UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



(Mark One)

☒þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ~~July 29, 2016~~May 5, 2017
or
☐		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:~~File Number: ~~333-208524~~001-37867

Dell Technologies Inc.

(Exact name of registrant as specified in its charter)



Delaware		80-0890963
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Dell Way, Round Rock, Texas 78682

(Address of principal executive offices) (Zip Code)

1-800-289-3355

(~~Registrant’s~~Registrant's telephone number, including area code)

~~Denali Holding Inc.~~

~~(Former name or former address, if changed since last report.)~~

Indicate by check mark whether the 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 ☒ þNo ☐

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ þNo ☐

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



Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒ þ(Do not check if a smaller reporting company)		Smaller reporting company ☐
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

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

As of ~~the close of business on August 29, 2016,~~June 5, 2017, there were ~~306,528,252~~771,976,220 shares of ~~Dell Technologies Inc. Series A~~the registrant's common stock outstanding, ~~98,181,818~~consisting of 203,140,570 outstanding shares of ~~Dell Technologies Inc. Series B common stock~~Class V Common Stock, 409,659,012 outstanding ~~and 327,561~~ shares of ~~Dell Technologies Inc. Series~~Class A Common Stock, 136,986,858 outstanding shares of Class B Common Stock, and 22,189,780 outstanding shares of Class C ~~common stock outstanding.~~Common Stock.

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report ~~includes “forward-looking statements.”~~contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words ~~“may,” “will,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “aim,” “seek”~~"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 ~~described~~discussed in ~~the section titled “Risk Factors~~"Part I — Item 1A — Risk ~~Factors Relating to Denali, Dell and EMC — Risk Factors Relating to Denali and Dell” of the proxy statement/prospectus dated June 6, 2016 forming part of~~Factors" in our ~~registration statement~~Annual Report on Form ~~S-4 (Registration No. 333-208524)~~10-K for the fiscal year ended February 3, 2017 and in our other periodic and current reports filed with the Securities and Exchange Commission. ~~We changed our name from Denali Holding Inc. to Dell Technologies Inc. on August 25, 2016.~~ 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.~~made, whether to reflect changes in circumstances or our expectations, the occurrence of unanticipated events, or otherwise.

Table of Contents

DELL TECHNOLOGIES INC.

TABLE OF CONTENTS



			Page
PART I — FINANCIAL INFORMATION
	Item 1.	Financial Statements (unaudited)
	~~Condensed Consolidated Statements of Financial Position as of July 29, 2016 and January 29, 2016~~		4
	~~Condensed Consolidated Statements of Income (Loss) for the three and six months ended July 29, 2016 and July 31, 2015~~		5
	~~Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended July 29, 2016 and July 31, 2015~~		6
	~~Condensed Consolidated Statements of Cash Flows for the six months ended July 29, 2016 and July 31, 2015~~		7
	~~Notes to Unaudited Condensed Consolidated Financial Statements~~		9
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4857
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7483
	Item 4.	Controls and Procedures	7483
PART II — OTHER INFORMATION
	Item 1.	Legal Proceedings	7583
	Item 1A.	Risk Factors	7583
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7584
	Item 6.	Exhibits	7584

	Signatures		7685
	Index to Exhibits		7786

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

~~DELL TECHNOLOGIES INC.~~Index

~~CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION~~

~~(in millions; unaudited)~~

July 29, 2016 January 29, 2016
ASSETS
Current assets:

Cash and cash equivalents $ 7,226
$ 6,322
Accounts receivable, net 5,257
4,848
Short-term financing receivables, net 2,867
2,915
Inventories, net 1,446
1,619
Other current assets 3,326
3,497
Current assets held for sale 4,125
4,372
Total current assets 24,247
23,573
Restricted cash (Note 5) 23,285
—
Property, plant, and equipment, net 1,562
1,649
Long-term investments 104
114
Long-term financing receivables, net 2,271
2,177
Goodwill 8,406
8,406
Intangible assets, net 7,595
8,577
Other non-current assets 1,446
626
Total assets $ 68,916
$ 45,122

LIABILITIES, REDEEMABLE SHARES, AND STOCKHOLDERS’ EQUITY
Current liabilities:

Short-term debt $ 2,500
$ 2,981
Accounts payable 14,050
12,746
Accrued and other 3,835
4,217
Short-term deferred revenue 3,916
3,632
Current liabilities held for sale 1,522
1,829
Total current liabilities 25,823
25,405
Long-term debt (Note 5) 33,836
10,650
Long-term deferred revenue 4,154
4,089
Other non-current liabilities 2,733
3,406
Total liabilities 66,546
43,550
Commitments and contingencies (Note 9)

Redeemable shares 179
106
Stockholders' equity:
Common stock and capital in excess of $.01 par value, net of treasury stock; shares authorized: 700 (Series A: 350, Series B: 150, Series C: 200); shares issued and outstanding: 405 (Series A: 307, Series B: 98) and 405 (Series A: 307, Series B: 98), respectively 5,682
5,727
Accumulated deficit (3,309 ) (3,937 )
Accumulated other comprehensive loss (308 ) (324 )
Total Dell Technologies Inc. stockholders’ equity 2,065
1,466
Non-controlling interest 126
—
Total stockholders' equity 2,191
1,466
Total liabilities, redeemable shares, and stockholders' equity $ 68,916
$ 45,122



	Page
Condensed Consolidated Statements of Financial Position as of May 5, 2017 and February 3, 2017	5
Condensed Consolidated Statements of Income (Loss) for the three months ended May 5, 2017 and April 29, 2016	6
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended May 5, 2017 and April 29, 2016	7
Condensed Consolidated Statements of Cash Flows for the three months ended May 5, 2017 and April 29, 2016	8
Condensed Consolidated Statements of Stockholders' Equity for the three months ended May 5, 2017 and April 29, 2016	10
Notes to the Condensed Consolidated Financial Statements
Note 1 — Basis of Presentation	12
Note 2 — Business Combinations	15
Note 3 — Discontinued Operations	18
Note 4 — Fair Value Measurements	19
Note 5 — Investments	21
Note 6 — Financial Services	22
Note 7 — Debt	27
Note 8 — Derivative Instruments and Hedging Activities	31
Note 9 — Goodwill and Intangible Assets	35
Note 10 — Warranty Liability	37
Note 11 — Severance Charges	38
Note 12 — Commitments and Contingencies	39
Note 13 — Income and Other Taxes	43
Note 14 — Accumulated Other Comprehensive Loss	44
Note 15 — Non-Controlling Interests	45
Note 16 — Earnings (Loss) Per Share	46
Note 17 — Capitalization	49
Note 18 — Redeemable Shares	51
Note 19 — Segment Information	52
Note 20 — Supplemental Consolidated Financial Information	55
Note 21 — Subsequent Events	56

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

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DELL TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME (LOSS)~~FINANCIAL POSITION

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



	May 5, 2017			February 3, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	9,554		$	9,474
Short-term investments	1,620			1,975
Accounts receivable, net	8,834			9,420
Short-term financing receivables, net	3,255			3,222
Inventories, net	2,466			2,538
Other current assets	4,655			4,144
Total current assets	30,384			30,773
Property, plant, and equipment, net	5,438			5,653
Long-term investments	3,772			3,802
Long-term financing receivables, net	2,741			2,651
Goodwill	38,930			38,910
Intangible assets, net	33,283			35,053
Other non-current assets	1,492			1,364
Total assets	$	116,040		$	118,206
LIABILITIES, REDEEMABLE SHARES, AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	4,842		$	6,329
Accounts payable	15,064			14,422
Accrued and other	6,376			7,119
Short-term deferred revenue	10,354			10,265
Total current liabilities	36,636			38,135
Long-term debt (Note 7)	44,948			43,061
Long-term deferred revenue	8,330			8,431
Other non-current liabilities	8,435			9,339
Total liabilities	98,349			98,966
Commitments and contingencies (Note 12)
Redeemable shares	301			231
Stockholders' equity:
Common stock and capital in excess of $.01 par value (Note 17)	20,057			20,199
Treasury stock at cost	(1,113		)	(752		)
Accumulated deficit	(6,859		)	(5,609		)
Accumulated other comprehensive loss	(553		)	(595		)
Total Dell Technologies Inc. stockholders’ equity	11,532			13,243
Non-controlling interests	5,858			5,766
Total stockholders' equity	17,390			19,009
Total liabilities, redeemable shares, and stockholders' equity	$	116,040		$	118,206

Three Months Ended Six Months Ended
July 29, 2016 July 31, 2015 July 29, 2016 July 31, 2015
Net revenue:

Products $ 10,961
$ 10,938
$ 21,144
$ 21,462
Services, including software related 2,089
2,037
4,119
4,038
Total net revenue 13,050
12,975
25,263
25,500
Cost of net revenue:
Products 9,495
9,663
18,294
19,027
Services, including software related 1,226
1,233
2,453
2,482
Total cost of net revenue 10,721
10,896
20,747
21,509
Gross margin 2,329
2,079
4,516
3,991
Operating expenses:
Selling, general, and administrative 2,020
1,932
4,086
3,900
Research, development, and engineering 246
250
510
505
Total operating expenses 2,266
2,182
4,596
4,405
Operating income (loss) 63
(103 ) (80 ) (414 )
Interest and other, net (349 ) (222 ) (568 ) (397 )
Loss from continuing operations before income taxes (286 ) (325 ) (648 ) (811 )
Income tax provision (benefit) (22 ) (33 ) 42
(73 )
Net loss from continuing operations (264 ) (292 ) (690 ) (738 )
Income (loss) from discontinued operations, net of income taxes 836
27
1,317
(31 )
Net income (loss) 572
(265 ) 627
(769 )
Less: Net loss attributable to non-controlling interests (1 ) —
(1 ) —
Net income (loss) attributable to Dell Technologies Inc. $ 573
$ (265 ) $ 628
$ (769 )

Earnings (loss) per share attributable to Dell Technologies Inc. - basic:
Continuing operations $ (0.65 ) $ (0.72 ) $ (1.70 ) $ (1.82 )
Discontinued operations 2.06
0.07
3.25
(0.08 )
Basic $ 1.41
$ (0.65 ) $ 1.55
$ (1.90 )

Earnings (loss) per share attributable to Dell Technologies Inc. - diluted:
Continuing operations $ (0.65 ) $ (0.72 ) $ (1.70 ) $ (1.82 )
Discontinued operations 2.06
0.07
3.25
(0.08 )
Diluted $ 1.41
$ (0.65 ) $ 1.55
$ (1.90 )

Weighted-average shares outstanding:
Basic 405
405
405
405
Diluted 405
405
405
405

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

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DELL TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE~~ INCOME (LOSS)

(in ~~millions; unaudited)~~

millions, except per share amounts; unaudited)

Three Months Ended Six Months Ended
July 29, 2016 July 31, 2015 July 29, 2016 July 31, 2015
Net income (loss) $ 572
$ (265 ) $ 627
$ (769 )

Other comprehensive income (loss), net of tax
Foreign currency translation adjustments (37 ) (14 ) 42
(47 )

Cash flow hedges
Change in unrealized gains (losses) 58
66
(107 ) 60
Reclassification adjustment for net (gains) losses included in net income (loss) 27
(88 ) 81
(272 )
Net change 85
(22 ) (26 ) (212 )

Total other comprehensive income (loss), net of tax benefit (expense) of $(6) and $(5), respectively and $5 and $8, respectively 48
(36 ) 16
(259 )
Comprehensive income (loss), net of tax 620
(301 ) 643
(1,028 )
Less: Net loss attributable to non-controlling interests (1 ) —
(1 ) —
Less: Other comprehensive income (loss) attributable to non-controlling interests —
—
—
—
Comprehensive income (loss) attributable to Dell Technologies Inc. $ 621
$ (301 ) $ 644
$ (1,028 )



	Three Months Ended
	May 5, 2017			April 29, 2016
Net revenue:
Products	$	12,968		$	10,183
Services	4,848			2,058
Total net revenue	17,816			12,241
Cost of net revenue:
Products	11,459			8,799
Services	2,055			1,249
Total cost of net revenue	13,514			10,048
Gross margin	4,302			2,193
Operating expenses:
Selling, general, and administrative	4,669			2,068
Research and development	1,133			264
Total operating expenses	5,802			2,332
Operating loss	(1,500		)	(139		)
Interest and other, net	(573		)	(219		)
Loss from continuing operations before income taxes	(2,073		)	(358		)
Income tax provision (benefit)	(690		)	66
Net loss from continuing operations	(1,383		)	(424		)
Income from discontinued operations, net of income taxes (Note 3)	—			479
Net income (loss)	(1,383		)	55
Less: Net loss attributable to non-controlling interests	(49		)	—
Net income (loss) attributable to Dell Technologies Inc.	$	(1,334	)	$	55

Earnings (loss) per share attributable to Dell Technologies Inc. - basic:
Continuing operations - Class V Common Stock - basic	$	0.57		$	—
Continuing operations - DHI Group - basic	$	(2.57	)	$	(1.05	)
Discontinued operations - DHI Group - basic	$	—		$	1.18

Earnings (loss) per share attributable to Dell Technologies Inc. - diluted:
Continuing operations - Class V Common Stock - diluted	$	0.56		$	—
Continuing operations - DHI Group - diluted	$	(2.57	)	$	(1.05	)
Discontinued operations - DHI Group - diluted	$	—		$	1.18

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

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DELL TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~COMPREHENSIVE INCOME (LOSS)

(in millions; ~~unaudited; continued on next page)~~unaudited)

Six Months Ended
July 29, 2016 July 31, 2015
Cash flows from operating activities:
Net income (loss) $ 627
$ (769 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 1,321
1,437
Stock-based compensation expense 34
34
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies 47
53
Deferred income taxes (1,619 ) (216 )
Provision for doubtful accounts — including financing receivables 45
76
Other 50
49
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable (380 ) (175 )
Financing receivables (74 ) (268 )
Inventories 171
150
Other assets 127
298
Accounts payable 1,232
68
Deferred revenue 286
459
Accrued and other liabilities (52 ) (464 )
Change in cash from operating activities 1,815
732
Cash flows from investing activities:
Investments:
Purchases (8 ) (26 )
Maturities and sales 18
1
Capital expenditures (235 ) (230 )
Proceeds from sale of facilities, land, and other assets 19
85
Collections on purchased financing receivables 25
49
Divestitures of businesses, net of cash transferred —
8
Other (40 ) —
Change in cash from investing activities (221 ) (113 )



	Three Months Ended
	May 5, 2017			April 29, 2016
Net income (loss)	$	(1,383	)	$	55

Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	53			79
Available-for-sale investments:
Change in unrealized gains	28			—
Reclassification adjustment for net losses realized in net income (loss)	1			—
Net change in market value of investments	29			—
Cash flow hedges:
Change in unrealized losses	(16		)	(165		)
Reclassification adjustment for net (gains) losses included in net income (loss)	(21		)	54
Net change in cash flow hedges	(37		)	(111		)

Total other comprehensive income (loss), net of tax benefit (expense) of $(15) and $11, respectively	45			(32		)
Comprehensive income (loss), net of tax	(1,338		)	23
Less: Net loss attributable to non-controlling interests	(49		)	—
Less: Other comprehensive income attributable to non-controlling interests	3			—
Comprehensive income (loss) attributable to Dell Technologies Inc.	$	(1,292	)	$	23

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

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DELL TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions; unaudited; continued on next page)



	Three Months Ended
	May 5, 2017			April 29, 2016
Cash flows from operating activities:
Net income (loss)	$	(1,383	)	$	55
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	2,212			692
Stock-based compensation expense	201			14
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies	27			27
Deferred income taxes	(839		)	(586		)
Provision for doubtful accounts — including financing receivables	34			26
Net gain on sale of businesses	(33		)	—
Amortization of debt issuance costs	46			12
Other	107			34
Changes in assets and liabilities, net of effects from acquisitions and dispositions:
Accounts receivable	561			108
Financing receivables	(136		)	73
Inventories	15			(20		)
Other assets	(529		)	126
Accounts payable	665			(440		)
Deferred revenue	(1		)	163
Accrued and other liabilities	(707		)	(347		)
Change in cash from operating activities	240			(63		)
Cash flows from investing activities:
Investments:
Purchases	(559		)	—
Maturities and sales	973			12
Capital expenditures	(245		)	(92		)
Proceeds from sale of facilities, land, and other assets	—			4
Capitalized software development costs	(89		)	—
Collections on purchased financing receivables	3			16
Acquisition of businesses, net	(12		)	—
Divestitures of businesses, net	(20		)	—
Change in cash from investing activities	51			(60		)

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

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DELL TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(continued; in millions; unaudited)


	Six Months Ended						Three Months Ended
	July 29, 2016			July 31, 2015			May 5, 2017			April 29, 2016
Cash flows from financing activities:
Payment of dissenting shares obligation	(446		)	—
Repurchases of common stock	(2		)	—
Contributions from non-controlling interests, net	100			—
Proceeds from the issuance of common stock of subsidiaries							8			102
Repurchases of DHI Group Common Stock							(2		)	—
Repurchases of Class V Common Stock							(368		)	—
Issuance of common stock under employee plans	—			2			1			—
Payments for debt issuance costs	(15		)	(7		)	(5		)	(2		)
Proceeds from debt	2,148			3,078			3,441			552
Repayments of debt	(2,638		)	(2,749		)	(3,154		)	(1,041		)
Repurchases for tax withholdings on vesting of equity awards							(126		)	(1		)
Other	4			3			—			3
Change in cash from financing activities	(849		)	327			(205		)	(387		)
Effect of exchange rate changes on cash and cash equivalents	52			(50		)	(6		)	73
Change in cash and cash equivalents	797			896			80			(437		)
Cash and cash equivalents at beginning of the period	6,576			5,398
Cash and cash equivalents at beginning of the period, including amounts held for sale							9,474			6,576
Cash and cash equivalents at end of the period	$	7,373		$	6,294		9,554			6,139
Less: Cash included in assets held for sale	147			295
Less: Cash included in current assets held for sale							—			268
Cash and cash equivalents from continuing operations	$	7,226		$	5,999		$	9,554		$	5,871

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

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DELL TECHNOLOGIES INC.

~~NOTES TO~~ CONDENSED CONSOLIDATED ~~FINANCIAL~~ STATEMENTS

~~(unaudited)~~

OF STOCKHOLDERS' EQUITY

~~NOTE 1 — EMC MERGER TRANSACTION, DIVESTITURES AND BASIS OF PRESENTATION~~(in millions; unaudited; continued on next page)

~~EMC Merger Transaction~~ — On October 12, 2015, Dell Technologies Inc. (formerly Denali Holding Inc., referred to as Parent or Dell Technologies) entered into an agreement and plan of merger (the “EMC merger agreement”) with EMC Corporation (“EMC”), Dell Inc. (“Dell”) and Universal Acquisition Co., a direct wholly-owned subsidiary of Parent (“EMC Merger Sub”). Pursuant to the EMC merger agreement, EMC Merger Sub will merge with and into EMC (“the EMC merger”), with EMC continuing as the surviving corporation and a wholly-owned subsidiary of Parent.

Upon the closing of the EMC merger, each share of EMC common stock, par value $0.01 per share (“EMC common stock”) owned immediately prior to the effective time of the EMC merger (other than shares owned by Parent, EMC Merger Sub, EMC or any of its wholly-owned subsidiaries, and other than shares with respect to which EMC’s shareholders are entitled to and properly exercise appraisal rights) automatically will be converted into the right to receive the merger consideration, consisting of (1) $24.05 in cash, without interest, and (2) a number of shares of validly issued, fully paid and non-assessable Class V common stock of Parent (the “Class V Common Stock”) equal to the quotient (rounded to the nearest five decimal points) obtained by dividing (A) 222,966,450 by (B) the aggregate number of shares of EMC common stock issued and outstanding immediately prior to the effective time of the EMC merger, plus cash in lieu of any fractional shares. No fractional shares of Class V Common Stock will be issued in the EMC merger. The approximately 223 million shares of Class V Common Stock issuable in the EMC merger (assuming EMC shareholders are not entitled to or do not properly exercise appraisal rights) are intended to track and reflect the economic performance of approximately 65% of EMC’s current economic interest in the business of VMware, Inc. (“VMware”), which currently consists of approximately 343 million shares of VMware common stock. Based on the number of shares of EMC common stock Parent currently expects will be issued and outstanding immediately prior to the completion of the EMC merger, it is estimated that EMC shareholders will receive in the EMC merger approximately 0.111 shares of Class V Common Stock for each share of EMC common stock.



	Common Stock and Capital in Excess of Par Value							Treasury Stock
	DHI Group				Class V Common Stock			DHI Group				Class V Common Stock
	Issued Shares	Amount			Issued Shares	Amount		Shares	Amount			Shares	Amount			Accumulated Deficit			Accumulated Other Comprehensive Income/(Loss)			Dell Technologies Stockholders' Equity			Non-Controlling Interests				Total Stockholders' Equity
Balances as of February 3, 2017	569	$	10,158		223	$	10,041	—	$	(10	)	14	$	(742	)	$	(5,609	)	$	(595	)	$	13,243		$	5,766			$	19,009
Adjustment for adoption of accounting standard (Note 1)	—	—			—	—		—	—			—	—			84			—			84			—				84
Net loss	—	—			—	—		—	—			—	—			(1,334		)	—			(1,334		)	(49		)		(1,383		)
Foreign currency translation adjustments	—	—			—	—		—	—			—	—			—			53			53			—				53
Investments, net change	—	—			—	—		—	—			—	—			—			27			27			2				29
Cash flow hedges, net change	—	—			—	—		—	—			—	—			—			(38		)	(38		)	1				(37		)
Issuance of common stock	—	(4		)	—	—		—	—			—	—			—			—			(4		)	—				(4		)
Stock-based compensation expense	—	29			—	—		—	—			—	—			—			—			29			172				201
Treasury stock repurchases	—	—			—	—		—	(2		)	6	(359		)	—			—			(361		)	—				(361		)
Revaluation of redeemable shares	—	(70		)	—	—		—	—			—	—			—			—			(70		)	—				(70		)
Impact from equity transactions of non-controlling interests	—	(88		)	—	—		—	—			—	—			—			—			(88		)	(34		)		(122		)
Other	—	(9		)	—	—		—	—			—	—			—			—			(9		)	—				(9		)
Balances as of May 5, 2017	569	$	10,016		223	$	10,041	—	$	(12	)	20	$	(1,101	)	$	(6,859	)	$	(553	)	$	11,532		$	5,858		—	$	17,390

The ~~EMC merger will be financed with a combination~~accompanying notes are an integral part of equity and debt financing and cash on hand. As of September 6, 2016, Parent has obtained committed equity financing for up to $4.4 billion in the aggregate from Michael S. Dell, Chairman, Chief Executive Officer and founder of Dell, a separate property trust for the benefit of Mr. Dell's wife, MSDC Denali Investors, L.P. and MSDC Denali EIV, LLC (the “MSD Partners Funds”), funds affiliated with Silver Lake Partners, and an affiliate of Temasek Holdings (Private) Limited. Parent also has obtained debt financing commitments for up to $26.3 billion in the aggregate from financial institutions for the purpose of financing the EMC merger and refinancing certain existing indebtedness of Parent and EMC. The obligations of the lenders under Parent’s debt financing commitments are subject to a number of customary conditions. During the three months ended July 29, 2016, subsidiaries of Parent issued a total of $20.0 billion of First Lien Notes and $3.25 billion of Senior Unsecured Notes, the proceeds of which will be applied to finance the EMC merger upon closing. Parent’s debt financing commitments will terminate upon the earlier of the termination of the EMC merger agreement in accordance with its terms or December 16, 2016. In addition, each of Parent and EMC has agreed to make available a certain amount of cash on hand (at least $2.95 billion, in the case of Parent, and $4.75 billion, in the case of EMC) at the completion of the EMC merger for the purpose of financing the transactions contemplated by the EMC merger agreement.these Condensed Consolidated Financial Statements.

The completion of the EMC merger is subject to specified conditions, including (a) approval by EMC’s shareholders, which was obtained at a special meeting held on July 19, 2016, (b) the absence of an order or law prohibiting consummation of the transactions contemplated by the EMC merger agreement, (c) the effectiveness of the registration statement of Parent registering the shares of Class V Common Stock issuable in connection with the EMC merger and (d) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of certain foreign antitrust approvals. In addition, each party’s obligation to consummate the EMC merger is subject to other conditions, including (1) the accuracy of the other party’s representations and warranties (including the absence of a material adverse effect), (2) the other party’s compliance with its obligations, (3) receipt by each party of an opinion of counsel, dated as of the date of the EMC merger, as to certain tax matters and (4) the listing of the Class V Common Stock on the New York Stock Exchange or the Nasdaq Stock Market. Parent has applied to list the Class V Common Stock on the New York Stock Exchange.

The EMC merger agreement contains specified termination rights for both Parent and EMC, including that either party may terminate the EMC merger agreement if the EMC merger is not consummated by December 16, 2016, if any governmental authority has adopted any law or regulation prohibiting or rendering the consummation of the EMC merger permanently illegal,

910

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DELL TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in millions; unaudited; continued)



	DHI Group Common Stock and Capital in Excess of Par Value				Treasury Stock
	Issued Shares	Amount			Shares	Amount		Accumulated Deficit			Accumulated Other Comprehensive Income/(Loss)			Dell Technologies Stockholders' Equity			Non-Controlling Interests		Total Stockholders' Equity
Balances as of January 29, 2016	405	$	5,727		—	$	—	$	(3,937	)	$	(324	)	$	1,466		$	—	$	1,466
Net loss	—	—			—	—		55			—			55			—		55
Foreign currency translation adjustments	—				—	—		—			79			79			—		79
Cash flow hedges, net change	—	—			—	—		—			(111		)	(111		)	—		(111		)
Stock-based compensation expense	—	14			—	—		—			—			14			—		14
Revaluation of redeemable shares	—	(59		)	—	—		—			—			(59		)	—		(59		)
Impact from equity transactions of non-controlling interests	—	—			—	—		—			—			—			125		125
Other	—	(1		)	—	—		(1		)	—			(2		)	—		(2		)
Balances as of April 29, 2016	405	$	5,681		—	$	—	$	(3,883	)	$	(356	)	$	1,442		$	125	$	1,567

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

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DELL TECHNOLOGIES INC.

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

(unaudited)

or if any governmental authority has issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the EMC merger, and such order, decree or ruling has become final and nonappealable. If the EMC merger agreement is terminated under certain specified circumstances, including in connection with EMC’s entry into a definitive agreement for a superior proposal, EMC must pay Parent a termination fee of $2.5 billion. Further, if the EMC merger agreement is terminated under specified circumstances and, within 12 months after the termination, EMC enters into a definitive agreement providing for, or consummates, an acquisition proposal, EMC will be obligated to pay Parent a termination fee of $2.5 billion. The EMC merger agreement also provides that Parent and Dell will be obligated to pay EMC a reverse termination fee of $4 billion under specified circumstances and, in certain instances, an alternative reverse termination fee of $6 billion.

NOTE 1 — BASIS OF PRESENTATION

~~Other than the recognition~~EMC Merger Transaction — On September 7, 2016, EMC Corporation, a Massachusetts corporation ("EMC"), became a wholly-owned subsidiary of ~~certain expenses related to the EMC merger and interest expense associated with the issuance~~Dell Technologies Inc. (the "Company") as a result of the ~~First Lien Notes~~merger of Universal Acquisition Co., a Delaware corporation and ~~the Senior Unsecured Notes referred to above, the proceeds of which are held in escrow, there was no impact~~wholly-owned subsidiary of the Company ("Merger Sub"), with and into EMC, with EMC surviving as a wholly-owned subsidiary of the Company (the "EMC merger ~~on the accompanying Unaudited Condensed Consolidated Financial Statements.~~transaction"). See Note 52 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements for additional ~~information.~~information on the EMC merger transaction.

Divestitures — On ~~March 27,~~November 2, 2016, ~~Dell entered into a definitive agreement with NTT Data International L.L.C. to divest~~the Company completed substantially all of the divestiture of Dell ~~Services for cash consideration of approximately $3.1 billion.~~Services. On ~~June 19,~~October 31, 2016, ~~Dell entered into a definitive agreement with Francisco Partners and Elliot Management Corporation to divest substantially all~~the Company completed the divestiture of Dell Software Group ("DSG") ~~for cash consideration~~. On January 23, 2017, the Company completed the divestiture of ~~approximately $2.4 billion.~~the Dell EMC Enterprise Content Division ("ECD"). In accordance with applicable accounting guidance, the results of Dell Services, DSG, and ~~DSG~~ECD are presented as discontinued operations in the Condensed Consolidated Statements of Income (Loss) and, as such, have been excluded from both continuing operations and segment results for ~~all periods presented. Further,~~ the ~~Company has reclassified the related assets and liabilities as held for sale in the accompanying Condensed Consolidated Statements of Financial Position.~~relevant periods. See Note 23 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements for additional information.

SecureWorks Initial Public Offering — On April 27, 2016, SecureWorks Corp. ~~(“SecureWorks”~~("SecureWorks") completed a registered underwritten initial public offering ("IPO") of its Class A common stock. Prior to the IPO, Dell Technologies owned indirectly, through Dell and Dell's subsidiaries, 100% of the outstanding equity interest in SecureWorks. As of July 29, 2016, Dell Technologies held approximately 86.8% of the outstanding equity interest in SecureWorks, which represented approximately 98.5% of the combined voting power of both classes of the SecureWorks common stock outstanding. The results of the SecureWorks operations are ~~recorded~~included in ~~Corporate.~~other businesses. See ~~Note 12 and~~ Note 15 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements for more information.

~~Going-Private Transaction~~— On October 29, 2013, Dell was acquired by Dell Technologies in a merger transaction pursuant to an agreement and plan of merger, dated as of February 5, 2013, as amended. Dell Technologies is a Delaware corporation owned by Michael S. Dell and a separate property trust for the benefit of Mr. Dell’s wife, investment funds affiliated with Silver Lake Partners, the MSD Partners Funds, and certain members of Dell’s management and other investors. Mr. Dell serves as Chairman and Chief Executive Officer of Dell Technologies and Dell.

Basis of Presentation — The accompanying Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes filed with the U.S. Securities and Exchange Commission ("SEC") in the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2017 ("Fiscal 2017"). These 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 Technologies Inc. (individually and together with its consolidated subsidiaries, ~~"the Company"~~the "Company" or "Dell Technologies") as of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016,~~February 3, 2017, the results of its operations and corresponding comprehensive income (loss) ~~for the three and six months ended July 29, 2016 and July 31, 2015, and~~, as well as its cash flows, for the ~~six~~three months ended ~~July~~May 5, 2017 and April 29, 2016 and July 31, 2015. The accompanying Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Audited Consolidated Financial Statements and accompanying Notes for the fiscal year ended January 29, 2016 ("Fiscal 2016") included in the proxy statement/prospectus dated June 6, 2016 forming part of the Company’s registration statement on Form S-4 (Registration No. 333 208524).2016.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that

affect the amounts reported in the ~~Company's~~ Condensed Consolidated Financial Statements and the accompanying Notes. Actual results could differ materially from those estimates. The results of operations, comprehensive income (loss), and cash flows for the three ~~and six~~ months ended ~~July~~May 5, 2017 and April 29, 2016 ~~and July 31, 2015~~ are not necessarily indicative of the results to be expected for the full fiscal year or for any other fiscal period.

The Company's fiscal year is the 52- or 53-week period ending on the Friday nearest January 31. The fiscal year ended February 3, 2017 ("Fiscal 2017") was a 53-week period while the fiscal year ending February 2, 2018 ("Fiscal 2018") will be a 52-week period.

10As a result of the EMC merger transaction completed on September 7, 2016, the Company's results for the fiscal periods reflected in these Condensed Consolidated Financial Statements are not directly comparable. The results of the businesses acquired in the EMC merger transaction are included in the consolidated results of Dell Technologies for the three months ended May 5, 2017. The Dell Technologies balance sheet reflects the full consolidation of EMC's assets and liabilities as a result of the closing of the EMC merger transaction on September 7, 2016.

Unless the context indicates otherwise, references in these Notes to the Condensed Consolidated Financial Statements to "VMware" mean the VMware reportable segment, which reflects the operations of VMware, Inc. (NYSE: VMW) within Dell Technologies. See Exhibit 99.1 filed with the Company's quarterly report on Form 10-Q for the quarterly period ended May 5, 2017 for information on the differences between VMware reportable segment results and VMware, Inc. results.

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

~~The Company's fiscal year is the 52- or 53-week period ending on the Friday nearest January 31. The fiscal year ending February 3, 2017 ("Fiscal 2017") will be a 53-week period.~~

Recently Issued Accounting Pronouncements

Revenue from Contracts with Customers — In May 2014, the Financial Accounting Standards Board ~~("FASB"~~(the "FASB") issued amended guidance on the recognition of revenue from contracts with customers. The objective of the new standard is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede ~~most~~substantially all of the existing revenue recognition guidance, including industry-specific guidance. The new standard requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also provides guidance on the accounting for costs to fulfill or obtain a customer contract. Further, the new standard requires additional disclosures to help enable users of the financial statements to better understand the nature, amount, timing, risks, and judgments related to revenue recognition and related cash flows from contracts with customers.

In August 2015, the FASB approved a one-year deferral of the effective date of this standard. Public entities are required to adopt the new standard for fiscal years, and interim periods within those years, beginning after December 15, ~~2017, with the option of applying the standard as early as the original effective date for public entities.~~2017. The new revenue standard may be applied retrospectively to each prior period presented (full retrospective method) or retrospectively with the cumulative effect of initially applying the standard recognized ~~as of~~at the date of ~~adoption.~~initial application in retained earnings (modified retrospective method). The Company currently expects to adopt this standard retrospectively to each prior period presented for the fiscal year beginning February 3, 2018.

While the Company is currently evaluating the financial and system impacts that the new standard will have on the Condensed Consolidated Financial Statements, the Company expects that unearned license revenue related to the sale of software licenses and related deliverables will decline upon adoption. Currently, the Company defers revenue for certain software arrangements due to the absence of vendor specific objective evidence ("VSOE") of fair value for all or a portion of the deliverables. Under the new standard, the Company will no longer be required to establish VSOE of fair value in order to account for elements in an arrangement as separate units of accounting, and will be able to record revenue upon satisfaction of each performance obligation. Additionally, the Company expects the new standard to have an impact in the way the transaction price is allocated for certain non-standard warranties. The new standard is expected to result in more of the aggregate transaction price related to the non-standard warranty being recorded as revenue upon delivery of the underlying product, because the Company will no longer defer revenue based on the separately stated price of the non-standard warranty provided under the contract. The Company continues to make progress in assessing the impacts of the standard on the Condensed Consolidated Financial Statements and will continue to evaluate the impact of ~~the new guidance, the effective date, and the method of adoption.~~

~~Presentation of Debt Issuance Costs~~ ~~— In April 2015, the FASB issued amended guidance which~~any changes the classification of debt issuance costs in the Consolidated Statements of Financial Position. The new guidance requires debt issuance costs to be presented as a direct deduction from the carrying amount of the related debt liability consistent with the presentation of debt discounts, rather than as an asset as currently presented. The guidance related to recognition and measurement of debt issuance costs remains unchanged. The Company implemented the new presentation in the six months ended July 29, 2016 on a retrospective basis, and except for the reclassification of debt issuance costs of $128 million as of January 29, 2016 in the accompanying Condensed Consolidated Statements of Financial Position, there was no other impact to the ~~Consolidated Financial Statements.~~standard or interpretations should they become available.

Recognition and Measurement of Financial Assets and Financial Liabilities — In January 2016, the FASB issued amended guidance on Recognition and Measurement of Financial Assets and Financial Liabilities. The standard addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Public entities must adopt the new guidance for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company ~~is currently evaluating the impact~~does not expect that the standard will have a material impact on the Condensed Consolidated Financial Statements.

Leases — In February 2016, the FASB issued amended guidance on the accounting for leasing transactions. The primary objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Public entities must adopt the new guidance for reporting periods beginning after December 15, 2018, with early adoption permitted. Companies are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is currently evaluating the impact that the standard will have on the Condensed Consolidated Financial Statements.

