services revenue performance ~~was attributable to a 5% year-over-year increase in services revenue and an increase of 9% in software related services revenue for~~during the first quarter of Fiscal ~~2012.~~2013 was attributable to a 4% increase in revenue from services, excluding software related, largely offset by a 5% decrease in third-party software revenue, which has been impacted by a continued reduction of our participation in non-strategic areas. The increase in revenue from services, including software related, was driven by growth in our SMB and Large Enterprise segments, partially offset by a decline in services revenue from our Public and Consumer segments.

~~During the first quarter of Fiscal 2012, revenue from the U.S. decreased 5% to $7.4 billion and represented 49% of total net revenue.~~ Revenue from outside the U.S. ~~increased 7%~~decreased 2% to ~~$7.6~~$7.5 billion and represented ~~51%~~52% of total net revenue. Non-U.S. revenue excluding Western Europe, Canada and Japan grew 17% year-over-year to 27% of total net revenue. Revenue from Brazil, Russia, India, and China, which we refer to as "BRIC," increased 18% year-over-year, on a combined basis, for the first quarter of Fiscal 2012. The increase in revenue from BRIC was driven by sales in China and India, while revenue from Russia and Brazil has softened in comparison to prior quarters. Total revenue from BRIC increased to 14% of our total net revenue for the first quarter of Fiscal ~~2012 over 12% for~~2013, while revenue from the ~~prior year.~~U.S. decreased 6% to $6.9 billion. Revenue from Growth Countries was essentially unchanged, as we experienced a more competitive pricing environment in these markets. We ~~are continuing~~experienced 9% growth in revenue from China, which was offset by declines in revenue from other Growth Countries, as we focused on optimizing profitability. We continue to ~~expand into~~view these ~~and other emerging countries that represent~~markets, which include the vast majority of the world's population, as a long-term growth opportunity. Accordingly, we are continuing to tailor solutions to meet specific regional needs of these markets, and enhance relationships within these regions to provide customer choice and flexibility.

We manage our business on a U.S. dollar basis and factor foreign currency exchange rate movements into our pricing decisions. In addition, we utilize a comprehensive hedging strategy intended to mitigate the impact of foreign currency volatility over time. As a result of our hedging programs, the impact of foreign currency movements was not material to our total net revenue for the first quarter of Fiscal ~~2012.~~

~~Japan~~

On March 11, 2011, the northeast region of Japan sustained extensive damage from a severe earthquake and tsunami that has impacted Japan's infrastructure as well as its economy. We do not have any manufacturing facilities in Japan and our operations have not been significantly affected by the damage. Revenue from Japan represented less than 5% of our total net revenue for Fiscal 2011 and Fiscal 2010 and was not significantly impacted by the event for the first quarter of Fiscal 2012. Although certain components used in our products are produced by Japanese manufacturers, our preliminary assessment indicates that our supply chain to date has not been significantly impacted by this event. We will continue to monitor the situation.2013.

Gross Margin

Products — During the first quarter of Fiscal ~~2012, our~~2013, product gross margins ~~increased~~decreased in absolute dollars ~~year-over-year~~ and in gross margin percentage. Product gross margin percentage ~~increased from 14.1%~~decreased to 18.3% for the first quarter of Fiscal ~~2011 to~~2013 from 21.8% for the first quarter of Fiscal 2012. Decreasing component costs, improved pricing discipline, better sales and supply chain execution, and a shift in mix to more differentiated products with higher margins contributed to the year-over-year increaseThe decline in product gross ~~margin percentage for all our segments. We have created~~margins was driven by a ~~flexible supply chain that has improved our supply chain execution and~~more competitive pricing environment as we ~~have simplified our product offerings. Additionally, in the second half of~~moved through Fiscal ~~2011, we began to benefit from decreasing component costs,~~2012 into Fiscal 2013, particularly for ~~memory and displays. We expect that this favorable component cost environment will moderate in the second and third quarters of Fiscal 2012.~~our client products.

Services, including software related — During the first quarter of Fiscal ~~2012,~~2013, our ~~services~~ gross margin ~~decreased~~for services, including software related, increased in absolute dollars and in gross margin ~~percentage from the first quarter of Fiscal 2011. Services~~percentage. Our gross margin ~~decreased from 29.2%~~percentage for services, including software related, increased to 32.5% for the first quarter of Fiscal ~~2011 to~~2013 from 27.3% for the first quarter of Fiscal 2012. ~~Our~~The increase in gross margin ~~rate~~ for services, including software related, iswas primarily driven by our transactional services, which consist primarily of our extended warranty sales, offset by lower margin categories such as outsourcing and project-related services. The year-over-year decrease in services gross margin was driven by decreasesincreases in gross margin ~~percentage~~percentages from ~~transaction~~our support and ~~project-based~~deployment services, ~~due to temporary cost pressures.~~which primarily consist of extended warranty services, and our infrastructure, cloud, and security services. In addition, software gross margins increased in absolute dollars and in gross margin percentage.

Table of Contents

Total gross margin for the first quarter of Fiscal ~~2012 increased 36% to $3.4 billion~~2013 decreased 11% and 10% on a GAAP ~~basis~~ and ~~34% to $3.5 billion on a~~ non-GAAP basis, ~~from the first quarter of Fiscal 2011. Gross~~respectively. Total gross margin on a GAAP basis for the first quarter of Fiscal ~~2012~~2013 was $3.1 billion, compared to $3.2 billion on a non-GAAP basis. Gross margin on a GAAP basis for the first quarters of Fiscal 2013 and Fiscal ~~2011~~2012 includes the effects of amortization of intangible assets and of severance and facility action costs and acquisition-related charges. As set forth in the reconciliation under "Non-GAAP Financial Measures" below, these items are excluded from the calculation of non-GAAP gross margin for the first ~~quarter~~quarters of Fiscal ~~2012~~2013 and Fiscal ~~2011.~~2012. Amortization of intangible assets included in GAAP gross margin increased 4%24% to ~~$71~~$88 million for the first quarter of Fiscal ~~2012. Amortization~~2013. The increase in amortization of intangibles is

~~Table of Contents~~

primarily related to the intangible assets related to our acquisition of Perot Systems Corporation ("Perot Systems") in Fiscal 2010. Severance and facility action costs included in gross margin decreased 82% to $5 million duringfor the first quarter of Fiscal 2013 was primarily attributable to an increase in purchased intangible assets over the period.

Thailand

In the third quarter of Fiscal 2012, several regions of Thailand experienced severe flooding, causing damage to infrastructure and factories that has significantly impacted the hard disk drive ("HDD") supply chain. As previously reported, during the fourth quarter of Fiscal 2012, we entered into purchase commitments with certain HDD suppliers to ensure continuity of supply for these components. These purchase agreements have terms expiring on various dates through December 2012. ~~The decrease in severance and facility action costs was due to a decrease in cost reduction activities from Fiscal 2011. We believe that~~In general, we ~~have substantially completed our manufacturing transformation, and do not expect to incur significant additional costs related to these activities. However, we may incur severance costs~~experienced better supply of HDDs in the ~~future~~first quarter of Fiscal 2013; although we continued to manage supply availability to our customers. We expect the impact of the HDD situation to improve as ~~they relate to other acquisitions.~~we move through Fiscal 2013.

Vendor Rebate Programs

Our gross margin is affected by our ability to achieve competitive pricing with our vendors and contract manufacturers, including through our negotiation of a variety of vendor rebate programs to achieve lower net costs for the various components we include in our products. Under these programs, vendors provide us with rebates or other discounts from the list prices for the components, which are generally elements of their pricing strategy. Vendor rebate programs are only one element of the costs we negotiate for our product components. We account for rebates and other discounts as a reduction in cost of net revenue. Our total net cost includes supplier list prices reduced by vendor rebates and other discounts. We manage our costs on a total net cost basis.

The terms and conditions of our vendor rebate programs are largely based on product volumes and are generally not long-term in nature, but instead are typically negotiated at the beginning of each quarter. Because of the fluid nature of these ongoing negotiations, which reflect changes in the competitive environment, the timing and amount of rebates and other discounts we receive under the programs may vary from period to period. Since we manage our component costs on a total net cost basis, any fluctuations in the timing and amount of rebates and other discounts we receive from vendors may not necessarily result in material changes to our gross margin. We monitor our component costs and seek to address the effects of any changes to terms that might arise under our vendor rebate programs. Our gross margins for the first quarters of Fiscal ~~2012~~2013 and Fiscal ~~2011~~2012 were not materially affected by any changes to the terms of our vendor rebate programs, as the amounts we received under these programs were generally stable relative to our total net cost. We are not aware of any ~~significant~~ programmatic changes to vendor pricing and rebate programs that will significantly impact our results in the near term.

In addition, we have pursued legal action against certain vendors and are currently involved in negotiations with other vendors regarding their past pricing practices. We have negotiated settlements with some of these vendors and may have additional settlements in future quarters. These ~~discounts and rebates~~settlements are allocated to ~~the~~our segments based on ~~a variety~~the relative amount of ~~factors,~~affected vendor products used by each segment. Our gross margins for the first quarters of Fiscal 2013 and Fiscal 2012 were not materially affected by negotiated vendor settlements, including ~~strategic initiatives~~settlements related to ~~drive certain programs.~~past pricing practices.

Table of Contents

Operating Expenses

The following table presents information regarding our operating expenses for the three months ended May 4, 2012, and April 29, 2011 ~~and April 30, 2010:~~:

Three Months Ended
April 29, 2011 April 30, 2010
Dollars
% of
Revenue

%
Change
Dollars
% of
Revenue
(in millions, except percentages)
Operating expenses:
Selling, general, and administrative $ 2,025 13.5 % 11 % $ 1,830 12.3 %
Research, development, and engineering 195 1.3 % 17 % 167 1.1 %
Total operating expenses $ 2,220 14.8 % 11 % $ 1,997 13.4 %

Other Financial Information
Non-GAAP operating expenses ^(a)
$ 2,135 14.2 % 19 % $ 1,790 12.0 %

~~_______________________~~



	Three Months Ended
	May 4, 2012						April 29, 2011
	Dollars		% of Revenue		% Change		Dollars		% of Revenue
	(in millions, except percentages)
Operating expenses:
Selling, general, and administrative	$	2,009	13.9	%	(1	)%	$	2,025	13.5	%
Research, development, and engineering	234		1.7	%	20	%	195		1.3	%
Total operating expenses	$	2,243	15.6	%	1	%	$	2,220	14.8	%

Other Financial Information
Non-GAAP operating expenses ^(a)	$	2,157	15.0	%	1	%	$	2,135	14.2	%

^(a) For a reconciliation of non-GAAP operating expenses to operating expenses prepared in accordance with GAAP, see “Non-GAAP Financial Measures” below.

Selling, General, and Administrative — During the first quarter of Fiscal ~~2012,~~2013, selling, general, and administrative ("SG&A") expenses ~~increased year-over-year. The~~decreased 1%. During the first quarter of Fiscal 2013, we experienced a 2% increase ~~in SG&A expenses was primarily attributable to increases~~ in compensation-related expenses, ~~advertising, and promotional expenses. Compensation-related expenses,~~ excluding severance-related ~~expenses, increased approximately $239 million due to an~~costs, which was driven by a 2% increase in headcount, ~~of approximately 10% and an increase in performance-based compensation expense, which is tied to revenue and operating income growth and to~~

~~Table of Contents~~

~~cash flow targets. Our headcount increase was~~ primarily due to ~~our acquisitions~~acquisitions. This increase was offset by a decrease in other general and new hires relating to our strategic initiatives to increase the number of sales specialists for our enterprise solutions and services offerings. We also experienced a year-over-year increase of $37 million in advertising and promotionaladministrative expenses. ~~In addition, higher SG&A expenses reflected increases in acquisition-related expenses, which were offset in part by decreases in severance and facility action costs discussed below.~~

Research, Development, and Engineering — During the first quarter of Fiscal ~~2012,~~2013, research, development, and engineering ~~(“RD&E”)~~ expenses were ~~1.3%~~1.7% of net revenue, compared to ~~1.1%~~1.3% in the prior year. We manage our research, development, and engineering spending by targeting those innovations and products that we believe are most valuable to our customers and by relying upon the capabilities of our strategic relationships. We are increasingThis increase reflects our focus onto shift our investments to research and development ~~and will continue to shift our investment in RD&E~~ activities tothat support our initiatives tothat grow our enterprise solutions, services, and ~~services~~software offerings.

Total operating expenses for the first quarter of Fiscal ~~2012~~2013 increased ~~11%~~1% to $2.2 billion on both a GAAP ~~basis~~ and ~~19% to $2.1 billion on a~~ non-GAAP ~~basis from the first quarter of Fiscal 2011.~~basis. Operating expenses on a GAAP basis for the first quarters of Fiscal ~~2012~~2013 and Fiscal ~~2011~~2012 includes ~~severance and facility charges,~~the effects of amortization of intangible assets and of severance and facility action costs and acquisition-related charges. ~~For~~In aggregate, these charges were essentially unchanged for the first quarter of Fiscal 2011, operating expenses on a GAAP basis also includes $100 million we incurred for our settlement of the SEC investigation and a $40 million charge for a securities litigation class action lawsuit that was filed against Dell during Fiscal 2007. See "Note 11 of Notes to Condensed Consolidated Financial Statements included in Part I - ~~Item 1~~ - ~~Financial Statements" for a discussion of our prior year settlement of the SEC investigation.~~2013. As set forth in the reconciliation under “Non-GAAP Financial Measures” below, these items are excluded from the calculation of non-GAAP operating expenses for the first quarters of Fiscal ~~2012~~2013 and Fiscal 2011 excludes the effects of these severance and facility action costs, amortization of intangible assets, and acquisition-related charges, and, for Fiscal 2011, the settlements referred to above. Amortization of intangibles and acquisition-related charges included in operating expenses increased 8% to $21 million and 163% to $50 million, respectively, compared to Fiscal 2011. The increases for amortization of intangibles and acquisition-related charges are primarily related to the business acquisitions completed in the first quarter of Fiscal 2012. Consistent with the discussion on severance and facility action costs in the gross margin section above, severance and facility action costs included in operating expenses decreased year-over-year by 51% to $14 million for the first quarter of Fiscal 2012.

Operating and Net Income

Operating Income — During the first quarter of Fiscal ~~2012,~~2013, operating income ~~increased 134%~~decreased 32% to ~~$1.2 billion~~$824 million on a GAAP basis and ~~67%~~27% to ~~$1.4~~$1.0 billion on a non-GAAP ~~basis from the first quarter of Fiscal 2011. The increases were primarily~~basis. This decrease was attributable to declines in revenue and declines in product gross margin percentage, the effects of which were partially offset by improved gross ~~margins discussed above.~~margin percentages for services, including software related.

Net Income — During the first quarter of Fiscal ~~2012,~~2013, net income ~~increased 177%~~decreased 33% to ~~$945~~$635 million on a GAAP basis and ~~80%~~28% to ~~$1,050~~$761 million on a non-GAAP ~~basis from Fiscal 2011.~~basis. Net income was ~~positively~~ impacted by ~~increases~~decreases in operating income and a ~~lower~~higher effective ~~income~~ tax ~~rate. In addition, on a GAAP basis, Interest~~rate, the effects of which were partially offset by favorable changes in interest and ~~Other, net decreased favorably by 38% for Fiscal 2012.~~other, net. See “Income and Other Taxes” and “Interest and Other, ~~net”~~Net” below for a discussion of our effective tax rates and interest and other, net.

Table of Contents

Non-GAAP Financial Measures

We use non-GAAP financial measures ~~in this report as performance measures~~ to supplement the financial information ~~we present~~presented on a GAAP basis. We believe that excluding certain items from our GAAP results allows our management ~~and investors~~ to better understand our consolidated financial performance from period to period and in relationship to the operating results of our segments, as ~~our~~ management does not believe that the excluded items are reflective of our underlying operating performance. We also believe that excluding certain items from our GAAP results allows our management to better project our future consolidated financial performance because our forecasts are developed at a level of detail different from that used to prepare GAAP-based financial measures. Moreover, we believe ~~the~~these non-GAAP financial measures will provide investors with useful information to help them evaluate our operating results by facilitating an enhanced understanding of our ~~underlying~~ operating performance, and enabling them to make more meaningful period to period comparisons.

The non-GAAP financial measures presented in this report include non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share. These non-GAAP financial measures, as defined by us, represent the comparable GAAP ~~financial~~ measures adjusted to exclude ~~primarily the following items:~~severance and facility action costs and acquisition-related ~~charges;~~charges and amortization of purchased intangible assets related to ~~acquisitions; severance~~acquisitions, and ~~facility action costs;~~for non-GAAP net income and ~~amounts~~non-GAAP earnings per share, the aggregate adjustment for income taxes related to the ~~settlement~~exclusion of ~~the SEC investigation, as well as the settlement of a securities litigation matter, which were incurred during the first quarter of Fiscal 2011.~~such items. We provide ~~below~~ more detail below regarding each of these items and our reasons for excluding ~~the items.~~them. In future fiscal periods, we ~~expect that we~~ may ~~again~~ exclude such items and may incur income

~~Table of Contents~~

and expenses similar to these excluded items. Accordingly, the exclusion of these items and other similar items in our non-GAAP presentation should not be interpreted as implying that ~~the~~these items are non-recurring, infrequent, or unusual.

There are limitations to the use of the non-GAAP financial measures presented in this report. Our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate the non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes. In addition, items such as amortization of purchased intangible assets represent the loss in value of intangible assets over time. The expense associated with this loss in value is not included in the non-GAAP financial measures and such measures, therefore, do not reflect the full economic effect of such loss. Further, items such as severance and facility action costs and ~~acquisition expenses~~acquisition-related charges that are excluded from the non-GAAP financial measures can have a material impact on earnings. Our management compensates for the foregoing limitations by relying primarily on our GAAP results and using non-GAAP financial measures supplementally or for projections when comparable GAAP financial measures are not available. The non-GAAP financial measures are not meant to be considered as indicators of performance in isolation from or as ~~substitutes~~a substitute for gross margin, operating expenses, operating income, net income, and earnings per share prepared in accordance with GAAP, and should be read only in conjunction with financial information presented on a GAAP basis. We provide below reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure, and encourage you to review the reconciliations in conjunction with the presentation of the non-GAAP financial measures for each respective period.

The following is a summary of the costs and other items excluded from the most comparable GAAP financial measures to calculate the non-GAAP financial measures presented in this management's discussion and analysis:

Severance and Facility Actions and Acquisition-related Costs —Severance and facility action costs are primarily related to facilities charges including accelerated depreciation and severance and benefits for employees terminated pursuant to cost synergies related to strategic acquisitions and actions taken as part of a comprehensive review of costs. Acquisition-related charges are expensed as incurred and consist primarily of retention payments, integration costs, and other costs. Retention payments include stock-based compensation and cash incentives awarded to employees, which are recognized over the vesting period. Integration costs include incremental business costs that are primarily attributable to the acquisition of Perot Systems during the fourth quarter of Fiscal 2010 and are being incurred during the integration period. These costs primarily include IT costs related to the integration of IT systems and processes, costs related to the integration of ~~Perot Systems~~ employees, costs related to full-time employees who are working on the integration, and consulting expenses. ~~Acquisition-related~~Severance and facility actions and acquisition-related charges are inconsistent in amount and are significantly impacted by the timing and nature of ~~acquisitions.~~these events. Therefore, although we may incur these types of expenses in ~~connection with~~the future, ~~acquisitions,~~ we believe that eliminating ~~acquisition-related~~these charges for purposes of calculating the non-GAAP financial measures facilitates a more meaningful evaluation of our current operating performance and comparisons to our past operating performance.

Amortization of Intangible Assets — Amortization of purchased intangible assets consists primarily of amortization of customer relationships, ~~customer lists,~~ acquired technology, non-compete covenants, and trade names ~~and non-compete covenants~~ purchased in connection with business acquisitions. We incur charges relating to the amortization of these intangibles, and those charges are included in our ~~consolidated financial statements.~~Condensed Consolidated Financial Statements. Amortization charges for our purchased intangible assets are inconsistent in amount from period to period and are significantly impacted by the timing and magnitude of our acquisitions. Consequently, we exclude these charges for purposes of calculating the non-GAAP financial measures to

Table of Contents

facilitate a more meaningful evaluation of our current operating performance and comparisons to ~~Dell's past operating performance.~~

~~Severance and Facility Actions —~~ Severance and facility action costs primarily relate to facilities charges, including accelerated depreciation and severance and benefits for employees terminated pursuant to actions taken as part of a comprehensive review of costs, including certain employee cost synergies realized through our strategic acquisitions. While we expect to continue to incur severance and facility costs with any new cost reduction activities, we exclude these severance and facility action costs for purposes of calculating the non-GAAP financial measures because we believe that these historical costs do not reflect expected future operating expenses and do not contribute to a meaningful evaluation of our current operating performance or comparisons to our past operating performance.

~~Other Fees and Settlements —~~ We also adjust our GAAP results for certain fees and settlements. During the first quarter of Fiscal 2011, we recorded a $100 million settlement amount for the SEC investigation into certain of Dell's accounting and financial matters, which was initiated in 2005, and incurred $40 million for a securities litigation class action lawsuit that was filed against us during Fiscal 2007. We are excluding these settlements from the operating results for the first quarter of Fiscal 2011 for the purpose of calculating the non-GAAP financial measures because we believe these fees and settlements, while not unusual, are outside our ordinary course of business and do not contribute to a meaningful evaluation of our current operating performance.