Improvements to Employee Share-Based Payment Accounting — In March 2016, the FASB issued amended guidance on the accounting for employee share-based ~~payments. The topics that were amended in the update involve several aspects of~~payments, including the accounting for ~~share-based payment transactions, including the~~ income ~~tax consequences,~~taxes and forfeitures, classification of awards as either equity or liabilities, and classification ~~on the statement~~ of cash flows. ~~Public entities must adopt~~The Company adopted this guidance during the three months ended May 5, 2017. In accordance with the new guidance, excess tax benefits or deficiencies for ~~fiscal years, and interim periods within those years, beginning after December 2016.~~stock-based compensation are now reflected as a component of the provision for income taxes on the Condensed Consolidated Statements of Income (Loss), whereas they were previously recorded as additional paid-in capital. The Company ~~is currently evaluating~~has elected to continue to estimate expected forfeitures. Additionally, the Company now presents excess tax benefits as an operating activity rather than a financing activity on the Condensed Consolidated Statements of Cash Flows, while the cash flows related to employee taxes

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

paid for withheld shares are presented as a financing activity with prior periods adjusted accordingly. The adoption of the amended guidance did not have a material impact on the Condensed Consolidated Financial Statements. The prospective impact of the new standard will depend on the Company's stock price at the vesting or exercise dates of the awards and the number of awards that vest or are exercised in each period, but we do not expect the impact ~~that the standard will have on the Consolidated Financial Statements.~~to be material in future periods.

Measurement of Credit Losses on Financial Instruments — In June 2016, the FASB issued amended guidance which replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Public entities must adopt the new guidance for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All entities may adopt the amendments in the new standard as of fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ~~However, earlier~~Earlier adoption is not permitted. The Company is currently evaluating the impact that the standard will have on the Condensed Consolidated Financial Statements.

Classification of Certain Cash Receipts and Cash Payments — In August 2016, the FASB issued amended guidance on the presentation and classification of eight specific cash flow issues with the objective of reducing existing diversity in practice. Public entities must adopt the new guidance for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. Companies should reflect any adjustments on a retrospective basis, if practicable; otherwise, adoption is required to be applied as of the earliest date practicable. The Company is currently evaluating the timing of adoption as well as the impact that the standard will have on the Condensed Consolidated Financial Statements.

11Intra-Entity Transfers of Assets Other Than Inventory — In October 2016, the FASB issued amended guidance on the accounting for income taxes. The new guidance requires companies to recognize the income tax effects of intra-entity asset transfers, other than transfers of inventory, when the transfer occurs instead of when the asset is sold to a third party. The new guidance should be applied on a modified-retrospective basis with the cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company early adopted this guidance during the three months ended May 5, 2017. At adoption, approximately $84 million was reclassified from other non-current liabilities to retained earnings, resulting in a net credit to retained earnings.

Simplifying the Test for Goodwill Impairment — In January 2017, the FASB issued amended guidance to simplify the subsequent measurement of goodwill by removing Step 2 of the goodwill impairment test. Instead, under the amendments in the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. Public entities must adopt the new guidance in fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of the new guidance and timing of adoption, but does not expect that the standard will have an impact on its Condensed Consolidated Financial Statements.

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 2 —~~DISCONTINUED OPERATIONS~~ BUSINESS COMBINATIONS

EMC Merger Transaction

~~Dell Services Divestiture~~Transaction Overview — On ~~March 27,~~September 7, 2016, ~~Dell entered~~EMC became a wholly-owned subsidiary of the Company as a result of the merger of Merger Sub with and into EMC, with EMC surviving as a ~~definitive~~wholly-owned subsidiary of the Company. Pursuant to the terms of the merger agreement, with NTT Data International L.L.C. to divest substantially all of Dell Services, including the Dell Services Federal Government business. Dell Services includes business process outsourcing, application management, and infrastructure services. The pending transaction does not include the global support, deployment, and professional services offerings. Atupon the completion of the ~~sale, total~~EMC merger transaction, each issued and outstanding share of common stock, par value $0.01 per share, of EMC (approximately 2.0 billion as of September 7, 2016) was converted into the right to receive (1) $24.05 in cash, ~~consideration, which may vary due to adjustments included~~without interest, and (2) 0.11146 validly issued, fully paid and non-assessable shares of common stock of the Company designated as Class V Common Stock, par value $0.01 per share (the "Class V Common Stock"), plus cash in lieu of any fractional shares. Shares of the ~~transaction agreement, is expected to be between $2.9 billion~~Class V Common Stock were approved for listing on the New York Stock Exchange (the "NYSE") under the ticker symbol "DVMT" and ~~$3.1 billion, which would result in an estimated pre-tax gain~~began trading on sale of approximately $1.7 billion to $2.0 billion. The pending transaction is expected to close in the fourth quarter of Fiscal 2017, subject to the satisfaction of customary closing conditions, including approvals from regulatory authorities. September 7, 2016.

In connection with the ~~sale,~~EMC merger transaction, the Company expects to enter into various agreements that will provide a framework for the relationships between the parties after the sale, including, among others, a transition services agreement, intellectual property license agreements, and commercial support agreements.

~~Dell Software Group Divestiture~~ —authorized 343 million shares of Class V Common Stock. On ~~June 19,~~September 7, 2016, Dell ~~entered into~~Technologies issued 223 million shares of Class V Common Stock to EMC shareholders at a ~~definitive agreement with Francisco Partners~~purchase price of $45.07 per share for an aggregate purchase price of approximately $10.0 billion. The total fair value of consideration transferred to effect the EMC merger transaction was approximately $64.0 billion, which primarily consisted of cash and ~~Elliot Management Corporation to divest substantially all~~such shares of DSG. The pending transaction includes DSG's systems and information management, security solutions, and Statistica businesses. The pending transaction does not include the Company's cloud integration business. At the completion of the sale, total cash consideration, which may vary due to the available cash balance held by DSGClass V Common Stock, as well as ~~other adjustments included~~the fair value of non-controlling interests in ~~the transaction agreement, is expected to be between $2.3 billion~~VMware, Inc. and ~~$2.6 billion, which would result in an estimated pre-tax gain on sale~~Pivotal Software, Inc. ("Pivotal"), majority-owned consolidated subsidiaries of approximately $1.0 billion to $1.3 billion. The pending transaction is expected to close in the fourth quarter of Fiscal 2017, subject to the satisfaction of customary closing conditions, including approvals from regulatory authorities.

~~Discontinued Operations Presentation~~ ~~— In accordance with applicable accounting guidance, the Company concluded that Dell Services and DSG have met the criteria~~EMC. See Note 17 for discontinued operations reporting as of March 27, 2016 and June 19, 2016, respectively. Accordingly, the Company reclassified the financial results of Dell Services and DSG to discontinued operations in the Condensed Consolidated Statements of Income (Loss) for all periods presented. These financial results are presented as “Income (loss) from discontinued operations, net of income taxes”more information on the accompanying Condensed Consolidated Statements of Income (Loss) for the three and six months ended July 29, 2016 and July 31, 2015. The Company reclassified the related assets and liabilities as “Current assets held for sale” and “Current liabilities held for sale” on the accompanying Condensed Consolidated Statements of Financial Position as of July 29, 2016 and January 29, 2016. Cash flows from the Company's discontinued operations are included in the Condensed Consolidated Statements of Cash Flows.Class V Common Stock.

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

~~Dell Services~~Assets Acquired and Liabilities Assumed — The EMC merger transaction has been accounted for as a business combination under the acquisition method of accounting. The cumulative impact of any subsequent changes resulting from the facts and circumstances that existed as of the transaction date will be adjusted in the reporting period in which the adjustment amount is determined. The Company's purchase accounting is substantially complete. The following table summarizes, as of May 5, 2017, the preliminary purchase price allocation to the assets acquired and the liabilities assumed in the EMC merger transaction (in millions):



Current assets:
Cash and cash equivalents	$	10,080
Short-term investments	1,765
Accounts receivable	2,810
Short-term financing receivables	64
Inventories, net	1,993
Other current assets	903
Total current assets	17,615
Property, plant, and equipment	4,490
Long-term investments	4,317
Long-term financing receivables, net	65
Goodwill	31,539
Purchased intangibles	31,218
Other non-current assets	445
Total assets	$	89,689
Current liabilities:
Short-term debt	$	905
Accounts payable	728
Accrued and other	3,259
Short-term deferred revenue	4,954
Total current liabilities	9,846
Long-term debt	5,474
Long-term deferred revenue	3,469
Deferred tax liabilities	6,625
Other non-current liabilities	324
Total liabilities	25,738
Total net assets	$	63,951

The ~~following~~ table ~~presents key financial results of Dell Services included in “Income (loss) from discontinued operations, net of income taxes” for the three and six months ended July 29, 2016 and July 31, 2015:~~

Three Months Ended Six Months Ended
July 29, 2016 July 31, 2015 July 29, 2016 July 31, 2015
(in millions)
Net revenue $ 694
$ 694
$ 1,368
$ 1,394
Cost of net revenue 536
546
1,077
1,138
Operating expenses 98
105
211
207
Income from discontinued operations before income taxes 60
43
80
49
Income tax provision (benefit) (a) (453 ) 14
(914 ) 48
Income from discontinued operations, net of income taxes $ 513
$ 29
$ 994
$ 1

~~____________________~~

~~(a) The tax benefits recorded during the three and six months ended July 29, 2016 were $0.5 billion and $0.9 billion, respectively. The additional tax benefit recorded~~above includes amounts allocated to ECD, which was divested in the ~~three months~~fiscal year ended ~~July 29, 2016 was primarily due~~February 3, 2017. See Note 3 of the Notes to the ~~reversal of a valuation allowance~~Condensed Consolidated Financial Statements for ~~deferred tax assets that the Company now expects to utilize as a result of the DSG divestiture.~~

~~The following table presents the major classes of assets and liabilities as of July 29, 2016 and January 29, 2016 related to Dell Services which were classified as held for sale:~~

July 29, 2016 January 29, 2016
(in millions)
ASSETS
Current assets:

Accounts receivable, net $ 488
$ 443
Other current assets 68
73
Total current assets 556
516
Property, plant, and equipment, net 545
515
Goodwill 252
252
Intangible assets, net 376
388
Other non-current assets 16
50
Total assets $ 1,745
$ 1,721

LIABILITIES
Current liabilities:

Accounts payable $ 147
$ 173
Accrued and other 160
180
Short-term deferred revenue 77
82
Total current liabilities 384
435
Long-term deferred revenue 47
53
Other non-current liabilities —
126
Total liabilities $ 431
$ 614
more information on discontinued operations.

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

~~The significant cash flow items from Dell Services for the six months ended July 29, 2016 and July 31, 2015 were as follows:~~

Six Months Ended
July 29, 2016 July 31, 2015
(in millions)
Depreciation and amortization (a) $ 32
$ 110
Capital expenditures $ (47 ) $ (41 )

~~____________________~~

(a) Amounts represent depreciation and amortization recognized up until March 27, 2016, the date Dell Services met the criteria for discontinued operations reporting. Depreciation and amortization ceased upon determination that the held for sale criteria were met.

~~Dell Software Group~~

The following table presents key financial results of DSG included in “Income (loss) from discontinued operations, net of income taxes” for the three and six months ended July 29, 2016 and July 31, 2015:

Three Months Ended Six Months Ended
July 29, 2016 July 31, 2015 July 29, 2016 July 31, 2015
(in millions)
Net revenue $ 321
$ 330
$ 642
$ 643
Cost of net revenue 85
89
175
185
Operating expenses 239
220
488
461
Interest and other, net (7 ) (2 ) 7
(6 )
Income (loss) from discontinued operations before income taxes (10 ) 19
(14 ) (9 )
Income tax provision (benefit) (a) (333 ) 21
(337 ) 23
Income (loss) from discontinued operations, net of income taxes $ 323
$ (2 ) $ 323
$ (32 )

~~____________________~~

(a) The tax benefits of $333 million and $337 million for the three and six months ended July 29, 2016, respectively, were primarily due to the Company's determination that it could no longer assert permanent reinvestment in the outside basis of the entities that will be divested.

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

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

~~(unaudited)~~

Pro Forma Financial Information — The following table ~~presents~~provides unaudited pro forma results of operations for the ~~major classes~~periods presented as if the transaction date had occurred on January 31, 2015, the first day of ~~assets and liabilities as of July~~Fiscal 2016:



	Three Months Ended
	April 29, 2016
	(in millions)
Total net revenue	$	17,205
Net loss attributable to Dell Technologies Inc.	$	(1,383	)

Earnings (loss) per share attributable to Dell Technologies Inc. - basic (a):
Continuing operations - Class V Common Stock	$	0.39
Continuing operations - DHI Group	$	(2.59	)

Earnings (loss) per share attributable to Dell Technologies Inc. - diluted (a):
Continuing operations - Class V Common Stock	$	0.39
Continuing operations - DHI Group	$	(2.59	)

____________________


(a)	For purposes of calculating pro forma earnings (loss) per share, the Company used the two-class method. Earnings are allocated between the Class V Common Stock and the DHI Group on a basis consistent with historical earnings (loss) per share.

The pro forma information for the three months ended April 29, 2016 combines the Company's historical results for the three months ended April 29, 2016 and ~~January~~EMC's historical results for the three months ended March 31, 2016. The historical results have been adjusted in the pro forma information to give effect to items that are (a) directly attributable to the EMC merger transaction, (b) factually supportable, and (c) expected to have a continuing impact on the combined company's results. The pro forma information is presented for informational purposes only. The unaudited pro forma results include the elimination of non-recurring transaction and integration costs of $63 million in the three months ended April 29, ~~2016 related~~2016. The pro forma information does not purport to ~~DSG which were classified as held~~represent what the combined company's results of operations or financial condition would have been had the EMC merger transaction actually occurred on the date indicated, and does not purport to project the combined company's results of operations for ~~sale:~~

July 29, 2016 January 29, 2016
(in millions)
ASSETS
Current assets:
Cash and cash equivalents $ 147
$ 254
Accounts receivable, net 210
244
Inventories, net 20
24
Other current assets 9
11
Total current assets 386
533
Property, plant, and equipment, net 111
106
Goodwill 1,391
1,391
Intangible assets, net 557
613
Other non-current assets (a) 10
8
Total assets $ 2,455
$ 2,651

LIABILITIES
Current liabilities:

Accounts payable 20
15
Accrued and other 124
160
Short-term deferred revenue 603
625
Total current liabilities 747
800
Long-term deferred revenue 340
333
Other non-current liabilities (a) 79
82
Total liabilities $ 1,166
$ 1,215

~~____________________~~

~~(a) Other non-current liabilities includes a $75 million deferred tax liability~~any future period or as of ~~July 29, 2016 that is reflected in current assets held for sale on the Condensed Consolidated Statements of Financial Position due to jurisdictional netting of deferred taxes.~~any future date.

~~The significant cash flow items from DSG for the six months ended July 29, 2016 and July 31, 2015 were as follows:~~

Six Months Ended
July 29, 2016 July 31, 2015
(in millions)
Depreciation and amortization (a) $ 66
$ 83
Capital expenditures $ (15 ) $ (15 )

~~____________________~~

(a) Amounts represent depreciation and amortization recognized up until June 19, 2016, the date DSG met the criteria for discontinued operations reporting. Depreciation and amortization ceased upon determination that the held for sale criteria were met.

1517

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 3— DISCONTINUED OPERATIONS

Dell entered into a definitive agreement with NTT Data International L.L.C. to divest substantially all of Dell Services, and on November 2, 2016, the parties closed substantially all of the transaction. Dell entered into a definitive agreement with Francisco Partners and Elliot Management Corporation to divest substantially all of DSG, and on October 31, 2016, the parties closed the transaction. EMC, a subsidiary of the Company, entered into a definitive agreement with OpenText Corporation to divest the Dell EMC Enterprise Content Division, and on January 23, 2017, the parties closed the transaction.

Upon closing of the respective transactions, the Company entered into transition services agreements with NTT Data International L.L.C., Francisco Partners and Elliot Management, and OpenText Corporation pursuant to which the Company provides various administrative services on an interim transitional basis. Transition services may be provided for up to one year, with an option to renew after that period. The Company also entered into various commercial agreements with NTT Data International, Francisco Partners and Elliot Management, and OpenText Corporation that include reseller agreements for certain offerings.

In accordance with applicable accounting guidance, the Company reclassified the financial results of Dell Services, DSG, and ECD as discontinued operations in the Condensed Consolidated Statements of Income (Loss) for the relevant periods. The following table presents key financial results of Dell Services and DSG included in "Income from discontinued operations, net of income taxes (Note 3)" for the three months ended April 29, 2016:



	Three Months Ended April 29, 2016
	Dell Services			DSG			Total
	(in millions)
Net revenue	$	646		$	321		$	967
Cost of net revenue	519			90			609
Operating expenses	111			249			360
Interest and other, net	—			14			14
Income (loss) from discontinued operations before income taxes	16			(4		)	12
Income tax benefit (a)	(463		)	(4		)	(467		)
Income from discontinued operations, net of income taxes	$	479		$	—		$	479

____________________


(a)	The tax benefit for Dell Services recorded during the three months ended April 29, 2016 was primarily due to temporary differences arising from outside basis differences in the stock entities to be disposed, offset by a valuation allowance.

Cash flows from the Company's discontinued operations are included in the accompanying Condensed Consolidated Statements of Cash Flows. The significant cash flow items from Dell Services and DSG for the three months ended April 29, 2016 were as follows:



	Three Months Ended April 29, 2016
	Dell Services		DSG		Total
	(in millions)
Depreciation and amortization (a)	$	32	$	42	$	74
Capital expenditures	$	19	$	6	$	25

____________________


(a)	Depreciation and amortization ceased upon determination that Dell Services and DSG had met the criteria for discontinued operations reporting as of March 27, 2016 and June 19, 2016, respectively.

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 4 — FAIR VALUE MEASUREMENTS

The following table presents the Company's hierarchy for its assets and liabilities measured at fair value on a recurring basis as of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016:~~

February 3, 2017:


	July 29, 2016 (a)								January 29, 2016								May 5, 2017 (a)								February 3, 2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		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	$	4,406	$	—	$	—	$	4,406	$	3,832	$	—	$	—	$	3,832	$	5,477	$	—	$	—	$	5,477	$	4,866	$	—	$	—	$	4,866
Municipal obligations																	—		15		—		15		—		3		—		3
Debt securities:
U.S. government and agencies																	454		430		—		884		444		470		—		914
U.S. corporate																	—		1,720		—		1,720		—		1,800		—		1,800
Foreign																	—		1,888		—		1,888		—		2,083		—		2,083
Municipal obligations																	—		206		—		206		—		352		—		352
Asset-backed securities																	—		—		—		—		—		4		—		4
Equity and other securities																	204		1		—		205		169		—		—		169
Derivative instruments	—		87		—		87		—		195		—		195		—		108		—		108		—		205		—		205
Common stock purchase agreement	—		—		—		—		—		—		10		10
Restricted cash:
Money market funds	23,285		—		—		23,285		—		—		—		—
Total assets	$	27,691	$	87	$	—	$	27,778	$	3,832	$	195	$	10	$	4,037	$	6,135	$	4,368	$	—	$	10,503	$	5,479	$	4,917	$	—	$	10,396
Liabilities:
Derivative instruments	$	—	$	28	$	—	$	28	$	—	$	12	$	—	$	12	$	—	$	109	$	—	$	109	$	—	$	64	$	—	$	64
Debt - Other	—		—		—		—		—		—		28		28
Common stock purchase agreement	—		—		1		1		—		—		—		—
Total liabilities	$	—	$	28	$	1	$	29	$	—	$	12	$	28	$	40	$	—	$	109	$	—	$	109	$	—	$	64	$	—	$	64

____________________

(a) The Company did not transfer any securities between levels during the ~~six~~three months ended ~~July 29, 2016.~~May 5, 2017.

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

Money Market Funds— The Company's investment in money market funds that are classified as cash equivalents ~~have original maturities~~hold underlying investments with a weighted average maturity of 90 days or less and are recognized at fair 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. The Company reviews security pricing and assesses liquidity on a quarterly basis. As of May 5, 2017, the Company's U.S. portfolio had no material exposure to money market funds with a fluctuating net asset value.

~~During~~Cash Equivalent Municipal Obligations — The Company's municipal obligations that are classified as cash equivalents have original maturities of 90 days or less and are recognized at fair value. The valuation methodology for these securities is the ~~three months ended July 29, 2016,~~same as the ~~Company issued $23.25 billion~~methodology for non-cash equivalent municipal obligations as described in the Debt Securities section below.

Debt Securities — The majority of the Company's debt securities consist of various fixed income securities such as U.S. government and agencies, U.S. corporate, and foreign. Valuation is based on pricing models whereby all significant inputs, including 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 ~~connection~~accordance with the ~~pending EMC merger transaction.~~fair value measurements hierarchy. The ~~net proceeds were deposited directly into escrow~~Company reviews security pricing and ~~invested in money market funds. As~~assesses liquidity on a quarterly basis. See Note 5 of ~~July 29, 2016, these money market funds had a carrying value of approximately $23.3 billion, which was included in restricted cash and classified as non-current on~~the Notes to the Condensed Consolidated Financial Statements ~~of Financial Position as the funds will be used to consummate the EMC merger transaction.~~for additional information about investments.

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Equity and Other Securities — The majority of the Company's investments in equity and other securities that are measured at fair value on a recurring basis consist of strategic investments in publicly traded companies. The valuation of these securities is based on quoted prices in active markets.

Derivative Instruments — The Company'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 also factored into the fair value calculation of the Company's derivative instrument portfolio. See Note 68 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements for a description of the Company's derivative financial instrument activities.

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

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

~~(unaudited)~~

~~Debt - Other~~ — As of January 29, 2016, the Company recognized a portion of its short-term debt at fair value. This debt was represented by promissory notes issued on August 3, 2015 and September 14, 2015, which were extinguished during the six months ended July 29, 2016. The Company determined fair value using a discounted cash flow model which included significant unobservable inputs and assumptions. The unobservable inputs used include projected cash outflows over varying possible maturity dates, weighted by the probability of those possible outcomes, along with assumed discount rates.

~~Common Stock Purchase Agreements~~ — The equity financing agreements obtained by Parent in connection with the EMC merger transaction described in Note 1 of the Notes to the Unaudited Condensed Consolidated Financial Statements permit Michael S. Dell, the MSD Partners Funds, Silver Lake Partners, and Temasek Holdings (Private) Limited ("Temasek") to purchase Parent common stock at a fixed price per share contingent on the closing of the EMC merger transaction. Each agreement also provides for a price protection in the event additional equity investors purchase Parent common stock at a lower price. The agreements with Michael S. Dell, the MSD Partners Funds, and Silver Lake Partners are not required to be remeasured to fair value and are effectively capital commitments, because of the degree of control and influence such persons can exercise over Parent, including control over when and at what price Parent will issue new shares, as well as the fact that the equity agreements were entered into solely for the purpose of financing the EMC merger transaction. The provision relating to price protection is considered substantive to Temasek as an unrelated party. Consequently, the Company has recognized the contract as an asset or liability, initially recorded at fair value of zero, with subsequent changes in fair value recorded in earnings. As of July 29, 2016, the Company recorded a liability of $1 million related to the Temasek equity contract.

The Company determined the fair value of this forward contract using a Black-Scholes valuation model, which included significant unobservable inputs and assumptions. The unobservable inputs used include the current value of the Parent common stock, which was estimated based on a combination of a discounted cash flow methodology and a market approach, the probability of the EMC merger occurring, the time period to contract expiration, and the probability that Parent will issue its shares below the foregoing fixed price per share. Varying these inputs could materially alter the fair value recognized for this instrument.

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. These assets consist primarily of non-financial assets such as goodwill and intangible ~~assets and investments accounted for under the cost method.~~assets. See Note 79 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements for additional information about goodwill and intangible assets.

As of May 5, 2017 and February 3, 2017, the Company held strategic investments of $489 million and $455 million, respectively. These investments are accounted for under the cost method and are not included in the recurring fair value table above. Investments accounted for under the cost method are ~~measured~~recorded at cost initially, which approximates fair ~~value initially.~~value. Subsequently, ~~when~~if there is an indicator of impairment, the impairment is recognized. In evaluating these investments for impairment, the Company uses inputs including pre- and post-money valuations of recent financing events and the impact of those on its fully diluted ownership percentages, as well as other available information regarding the issuer's historical and forecasted performance. As these investments are early-stage companies which are not publicly traded, it is not practicable for the Company to reliably estimate the fair value of these investments.

Carrying Value and Estimated Fair Value of Outstanding Debt— The following table summarizes the carrying value and estimated fair value of the Company's outstanding debt as described in Note 57 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements, including the current portion, as of the dates indicated:

July 29, 2016 January 29, 2016
Carrying Value Fair Value Carrying Value Fair Value
(in billions)
Term Loan Facilities $ 5.9
$ 6.1
$ 6.1
$ 6.2
Senior First Lien Notes $ 1.4
$ 1.5
$ 1.4
$ 1.5
First Lien Notes $ 20.0
$ 21.4
$ —
$ —
Unsecured Notes and Debentures $ 2.3
$ 2.5
$ 2.7
$ 2.7
Senior Unsecured Notes $ 3.3
$ 3.5
$ —
$ —



	May 5, 2017				February 3, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in billions)
Senior Secured Credit Facilities	$	11.8	$	12.1	$	11.4	$	11.7
First Lien Notes	$	19.7	$	22.1	$	19.7	$	21.8
Unsecured Notes and Debentures	$	2.3	$	2.5	$	2.3	$	2.5
Senior Notes	$	3.1	$	3.5	$	3.1	$	3.5
EMC Notes	$	5.5	$	5.4	$	5.5	$	5.4
Margin Loan Facility	$	2.0	$	2.0	$	—	$	—
Bridge Facilities	$	1.5	$	1.5	$	4.0	$	4.0

The fair values of the outstanding ~~Term Loan~~Senior Secured Credit Facilities, ~~Senior~~ First Lien Notes, Unsecured Notes and Debentures, ~~issued prior to the going-private transaction~~Senior Notes, EMC Notes, Margin Loan Facility, and ~~the fair value of the outstanding First Lien Notes and Senior Unsecured Notes issued in connection with the pending EMC merger transaction~~Bridge Facilities were determined based on observable market prices in a less active market or based on valuation methodologies using observable inputs and were categorized as Level 2 in the fair value hierarchy. The fair values of the other short-term debt and the structured financing debt approximate their carrying values due to their short-term maturities.

1720

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 5— INVESTMENTS

The following table summarizes, by major security type, the carrying value and amortized cost of the Company's investments. All debt security investments with remaining effective 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 5, 2017									February 3, 2017
	Cost		Unrealized Gain		Unrealized (Loss)			Carrying Value		Cost		Unrealized Gain		Unrealized (Loss)			Carrying Value
	(in millions)
Investments:
U.S. government and agencies	$	275	$	—	$	—		$	275	$	231	$	—	$	—		$	231
U.S. corporate debt securities	542		—		(1		)	541		651		—		(1		)	650
Foreign debt securities	599		—		(1		)	598		743		—		(1		)	742
Municipal obligations	206		—		—			206		348		—		—			348
Asset-backed securities	—		—		—			—		4		—		—			4
Total short-term investments	1,622		—		(2		)	1,620		1,977		—		(2		)	1,975
U.S. government and agencies	614		—		(5		)	609		689		—		(6		)	683
U.S. corporate debt securities	1,188		1		(10		)	1,179		1,164		—		(14		)	1,150
Foreign debt securities	1,299		1		(10		)	1,290		1,356		—		(15		)	1,341
Municipal obligations	—		—		—			—		4		—		—			4
Equity and other securities (a)	640		54		—			694		604		22		(2		)	624
Total long-term investments	3,741		56		(25		)	3,772		3,817		22		(37		)	3,802
Total investments	$	5,363	$	56	$	(27	)	$	5,392	$	5,794	$	22	$	(39	)	$	5,777

____________________


(a)	The majority of equity and other securities are strategic investments accounted for under the cost method, while the remainder are investments that are measured at fair value on a recurring basis. See Note 4 of the Notes to the Condensed Consolidated Financial Statements for additional information on investments measured at fair value on a recurring basis.

The Company's investments in debt securities are classified as available-for-sale securities, which are carried at fair value. As of May 5, 2017, all investments in an unrealized loss position have been in a continuous unrealized loss position for less than 12 months.

The contractual maturities of debt securities held at May 5, 2017 are as follows:



	Amortized Cost		Carrying Value
	(in millions)
Due within one year	$	1,622	$	1,620
Due after 1 year through 5 years	3,024		3,002
Due after 5 years through 10 years	77		76
Total	$	4,723	$	4,698

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 6 — FINANCIAL SERVICES

~~Dell Financial Services~~

The Company offers or arranges various financing options and services for its business and consumer customers in the United States, Canada, Europe, and Mexico through Dell Financial Services and its affiliates (collectively, "DFS"). The key activities of DFS include the origination, collection, and servicing of customer receivables primarily related to the purchase of Dell Technologies' products and services. New financing originations, which represent the amounts of financing provided by DFS to customers for equipment and related software and services, including third-party originations, were ~~$1.0~~$1.1 billion and $0.8 billion, respectively, for ~~both the~~ three months ended ~~July~~May 5, 2017 and April 29, ~~2016 and July 31, 2015, and $1.9 billion for both the six months ended July 29, 2016 and July 31, 2015.~~2016.

The Company'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 consumer customers, and the DBC product is primarily offered to small and medium-sized commercial customers. Revolving loans in the United States 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 twelve months on average.

Fixed-term sales-type leases and loans — The Company enters into sales-type lease arrangements with customers who ~~desire~~seek lease financing. Leases with business customers have fixed terms of generally two to four years. Future maturities of minimum lease payments as of ~~July 29, 2016~~May 5, 2017 were as follows: Fiscal ~~2017 - $885 million; Fiscal~~ 2018 - ~~$1,322~~$1,434 million; Fiscal 2019 - ~~$747~~$1,276 million; Fiscal 2020 - ~~$239~~$703 million; Fiscal 2021 - $214 million; Fiscal 2022 and beyond - ~~$52~~$54 million. The Company also offers fixed-term loans to qualified small businesses, large commercial accounts, governmental organizations, educational entities, and certain individual consumer customers. These loans are repaid in equal payments including interest and have defined terms of generally three to five years.

The following table summarizes the components of the Company's financing receivables segregated by portfolio segment as of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016:~~February 3, 2017:


	July 29, 2016									January 29, 2016									May 5, 2017									February 3, 2017
	Revolving			Fixed-term			Total			Revolving			Fixed-term			Total			Revolving			Fixed-term			Total			Revolving			Fixed-term			Total
	(in millions)																		(in millions)
Financing Receivables, net:
Financing receivables, net:
Customer receivables, gross	$	1,043		$	3,786		$	4,829		$	1,173		$	3,637		$	4,810		$	940		$	4,703		$	5,643		$	1,009		$	4,530		$	5,539
Allowances for losses	(100		)	(56		)	(156		)	(118		)	(58		)	(176		)	(85		)	(51		)	(136		)	(91		)	(52		)	(143		)
Customer receivables, net	943			3,730			4,673			1,055			3,579			4,634			855			4,652			5,507			918			4,478			5,396
Residual interest	—			465			465			—			458			458			—			489			489			—			477			477
Financing receivables, net	$	943		$	4,195		$	5,138		$	1,055		$	4,037		$	5,092		$	855		$	5,141		$	5,996		$	918		$	4,955		$	5,873
Short-term	$	943		$	1,924		$	2,867		$	1,055		$	1,860		$	2,915		$	855		$	2,400		$	3,255		$	918		$	2,304		$	3,222
Long-term	$	—		$	2,271		$	2,271		$	—		$	2,177		$	2,177		$	—		$	2,741		$	2,741		$	—		$	2,651		$	2,651

1822

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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


	Three Months Ended																		Three Months Ended
	July 29, 2016									July 31, 2015									May 5, 2017									April 29, 2016
	Revolving			Fixed-term			Total			Revolving			Fixed-term			Total			Revolving			Fixed-term			Total			Revolving			Fixed-term			Total
	(in millions)																		(in millions)
Allowance for financing receivable losses:																			Allowance for financing receivable losses:
Balance at beginning of period	$	107		$	58		$	165		$	134		$	53		$	187
Balances at beginning of period																			$	91		$	52		$	143		$	118		$	58		$	176
Charge-offs, net of recoveries	(23		)	(2		)	(25		)	(21		)	(7		)	(28		)	(22		)	(3		)	(25		)	(25		)	(3		)	(28		)
Provision charged to income statement	16			—			16			14			4			18			16			2			18			14			3			17
Balance at end of period	$	100		$	56		$	156		$	127		$	50		$	177

	Six Months Ended
	July 29, 2016									July 31, 2015
	Revolving			Fixed-term			Total			Revolving			Fixed-term			Total
	(in millions)
Allowance for financing receivable losses:
Balance at the beginning of period	$	118		$	58		$	176		$	145		$	49		$	194
Charge-offs, net of recoveries	(48		)	(5		)	(53		)	(52		)	(9		)	(61		)
Provision charged to income statement	30			3			33			34			10			44
Balance at end of period	$	100		$	56		$	156		$	127		$	50		$	177
Balances at end of period																			$	85		$	51		$	136		$	107		$	58		$	165

The following table summarizes the aging of the Company's customer financing receivables, gross, including accrued interest, as of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016,~~February 3, 2017, segregated by class:


	July 29, 2016								January 29, 2016								May 5, 2017								February 3, 2017
	Current		Past Due 1 — 90 Days		Past Due > 90 Days		Total		Current		Past Due 1 — 90 Days		Past Due > 90 Days		Total		Current		Past Due 1 — 90 Days		Past Due > 90 Days		Total		Current		Past Due 1 — 90 Days		Past Due > 90 Days		Total
	(in millions)																(in millions)
Revolving — DPA	$	725	$	84	$	27	$	836	$	812	$	99	$	36	$	947	$	669	$	58	$	23	$	750	$	715	$	66	$	27	$	808
Revolving — DBC	186		17		4		207		202		20		4		226		162		23		5		190		175		22		4		201
Fixed-term — Consumer and Small Commercial	318		13		2		333		315		13		1		329
Fixed-term — Medium and Large Commercial	3,303		129		21		3,453		3,131		171		6		3,308
Fixed-term — Consumer and Commercial																	4,116		510		77		4,703		3,994		506		30		4,530
Total customer receivables, gross	$	4,532	$	243	$	54	$	4,829	$	4,460	$	303	$	47	$	4,810	$	4,947	$	591	$	105	$	5,643	$	4,884	$	594	$	61	$	5,539

1923

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Credit Quality

The following table summarizes customer receivables, gross, including accrued interest, by credit quality indicator segregated by class, as of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016.~~February 3, 2017. The categories shown in the table below segregate customer receivables based on the relative degrees of credit risk. The credit quality indicators for DPA revolving accounts are measured primarily as of each quarter-end date, while all other indicators are generally updated on a periodic basis.

For DPA revolving receivables shown in the table below, the Company makes credit decisions based on proprietary scorecards, which include the customer's credit history, payment history, credit usage, and other credit agency-related elements. The higher quality category includes prime accounts 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. customer FICO scores from 660 to 719. The lower category is generally sub-prime and represents lower credit quality accounts that are comparable to ~~U.S~~U.S. customer FICO scores below 660. For the DBC revolving receivables and fixed-term commercial receivables shown in the table below, 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. The grading criteria and classifications for the fixed-term products differ from those for the revolving products as loss experience varies between these product and customer groups. The credit quality categories cannot be compared between the different classes as loss experience varies substantially between the classes.


	July 29, 2016								January 29, 2016								May 5, 2017								February 3, 2017
	Higher		Mid		Lower		Total		Higher		Mid		Lower		Total		Higher		Mid		Lower		Total		Higher		Mid		Lower		Total
	(in millions)																(in millions)
Revolving — DPA	$	139	$	248	$	449	$	836	$	148	$	270	$	529	$	947	$	134	$	216	$	400	$	750	$	136	$	244	$	428	$	808
Revolving — DBC	$	62	$	61	$	84	$	207	$	68	$	65	$	93	$	226	$	56	$	58	$	76	$	190	$	61	$	60	$	80	$	201
Fixed-term — Consumer and Small Commercial	$	95	$	144	$	94	$	333	$	93	$	136	$	100	$	329
Fixed-term — Medium and Large Commercial	$	1,604	$	1,153	$	696	$	3,453	$	1,597	$	1,075	$	636	$	3,308
Fixed-term — Consumer and Commercial (a)																	$	2,333	$	1,474	$	896	$	4,703	$	2,232	$	1,428	$	870	$	4,530

____________________

(a)

During the three months ended May 5, 2017, the Company modified its credit scoring methodology for fixed-term financing receivables in response to changes in its go-to-market strategy. This methodology has been modified to a single, consistent, and comparable model across all fixed-term product customers. In connection with this change, the Company has re-categorized existing fixed-term customers and has recast prior period credit quality categories to align with the current period presentation.