~~Table of Contents~~

Aggregate Adjustment for Income Taxes —The aggregate adjustment for income taxes is the estimated combined income tax effect for the ~~adjustments mentioned~~items described above. The tax effects are determined based on the jurisdictions where the ~~adjustments~~items were incurred.

The table below presents a reconciliation of ~~our~~each non-GAAP financial ~~measures~~measure to the most comparable GAAP measure for each of the three months ended May 4, 2012, and April 29, 2011 ~~and April 30, 2010:~~:


	Three Months Ended								Three Months Ended
	April 29, 2011			% Change		April 30, 2010			May 4, 2012			% Change		April 29, 2011
	(in millions, except percentages)								(in millions, except percentages)
GAAP gross margin	$	3,432		36	%	$	2,516		$	3,067		(11	)%	$	3,432
Non-GAAP adjustments:
Amortization of intangibles	71					68			88					71
Severance and facility actions	5					29
Acquisition-related	3					1
Severance and facility actions and acquisition-related costs									12					8
Non-GAAP gross margin	$	3,511		34	%	$	2,614		$	3,167		(10	)%	$	3,511

GAAP operating expenses	$	2,220		11	%	$	1,997		$	2,243		1	%	$	2,220
Non-GAAP adjustments:
Amortization of intangibles	(21		)			(20		)	(22		)			(21)
Severance and facility actions	(14		)			(28		)
Acquisition-related	(50		)			(19		)
Other fees and settlements	—					(140		)
Severance and facility actions and acquisition-related costs									(64		)			(64)
Non-GAAP operating expenses	$	2,135		19	%	$	1,790		$	2,157		1	%	$	2,135

GAAP operating income	$	1,212		134	%	$	519		$	824		(32	)%	$	1,212
Non-GAAP adjustments:
Amortization of intangibles	92					88			110					92
Severance and facility actions	19					57
Acquisition-related	53					20
Other fees and settlements	—					140
Severance and facility actions and acquisition-related costs									76					72
Non-GAAP operating income	$	1,376		67	%	$	824		$	1,010		(27	)%	$	1,376

GAAP net income	$	945		177	%	$	341		$	635		(33	)%	$	945
Non-GAAP adjustments:
Amortization of intangibles	92					88			110					92
Severance and facility actions	19					57
Acquisition-related	53					20
Other fees and settlements	—					140
Severance and facility actions and acquisition-related costs									76					72
Aggregate adjustment for income taxes	(59		)			(62		)	(60		)			(59)
Non-GAAP net income	$	1,050		80	%	$	584		$	761		(28	)%	$	1,050

GAAP earnings per share - diluted	$	0.49		188	%	$	0.17		$	0.36		(27	)%	$	0.49
Non-GAAP adjustments per share - diluted	0.06					0.13			0.07					0.06
Non-GAAP earnings per share - diluted	$	0.55		83	%	$	0.30		$	0.43		(22	)%	$	0.55

3339

Table of Contents


	Three Months Ended				Three Months Ended
	April 29, 2011		April 30, 2010		May 4, 2012		April 29, 2011
Percentage of Total Net Revenue
GAAP gross margin	22.9	%	16.9	%	21.3	%	22.9	%
Non-GAAP adjustments	0.5	%	0.7	%	0.7	%	0.5	%
Non-GAAP gross margin	23.4	%	17.6	%	22.0	%	23.4	%

GAAP operating expenses	14.8	%	13.4	%	15.6	%	14.8	%
Non-GAAP adjustments	(0.6	)%	(1.4	)%	(0.6	)%	(0.6	)%
Non-GAAP operating expenses	14.2	%	12.0	%	15.0	%	14.2	%

GAAP operating income	8.1	%	3.5	%	5.7	%	8.1	%
Non-GAAP adjustments	1.1	%	2.0	%	1.3	%	1.1	%
Non-GAAP operating income	9.2	%	5.5	%	7.0	%	9.2	%

GAAP net income	6.3	%	2.3	%	4.4	%	6.3	%
Non-GAAP adjustments	0.7	%	1.6	%	0.9	%	0.7	%
Non-GAAP net income	7.0	%	3.9	%	5.3	%	7.0	%

3440

Table of Contents

Segment Discussion

Our four global business segments are Large Enterprise, Public, Small and Medium Business, and Consumer.

Severance and facility ~~action expenses,~~actions and acquisition-related charges, broad based, long-term incentive expenses, and amortization of purchased intangible assets, costs, acquisition-related expenses, and charges related to our settlement of the SEC investigation as well as a securities litigation class action lawsuit that were incurred during the first quarter of Fiscal 2011, are not allocated to the reporting segments as management does not believe that these items are reflective of the underlying operating performance of the reporting segments. These costs totaled ~~$261~~$270 million and ~~$392~~$261 million for the first quarters of Fiscal ~~2012~~2013 and Fiscal ~~2011,~~2012, respectively.

SeIn the first quarter of Fiscal 2013, we made certain segment realignments in order to conform to the way we now internally manage segment performance. These realignments affected all of our operating segments, but primarily consisted of the transfer of small office business customers from our SMB operating segment to our Consumer segment. We have recast prior period amounts to provide visibility and comparability. None of these changes impact our previously reported consolidated net revenue, gross margin, operating income, net income, or earnings per share. eSee Note 1514 of the Notes to the Condensed Consolidated Financial Statements included in “Part I — Item 1 — Financial Statements” for additional ~~information~~information and a reconciliation of segment revenue and operating income to consolidated revenue and operating income.

The following table presents our net revenue and operating income by our reportable global segments:


	Three Months Ended										Three Months Ended
	April 29, 2011						April 30, 2010				May 4, 2012						April 29, 2011
	Dollars		% of Revenue^(a)		% Change		Dollars		% of Revenue^(a)		Dollars		% of Revenue^(a)		% Change		Dollars		% of Revenue^(a)
	(in millions, except percentages)										(in millions, except percentages)
Large Enterprise
Net revenue	$	4,477	30	%	5	%	$	4,246	28	%	$	4,436	31	%	(3	)%	$	4,587	31	%
Operating income	$	504	11	%	78	%	$	283	7	%	$	402	9.1	%	(22	)%	$	516	11.2	%
Public
Net revenue	$	3,767	25	%	(2	)%	$	3,856	26	%	$	3,466	24	%	(4	)%	$	3,621	24	%
Operating income	$	370	10	%	24	%	$	298	8	%	$	271	7.8	%	(23	)%	$	352	9.7	%
Small and Medium Business
Net revenue	$	3,768	25	%	7	%	$	3,524	24	%	$	3,477	24	%	4	%	$	3,355	22	%
Operating income	$	463	12	%	48	%	$	313	9	%	$	389	11.2	%	(10	)%	$	435	13.0	%
Consumer
Net revenue	$	3,005	20	%	(7	)%	$	3,248	22	%	$	3,043	21	%	(12	)%	$	3,454	23	%
Operating income	$	136	5	%	685	%	$	17	1	%	$	32	1.1	%	(81	)%	$	170	4.9	%

_______________________


^(a)	Operating income percentage of revenue is stated in relation to the respective segment.

Large Enterprise — ~~Revenue for Large Enterprise increased year-over-year for~~During the first quarter of Fiscal ~~2012~~2013, Large Enterprise experienced a 3% decrease in revenue which was due to the sales execution issues we experienced as well as delayed spending from our Large Enterprise customers. Revenue across all product lines ,decreased, except for ~~storage and desktop~~services revenue, which ~~declined 30% and 1%, respectively. The decrease in storage revenue was primarily due to a decrease in the sale of third-party storage products as we shift towards more Dell-branded storage solutions.~~increased 9%. Revenue from servers and networking and ~~services increased 6%~~storage decreased 5% and 7%17%, ~~respectively. Mobility~~respectively, while revenue ~~increased 16% and~~from software and peripherals, ~~increased 11% year-over-year for~~mobility products, and desktop PC revenue decreased 12%, 3%, and 1%, respectively. At a regional level, Large Enterprise revenue from the Americas and the Asia Pacific and Japan region ("APJ") decreased during the first quarter of Fiscal ~~2012. During the first quarter of Fiscal 2012, Large Enterprise's revenue increased overall across non-US regions,~~2013, while revenue from Europe, the Middle East, and Africa ("EMEA") increased. The decline in revenue from the Americas was primarily driven by a decline in revenue from the U.S. ~~decreased slightly.~~

During the first quarter of Fiscal ~~2012,~~2013, Large Enterprise's operating income as a percentage of ~~net~~ revenue ~~increased 460~~decreased 210 basis points ~~year-over-year~~ to ~~11.3%~~9.1%. ~~The increase~~This decrease was primarily attributable to ~~improvements~~declines in gross margin for our ~~products. The increase in gross margins was~~products, partially offset by an increase in gross margins attributable to our services, including software related. To a lesser extent, the decrease in Large Enterprise's operating income was also impacted by a 4% increase in operating expenses, ~~as a percentage of net revenue,~~ primarily ~~due~~attributable to ~~increased~~higher selling and marketing costs.

Table of Contents

Public — During the first quarter of Fiscal ~~2012,~~2013, Public experienced ~~an overall~~a 4% decrease in revenue ~~that~~which was primarily driven by year-over-year decreases in revenue from mobility and desktop products of 6% and 13%, respectively. Revenue from servers and networking increased 9% year-over-year, while storage revenue decreased 6%. Revenue from services, and software and peripherals increased 2% and 6% year-over-year, respectively. The decline in Public's revenue was primarily driven by decreases inattributable to the ~~U.S. and the Europe, Middle East, and African regions, which~~sales execution issues we ~~refer to~~experienced as ~~"EMEA,"~~

~~Table of Contents~~

~~due to continuing~~well as budgetary constraints on public spending.

~~Public's operating income percentage increased 210 basis points to 9.8% for~~ During the first quarter of Fiscal ~~2012 due to improved gross margin percentages~~2013, revenue from all product lines decreased, except for ~~our~~revenue from servers and networking, which was essentially unchanged. Revenue from storage and services decreased 11% and 2%, respectively, while revenue from software and peripherals, mobility products, ~~which were partially offset~~and desktop PC revenue decreased 7%, 9%, and 2%, respectively. At a regional level, Public revenue from the Americas decreased during the first quarter of Fiscal 2013, primarily driven by ~~increases~~a decline in revenue from the U.S., while revenue from APJ and EMEA was essentially unchanged.

During the first quarter of Fiscal 2013, Public's operating ~~expenses~~income as a percentage of net revenue decreased 190 basis points to 7.8%. This decrease was primarily ~~due~~attributable to ~~increases~~declines in ~~selling and marketing costs.~~gross margin for our products, partially offset by an increase in gross margins attributable to our services, including software related.