~~Securitizations and~~ Structured Financing Debt

The Company transfers certain U.S. customer financing receivables to Special Purpose Entities ("SPEs") that meet the definition of a Variable Interest Entity ("VIE") and are consolidated, along with the associated debt, into the Company's Consolidated Financial Statements, as the Company is the primary beneficiary of those VIEs. These SPEs are bankruptcy remote legal entities with separate assets and liabilities. The purpose of these SPEs is tomaintains programs which facilitate the funding of ~~customer~~financing receivables in the capital ~~markets.~~

~~The following table shows financing receivables held by the consolidated VIEs as of the respective dates:~~

July 29, 2016 January 29, 2016
(in millions)
Financing receivables held by consolidated VIEs, net:

Short-term, net $ 2,057
$ 2,125
Long-term, net 1,255
1,215
Financing receivables held by consolidated VIEs, net $ 3,312
$ 3,340

Financing receivables transferred via securitization through SPEs were $0.8 billion for both the three months ended July 29, 2016 and July 31, 2015, and $1.4 billion and $1.8 billion for the six months ended July 29, 2016 and July 31, 2015, respectively.

~~Some of the SPEs have entered into financing arrangements with multi-seller conduits that, in turn, issue asset-backed debt securities~~markets in the ~~capital markets. The Company's risk of loss related to securitized receivables is limited to the amount by which~~

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

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

~~(unaudited)~~

~~the Company's right to receive collections for assets securitized exceeds the amount required to pay interest, principal,~~United States, Canada, and ~~fees and expenses related to the asset-backed securities. The Company provides credit enhancement to the securitization in the form of over-collateralization.~~

Europe. The Company's total structured financing debt, which is collateralized by financing receivables, was $3.9 billion and $3.5 billion as of May 5, 2017 and February 3, 2017, respectively, under the following programs.

Securitization Programs —The Company maintains securitization programs in the United States ~~Canada,~~ and ~~Europe, was $3.5 billion and $3.4 billion as of July 29, 2016 and January 29, 2016, respectively, under the following programs:~~

Europe. The ~~structured financing debt program~~securitization programs in the United States ~~which is related to~~include the fixed-term lease and loan securitization program and the revolving loan securitization ~~program,~~program. The outstanding balance of debt under these U.S. programs was ~~$0.9~~$1.1 billion and ~~$1.3~~$1.5 billion as of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016,~~February 3, 2017, respectively. This debt is collateralized solely by the ~~U.S~~U.S. financing receivables in the programs. The debt has a variable interest rate and the duration of this debt is based on the terms of the underlying financing receivables. As of ~~July 29, 2016,~~May 5, 2017, the total debt capacity related to the U.S. securitization programs was $2.1 billion. The Company enters into interest swap agreements to effectively convert the portion of its structured financing debt from a floating rate to a fixed rate. See Note 68 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements for additional information about interest rate swaps.

The Company's U.S. securitization programs became effective on October 29, 2013. The revolving program, which was extended during the ~~first~~third quarter of Fiscal 2017, is effective for four and one-half ~~years.~~years beginning October 29, 2013. The ~~fixed term~~fixed-term program, which was extended during the first quarter of Fiscal 2016, is effective for four and one-half years beginning October 29, 2013.

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The Company established a securitization program in Europe for fixed-term leases and loans. This program became effective on January 13, 2017, and is effective for two years. The outstanding balance of debt under this program was $302 million as of May 5, 2017, and the total debt capacity related to the securitization program was $659 million.

The securitization programs contain standard structural features related to the performance of the securitized receivables which include defined credit losses, delinquencies, average credit scores, and minimum collection requirements. In the event one or more of these criteria are not met and the Company is unable to restructure the program, no further funding of receivables will be permitted and the timing of the Company's expected cash flows from over-collateralization will be delayed. As of ~~July 29, 2016,~~May 5, 2017, these criteria were met.

Fixed-Term Securitization Programs —The Company ~~may~~ periodically ~~issue~~issues asset-backed debt securities under fixed-term securitization programs to private investors. As of ~~July 29, 2016,~~May 5, 2017 and February 3, 2017, the associated debt balance of these securities was ~~$2.0 billion.~~$2.1 billion and $1.4 billion, respectively. The asset-backed debt securities are collateralized solely by the U.S. fixed-term financing receivables in the offerings, which are held by ~~SPEs.~~SPEs, as discussed below. The interest rate on these securities is fixed and ranges from ~~0.26%~~0.42% to 3.61%, and the duration of these securities is based on the terms of the underlying financing receivables.

Other Structured Financing Programs —In connection with the Company's international financing operations, the Company has entered into revolving structured financing debt programs related to its fixed-term lease and loan products sold in Canada and Europe. The aggregate outstanding balances of the Canadian and European revolving structured loans as of May 5, 2017 and February 3, 2017 were $387 million and $382 million, respectively. As of ~~July 29, 2016,~~May 5, 2017, the Canadian program, which was extended during the ~~six months~~fiscal year ended ~~July 29, 2016,~~May 5, 2017, had a total debt capacity of ~~$167~~$160 million. This program is effective for two years, beginning on April 15, 2016, and is collateralized solely by the Canadian financing receivables. The European program, which was extended during the ~~three months ended May 1, 2015,~~first quarter of Fiscal 2016, is now effective for four years, beginning on December 23, 2013. The program is collateralized solely by the European financing receivables and had a total debt capacity of ~~$665~~$330 million as of ~~July 29, 2016.~~May 5, 2017.

Variable Interest Entities

In connection with the securitization programs discussed above, the Company transfers certain U.S. and European customer financing receivables to Special Purpose Entities ("SPEs") that meet the definition of a Variable Interest Entity ("VIE") and are consolidated, along with the associated debt, into the Condensed Consolidated Financial Statements, as the Company is the primary beneficiary of those VIEs. These SPEs are bankruptcy-remote legal entities with separate assets and liabilities. The ~~aggregate outstanding balances~~purpose of these SPEs is to facilitate the funding of customer receivables in the capital markets.

The following table shows financing receivables held by the consolidated VIEs as of the ~~Canadian~~respective dates:



	May 5, 2017		February 3, 2017
	(in millions)
Financing receivables held by consolidated VIEs, net:
Short-term, net	$	2,348	$	2,227
Long-term, net	1,636		1,381
Financing receivables held by consolidated VIEs, net	$	3,984	$	3,608

Financing receivables transferred via securitization through SPEs were $0.9 billion and ~~European revolving~~$0.6 billion for the three months ended May 5, 2017 and April 29, 2016, respectively.

Some of the SPEs have entered into financing arrangements with multi-seller conduits that, in turn, issue asset-backed debt securities in the capital markets. The structured ~~loans~~financing debt outstanding, which is collateralized by the financing receivables held by the consolidated VIEs, was $3.5 billion and $3.1 billion as of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016 were $580 million~~February 3, 2017, respectively. The Company's risk of loss related to securitized receivables is limited to the amount by which the Company's right to receive collections for assets securitized exceeds the amount required to pay interest, principal, and ~~$559 million, respectively.~~fees and expenses related to the asset-backed securities. The Company provides credit enhancement to the securitization in the form of over-collateralization.

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Financing Receivable Sales

To manage certain concentrations of customer credit exposure, the Company may sell selected fixed-term financing receivables to unrelated third parties on a periodic basis. The amount of financing receivables sold was ~~$98~~$55 million and ~~$31~~$80 million ~~during~~for the ~~six~~three months ended ~~July~~May 5, 2017 and April 29, 2016, ~~and July 31, 2015,~~ respectively.

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 57 — DEBT

The following table summarizes the Company's outstanding debt as of the dates indicated:

July 29, 2016 January 29, 2016
(in millions)
Secured Debt

Structured financing debt $ 3,488
$ 3,411
3.75% Floating rate due October 2018 ("Term Loan C Facility") 834
1,003
4.00% Floating rate due April 2020 ("Term Loan B Facility") 4,307
4,329
4.00% Floating rate due April 2020 ("Term Loan Euro Facility") 903
891
5.625% due October 2020 ("Senior First Lien Notes") 1,400
1,400
EMC merger financing issued on June 1, 2016 ("First Lien Notes"):
3.48% due June 2019 3,750
—
4.42% due June 2021 4,500
—
5.45% due June 2023 3,750
—
6.02% due June 2026 4,500
—
8.10% due June 2036 1,500
—
8.35% due June 2046 2,000
—
Unsecured Notes and Debentures
Notes and debentures issued prior to going-private transaction:
3.10% due April 2016 —
400
5.65% due April 2018 500
500
5.875% due June 2019 600
600
4.625% due April 2021 400
400
7.10% due April 2028 300
300
6.50% due April 2038 388
388
5.40% due September 2040 265
265
EMC merger financing issued on June 22, 2016 ("Senior Unsecured Notes"):
5.875% due June 2021 1,625
—
7.125% due June 2024 1,625
—
Other 58
93
Total debt, principal amount 36,693
13,980
Unamortized discount, net of unamortized premium (218 ) (221 )
Debt issuance costs (139 ) (128 )
Total debt, carrying value $ 36,336
$ 13,631
Total short-term debt $ 2,500
$ 2,981
Total long-term debt $ 33,836
$ 10,650

To finance the going-private transaction, the Company issued $13.9 billion in debt, which included borrowings under the Term Loan facilities and the ABL Credit Facility, proceeds from the sale of the Senior First Lien Notes and other notes, as well as borrowings under the structured financing debt programs. During June 2016, the Company issued $23.25 billion of debt securities in connection with the pending EMC merger transaction, which included proceeds from the sale of the First Lien Notes and Senior Unsecured Notes. During the six months ended July 29, 2016, the Company repaid $0.4 billion of maturing Unsecured Notes and Debentures as well as $0.2 billion of Term Loan facilities, net.



	May 5, 2017			February 3, 2017
	(in millions)
Secured Debt
Structured financing debt	$	3,869		$	3,464
Senior Secured Credit Facilities:
3.50% Term Loan B Facility due September 2023	5,473			4,987
3.00% Term Loan A-1 Facility due December 2018	599			600
3.25% Term Loan A-2 Facility due September 2021	3,827			3,876
3.00% Term Loan A-3 Facility due December 2018	1,800			1,800
3.00% Revolving Credit Facility due September 2021	375			375
First Lien Notes:
3.48% due June 2019	3,750			3,750
4.42% due June 2021	4,500			4,500
5.45% due June 2023	3,750			3,750
6.02% due June 2026	4,500			4,500
8.10% due June 2036	1,500			1,500
8.35% due June 2046	2,000			2,000
Unsecured Debt
Unsecured Notes and Debentures:
5.65% due April 2018	500			500
5.875% due June 2019	600			600
4.625% due April 2021	400			400
7.10% due April 2028	300			300
6.50% due April 2038	388			388
5.40% due September 2040	265			265
Senior Notes:
5.875% due June 2021	1,625			1,625
7.125% due June 2024	1,625			1,625
EMC Notes:
1.875% due June 2018	2,500			2,500
2.650% due June 2020	2,000			2,000
3.375% due June 2023	1,000			1,000
Other
3.42% Margin Loan Facility due April 2022	2,000			—
2.53% Margin Bridge Facility due September 2017	—			2,500
2.75% VMware Note Bridge Facility due September 2017	1,500			1,500
Other	82			51
Total debt, principal amount	$	50,728		$	50,356
Unamortized discount, net of unamortized premium	(293		)	(284		)
Debt issuance costs	(645		)	(682		)
Total debt, carrying value	$	49,790		$	49,390
Total short-term debt, carrying value	$	4,842		$	6,329
Total long-term debt, carrying value	$	44,948		$	43,061

2227

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

~~EMC Merger Financing~~— On June 1, 2016, two subsidiaries of the Company completed a private offering of the First Lien Notes with an aggregate principal amount of $20.0 billion, and on June 22, 2016, two subsidiaries of the Company completed a private offering of the Senior Unsecured Notes with an aggregate principal amount of $3.25 billion.

Under the terms of the agreements relating to the issuance of the First Lien Notes and Senior Unsecured Notes, the proceeds of the offerings were deposited into escrow, with such proceeds to be released to finance the consummation of the EMC merger subject to the satisfaction of customary conditions. Upon the completion of the EMC merger, Dell International L.L.C. (a wholly-owned indirect subsidiary of Dell Technologies) and EMC will assume all of the co-issuers' obligations under the First Lien Notes and Senior Unsecured Notes, and the First Lien Notes and Senior Unsecured Notes will be guaranteed on a joint and several basis by Dell Technologies, Denali Intermediate Inc. (a wholly-owned direct subsidiary of Dell Technologies), Dell Inc. and each of Denali Intermediate Inc.'s wholly-owned domestic subsidiaries (including EMC's wholly-owned domestic subsidiaries following the completion of the EMC merger) that guarantees obligations under the new senior secured credit facilities that will be entered into in connection with the EMC merger.

The net proceeds held in escrow from the private offerings of multiple series of the First Lien Notes and Senior Unsecured Notes were included in restricted cash in the Condensed Consolidated Statements of Financial Position as of July 29, 2016, and such proceeds will be held as restricted cash until the completion of the EMC merger. The receipt of the net proceeds is not reflected in the Condensed Consolidated Statements of Cash Flows, given that the proceeds were required to be deposited directly into escrow rather than into the Company's unrestricted cash accounts. During the three months ended ~~July 29, 2016, as required under the escrow agreement,~~May 5, 2017, the Company ~~prepaid~~refinanced the Term Loan B Facility to reduce the interest ~~into escrow~~rate margin by 0.75% and to increase the outstanding principal amount by $500 million. The Company applied the proceeds from the Term Loan B Facility refinancing to repay $500 million principal amount of the Margin Bridge Facility, without premium or penalty, and accrued and unpaid interest thereon. Additionally, during the three months ended May 5, 2017, the Company issued the Margin Loan Facility in the principal amount of ~~$40 million, which is reflected as a cash outflow from investing activities in~~$2.0 billion, and used the ~~Condensed Consolidated Statements~~proceeds of ~~Cash Flows. This amount will be returned~~the new facility to extinguish the ~~Company upon~~Margin Bridge Facility, without premium or penalty.

Senior Secured Credit Facilities—At the closing of the EMC merger transaction on September 7, 2016, the Company entered into a credit agreement that provides for senior secured credit facilities (the "Senior Secured Credit Facilities") in the aggregate principal amount of $17.6 billion comprising (a) term loan facilities and ~~paid~~(b) a senior secured Revolving Credit Facility, which includes capacity for up to $0.5 billion of letters of credit and for borrowings of up to $0.4 billion under swing-line loans. As of May 5, 2017, available borrowings under the Revolving Credit Facility totaled $2.7 billion. The Senior Secured Credit Facilities provide that the borrowers have the right at any time, subject to customary conditions, to request incremental term loans or incremental revolving commitments.

Borrowings under the Senior Secured Credit Facilities bear interest at a rate per annum equal to an applicable margin, plus, at the borrowers' option, either (a) a base rate, which, under the Term Loan B Facility, is subject to an interest rate floor of 1.75% per annum, and under all other borrowings is subject to an interest rate floor of 0% per annum, or (b) a London interbank offered rate ("LIBOR"), which, under the Term Loan B Facility, is subject to an interest rate floor of 0.75% per annum, and under all other borrowings is subject to an interest rate floor of 0% per annum. Interest is payable, in the case of loans bearing interest based on LIBOR, at the end of each interest period (but at least every three months), in arrears and, in the case of loans bearing interest based on the base rate, quarterly in arrears.

The Term Loan A-1 Facility, the Term Loan A-3 Facility, and the Revolving Credit Facility have no amortization. The Term Loan A-2 Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 5% of the original principal amount in each of the first two years after the closing date of the EMC merger transaction, 10% of the original principal amount in each of the third and fourth years after the closing date of the EMC merger transaction, and 70% of the original principal amount in the fifth year after the closing date of the EMC merger transaction. The Term Loan B Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1% of the original principal amount. The Term Loan A-1 and Term Loan A-3 Facilities require the borrowers to prepay outstanding borrowings under these facilities with 100% of the net cash proceeds of certain non-ordinary course asset sales or dispositions. The borrowers may voluntarily repay outstanding loans under the term loan facilities and the Revolving Credit Facility at any time without premium or penalty, other than customary "breakage" costs.

All obligations of the borrowers under the Senior Secured Credit Facilities and certain swap agreements, cash management arrangements, and certain letters of credit provided by any lender or agent party to the ~~holders~~Senior Secured Credit Facilities or any of its affiliates and certain other persons are secured by (a) a first-priority security interest in certain tangible and intangible assets of the borrowers and the guarantors and (b) a first-priority pledge of 100% of the capital stock of the borrowers, Dell Inc., an indirect wholly-owned subsidiary of Dell Technologies ("Dell"), and each wholly-owned material restricted subsidiary of the borrowers and the guarantors, in each case subject to certain thresholds, exceptions, and permitted liens.

During the three months ended May 5, 2017, the Company refinanced the Term Loan B Facility to reduce the interest rate margin by 0.75% and to increase the outstanding principal amount by $500 million.

First Lien Notes — The senior secured notes (collectively, the "First Lien Notes") were issued on June 1, 2016 in an aggregate principal amount of $20.0 billion. Interest on these borrowings is payable semiannually. The First Lien Notes are secured, on a pari passu basis with the Senior Secured Credit Facilities, on a first-priority basis by substantially all of the tangible and intangible assets of the issuers and guarantors that secure obligations under the Senior Secured Credit Facilities, including pledges of all capital stock of the issuers, of Dell, and of certain wholly-owned material subsidiaries of the issuers and the guarantors, subject to certain exceptions.

The Company has agreed to use commercially reasonable efforts to register with the SEC notes having terms substantially identical to the terms of the First Lien Notes ~~and Senior Unsecured Notes~~as part of an offer to exchange such registered notes for the First Lien Notes. The Company will be obligated to pay additional interest on the ~~scheduled interest payment dates.~~First Lien Notes if it fails to consummate such an exchange offer within five years after the closing date of the EMC merger transaction.

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Senior Notes — The ~~Company expects to incur costs~~senior unsecured notes (collectively, the "Senior Notes") were issued on June 22, 2016 in an aggregate principal amount of ~~approximately $0.5~~$3.25 billion. Interest on these borrowings is payable semiannually.

EMC Notes— On September 7, 2016, EMC had outstanding $2.5 billion ~~upon~~aggregate principal amount of its 1.875% Notes due June 2018, $2.0 billion aggregate principal amount of its 2.650% Notes due June 2020 and $1.0 billion aggregate principal amount of its 3.375% Notes due June 2023 (collectively, the "EMC Notes"). Interest on these borrowings is payable semiannually. The EMC Notes remain outstanding following the closing of the EMC merger ~~transaction relating~~transaction.

Margin Loan Facility— During the three months ended May 5, 2017, the Company issued the Margin Loan Facility in an aggregate principal amount of $2.0 billion. VMW Holdco LLC, a wholly owned subsidiary of EMC, is the borrower under the Margin Loan Facility, which is secured by 60 million shares of Class B common stock of VMware, Inc. and 20 million shares of Class A common stock of VMware, Inc. Loans under the Margin Loan Facility bear interest at a rate per annum payable, at the borrower's option, either at (a) a base rate plus 1.25% per annum or (b) a LIBOR-based rate plus 2.25% per annum. Interest under the Margin Loan Facility is payable quarterly.

The Margin Loan Facility will mature in April 2022. The borrower may voluntarily repay outstanding loans under the Margin Loan Facility at any time without premium or penalty, other than customary "breakage" costs, subject to certain minimum threshold amounts for prepayment.

Margin Bridge Facility— On September 7, 2016, Merger Sub and EMC entered into a credit agreement providing for a senior secured margin bridge facility in an aggregate principal amount of $2.5 billion (the "Margin Bridge Facility").

During the three months ended May 5, 2017, the Company separately applied the proceeds from the Term Loan B Facility refinancing and the issuance of the ~~First Lien Notes~~Margin Loan Facility to extinguish the Margin Bridge Facility, without premium or penalty.

VMware Note Bridge Facility— On September 7, 2016, Merger Sub and ~~Senior Unsecured Notes, which will be capitalized as debt issuance costs~~EMC entered into a credit agreement providing for a senior secured note bridge facility in an aggregate principal amount of $1.5 billion (the "VMware Note Bridge Facility"). The VMware Note Bridge Facility is secured solely by certain intercompany notes in an aggregate principal amount of $1.5 billion issued by VMware, Inc. that are payable to EMC, and the proceeds thereof.

Interest under the VMware Note Bridge Facility is payable, at the borrower's option, either at (a) a base rate plus 0.75% per annum or (b) a LIBOR-based rate plus 1.75% per annum. Interest is payable, in the ~~Condensed Consolidated Statements~~case of ~~Financial Position. If~~loans bearing interest based on LIBOR, at the ~~EMC merger agreement~~end of each interest period (but at least every three months), in arrears and, in the case of loans bearing interest based on the base rate, quarterly in arrears.

The VMware Note Bridge Facility has no amortization. The borrower is ~~terminated,~~required to prepay outstanding borrowings under the ~~Company expects to incur a First Lien~~VMware Note ~~redemption fee of $0.2 billion. Upon the closing~~Bridge Facility with 100% of the ~~EMC merger transaction,~~net cash proceeds of any asset sale or other disposition of the ~~Company will be party~~pledged VMware, Inc. promissory notes. The borrower may voluntarily repay outstanding loans under the VMware Note Bridge Facility at any time without premium or penalty, other than customary "breakage" costs, subject to ~~new credit agreements containing covenants that are not expected to materially differ from the covenants contained in the Company's existing credit agreements.~~certain minimum threshold amounts for prepayment.

Structured Financing Debt— As of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016,~~February 3, 2017, the Company had ~~$3.5~~$3.9 billion and ~~$3.4~~$3.5 billion, respectively, in outstanding structured financing debt, which was primarily related to the fixed-term lease and loan securitization programs and the revolving loan securitization programs. See Note 46 and Note 68 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements for further discussion of the structured financing debt and the interest rate swap agreements that hedge a portion of that debt.

~~Term Loan Facilities~~Unsecured Notes and Debentures — The ~~$1.5 billion Term Loan C Facility was issued on October 29, 2013,~~Company has unsecured notes and ~~provides for equal quarterly principal amortization in an annual amount equal to 10% of~~debentures (collectively, the ~~original principal amount in the first year of the agreement~~"Unsecured Notes and increasing annual percentage amounts in subsequent years with the payment of the outstanding balance due at maturity, in October 2018. The annual principal amortization percentage is currently 22.5%. The $4.7 billion Term Loan B Facility and the €0.7 billion Term Loan Euro FacilityDentures") that were issued ~~on October 29, 2013, and provide for quarterly principal amortization in an annual amount equal~~prior to 1%the acquisition of the original principal amount and payment of the outstanding balances due at maturity in April 2020. On June 10, 2015, the Company refinanced and amended the Term Loan facilities to reduce interest rate floors and margins and to modify certain covenant requirements. The refinancing increased the outstanding Term Loan Euro Facility to €0.8 billion, which was offsetDell by a decrease in the Term Loan B Facility to $4.4 billion. Borrowings under the Term Loan facilities bear interest, payable quarterly, at a rate per annum equal to an applicable margin, plus, at the borrowers’ option, either (a) a base rate or (b) a LIBOR rate for the applicable currency, in each case, subject to interest rate floors. Under the Term Loan facilities, if the Company has excess cash flows that are not reinvested in working capital, strategic investments, or finance activities on an annual basis and if the Company’s secured leverage ratio falls within certain thresholds, a percentage of the excess cash flows is required to be applied to prepay secured debt.

~~Senior First Lien Notes~~— ~~The Senior First Lien Notes were issued on October 7, 2013 in an aggregate principal amount of~~

~~$1.5 billion and are payable in full at maturity, in October 2020. As of July 29, 2016, the outstanding balance of these notes was $1.4 billion.~~Dell Technologies Inc. Interest on ~~the Senior First Lien Notes~~these borrowings is payable semiannually.

2329

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

~~ABL Credit Facility~~— On October 29, 2013, the Company entered into a secured ABL Credit Facility to support its working capital needs. The maximum aggregate borrowings under this revolving credit facility are approximately $2.0 billion. Borrowings under the ABL Credit Facility are subject to a borrowing base, which consists of certain receivables and inventory. Available borrowings under the ABL Credit Facility are reduced by draws on the facility as well as letters of credit. As of July 29, 2016, there were no draws on the facility and, after taking into account outstanding letters of credit, available borrowings totaled $1.4 billion. Borrowings under the facility bear interest at a rate per annum equal to an applicable margin, plus, at the borrowers’ option, either (a) a base rate, (b) a LIBOR rate or (c) certain other applicable rates. The applicable margin under the facility is determined based on excess liquidity as a percentage of the maximum borrowing amount under the facility. The ABL Credit Facility will expire in October 2018.

The borrowers under the Term Loan facilities and the ABL Credit Facility and the co-issuers of the Senior First Lien Notes are subsidiaries of Dell Inc. Dell Inc. and substantially all of its domestic subsidiaries guarantee the borrowings under the Term

Loan facilities and the obligations under the Senior First Lien Notes. Dell Inc. and certain of its domestic subsidiaries guarantee the borrowings under the ABL Credit Facility. All borrowings and other obligations under the Term Loan facilities and the ABL Credit Facility generally are secured by first-priority or second-priority security interests in substantially all of the assets of Dell Inc., the borrowers under the facilities and the guarantors of the facilities, as well as by pledges of the equity interests of Dell Inc. and certain of its subsidiaries, and a portion of the equity interests of certain first-tier foreign subsidiaries of Dell Inc. All obligations under the Senior First Lien Notes are secured by a first-priority security interest in certain cash flow collateral and a second-priority security interest in other collateral securing the ABL Credit Facility.

~~Unsecured Notes and Debentures~~ — The Company has Unsecured Notes and Debentures that were issued prior to the going-private transaction. Interest on these borrowings is payable semiannually. See "EMC Merger Financing" above for a discussion of the Senior Unsecured Notes issued in connection with the EMC merger.

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

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

~~(unaudited)~~

Aggregate Future Maturities

— As of ~~July 29, 2016,~~May 5, 2017, aggregate future maturities of the Company's debt were as follows:


	Maturities by Fiscal Year																					Maturities by Fiscal Year
	2017 (remaining six months)			2018			2019			2020			2021			Thereafter			Total			2018 (remaining nine months)			2019			2020			2021			2022			Thereafter			Total
	(in millions)																					(in millions)
Structured Financing Debt	$	1,121		$	1,516		$	691		$	136		$	23		$	1		$	3,488		$	2,039		$	1,291		$	406		$	107		$	26		$	—		$	3,869
Term Loan Facilities, Senior First Lien Notes, and First Lien Notes	205			427			334			3,802			6,426			16,250			27,444
Senior Secured Credit Facilities and First Lien Notes																						188			2,699			4,197			336			7,677			16,977			32,074
Unsecured Notes and Debentures	—			—			500			600			—			4,603			5,703			—			500			600			—			400			953			2,453
Senior Notes and EMC Notes																						—			2,500			—			2,000			1,625			2,625			8,750
Margin Loan Facility																						—			—			—			—			—			2,000			2,000
Bridge Facility																						1,500			—			—			—			—			—			1,500
Other	21			9			2			—			—			26			58			9			18			3			27			—			25			82
Total maturities, principal amount	1,347			1,952			1,527			4,538			6,449			20,880			36,693			3,736			7,008			5,206			2,470			9,728			22,580			50,728
Associated carrying value adjustments	(2		)	(2		)	(16		)	(7		)	(130		)	(200		)	(357		)	(9		)	(42		)	(51		)	(1		)	(230		)	(605		)	(938		)
Total maturities, carrying value amount	$	1,345		$	1,950		$	1,511		$	4,531		$	6,319		$	20,680		$	36,336		$	3,727		$	6,966		$	5,155		$	2,469		$	9,498		$	21,975		$	49,790

Covenants and ~~Restricted~~Unrestricted Net Assets — The credit ~~agreements~~agreement for the ~~Term Loan facilities~~Senior Secured Credit Facilities contain customary negative covenants that generally limit the ability of Denali Intermediate Inc., a wholly-owned subsidiary of Dell Technologies ("Dell Intermediate"), Dell, and ~~the ABL Credit Facility~~Dell's and ~~the~~Denali Intermediate's other restricted subsidiaries to incur debt, create liens, make fundamental changes, enter into asset sales, make certain investments, pay dividends or distribute or redeem certain equity interests, prepay or redeem certain debt, and enter into certain transactions with affiliates. The indenture governing the Senior ~~First Lien~~ Notes ~~contain~~contains customary negative covenants ~~restricting~~that generally limit the ability of ~~the Company~~Denali Intermediate, Dell, and ~~its~~Dell's and Denali Intermediate's other restricted subsidiaries ~~subject to specified exceptions,~~ to incur additional debt ~~create liens on~~or issue certain ~~assets to secure debt,~~preferred shares, pay dividends ~~and~~on or make other distributions in respect of capital stock or make other restricted payments, make certain investments, sell or transfer certain assets, create liens on certain assets to secure debt, consolidate, merge, sell, or otherwise dispose of all or substantially all ~~of their~~ assets, ~~and~~ enter into certain transactions with ~~affiliates.~~affiliates, and designate subsidiaries as unrestricted subsidiaries. The negative covenants under such credit agreements and indenture are subject to certain exceptions, qualifications, and "baskets." The indentures governing the First Lien Notes, the Unsecured Notes and Debentures, and the EMC Notes variously impose limitations, subject to specified exceptions, on creating certain liens, entering into sale and lease-back transactions, and entering into certain asset sales. As of May 5, 2017, the Company ~~designated~~had certain consolidated subsidiaries that were designated as unrestricted subsidiaries for all purposes of the applicable credit agreements and the ~~indenture as of August 1, 2015, the impact of which was not material to its financial position as of July 29, 2016 or results of operations for the three and six months then ended. The~~ indentures governing the ~~Unsecured~~First Lien Notes and ~~Debentures contain covenants limiting~~ the Company'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.Senior Notes. The foregoing credit agreements and ~~all such~~ indentures contain customary events of default, including failure to make required payments, failure to comply with covenants, and the occurrence of certain events of bankruptcy and insolvency.

The ~~ABL~~Term Loan A-1 Facility, the Term Loan A-2 Facility, the Term Loan A-3 Facility, and the Revolving Credit Facility ~~requires compliance~~are subject to a first lien net leverage ratio covenant that is tested at the end of each fiscal quarter of Dell with ~~conditions that must be satisfied prior~~respect to ~~any borrowing and maintenance of a minimum fixed charge coverage ratio.~~Dell's preceding four fiscal quarters. The Company was in compliance with all financial covenants as of ~~July 29, 2016.~~

The issuers and holders of the proceeds of the First Lien Notes and Senior Unsecured Notes issued in connection with the pending EMC merger transaction are unrestricted subsidiaries for purposes of the Company’s indebtedness. At the closing of the EMC merger transaction, Dell International and EMC, which are restricted subsidiaries for purposes of the Company’s indebtedness, will succeed to the obligations of such unrestricted subsidiaries as the issuers of the First Lien Notes and Senior Unsecured Notes.

May 5, 2017.

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 68 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Derivative Instruments

As part of its risk management strategy, the Company uses derivative instruments, primarily foreign currency forward and option contracts ~~purchased options,~~ and interest rate swaps, to hedge certain foreign currency and interest rate ~~exposures.~~ exposures, respectively.

The Company'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 the fair values of assets and liabilities. For derivatives designated as cash flow hedges, the Company 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 in earnings as a component of interest and other, net. Hedge ineffectiveness recognized in earnings was not material during the three ~~and six~~ months ended ~~July~~May 5, 2017 and April 29, ~~2016 and July 31, 2015.~~2016.

Foreign Exchange Risk

The Company uses foreign currency forward ~~contracts~~ and ~~purchased options~~option contracts 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. Hedge accounting is applied based upon the criteria established by accounting guidance for derivative instruments and hedging activities. 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 twelve months or less.

During the three ~~and six~~ months ended ~~July~~May 5, 2017 and April 29, 2016, ~~and July 31, 2015,~~ the Company did not discontinue any cash flow hedges related to foreign exchange contracts that had a material impact on the Company's results of operations due to the probability that the forecasted cash flows would not occur.

The Company uses forward contracts to hedge monetary assets and liabilities denominated in a foreign currency. These contracts generally expire in three months or less, are considered economic hedges, and are not designated for hedge accounting. The change in the fair value of these instruments represents a natural hedge as their gains and losses offset the changes in the underlying fair value of the monetary assets and liabilities due to movements in currency exchange rates.

In connection with the expanded offerings of DFS in Europe, forward contracts are used to hedge financing receivables denominated in foreign currencies. These contracts are not designated for hedge accounting and most expire within three years or less.

Interest Rate Risk

The Company 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. These contracts are not designated for hedge accounting and most expire within three years or less.

Interest rate swaps are utilized to manage the interest rate risk, at a portfolio level, associated with DFS operations in Europe. The interest rate swaps economically convert the fixed rate on financing receivables to a three-month Euribor floating rate basis in order to match the floating rate nature of the banks' funding pool. These contracts are not designated for hedge accounting and most expire within three years or less.

The Company utilizes cross currency amortizing swaps to hedge the currency and interest rate risk exposure associated with the securitization program that was established in Europe in January 2017. The cross currency swaps combine a Euro-based interest rate swap with a British Pound or U.S. Dollar foreign exchange forward contract in which the Company pays a fixed British Pound or U.S. Dollar amount and receives a floating amount in Euro linked to the one-month Euribor. The notional value of the swaps amortizes in line with the expected cash flows and run-off of the securitized assets. The swaps mature within five years or less and are not designated for hedge accounting.

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Notional Amounts of Outstanding Derivative Instruments

The notional amounts of the Company's outstanding derivative instruments were as follows as of the dates indicated:


	July 29, 2016		January 29, 2016		May 5, 2017		February 3, 2017 (a)
	(in millions)				(in millions)
Foreign Exchange Contracts
Foreign exchange contracts:
Designated as cash flow hedging instruments	$	3,782	$	3,947	$	4,113	$	3,781
Non-designated as hedging instruments	509		985		5,767		5,146
Total	$	4,291	$	4,932	$	9,880	$	8,927

Interest Rate Contracts
Interest rate contracts:
Non-designated as hedging instruments	$	757	$	1,017	$	1,033	$	1,251

____________________


(a)	The notional amount calculation methodology has been enhanced to reflect the sum of the absolute value of derivative instruments netted by currency. Prior period amounts have been updated to conform with the current period presentation.

Effect of Derivative Instruments on the Condensed Consolidated Statements of Financial Position and the Condensed Consolidated Statements of Income (Loss)



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)
(in millions)
For the three months ended May 5, 2017
				Total net revenue	$	17
Foreign exchange contracts	$	(16	)	Total cost of net revenue	4
Interest rate contracts	—			Interest and other, net	—			Interest and other, net	$	—
Total	$	(16	)		$	21			$	—

For the three months ended April 29, 2016
				Total net revenue	$	(45	)
Foreign exchange contracts	$	(165	)	Total cost of net revenue	(8		)
Interest rate contracts	—			Interest and other, net	—			Interest and other, net	$	(1	)
Total	$	(165	)		$	(53	)		$	(1	)

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

~~Effect of Derivative Instruments on the Consolidated Statements of Financial Position and the Consolidated Statements of Income (Loss)~~

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)
(in millions)
For the three months ended July 29, 2016

Total net revenue $ (21 )
Foreign exchange contracts $ 58
Total cost of net revenue (6 )
Interest rate contracts —
Interest and other, net —
Interest and other, net $ —
Total $ 58
$ (27 ) $ —

For the three months ended July 31, 2015

Total net revenue $ 82

Foreign exchange contracts $ 66
Total cost of net revenue 7

Interest rate contracts —
Interest and other, net —
Interest and other, net $ (1 )
Total $ 66
$ 89
$ (1 )

For the six months ended July 29, 2016

Total net revenue $ (66 )
Foreign exchange contracts $ (107 ) Total cost of net revenue (14 )
Interest rate contracts —
Interest and other, net —
Interest and other, net $ (1 )
Total $ (107 ) $ (80 ) $ (1 )

For the six months ended July 31, 2015

Total net revenue $ 255

Foreign exchange contracts $ 60
Total cost of net revenue 18

Interest rate contracts —
Interest and other, net —
Interest and other, net $ (1 )
Total $ 60
$ 273
$ (1 )

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

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

~~(unaudited)~~

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

The Company 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 was as follows:


	July 29, 2016														May 5, 2017
	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
Derivatives designated as hedging instruments:															Derivatives designated as hedging instruments:
Foreign exchange contracts in an asset position	$	78		$	—	$	25		$	—		$	103		$	37		$	—	$	21		$	—		$	58
Foreign exchange contracts in a liability position	(8		)	—		(4		)	—			(12		)	(17		)	—		(22		)	—			(39		)
Net asset (liability)	70			—		21			—			91			20			—		(1		)	—			19
Derivatives not Designated as Hedging Instruments
Derivatives not designated as hedging instruments:															Derivatives not designated as hedging instruments:
Foreign exchange contracts in an asset position	133			5		30			—			168			161			1		52			—			214
Foreign exchange contracts in a liability position	(121		)	—		(76		)	(1		)	(198		)	(77		)	—		(154		)	—			(231		)
Interest rate contracts in an asset position	—			—		—			—			—			—			3		—			—			3
Interest rate contracts in a liability position	—			—		—			(2		)	(2		)	—			—		—			(6		)	(6		)
Net asset (liability)	12			5		(46		)	(3		)	(32		)	84			4		(102		)	(6		)	(20		)
Total derivatives at fair value	$	82		$	5	$	(25	)	$	(3	)	$	59		$	104		$	4	$	(103	)	$	(6	)	$	(1	)

	January 29, 2016														February 3, 2017
	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
Derivatives designated as hedging instruments:															Derivatives designated as hedging instruments:
Foreign exchange contracts in an asset position	$	100		$	—	$	—		$	—		$	100		$	41		$	—	$	17		$	—		$	58
Foreign exchange contracts in a liability position	(11		)	—		—			—			(11		)	(19		)	—		(6		)	—			(25		)
Net asset (liability)	89			—		—			—			89			22			—		11			—			33
Derivatives not Designated as Hedging Instruments
Derivatives not designated as hedging instruments:															Derivatives not designated as hedging instruments:
Foreign exchange contracts in an asset position	301			1		—			—			302			309			2		31			—			342
Foreign exchange contracts in a liability position	(198		)	—		(5		)	(3		)	(206		)	(131		)	—		(103		)	—			(234		)
Interest rate contracts in an asset position	—			2		—			—			2			—			3		—			—			3
Interest rate contracts in a liability position	—			—		—			(4		)	(4		)	—			—		—			(3		)	(3		)
Net asset (liability)	103			3		(5		)	(7		)	94			178			5		(72		)	(3		)	108
Total derivatives at fair value	$	192		$	3	$	(5	)	$	(7	)	$	183		$	200		$	5	$	(61	)	$	(3	)	$	141

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table presents the gross amounts of the Company's derivative instruments, amounts offset due to master netting agreements with the Company's ~~various~~ counterparties, and the net amounts recognized in the Condensed Consolidated Statements of Financial Position.