Small and Medium Business — During the first quarter of Fiscal ~~2012,~~2013, SMB experienced a ~~year-over-year~~4% increase in revenue ~~with~~which was primarily attributable to increases ~~across all product~~in enterprise solutions and services ~~categories, although~~ revenue, ~~increases for~~partially offset by a decrease in mobility and desktop ~~products were slight. Servers~~PC revenue. Revenue from servers and networking, storage, and ~~storage revenue~~services increased ~~19%~~16%, 7%, and ~~7% year-over-year,~~23%, respectively. Revenue from ~~mobility and desktop PCs increased 1% and 2% year-over-year, respectively, while~~ software and peripherals increased 1%, while mobility revenue ~~increased 11% year-over-year. The improved demand environment was~~and revenue from desktop PCs decreased 5% and 2%, respectively. SMB experienced revenue growth across all regions, led by a ~~major contributor to the~~10% increase in revenue ~~for all product categories. Services revenue increased 16% year-over-year. For~~from APJ.

During the first quarter of Fiscal ~~2012, SMB~~2013, SMB's operating income as a percentage of net revenue ~~experienced year-over-year growth across the Americas and Asia Pacific Japan, or "APJ", while SMB revenue from EMEA remained flat.~~

~~Operating income percentage increased 340~~decreased 180 basis points to ~~12.3%~~11.2%. ~~The increase in operating income percentage~~This decrease was primarily attributable to ~~improved~~declines in gross ~~margins~~margin for our products ~~which were~~and increased operating expenses, partially offset by an increase in ~~operating expenses as a percentage of revenue due~~gross margins attributable to ~~higher selling and marketing costs.~~our services, including software related.

Consumer — ~~Consumer's revenue decreased 7% year-over-year during~~During the first quarter of Fiscal ~~2012.~~2013, Consumer experienced a 12% decrease in revenue. Revenue from all product and services categories decreased year-over-year for the first quarter of Fiscal 2012, except mobility products, which had a slight increase of 2% year-over-year. Revenue from desktop PCs decreased by 26% due to a decline in desktop PC units of 20%. Average selling prices for Consumer mobility and desktop PCs decreased 6% and 7% year-over-year, respectively, during the first quarter of Fiscal ~~2012. Consumer services decreased 6% year-over-year~~2013, except desktop PC revenue, which increased 2%. The increase in desktop PC revenue was driven by a 13% increase in units sold, largely offset by a 9% decrease in average selling prices. The overall decrease in consumer revenue was primarily attributable to a 15% decline in mobility product revenue, driven by an 11% decrease in units sold and a 5% decrease in average selling prices. Revenue from software and peripherals decreased 9%, and Consumer services revenue decreased ~~27% for the same period. We continue~~13%, primarily due to ~~see~~ a ~~shift~~decrease in ~~sales mix from direct to retail sales, which typically have lower attach rates for services and software and peripherals. At a country level, our U.S.~~client units sold. Consumer revenue ~~decreased 21% year-over-year due to softer demand, while our non-U.S. regions~~was impacted in ~~aggregate experienced 6% revenue growth. Revenue from BRIC grew 26% year-over-year for~~ the first quarter of Fiscal ~~2012.~~2013 as we limited our participation in lower-value offerings, such as low-value notebooks and software and peripherals, particularly in Growth Countries. In addition, we experienced competition from alternative mobile computing devices, including tablets and smart phones. Consumer experienced declines in revenue across all regions, particularly in the Americas, driven by a decline in revenue from the U.S. Revenue from Growth Countries decreased 6%, although revenue from BRIC continued to increase overall.

~~For~~During the first quarter of Fiscal ~~2012,~~2013, Consumer's operating income as a percentage ~~increased 400~~of net revenue decreased 380 basis points ~~year-over-year~~ to ~~4.5%~~1.1%. The ~~increase~~decrease in operating income percentage was ~~largely~~primarily attributable to ~~an increase~~the competitive pricing environment we experienced in gross margin percentage. Consumer gross margin increased due to a shift in product mix to higher value client products, which generate more favorable gross margins, as well as year-over-year increases in profitability from our customer financing arrangements. Operating expenses as a percentage of revenue increased slightly year-over-year due to increased selling and marketing costs.

~~For~~ the ~~second~~first quarter of Fiscal 2012, we expect to see stronger spending from our Public customers and above average seasonal increases in revenue from our SMB and Consumer customers. Our gross margins will continue to be impacted by changes in commodity prices. We expect the current favorable commodity price environment to moderate over the next two quarters. We expect to balance the effects of changes in the commodity cost environment with pricing discipline, and continue to execute our move to more differentiated and higher value products. 2013.

3642

Table of Contents

Revenue by Product and Services Categories

We design, develop, manufacture, market, sell, and support a wide range of products that in many cases are customized to individual customer requirements. Our products are organized ~~between~~into enterprise and client categories. Our enterprise products include servers and networking, and storage products. Client products include mobility and desktop PC products. Our services include a broad range of configurable IT and business services, including support and deployment services, infrastructure, ~~technology, consulting~~cloud, and security services, and applications and ~~product-related support~~business process services. We also offer software and peripheral products.

The following table summarizes our net revenue by product and services categories for the three months ended May 4, 2012, and April 29, 2011 ~~and April 30, 2010:~~:


	Three Months Ended										Three Months Ended
	April 29, 2011						April 30, 2010				May 4, 2012						April 29, 2011
	Dollars		% of Revenue		% Change		Dollars		% of Revenue		Dollars		% of Revenue		% Change		Dollars		% of Revenue
	(in millions, except percentages)										(in millions, except percentages)
Net revenue:
Enterprise solutions and services:
Enterprise solutions:
Servers and networking	$	1,973	13	%	11	%	$	1,785	12	%	$	2,017	14	%	2	%	$	1,973	13	%
Storage	481		3	%	(13	)%	554		4	%	444		3	%	(8	)%	481		3	%
Services	1,984		13	%	5	%	1,891		13	%	2,071		14	%	4	%	1,984		13	%
Software and peripherals	2,567		17	%	3	%	2,496		17	%	2,386		17	%	(7	)%	2,567		17	%
Client:
Mobility	4,716		32	%	3	%	4,563		30	%	4,236		29	%	(10	)%	4,716		32	%
Desktop PCs	3,296		22	%	(8	)%	3,585		24	%	3,268		23	%	(1	)%	3,296		22	%
Total net revenue	$	15,017	100	%	1	%	$	14,874	100	%	$	14,422	100	%	(4	)%	$	15,017	100	%

Enterprise Solutions and Services

▪Enterprise Solutions:

Servers and Networking — The increase in our servers and networking revenue for the first quarter of Fiscal ~~2012, over~~2013 as compared to the first quarter of Fiscal ~~2011~~2012 was ~~due~~primarily driven by our acquisition of Force10 Networks Inc., which expanded our networking offerings, as well as an increase in revenue from our PowerConnect line of networking products. This increase was partially offset by a decrease in revenue, as we saw a decline in average selling prices for our servers, which was largely offset by an increase in unit demand. At the end of the first quarter of Fiscal 2013, we launched our next generation line of servers, and we are seeing a positive response to ~~a shift towards more differentiated products that command higher selling prices.~~these new servers.

Storage — During the first quarter of Fiscal ~~2012, average selling prices increased 16%, while units sold decreased 5%.~~

~~Storage~~ ~~— Storage~~2013, storage revenue decreased ~~13% for~~8%. The decrease in storage revenue was primarily attributable to an anticipated decline in sales of third-party storage products, which was partially offset by revenue from sales of Dell-owned storage products, such as our Compellent products. During the first quarter of Fiscal 2013, sales of Dell-owned storage products increased 24% to 95% of our total storage revenue, compared to 71% in the first quarter of Fiscal 2012. The decrease in Storage revenue was primarily due to an anticipated decline in the sale of third-party storage products as we shift towards selling more Dell-branded storage products such as our EqualLogic, PowerVault, and recently added Compellent products. Revenue from Dell-branded storage products increased 11% year-over-year. We believe ~~that we~~Dell-owned storage offerings will generate higher margins ~~as we shift towards more Dell-branded storage offerings, which generally can be sold with service solutions. Our acquisition of Compellent during~~in the ~~first quarter of Fiscal 2012 will expand our enterprise and cloud storage offerings.~~long-term.

▪

Services — ~~Services revenue increased 5% for~~During the first quarter of Fiscal ~~2012, which~~2013, services revenue increased 4% to $2.1 billion. This increase was ~~mostly~~ driven by an 8% increase in ~~transactional revenue.~~support and deployment services, which consist of support and extended warranty services, managed deployment, enterprise installation, and configuration services. Our estimated services backlog as of ~~April 29, 2011,~~May 4, 2012, and ~~April 30, 2010,~~February 3, 2012, was ~~$14.1~~$15.4 billion and ~~$13.9~~$15.5 billion, respectively. We provide information regarding services backlog because we believe it provides useful trend information regarding changes in the size of our services business over time. Services backlog, as defined by us, includes deferred ~~services~~ revenue from extended warranties and contracted services backlog. Deferred ~~services~~ revenue ~~which consists primarily of our~~from extended warranties was ~~$6.9 billion and $6.1~~$7.0 billion as of ~~April 29, 2011,~~May 4, 2012, and ~~April 30, 2010,~~February 3, 2012, respectively. Estimated contracted services backlog, which is primarily related to our outsourcing services business, was ~~$7.2~~$8.3 billion and ~~$7.7~~$8.5 billion as of ~~April 29, 2011, and April 30, 2010, respectively. See "~~Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Revenue by Product and Services Categories — Services ” in our Annual Report on Form 10-K for the fiscal year ended January 28, 2011 for more information on our servicesMay 4,

3743

Table of Contents

2012, and February 3, 2012, respectively. See "Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Revenue by Product and Services categories — Services" in our Annual Report on Form 10-K for the fiscal year ended February 3, 2012 for more information on our services backlog calculation.

Software and Peripherals — Revenue from sales of software and peripherals (“S&P”) is derived from sales of Dell-branded printers, monitors (not sold with systems), projectors, keyboards, mice, docking stations, and a multitude of third-party peripherals, including televisions, cameras, ~~stand-alone~~third-party software sales and related support services, and other products. ~~The 3% year-over-year increase in S&P revenue for~~During the first quarter of Fiscal ~~2012~~2013, S&P revenue decreased 7%. Revenue growth in S&P has been impacted as we continue to reduce our participation in non-strategic areas. In addition, revenue growth in the S&P area was ~~driven by increases~~impacted in ~~revenue from the sale of electronics and peripherals and software, which was partially offset by a decrease in revenue from imaging products. Revenue from displays were flat year-over-year for~~ the first quarter of Fiscal ~~2012.~~2013 by a decrease in unit sales of our client products, which affected our ability to attach additional S&P products.