	July 29, 2016																May 5, 2017
	Gross Amounts of Recognized Assets/ (Liabilities)			Gross Amounts Offset in the Statement of Financial Position			Net Amounts of Assets/ (Liabilities) Presented in the Statement of Financial Position			Gross Amounts not Offset in the Statement of Financial Position				Net Amount			Gross Amounts of Recognized Assets/ (Liabilities)			Gross Amounts Offset in the Statement of Financial Position			Net Amounts of Assets/ (Liabilities) Presented in the Statement of Financial Position			Gross Amounts not Offset in the Statement of Financial Position				Net Amount
	Gross Amounts of Recognized Assets/ (Liabilities)			Gross Amounts Offset in the Statement of Financial Position						Financial Instruments		Cash Collateral Received or Pledged		Net Amount			Gross Amounts of Recognized Assets/ (Liabilities)			Gross Amounts Offset in the Statement of Financial Position						Financial Instruments		Cash Collateral Received or Pledged		Net Amount
	(in millions)																(in millions)
Derivative Instruments
Derivative instruments:
Financial assets	$	271		$	(184	)	$	87		$	—	$	—	$	87		$	275		$	(167	)	$	108		$	—	$	—	$	108
Financial liabilities	(212		)	184			(28		)	—		—		(28		)	(276		)	167			(109		)	—		—		(109		)
Total Derivative Instruments	$	59		$	—		$	59		$	—	$	—	$	59
Total derivative instruments																	$	(1	)	$	—		$	(1	)	$	—	$	—	$	(1	)

	January 29, 2016																February 3, 2017
	Gross Amounts of Recognized Assets/ (Liabilities)			Gross Amounts Offset in the Statement of Financial Position			Net Amounts of Assets/ (Liabilities) Presented in the Statement of Financial Position			Gross Amounts not Offset in the Statement of Financial Position				Net Amount			Gross Amounts of Recognized Assets/ (Liabilities)			Gross Amounts Offset in the Statement of Financial Position			Net Amounts of Assets/ (Liabilities) Presented in the Statement of Financial Position			Gross Amounts not Offset in the Statement of Financial Position				Net Amount
	Gross Amounts of Recognized Assets/ (Liabilities)			Gross Amounts Offset in the Statement of Financial Position						Financial Instruments		Cash Collateral Received or Pledged		Net Amount			Gross Amounts of Recognized Assets/ (Liabilities)			Gross Amounts Offset in the Statement of Financial Position						Financial Instruments		Cash Collateral Received or Pledged		Net Amount
	(in millions)																(in millions)
Derivative Instruments
Derivative instruments:
Financial assets	$	404		$	(209	)	$	195		$	—	$	—	$	195		$	403		$	(198	)	$	205		$	—	$	—	$	205
Financial liabilities	(221		)	209			(12		)	—		—		(12		)	(262		)	198			(64		)	—		—		(64		)
Total Derivative Instruments	$	183		$	—		$	183		$	—	$	—	$	183
Total derivative instruments																	$	141		$	—		$	141		$	—	$	—	$	141

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 79 — GOODWILL AND INTANGIBLE ASSETS

In connection with the going-private transaction on October 29, 2013, all of the Company’s tangible and intangible assets and liabilities were accounted for and recognized at fair value on the transaction date. The excess of the purchase price over the fair value of the assets acquired and liabilities assumed was accounted for and recognized as goodwill. Accordingly, on the date of the going-private transaction, there was no excess fair value for any of the Company's goodwill reporting units.

Goodwill

The following table presents goodwill allocated to the Company's business segments as of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016,~~February 3, 2017, and changes in the carrying amount of goodwill for the respective periods:

Client Solutions Enterprise Solutions Group Corporate Total
(in millions)
Balances at January 29, 2016 $ 4,428
$ 3,907
$ 71
$ 8,406
Goodwill recognized during the period —
—
—
—
Adjustments —
—
—
—
Balances at July 29, 2016 $ 4,428
$ 3,907
$ 71
$ 8,406



	Client Solutions Group		Infrastructure Solutions Group			VMware		Other Businesses (a)		Total
	(in millions)
Balances as of February 3, 2017	$	4,237	$	15,607		$	15,070	$	3,996	$	38,910
Goodwill recognized during the period	—		—			—		9		9
Goodwill divested	—		(13		)	—		—		(13		)
Impact of foreign currency translation	—		23			—		1		24
Other adjustments	—		—			—		—		—
Balances as of May 5, 2017	$	4,237	$	15,617		$	15,070	$	4,006	$	38,930

____________________


(a)	Other Businesses consists of offerings by RSA Information Security, SecureWorks, Pivotal, and Boomi, Inc. ("Boomi").

Goodwill and indefinite-lived intangible assets are tested for impairment annually during the third fiscal quarter and whenever events or circumstances may indicate that an impairment has occurred. Based on the results of the annual impairment test, which was a qualitative ~~and quantitative~~ test, no impairment of goodwill or indefinite-lived intangible assets existed for any reporting unit as of October ~~30, 2015. As~~28, 2016. No events or circumstances transpired subsequent to the annual impairment test that would indicate a ~~result~~potential impairment of ~~this analysis, it was determined that the excess of fair value over carrying amount was greater than 15% for all of the Company's existing~~ goodwill ~~reporting units~~ as of October 30, 2015. The announcements of the divestitures of Dell Services and DSG during the six months ended July 29, 2016 created triggering events that required assessments of goodwill. As a result of these assessments, the Company determined no impairment existed as of July 29, 2016.May 5, 2017. Further, the Company did not have any accumulated goodwill impairment charges as of ~~July 29, 2016.~~May 5, 2017.

Management exercised significant judgment related to the above assessment, including the identification of goodwill reporting units, assignment of assets and liabilities to goodwill reporting units, assignment of goodwill to reporting units, and determination of the fair value of each goodwill reporting unit. The fair value of each goodwill reporting unit is generally estimated using a discounted cash flow methodology. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, the estimation of the long-term growth rate of the Company's business, and the determination of the Company's weighted average cost of capital. Changes in these estimates and assumptions could materially affect the fair value of the goodwill reporting unit, potentially resulting in a non-cash impairment charge.

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(unaudited)

Intangible Assets

The Company's intangible assets as of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016,~~February 3, 2017 were as follows:


	July 29, 2016							January 29, 2016							May 5, 2017							February 3, 2017
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
	(in millions)														(in millions)
Customer relationships	$	9,869	$	(4,363	)	$	5,506	$	9,869	$	(3,600	)	$	6,269	$	22,711	$	(6,324	)	$	16,387	$	22,708	$	(5,552	)	$	17,156
Technology	1,536		(1,066		)	470		1,536		(871		)	665
Developed technology															15,381		(3,455		)	11,926		14,569		(2,510		)	12,059
Trade names	318		(134		)	184		318		(110		)	208		1,267		(258		)	1,009		1,268		(201		)	1,067
Finite-lived intangible assets	11,723		(5,563		)	6,160		11,723		(4,581		)	7,142
Indefinite-lived intangible assets	1,435		—			1,435		1,435		—			1,435
Leasehold assets (liabilities)															128		(2		)	126		128		(1		)	127
Definite-lived intangible assets															39,487		(10,039		)	29,448		38,673		(8,264		)	30,409
In-process research and development															80		—			80		890		—			890
Indefinite-lived trade names															3,755		—			3,755		3,754		—			3,754
Total intangible assets	$	13,158	$	(5,563	)	$	7,595	$	13,158	$	(4,581	)	$	8,577	$	43,322	$	(10,039	)	$	33,283	$	43,317	$	(8,264	)	$	35,053

Amortization expense related to ~~finite-lived~~definite-lived intangible assets was approximately ~~$491~~$1,776 million and ~~$492~~$491 million during the three months ended ~~July~~May 5, 2017 and April 29, 2016, ~~and July 31, 2015, respectively, and $982 million and $986 million during the six months ended July 29, 2016 and July 31, 2015,~~ respectively. There were no material impairment charges related to intangible assets during the three ~~and six~~ months ended ~~July~~May 5, 2017 and April 29, ~~2016 and July 31, 2015.~~2016.

Estimated future annual pre-tax amortization expense of ~~finite-lived~~definite-lived intangible assets as of ~~July 29, 2016~~February 3, 2017 over the next five fiscal years and thereafter is as follows:


Fiscal Years	(in millions)		(in millions)
2017 (remaining six months)	$	964
2018	1,712
2018 (remaining nine months)			$	5,178
2019	1,632		6,026
2020	765		4,238
2021	576		3,316
2022			2,609
Thereafter	511		8,081
Total	$	6,160	$	29,448

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(unaudited)

NOTE 810 — WARRANTY ~~AND DEFERRED EXTENDED WARRANTY REVENUE~~LIABILITY

The Company records a liability 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 in the Condensed Consolidated Statements of Financial Position.

Changes in the Company's ~~liabilities~~liability for standard limited warranties are presented in the following table for the periods indicated.


	Three Months Ended						Six Months Ended						Three Months Ended
	July 29, 2016			July 31, 2015			July 29, 2016			July 31, 2015			May 5, 2017			April 29, 2016
	(in millions)												(in millions)
Warranty liability:
Warranty liability at beginning of period	$	561		$	675		$	574		$	679		$	604		$	574
Costs accrued for new warranty contracts and changes in estimates for pre-existing warranties (a) (b)	182			201			382			403			240			200
Service obligations honored	(178		)	(223		)	(391		)	(429		)	(237		)	(213		)
Warranty liability at end of period	$	565		$	653		$	565		$	653		$	607		$	561
Current portion	$	385		$	434		$	385		$	434		$	420		$	383
Non-current portion	$	180		$	219		$	180		$	219		$	187		$	178

____________________


(a)	Changes in cost estimates related to pre-existing warranties are aggregated with accruals for new standard warranty contracts. The Company'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.

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 revenue in the Condensed Consolidated Statements of Financial Position.

~~Changes in the Company's liabilities for deferred revenue related to extended warranties are presented in~~ ~~the following table for the periods indicated.~~

Three Months Ended Six Months Ended
July 29, 2016 July 31, 2015 July 29, 2016 July 31, 2015
(in millions)
Deferred extended warranty revenue:
Deferred extended warranty revenue at beginning of period $ 7,434
$ 6,753
$ 7,229
$ 6,573
Revenue deferred for new extended warranties (a) 1,092
1,118
2,240
2,173
Service revenue recognized (973 ) (888 ) (1,916 ) (1,763 )
Deferred extended warranty revenue at end of period $ 7,553
$ 6,983
$ 7,553
$ 6,983
Current portion $ 3,507
$ 3,115
$ 3,507
$ 3,115
Non-current portion $ 4,046
$ 3,868
$ 4,046
$ 3,868

~~____________________~~


~~(a)~~	~~Includes the impact of foreign currency exchange rate fluctuations.~~

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(unaudited)

NOTE 911— SEVERANCE CHARGES

In connection with the transformation of the Company's business model, the Company incurs costs related to employee severance. The Company records a liability for these costs when it is probable that employees will be entitled to termination benefits and the amounts can be reasonably estimated. The liability related to these actions is included in accrued and other current liabilities in the Condensed Consolidated Statements of Financial Position and was $257 million and $416 million as of May 5, 2017 and February 3, 2017, respectively.

The following table sets forth the activity related to the Company's severance liability for the respective periods:



	Three Months Ended
	May 5, 2017			April 29, 2016
	(in millions)
Balance at beginning of period	$	416		$	26
Severance charges to provision	30			17
Cash paid and other	(189		)	(14		)
Balance at end of period	$	257		$	29

Severance costs are included in cost of net revenue, selling, general, and administrative expenses, and research and development expense in the Condensed Consolidated Statements of Income (Loss) as follows:



	Three Months Ended
	May 5, 2017		April 29, 2016
	(in millions)
Severance charges:
Cost of net revenue	$	5	$	4
Selling, general, and administrative	7		7
Research and development	18		6
Total	$	30	$	17

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 12 — COMMITMENTS AND CONTINGENCIES

Legal Matters —

The Company 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. The Company 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. The Company 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 the Company's views on the probable outcomes of claims, suits, assessments, investigations, or legal proceedings change, changes in the Company's accrued liabilities would be recorded in the period in which such a 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. The following is a discussion of the Company's significant legal matters and other proceedings:

EMC Merger Litigation — The Company, Dell, and Universal Acquisition Co. ~~(“Universal”~~("Universal") ~~have been~~were named as defendants in fifteen putative class-action lawsuits brought by purported EMC shareholders and VMware, Inc. stockholders challenging the proposed merger between the Company, Dell, and Universal on the one hand, and EMC on the ~~other.~~other (the "EMC merger"). Those suits are captioned as follows: (1) IBEW Local No. 129 Benefit Fund v. Tucci, Civ. No. 1584-3130-BLS1 (Mass. Super. Ct., Suffolk Cnty. filed Oct. 15, 2015); (2) Barrett v. Tucci, Civ. No. 15-6023-A (Mass. Super. Ct, Middlesex Cnty. filed Oct. 16, 2015); (3) Graulich v. Tucci, Civ. No. 1584-3169-BLS1 (Mass. Super. Ct, Suffolk Cnty. filed Oct. 19, 2015; (4) Vassallo v. EMC Corp., Civ. No. 1584-3173-BLS1 (Mass. Super. Ct, Suffolk Cnty. filed Oct. 19, 2015); (5) City of Miami Police Relief & Pension Fund v. Tucci, Civ. No. 1584-3174-BLS1 (Mass. Super. Ct. Suffolk Cnty. filed Oct. 19, 2015); (6) Lasker v. EMC Corp., Civ. No. 1584-3214-BLS1 (Mass. Super. Ct. Suffolk Cnty. filed Oct. 23, 2015); (7) Walsh v. EMC Corp., Civ. No. 15-13654 (D. Mass. filed Oct. 27, 2015); (8) Local Union No. 373 U.A. Pension Plan v. EMC Corp., Civ. No. 1584-3253-BLS1 (Mass. Super. Ct. Suffolk Cnty. filed Oct. 28, 2015); (9) City of Lakeland Emps.’ Pension & Ret. Fund v. Tucci, Civ. No. 1584-3269-BLS1 (Mass. Super. Ct. Suffolk Cnty. filed Oct. 28, 2015); (10) Ma v. Tucci, Civ. No. 1584-3281-BLS1 (Mass. Super. Ct. Suffolk Cnty. filed Oct. 29, 2015); (11) Stull v. EMC Corp., Civ. No. 15-13692 (D. Mass. filed Oct. 30, 2015); (12) Jacobs v. EMC Corp., Civ. No. 15-6318-H (Mass. Super. Ct. Middlesex Cnty. filed Nov. 12, 2015); (13) Ford v. VMware, Inc., C.A. No. 11714-VCL (Del. Ch. filed Oct. 17, 2015); (14) Pancake v. EMC Corp., Civ. No. 16-10040 (D. Mass. filed Jan. 11, 2016); and (15) Booth Family Trust v. EMC Corp. Civ. No. 16-10114 (D. Mass. filed Jan. 26, 2016).



Case		Court	Filing Date
1.	IBEW Local No. 129 Benefit Fund v. Tucci, Civ. No. 1584-3130-BLS1	Mass. Superior Court, Suffolk County	10/15/2015
2.	Barrett v. Tucci, Civ. No. 15-6023-A	Mass. Superior Court, Middlesex County	10/16/2015
3.	Graulich v. Tucci, Civ. No. 1584-3169-BLS1	Mass. Superior Court, Suffolk County	10/19/2015
4.	Vassallo v. EMC Corp., Civ. No. 1584-3173-BLS1	Mass. Superior Court, Suffolk County	10/19/2015
5.	City of Miami Police Relief & Pension Fund v. Tucci, Civ. No. 1584-3174-BLS1	Mass. Superior Court, Suffolk County	10/19/2015
6.	Lasker v. EMC Corp., Civ. No. 1584-3214-BLS1	Mass. Superior Court, Suffolk County	10/23/2015
7.	Walsh v. EMC Corp., Civ. No. 15-13654	U.S. District Court, District of Massachusetts	10/27/2015
8.	Local Union No. 373 U.A. Pension Plan v. EMC Corp., Civ. No. 1584-3253-BLS1	Mass. Superior Court, Suffolk County	10/28/2015
9.	City of Lakeland Emps.' Pension & Ret. Fund v. Tucci, Civ. No. 1584-3269-BLS1	Mass. Superior Court, Suffolk County	10/28/2015
10.	Ma v. Tucci, Civ. No. 1584-3281-BLS1	Mass. Superior Court, Suffolk County	10/29/2015
11.	Stull v. EMC Corp., Civ. No. 15-13692	U.S. District Court, District of Massachusetts	10/30/2015
12.	Jacobs v. EMC Corp., Civ. No. 15-6318-H	Mass. Superior Court, Middlesex County	11/12/2015
13.	Ford v. VMware, Inc., C.A. No. 11714-VCL	Delaware Chancery Court	11/17/2015
14.	Pancake v. EMC Corp., Civ. No. 16-10040	U.S. District Court, District of Massachusetts	1/11/2016
15.	Booth Family Trust v. EMC Corp., Civ. No. 16-10114	U.S. District Court, District of Massachusetts	1/26/2016

The fifteen lawsuits ~~seek,~~sought, among other things, injunctive relief enjoining the EMC merger, rescission of the EMC merger if consummated, an award of fees and costs, and/or an award of damages.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The complaints in the IBEW, Barrett, Graulich, Vassallo, City of Miami, Lasker, Local Union No. 373, City of Lakeland, and Ma actions generally allege that the EMC directors breached their fiduciary duties to EMC shareholders in connection with the EMC merger by, among other things, failing to maximize shareholder value and agreeing to provisions in the EMC merger agreement that ~~discourage~~discouraged competing bids. The complaints generally further allege that there were various conflicts of interest in the proposed transaction. The IBEW, Graulich, City of Miami, and Ma plaintiffs brought suit against the Company, Dell, and Universal for injunctive relief. The Barrett, Vassallo, Lasker, Lakeland, and Local Union No. 373 plaintiffs brought suit against the Company, Dell, and Universal as alleged aiders and abettors. After consolidating the nine complaints, by decision dated December 7, 2015, the ~~Suffolk County, Massachusetts Superior Court,~~ Business Litigation Session of the Suffolk County Superior Court in Massachusetts dismissed all nine complaints for failure to make a demand on the EMC board of directors. ~~On January 21, 2016,~~Three of the nine plaintiffs in the consolidated actions ~~appealed. That appeal is pending before~~appealed the judgment dismissing their complaints. The Massachusetts Supreme ~~Court.~~Judicial Court granted an application for direct appellate review, and heard oral argument on the appeal on November 7, 2016. On March 6, 2017, the Supreme Judicial Court issued a decision affirming the dismissal. This decision terminated the consolidated actions.

The complaints in the Walsh, Stull, Pancake, and Booth actions allege that the EMC directors breached their fiduciary duties to EMC shareholders in connection with the EMC merger by, among other things, failing to maximize shareholder value and agreeing to provisions in the EMC merger agreement that ~~discourage~~discouraged competing bids. The complaints generally further allege that ~~there were various conflicts of interest in the proposed transaction and that~~ the preliminary ~~SEC~~registration statement on Form S-4 filed by the Company on December 14, 2015 in connection with the transaction contained material misstatements and omissions, in violation of Section 14(a) of the Securities Exchange Act of 1934 (the "Exchange ~~Act”~~Act") and SEC Rule 14a-9 promulgated thereunder ~~(“Rule 14a-9”). Under the amended complaints, the plaintiffs in the Walsh, Stull, and Pancake actions have brought suit against~~and/or that the Company, Dell, and Universal acted as controlling persons of EMC under Section 20(a) of the Exchange ~~Act as alleged controlling persons of EMC. The plaintiffs in the Booth action have~~

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~~DELL TECHNOLOGIES INC.~~

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

~~(unaudited)~~

brought suit against the Company, Dell, and Universal under Section 14(a) of the Exchange Act and Rule 14a-9. On April 26, 2016, the Court consolidated the actions and entered an order appointing Plaintiff Stull as lead plaintiff and his choice of counsel as lead and liaison counsel.Act. On June 6, 2016, the Securities and Exchange Commission declared effective the ~~Company’s~~Company's registration statement on Form S-4 relating to the EMC merger (the ~~“SEC~~"SEC Form ~~S-4”~~S-4"), including the amendments thereto. On June 17, 2016, the parties to the Walsh, Stull, Pancake, and Booth actions submitted to the Court a Stipulation and Proposed Order Dismissing Action and Retaining Jurisdiction to Determine ~~Plaintiffs’ Counsel’s~~Plaintiffs' Counsel's Application for an Award of ~~Attorneys’~~Attorneys' Fees and Reimbursement of Expenses. In the stipulation, the plaintiffs represented to the Court that they believe sufficient information had been disclosed to warrant dismissal of the actions as moot in light of the disclosures in the SEC Form S-4, including the amendments thereto. ~~The~~On October 25, 2016, following an agreement between the parties with respect to attorneys' fees and expenses, the Court ~~has not yet~~ entered an order terminating the ~~proposed order.~~four actions for all purposes.

The amended complaints in the Jacobs and Ford actions allege that EMC, as the majority stockholder of VMware, Inc., and the individual defendants, who ~~are~~were directors of EMC, VMware, Inc., or both, breached their fiduciary duties to minority stockholders of VMware, Inc. ~~("VMware"),~~ in connection with the proposed EMC merger by allegedly entering into or approving a merger that favors the interests of EMC and Dell at the expense of the minority stockholders. ~~Under the amended complaint, the~~The plaintiffs in the Jacobs action ~~have~~also brought suit against the Company, Dell, and Universal as alleged aiders and abettors. ~~No oral argument date has been set for~~Effective December 2, 2016, the ~~motions~~parties entered into an agreement to ~~dismiss/motions to stay~~resolve the Jacobs ~~action.~~action, pursuant to which the plaintiff voluntarily dismissed the action with prejudice. Under the operative amended complaint ~~the plaintiffs~~ in the Ford action, ~~have~~the plaintiffs also brought suit against the Company and ~~individual defendants~~Dell for alleged breach of fiduciary duties to VMware, Inc. and its stockholders, ~~or, alternatively,~~and against the Company, Dell, and Universal for aiding and abetting the alleged breach of fiduciary duties by ~~EMC~~EMC's and ~~VMware’s~~VMware, Inc.'s directors. ~~On November 17, 2015, the plaintiffs in the Ford action moved for a preliminary injunction and for expedited discovery.~~ Certain defendants filed motions to dismiss the amended complaint ~~in the Ford action~~on June 21, 2016. A hearing on those motions was held on February ~~26, 2016 and February 29, 2016.~~3, 2017. On ~~March 7, 2016,~~May 2, 2017, the ~~defendants moved~~Court dismissed the amended complaint for failure to stay or dismiss the Jacobs action in favor of the Ford action. On April 19, 2016, EMC, the Company, Dell, Universal, and certain of the individual defendants filed briefs in support of the previously filed motions to dismiss. The parties are still in the process of briefing the motion to dismiss.

No trial dates have been set in any of these actions. The outcome of these lawsuits is uncertain, and additional lawsuits may be brought or additional claims advanced concerning the EMC merger. An adverse judgment for monetary damages could have an adverse effect on the Company’s operations. A preliminary injunction could delay or jeopardize the completion of the EMC merger, and an adverse judgment granting permanent injunctivestate a claim upon which relief could ~~indefinitely enjoin the completion of the~~be granted and no appeal was taken. All fifteen EMC ~~merger.~~merger-related lawsuits are now fully and finally resolved.

Appraisal Proceedings — Holders of shares of Dell common stock who did not vote on September 12, 2013 in favor of the proposal to adopt the amended going-private transaction agreement and who properly demanded appraisal of their shares and who otherwise comply with the requirements of Section 262 of the Delaware General Corporate Law ("DGCL") are entitled to seek appraisal for, and obtain payment in cash for the judicially determined "fair value" (as defined pursuant to Section 262 of the DGCL) of, their shares in lieu of receiving the going-private transaction consideration. ~~This appraised value could be more than, the same as, or less than the $13.75 per share going-private transaction consideration.~~ Dell initially recorded a liability of $13.75 for each share with respect to which appraisal has been demanded and as to which the demand has not been withdrawn, together with interest at the statutory rate discussed below. As of ~~July 29, 2016,~~May 5, 2017 and February 3, 2017, this liability was approximately $129 million, compared to approximately $593 million as of January 29, 2016, as the Company settled a substantial portion of the liability during the three months ended July 29, 2016. Also during the three months ended July 29, 2016, as discussed further below, themillion. The Court of Chancery ruled ~~that~~ that the fair value of the appraisal shares as of October 29, 2013, the date on which the going-private transaction became effective, was $17.62 per share. The Company expects to appeal this ruling. The Company believes it was adequately reserved for the appraisal proceedings as of July 29, 2016.

Between October 29, 2013 and February 25, 2014, former Dell stockholders filed petitions in thirteen separate matters commencing appraisal proceedings in the Delaware Court of Chancery in which they seek a determination of the fair value of a total of approximately 38 million shares of Dell common stock plus interest, costs, and attorneys' fees. These matters have been consolidated as In Re Appraisal of Dell (C.A. No. 9322-VCL). The trial took place during the week of October 5, 2015.

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~~DELL TECHNOLOGIES INC.~~

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

~~(unaudited)~~

The appraisal proceedings were conducted in accordance with the rules of the Delaware Court of Chancery. In these proceedings, the Court of Chancery determined the fair value of the shares as to which appraisal has been properly demanded, exclusive of any element of value arising from the accomplishment or expectation of the going-private transaction. Interest on such fair value from the effective time of the going-private transaction through the date of payment of the judgment will be compounded quarterly and will accrue at a per annum rate of 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time. Any payment in respect of the shares subject to appraisal rights will be required to be paid in cash.

The petitioners sought $28.61 per share, plus interest. Dell, by contrast, believes that the fair value of Dell on the day the going-private transaction was completed was $12.68 per share. The number of shares subject to appraisal demands, including shares held by those parties who have sought appraisal but not filed petitions, originally was 38,766,982. By orders dated June 27 and September 10, 2014, and May 13, May 14, July 13 and July 28, 2015, the Court of Chancery dismissed claims of holders of approximately 2,530,322 shares for failure to comply with the statutory requirements for seeking appraisal. On July 30, 2015, Dell moved for summary judgment seeking to dismiss claims of holders of an additional 30,730,930 shares (as well as a number of shares previously disqualified on other grounds) because those shares were voted in favor of the going-private transaction, and thus failed to comply with the statutory requirements for seeking appraisal. On May 11, 2016, the Court of Chancery granted Dell's motion and dismissed the appraisal claims of the holders of the 30,730,930 shares, determining that they were entitled to the merger consideration without interest. On May 18, 2016, the petitioners filed a motion for an equitable award of interest, which was denied by the Court on May 31, 2016.

~~The Court of Chancery ruled on May 31, 2016, that the fair value of~~ shares as of October 29, 2013, the date on which the going-private transaction became effective, was $17.62 per share. This ruling would entitle the holders of the remaining 5,505,730 shares subject to the appraisal proceedings to $17.62 per share, plus interest at a statutory rate, compounded quarterly. On June 6, 2016, the petitioners filed a motion to amend the Court’s memorandum opinion, which was denied by the Court on June 16, 2016. The Court of Chancery’s decisions are subject to review on appeal when final judgment is entered.

On June 29, 2016, the Company, Dell and certain funds affiliated with T. Rowe entered into a settlement agreement to resolve a dispute regarding the fair value and interest due on approximately 31,653,905 shares held by the funds, representing the 30,730,930 shares subject to claims that were dismissed on May 11, 2016 plus an additional 922,975 shares that had been previously disqualified on other grounds. The terms of the T. Rowe settlement, among other matters, provide that, in exchange for a release and dismissal of all asserted claims, the Company pay $13.75 per share for a total sum of approximately $463 million, including interest. On June 29,November 21, 2016, the Court of Chancery entered ~~an order approving~~final judgment in the ~~settlement, which was subsequently consummated. The remaining 5,505,730 shares not subject~~appraisal action. On November 22, 2016,

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Dell filed a notice of appeal to the ~~settlement agreement remain subject to~~Delaware Supreme Court. That appeal is pending. The Company believes it was adequately reserved for the appraisal ~~proceedings.~~proceedings as of May 5, 2017.

Securities Litigation — On May 22, 2014, a securities class action seeking compensatory damages was filed in the United States District Court for the Southern District of New York, captioned the City of Pontiac Employee Retirement System vs. Dell Inc. et. al. (Case No. 1:14-cv-03644). The action names as defendants Dell Inc. and certain current and former executive officers, and alleges that Dell made false and misleading statements about ~~Dell’s~~Dell's business operations and products between February 22, 2012 and May 22, 2012, which resulted in artificially inflated stock prices. The case was transferred to the United States District Court for the Western District of Texas, where the defendants filed a motion to dismiss. ~~The~~On September 16, 2016, the Court denied the motion to dismiss and the case is ~~fully briefed and a ruling is expected in 2016.~~proceeding with discovery. The defendants believe the claims asserted are without merit and the risk of material loss is remote.

Copyright Levies — The Company's obligation to collect and remit copyright levies in certain European Union ("EU") countries 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 described below, generally seek to impose or modify the levies with respect to sales of such equipment as multifunction devices, phones, personal computers, and printers, alleging that such products enable the copying of copyrighted materials. Some of the proceedings also challenge whether the levy schemes in those countries comply with EU law. Certain EU member countries that do not yet impose levies on digital devices are expected to implement 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

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~~DELL TECHNOLOGIES INC.~~

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

~~(unaudited)~~

digital environment and have advocated alternative models of compensation to rights holders. The Company continues to collect levies in certain EU countries where it has determined that based on local laws it is probable that it has a payment obligation. The amount of levies is generally based on the number of products sold and the per-product amounts of the levies, which vary. The Company accrues a liability when it believes that it is both probable that a loss has been incurred and when it can reasonably estimate the amount of the loss.

On December 29, 2005, Zentralstelle für private Überspielungsrechte ("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 personal 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 under the settlement. On March 25, 2014, ZPÜ and Dell reached a settlement for levies to be paid on each personal computer sold for the period of January 2, 2011 through December 31, 2016. The amount of the settlement is not material to the Company. The amount of any levies payable after calendar year 2016, as well as the Company's ability to recover such amounts through increased prices, 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. In August 2014, the German Supreme Court delivered an opinion ruling that printers and personal computers are subject to levies, and referred the case back to the Court of Appeals. Dell joined the industry settlement in the Fujitsu Siemens case, and Dell believes it has no remaining material obligations in either case.

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Proceedings seeking to impose or modify copyright levies for sales of digital devices also have been instituted in courts in other EU member states. Even in countries where Dell is not a party to such proceedings, decisions in those cases could impact Dell's business and the amount of copyright levies Dell may be required to collect.

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

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 evaluation. While the number of patent cases ~~has grown~~varies over time, Dell does not currently anticipate that any of these matters will have a material adverse effect on its business, financial condition, results of operations, or cash flows.

As of ~~July 29, 2016,~~May 5, 2017, the Company does not believe there is a reasonable possibility that a material loss exceeding the amounts already accrued for these or other proceedings or matters has been incurred. However, since the ultimate resolution of any such proceedings and matters is inherently unpredictable, the Company's business, financial condition, results of operations, or cash flows could be materially affected in any particular period by unfavorable outcomes in one or more of these proceedings or matters. Whether the outcome of any claim, suit, assessment, investigation, or legal proceeding, individually or collectively, could have a material adverse effect on the Company's business, financial condition, results of operations, or cash flows will

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~~DELL TECHNOLOGIES INC.~~

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

~~(unaudited)~~

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.

Indemnifications —

In the ordinary course of business, the Company enters into contractual arrangements under which it may agree to indemnify the third party to such arrangements from any losses incurred relating to the services it performs on behalf of the Company or for losses arising from certain events as defined in the particular contract, such as litigation or claims relating to past performance. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments related to these indemnifications have not been material to the Company.

In connection with the divestitures discussed in Note 3 of the Notes to the Condensed Consolidated Financial Statements, the Company has indemnified the purchasers of businesses for the occurrence of specified events. The Company does not currently believe that contingent obligations to provide indemnification in connection with these divestitures will have a material adverse effect on the Company.

Purchase Obligations

The Company has contractual obligations to purchase goods or services, which specify significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. As of May 5, 2017, the Company had $2,674 million, $260 million, and $432 million in purchase obligations for Fiscal 2018, Fiscal 2019, and Fiscal 2020 and thereafter, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 1013 — INCOME AND OTHER TAXES

For the three ~~and six~~ months ended ~~July~~May 5, 2017 and April 29, 2016, the Company's effective income tax ~~rate~~rates for continuing operations ~~was 7.7%~~were 33.3% and ~~-6.5%~~(18.4)% on pre-tax losses from continuing operations of ~~$286~~$2,073 million and $648 million, respectively. In comparison, for the three and six months ended July 31, 2015, the Company's effective income tax rates were 10.2% and 9.0% on pre-tax losses from continuing operations of $325 million and $811$358 million, respectively. The change in the Company's ~~provision for~~effective income ~~taxes~~tax rate was primarily attributable to prior year tax charges ~~on previously untaxed earnings~~recognized during the three months ended April 29, 2016 relating to the divestiture of ~~foreign subsidiaries that will no longer be permanently reinvested as a result of the~~ Dell Services, ~~and DSG divestitures. These tax charges were $66 million and $201 million for the three and six months ended July 29, 2016, respectively. Off-setting these tax charges were increased~~as well as tax benefits from ~~interest expense in the United States for debt related to~~charges associated with the EMC ~~merger. See~~merger transaction incurred during the three months ended May 5, 2017, including purchase accounting adjustments, interest charges, and stock-based compensation expense. For more information regarding the EMC merger transaction, see Note 2 ~~and Note 5~~ of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial ~~Statements for more information on the divestitures and the EMC merger financing.~~Statements. The income tax rate for future quarters of Fiscal ~~2017~~2018 will be impacted by the actual mix of jurisdictions in which income is generated.

The differences between the estimated effective income tax rates and the U.S. federal statutory rate of 35% principally result from the Company's geographical distribution of income ~~change in valuation allowance for deductible temporary differences or carryforwards,~~ and differences between the book and tax treatment of certain items. A portion of the Company's operations is subject to a reduced tax rate or is free of tax under various tax holidays. A significant portion of these income tax benefits ~~is related~~relate to a tax holiday that will expire on December 31, 2016. The Company has negotiated new terms for the affected subsidiary, which provides for a reduced income tax rate and will be effective for a two-year bridge period expiringexpires in January 2019. The Company's other tax holidays will expire in whole or in part during ~~Fiscal~~fiscal years 2019 through ~~Fiscal~~ 2023. 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.