Software revenue from our S&P line of business, which includes stand-alone sales of software license fees and related post-contract customer support, is reported in services revenue, including software related, on our Condensed Consolidated Statements of Income. Software and related support services revenue represented ~~33%~~31% and ~~32%~~33% of services revenue, including software related, for the first quarters of Fiscal ~~2012~~2013 and Fiscal ~~2011,~~2012, respectively.

Client

▪

Mobility — Revenue from mobility products (which include ~~notebook computers,~~notebooks, mobile workstations, smartphones, and ~~smartphones) increased 3%~~tablets) decreased 10% during the first quarter of Fiscal ~~2012, which~~2013. This decrease was ~~primarily driven by our Large Enterprise segment and partially offset by~~attributable to a 6% decrease in ~~our Public segment. Revenue from our SMB~~notebook units sold and ~~Consumer customers was relatively flat year-over-year for~~a 4% decline in average selling price. During the first quarter of Fiscal ~~2012. Mobility units increased 6%~~2013, Commercial mobility revenue decreased 5%, while ~~average selling prices~~Consumer mobility revenue decreased ~~slightly by 2% for~~15%. During the first quarter of Fiscal ~~2012. The increase~~2013, we experienced an increasingly competitive pricing environment in ~~mobility revenue is primarily driven by~~ our ~~Latitude~~client business, particularly for our lower-value offerings in Growth Countries. In addition, particularly in our Consumer segment, we are seeing some impact as customers focus on alternative computing devices, including tablets and ~~XPS notebooks.~~smartphones.

▪

Desktop PCs — During the first quarter of Fiscal ~~2012,~~2013, revenue from desktop PCs (which include desktop computer systems and fixed workstations) decreased ~~as units sold for desktop PCs decreased~~1%. This decrease was driven by ~~7%. The~~a 3% decrease in average selling ~~price~~prices for our desktop ~~computers decreased slightly~~PCs, largely offset by a 2% year-over-year. Revenue from our Large Enterprise and SMB customers were relatively flat year-over-year, while our Public and Consumer businesses experienced 13% and 26% decreases, respectively. We are continuing to see rising end-user demand for mobility products, which moderates the demand for desktop PCs.increase in unit sales.

Interest and Other, ~~net~~Net

The following table provides a detailed presentation of interest and other, net for the three months ended ~~April 29, 2011~~May 4, 2012, and April ~~30, 2010~~29, 2011:


	Three Months Ended						Three Months Ended
	April 29, 2011			April 30, 2010			May 4, 2012			April 29, 2011
	(in millions)						(in millions)
Interest and other, net:
Investment income, primarily interest	$	17		$	8		$	29		$	17
Gains (losses) on investments, net	1			—			6			1
Interest expense	(62		)	(47		)	(69		)	(62		)
Foreign exchange	—			(30		)	10			—
Other	2			1			(8		)	2
Interest and other, net	$	(42	)	$	(68	)	$	(32	)	$	(42	)

~~We continued to maintain a portfolio of instruments with short maturities, which typically carry lower market yields. For~~During the first quarter of Fiscal ~~2012, our~~2013, interest and other net, increased $10 million. This increase was attributable to increases in investment income ~~increased over the prior year, primarily due to higher average cash balances with higher average yields.~~

~~The year-over-year increase~~and foreign exchange gains, which were largely offset by increases in interest ~~expense for the first quarter of Fiscal 2012 was due to higher debt levels, which increased to $7.6 billion as of April 29, 2011, from $4.7 billion as of April 30, 2010.~~and other expenses.

The year-over-year decrease in foreign exchange expense for the first quarter of Fiscal 2012 was primarily due to revaluation gains from unhedged currencies and a decrease in the cost of the hedging program.

3844

Table of Contents

Income and Other Taxes

Our effective tax rate was ~~19.2%~~19.8% and ~~24.4%~~19.2% for the first quarters of Fiscal ~~2012~~2013 and Fiscal ~~2011,~~2012, respectively. The ~~decrease~~slight increase in our effective income tax rate for the first quarter of Fiscal ~~2012~~2013 from the first quarter of Fiscal ~~2011~~2012 was primarily due to ~~an increase~~a decrease in the proportion of taxable income attributable to lower tax jurisdictions. In addition, our effective tax rate was impacted by the expiration of certain beneficial U.S. tax statutes that have not been extended. Our effective tax rate can fluctuate depending on the geographic distribution of our world-wide earnings, as our foreign earnings are generally taxed at lower rates than in the U.S. In certain jurisdictions, our tax rate is significantly less than the applicable statutory rate as a result of tax holidays. The majority of our foreign income that is subject to these tax holidays and lower tax rates is attributable to Singapore, China, and Malaysia. Our significant tax holidays expire in whole or in part during Fiscal ~~2012.~~2016 through Fiscal 2021. The differences between our effective tax rate and the U.S. federal statutory rate of 35% principally resulted from ~~our~~the geographical distribution of taxable income discussed above and permanent differences between the book and tax treatment of certain items. ~~Our foreign earnings are generally taxed at lower rates than in the U.S.~~ We continue to assess our business model and its impact in various taxing jurisdictions.

For further discussion regarding tax ~~jurisdictions.~~

~~We take certain non-income~~matters, including the status of income tax positions in the jurisdictions in which we operate and have received certain non-income tax assessments from some of these jurisdictions. These jurisdictions include Brazil, where we are in litigation with a state government over the proper application of transactional taxes to warranties related to the sale of computers. Seeaudits, see Note 1312 of the Notes to the Condensed Consolidated Financial Statements included in “Part I -— Item 1 -— Financial ~~Statements ” for additional information on these income tax related matters.~~Statements."

~~LEGAL MATTERS~~

Several of our vendors have been involved in legal actions initiated by their customers, including us, that relate to these vendors' past pricing practices. In the past, we have received settlements relating to these legal actions and we may receive additional settlements in the future relating to such currently unresolved actions. See Note 11 of Notes to Condensed Consolidated Financial Statements included in “Part I - Item 1 - Financial Statements” for additional information on other litigation related matters.

ACCOUNTS RECEIVABLE

We sell products and services directly to customers and through a variety of sales channels, including retail distribution. At ~~April 29, 2011, our~~Our accounts receivable, net was ~~$6.2~~$6.3 billion as of May 4, 2012, which represented a 5%3% decrease from our balance at ~~January 28, 2011~~.February 3, 2012. This decrease in accounts receivable, net was primarily due to a ~~slight~~sequential decrease in ~~revenue quarter-over-quarter.~~revenue. We maintain an allowance for doubtful accounts to cover receivables that may be deemed uncollectible. The allowance for losses is based on specific identifiable customer accounts that are deemed at risk and a ~~general~~ provision for accounts that are collectively evaluated based on historical bad debt experience. As of ~~April 29, 2011~~May 4, 2012, and ~~January 28, 2011~~,February 3, 2012, the allowance for doubtful accounts was ~~$95~~$64 million and ~~$96~~$63 million, respectively. Based on our assessment, we believe we are adequately reserved for expected credit losses. We monitor the aging of our accounts receivable and continue to take actions to reduce our exposure to credit losses.

DELL FINANCIAL SERVICES AND FINANCING RECEIVABLES

~~DFS~~Dell Financial Services ("DFS") offers a wide range of financial services, ~~in the U.S.,~~ including originating, collecting, and servicing customer receivables primarily related to the purchase of Dell products. To support the financing needs of our customers internationally, we have aligned with a select number of third-party financial services companies. ~~In April 2011,~~During Fiscal 2012, we ~~announced our intent~~entered into a definitive agreement to acquire ~~Dell Financial Services Canada Limited. from CIT Group Inc., as well as~~ CIT Vendor Finance's Dell-related financing assets portfolio and sales and servicing functions in ~~Europe. The acquisition of these assets will enable global expansion of Dell's direct finance model.~~Europe for approximately $400 million. Subject to customary closing, regulatory, and other conditions, we expect to ~~close the acquisition~~complete this transaction in ~~Canada in the second quarter of~~ Fiscal 2014.

At May 4, 2012, and the acquisition in Europe in Fiscal 2013. CIT Vendor Finance is currently a Dell financing partner operating on behalf of Dell Financial Services in more than 25 countries and will continue to support Dell for the transition periods in Canada and Europe. CIT Vendor Finance will also continue to provide financing programs with Dell in select countries around the world beyond these transactions, including programs in Latin America.

The results of DFS are included in the business segment where the customer receivable was originated. Due to improving economic conditions and portfolio performance, DFS's contribution to operating profitability has increased for all of our business segments.

At ~~April 29, 2011~~ ~~and~~ ~~January 28, 2011~~,February 3, 2012, our net financing receivables balances were ~~$4.3~~$4.5 billion and ~~$4.4~~$4.7 billion, respectively. ~~We expect some growth in financing receivables to continue throughout Fiscal 2012.~~ To manage the expected net growth in financing receivables, we will continue to balance the use of our own working capital and other sources of liquidity, including securitization programs.

We have securitization programs to fund revolving loans and fixed-term leases and loans through consolidated special purpose entities ("SPEs"), which we account for as secured borrowings. We transfer certain U.S. customer financing receivables to these SPEs, whose purpose is to facilitate the funding of customer receivables through financing arrangements with multi-seller

~~Table of Contents~~

conduits that issue asset-backed debt securities in the capital markets. During the first quarters of Fiscal ~~2012~~2013 and Fiscal ~~2011,~~2012, we transferred ~~$499~~$536 million and ~~$496~~$499 million, respectively, to these SPEs. Our risk of loss related to these securitized receivables is limited to the amount of our over-collateralization in the transferred pool of receivables. ~~We recently replaced one of the fixed-term lease~~At May 4, 2012, and ~~loan programs in May 2011, which resulted in better pricing for this program. At April 29, 2011 and January 28, 2011,~~February 3, 2012, the structured financing debt related to all of our secured borrowing securitization programs was ~~$1.2~~$1.4 billion and ~~$1.0~~$1.3 billion, respectively, and the carrying amount of the corresponding financing receivables was ~~$1.4~~$1.6 billion and ~~$1.3~~$1.5 billion, respectively.

We maintain an allowance to cover expected financing receivable credit losses and evaluate credit loss expectations based on our total portfolio. For the three months ended May 4, 2012 and April 29, 2011, ~~and January 28, 2011,~~ the ~~net~~ principal charge-off rate for our total portfolio was 4.1% and 5.3%, ~~and 6.5%,~~ respectively. The allowance for losses is determined based on various factors, including historical and anticipated experience, past due receivables, receivable type, and customer risk profile. At April 29, 2011 and January 28, 2011, the allowance for financing receivable losses was $217 million and $241 million, respectively. In general, we are seeing improving loss rates associated with our financing receivables as the economy has stabilized. We have an extensive process to manage our exposure to customer risk, including active management of credit lines and our collection activities. The credit quality mix of our financing receivables has improved in recent years due to our underwriting actions and as the mix of high quality commercial accounts in our portfolio has increased. The allowance for losses is determined based on various factors, including historical and anticipated experience, past due receivables, receivable type, and customer risk profile. At May 4, 2012, and February 3, 2012, the allowance for financing receivable losses was $192 million and $202 million, respectively. In general, the loss rates on our financing receivables for the first quarter of Fiscal 2013 continued to improve over the prior year. However, we do not expect this same level of

Table of Contents

improvement to continue given the stabilization we have seen in our loss rate over the past few quarters. We continue to monitor broader economic indicators and their potential impact on future loss performance. We have an extensive process to manage our exposure to customer risk, including active management of credit lines and our collection activities. Based on our assessment of the customer financing receivables, we believe that we are adequately reserved.

See Note 5 of the Notes to the Condensed Consolidated Financial Statements included in “Part I — Item 1 — Financial Statements” for additional information about our financing receivables and the associated allowance.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet financing arrangements.

Table of Contents

LIQUIDITY, CAPITAL COMMITMENTS, AND CONTRACTUAL CASH OBLIGATIONS

Current Market Conditions

We regularly monitor economic conditions and associated impacts on the financial markets and our business. Though there has been improvement in the global economic environment in recent quarters, we continue to be cautious given the volatility associated with currency markets, international sovereign economies, and other economic indicators. We ~~continue to~~consistently evaluate the financial health of our supplier base, carefully manage customer credit, diversify counterparty risk, and monitor the concentration risk of our cash and cash equivalents balances globally. We routinely monitor our financial exposure to both sovereign and non-sovereign borrowers and counterparties, particularly in Europe in recent quarters. At May 4, 2012, our gross exposures to our customers and investments in Portugal, Ireland, Italy, Greece, and Spain were individually and collectively immaterial.

We monitor credit risk associated with our financial counterparties using various market credit risk indicators such as credit ratings issued by nationally recognized rating agencies and changes in market credit default swap levels. We perform periodic evaluations of our positions with these counterparties and may limit exposure to any one counterparty in accordance with our policies. We monitor and manage these activities depending on current and expected market developments.

We also use derivative instruments to hedge certain foreign currency exposures. We use a combination of forward contracts and purchased options designated as cash flow hedges to protect against the foreign currency exchange rate risks inherent in our forecasted transactions denominated in currencies other than the U.S. dollar. In addition, we use forward contracts to hedge monetary assets and liabilities denominated in a foreign currency. See Note 7 of the Notes to the Condensed Consolidated Financial Statements under “Part I — Item 1 — Financial Statements” for more information about our use of derivative instruments.

See “Part I — Item 1A — Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended ~~January 28, 2011~~,February 3, 2012, for further discussion of risks associated with adverse global economic conditions and instability, and our use of ~~counterparties. The impact on~~counterparties, and our ~~Condensed Consolidated Financial Statements of any credit adjustments related~~ability to ~~these counterparties has been immaterial.~~effectively hedge our exposure to fluctuations in foreign currency exchange rates.

Liquidity

Cash generated from operations is our primary source of operating ~~liquidity~~liquidity. In general, we seek to deploy our capital in a systematically prioritized manner focusing first on requirements for operations, then on growth investments, and ~~we believe that~~finally on returns of cash to stockholders. Our strategy is to deploy capital from any potential source, whether internally generated cash ~~flows are sufficient to support day-to-day business operations. Our working capital management team actively monitors~~or debt, depending on the ~~efficiency~~adequacy and availability of our balance sheet under various macroeconomic and competitive scenarios. These scenarios quantify risks to the financial statements and provide a basis for actions necessary to ensure adequate liquidity, both domestically and internationally, to support our acquisition and investment strategy, share repurchase activity and other corporate needs. We utilize external capital sources, such as long-term notes and structured financing arrangements, and short-term borrowings, consisting primarily of commercial paper, to supplement our internally generated sources of liquidity as necessary. We have a currently effective shelf registration statement filed with the SEC for the issuance of debt securities. The current shelf registration will terminate during the second quarter of Fiscal 2012 and we intend to replace the shelf registration prior to its termination to allow us to continue to issue debt securities. During the first quarter of Fiscal 2012, we issued $1.5 billion principal amount of notes with terms that ~~are consistent with our recent note issuances. We intend to maintain appropriate debt levels based upon cash flow expectations, the overall cost~~source of capital ~~cash requirements for operations,~~ and ~~discretionary spending, including for acquisitions and share repurchases. Due to the overall strength of our financial position, we believe that we will have adequate access to capital~~

~~Table of Contents~~

~~markets. Any future disruptions, uncertainty or volatility~~whether it can be accessed in ~~those markets may result in higher funding costs for us and could adversely affect our ability to obtain funds.~~

At April 29, 2011, we had $15.2 billion in total cash, cash equivalents, and investments. Our cash balances are held in numerous locations throughout the world, most of which are outside of the U.S. While our U.S. cash balances do fluctuate, we typically operate with 10% - 20% of our cash balances held domestically.a cost effective manner. Demands on our domestic cash have increased as a result of our strategic initiatives. We ~~fund these initiatives through a balance of~~believe that internally generated cash flows, which consist of operating cash flows, are sufficient to support our day-to-day business operations, both domestically and internationally, for at least the next 12 months. Additionally, while cash generated from operations is our primary source of operating liquidity, we use a variety of capital sources to fund the growth in our financing receivables, share repurchases and our needs for less predictable investing and financing decisions such as acquisitions. We have access to external sources of capital, including through issuances of long-term debt, which ~~include~~is rated as investment grade by independent rating agencies, and utilization of our ~~$2.0~~commercial paper program.

The following table summarizes our cash, marketable securities, and available borrowings as of May 4, 2012 and February 3, 2012:



	May 4, 2012		February 3, 2012
	(in millions)
Cash, cash equivalents, and investments:
Cash and cash equivalents	$	12,814	$	13,852
Investments	4,402		4,370
Cash, cash equivalents, and investments	$	17,216	$	18,222
Unsecured revolving credit facilities	3,000		3,000
Total cash, cash equivalents, investments, and available borrowings	$	20,216	$	21,222

In addition, we have a currently effective shelf registration statement under which we may issue up to $3.5 billion of debt securities.

Our senior unsecured revolving credit facilities primarily support our $2.5 billion commercial paper ~~program,~~program. Of the credit facilities, $1.0 billion will expire on April 2, 2013, and ~~when advantageous, access~~$2.0 billion will expire on April 15, 2015. No amounts were outstanding under our revolving credit facilities as of May 4, 2012, or February 3, 2012.

Table of Contents

Of our $17.2 billion of cash, cash equivalents, and investments as of May 4, 2012, $12.8 billion is classified as cash and cash equivalents. Our cash equivalents primarily consist of money market funds and commercial paper. The remaining $4.4 billion of investments is primarily invested in fixed income securities of varying maturities at the date of acquisition. The fair value of our portfolio can be affected by interest rate movements, credit, and liquidity risks. The objective of our investment policy and strategy is to ~~foreign~~manage our total cash and investments balances to preserve principal and maintain liquidity while maximizing the return on the investment portfolio through the full investment of available funds. We diversify our investment portfolio by investing in ~~a tax efficient manner. Where local regulations limit an efficient intercompany transfer~~multiple types of ~~amounts~~investment-grade securities and through the use of third-party investment managers.

A significant portion of our income is earned in non-U.S. jurisdictions. As such, we typically operate with 80% to 90% of our cash balances held outside of the U.S.~~, we will continue to utilize these funds for local liquidity needs.~~ Under current law, ~~balances~~earnings available to be repatriated to the U.S. would be subject to U.S. federal income ~~taxes,~~tax, less applicable foreign tax credits. We have provided for the U.S. federal tax liability on these amounts for financial statement purposes, except for foreign earnings that are considered permanently reinvested outside of the U.S. We utilize a variety of tax planning and financing strategies with the objective of having our worldwide cash available in the locations where it is needed. When appropriate, we access our foreign cash balances in a tax efficient manner.

Although there are uncertainties surrounding the global economic environment, due to the overall strength of our financial position, we believe that we currently have adequate access to capital markets. Any future disruptions or additional uncertainty or volatility in those markets may result in higher funding costs for us and could adversely affect our ability to obtain funds.

The following table summarizes our outstanding debt as of May 4, 2012 and February 3, 2012:



	May 4, 2012		February 3, 2012
	(in millions)
Outstanding Debt
Senior notes and debentures	$	6,391	$	6,391
Structured financing debt	1,417		1,360
Commercial Paper	1,188		1,500
Other	3		3
Total debt	$	8,999	$	9,254

During the three months ended May 4, 2012, total debt decreased $255 million, primarily due to a decrease in outstanding commercial paper. We have $1.0 billion in senior notes that will mature during the next twelve months. We expect to use a combination of cash from operations and our available borrowing resources to repay these maturing notes.

We also issue structured financing-related debt to fund our financing receivables as discussed under “Financing Receivables” above. Our ~~non-U.S. domiciled~~securitization programs are structured to operate near their debt capacity. As of May 4, 2012, we had $1.4 billion in outstanding structured financing securitization debt. We balance the use of our securitization programs with working capital and other sources of liquidity to fund growth in our financing receivables. See Note 5 of the Notes to the Condensed Consolidated Financial Statements under “Part I — Item 1 — Financial Statements” for further discussion of our structured financing debt.

We intend to maintain appropriate debt levels based upon cash flow expectations, the overall cost of capital, cash requirements for operations, and ~~investments are generally denominated in~~discretionary spending, including spending for acquisitions and share repurchases. See Note 6 of the ~~U.S. Dollar.~~Notes to the Condensed Consolidated Financial Statements under “Part I — Item 1 — Financial Statements” for further discussion of our debt.

Our management team actively monitors the efficiency of our balance sheet under various macroeconomic and competitive scenarios. These scenarios quantify risks to the financial statements and provide a basis for actions necessary to ensure adequate liquidity, both domestically and internationally, to support our acquisition and investment strategy, share repurchase activity and other corporate needs.

Table of Contents

The following table contains a summary of our Condensed Consolidated Statements of Cash Flows for the respective periods:


	Three Months Ended						Three Months Ended
	April 29, 2011			April 30, 2010			May 4, 2012			April 29, 2011
	(in millions)						(in millions)
Net change in cash from:
Operating activities	$	465		$	238		$	(138	)	$	465
Investing activities	(1,549		)	(360		)	(365		)	(1,549		)
Financing activities	1,170			(254		)	(532		)	1,170
Effect of exchange rate changes on cash and cash equivalents	62			(4		)	(3		)	62
Change in cash and cash equivalents	$	148		$	(380	)	$	(1,038	)	$	148

Operating Activities — Operating cash flows for the first quarter of Fiscal ~~2012 increased~~2013 decreased compared to the ~~prior year.~~first quarter of Fiscal 2012. Cash used in operating activities during the first quarter of Fiscal 2013 was $138 million, compared to cash provided by operating activities of $465 million during the first quarter of Fiscal 2012. The ~~increase~~decrease in operating cash flows from the first quarter of Fiscal 2012 was primarily driven by ~~year-over-year increases~~a decrease in net income ~~and deferred services revenue, which were partially offset by a net~~as well as unfavorable ~~change~~changes in working capital. See “Key Performance Metrics” below for additional discussion of our cash conversion cycle.