During Fiscal 2014, the Internal Revenue Service ("IRS") issued a revised Revenue Agent's Report ("RAR") for fiscal years 2004 through 2006, proposing certain assessments primarily related to transfer pricing matters. The ~~Company disagrees with certain of the proposed assessments and has contested them through the IRS administrative appeals procedures. The Company’s~~Company's U.S. federal income tax returns for fiscal years 2007 through 2009 are currently under ~~examination~~consideration by the ~~IRS and~~Office of Appeals of the Internal Revenue Service (the "IRS"). The IRS issued a ~~RAR~~Revenue Agent's Report ("RAR") related to those years during the ~~six months~~fiscal year ended ~~July 29, 2016. Similar to the action taken in connection with the audit of the Company’s U.S. federal income tax returns for fiscal years 2004 through 2006, the~~February 3, 2017. The IRS has proposed adjustments primarily relating to ~~certain tax positions taken on the tax returns~~transfer pricing matters with which the Company disagrees and will contest through the IRS administrative appeals procedures. Prior to the EMC merger transaction, EMC received a RAR for its tax years 2009 and 2010, and during the three months ended May 5, 2017, EMC received an RAR for its tax year 2011. The Company ~~believes it has valid positions supporting its tax returns~~also disagrees with certain proposed adjustments in these RARs and ~~that it~~ is ~~adequately reserved.~~currently contesting the proposed adjustments through the IRS administrative appeals process.

The Company is also currently under income tax audits in various state and foreign jurisdictions. The Company is undergoing negotiations, and in some cases contested proceedings, relating to tax matters with the taxing authorities in these jurisdictions. The Company believes that it has provided adequate reserves related to all matters contained in tax periods open to examination. Although the Company believes it has made adequate provisions for the uncertainties surrounding these audits, should the Company experience unfavorable outcomes, such outcomes could have a material impact on its results of operations, financial position, and cash flows. Although timing of resolution or closure of audits is not certain, the Company believes it is reasonably possible that tax audit resolutions could reduce its unrecognized tax benefits by an amount between $300 million to $750 million in the next twelve months. Such a reduction could have a material effect on the Company’s effective tax rate. Net unrecognized tax benefits, if recognized, would favorably affect the Company's effective tax rate. With respect to major U.S. state and foreign taxing jurisdictions, the Company is generally not subject to tax examinations for years prior to fiscal year ~~2000.~~2007.

Judgment is required in evaluating the Company's uncertain tax positions and determining the Company's provision for income taxes. The Company's net unrecognized tax benefits were $3.1 billion as of both May 5, 2017 and February 3, 2017 and are included in ~~accrued and other, and~~ other non-current liabilities in the Condensed Consolidated Statements of Financial ~~Position was $3.2 billion and~~ ~~$3.1 billion as~~Position. The Company does not anticipate a significant change to the total amount of ~~July 29, 2016 and January 29, 2016, respectively.~~unrecognized tax benefits within the next twelve months.

The Company takes certain non-income tax positions in the jurisdictions in which it operates and has received certain non-income tax assessments from various jurisdictions. The Company believes that a material loss in these matters is not probable and that it is not reasonably possible that a material loss exceeding amounts already accrued has been incurred. The Company believes its positions in these non-income tax litigation matters are supportable and that it ultimately will ~~prevail.~~prevail in the matters. In the normal

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~~DELL TECHNOLOGIES INC.~~

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

~~(unaudited)~~

course of business, the Company'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 the Company's views on its positions, probable outcomes of assessments, or litigation change, changes in estimates to the Company's accrued liabilities would be recorded in the period in which such a determination is made. In the resolution process for income tax and non-income tax audits, the Company may be required to provide collateral guarantees or indemnification to regulators and tax authorities until the matter is resolved.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 1114 — ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss is presented in stockholders' equity in the Condensed Consolidated Statements of Financial Position and ~~is comprised~~consists of amounts related to foreign currency translation adjustments, ~~and amounts related to the Company's~~unrealized net gains (losses) on investments, unrealized net gains (losses) on cash flow ~~hedges.~~hedges, and actuarial net gains (losses) from pension and other postretirement plans.

The following table presents changes in accumulated other comprehensive loss, net of tax, by the following components for the periods indicated:


	Foreign Currency Translation Adjustments			Cash Flow Hedges			Accumulated Other Comprehensive Loss			Foreign Currency Translation Adjustments			Investments			Cash Flow Hedges			Pension and Other Postretirement Plans		Accumulated Other Comprehensive Loss
	(in millions)									(in millions)
Balances at January 29, 2016	$	(358	)	$	34		$	(324	)
Balances as of February 3, 2017										$	(612	)	$	(13	)	$	11		$	19	$	(595	)
Other comprehensive income (loss) before reclassifications	42			(107		)	(65		)	53			28			(16		)	—		65
Amounts reclassified from accumulated other comprehensive loss	—			81			81			—			1			(21		)	—		(20		)
Total change for the period	42			(26		)	16			53			29			(37		)	—		45
Less: Change in comprehensive income attributable to non-controlling interest	—			—			—
Balances at July 29, 2016	$	(316	)	$	8		$	(308	)
Less: Change in comprehensive income attributable to non-controlling interests										—			2			1			—		3
Balances as of May 5, 2017										$	(559	)	$	14		$	(27	)	$	19	$	(553	)

Amounts related to investments are reclassified to net income when gains and losses are realized. See Note 4 and Note 5 of the Notes to the Condensed Consolidated Financial Statements for more information on the Company's investments. Amounts related to the Company's cash flow hedges are reclassified to net income during the same period in which the items being hedged are recognized in earnings. In addition, any hedge ineffectiveness related to cash flow hedges is recognized currently in net income. See Note 68 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements for more information on the Company's derivative instruments.

The following table presents reclassifications out of accumulated other comprehensive loss, net of tax, ~~which consists entirely of gains and losses related to cash flow hedges,~~ to net income (loss) for the periods presented:


													Three Months Ended
	Three Months Ended						Six Months Ended						May 5, 2017								April 29, 2016
	July 29, 2016			July 31, 2015			July 29, 2016			July 31, 2015			Investments			Cash Flow Hedges		Total			Investments		Cash Flow Hedges			Total
	(in millions)												(in millions)
Total reclassifications, net of tax:
Net revenue	$	(21	)	$	82		$	(66	)	$	255		$	—		$	17	$	17		$	—	$	(45	)	$	(45	)
Cost of net revenue	(6		)	7			(14		)	18			—			4		4			—		(8		)	(8		)
Interest and other, net	—			(1		)	(1		)	(1		)	(1		)	—		(1		)	—		(1		)	(1		)
Total reclassifications, net of tax (benefit) expense of $(6) and $(5), respectively and $5 and $8, respectively	$	(27	)	$	88		$	(81	)	$	272
Total reclassifications, net of tax													$	(1	)	$	21	$	20		$	—	$	(54	)	$	(54	)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 1215 — NON-CONTROLLING ~~INTEREST~~INTERESTS

VMware, Inc. — The non-controlling interests' share of equity in VMware, Inc. is reflected as a component of the non-controlling interests in the accompanying Condensed Consolidated Statements of Financial Position and was $5.3 billion and $5.2 billion as of May 5, 2017 and February 3, 2017, respectively. As of May 5, 2017 and February 3, 2017, the Company held approximately 81.8% and 82.5%, respectively, of the outstanding equity interest in VMware, Inc.

SecureWorks — On April 27, 2016, SecureWorks completed a registered underwritten IPO of its Class A common stock. Prior to the IPO, Dell Technologies owned indirectly, through Dell and Dell's subsidiaries, 100% of the outstanding equity interest in SecureWorks. Following the completion of the IPO, the non-controlling interest owned all of the SecureWorks Class A common stock outstanding, and Dell Technologies owned all of the SecureWorks Class B common stock outstanding. As of July 29, 2016, Dell Technologies held approximately 86.8% of the outstanding equity interest in SecureWorks, which represented approximately 98.5% of the combined voting power of both classes of the SecureWorks common stock outstanding. The non-controlling ~~interest's~~interests' share of equity in SecureWorks is reflected as a component of the non-controlling ~~interest~~interests in the accompanying Condensed Consolidated Statements of Financial Position and was ~~$126~~$88 million and $0$86 million as of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016,~~February 3, 2017, respectively. ~~Consolidated comprehensive income (loss)~~As of May 5, 2017 and February 3, 2017, Dell Technologies held approximately 87.1% and 87.5%, respectively, of the outstanding equity interest in SecureWorks.

Pivotal — A portion of the non-controlling interests in Pivotal is held by third parties in the form of preferred equity instruments. Due to the terms of such instruments, Pivotal's results of operations and equity activity are not attributable to such interests in Pivotal in the Condensed Consolidated Statements of Income (Loss) and Condensed Consolidated Statements of Financial Position. The preferred equity instruments are convertible into common shares at the non-controlling owner's election at any time. The remaining portion of the non-controlling interests in Pivotal is held by third parties in the form of common stock. Pivotal's results of operations and equity activity are attributable to such interests in Pivotal in the Condensed Consolidated Statements of Income (Loss) and Condensed Consolidated Statements of Financial Position. The non-controlling interests' share of equity in Pivotal, including both preferred equity instruments and common stock, is reflected as a component of the non-controlling interests in the accompanying Condensed Consolidated Statements of Financial Position and was $473 million and $472 million as of May 5, 2017 and February 3, 2017, respectively. As of May 5, 2017 and February 3, 2017, the Company held approximately 77.6% and 77.8%, respectively, of the outstanding equity interest ~~was immaterial during the three and six months ended July 29, 2016.~~in Pivotal.

The ~~following table summarizes the~~effect of changes in the Company's ownership interest in VMware, Inc., SecureWorks, and Pivotal on the Company's equity ~~attributable to controlling and non-controlling interest:~~was as follows:

Dell Technologies Stockholders' Equity Non-Controlling Interest Total Stockholders' Equity
(in millions)
Balances at January 29, 2016 $ 1,466
$ —
$ 1,466
Net income (loss) 628
(1 ) 627
Issuance of common stock of subsidiary upon public offering, net of offering costs —
124
124
Foreign currency translation adjustments 42
—
42
Cash flow hedges, net change (26 ) —
(26 )
Stock-based compensation expense 30
3
33
Revaluation of redeemable shares (73 ) —
(73 )
Treasury stock repurchases and other (2 ) —
(2 )
Balances at July 29, 2016 $ 2,065
$ 126
$ 2,191



	Three Months Ended
	May 5, 2017			April 29, 2016
	(in millions)
Net income (loss) attributable to Dell Technologies Inc.	$	(1,334	)	$	55
Transfers (to) from the non-controlling interests:
Increase in Dell Technologies Inc. additional paid-in-capital for equity issuances and other equity activity	160			—
Decrease in Dell Technologies Inc. additional paid-in-capital for equity issuances	(248		)	—
Net transfers to non-controlling interests	(88		)	—
Change from net income (loss) attributable to Dell Technologies Inc. and transfers to/from the non-controlling interests	$	(1,422	)	$	55

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 1316 — EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is based on the weighted-average effect of all common shares issued and outstanding and is calculated by dividing net income (loss) by the weighted-average shares outstanding during the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares used in the basic earnings (loss) per share calculation plus the number of common shares that would be issued assuming exercise or conversion of all potentially dilutive ~~common shares outstanding.~~instruments. The Company excludes equity instruments from the calculation of diluted earnings (loss) per share if the effect of including such instruments is antidilutive.

The Company has ~~three~~two groups of common stock, denoted as the DHI Group Common Stock and the Class V Common Stock. The DHI Group Common Stock consists of four classes of common stock, ~~denominated~~referred to as ~~Series~~Class A ~~Series~~Common Stock, Class B Common Stock, Class C Common Stock, and ~~Series C~~Class D Common Stock. The DHI Group generally refers to the direct and indirect interest of Dell Technologies in all of Dell Technologies' business, assets, properties, liabilities, and preferred stock other than those attributable to the Class V Group, as well as its retained interest in the Class V Group equal to approximately 38% of the Company's economic interest in the Class V Group as of May 5, 2017. The Class V Common Stock is intended to track the economic performance of approximately 62% of the Company's economic interest in the Class V Group as of such date. As of May 5, 2017, the Class V Group consisted solely of approximately 334 million shares of VMware, Inc. common ~~stock.~~ stock held by the Company. See Note 17 of the Notes to the Condensed Consolidated Financial Statements and Exhibit 99.1 to the Company's quarterly report on Form 10-Q for the quarterly period ended May 5, 2017 for more information regarding the allocation of earnings from Dell Technologies' interest in VMware, Inc. between the DHI Group and the Class V Common Stock.

For purposes of calculating ~~net~~ earnings (loss) per share, the Company ~~uses~~used the two-class method. As all classes of DHI Group Common Stock share the same rights in dividends, basic and diluted earnings (loss) per share are the same for ~~all classes.~~each class of DHI Group Common Stock.

The following table sets forth basic and diluted earnings (loss) per share for each of the periods presented:



	Three Months Ended
	May 5, 2017			April 29, 2016
Earnings (loss) per share attributable to Dell Technologies Inc. - basic:
Continuing operations - Class V Common Stock - basic	$	0.57		$	—
Continuing operations - DHI Group - basic	$	(2.57	)	$	(1.05	)
Discontinued operations - DHI Group - basic	$	—		$	1.18

Earnings (loss) per share attributable to Dell Technologies Inc. - diluted:
Continuing operations - Class V Common Stock - diluted	$	0.56		$	—
Continuing operations - DHI Group - diluted	$	(2.57	)	$	(1.05	)
Discontinued operations - DHI Group - diluted	$	—		$	1.18

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table sets forth the computation of basic and diluted earnings (loss) per share for each of the periods presented:

Three Months Ended Six Months Ended
July 29, 2016 July 31, 2015 July 29, 2016 July 31, 2015
(in millions, except per share amounts)
Numerator:

Net loss from continuing operations $ (264 ) $ (292 ) $ (690 ) $ (738 )
Less: Net loss attributable to non-controlling interests (1 ) —
(1 ) —
Net loss from continuing operations attributable to Dell Technologies Inc. (263 ) (292 ) (689 ) (738 )
Income (loss) from discontinued operations, net of income taxes 836
27
1,317
(31 )
Net income (loss) attributable to Dell Technologies Inc. $ 573
$ (265 ) $ 628
$ (769 )

Denominator:

Weighted-average shares outstanding - basic 405
405
405
405
Dilutive effect of options, restricted stock units, restricted stock, and other —
—
—
—
Weighted-average shares outstanding - diluted 405
405
405
405

Earnings (loss) per share attributable to Dell Technologies Inc. - basic:
Continuing operations (0.65 ) (0.72 ) (1.70 ) (1.82 )
Discontinued operations 2.06
0.07
3.25
(0.08 )
Basic $ 1.41
$ (0.65 ) $ 1.55
$ (1.90 )

Earnings (loss) per share attributable to Dell Technologies Inc. - diluted:
Continuing operations (0.65 ) (0.72 ) (1.70 ) (1.82 )
Discontinued operations 2.06
0.07
3.25
(0.08 )
Diluted $ 1.41
$ (0.65 ) $ 1.55
$ (1.90 )

Weighted-average shares outstanding - antidilutive (a) 53
55
54
55



	Three Months Ended
	May 5, 2017			April 29, 2016
	(in millions)
Numerator: Continuing operations - Class V Common Stock
Net income from continuing operations attributable to Class V Common Stock - basic	$	118		$	—
Incremental dilution from VMware, Inc. attributable to Class V Common Stock (a)	(2		)	—
Net income from continuing operations attributable to Class V Common Stock - diluted	$	116		$	—

Numerator: Continuing operations - DHI Group
Net loss from continuing operations attributable to DHI Group - basic	$	(1,452	)	$	(424	)
Incremental dilution from VMware, Inc. attributable to DHI Group (a)	(1		)	—
Net loss from continuing operations attributable to DHI Group - diluted	$	(1,453	)	$	(424	)

Numerator: Discontinued operations - DHI Group
Income from discontinued operations, net of income taxes - basic and diluted	$	—		$	479

Denominator: Class V Common Stock weighted-average shares outstanding
Weighted-average shares outstanding - basic	207			—
Dilutive effect of options, restricted stock units, restricted stock, and other (b)	—			—
Weighted-average shares outstanding - diluted	207			—
Weighted-average shares outstanding - antidilutive (b)	—			—

Denominator: DHI Group weighted-average shares outstanding
Weighted-average shares outstanding - basic	566			405
Dilutive effect of options, restricted stock units, restricted stock, and other	—			—
Weighted-average shares outstanding - diluted	566			405
Weighted-average shares outstanding - antidilutive (c)	37			54

____________________

(a)

The incremental dilution from VMware, Inc. represents the impact of VMware, Inc.'s dilutive securities on the diluted earnings (loss) per share of the DHI Group and the Class V Common Stock, respectively, and is calculated by multiplying the difference between VMware, Inc.'s basic and diluted earnings (loss) per share by the number of shares of VMware, Inc. Class A common stock owned by the Company.


(b)	The dilutive effect of Class V Common Stock-based incentive awards was not material to the calculation of the weighted-average Class V Common Stock shares outstanding. The antidilutive effect of these awards was also not material.


(c)	Stock-based incentive awards have been excluded from the calculation of the DHI Group's diluted earnings (loss) per share because their effect would have been antidilutive, as the Company had a net loss from continuing operations attributable to the DHI Group for the periods presented.

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table presents a reconciliation to the consolidated net income (loss) attributable to Dell Technologies Inc.:



	Three Months Ended
	May 5, 2017			April 29, 2016
	(in millions)
Net income from continuing operations attributable to Class V Common Stock	$	118		$	—
Net loss from continuing operations attributable to DHI Group	(1,452		)	(424		)
Net loss from continuing operations attributable to Dell Technologies Inc.	(1,334		)	(424		)
Income from discontinued operations, net of income taxes (Note 3)	—			479
Net income (loss) attributable to Dell Technologies Inc.	$	(1,334	)	$	55

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 1417— CAPITALIZATION

The following table summarizes the Company's authorized, issued, and outstanding common stock as of the dates indicated:



	Authorized	Issued	Outstanding
	(in millions of shares)
Common stock as of February 3, 2017
Class A	600	410	410
Class B	200	137	137
Class C	900	22	22
Class D	100	—	—
Class V	343	223	209
	2,143	792	778

Common stock as of May 5, 2017
Class A	600	410	410
Class B	200	137	137
Class C	900	22	22
Class D	100	—	—
Class V	343	223	203
	2,143	792	772

Preferred Stock — The Company is authorized to issue one million shares of preferred stock, par value $.01 per share. As of May 5, 2017, no shares of preferred stock were issued or outstanding.

Class V Common Stock and Class V Group — In connection with the EMC merger transaction, the Company authorized 343 million shares of Class V Common Stock. The Class V Common Stock is a type of common stock commonly referred to as a tracking stock, which is a class of common stock that is intended to track the economic performance of a defined set of assets and liabilities. As of May 5, 2017, the 203 million shares of outstanding Class V Common Stock were intended to track the economic performance of approximately 62% of Dell Technologies' economic interest in the Class V Group. The Class V Group as of such date consisted solely of approximately 334 million shares of VMware, Inc. common stock held by the Company. The remaining 38% economic interest in the Class V Group as of May 5, 2017 was represented by the approximately 127 million retained interest shares held by the DHI Group. The DHI Group generally refers, in addition to such retained interest, to the direct and indirect interest of Dell Technologies in all of Dell Technologies' business, assets, properties, liabilities, and preferred stock other than those attributable to the Class V Group.

Repurchases of Common Stock; Treasury Stock

Class V Common Stock Repurchases — On December 13, 2016, the board of directors approved a stock repurchase program (the "Class V Group Repurchase Program") under which the Company is authorized to use assets of the Class V Group to repurchase up to $500 million of shares of Class V Common Stock over a period of six months. During thethree months ended May 5, 2017, the Company repurchased 1.3 million shares of Class V Common Stock for $82 million. On February 13, 2017, the Class V Group Repurchase Program was completed.

On March 27, 2017, the board of directors approved an amendment of the Class V Group Repurchase Program (the "Extended Class V Group Repurchase Program") which authorizes the Company to use assets of the Class V Group to repurchase up to an additional $300 million of shares of Class V Common Stock over a period of an additional six months. During the three months ended May 5, 2017, the Company repurchased 4.2 million shares of Class V Common Stock for $277 million under this program. As of May 5, 2017, the Company's remaining authorized amount for share repurchases was $23 million. On May 9, 2017, subsequent to the close of the Company's fiscal quarter, the Extended Class V Group Repurchase Program was completed.

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table presents the repurchase activity with respect to the Class V Common Stock for the three months ended May 5, 2017, and the attribution of the Class V Group between the Class V Common Stock and the DHI Group's retained interest as of the dates indicated:



	Class V Common Stock				DHI Group Retained Interest
	Shares of Class V Common Stock		Interest in Class V Group		Retained Interest Shares	Interest in Class V Group
	(in millions of shares)
As of February 3, 2017	209		62	%	127	38	%
Repurchases of Class V Common Stock	(6	)			—
As of May 5, 2017	203		62	%	127	38	%

All shares of Class V Common Stock repurchased by the Company pursuant to the repurchase programs are held as treasury stock at cost. The repurchase of shares pursuant to the Class V Common Stock repurchase programs was funded from proceeds received by the Class V Group from the sale by a subsidiary of the Company of shares of Class A common stock of VMware, Inc. owned by such subsidiary, as described below under "VMware, Inc. Class A Common Stock Repurchases." Share repurchases made by VMware, Inc. of its Class A common stock from a subsidiary of the Company do not affect the determination of the respective interests of the Class V Common Stock and the DHI Group in the Class V Group. See Exhibit 99.1 to the Company's quarterly report on Form 10-Q for the quarterly period ended May 5, 2017 for more information regarding Unaudited Attributed Financial Information for the Class V Group.

VMware, Inc. Class A Common Stock Repurchases — On December 15, 2016, the Company entered into a stock purchase agreement with VMware, Inc. (the "December 2016 Stock Purchase Agreement"), pursuant to which VMware, Inc. agreed to repurchase for cash $500 million of shares of VMware, Inc. Class A common stock from a subsidiary of the Company. During the three months ended May 5, 2017, VMware, Inc. repurchased 1.4 million shares. On February 15, 2017, the sale transaction under the December 2016 Stock Purchase Agreement was completed. VMware, Inc. repurchased a total of6.2 million shares under this agreement. The Company applied the proceeds from the sale to the repurchase of shares of its Class V Common Stock under the Class V Group Repurchase Program described above. All shares repurchased under VMware, Inc.'s stock repurchase programs are retired.

In January 2017, VMware, Inc.'s board of directors authorized the repurchase of up to an additional $1.2 billion of shares of VMware, Inc. Class A common stock (the "January 2017 Authorization") through the end of Fiscal 2018. On March 29, 2017, the Company entered into a new stock purchase agreement with VMware, Inc. (the "March 2017 Stock Purchase Agreement"), pursuant to which VMware, Inc. repurchased for cash $300 million of shares of VMware, Inc. Class A common stock from a subsidiary of the Company. The proceeds from the sale were applied by the Company to the repurchase of shares of the Class V Common Stock under the Extended Class V Group Repurchase Program described above.

During the three months ended May 5, 2017, VMware, Inc. received an initial delivery of approximately 2.7 million shares of Class A common stock with a value of $240 million for $300 million in cash. On May 10, 2017, subsequent to the close of the Company's fiscal quarter, the sale transaction under the March 2017 Stock Purchase Agreement was completed, and VMware, Inc. received an additional 0.7 million shares. The total of3.4 million shares repurchased by VMware, Inc. under the March 2017 Stock Purchase Agreement was based on the volume-weighted average per share price of the Class A common stock as reported on the New York Stock Exchange during a specified reference period, less a discount of 3.5% from that volume-weighted average per share price. This repurchase was pursuant to the January 2017 Authorization. As of May 5, 2017, the cumulative authorized amount remaining for share repurchases by VMware, Inc. under the January 2017 Authorization was $900 million.

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 18 — REDEEMABLE SHARES

~~The 2013 Stock Incentive Plan provides for the grant of stock-based incentive awards to~~Awards under the Company's ~~employees, consultants, and non-employee directors. Equity awards available for issuance under the 2013 Stock Incentive Plan include~~ stock ~~options, stock appreciation rights, restricted stock units, and other equity-based awards. These awards~~incentive plans include certain rights that allow the holder to exercise a put feature for the underlying ~~stock~~Class A or Class C Common Stock after a six-month holding period following the issuance of ~~the~~such common stock ~~requiring~~that requires the Company to purchase the stock at its fair market value. Accordingly, these awards and common stock are subject to reclassification from equity to temporary equity, and the Company determines the award amounts to be classified as temporary equity as follows:

For stock options to purchase Class C Common Stock subject to service requirements, the intrinsic value of the option is multiplied by the portion of the option for which services have been rendered. Upon exercise of the option, the amount in temporary equity represents the fair value of the ~~Company's common stock.~~Class C Common Stock.

For stock appreciation rights, ~~and~~ restricted stock units ("RSUs"), or shares of restricted common stock ("RSAs"), any of which stock award types are subject to service requirements, the fair value of the share is multiplied by the portion of the ~~share~~shares for which services have been rendered.

For share-based arrangements that are subject to the occurrence of a contingent event, those amounts are not reclassified to temporary equity until the contingency has been satisfied.

The amount of redeemable shares classified as temporary equity as of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016~~February 3, 2017 was ~~$179~~$301 million and ~~$106~~$231 million, respectively. As of ~~July 29, 2016,~~May 5, 2017, the redeemable shares ~~was comprised~~consisted of ~~0.8~~1.3 million issued and outstanding unrestricted common shares, ~~0.1~~0.6 million ~~unvested restricted stock units,~~RSUs, 0.2 million RSAs, and ~~23.0~~15.6 million outstanding stock options. As of ~~January 29, 2016,~~February 3, 2017, the redeemable shares ~~was comprised~~consisted of ~~0.9~~1.1 million issued and outstanding unrestricted common shares, 0.4 million RSUs, 0.1 million ~~unvested restricted stock units,~~RSAs, and ~~18.6~~13.7 million outstanding stock options.

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 1519 — SEGMENT INFORMATION

~~With the classification of Dell Services and DSG as discontinued operations during the six months ended July 29, 2016, the~~The Company ~~now~~ has ~~two~~three reportable segments that are based on the following ~~product and services~~ business units: Client Solutions ~~and Enterprise~~Group ("CSG"); Infrastructure Solutions Group ("~~ESG"~~ISG").; and VMware.

~~Client Solutions~~CSG includes sales to commercial and consumer customers of desktops, thin client products, and notebooks, as well as services and third-party software and peripherals closely tied to the sale of ~~Client Solutions~~CSG hardware. ~~ESG~~ISG includes servers, networking, and storage, as well as services and third-party software and peripherals that are closely tied to the sale of ~~ESG~~ISG hardware. VMware includes a broad portfolio of virtualization technologies across three main product groups: software-defined data center; hybrid cloud computing; and end-user computing.

The reportable segments disclosed herein are based on information reviewed by the Company's management to evaluate the business segment results. The Company's measure of segment operating income for management reporting purposes excludes the impact of other businesses, purchase accounting, amortization of intangible assets, unallocated corporate transactions, severance and facility action costs, ~~acquisition-related charges,~~ and ~~costs related to the going-private transaction. See Note 1 of the Notes to the Unaudited Condensed Consolidated Financial Statements for more information on the going-private transaction.~~transaction-related expenses. The Company does not allocate assets to the above reportable segments for internal reporting purposes.

The following table presents a reconciliation of net revenue by the Company’s reportable segments to the Company’s consolidated net revenue as well as a reconciliation of consolidated segment operating income (loss) to the Company’s consolidated operating income (loss):

Three Months Ended Six Months Ended
July 29, 2016 July 31, 2015 July 29, 2016 July 31, 2015
(in millions)
Consolidated net revenue:

Client Solutions $ 9,220
$ 9,235
$ 17,791
$ 18,104
Enterprise Solutions Group 3,779
3,769
7,392
7,471
Segment net revenue 12,999
13,004
25,183
25,575
Corporate(a)
116
94
223
188
Impact of purchase accounting (b) (65 ) (123 ) (143 ) (263 )
Total net revenue $ 13,050
$ 12,975
$ 25,263
$ 25,500

Consolidated operating income (loss):
Client Solutions $ 484
$ 323
$ 869
$ 542
Enterprise Solutions Group 300
280
492
519
Segment operating income 784
603
1,361
1,061
Impact of purchase accounting (b) (98 ) (154 ) (204 ) (326 )
Amortization of intangible assets (491 ) (492 ) (982 ) (986 )
Corporate (a) (32 ) (35 ) (74 ) (102 )
Other(c)
(100 ) (25 ) (181 ) (61 )
Total operating income (loss) $ 63
$ (103 ) $ (80 ) $ (414 )

~~_________________~~


~~(a)~~	Corporate consists of SecureWorks and unallocated transactions, which include long-term incentives, certain short-term incentive compensation expenses, and other corporate items that are not allocated to the Company's reportable segments.


~~(b)~~	~~Impact of purchase accounting includes non-cash purchase accounting adjustments related to the going-private transaction.~~


~~(c)~~	~~Other includes severance and facility action costs; acquisition, integration, and divestiture related costs; and stock-based compensation expenses.~~

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table presents a reconciliation of net revenue by ~~product and services categories:~~ the Company's reportable segments to the Company's consolidated net revenue as well as a reconciliation of consolidated segment operating income to the Company's consolidated operating loss:

Three Months Ended Six Months Ended
July 29, 2016 July 31, 2015 July 29, 2016 July 31, 2015
(in millions)
Net revenue:

Client Solutions (a):
Commercial $ 6,798
$ 6,913
$ 12,943
$ 13,341
Consumer 2,422
2,322
4,848
4,763
Total Client Solutions net revenue 9,220
9,235
17,791
18,104

Enterprise Solutions Group:
Servers and networking 3,237
3,212
6,312
6,364
Storage 542
557
1,080
1,107
Total ESG net revenue 3,779
3,769
7,392
7,471

Total segment net revenue $ 12,999
$ 13,004
$ 25,183
$ 25,575



	Three Months Ended
	May 5, 2017			April 29, 2016
	(in millions)
Consolidated net revenue:
Client Solutions Group	$	9,056		$	8,571
Infrastructure Solutions Group	6,916			3,613
VMware	1,736			—
Reportable segment net revenue	17,708			12,184
Other businesses (a)	462			110
Unallocated transactions (b)	1			25
Impact of purchase accounting (c)	(355		)	(78		)
Total net revenue	$	17,816		$	12,241

Consolidated operating income (loss):
Client Solutions Group	$	374		$	385
Infrastructure Solutions Group	323			192
VMware	486			—
Reportable segment operating income	1,183			577
Other businesses (a)	3			(16		)
Unallocated transactions (b)	11			(22		)
Impact of purchase accounting (c)	(423		)	(106		)
Amortization of intangibles	(1,776		)	(491		)
Transaction-related expenses (d)	(191		)	(57		)
Other corporate expenses(e)	(307		)	(24		)
Total operating loss	$	(1,500	)	$	(139	)

_________________

(a)

~~During~~Other businesses consist of RSA Information Security, SecureWorks, Pivotal, and Boomi offerings, and do not constitute a reportable segment, either individually or collectively, as the ~~six months ended July 29, 2016,~~results of the ~~Company redefined the categories within the Client Solutions business unit. None of these changes impacted~~businesses are not material to the Company's ~~consolidated or total business unit results.~~overall results and the businesses do not meet the criteria for reportable segments.


(b)	Unallocated transactions includes long-term incentives, certain short-term incentive compensation expenses, and other corporate items that are not allocated to Dell Technologies' reportable segments.


(c)	Impact of purchase accounting includes non-cash purchase accounting adjustments that are primarily related to the EMC merger transaction.


(d)	Transaction-related expenses includes acquisition, integration, and divestiture related costs.


(e)	Other corporate expenses includes severance and facility action costs as well as stock-based compensation expense.

~~NOTE 16 — SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION~~

~~Supplemental Consolidated Statements of Financial Position Information~~

~~The following table provides information on amounts included in inventories, net as of July 29, 2016 and January 29, 2016.~~

July 29, 2016 January 29, 2016
(in millions)
Inventories, net:
Production materials $ 503
$ 657
Work-in-process 188
189
Finished goods 755
773
Total inventories, net $ 1,446
$ 1,619

~~NOTE 17 — SUBSEQUENT EVENTS~~

Effective August 25, 2016, Denali Holding Inc. changed its name to Dell Technologies Inc. by an amendment (the “Amendment”) to its Third Amended and Restated Certificate of Incorporation. The Amendment was approved by the board of directors of the Company, and was filed with the Secretary of State of the State of Delaware on August 25, 2016.

Final regulatory approval from the Chinese Ministry of Commerce was received for the EMC merger transaction. The condition to closing the transaction in respect of clearances under antitrust and competition laws has been satisfied. The transaction is expected to close on September 7, 2016. The EMC merger will be financed with a combination of equity and debt financing and cash on hand. As of September 6, 2016, the Company obtained an incremental equity financing commitment of $0.15 billion from Silver Lake Partners.

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table presents net revenue by business unit categories:



	Three Months Ended
	May 5, 2017		April 29, 2016
	(in millions)
Net revenue:
Client Solutions Group:
Commercial	$	6,350	$	6,145
Consumer	2,706		2,426
Total CSG net revenue	9,056		8,571

Infrastructure Solutions Group:
Servers and networking	3,231		3,075
Storage	3,685		538
Total ISG net revenue	6,916		3,613

VMware
Total VMware net revenue	1,736		—

Total segment net revenue	$	17,708	$	12,184

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 20 — SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION

The following table provides additional information on selected accounts included in the Condensed Consolidated Statements of Financial Position as of May 5, 2017 and February 3, 2017:



	May 5, 2017		February 3, 2017
	(in millions)
Inventories, net:
Production materials	$	872	$	925
Work-in-process	506		503
Finished goods	1,088		1,110
Total inventories, net	2,466		2,538
Other non-current liabilities:
Warranty liability	187		199
Deferred and other tax liabilities	7,726		8,607
Other	522		533
Total other non-current liabilities	$	8,435	$	9,339

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DELL TECHNOLOGIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 21 — SUBSEQUENT EVENTS

Federal Income Taxes— In May 2017, the IRS commenced a federal income tax audit for fiscal years 2010 through 2014, which could take several years to complete. Dell believes that adequate reserves have been provided related to all matters contained in tax periods open to examination. For further discussion regarding tax matters, including the status of income tax audits, see Note 13 of the Notes to the Condensed Consolidated Financial Statements.

Other than the ~~items noted~~matters identified above, there were no known events occurring after the balance sheet date and up until the date of the issuance of this report that would materially affect the information presented herein. ~~The Company evaluated subsequent events through September 6, 2016, the date of the issuance of these financial statements.~~

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

~~OPERATIONS~~

This ~~management’s~~management's discussion and analysis should be read in conjunction with the ~~Audited~~audited Consolidated Financial Statements and accompanying Notes included in the Company's annual report on Form 10-K for the fiscal year ended ~~January 29, 2016 included in the proxy statement/prospectus dated June 6, 2016 forming part of our registration statement on Form S-4 (Registration No. 333-208529)~~February 3, 2017 and the ~~Unaudited~~unaudited Condensed Consolidated Financial Statements included in this report. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs, and that are subject to numerous risks and uncertainties. Our actual results may differ materially from those expressed or implied in any forward-looking statements.

Unless otherwise indicated, all results presented are prepared in in a manner that complies, in all material respects, with accounting principles generally accepted in the United States of America ~~or GAAP.~~("GAAP"). Additionally, unless otherwise indicated, all changes identified for the current-period results represent comparisons to results for the prior corresponding fiscal period.

Unless the context indicates otherwise, references in this report to "we," "us," "our," the "Company," and "Dell Technologies" mean Dell Technologies Inc. and its consolidated subsidiaries, and references to "EMC" mean EMC Corporation and EMC Corporation's consolidated subsidiaries.

Our fiscal year is the 52- or 53-week period ending on the Friday nearest January 31. We refer to our fiscal years ended February 2, 2018 and February 3, 2017 ~~and January 29, 2016~~ as "Fiscal ~~2017"~~2018" and "Fiscal ~~2016",~~2017" respectively. Fiscal ~~2016~~2017 included ~~52 weeks. Fiscal 2017 will include~~ 53 weeks, with the extra week ~~to be~~ included in the fourth quarter of Fiscal 2017.

We changed our name from Denali Holding Inc. to Dell Technologies Inc. on August 25, 2016. Unless the context indicates otherwise, references in this management’s discussion and analysis to "we," "us," "our," and "Dell Technologies" mean Dell Technologies Inc. and its consolidated subsidiaries, and references to “Dell” mean Dell Inc. and Dell Inc.’s consolidated subsidiaries. Fiscal 2018 will include 52 weeks.

On ~~March 27,~~September 7, 2016, we completed our acquisition by merger of EMC. The consolidated results of EMC are included in Dell ~~entered into a definitive agreement with NTT Data International L.L.C. to sell substantially all of~~Technologies' consolidated results for the Fiscal 2018 period presented. During Fiscal 2017, we closed the Dell Services, ~~for cash consideration of approximately $3.1 billion. On June 19, 2016, Dell entered into a definitive agreement with Francisco Partners~~DSG, and ~~Elliot Management Corporation to sell substantially all of Dell Software Group for cash consideration of approximately $2.4 billion.~~ECD divestiture transactions. Accordingly, the results of operations of Dell Services, DSG, and ~~Dell Software Group~~ECD, as well as the related gains or losses on sale, have been excluded from the results of continuing operations in the periods presented in this management's discussion and ~~analysis.~~analysis, except as otherwise indicated.

INTRODUCTION

Dell Technologies is a strategically aligned family of businesses that brings together the entire infrastructure from hardware to software to services — from the edge to the data center to the cloud. Dell Technologies is a leader in the traditional technology of today and a leader in the cloud-native infrastructure of tomorrow. We are a leading provider of scalable IT solutions enabling customers to be more efficient, mobile, informed, and secure. Through our recent combination with EMC, Dell Technologies now primarily encompasses our Client Solutions Group, Infrastructure Solutions Group, VMware, Inc., RSA Information Security, SecureWorks Corp., Pivotal Software, Inc. and Boomi, Inc. We ~~built our reputation through listening~~are focused on providing technology solutions and services that accelerate digital transformation. We believe technology exists to ~~customers~~drive human progress on a global scale — to create new markets, reshape industries, and ~~developing solutions that meet their needs. Several years ago, we initiated a broad transformation of our company to become the leading provider of scalable information technology solutions.~~improve lives. We are positioned to help customers of any size ~~with~~build the essential infrastructure to modernize IT and enable digital business, and are differentiated by our practical innovation and efficient, simple, and affordable solutions.

~~Our announcement in October 2015 of~~Dell Technologies is committed to our ~~agreement to combine with EMC evidences~~customers. We believe our intention to accelerate this strategy. The combined strength of Dell and EMC will benefit our customers through complementary product portfolios, sales teams, and research and development strategies. During this time of transition, we remain focused on supporting our customers with outstanding products, services and solutions. We will continue to build superior customer relationships through our direct model and our network of channel partners, which includes value-added resellers, system integrators, distributors, and retailers. We will invest in strategic solutions, and ~~enhance our go-to-market sales and marketing capabilities to create a leading global technology company poised for long-term sustainable growth and innovation.~~

A key component of our strategic transformation is to shift our product and solutions portfolio to offerings that provide higher-value and recurring revenue streams over time. As part of this strategy, we continue to expand and enhance our offerings through strategic investments and acquisitions thatservices will ~~complement our existing portfolio of solutions.~~help power digital transformation. As we innovate to make our ~~customers’~~customers' existing IT increasingly productive, we help them reinvest their savings into the next generation of technologies that they need to succeed in the digital ~~economy of a hyper-connected world. These~~economy. Our next-generation solutions ~~include~~which enable digital transformation include software-defined data centers, all flash arrays, hybrid cloud, converged and hyper-converged infrastructure, mobile, and ~~security.~~security solutions. In addition, our extended warranty and delivery offerings, and software and peripherals, which are closely tied to the sale of our hardware

~~Table of Contents~~

products, are important value differentiators that we are able to offer our customers. ~~Our~~

We are actively working on the integration of EMC acquired businesses, and our combined go-to-market initiatives. During this period of transition and integration, we remain focused on supporting our customers with outstanding solutions, products, and services. We will continue our focus on building superior customer relationships through our direct model and our network of channel partners, which includes value-added resellers, system integrators, distributors, and retailers. We also will continue investing in strategic solutions and enhancing our go-to-market sales and marketing capabilities as we seek to create a leading global technology company poised for long-term sustainable growth and innovation.

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As we stay focused on our customers, we will pursue the following strategic initiatives:

To extend our market leading position through our Client Solutions Group and Infrastructure Solutions Group offerings, ~~are an important element of~~both on- and off-premises

To grow our ~~strategy,~~strong position in IT infrastructure for cloud-native workloads, both on- and ~~we believe the strategic expansion~~off-premises

To innovate with winning technology that spans and unites on- and off-premises applications and infrastructure and that enables workforce transformation required by our customers

As part of this ~~business is critical~~strategy, we will continue to evaluate opportunities for strategic investments and disciplined acquisitions with a focus on emerging technology areas that are relevant to the Dell Technologies' unique family of businesses and that will complement our ~~long-term success.~~existing portfolio of solutions. Our investment areas include storage, software-defined networking, management and orchestration, security, machine learning and artificial intelligence, Big Data and analytics, cloud, Internet of Things, and software development operations.

We operate a diversified business model with the majority of our net revenue and operating income derived from commercial clients ~~(large~~that consist of large enterprises, small and medium-sized businesses, and public sector customers). We have a large global presence across the Americas, Europe, Middle East, Asia, and other geographic regions with approximately 50% of our revenue generated by sales to customers outside of the United States during the first six months of Fiscal 2017 and the first six months of Fiscal 2016. We continue to view emerging markets, which include the vast majority of the world’s population, as a long-term growth opportunity. Accordingly, we continue to pursue the development of technology solutions that meet the needs of these markets.customers.

Products and Services ~~Before the EMC Merger~~

We design, develop, manufacture, market, sell, and support a wide range of products and services. We are organized into the following ~~product and services~~ business units, which are our reportable segments: Client Solutions Group; Infrastructure Solutions Group; and ~~Enterprise Solutions Group.~~VMware. Due to our ~~pending~~ divestitures of Dell Services, ~~and~~ Dell Software Group, and Dell EMC Enterprise Content Division, the results of these businesses, as well as the related gains or losses on sale, have been excluded from this ~~Management's Discussion~~management's discussion and ~~Analysis~~analysis for all periods presented, except as otherwise indicated. ~~See "Divestitures" below for more information regarding the sale of Dell Services and Dell Software Group.~~

Client Solutions Group (CSG) — ~~Client Solutions offerings~~Offerings by CSG include branded hardware, such as desktop PCs ~~notebooks~~ and ~~tablets,~~notebooks, and branded peripherals, such as monitors, printers, and ~~projectors, as well as third-party~~projectors. CSG also offers attached software, and peripherals. Our computing devices are designed with our commercial and consumer customers’ needs in mind, and we seek to optimize performance, reliability, manageability, design, and security. In addition to the traditional PC business, we also have a portfolio of end-to-end thin client offerings that is well-positioned to benefit from the growth trends in cloud computing. Client Solutions hardwareperipherals and services, ~~also provide the architecture required for connected ecosystems to securely~~including support and ~~efficiently capture massive amounts of data for analytics~~deployment, configuration, and ~~actionable insights for commercial customers, as the “Internet of things” (IoT) becomes an increasing part of the IT environment.~~ extended warranty services.

~~Generally, over~~Approximately half of ~~Client Solutions~~CSG revenue is generated by sales to customers in the Americas, with the remaining portion derived from sales to customers in the Europe, ~~the~~ Middle East and Africa ~~referred to as EMEA,~~region ("EMEA") and ~~Asia~~ the Asia‑Pacific and Japan ~~referred to as APJ.~~region ("APJ").

~~Enterprise~~Infrastructure Solutions Group (ISG) — EMC's Information Storage segment and our existing Enterprise Solutions Group were merged to create the Infrastructure Solutions Group, or ~~ESG,~~ISG. The comprehensive portfolio of advanced storage solutions includes ~~servers, networking, and~~traditional storage solutions as well as next-generation storage solutions (including all flash arrays, scale-out file and object platforms). The server portfolio includes high-performance rack, blade, tower, and hyperscale servers. The networking portfolio will help our business customers transform and modernize their infrastructure, mobilize and enrich end-user experiences, and accelerate business applications and processes. Similar to CSG, ISG also offers attached software, peripherals, and services, including support and ~~third-party software~~deployment, configuration, and ~~peripherals that are closely tied to the sale of ESG hardware. Generally, over~~extended warranty services.

Approximately half of ~~ESG~~ISG revenue is generated by sales to customers in the Americas, with the remaining portion derived from sales to customers in EMEA and APJ.

We also offer or arrange various financing options and services for our commercial and consumer customers in the United States, Canada, Europe, and Mexico through DFS and its affiliates. DFS services include originating, collecting, and servicing customer receivables primarily related to the purchase of Dell products. The results of these operations are allocated to our segments based on the underlying product or service financed.

On April 27, 2016, SecureWorks completed a registered underwritten initial public offering, or IPO, of its Class A common stock. As of July 29, 2016, Dell Technologies held approximately 86.8% of the outstanding equity interest in SecureWorks, which represented approximately 98.5% of the combined voting power of both classes of the SecureWorks common stock outstanding. The results of the SecureWorks operations are recorded in Corporate. See Note 12 and Note 15 of the Notes to the Unaudited Condensed Consolidated Financial Statements included in this report for more information.

~~For further discussion regarding our current reportable segments, see "Results of Operations — Product and Services Business Units."~~

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~~Products and Services After the EMC Merger~~

~~We describe below what we currently expect will be the product and services business units, and reportable segments, of our company after the EMC merger is completed.~~

~~Client Solutions~~—The Client Solutions business will consist of our existing Client Solutions business unit. Client Solutions offerings include branded hardware, such as desktop PCs, notebooks and tablets, and branded peripherals, such as monitors, printers and projectors, as well as third-party software and peripherals. Our computing devices are designed with our commercial and consumer customers’ needs in mind, and we seek to optimize performance, reliability, manageability, design and security. In addition to the traditional PC business, we also have a portfolio of end-to-end thin client offerings that is well-positioned to benefit from the growth trends in cloud computing. Client Solutions hardware and services also provide the architecture to enable the IoT and connected ecosystems to securely and efficiently capture massive amounts of data for analytics and actionable insights for commercial customers. We will also offer attached software, peripherals and services, including support and deployment, configuration and extended warranty services as well as financing options and services offered by Dell Financial Services.

~~Infrastructure Solutions Group (ISG)~~ — EMC’s Information Storage segment and our existing Enterprise Solutions Group will be merged to create the Infrastructure Solutions Group. The Infrastructure Solutions Group will enable the digital transformation of our enterprise customers through our trusted hybrid cloud and big data solutions which are built upon a modern data center infrastructure that incorporates industry-leading converged infrastructure and storage technologies. The comprehensive portfolio of advanced storage solutions will include traditional storage solutions as well as next-generation storage solutions (including all flash arrays, scale out file and object platforms and other solutions). The server portfolio will include high-performance rack, blade, tower, and hyperscale servers. The networking portfolio will help business customers transform and modernize their infrastructure, mobilize and enrich end-user experiences, and accelerate business applications and processes. In addition, combining in the Infrastructure Solutions Group the strengths of our Enterprise Solutions Group and EMC’s strengths in core server and storage solutions will enable us to offer leading converged and hyper-converged solutions, which will allow our customers to accelerate their IT transformation by buying scalable integrated IT solutions instead of building and assembling their own IT platforms. Similar to Client Solutions, the Infrastructure Solutions Group will also offer attached software, peripherals and services, including support and deployment, configuration and extended warranty services as well as financing options and services offered by Dell Financial Services.

The Infrastructure Solutions Group will also include Virtustream product and service offerings. Virtustream’s cloud software and infrastructure-as-a-service solutions enable customers to migrate, run and manage mission-critical applications in cloud-based IT environments, and represents a critical element of our strategy to help customers move their applications to a cloud-based IT infrastructure.

VMware — The VMware reportable segment ("VMware") reflects the operations of VMware, Inc. (NYSE: VMW) within Dell Technologies. See Exhibit 99.1 filed with this report for further details on the differences between VMware reportable segment results and VMware, Inc. results.

VMware is a leader in virtualization and cloud infrastructure solutions, which enable organizations to ~~leverage synergies and~~ manage IT resources across complex multi-cloud, multi-device environments. VMware ~~has expanded beyond its core business of compute virtualization to offer~~offers a broad portfolio of virtualization technologies across three main product groups: software-defined data ~~center,~~center; hybrid cloud ~~computing~~computing; and end-user computing. ~~VMware’s software-defined data center includes~~

Approximately half of VMware revenue is generated by sales to customers in the fundamental compute layer for the data center (vSphere); storage and availability to offer cost-effective holistic data storage and protection options (Virtual SAN); network and security (VMware NSX); and management and automation (vRealize) products. VMware provides two offerings, VMware vCloud Air Network Service Providers (vCAN) and VMware vCloud Air, that enable companies to consume off-premise vSphere-based computing capacity. VMware’s end-user computing offerings (such as AirWatch mobile solutions and Horizon application and desktop virtualization solutions) enable IT organizations to efficiently deliver more secure access to applications, data and devices for their end users by leveraging VMware’s software-defined data center solutions to extend the valueUnited States.

Table of ~~virtualization from data centers to devices.~~Contents

~~After the EMC merger is completed, our~~Our other businesses, described below, ~~will primarily~~ consist of product and service offerings of RSA ~~Enterprise Content Division,~~Information Security, SecureWorks, Pivotal, and Boomi. These businesses ~~will~~are not be classified as reportable segments, either individually or collectively, as the results of the businesses are not material to our overall results and the businesses do not meet the criteria for reportable ~~segments and are not material to our overall results.~~segments.

RSA Information Security provides essential cybersecurity solutions engineered to enable organizations to detect, investigate, and respond to advanced attacks, confirm and manage identities, and, ultimately, help reduce IP theft, fraud, and cybercrime.

~~Enterprise Content Division provides enterprise software and cloud solutions that help organizations leverage their business content throughout its lifecycle.~~

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SecureWorks (NASDAQ: SCWX) is a leading global provider of intelligence-driven information security solutions ~~exclusively~~singularly focused on protecting its clients from cyber attacks.

Pivotal is a leading provider of application and data infrastructure software, agile development services, and data science consulting. Pivotal's cloud-native platform enables leading companies to transform their operations with an approach that is focused on building software, rather than buying it.

Boomi specializes in cloud-based integration, connecting information between existing on-premise and cloud-based applications to ensure business processes are optimized, data is accurate and workflow is reliable.

See Note 19 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about our other businesses.

For further discussion regarding our current reportable segments, see "Results of Operations — Business Unit Results."

Dell Financial Services

We also offer or arrange various financing options and services for our commercial and consumer customers in the United States, Canada, Europe, and Mexico through Dell Financial Services ("DFS") and its affiliates. DFS services include originating, collecting, and servicing customer receivables primarily related to the purchase of Dell Technologies products. The results of these operations are allocated to our segments based on the underlying product or service financed. For additional information about our financing arrangements, see Note 6 of the Notes to the Condensed Consolidated Financial Statements included in this report.

Business Trends and Challenges

We are seeing an unprecedented rate of change in the IT ~~industry, but~~industry. Organizations of all kinds are embracing digital technology to achieve their business objectives. Our vision is to be the essential infrastructure company and leader in end-user computing, data center infrastructure solutions, virtualization, and cloud software that our ~~strategy remains focused~~customers continue to trust and rely on ~~being a leading provider of scalable end-to-end technology solutions.~~for their IT solutions and transformations. We accelerate results for our customers by enabling them to be more efficient, mobile, informed, and secure. We continue to invest in ~~R&D,~~research and development, sales, and other key areas of our business to deliver superior products and ~~solution~~solutions capabilities and to drive execution of long-term profitable growth. We believe that our results will ~~improve over time in connection with~~benefit from an integrated go-to-market strategy, including enhanced coordination among the ~~productivity initiatives directed at our salesforce~~family of Dell Technologies companies, and ~~as a result of~~from our differentiated products and solutions capabilities. We intend to continue to execute on our business model and seek to balance liquidity, profitability, and growth to position our company for long-term success.

We are able to leverage our traditional strength in the PC market to offer solutions and services that provide higher value recurring revenue streams. ~~We anticipate~~Given the macroeconomic environment and computing trends, we expect that the demand environment will continue to be uneven and ~~expect intensifying~~cyclical and that market competition in our Client Solutions Group business ~~given the macroeconomic environment and computing trends.~~will intensify. However, we are committed to a long-term growth strategy that we believe will benefit from the consolidation trends that are occurring in ~~the market.~~our markets. Our Client Solutions Group offerings remain an important element of our strategy, generating strong cash flow and opportunities for cross-selling of complementary solutions.

We expect that our ~~ESG business, which will be referred to as ISG after the EMC merger,~~Infrastructure Solutions Group will continue to be adversely affected by declines in the traditional storage ~~market. Through~~and server markets. Cloud-native applications are expected to continue as a primary growth driver in the infrastructure market as IT organizations increasingly become multi-cloud environments. We believe the complementary cloud solutions across our business, created through our combination with EMC, strongly position us to meet these demands for our customers who are increasingly looking to leverage cloud-based computing. Further, we will be able to provide new and more robust storage and data center solutions to meet the evolving needs of our customers. We also anticipate significant growth in demand for cloud offerings. We believe the complementary cloud solutions of Dell and EMC strongly position us to meet these demands for our customers who are increasingly looking to leverage the cloud. In addition, we also continue to be impacted by the emerging trends of enterprises deploying software-defined storage, hyper-converged, and modular solutions based on server-centric architectures.

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We ~~believe that combining with EMC will complement~~are also seeing increased interest in "as a service" flexible consumption models by our customers as they seek to build greater flexibility into their cost structures. We have responded to this interest by introducing various financing and ~~accelerate~~consumption model offerings.

We have leading solutions in these categories through our ~~overall position~~ISG and ~~strengthen our~~VMware data center offerings. ~~Additionally,~~In addition, through ~~combined~~our research and development efforts, ~~of Dell and EMC,~~ we ~~will actively~~expect to develop new solutions in this rapidly changing industry that we believe will enable us to continue to provide superior solutions to our customers.

We manage our business on a U.S. dollar basis. However, we have a large global presence, generating approximately ~~50%~~half of our revenue by sales to customers outside of the United States during the first ~~six~~three months of Fiscal ~~2017~~2018 and the first ~~six~~three months of Fiscal ~~2016.~~2017. Our revenues, therefore, can be impacted by fluctuations in foreign currency exchange rates. We utilize a comprehensive hedging strategy intended to mitigate the impact of foreign currency volatility over time, and we adjust pricing when possible to further minimize foreign currency impacts. The percentage of our revenues generated in regions outside of the United States did not change substantially as a result of the EMC merger transaction.

EMC Merger Transaction

As described in Note 12 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements included in this report, on ~~October 12, 2015, EMC,~~September 7, 2016, a merger subsidiary of Dell Technologies ~~Dell, and Merger Sub entered into a merger agreement pursuant to which Merger Sub will be~~ merged with and into EMC Corporation, with EMC Corporation surviving the merger as a wholly-owned subsidiary of Dell Technologies.

~~Subject~~Pursuant to the terms ~~and conditions~~ of the merger agreement, atupon the ~~effective time~~completion of the EMC merger transaction, each issued and outstanding share of common stock, par value $0.01 per share, of EMC ~~common stock issued and outstanding immediately prior to the effective time~~(approximately 2.0 billion as of the EMC merger (other than shares owned by Dell Technologies, Merger Sub, EMC, or any of EMC’s wholly owned subsidiaries, and other than shares with respect to which EMC’s shareholders are entitled to and properly exercise appraisal rights) automatically will beSeptember 7, 2016) was converted into the right to receive ~~the merger consideration, consisting of~~ (1) $24.05 in cash, without interest, and (2) ~~a number of~~0.11146 validly issued, fully paid and non-assessable shares of common stock of the Company designated as Class V Common Stock, equal to the quotient (rounded to the nearest five decimal points) obtained by dividing (A) 222,966,450 by (B) the aggregate number of shares of EMC common stock issued and outstanding immediately prior to the effective time of the EMC merger,par value $0.01 per share, plus cash in lieu of any fractional shares. Shares of the Class V Common Stock were approved for listing on the New York Stock Exchange (the "NYSE") under the ticker symbol "DVMT" and began trading on September 7, 2016.

The merger agreement provides that each currently outstanding EMC stock option will vest and become fully exercisable for a reasonable period of time prior to 11:59 p.m., New York City time, on the last trading day prior to the effective time of the EMC merger, referred to as the vesting effective time of the merger. Each EMC stock option that remains outstanding

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immediately prior to the vesting effective time of the merger will be automatically exercised immediately prior to the vesting effective time of the merger on a net exercise basis, such that shares of EMC common stock with a value equal to the aggregate exercise price and applicable tax withholding will reduce the number of shares of EMC common stock otherwise issuable. The merger agreement also provides that, except for a limited number of restricted stock units that may be granted following the date of the merger agreement and that will continue in effect as cash awards following the effective time of the merger, each EMC restricted stock unit outstanding immediately prior to the vesting effective time of the merger will become fully vested immediately prior to the vesting effective time of the merger (with performance vesting units vesting at the target level of performance) and the holder will become entitled to receive the merger consideration with respect to the shares of EMC common stock subject to the award (which will be calculated net of the number of shares withheld in respect of taxes upon the vesting of the award). The merger agreement provides that Dell Technologies may agree with individual award recipients to different equity treatment. As of the date of this report, agreements for different equity treatment have been reached with certain members of management.

~~Also, in~~In connection with the EMC merger transaction, all principal, accrued but unpaid interest, fees, and other amounts (other than certain contingent obligations) outstanding at the effective time of the EMC merger transaction under ~~EMC’s~~EMC's unsecured revolving credit facility, ~~Dell International’s~~Dell's asset-based revolving credit facility, and ~~Dell International’s~~Dell's term facilities ~~will be~~were substantially repaid ~~in full substantially~~ concurrently with the ~~closing, and~~closing. Further, all commitments to lend and guarantees and security interests, as applicable, in connection therewith ~~will be~~were terminated ~~and/~~or released. ~~In connection with the EMC merger, Dell expects that the~~The aggregate amounts of principal, interest, and premium necessary to redeem in full the outstanding $1.4 billion in aggregate principal amount of 5.625% Senior First Lien Notes due 2020 co-issued by Dell International and Denali Finance Corp. ~~will be~~were deposited with the trustee for such notes, and ~~that~~ such notes ~~will~~were thereby be satisfied and discharged, ~~substantially~~ concurrently with the effective time of the EMC ~~merger. Dell further expects that all~~merger transaction. All of ~~Dell’s and EMC’s~~Dell's other outstanding senior notes and all of EMC's outstanding senior ~~debentures will remain~~notes remained outstanding after the effective time of the EMC merger transaction in accordance with their respective terms.

Dell Technologies ~~expects to finance~~financed the EMC merger transaction, repayment of the ~~refinancing~~foregoing indebtedness of ~~certain of~~EMC and Dell ~~International’s and EMC’s indebtedness~~ outstanding as of the closing of the EMC merger transaction, and the payment of related fees and expenses, with ~~up to $26.3~~debt financing arrangements in an aggregate principal amount of approximately $45.9 billion, ~~from debt financings and up to~~equity financing arrangements of approximately $4.4 billion, and cash on hand of committed equity financing. In the second quarter of Fiscal 2017, subsidiaries of Dell Technologies issued a total of $20 billion of First Lien Notes and $3.25 billion of Senior Unsecured Notes, the proceeds of which will be applied to finance the EMC merger.approximately $7.8 billion.

Other than the recognition of certain expenses related to the EMC merger and interest expense associated with the issuance of the First Lien Notes and Senior Unsecured Notes referred to above, the proceeds of which are held in escrow, there was no impact of the EMC merger on the Unaudited Condensed Consolidated Financial Statements included in this report. See Note 5 of the Notes to the Unaudited Condensed Consolidated Financial Statements included in this report for additional information.

~~Divestitures~~

~~Dell Services Divestiture —~~ On March 27, 2016, Dell entered into a definitive agreement with NTT Data International L.L.C. to sell substantially all of Dell Services, including the Dell Services Federal Government business, for cash consideration of approximately $3.1 billion. Dell Services includes business process outsourcing, application management, and infrastructure services. The pending transaction does not include the global support, deployment, and professional services offerings. We anticipate that the transaction will close in the fourth quarter of Fiscal 2017, subject to the satisfaction of customary closing conditions, including approvals from regulatory authorities.

~~Dell Software Group Divestiture —~~ On June 19, 2016, Dell entered into a definitive agreement with Francisco Partners and Elliot Management Corporation to divest substantially all of DSG for cash consideration of approximately $2.4 billion. The pending transaction includes DSG's systems and information management, security solutions, and Statistica businesses. The pending transaction does not include our cloud integration business. We anticipate that the transaction will close in the fourth quarter of Fiscal 2017, subject to the satisfaction of customary closing conditions, including approvals from regulatory authorities.

~~Discontinued Operations Presentation —~~ The results of Dell Services and DSG are presented as discontinued operations in our Condensed Consolidated Statements of Income (Loss), and as such, have been excluded from both continuing operations and segment results for all periods presented. Further, we have reclassified the related assets and liabilities as held for sale in our Condensed Consolidated Statements of Financial Position. See Note 2 ~~of the Notes~~and Note 7 to the ~~Unaudited~~ Condensed Consolidated Financial Statements included in this report for additional information regarding ~~these discontinued operations.~~the EMC merger transaction and the related financing transactions.

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~~Going-Private Transaction~~

On October 29, 2013, Dell was acquired by Dell Technologies in a merger transaction pursuant to an agreement and plan of merger, dated as of February 5, 2013, as amended. Dell Technologies is a Delaware corporation owned by Michael S. Dell and a separate property trust for the benefit of Mr. Dell’s wife, investment funds affiliated with Silver Lake Partners, the MSD Partners Funds, and certain members of Dell’s management and other investors. Mr. Dell serves as Chairman and Chief Executive Officer of Dell Technologies and Dell.

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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, or GAAP. These non-GAAP financial measures include non-GAAP product net revenue; non-GAAP services net revenue; non-GAAP net revenue; non-GAAP product gross margin; non-GAAP services gross margin; non-GAAP gross margin; non-GAAP operating expenses; non-GAAP operating income; non-GAAP net income from continuing operations; ~~non-GAAP earnings from continuing operations attributable to Dell Technologies Inc. per share - diluted;~~ earnings before interest and other, net, taxes, depreciation and amortization, referred to as EBITDA; and adjusted EBITDA.

We use non-GAAP financial measures to supplement financial information presented on a GAAP basis. We believe that excluding certain items from our GAAP results allows management to better understand our consolidated financial performance from period to period and better project our future consolidated financial performance as forecasts are developed at a level of detail different from that used to prepare GAAP-based financial measures. Moreover, we believe these non-GAAP financial measures ~~will~~ provide our stakeholders with useful information to help them evaluate our operating results by facilitating an enhanced understanding of our operating performance and enabling them to make more meaningful period to period comparisons.

In particular, we have excluded the impact of purchase accounting adjustments related to the going-private transaction. The going-private transaction was recorded using the acquisition method of accounting in accordance with the accounting guidance for business combinations. This guidance prescribes that the purchase price be allocated to assets acquired and liabilities assumed based on the estimated fair value of such assets and liabilities on the date of the transaction. All of our assets and liabilities were accounted for and recognized at fair value as of the transaction date, and the fair value adjustments are being amortized over the estimated useful lives in the periods following the transaction, while the ongoing business and operations did not change. As a result, we believe that excluding these adjustments provides results that are useful in understanding our operating performance, and aligns with how we manage our business. Excluding these adjustments also provides for more comparable operating results over the periods presented.

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 non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

Non-GAAP product net revenue, non-GAAP services net revenue, non-GAAP net revenue, non-GAAP product gross margin, non-GAAP services gross margin, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, and non-GAAP net income from continuing operations, ~~and non-GAAP earnings from continuing operations attributable to Dell Technologies Inc. per share,~~ as defined by us, exclude ~~the following items:~~ the impact of purchase accounting, amortization of intangible assets, transaction-related expenses, other corporate expenses and, for non-GAAP net income, ~~and non-GAAP earnings from continuing operations attributable to Dell Technologies Inc. per share,~~ an aggregate adjustment for income taxes. As the excluded items have a material impact on our financial results, our management compensates for this limitation 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 a substitute for net revenue, gross margin, operating expenses, operating income, or net income prepared in accordance with GAAP, and should be read only in conjunction with financial information presented on a GAAP basis.

Reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure are presented below. We encourage you to review the reconciliations in conjunction with the presentation of the non-GAAP financial measures for each of the periods presented. See the discussion below for more information on each of the excluded items as well as our reasons for excluding them from our non-GAAP results. In future fiscal periods, we may exclude such items and may incur income 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 these items are non-recurring, infrequent, or unusual.

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The following is a summary of the items excluded from the most comparable GAAP financial measures to calculate our non-GAAP financial measures:

Impact of Purchase Accounting — The impact of purchase accounting includes purchase accounting adjustments, related to the EMC merger transaction and the acquisition of Dell Inc. by Dell Technologies Inc. on October 29, 2013, referred to as the going-private transaction, recorded under the acquisition method of accounting ~~related~~in accordance with the accounting guidance for business combinations. This guidance prescribes that the purchase price be allocated to assets acquired and liabilities assumed based on the estimated fair value of such assets and liabilities on the date of the transaction. Accordingly, all of the assets and liabilities acquired in the EMC merger transaction and the going-private ~~transaction. Purchase accounting adjustments primarily include~~transaction were accounted for and recognized at fair value as of the respective transaction dates, and the fair value adjustments ~~made~~are being amortized over the estimated useful lives in the periods following the transactions. The fair value adjustments primarily relate to deferred revenue, inventory, and property, plant, and ~~equipment which~~equipment. The purchase accounting adjustments and related amortization of those adjustments are ~~recorded over time.~~reflected in our GAAP results; however, we evaluate the operating results of the underlying businesses on a non-GAAP basis, after removing such adjustments. We ~~exclude these charges for purposes~~believe that excluding the impact of ~~calculating the non-GAAP financial measures presented below to facilitate a more meaningful evaluation of~~purchase accounting provides results that are useful in understanding our current operating performance and provides more meaningful comparisons to our past operating performance.

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Amortization of Intangible Assets — Amortization of intangible assets primarily consists of amortization of customer relationships, developed technology, and trade names. In connection with the EMC merger transaction and the going-private transaction, all of the tangible and intangible assets and liabilities of EMC and Dell, ~~Technologies~~respectively, were accounted for and recognized at fair value on the transaction ~~date.~~dates. Accordingly, for the periods presented, amortization of intangible assets represents amortization associated with intangible assets recognized in connection with the EMC merger transaction and the going-private transaction. Amortization charges for purchased intangible assets are significantly impacted by the timing and magnitude of our acquisitions, and these charges may vary in amount from period to period. We exclude these charges for purposes of calculating the non-GAAP financial measures presented below to facilitate a more meaningful evaluation of our current operating performance and comparisons to our past operating performance.

Transaction-related Expenses — Transaction-related expenses consist of acquisition, integration, and divestiture related costs, and are expensed as incurred. These expenses primarily represent costs for legal, banking, consulting, and advisory services, as well as certain compensatory retention awards directly related to the EMC merger transaction and related integration.

Other Corporate Expenses — Other corporate expenses consists of severance, facility action costs, and stock-based compensation expense associated with equity awards. Severance costs are primarily related to severance and benefits for employees terminated pursuant to cost savings initiatives. Facility action costs included in the ~~following items:~~


◦	~~Severance and facility action costs primarily related to severance and benefits for employees terminated pursuant to cost savings initiatives.~~


◦	Acquisition, integration, and divestiture related charges which are expensed as incurred and consist primarily of consulting and advisory services and retention payments. During the second quarter and first six months of Fiscal 2017, these charges include $72 million and $128 million, respectively, of operating expenses related to the pending EMC merger.


◦	~~Stock-based compensation expense associated with equity awards.~~

first three months of Fiscal 2018 were $79 million, and we expect to incur these costs over the next nine months as we continue to integrate owned and leased facilities and as we seek opportunities for operational efficiencies and cost savings. Other corporate expenses vary from period to period and are significantly impacted by the timing and nature of these events. Therefore, although we may incur these types of expenses in the future, we believe that eliminating these charges for purposes of calculating the non-GAAP financial measures presented below facilitates a more meaningful evaluation of our current operating performance and comparisons to our past operating performance.

Aggregate Adjustment for Income Taxes — The aggregate adjustment for income taxes is the estimated combined income tax effect for the adjustments ~~mentioned~~described above. During the ~~second~~first quarter ~~and first six months~~ of Fiscal 2017, this ~~amount~~category also includes tax charges of approximately ~~$66~~$135 million ~~and $201 million, respectively,~~ on previously untaxed earnings of a foreign subsidiary that will no longer be permanently reinvested as a result of the Dell Services ~~and DSG divestitures.~~divestiture. The tax effects are determined based on the tax jurisdictions where the above items were incurred.

~~Non-GAAP Adjustments Per Share~~ ~~— This financial measure shows the cumulative impact of the above adjustments on earnings per share - diluted.~~

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The table below presents a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP measure for each of the periods presented:


	Three Months Ended								Six Months Ended								Three Months Ended
	July 29, 2016			% Change		July 31, 2015			July 29, 2016			% Change		July 31, 2015			May 5, 2017		% Change		April 29, 2016
	(in millions, except percentages)																(in millions, except percentages)
Product net revenue	$	10,961		—	%	$	10,938		$	21,144		(1	)%	$	21,462		$	12,968	27	%	$	10,183
Non-GAAP adjustments:
Impact of purchase accounting	—					(8		)	(1		)			(14		)	55				(1		)
Non-GAAP product net revenue	$	10,961		—	%	$	10,930		$	21,143		(1	)%	$	21,448		$	13,023	28	%	$	10,182

Services net revenue	$	2,089		3	%	$	2,037		$	4,119		2	%	$	4,038		$	4,848	136	%	$	2,058
Non-GAAP adjustments:
Impact of purchase accounting	65					131			144					277			300				79
Non-GAAP services net revenue	$	2,154		(1	)%	$	2,168		$	4,263		(1	)%	$	4,315		$	5,148	141	%	$	2,137

Net revenue	$	13,050		1	%	$	12,975		$	25,263		(1	)%	$	25,500		$	17,816	46	%	$	12,241
Non-GAAP adjustments:
Impact of purchase accounting	65					123			143					263			355				78
Non-GAAP net revenue	$	13,115		—	%	$	13,098		$	25,406		(1	)%	$	25,763		$	18,171	48	%	$	12,319

Product gross margin	$	1,466		15	%	$	1,275		$	2,850		17	%	$	2,435		$	1,509	9	%	$	1,384
Non-GAAP adjustments:
Impact of purchase accounting	12					5			24					10			65				12
Amortization of intangibles	101					98			202					197			950				101
Transaction-related expenses																	2				—
Other corporate expenses	1					3			2					4			3				1
Non-GAAP product gross margin	$	1,580		14	%	$	1,381		$	3,078		16	%	$	2,646		$	2,529	69	%	$	1,498

Services gross margin	$	863		7	%	$	804		$	1,666		7	%	$	1,556		$	2,793	245	%	$	809
Non-GAAP adjustments:
Impact of purchase accounting	67					128			144					274			300				77
Amortization of intangibles	—					—			—					—			—				—
Transaction-related expenses																	5				(1		)
Other corporate expenses	(2		)			3			(1		)			4			19				2
Non-GAAP services gross margin	$	928		(1	)%	$	935		$	1,809		(1	)%	$	1,834		$	3,117	251	%	$	887

Gross margin	$	2,329		12	%	$	2,079		$	4,516		13	%	$	3,991		$	4,302	96	%	$	2,193
Non-GAAP adjustments:
Impact of purchase accounting	79					133			168					284			365				89
Amortization of intangibles	101					98			202					197			950				101
Transaction-related expenses																	7				(1		)
Other corporate expenses	(1		)			6			1					8			22				3
Non-GAAP gross margin	$	2,508		8	%	$	2,316		$	4,887		9	%	$	4,480		$	5,646	137	%	$	2,385

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	Three Months Ended								Six Months Ended								Three Months Ended
	July 29, 2016			% Change		July 31, 2015			July 29, 2016			% Change		July 31, 2015			May 5, 2017			% Change		April 29, 2016
	(in millions, except percentages and per share amounts)																(in millions, except percentages)
Operating expenses	$	2,266		4	%	$	2,182		$	4,596		4	%	$	4,405		$	5,802		149	%	$	2,332
Non-GAAP adjustments:
Impact of purchase accounting	(19		)			(21		)	(36		)			(42		)	(58		)			(17		)
Amortization of intangibles	(390		)			(394		)	(780		)			(789		)	(826		)			(390		)
Transaction-related expenses																	(184		)			(58		)
Other corporate expenses	(101		)			(19		)	(180		)			(53		)	(285		)			(21		)
Non-GAAP operating expenses	$	1,756		—	%	$	1,748		$	3,600		2	%	$	3,521		$	4,449		141	%	$	1,846

Operating income (loss)	$	63		161	%	$	(103	)	$	(80	)	81	%	$	(414	)
Operating loss																	$	(1,500	)	(979	)%	$	(139	)
Non-GAAP adjustments:
Impact of purchase accounting	98					154			204					326			423					106
Amortization of intangibles	491					492			982					986			1,776					491
Transaction-related expenses																	191					57
Other corporate expenses	100					25			181					61			307					24
Non-GAAP operating income	$	752		32	%	$	568		$	1,287		34	%	$	959		$	1,197		122	%	$	539

Net loss from continuing operations	$	(264	)	10	%	$	(292	)	$	(690	)	7	%	$	(738	)	$	(1,383	)	(226	)%	$	(424	)
Non-GAAP adjustments:
Impact of purchase accounting	98					154			204					326			423					106
Amortization of intangibles	491					492			982					986			1,776					491
Transaction-related expenses																	191					57
Other corporate expenses	97					22			178					55			307					24
Aggregate adjustment for income taxes	(62		)			(124		)	(52		)			(254		)	(733		)			10
Non-GAAP net income from continuing operations	$	360		43	%	$	252		$	622		66	%	$	375		$	581		120	%	$	264

Earnings (loss) from continuing operations attributable to Dell Technologies Inc. per share - diluted	$	(0.65	)	10	%	$	(0.72	)	$	(1.70	)	7	%	$	(1.82	)
Non-GAAP adjustments per share - diluted	1.52					1.33			3.21					2.73
Non-GAAP earnings from continuing operations attributable to Dell Technologies Inc. per share - diluted	$	0.87		43	%	$	0.61		$	1.51		66	%	$	0.91

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In addition to the above measures, we also use EBITDA and adjusted EBITDA to provide additional information for evaluation of our operating performance. Adjusted EBITDA excludes purchase accounting adjustments related to the EMC merger transaction and the going-private transaction, acquisition, integration, and divestiture-related costs, severance and facility actions, ~~acquisition, integration, and divestiture related costs,~~ and stock-based compensation expense. We believe that, due to the non-operational nature of the purchase accounting entries, it is appropriate to exclude these adjustments. EBITDA and adjusted EBITDA provide more comparability between our historical results prior to the completion of the going-private transaction and historical results that reflect our capital structure upon the completion of the going-private transaction.