Investing Activities — Investing activities consist of the net of maturities and sales and purchases of investments; net capital expenditures for property, plant, and equipment; ~~principal cash flows related to purchased financing receivables;~~ and net cash used to fund strategic acquisitions. Cash used in investing activities during the first quarter of Fiscal ~~2012~~2013 was ~~$1.5 billion~~$365 million compared to ~~cash used of $360 million~~$1.5 billion during the first quarter of Fiscal ~~2011.~~2012. The ~~year-over-year increase~~decrease in cash used in investing activities for the first quarter of Fiscal ~~2012~~2013 was ~~mainly~~primarily due to ~~higher~~lower acquisition spending. Cash used to fund ~~strategic~~business acquisitions, net of cash acquired, was approximately $245 million during the first quarter of Fiscal 2013 compared to $1.5 billion during the first quarter of Fiscal 2012 compared to approximately $133 million during the first quarter of Fiscal 2011. Our Fiscal 2012 acquisitions consisted of SecureWorks and Compellent , while our first quarter Fiscal 2011 acquisitions consisted primarily of Kace Networks, Inc.2012.

Financing Activities — Financing activities primarily consist of proceeds and repayments from borrowings and the repurchase of our common stock. Cash used by financing activities for the first quarter of Fiscal 2013 was $532 million compared to cash provided by financing activities of $1.2 billion for the first quarter of Fiscal 2012. The ~~year-over-year increase~~decrease in cash provided by financing activities for the first quarter of Fiscal ~~2012~~2013 was ~~mainly~~primarily due to ~~the~~ net proceeds from the issuance of long-term debt of $1.5 ~~billion. We~~billion in the first quarter of Fiscal 2012. In comparison, we did not issue or repay any long-term debt during the first quarter of Fiscal ~~2011. During the first quarter of Fiscal 2012, net cash provided by proceeds from structured financing programs was $116 million compared to $35 million~~2013. In addition, during the first quarter of Fiscal ~~2011. We~~2013, we had a net ~~repayments~~repayment of ~~$86~~$312 million ~~from~~related to commercial paper, ~~during the first quarter of Fiscal 2011. We~~while we did not issue or repay any commercial paper during the first quarter of Fiscal 2012. ~~We had $6.3 billion principal amount~~

During the first quarter of ~~long-term notes and senior debentures outstanding as~~Fiscal 2013, we repurchased approximately 17 million shares of ~~April 29, 2011,~~common stock for $300 million compared to ~~$3.3 billion as of April 30, 2010. Offsetting the net proceeds from debt was cash used for the repurchase of~~approximately 31 million shares of common stock for $450 million during the first quarter of Fiscal ~~2012 compared to $200 million used for the repurchase of 12 million shares in the first quarter of Fiscal 2011.~~

We have $3 billion of senior unsecured revolving credit facilities primarily to support our $2 billion commercial paper program. We entered into a new senior unsecured revolving credit facility during the first quarter of Fiscal 2012 for an increased amount of $2 billion, which will expire on April 15, 2015. We terminated the $1 billion credit facility that was set to expire in the second quarter of Fiscal 2012. ~~The remaining $1 billion credit facility will expire on April 2, 2013.~~ As of ~~April~~

~~Table of Contents~~

~~29, 2011, we did not have any amounts outstanding under the commercial paper program compared to $410 million as of April 30, 2010.~~

We issued structured financing-related debt to fund our financing receivables as previously discussed in the “Financing Receivables” section above. The total debt capacity of our securitization programs is $1.4May 4, 2012, $5.7 billion ~~and we had $1.2 billion in outstanding structured financing securitization debt as of April 29, 2011.~~

~~See Note 6 of the Notes to Condensed Consolidated Financial Statements under “Part I — Item 1 — Financial Statements”~~remained available for ~~further discussion of our debt.~~future share repurchases.

Key Performance Metrics — Our cash conversion cycle for the ~~fiscal~~first quarter ~~ended April 29, 2011 contracted~~of Fiscal 2013 improved from the ~~fiscal~~first quarter ~~ended April 30, 2010.~~of Fiscal 2012. Our business model allows us to maintain an efficient cash conversion cycle, which compares favorably with that of others in our industry.

The following table presents the components of our cash conversion cycle for the three months ended May 4, 2012 and April 29, ~~2011, and April 30, 2010:~~2011:


	Three Months Ended				Three Months Ended
	April 29, 2011		April 30, 2010		May 4, 2012		April 29, 2011
Days of sales outstanding^(a)	40		38		43		40
Days of supply in inventory^(b)	10		9		12		10
Days in accounts payable^(c)	(81	)	(83	)	(87	)	(81	)
Cash conversion cycle	(31	)	(36	)	(32	)	(31	)

_____________________

^(a)

Days of sales outstanding (“DSO”) calculates the average collection period of our receivables. DSO is based on the ending net trade receivables and the most recent quarterly revenue for each period. DSO also includes the effect of product costs related to customer shipments not yet recognized as revenue that are classified in other current assets. DSO is calculated by adding accounts receivable, net of allowance for doubtful accounts, and customer shipments in transit and dividing that sum by average net revenue per day for the current quarter (90 days). At May 4, 2012, and April 29, 2011,~~, and~~ ~~April 30, 2010~~, DSO and days of customer shipments not yet recognized were 39 and 4 days, and 37 and 3 days, ~~and 35 and 3 days,~~ respectively.

Table of Contents


^(b)	Days of supply in inventory (“DSI”) measures the average number of days from procurement to sale of our ~~products.~~product. DSI is based on ending inventory and most recent quarterly cost of sales for each period. DSI is calculated by dividing inventory by average cost of goods sold per day for the current quarter (90 days).


^(c)	Days in accounts payable (“DPO”) calculates the average number of days our payables remain outstanding before payment. DPO is based on ending accounts payable and most recent quarterly cost of sales for each period. DPO is calculated by dividing accounts payable by average cost of goods sold per day for the current quarter (90 days).

The ~~five~~one day ~~contraction~~improvement from the prior year quarter was driven by a six day improvement in DPO, the effects of which were offset in part by a three day increase in DSO and a two day increase in DSI. The improvement in DPO was driven by the timing of payments in the first quarter of Fiscal 2013. The three day increase in DSO was due to a ~~one~~shift in the mix of receivables towards customers with longer payment terms. The two day increase in DSI and a two day decrease in DPO year-over-year. The increase in DSO from April 30, 2010, was due to growth in our commercial business, which typically has longer payment terms. The slight increase in DSI from April 30, 2010, was primarily attributable to the optimization of our supply chain, which required an increase in work-in-process inventory and an increase in strategic purchases of ~~materials and finished goods inventory. The two day decrease in DPO was due to the timing of supplier purchases and payments.~~materials.

We defer the cost of revenue associated with customer shipments not yet recognized as revenue until these shipments are delivered. These deferred costs are included in our reported DSO because we believe this reporting results in a more accurate presentation of our DSO and cash conversion cycle. These deferred costs are recorded in other current assets in our Condensed Consolidated Statements of Financial Position and totaled $522 million and $497 million, at May 4, 2012, and ~~$465 million, at~~ April 29, 2011, ~~and April 30, 2010,~~ respectively.

We believe that we can generate cash flow from operations in excess of net income over the long term and can operate our cash conversion cycle in the ~~mid-negative~~mid negative 30 day range.

Capital Commitments

Share Repurchase Program — We have a share repurchase program that authorizes us to purchase shares of our common stock through a systematic program of open market purchases in order to increase shareholder value and manage dilution resulting from shares issued under our equity compensation plans. However, we do not currently have a policy that requires the repurchase of common stock to offset share-based compensation arrangements. For more information regarding our share repurchases, see “Part II — Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds.”

Capital Expenditures — During the first quarters of Fiscal ~~2012~~2013 and Fiscal ~~2011,~~2012, we spent ~~$137~~$142 million and ~~$46~~$137 million, respectively, on property, plant, and equipment primarily in connection with our global expansion efforts and infrastructure

~~Table of Contents~~

investments made to support future growth. Product demand, product mix, and the increased use of contract manufacturers, as well as ongoing investments in operating and information technology infrastructure, influence the level and prioritization of our capital expenditures. Aggregate capital expenditures for Fiscal ~~2012,~~2013, which will be primarily related to infrastructure investments and strategic initiatives, are currently expected to total approximately ~~$700~~$600 million to ~~$750~~$650 million. These expenditures will be primarily funded from our cash flows from operating activities.

Purchase Obligations— We utilize several suppliers to manufacture sub-assemblies for our products. Our efficient supply chain management allows us to enter into flexible and mutually beneficial purchase arrangements with our suppliers in order to minimize inventory risk. Consistent with industry practice, we acquire raw materials or other goods and services, including product components, by issuing to suppliers authorizations to purchase based on our projected demand and manufacturing needs.

Table of Contents

~~RECENTLY ISSUED AND ADOPTED~~RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1 of the Notes to the Condensed Consolidated Financial Statements included in “Part I — Item 1 — Financial Statements” for a description of ~~recently issued and adopted~~recent accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial ~~position,~~condition, and cash flows.

Table of Contents

ITEM 3. — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a description of market risks, see “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk” in our Annual Report on Form 10-K for the fiscal year ended ~~January 28, 2011.~~February 3, 2012. Our exposure to market risks has not changed materially from the ~~description~~exposure described in the Annual Report on Form 10-K.

~~Table of Contents~~

ITEM 4 — CONTROLS AND PROCEDURES

This report includes the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 under the Securities Exchange Act of 1934 (the "Exchange Act"). See Exhibits 31.1 and 31.2. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

In connection with the preparation of this report, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~April 29, 2011.~~May 4, 2012. Based on that evaluation, our management has concluded that our disclosure controls and procedures were effective as of ~~April 29, 2011.~~

~~SEC Settlement Undertakings~~ - May 4, 2012As part of our settlement of an SEC investigation into certain disclosure, accounting and financial reporting matters described under the caption “Legal Matters” in Note 11 of Notes to Condensed Consolidated Financial Statements included in “Part I - Item 1 - Financial Statements,” we have consented to perform the following undertakings related to our disclosure processes, practices and controls:.

For a minimum period of three years, enhance our disclosure review committee (“DRC”) processes by having qualified outside securities counsel attend all DRC meetings and review all of our SEC periodic filings prior to filing.