As is the case with the non-GAAP measures presented above, users should consider the limitations of using EBITDA and adjusted EBITDA, including the fact that those measures do not provide a complete measure of our operating performance. EBITDA and adjusted EBITDA do not purport to be alternatives to net income (loss) as measures of operating performance or to cash flows from operating activities as a measure of liquidity. In particular, EBITDA and adjusted EBITDA are not intended to be a measure of free cash flow available for ~~management’s~~management's discretionary use, as these measures do not consider certain cash requirements, such as working capital needs, capital expenditures, contractual commitments, interest payments, tax payments, and other debt service requirements.

~~Our management believes that these non-GAAP financial measures are helpful in highlighting trends because they exclude the results~~

Table of decisions that are outside the control of operating management and that can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate, and capital investments.Contents

The table below presents a reconciliation of EBITDA and adjusted EBITDA to net loss from continuing operations for the periods presented:


	Three Months Ended								Six Months Ended								Three Months Ended
	July 29, 2016			% Change		July 31, 2015			July 29, 2016			% Change		July 31, 2015			May 5, 2017			% Change		April 29, 2016
	(in millions, except percentages)																(in millions, except percentages)
Net loss from continuing operations	$	(264	)	10	%	$	(292	)	$	(690	)	7	%	$	(738	)	$	(1,383	)	(226	)%	$	(424	)
Adjustments:
Interest and other, net (a)	349					222			568					397			573					219
Income tax provision (benefit)	(22		)			(33		)	42					(73		)	(690		)			66
Depreciation and amortization	605					622			1,223					1,244			2,212					618
EBITDA	$	668		29	%	$	519		$	1,143		38	%	$	830		$	712		49	%	$	479

EBITDA	$	668		29	%	$	519		$	1,143		38	%	$	830		$	712		49	%	$	479
Adjustments:
Stock based compensation expense	19					14			33					29
Stock-based compensation expense																	201					14
Impact of purchase accounting (b)	75					128			158					274			357					83
Othercorporate expenses (c)	118					12			185					32
Transaction-related expenses (c)																	191					57
Other corporate expenses (d)																	106					10
Adjusted EBITDA	$	880		31	%	$	673		$	1,519		30	%	$	1,165		$	1,567		144	%	$	643

________________


(a)	See "Results of Operations — Interest and Other, Net" for more information on the components of interest and other, net.


(b)	This amount includes the non-cash purchase accounting adjustments related to the EMC merger transaction and the going-private transaction.


(c)	Transaction-related expenses consist of acquisition, integration, and divestiture related costs.


(d)	Consists of severance and facility action ~~costs and acquisition, integration, and divestiture related~~ costs.

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RESULTS OF OPERATIONS

Consolidated Results

The following table summarizes our consolidated results from continuing operations for each of the ~~second quarter and first six months of July 29, 2016 and July 31, 2015.~~periods presented. Unless otherwise indicated, all changes identified for the current-period results represent comparisons to results for the prior corresponding fiscal period.


	Three Months Ended												Six Months Ended												Three Months Ended
	July 29, 2016							July 31, 2015					July 29, 2016							July 31, 2015					May 5, 2017						April 29, 2016
	Dollars			% of Net Revenue		% Change		Dollars			% of Net Revenue		Dollars			% of Net Revenue		% Change		Dollars			% of Net Revenue		Dollars			% of Net Revenue		% Change	Dollars			% of Net Revenue
	(in millions, except percentages and per share amounts)																								(in millions, except percentages)
Net revenue:
Product	$	10,961		84.0	%	—	%	$	10,938		84.3	%	$	21,144		83.7	%	(1	)%	$	21,462		84.2	%	$	12,968		72.8	%	27%	$	10,183		83.2	%
Services, including software related	2,089			16.0	%	3	%	2,037			15.7	%	4,119			16.3	%	2	%	4,038			15.8	%
Services																									4,848			27.2	%	136%	2,058			16.8	%
Total net revenue	$	13,050		100.0	%	1	%	$	12,975		100.0	%	$	25,263		100.0	%	(1	)%	$	25,500		100.0	%	$	17,816		100.0	%	46%	$	12,241		100.0	%
Gross margin:
Product	$	1,466		13.4	%	15	%	$	1,275		11.7	%	$	2,850		13.5	%	17	%	$	2,435		11.3	%
Services, including software related	863			41.3	%	7	%	804			39.5	%	1,666			40.4	%	7	%	1,556			38.5	%
Product (a)																									$	1,509		11.6	%	9%	$	1,384		13.6	%
Services (b)																									2,793			57.6	%	245%	809			39.3	%
Total gross margin	$	2,329		17.8	%	12	%	$	2,079		16.0	%	$	4,516		17.9	%	13	%	$	3,991		15.7	%	$	4,302		24.1	%	96%	$	2,193		17.9	%
Operating expenses	2,266			17.4	%	4	%	2,182			16.8	%	4,596			18.2	%	4	%	4,405			17.3	%	$	5,802		32.6	%	149%	$	2,332		19.1	%
Operating income (loss)	$	63		0.5	%	161	%	$	(103	)	(0.8	)%	$	(80	)	(0.3	)%	81	%	$	(414	)	(1.6	)%
Operating loss																									$	(1,500	)	(8.4	)%	(979)%	$	(139	)	(1.1	)%
Net loss from continuing operations	$	(264	)	(2.0	)%	10	%	$	(292	)	(2.3	)%	$	(690	)	(2.7	)%	7	%	$	(738	)	(2.9	)%	$	(1,383	)	(7.8	)%	(226)%	$	(424	)	(3.5	)%
Earnings (loss) from continuing operations attributable to Dell Technologies Inc. per share - diluted	$	(0.65	)	N/A		10	%	$	(0.72	)	N/A		$	(1.70	)	N/A		7	%	$	(1.82	)	N/A
Net loss attributable to Dell Technologies Inc.																									$	(1,334	)	(7.5	)%	NM	$	55		0.4	%

Other Financial Information
Non-GAAP net revenue	$	13,115		N/A		—	%	$	13,098		N/A		$	25,406		N/A		(1	)%	$	25,763		N/A
Non-GAAP gross margin	$	2,508		19.1	%	8	%	$	2,316		17.7	%	$	4,887		19.2	%	9	%	$	4,480		17.4	%
Non-GAAP net revenue:
Product																									$	13,023		71.7	%	28%	$	10,182		82.7	%
Services																									5,148			28.3	%	141%	2,137			17.3	%
Total non-GAAP net revenue																									$	18,171		100.0	%	48%	$	12,319		100.0	%
Non-GAAP gross margin:
Product (a)																									$	2,529		19.4	%	69%	$	1,498		14.7	%
Services (b)																									3,117			60.5	%	251%	887			41.5	%
Total non-GAAP gross margin																									$	5,646		31.1	%	137%	$	2,385		19.4	%
Non-GAAP operating expenses	$	1,756		13.4	%	—	%	$	1,748		13.3	%	$	3,600		14.2	%	2	%	$	3,521		13.7	%	$	4,449		24.5	%	141%	$	1,846		15.0	%
Non-GAAP operating income	$	752		5.7	%	32	%	$	568		4.3	%	$	1,287		5.1	%	34	%	$	959		3.7	%	$	1,197		6.6	%	122%	$	539		4.4	%
Non-GAAP net income from continuing operations	$	360		2.7	%	43	%	$	252		1.9	%	$	622		2.4	%	66	%	$	375		1.5	%	$	581		3.2	%	120%	$	264		2.1	%
EBITDA	$	668		5.1	%	29	%	$	519		4.0	%	$	1,143		4.5	%	38	%	$	830		3.2	%	$	712		3.9	%	49%	$	479		3.9	%
Adjusted EBITDA	$	880		6.7	%	31	%	$	673		5.1	%	$	1,519		6.0	%	30	%	$	1,165		4.5	%	$	1,567		8.6	%	144%	$	643		5.2	%
Non-GAAP earnings from continuing operations attributable to Dell Technologies Inc. per share - diluted	$	0.87		N/A		43	%	$	0.61		N/A		$	1.51		N/A		66	%	$	0.91		N/A

____________________


(a)	Product gross margin percentages represent product gross margin as a percentage of product net revenue, and non-GAAP product gross margin as a percentage of non-GAAP product net revenue.


(b)	Services gross margin percentages represent services gross margin as a percentage of services net revenue, and non-GAAP services gross margin as a percentage of non-GAAP services net revenue.


NM	Not meaningful.

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reasons for including these 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.

As a result of the EMC merger transaction completed on September 7, 2016 and its impact on the first quarter of Fiscal 2018, our results for the fiscal periods discussed below are not directly comparable.

Overview

During the ~~second~~first quarter ~~and first six months~~ of Fiscal ~~2017,~~2018, our net revenue and non-GAAP net revenue ~~were relatively unchanged. Client Solutions~~increased 46% and 48%, respectively. The increase in net revenue and non-GAAP net revenue was primarily attributable to revenue from the EMC acquired businesses and, to a lesser extent, an increase in revenue from CSG. The EMC merger transaction had an impact on the mix of revenue contributed by our business units. CSG net revenue represented approximately 50% of our net revenue during the first quarter of Fiscal 2018. In comparison, CSG net revenue represented a higher proportion of our revenue prior to the EMC merger transaction, accounting for approximately 70% of our ~~total~~ net revenue ~~for both~~during the ~~second quarter and~~ first ~~six months of Fiscal 2017 and Fiscal 2016.~~

~~During the second~~ quarter of Fiscal ~~2017, our operating income was $0.1 billion, compared to an operating loss of $0.1 billion during the second quarter of Fiscal 2016.~~ 2017.

During the first ~~six months~~quarters of Fiscal 2018 and Fiscal 2017, our operating loss was $1.5 billion and $0.1 billion, ~~compared~~respectively. The increase in our operating loss for the first quarter of Fiscal 2018 was primarily attributable to an increase in amortization of intangible assets and purchase accounting adjustments related to the EMC merger transaction, as well as an increase in compensation and benefits expense as a result of growth in our headcount. The impact of the increase in operating expenses was partially offset by the favorable impact of gross margin from the EMC acquired businesses.

Our operating loss ~~of $0.4 billion~~ ~~during the first six months of Fiscal 2016. Our operating income includes~~was impacted by purchase accounting adjustments associated with the EMC merger transaction and the going-private transaction, amortization of intangible assets, ~~costs related to acquisition, integration, and divestitures,~~transaction-related expenses, and other corporate expenses. In aggregate, these items totaled ~~$0.7~~$2.7 billion and ~~$1.4~~$0.7 billion for the ~~second quarter~~first quarters of Fiscal 2018 and ~~first six months of~~ Fiscal 2017, respectively. ~~Non-GAAP~~Excluding these adjustments, non-GAAP operating income increased ~~32%~~122% to ~~$0.8 billion during the second quarter of Fiscal 2017, and 34% to $1.3~~$1.2 billion during the first ~~six months~~quarter of Fiscal ~~2017.~~2018. The ~~increases~~increase in ~~operating income and~~ non-GAAP operating income ~~were~~in the first quarter of Fiscal 2018 was primarily attributable to ~~higher gross margins, partially offset by increases in~~the favorable impact of non-GAAP operating ~~expenses driven by compensation and benefits costs due to increased investment in sales capabilities, marketing costs, and outside services associated with~~income from the ~~pending~~ EMC ~~merger transaction.~~acquired businesses, particularly VMware.

Cash provided by operating activities was ~~$1.8 billion and $0.7~~$0.2 billion during the first ~~six months~~quarter of Fiscal ~~2017 and Fiscal 2016, respectively. The improvement in~~2018. Positive operating cash flows ~~was primarily attributable to~~were driven by profitability, ~~and favorable changes~~particularly in working capital attributable to extending payment terms with certain suppliers. The terms of our supplier arrangements will continue to evolve as we close the EMC merger transaction and integrate the businesses.VMware. See "Market Conditions, Liquidity, and Capital Commitments" for further information on our cash flow metrics.

Net Revenue

During the ~~second~~first quarter of Fiscal ~~2017,~~2018, our net revenue increased ~~1%. Client Solutions and ESG~~46% primarily due to revenue from the EMC acquired businesses, offset partially by an increase in purchase accounting adjustments as a result of the EMC merger transaction. Our non-GAAP net revenue ~~was relatively unchanged~~increased 48% during the ~~second~~first quarter of Fiscal ~~2017, but~~2018, primarily due to the impact from the EMC acquired businesses. An increase of 6% in CSG net revenue also contributed to higher net revenue and non-GAAP net revenue during the ~~current quarter benefited from the lower impact of purchase accounting adjustments related to the going-private transaction. Non-GAAP net revenue during the second~~first quarter of Fiscal ~~2017 remained relatively unchanged. In comparison, during the first six months of Fiscal 2017, our net revenue and non-GAAP revenue both decreased 1%, primarily as~~2018, but to a ~~result of lower commercial revenue in our~~lesser extent. See "Business Unit Results — Client Solutions ~~business.~~Group" for further information.

Product Net Revenue — Product net revenue includes revenue from the sale of hardware products and ~~Dell-owned~~Dell Technologies-owned software licenses. During the ~~second~~first quarter of Fiscal ~~2017,~~2018, product net revenue increased 27% and non-GAAP product net revenue ~~was relatively unchanged. During~~increased 28% primarily due to the ~~first six months of Fiscal 2017, product revenue and non-GAAP product revenue decreased 1%. Client Solutions contributed to most of~~impact from the ~~decrease in product revenue during the first six months of Fiscal 2017.~~EMC acquired businesses.

Services Net Revenue ~~including software related~~ — Services net revenue ~~including software related,~~ includes revenue from our services offerings, third-party software ~~revenue,~~license sales, and support services related to ~~Dell-owned software.~~Dell Technologies-owned software and hardware. During the ~~second~~first quarter ~~and the first six months~~ of Fiscal ~~2017,~~2018, services net revenue ~~attributable to these~~increased 136% and non-GAAP services net revenue increased ~~3% and 2%, respectively, which was~~141% primarily ~~attributable~~due to the ~~diminishing negative~~ impact ~~of purchase accounting adjustments. These adjustments were $65 million and $144 million in~~from the second quarter and first six months of Fiscal 2017, respectively, compared to $131 million and $277 million in the second quarter and first six months of Fiscal 2016, respectively. Non-GAAP net revenue attributable to services, including software related, decreased 1% during both the second quarter and first six months of Fiscal 2017.EMC acquired businesses.

See ~~"Products and Services Business Units"~~"Business Unit Results" for further information regarding revenue from our products, services, and software offerings.

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From a geographical perspective, net revenue generated by sales to customers in ~~the Americas~~all regions increased during the ~~second~~first quarter ~~and first six months~~ of Fiscal ~~2017~~2018 primarily ~~due to growth in sales to customers~~as a result of the impact from the EMC acquired businesses. Our mix of revenues generated in the ~~United States. Net revenue generated by sales to customers in~~Americas, EMEA, and APJ ~~decreased throughout~~did not change substantially as a result of the ~~two regions.~~

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EMC merger transaction.

Gross Margin

During the ~~second~~first quarter ~~and first six months~~ of Fiscal ~~2017,~~2018, our ~~total~~ gross margin increased ~~12%~~96% to ~~$2.3~~$4.3 billion, and ~~13% to $4.5 billion, respectively. During the second quarter and first six months of Fiscal 2017,~~ our gross margin percentage increased ~~180~~620 basis points to ~~17.8%, and 220 basis points to 17.9%, respectively. During the second quarter and first six months of Fiscal 2017,~~24.1%. The increase in our ~~total non-GAAP~~ gross margin ~~increased 8% to $2.5 billion~~ and ~~9% to $4.9 billion, respectively. During the second quarter and first six months of Fiscal 2017 our non-GAAP~~ gross margin percentage ~~increased 140 basis points~~was primarily attributable to ~~19.1%~~incremental gross margin from the EMC acquired businesses, which had higher gross margin percentages. This increase was partially offset by the higher impact of purchase accounting and ~~180 basis points to 19.2%, respectively.~~ amortization of intangibles as a result of the EMC merger transaction.

Our gross ~~margins~~margin for ~~the second quarter and first six months of~~ Fiscal ~~2017~~2018 included the effect of ~~$0.2~~$1.3 billion ~~and $0.4 billion, respectively,~~ of purchase accounting adjustments and amortization of intangibles related to the EMC merger transaction and the going-private transaction. In comparison, ~~these impacts were~~the impact of purchase accounting and amortization of intangibles totaled $0.2 ~~billion and $0.5~~ billion in the ~~second~~first quarter ~~and first six months of Fiscal 2016.~~

~~During the second quarter and first six months~~ of Fiscal 2017, and in this period related only to the going-private transaction. Excluding these costs, transaction-related expenses and other corporate expenses, non-GAAP gross margin increased 137% to $5.6 billion and our non-GAAP gross margin percentage increased 1,170 basis points to 31.1%. The increase in our ~~total~~non-GAAP gross margin ~~in dollars~~ and ~~percentages~~non-GAAP gross margin percentage was primarily ~~attributable~~due to ~~improved product~~the impact from the EMC acquired businesses, which had higher gross ~~margins in our Client Solutions business, which benefited from a favorable cost position. We will continue to manage our cost position and pricing discipline in the prevailing demand environment.~~margin percentages.

Products — During the ~~second~~first quarter of Fiscal ~~2017,~~2018, product gross margin ~~dollars~~ increased ~~15%~~9% to $1.5 billion, and product gross margin percentage decreased 200 basis points to 11.6%. The increase in product gross margin was driven primarily by additional product gross margin from the EMC acquired businesses, which was largely offset by an increase in amortization of intangibles related to the EMC merger transaction. The decrease in product gross margin percentage was primarily driven by an increase in amortization of intangibles and, to a lesser extent, a decrease in CSG product gross margin.

During the first quarter of Fiscal 2018, non-GAAP product gross margin ~~dollars~~ increased ~~14%. Product gross margin percentage increased 170 basis points~~69% to ~~13.4% during the second quarter of Fiscal 2017, while~~$2.5 billion, and non-GAAP product gross margin percentage increased ~~180~~470 basis points to ~~14.4% during the second quarter of Fiscal 2017.~~

~~During the first six months of Fiscal 2017, product gross margin dollars increased 17% and~~19.4%. The increase in non-GAAP product margin dollars increased 16%. Product gross margin percentage increased 220 basis points to 13.5% during the first six months of Fiscal 2017, while non-GAAP product gross margin percentage increased 230 basis points to 14.6% during the first six months of Fiscal 2017.

~~The increases in~~ product gross margin and non-GAAP product gross margin ~~in dollars and percentages~~percentage were primarily attributable to ~~an increase in Client Solutions gross margin.~~

~~Subsequent to~~ the ~~second quarter of Fiscal 2017, on August 17, 2016, we entered into a settlement agreement with a vendor to resolve a dispute regarding past pricing practices. Our~~incremental product gross margin ~~for~~from the third quarter of Fiscal 2017 is expected to include a benefit of $88 million related to receipt of this settlement. Vendor settlements are allocated to our segments based on the relative amount of affected vendor products sold by each segment.EMC acquired businesses, which had higher gross margin percentages.

Services ~~including software related~~ — During the ~~second~~first quarter of Fiscal ~~2017,~~2018, our services gross margin ~~dollars for services, including software related,~~ increased ~~7%,~~245% to $2.8 billion, and our services gross margin percentage increased ~~180~~1,830 basis points to ~~41.3%~~57.6%. The increase in services gross margin ~~dollars and percentage~~ was primarily attributable to gross margin from the ~~diminishing negative impact of purchase~~EMC acquired businesses. Purchase accounting adjustments ~~which~~ totaled ~~$67 million in~~$0.3 billion during the ~~second~~first quarter of Fiscal ~~2017,~~2018, compared to ~~$128 million in~~$0.1 billion during the ~~second~~first quarter of Fiscal ~~2016. Non-GAAP~~2017. Excluding these costs, transaction-related expenses and other corporate expenses, non-GAAP gross margin dollars for services ~~including software related, decreased 1% during the second quarter of Fiscal 2017, while non-GAAP services gross margin percentage remained unchanged at 43.1%.~~

~~During the first six months of Fiscal 2017, our gross margin dollars for services, including software related,~~ increased 7%251% to $3.1 billion and services gross margin percentage increased ~~190~~1,900 basis points to ~~40.4%~~60.5%. The increase in services gross margin dollars and percentage was primarily attributable to the diminishing negative impact of purchase accounting adjustments, which totaled $128 million in the second quarter of Fiscal 2017, compared to $274 million in the second quarter of Fiscal 2016. During the first six months of Fiscal 2017, non-GAAP gross margin dollars for services, including software related, decreased 1% and services gross margin percentage decreased 10 basis points to 42.4%.

Vendor Programs and Settlements

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. We account for vendor rebates and other discounts as a

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reduction in cost of net revenue. We manage our costs on a total net cost basis, which includes supplier list prices reduced by vendor rebates and other discounts.

The terms and conditions of our vendor rebate programs are largely based on product volumes and are generally negotiated either at the beginning of the annual or quarterly period, depending on the program. The timing and amount of vendor rebates and other discounts we receive under the programs may vary from period to period, reflecting changes in the competitive environment. 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 ~~second quarter and~~ first ~~six months~~quarters of Fiscal ~~2017~~2018 and Fiscal ~~2016~~2017 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 or rebate programs that may impact our results in the near term.

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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.~~periods. These settlements are allocated to our segments based on the relative amount of affected vendor products ~~used~~sold by each segment. No such settlements were recorded in the ~~second~~first quarter ~~or first six months~~ of Fiscal ~~2017~~2018 that would have a material impact on product gross margins in ~~those periods,~~the current quarter or affect comparability with product gross margin in the ~~second~~first quarter ~~or first six months~~ of Fiscal ~~2016.~~2017.

Operating Expenses

The following table presents information regarding our operating expenses during each of the periods presented:


	Three Months Ended										Six Months Ended										Three Months Ended
	July 29, 2016						July 31, 2015				July 29, 2016						July 31, 2015				May 5, 2017					April 29, 2016
	Dollars		% of Net Revenue		% Change		Dollars		% of Net Revenue		Dollars		% of Net Revenue		% Change		Dollars		% of Net Revenue		Dollars		% of Net Revenue		% Change	Dollars		% of Net Revenue
	(in millions, except percentages)																				(in millions, except percentages)
Operating expenses:
Selling, general, and administrative	$	2,020	15.5	%	5	%	$	1,932	14.9	%	$	4,086	16.2	%	5	%	$	3,900	15.3	%	$	4,669	26.2	%	126%	$	2,068	16.9	%
Research, development, and engineering	246		1.9	%	(2	)%	250		1.9	%	510		2.0	%	1	%	505		2.0	%
Research and development																					1,133		6.4	%	329%	264		2.2	%
Total operating expenses	$	2,266	17.4	%	4	%	$	2,182	16.8	%	$	4,596	18.2	%	4	%	$	4,405	17.3	%	$	5,802	32.6	%	149%	$	2,332	19.1	%

Other Financial Information	Other Financial Information
Non-GAAP operating expenses	$	1,756	13.4	%	—	%	$	1,748	13.3	%	$	3,600	14.2	%	2	%	$	3,521	13.7	%	$	4,449	24.5	%	141%	$	1,846	15.0	%

During ~~both~~ the ~~second~~first quarter ~~and first six months~~ of Fiscal ~~2017,~~2018, our total operating expenses increased 4%149%. ~~During~~The increase in total operating expenses was primarily due to incremental operating costs of the ~~second quarter~~EMC acquired businesses. Our operating expenses include the impact of ~~Fiscal 2017~~purchase accounting associated with the EMC merger transaction and ~~first six months of Fiscal 2017, we recognized $409 million and $816 million, respectively, in~~the going-private transaction, amortization of intangible assets, transaction-related expenses, and ~~purchase accounting adjustments related to the going-private transaction.~~other corporate expenses. In ~~comparison, during the second quarter~~aggregate, these items totaled $1.4 billion and ~~first six months of~~$0.5 billion for Fiscal ~~2016, we recognized $415 million~~2018 and ~~$831 million,~~Fiscal 2017, respectively. Excluding these costs, ~~as well as other corporate expenses,~~ total non-GAAP operating expenses ~~were relatively unchanged during~~increased 141% primarily due to the ~~second quarter and increased 2% during~~impact from the ~~first six months of Fiscal 2016.~~EMC acquired businesses.

Selling, General, and Administrative — Selling, general, and administrative ~~expenses, or~~ ("SG&A&A") expenses increased 5%126% during ~~both~~ the ~~second~~first quarter ~~and first six months~~ of Fiscal ~~2017.~~2018. The increases in SG&A expenses were primarily driven by ~~compensation and benefits~~incremental operating costs ~~due to increased investment in sales capabilities, marketing costs, and outside services associated with~~of the ~~pending~~ EMC ~~merger transaction.~~acquired businesses.

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Research ~~Development,~~ and ~~Engineering~~Development — Research and development ~~and engineering expenses, or RD&E~~("R&D") expenses are primarily composed of personnel-related expenses related to product development. ~~RD&E~~R&D expenses were approximately ~~1.9% of net revenues for both the second quarter of Fiscal 2017~~6.4% and ~~Fiscal 2016, compared to 2.0%~~2.2% of net revenue for ~~both~~ the first ~~six months~~quarters of Fiscal ~~2017~~2018 and Fiscal ~~2016.~~2017, respectively. The increases in R&D expenses were attributable to the expansion of our R&D capability through the EMC merger transaction. As our industry continues to change and as the needs of our customers evolve, we intend to support R&D initiatives to innovate and introduce new and enhanced solutions into the market.

We will continue to ~~maintain~~balance our efforts to drive cost ~~discipline while investing~~efficiencies in the business with strategic investments in areas that will enable growth, such as our sales force, marketing, and ~~RD&E.~~R&D.

Operating Income/Loss

~~During the second quarter of Fiscal 2017, our operating income was $0.1 billion, compared to an~~Our operating loss ofwas $1.5 billion and $0.1 billion during the ~~second quarter~~first quarters of Fiscal ~~2016. During the first six months of~~2018 and Fiscal 2017, ~~our~~respectively. The increase in operating loss was ~~$0.1 billion, compared~~primarily attributable to anhigher operating expenses, partially offset by increases in gross margin. Our operating loss ~~of $0.4 billion during~~includes the ~~first six months~~impact of ~~Fiscal 2016. Our operating income includes~~ purchase accounting ~~adjustments~~ associated with the EMC merger transaction and the going-private transaction, amortization of intangible assets, ~~costs related to acquisition, integration,~~transaction-related expenses, and ~~divestitures, as well as~~ other corporate expenses. In aggregate, these items totaled ~~$0.7~~$2.7 billion and ~~$1.4~~$0.7 billion for the ~~second quarter~~first quarters of Fiscal 2018 and ~~first six months of~~ Fiscal 2017, respectively. ~~On a~~Excluding these costs, non-GAAP ~~basis,~~ operating income increased ~~32%~~122% to ~~$0.8~~$1.2 billion during ~~the second quarter~~Fiscal 2018. The increase in non-GAAP

Table of ~~Fiscal 2017 and 34% to $1.3 billion during the first six months of Fiscal 2017. The increases in~~ Contents

operating income ~~and non-GAAP operating income were~~was primarily attributable to ~~higher~~an increase in gross ~~margins,~~margin, which was partially offset by ~~increases in~~higher operating ~~expenses.~~expenses from the EMC acquired businesses.

Interest and Other, Net

The following table provides ~~a detailed presentation of~~ information regarding interest and other, net for each of the periods presented:


	Three Months Ended						Six Months Ended						Three Months Ended
	July 29, 2016			July 31, 2015			July 29, 2016			July 31, 2015			May 5, 2017			April 29, 2016
	(in millions)												(in millions)
Interest and other, net:
Investment income, primarily interest	$	15		$	10		$	24		$	21		$	38		$	9
Gain (loss) on investments, net	2			—			2			(3		)	(1		)	—
Interest expense	(352		)	(171		)	(515		)	(349		)	(597		)	(163		)
Foreign exchange	(13		)	(47		)	(54		)	(47		)	(27		)	(42		)
Other	(1		)	(14		)	(25		)	(19		)	14			(23		)
Total interest and other, net	$	(349	)	$	(222	)	$	(568	)	$	(397	)	$	(573	)	$	(219	)

During the ~~second~~first quarter of Fiscal ~~2017,~~2018, changes in interest and other, net were unfavorable by ~~$127 million,~~$0.4 billion, primarily due to an increase in interest expense from higher average debt balances from debt issued in connection with the pending EMC merger transaction. The increase in interest expense was partially offset by a decrease in foreign exchange losses attributable to a decrease in trading costs and certain revaluations of un-hedged foreign currencies. Other expenses included the recognition of a benefit of approximately $5 million representing the fair value adjustment on the common stock purchase agreement with Temasek entered into in connection with the pending EMC merger transaction. See Note 37 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements included in this report for further information regarding ~~the common stock purchase agreement.~~

During the first six months of Fiscal 2017, changes in interest and other, net were unfavorable by $171 million when compared to the same period in Fiscal 2016. Overall, this change was attributable to an increase in interest expense, driven by higher debt balances over the period. Other expenses included the recognition of approximately $11 million of expense representing the fair value adjustment on the common stock purchase agreement with Temasek entered into in connection with the pending EMC merger transaction.our debt.

Income and Other Taxes

~~For the second quarter and first six months of Fiscal 2017, the Company's~~Our effective income tax ~~rate~~rates for continuing operations ~~was 7.7%~~were 33.3% and ~~-6.5%~~(18.4)% on pre-tax losses from continuing operations of ~~$286 million~~$2.1 billion and ~~$648 million, respectively. In~~

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~~comparison,~~$0.4 billion for the ~~second quarter and~~ first ~~six months~~quarters of Fiscal ~~2016, the Company's effective income tax rates were 10.2%~~2018 and ~~9.0% on pre-tax losses from continuing operations of $325 million and $811 million,~~Fiscal 2017, respectively. The change in our effective income tax rate for the ~~Company's provision for income taxes~~first quarter of Fiscal 2018 was primarily attributable to prior year tax charges ~~on previously untaxed earnings of foreign subsidiaries that will no longer be permanently reinvested as a result of~~recognized in the ~~Dell Services and DSG divestitures. These tax charges were $66 million and $201 million for the second~~first quarter ~~and first six months~~ of Fiscal 2017 ~~respectively. Off-setting these tax charges were increased~~relating to the divestiture of Dell Services, as well as tax benefits from ~~interest expense~~charges associated with the EMC merger transaction incurred in the ~~United States for debt related to the EMC merger.~~first quarter of Fiscal 2018, including purchase accounting adjustments, interest charges, and stock-based compensation expense. See Note 2 ~~and Note 5~~ of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements included in this report for more information on the ~~divestitures and the~~ EMC merger ~~financing.~~transaction. The income tax rate for future quarters of Fiscal ~~2017~~2018 will be impacted by the actual mix of jurisdictions in which income is generated.

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 United States. 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. A significant portion of these income tax benefits ~~is related~~relate to a tax holiday that ~~will expire on December 31, 2016. We have negotiated new terms for the affected subsidiary, which provides for a reduced income tax rate and will be effective for a two-year bridge period expiring~~expires in January 2019. Our other tax holidays will expire in whole or in part during Fiscal 2019 through Fiscal 2023. 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 differences between our effective tax rate and the U.S. federal statutory rate of 35% principally resulted from the geographical distribution of taxable income discussed above and permanent differences between the book and tax treatment of certain items. We continue to assess our business model and its impact in various taxing jurisdictions.

For further discussion regarding tax matters, including the status of income tax audits, see Note 1013 and Note 21 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements included in this report.

Net Income/Loss from Continuing Operations

During the ~~second~~first quarter ~~and first six months~~ of Fiscal ~~2017,~~2018, net loss from continuing operations ~~decreased 10%~~increased 226% to a net loss of ~~$264 million and 7% to a~~$1.4 billion. The increase in net loss ~~of $690 million, respectively. The changes in net income/loss~~from continuing operations for the ~~second~~first quarter ~~and first six months~~ of Fiscal ~~2017 were~~2018 was primarily attributable to an increase in operating ~~income, which was offset by~~loss and to an increase in interest and other, net ~~expense due to higher interest from new debt issued during the second quarter in connection with the pending EMC merger transaction. For the first six months~~expense. The effect of ~~Fiscal 2017,~~these factors was partially offset by an increase in tax ~~expense also partially offset higher operating income over~~benefit during the period. See Note 1013 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements included in this report for more information regarding our effective tax rate.

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Net loss from continuing operations for the ~~second~~first quarter ~~and first six months~~ of Fiscal ~~2017~~2018 included amortization of intangible assets, the impact of purchase accounting, ~~adjustments, costs related to acquisition, integration, and divestitures,~~transaction-related expenses, and other corporate expenses. Excluding these costs, ~~during the second quarter and first six months of Fiscal 2017,~~ non-GAAP net income from continuing operations increased ~~43%~~120% to ~~$360 million, and 66% to $622 million, respectively.~~$0.6 billion during the first quarter of Fiscal 2018. The ~~changes~~increase in non-GAAP net ~~income/loss for~~income from continuing operations during the ~~second~~first quarter ~~and first six months~~ of Fiscal ~~2017 were~~2018 was primarily attributable to an increase in operating income, the effect of which was partially offset by an increase in interest and other, net ~~expense due~~expense.

Non-controlling Interests

During the first quarter of Fiscal 2018, net loss attributable to ~~higher~~the non-controlling interests was $49 million. Net loss attributable to the non-controlling interests was primarily attributable to the net loss attributable to the non-controlling interest ~~from new debt issued during~~in VMware, Inc. of $45 million. During the ~~second~~first quarter of Fiscal 2017, Dell Technologies had an immaterial amount of non-controlling interest related to SecureWorks, which completed a registered underwritten initial public offering of its Class A common stock on April 27, 2016. For more information about our non-controlling interests, see Note 15 of the Notes to the Condensed Consolidated Financial Statements included in ~~connection with the pending EMC merger transaction.~~this report.