Retain an independent consultant not unacceptable to the SEC staff to review and evaluate our disclosure processes, practices and controls and to recommend changes designed to improve those processes, practices and controls, and, within 90 days after issuance of the independent consultant's report containing such review, evaluation and recommendations, which was issued in the first quarter of Fiscal 2012, adopt and implement all recommendations contained in the report.

For a minimum period of three years, provide annual training reasonably designed to minimize the possibility of future violations of the disclosure requirements of the federal securities laws, with a focus on disclosures required in management's discussion and analysis of financial condition and results of operations, for (1) members of the Audit Committee of our Board of Directors; (2) members of the DRC; (3) our senior officers; (4) our internal disclosure counsel; (5) personnel in our internal audit department that perform assurance services; (6) all persons required to certify in our filings with the SEC that such filings make adequate disclosure under the federal securities laws; and (7) all other persons employed by us who have responsibility for the review of our filings with the SEC.

~~We will be required to certify to the SEC staff that we have complied with the foregoing undertakings. We have initiated actions to perform each of the foregoing undertakings.~~

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the first quarter of Fiscal ~~2012~~2013 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~Table of Contents~~

PART II — OTHER INFORMATION

ITEM 1 — LEGAL PROCEEDINGS

The information required by this item is incorporated herein by reference to the information set forth under the caption “Legal Matters” in Note 11 of the Notes to the Condensed Consolidated Financial Statements included in “Part I — Item 1 — Financial ~~Statements” and is incorporated herein by reference.~~Statements.”

Additional information on ~~Dell's~~our commitments and contingencies can be found in ~~Dell's~~our Annual Report on Form 10-K for the fiscal year ended ~~January 28, 2011.~~February 3, 2012.

ITEM 1A — RISK FACTORS

In addition to the other information set forth in this report, the factors discussed in "Part I — Item 1A — Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended ~~January 28, 2011,~~February 3, 2012 could materially affect our business, financial condition, or operating results. The risks described in our Annual Report on Form 10-K and our subsequent SEC reports are not the only risks facing us. There are additional risks and uncertainties not currently known to us or that we currently deem to be immaterial that may also materially adversely affect our business, financial condition, or operating results.

Table of Contents

ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

PURCHASES OF COMMON STOCK

Share Repurchase Program

We have a share repurchase program that authorizes us to purchase shares of common stock in order to increase shareholder value and manage dilution resulting from shares issued under our equity compensation plans. However, we do not currently have a policy that requires the repurchase of common stock in conjunction with share-based payment arrangements. The following table sets forth information regarding our repurchases or acquisitions of common stock during the first quarter of Fiscal ~~2012~~2013 and the remaining authorized amount of future purchases under our share repurchase program:

Total Number of Shares Purchased ^(a)
Weighted Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ^(b)

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ^(b)
Period
(in millions, except average price paid per share)
Repurchases from January 29, 2011 through February 25, 2011 11 $ 14.27 11 $ 3,582
Repurchases from February 26, 2011 through March 25, 2011 6 $ 15.36 6 $ 3,493
Repurchases from March 26, 2011 through April 29, 2011 14 $ 14.72 14 $ 3,293
Total 31 $ 14.68 31



	Total Number of Shares Purchased^(a)	Weighted Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs^(b)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ^(b)
Period	Total Number of Shares Purchased^(a)	Weighted Average Price Paid per Share
	(in millions, except average price paid per share)

Repurchases from February 6, 2012 through March 2, 2012	9	$	17.74	9	$	5,846
Repurchases from March 5, 2012 through March 30, 2012	8	$	17.11	8	$	5,702
Repurchases from April 2, 2012 through May 4, 2012	—	$	—	—	$	5,702
Total	17	$	17.43	17

_____________________

^(a)Includes ~~1,858~~2,215 shares withheld to cover employee tax obligations for restricted stock awards vested during the ~~quarter ended April 29, 2011 at an average price of $15.69 per share.~~quarter.

^(b)~~On December 4,~~ Between 1996 and 2007, ~~we publicly announced that~~ our Board of Directors ~~had~~ authorized a share repurchase ~~program for~~programs to repurchase up to ~~$10.0~~$40 billion of our common stock over an unspecified amount of time. On September 13, 2011, we announced that our Board of Directors had authorized an additional $5 billion for share repurchases under the program, bringing the aggregate amount of common stock we can repurchase to $45 billion over an unspecified amount of time. As of May 4, 2012, $5.7 billion remained available for future share repurchases.

4553

Table of Contents

ITEM 6. EXHIBITS

Exhibits — See Index to Exhibits below following the signature page to this report.

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	DELL INC.

	By:	/s/ THOMAS W. SWEET
		Thomas W. Sweet
		Vice President, Corporate Finance and
		Chief Accounting Officer
		(On behalf of registrant and as principal accounting officer)

Date: May ~~26, 2011~~31, 2012

4655

Table of Contents

INDEX TO EXHIBITS



Exhibit No.			Description of Exhibit
3.1	†	—	Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 of Dell's Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 2011, Commission File No. 0-17017)
3.2		—	Restated Bylaws, as amended and effective as of August 16, 2010 (incorporated by reference to Exhibit 3.2 of Dell's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 2010, Commission File No. 0-17017)
4.1		—	Indenture, dated as of April 27, 1998, between Dell Computer Corporation and Chase Bank of Texas, National Association (incorporated by reference to Exhibit 99.2 of Dell's Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017)
4.2		—	Officers' Certificate pursuant to Section 301 of the Indenture establishing the terms of Dell's 7.10% Senior Debentures Due 2028 (incorporated by reference to Exhibit 99.4 of Dell's Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017)
4.3		—	Form of Dell's 7.10% Senior Debentures Due 2028 (incorporated by reference to Exhibit 99.6 of Dell's Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017)
4.4		—	Indenture, dated as of April 17, 2008, between Dell Inc. and The Bank of New York Mellon Trust Company, N.A. (formerly The Bank of New York Trust Company, N.A.), as trustee (including the form of notes) (incorporated by reference to Exhibit 4.1 of Dell's Current Report on Form 8-K filed April 17, 2008, Commission File No. 0-17017)
4.5		—	Indenture, dated as of April 6, 2009, between Dell Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 of Dell's Current Report on Form 8-K filed April 6, 2009, Commission File No. 0-17017)
4.6		—	First Supplemental Indenture, dated April 6, 2009, between Dell Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 of Dell's Current Report on Form 8-K filed April 6, 2009, Commission File No. 0-17017)
4.7		—	Form of 5.625% Notes due 2014 (incorporated by reference to Exhibit 4.3 of Dell's Current Report on Form 8-K filed April 6, 2009, Commission File No. 0‑17017)
4.8		—	Second Supplemental Indenture, dated June 15, 2009, between Dell Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 of Dell's Current Report on Form 8-K filed June 15, 2009, Commission File No. 0-17017)
4.9		—	Form of 3.375% Notes due 2012 (incorporated by reference to Exhibit 4.2 of Dell's Current Report on Form 8-K filed June 15, 2009, Commission File No. 0‑17017)
4.10		—	Form of 5.875% Notes due 2019 (incorporated by reference to Exhibit 4.3 of Dell's Current Report on Form 8-K filed June 15, 2009, Commission File No. 0‑17017)
4.11		—	Third Supplemental Indenture, dated September 10, 2010, between Dell Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 of Dell's Current Report on Form 8-K filed September 10, 2010, Commission File No. 0-17017)
4.12		—	Form of 1.40% Notes due 2013 (incorporated by reference to Exhibit 4.2 of Dell's Current Report on Form 8-K filed September 10, 2010, Commission File No. 0-17017)
4.13		—	Form of 2.30% Notes due 2015 (incorporated by reference to Exhibit 4.3 of Dell's Current Report on Form 8-K filed September 10, 2010, Commission File No. 0-17017)
4.14		—	Form of 5.40% Notes due 2040 (incorporated by reference to Exhibit 4.4 of Dell's Current Report on Form 8-K filed September 10, 2010, Commission File No. 0-17017)
4.15		—	Fourth Supplemental Indenture, dated March 31, 2011, between Dell Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 of Dell's Current Report on Form 8-K filed March 31, 2011, Commission File No. 0-17017)

~~Table of Contents~~



~~Exhibit No.~~			~~Description of Exhibit~~
4.16		—	Form of Floating Rate Notes due 2014 (incorporated by reference to Exhibit 4.2 of Dell's Current Report on Form 8-K filed March 31, 2011, Commission File No. 0-17017)
4.17		—	Form of 2.100% Notes due 2014 (incorporated by reference to Exhibit 4.3 of Dell's Current Report on Form 8-K filed March 31, 2011, Commission File No. 0-17017)
4.18		—	Form of 3.100% Notes due 2016 (incorporated by reference to Exhibit 4.4 of Dell's Current Report on Form 8-K filed March 31, 2011, Commission File No. 0-17017)
4.19		—	Form of 4.625% Notes due 2021 (incorporated by reference to Exhibit 4.5 of Dell's Current Report on Form 8-K filed March 31, 2011, Commission File No. 0-17017)
10.1	†	—	Form of Protection of Sensitive Information, Noncompetition and Nonsolicitation Agreement
12.1	†	—	Computation of ratio of earnings to fixed charges

Table of Contents



Exhibit No.				Description of Exhibit
31.1	†		—	Certification of Michael S. Dell, Chairman and Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	†		—	Certification of Brian T. Gladden, Senior Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	††		—	Certifications of Michael S. Dell, Chairman and Chief Executive Officer, and Brian T. Gladden, Senior Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	.INS§		—	XBRL Instance Document
101	.SCH§		—	XBRL Taxonomy Extension Schema Document
101	.CAL§		—	XBRL Taxonomy Extension Calculation Linkbase Document.
101	.LAB§		—	XBRL Taxonomy Extension Label Linkbase Document.
101	.PRE§		—	XBRL Taxonomy Extension Presentation Linkbase Document.
101	.DEF§		—	XBRL Taxonomy Extension Definition Linkbase Document.

†		Filed with this report.
††		Furnished with this report.
§		Furnished with this report. In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

4857



	April 29, 2011								January 28, 2011
	FICO 720+		FICO 660 to 719		FICO < 660		Total		FICO 720+		FICO 660 to 719		FICO < 660		Total
	(in millions)
Revolving — Consumer
Owned since inception	$	229	$	397	$	786	$	1,412	$	251	$	415	$	837	$	1,503
Purchased	$	43	$	108	$	319	$	470	$	50	$	127	$	393	$	570



	Total Number of Shares Purchased ^(a)	Weighted Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ^(b)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ^(b)
Period	Total Number of Shares Purchased ^(a)	Weighted Average Price Paid per Share
	(in millions, except average price paid per share)
Repurchases from January 29, 2011 through February 25, 2011	11	$	14.27	11	$	3,582
Repurchases from February 26, 2011 through March 25, 2011	6	$	15.36	6	$	3,493
Repurchases from March 26, 2011 through April 29, 2011	14	$	14.72	14	$	3,293
Total	31	$	14.68	31