Net Income/Loss Attributable to Dell Technologies Inc.

Net ~~income/~~loss attributable to Dell Technologies Inc. represents net income/loss from continuing operations, ~~plus the reduction of net income/loss attributable to~~and an adjustment for non-controlling ~~interest.~~interests, and, in Fiscal 2017, an adjustment for discontinued operations. During the ~~second~~first quarter ~~and first six months~~ of Fiscal ~~2017, the~~2018, net loss attributable to Dell Technologies Inc. was $1.3 billion, compared to a $0.1 billion net gain attributable to Dell Technologies Inc. during the ~~non-controlling interest in SecureWorks was $1 million. During the second~~first quarter ~~and first six months~~ of Fiscal ~~2016,~~2017. This increase in net loss attributable to Dell Technologies ~~did not have any non-controlling interests.~~Inc. was primarily attributable to an increase in net loss from continuing operations and the absence of an adjustment for income from discontinued operations. For more information ~~about~~regarding our ~~non-controlling interest~~discontinued operations, see Note 123 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements included in this report.

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~~Product and Services~~ Business Unit Results

~~The Company's~~Our reportable segments are based on the following ~~product and services~~ business units: Client Solutions ~~and Enterprise~~Group ("CSG"); Infrastructure Solutions Group ~~or ESG.~~("ISG"); and VMware. A description of our ~~two~~three business units is provided under "Introduction." See Note 1519 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements included in this report for a reconciliation of net revenue and operating income by reportable segment to consolidated net ~~revenue.~~revenue and consolidated operating income, respectively.

Client ~~Solutions:~~

~~The following table presents net revenue and operating income attributable to Client Solutions for the respective periods:~~

Three Months Ended Six Months Ended
July 29,
2016 % Change July 31,
2015 July 29,
2016 % Change July 31,
2015
(in millions, except percentages)
Net Revenue (a):
Commercial $ 6,798
(2 )% $ 6,913
$ 12,943
(3 )% $ 13,341
Consumer 2,422
4 % 2,322
4,848
2 % 4,763
Total Client Solutions net revenue $ 9,220
— % $ 9,235
$ 17,791
(2 )% $ 18,104

Operating Income:
Client Solutions operating income $ 484
50 % $ 323
$ 869
60 % $ 542
% of segment net revenue 5.2 % 3.5 % 4.9 % 3.0 %

~~____________________~~


~~(a)~~	In the first quarter of Fiscal 2017, we redefined the categories within the Client Solutions business unit. None of these changes impacted our consolidated or total business unit results. Prior period amounts have been recast to provide comparability.

~~Net Revenue~~— During the second quarter of Fiscal 2017, Client Solutions net revenue was relatively unchanged as the decrease in commercial net revenue was offset by the increase in consumer net revenue. The decrease in commercial net revenue was primarily attributable to a decline in demand for desktops and an overall decrease in average selling prices. The increase in consumer net revenue was driven by an increase in notebook units sold, partially offset by an overall decrease in average selling prices. Both commercial and consumer experienced an overall decline in average selling prices as we strategically managed our pricing position given the favorable cost environment.

From a geographical perspective, net revenue attributable to Client Solutions decreased in EMEA and APJ during the second quarter of Fiscal 2017, mostly offset by an increase in net revenue in the Americas.

During the first six months of Fiscal 2017, Client Solutions net revenue decreased 2%. The decrease in commercial net revenue was partially offset by the increase in consumer. The decrease in commercial net revenue was attributable to an overall decrease in average selling prices, while demand was relatively unchanged. The increase in consumer net revenue was primarily driven by an increase in notebook units sold, partially offset by an overall decrease in average selling prices. Both commercial and consumer experienced an overall decline in average selling prices as we strategically managed our pricing position given the favorable cost environment.

From a geographical perspective, net revenue attributable to Client Solutions decreased in EMEA and APJ during the first six months of Fiscal 2017, partially offset by an increase in net revenue in the Americas.

~~Operating Income~~— During the second quarter of Fiscal 2017, operating income as a percentage of net revenue attributable to Client Solutions increased 170 basis points to 5.2%. This increase was primarily driven by an increase in our gross margin percentage, which was principally the result of a favorable cost position.

During the first six month of Fiscal 2017, operating income as a percentage of net revenue attributable to Client Solutions increased 190 basis points to 4.9%. This increase was driven by an improvement in our gross margin percentage, offset

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partially by an increase in our operating expense percentage. The improvement in our gross margin percentage was primarily a result of a favorable cost position, partially offset by a decline in net revenue due to a decrease in average selling prices. Operating expenses as a percentage of net revenue increased over the period as a result of investments in our sales force.

~~Enterprise~~ Solutions Group:

The following table presents net revenue and operating income attributable to ~~ESG~~CSG for the respective periods:

Three Months Ended Six Months Ended
July 29,
2016 % Change July 31,
2015 July 29,
2016 % Change July 31,
2015
(in millions, except percentages)
Net Revenue:
Servers and networking $ 3,237
1 % $ 3,212
$ 6,312
(1 )% $ 6,364
Storage 542
(3 )% 557
1,080
(2 )% 1,107
Total ESG net revenue $ 3,779
— % $ 3,769
$ 7,392
(1 )% $ 7,471

Operating Income:
ESG operating income $ 300
7 % $ 280
$ 492
(5 )% $ 519
% of segment net revenue 7.9 % 7.4 % 6.7 % 6.9 %



	Three Months Ended
	May 5, 2017			% Change	April 29, 2016
	(in millions, except percentages)
Net Revenue:
Commercial	$	6,350		3%	$	6,145
Consumer	2,706			12%	2,426
Total CSG net revenue	$	9,056		6%	$	8,571

Operating Income:
CSG operating income	$	374		(3)%	$	385
% of segment net revenue	4.1		%		4.5		%

Net Revenue — During the ~~second~~first quarter of Fiscal ~~2017, ESG~~2018, CSG net revenue increased 6% driven by an increase in both commercial and consumer net revenue. The increase in CSG net revenue was ~~relatively unchanged as the~~primarily driven by an increase in units sold as we benefited from a general improvement in customer demand, which favored premium notebooks and workstations over desktops. Despite an increase in sales of our premium offerings, overall average selling prices were relatively flat over the period as we strategically managed our pricing position.

From a geographical perspective, net revenue attributable to CSG increased in APJ and the Americas during the first quarter of Fiscal 2018, while net revenue in EMEA was relatively unchanged.

Operating Income— During the first quarter of Fiscal 2018, CSG operating income as a percentage of net revenue decreased 40 basis points to 4.1%. This decrease was driven by an overall decline in our gross margin percentage due to increases in certain component costs that we were not able to fully offset through pricing. This decline in gross margin was partially offset by a reduction in operating expenses as we managed our cost position. We expect that component cost increases will continue to be challenging over the next few quarters.

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Infrastructure Solutions Group:

The following table presents net revenue and operating income attributable to ISG for the respective periods:



	Three Months Ended
	May 5, 2017			% Change	April 29, 2016
	(in millions, except percentages)
Net Revenue:
Servers and networking	$	3,231		5%	$	3,075
Storage	3,685			585%	538
Total ISG net revenue	$	6,916		91%	$	3,613

Operating Income:
ISG operating income	$	323		68%	$	192
% of segment net revenue	4.7		%		5.3		%

Net Revenue— During the first quarter of Fiscal 2018, ISG net revenue increased approximately $3.3 billion, or 91%, primarily due to incremental net revenue associated with the EMC acquired storage business, which caused storage revenue to increase approximately $3.1 billion, or 585%. Revenue from servers and networking ~~was mostly offset by a decrease in net revenue~~also increased 5% over the period, primarily resulting from ~~storage. The increase in revenue from servers and networking was attributable to~~ an increase in ~~revenue from the~~ sale of ~~cloud servers and other cloud products, which was mostly offset by a decline in net revenue from~~ PowerEdge ~~servers due to lower volume. The impact of lower volume of PowerEdge sales was partially mitigated by an increase in~~units, while average selling prices ~~due to a shift to products with richer configurations. For the second quarter of Fiscal 2017, net revenue from storage decreased 3%.~~

During the first six months of Fiscal 2017, the overall decline in ESG net revenue of 1% was primarily attributable to declines in PowerEdge units sold, partially mitigated by an increase in average selling prices due to a shift to products with richer configurations. In servers and networking, the decline in revenue from sales of PowerEdge ~~units was largely offset by revenue from sale of cloud servers and other cloud products. For the first six months of Fiscal 2017, net revenue from storage also decreased 2%.~~remained relatively flat.

From a geographical perspective, during the ~~second~~first quarter of Fiscal ~~2017, ESG~~2018, ISG net revenue increased in all regions due to the ~~Americas, mostly offset by decreases in net revenue in EMEA and APJ. During the first six months of Fiscal 2017, ESG net revenue decreased in EMEA, while~~incremental revenue from the ~~Americas and APJ remained relatively unchanged.~~EMC acquired storage business. The EMC acquired storage business operates on a world-wide basis with a geographic mix similar to that of the legacy Dell ISG business.

Operating Income — During the ~~second~~first quarter of Fiscal 2017, ESG operating income as a percentage of net revenue increased 50 basis points to 7.9%. The increase in ESG operating income percentage was primarily driven by a decrease in operating expense percentage, as we continued to improve our operational efficiency in this business.2018,

~~During the first six months of Fiscal 2017, ESG~~ISG operating income as a percentage of net revenue decreased 2060 basis points to ~~6.7%~~4.7%. ~~The decrease~~While the EMC acquired storage business contributed higher gross margin overall, we experienced gross margin pressure due to changing product mix within ISG as well as component cost inflation, which we expect to continue in ~~ESG~~the near term. ISG operating income ~~percentage~~also was ~~driven~~affected by ~~an increase~~increased operating expenses reflecting larger investments in research and development as well as expenses incurred in connection with the discontinuation of certain products.

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VMware:

The following table presents net revenue and operating ~~expense percentage primarily due~~income attributable to ~~higher sales and marketing costs, particularly sponsorship of an annual marketing event in~~VMware for the respective periods:



	Three Months Ended
	May 5, 2017			% Change	April 29, 2016
	(in millions, except percentages)
Net Revenue:
VMware net revenue	$	1,736		NA	$	—

Operating Income:
VMware operating income	$	486		NA	$	—
% of segment net revenue	28.0		%		NA

Net Revenue— VMware net revenue during the first quarter of Fiscal ~~2017. The increase~~2018 primarily consists of revenue from the sale of software licenses under perpetual licenses, related software maintenance and support, training, consulting services, and hosted services.

From a geographical perspective, approximately half of VMware net revenue during the first quarter of Fiscal 2018 was generated from sales to customers in the United States.

Operating Income— During the first quarter of Fiscal 2018, VMware operating ~~expense~~income as a percentage of net revenue was ~~partially offset by improvement in gross margin percentage, which was principally the result of a favorable cost position.~~28.0%.

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OTHER BALANCE SHEET ITEMS

Accounts Receivable

We sell products and services directly to customers and through a variety of sales channels, including retail distribution. Our accounts receivable, net, was ~~$5.3~~$8.8 billion and ~~$4.8~~$9.4 billion as of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016,~~February 3, 2017, respectively. The decrease in accounts receivable, net was primarily driven by a sequential decline in net revenue in line with normal seasonality. We maintain an allowance for doubtful accounts to cover receivables that may be deemed uncollectible. The allowance for losses is based on a provision for accounts that are collectively evaluated based on historical bad debt experience as well as specific identifiable customer accounts that are deemed at risk. As of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016,~~February 3, 2017, the allowance for doubtful accounts was ~~$39~~$64 million and ~~$36~~$57 million, respectively. Based on our assessment, we believe that 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

Dell Financial Services, referred to as DFS, offers a wide range of financial services, including originating, collecting, and servicing customer receivables primarily related to the purchase of Dell products. Following the closing of the EMC merger transaction, DFS began offering similar financial services related to the purchase of Dell EMC and VMware products. In some cases, we originate financing activities for our commercial customers related to the purchase of third-party technology products that complement our 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, including third-party originations, were ~~$1.0~~$1.1 billion and $0.8 billion for ~~both~~ the ~~second~~first quarter of Fiscal 2018 and the first quarter of Fiscal 2017, ~~and Fiscal 2016, and $1.9 billion for both the first six months~~respectively. As of ~~Fiscal~~May 5, 2017 and ~~Fiscal 2016. As of both July 29, 2016 and January 29, 2016,~~February 3, 2017, our financing receivables, net were ~~$5.1 billion.~~$6.0 billion and $5.9 billion, respectively.

We have securitization programs to fund revolving loans and fixed-term leases and loans through consolidated special purpose entities, referred to as SPEs, which we account for as secured borrowings. We transfer certain U.S. and European customer financing receivables to these SPEs, whose purpose is to facilitate the funding of customer receivables through financing arrangements with multi-seller conduits that issue asset-backed debt securities in the capital markets and to private investors. During ~~both~~ the ~~second~~first quarters of Fiscal ~~2017~~2018 and Fiscal ~~2016,~~2017, we transferred ~~$0.8~~$0.9 billion and $0.6 billion to these SPEs, ~~and during the first six months of Fiscal 2017 and Fiscal 2016, we transferred $1.4 billion and $1.8 billion,~~ respectively. The structured financing debt related to all of our securitization programs included as secured borrowing was ~~$2.9~~$3.5 billion and ~~$2.8~~$3.1 billion as of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016,~~February 3, 2017, respectively. In addition, the carrying amount of the corresponding financing receivables was ~~$3.3~~$4.0 billion and $3.6 billion as of ~~both July 29, 2016~~May 5, 2017 and ~~January 29, 2016.~~February 3, 2017, respectively. As a result of the EMC merger transaction, we plan to expand our existing securitization programs to allow for additional funding of customer receivables in the capital markets.

We maintain an allowance to cover expected financing receivable credit losses and evaluate credit loss expectations based on our total portfolio. For the ~~second~~first quarter of Fiscal ~~2017~~2018 and the first quarter of Fiscal ~~2016,~~2017, the principal charge-off rate for our total portfolio was ~~2.0%~~1.8% and ~~2.7%, respectively. For the first six months of Fiscal 2017 and Fiscal 2016, the principal charge-off rate for our total portfolio was 2.1% and 2.7%~~2.2%, respectively. The credit quality of our financing receivables has improved in recent years due to an overall improvement in the credit environment and as the mix of high-quality commercial accounts in our portfolio has increased. We expect that trend to continue with increased commercial customer volume resulting from the EMC merger transaction. 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 ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016,~~February 3, 2017, the allowance for financing receivable losses was ~~$156~~$136 million and ~~$176~~$143 million, respectively. In general, the loss rates on our financing receivables have improved over the periods presented. We expect relatively stable loss rates in future periods, with movements in these rates being primarily driven by seasonality and a continued shift in portfolio composition to lower risk commercial assets. 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 credit risk, including active management of credit lines and our collection activities. We also sell selected fixed-term financing receivables to unrelated third parties on a periodic basis, primarily to manage certain concentrations of customer credit exposure. Based on our assessment of the customer financing receivables, we believe that we are adequately reserved.

See Note 46 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements included in this report for additional information about our financing receivables and the associated allowance.

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Deferred Revenue

Deferred revenue is recorded when billings have been generated or payments have been received for undelivered products or services, or in situations where revenue recognition criteria have not been met. Deferred revenue represents amounts received in advance for extended warranty services, software maintenance, unearned license fees, and deferred profit on third-party software offerings. Deferred revenue is recognized on these items when the revenue recognition criteria are met, generally resulting in ratable recognition over the contract term. We also have deferred revenue related to undelivered hardware and professional services, consisting of installations and consulting engagements, which are recognized as our obligations under the contract are completed.

Our total deferred revenue was $18.7 billion as of both May 5, 2017 and February 3, 2017. A majority of our deferred revenue as of May 5, 2017 is expected to be recognized over the next two years.

Off-Balance Sheet Arrangements

~~We do not have any~~As of May 5, 2017, we had no off-balance sheet ~~financing arrangements.~~arrangements that have or are reasonably likely to have a current or future material effect on our financial condition or results of operations.

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MARKET CONDITIONS, LIQUIDITY, AND CAPITAL COMMITMENTS

Market Conditions

We regularly monitor economic conditions and associated impacts on the financial markets and our business. We 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 borrowers and counterparties.

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 use derivative instruments to hedge certain foreign currency exposures. We use 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 primarily use forward contracts and may use purchased options to hedge monetary assets and liabilities denominated in a foreign currency. See Note 68 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements included in this report for more information about our use of derivative instruments.

We are exposed to interest rate risk related to our variable-rate debt and investment portfolio. In the normal course of business, we follow established policies and procedures to manage this risk, including monitoring of our asset and liability mix. As a result, we do not anticipate any material losses from interest rate risk.

The impact on our ~~Unaudited~~ Condensed Consolidated Financial Statements included in this report of any credit adjustments related to our use of counterparties has been immaterial.

Liquidity and Capital Resources

To support our ongoing business operations, we rely on operating cash flows as our primary source of liquidity. We monitor the efficiency of our balance sheet to ensure that we have adequate liquidity to support our strategic initiatives. In addition to internally generated cash, we have access to other capital sources to finance our strategic initiatives and fund growth in our financing operations, as evidenced by our actions to raise capital for the EMC merger transaction. We have undertaken strategic divestitures and intend to use the net proceeds from those divestitures to pay down the EMC merger financing.operations. As of ~~July 29, 2016,~~May 5, 2017, we had ~~$7.2~~$9.6 billion of total cash and cash equivalents, athe majority of which was held outside of the United States. Our strategy is to deploy capital from any potential source, whether internally generated cash or debt, depending on the adequacy and availability of that source of capital and whether it can be accessed in a cost-effective manner. We expect to make available at least $2.95 billion of cash on hand to be utilized to consummate the EMC merger, which may result in a need to repatriate cash from foreign jurisdictions. We do not expect to incur material tax or other costs as a result of any such repatriation.

A significant portion of our income is earned in non-U.S. jurisdictions. Under current law, earnings available to be repatriated to the United States would be subject to U.S. federal income 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 United States. 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.

The following table summarizes our cash and cash equivalents as well as our available borrowings as of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016:~~February 3, 2017:


	July 29, 2016		January 29, 2016		May 5, 2017		February 3, 2017
	(in millions)				(in millions)
Cash and cash equivalents, and available borrowings:
Cash and cash equivalents(a)	$	7,226	$	6,322	$	9,554	$	9,474
Remaining available borrowings under the asset-backed credit line ("ABL Credit Facility")	1,381		1,676
Remaining available borrowings under the Revolving Credit Facility					2,678		2,678
Total cash, cash equivalents, and available borrowings	$	8,607	$	7,998	$	12,232	$	12,152

__________________

(a) Of the $9.6 billion of cash and cash equivalents as of May 5, 2017, $3.9 billion was held by VMware, Inc.

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The Revolving Credit Facility has maximum aggregate borrowings ~~under the ABL Credit Facility are~~of approximately ~~$2.0~~$3.2 billion. ~~Borrowings under the ABL Credit Facility are subject to a borrowing base, which consists of certain receivables and inventory.~~ Available borrowings under the ~~ABL~~Revolving Credit Facility are reduced by draws on the facility as well as by outstanding letters of credit. As of ~~July 29, 2016, there were no draws on the~~May 5, 2017, remaining available borrowings under this facility ~~and, after taking into account outstanding letters of credit, our~~totaled approximately $2.7 billion. These available ~~capacity totaled $1.4 billion.~~borrowings may be used periodically for general corporate purposes.

We believe that our current cash and cash equivalents, along with cash that will be provided by future operations and borrowings expected to be available under the ~~ABL~~Revolving Credit Facility, will be sufficient over at least the next twelve months to fund our operations, capital expenditures, share repurchases, and debt service requirements, as well as payments for shares subject to the appraisal proceedings and any tax audit settlements described in Note 9 and Note 10, respectively, of the Notes to the Unaudited Condensed Consolidated Financial Statements included in this report. We also believe that we will have sufficient cash to fund the closing of the pending EMC merger transaction.requirements.

Debt

The following table summarizes our outstanding debt as of ~~July 29, 2016~~May 5, 2017 and ~~January 29, 2016:~~February 3, 2017:


	July 29, 2016			January 29, 2016			May 5, 2017			February 3, 2017
	(in millions)						(in millions)
Outstanding Debt:
Term loan facilities and Senior First Lien Notes	$	7,444		$	7,623
Unsecured notes and debentures issued prior to going-private transaction	2,453			2,853
Structured financing debt	3,488			3,411			$	3,869		$	3,464
First Lien Notes issued for EMC merger financing	20,000			—
Senior Unsecured Notes issued for EMC merger financing	3,250			—
Senior Secured Credit Facilities and First Lien Notes							32,074			31,638
Unsecured Notes and Debentures							2,453			2,453
Senior Notes							3,250			3,250
EMC Notes							5,500			5,500
Margin Loan Facility							2,000			—
Bridge Facilities							1,500			4,000
Other	58			93			82			51
Total debt, principal amount	36,693			13,980			50,728			50,356
Carrying value adjustments	(357		)	(349		)	(938		)	(966		)
Total debt, carrying value	$	36,336		$	13,631		$	49,790		$	49,390

To finance the ~~going-private~~EMC merger transaction, we issued ~~$13.9~~an aggregate principal amount of $45.9 billion in new debt, which included borrowings under our Term Loan Facilities and the ABL Credit Facility, proceeds from the sale of Senior First Lien Notes and other notes, and borrowings under structured financing debt programs. See Note 1 and Note 5 of the Notes to the Unaudited Condensed Consolidated Financial Statements included in this report for more information on the going-private transaction and our outstanding borrowings.

During the first six months of Fiscal 2017, we repaid $0.6 billion of debt, which primarily consisted of $0.4 billion of maturing Unsecured Notes and Debentures and $0.2 billion of Term Loan facilities. Further, during June 2016, we issued $23.25 billion of debt in connection with the pending EMC merger transaction, which included proceeds from the sale of the First Lien Notes and Senior ~~Unsecured Notes.~~

~~Under~~Notes, as well as borrowings under the ~~terms~~Senior Secured Credit Facilities (including the Revolving Credit Facility), the Asset Sale Bridge Facility, the Margin Bridge Facility, and the VMware Bridge Facility at the closing of the ~~agreements relating to~~transaction. Additionally, on September 7, 2016, EMC had outstanding senior notes (the "EMC Notes") consisting of $2.5 billion aggregate principal amount of its 1.875% Notes due June 2018, $2.0 billion aggregate principal amount of its 2.650% Notes due June 2020 and $1.0 billion aggregate principal amount of its 3.375% Notes due June 2023. The EMC Notes remain outstanding following the ~~issuance~~closing of the ~~First Lien Notes~~EMC merger transaction.

During the first quarter of Fiscal 2018, we refinanced the Term Loan B Facility to reduce the interest rate margin by 0.75% and ~~Senior Unsecured Notes,~~to increase the outstanding principal amount by $0.5 billion. We applied the proceeds from the Term Loan B Facility refinancing to repay $0.5 billion principal amount of the Margin Bridge Facility. Additionally, during the first quarter of Fiscal 2018, we issued the Margin Loan Facility in the principal amount of $2.0 billion, and used the proceeds of the ~~offerings were deposited into escrow, with such proceeds~~new facility to ~~be released~~extinguish the Margin Bridge Facility. Further, we issued an additional $0.4 billion, net, in structured financing debt to ~~finance~~support the ~~consummation~~expansion of ~~the EMC merger subject to the satisfaction of customary conditions. The net proceeds held in escrow from the private offerings of the First Lien Notes~~our financing receivables portfolio, and Senior Unsecured Notes were included in restricted cash in the Condensed Consolidated Statements of Financial Position as of July 29, 2016, and such proceeds will be held as restricted cash until the completion of the EMC merger. The receipt of the net proceeds is not reflected in the Condensed Consolidated Statements of Cash Flows, given that the proceeds were required to be deposited directly into escrow rather than through the Company's unrestricted cash accounts.

~~Upon the close of the EMC merger, we intend to repay~~repaid approximately ~~$7.7~~$0.1 billion principal amount of existing Dell Technologies debt. Further, we intend to incur approximately $22.6 billion of incremental borrowings through new term loan facilities, a revolving credit facility, bridge facilities, and margin financing. Additionally, we will incur approximately $5.5 billion of incremental borrowings through existing EMC debt. We will maintain our ~~securitization programs to fund revolving loans and fixed-term leases and loans through SPEs.~~

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Term Loan facilities.

Our requirements for cash to pay principal and interest ~~are expected to increase~~have increased significantly due to the ~~incremental~~ borrowings that ~~will be~~were required to finance the EMC merger ~~transaction, and we expect the increased cash flows from the combined businesses will be sufficient to meet these requirements. After the closing of the EMC merger, we may,~~transaction. We or our affiliates, at our or their sole discretion, may purchase, redeem, prepay, refinance, or otherwise retire our outstanding indebtedness under the terms of such indebtedness at any time and from time to time, in open market or negotiated transactions with the holders of such indebtedness, or otherwise.

We balance the use of our securitization programs with working capital and other sources of liquidity to fund growth in our global financial services business. Of the ~~$36.7~~$50.7 billion in outstanding principal debt as of ~~July 29, 2016, $4.5~~May 5, 2017, $5.2 billion, which includes ~~$3.5~~$3.9 billion in structured financing debt, is used to fund this business.

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See Note 7 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about our debt.

Cash Flows

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


	Six months ended						Three Months Ended
	July 29, 2016			July 31, 2015			May 5, 2017			April 29, 2016
	(in millions)						(in millions)
Net change in cash from:
Operating activities	$	1,815		$	732		$	240		$	(63	)
Investing activities	(221		)	(113		)	51			(60		)
Financing activities	(849		)	327			(205		)	(387		)
Effect of exchange rate changes on cash and cash equivalents	52			(50		)	(6		)	73
Change in cash and cash equivalents	$	797		$	896		$	80		$	(437	)

Operating Activities — ~~Cash~~Cash provided by operating ~~activiti~~esactivities was ~~$1.8 billion and $0.7 billion for~~$240 million during the first ~~six months~~quarter of Fiscal ~~2017~~2018 and cash used by operating activity was $63 million for first quarter of Fiscal ~~2016, respectively. The improvement in operating~~2017. Operating cash flows during the first quarter of Fiscal 2018 were driven by profitability, primarily in VMware. The favorable impact of this profitability was ~~primarily due to profitability~~partially offset by increased compensation and ~~favorable changes in working capital, particularly with respect to an increase in accounts payable~~benefit expenses as a result of ~~extending payment terms with certain suppliers. The terms of our supplier arrangements will continue to evolve as we close the EMC merger transaction and integrate the businesses.~~higher seasonal incentive bonus payments.

Investing Activities — Investing activities primarily consist of the maturities, sales, and purchases of investments, capital expenditures for property, plant, and equipment, ~~collections on purchased financing receivables,~~ and ~~proceeds from sale of facilities, land and other assets.~~capitalized software development costs. Cash ~~used in~~provided by investing activities was ~~$221 million and $113~~$51 million during the first ~~six months~~quarter of Fiscal ~~2017~~2018 and cash used by investing activities was $60 million during the first quarter of Fiscal ~~2016, respectively, which included $62 million~~2017. The change in cash from investing activities during the first quarter of Fiscal 2018 was primarily driven by maturities and ~~$56 million, respectively, in capital expenditures attributable to discontinued operations~~sales of investments.

Financing Activities — Financing activities primarily consist of the proceeds and repayments of ~~debt. During~~debt and cash used to repurchase common stock. Cash used by financing activities was $205 million during the first ~~six months~~quarter of Fiscal ~~2017,~~2018 and primarily reflected our repurchase of shares of Class V Common Stock under the programs described below and other shares of common stock we repurchased for tax withholdings on vesting of equity awards. This use of cash was partially offset by net proceeds of approximately $400 million of cash from the issuance of structured financing debt. In comparison, cash used in financing activities was ~~$0.8 billion, primarily due to repayments of $0.4 billion in maturing Unsecured Notes and Debentures and $0.2 billion in Term Loan facilities and related foreign currency derivative settlements. Also~~$387 million during the first ~~six months~~quarter of Fiscal 2017 ~~we paid $0.4 billion in dissenting shares obligation related to appraisal litigation from~~and primarily consisted of the ~~going-private transaction.~~repayment of debt, partially offset by the issuance of common stock of SecureWorks upon the closing of the SecureWorks initial public offering. See Note 97 and Note 17 of the Notes to the Unaudited Condensed Consolidated Financial Statements included in this report for more information about the appraisal shares litigation. In comparison, during the first six months of Fiscal 2016, cash provided by financing activities was $0.3 billion as we issued approximately $0.6 billion, net, in additional structured financing debt and repaid $0.3 billion, net, in Term Loan Facilities and related foreign currency derivative settlements.

~~See Note 4 of the Notes to the Unaudited~~ Condensed Consolidated Financial Statements included in this report for more information about our ~~securitization~~debt and share repurchase programs, ~~and Note 5 of the Notes to the Unaudited Condensed Consolidated Financial Statements included in this report for more information about our debt.~~respectively.

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Key Performance Metrics

~~We derived the components of our~~Our key performance metrics are net revenue, operating income, adjusted EBITDA, cash flows from operations, and cash conversion cycle. Net revenue, operating income, adjusted EBITDA, and cash flows from operations are discussed elsewhere in this report. Our cash conversion cycle ~~for the periods~~is presented using balances and results of operations which include Dell Services and Dell Software Group. We will continue to evaluate and present our cash conversion cycle inclusive of Dell Services and Dell Software Group until we complete the divestitures.below.

Cash Conversion Cycle

The following table presents the components of our cash conversion cycle for the periods presented:


	Three months ended				Three Months Ended
	July 29, 2016		July 31, 2015		May 5, 2017		April 29, 2016
Days of sales outstanding (a)	42		43		48		41
Days of supply in inventory (b)	12		12		18		15
Days in accounts payable (c)	(114	)	(106	)	(108	)	(113	)
Cash conversion cycle (d)	(60	)	(51	)	(42	)	(57	)

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(a)

Days of sales outstanding, referred to as DSO, calculates the average collection period of our receivables. DSO is based on the ending net trade receivables ~~adjusted to include accounts receivable, net classified as held for sale,~~ and the most recent quarterly non-GAAP net revenue ~~adjusted to include discontinued operations,~~ 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.~~assets, as we believe this provides a more relevant metric that aligns with actual sales activity in the quarter, regardless of revenue recognition under GAAP. DSO is calculated by adding accounts receivable, net of allowance for doubtful accounts, and customer shipments in transit and dividing that sum by average non-GAAP net revenue per day for the current quarter (90 days for ~~all fiscal quarters presented herein)~~the three months ended May 5, 2017 and April 29, 2016). ~~At July~~As of May 5, 2017, DSO and days of customer shipments not yet recognized were 44 and 4 days, respectively. As of April 29, 2016, DSO and days of customer shipments not yet recognized were 3836 and ~~4 days, respectively. At July 31, 2015, DSO and days of customer shipments not yet recognized were 39 and 4~~5 days, respectively.

(b)

Days of supply in inventory, referred to as DSI, measures the average number of days from procurement to sale of our products. DSI is based on ending inventory and ~~most recent quarterly~~ non-GAAP cost of goods sold ~~adjusted to include discontinued operations,~~ for each period. DSI is calculated by dividing ending inventory by average non-GAAP cost of goods sold per day for the current quarter (90 days for ~~all fiscal quarters presented herein)~~the three months ended May 5, 2017 and April 29, 2016).

(c)

Days in accounts payable, referred to as DPO, calculates the average number of days our payables remain outstanding before payment. DPO is based on ending accounts payable ~~adjusted to include accounts payable classified as held for sale,~~ and ~~most recent quarterly~~ non-GAAP cost of goods sold ~~adjusted to include discontinued operations,~~ for each period. DPO is calculated by dividing accounts payable by average non-GAAP cost of goods sold per day for the current quarter (90 days for ~~all fiscal quarters presented herein)~~the three months ended May 5, 2017 and April 29, 2016).


(d)	We calculate our cash conversion cycle using non-GAAP net revenue ~~adjusted to include discontinued operations,~~ and non-GAAP cost of goods sold ~~adjusted to include discontinued operations,~~ because we believe that excluding certain items from the GAAP results facilitates management's understanding of this key performance metric.

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The ~~tables~~table below ~~provide~~provides reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure used in calculating the DSO, DSI and DPO metrics:

Three months ended
July 29,
2016 July 31,
2015
(in millions)
Net revenue $ 13,050
$ 12,975
Non-GAAP adjustments:

Impact of purchase accounting 65
123
Non-GAAP net revenue 13,115
13,098
Net revenue attributable to discontinued operations 1,015
1,024
Impact of purchase accounting attributable to discontinued operations —
12
Non-GAAP net revenue, adjusted to include discontinued operations $ 14,130
$ 14,134

Cost of goods sold $ 10,721
$ 10,896
Non-GAAP adjustments:

Impact of purchase accounting (14 ) (11 )
Amortization of intangibles (101 ) (98 )
Other corporate expenses —
(6 )
Non-GAAP cost of goods sold 10,606
10,781
Cost of goods sold attributable to discontinued operations 621
635
Impact of purchase accounting attributable to discontinued operations —
12
Impact of amortization of intangibles attributable to discontinued operations
(12 )
(23 )
Other corporate expenses attributable to discontinued operations 25
3
Non-GAAP cost of goods sold, adjusted to include discontinued operations $ 11,240
$ 11,408

July 29,
2016 July 31,
2015
(in millions)
Accounts receivable, net $ 5,257

Accounts receivable, net classified as held for sale 698

Accounts receivable, net, adjusted to included accounts receivable held for sale $ 5,955
$ 6,096

Accounts payable 14,050

Accounts payable, net classified as held for sale 167

Accounts payable, net, adjusted to included accounts receivable held for sale $ 14,217
$ 13,450



	Three Months Ended
	May 5, 2017			April 29, 2016
	(in millions)
Cost of goods sold	$	13,514		$	10,048
Non-GAAP adjustments:
Impact of purchase accounting	(10		)	(11		)
Amortization of intangibles	(950		)	(101		)
Transaction-related expenses	(7		)	1
Other corporate expenses	(22		)	(3		)
Non-GAAP cost of goods sold	$	12,525		$	9,934

For the three months ended ~~July 29, 2016,~~May 5, 2017, changes in our cash conversion cycle were ~~favorable~~unfavorable by ~~nine~~15 days when compared to the three months ended ~~July 31, 2015.~~April 29, 2016. This was primarily driven by ~~an eight~~the acquisition of EMC, which had a negative impact across all three components. We experienced a five day decrease in DPO, primarily driven by supplier payments terms of the EMC acquired businesses. A seven day increase in ~~DPO~~DSO was primarily ~~attributable to extending payment terms~~driven by differences in collections management from the EMC acquired businesses. A three day increase in DSI was primarily the result of the longer inventory cycle associated with ~~certain suppliers. The terms~~the EMC acquired product lines. We are continuing the integration of the EMC acquired businesses and, as a result, our supplier arrangements, collection activities, and operating cycles will continue to ~~evolve as we close the EMC merger transaction and integrate the businesses. DSO decreased by one day primarily driven by improved collections performance.~~evolve. We believe our business model allows us to maintain an efficient cash conversion cycle, which compares favorably with that of others in our industry.

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Capital Commitments

Capital Expenditures— During the first ~~six months~~quarters of Fiscal ~~2017~~2018 and Fiscal ~~2016,~~2017, we spent ~~$235~~$245 million and ~~$230~~$92 million, respectively, on property, plant, and ~~equipment, which included $62 million and $56 million, respectively, attributable to discontinued operations.~~equipment. These expenditures were primarily incurred in connection with our global expansion efforts and infrastructure 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 ~~2017,~~2018, which will be primarily related to infrastructure investments and strategic initiatives, are currently expected to total approximately ~~$0.5~~$1.3 billion.

Repurchases of Common Stock

Class V Common Stock Repurchases — On December 13, 2016, the board of directors approved a stock repurchase program under which we are authorized to use assets of the Class V Group to repurchase up to $500 million of shares of Class V Common Stock over a period of six months. During the first quarter of Fiscal 2018, we repurchased 1.3 million shares of Class V Common Stock for $82 million, and on February 13, 2017, the stock repurchase program was completed.

On March 27, 2017, the board of directors approved an amendment of the stock repurchase program which authorizes us to use assets of the Class V Group to repurchase up to an additional $300 million of shares of Class V Common Stock over a period of an additional six months. During the first quarter of Fiscal 2018, we repurchased 4.2 million shares of Class V Common Stock for $277 million under the extended stock repurchase program. As of May 5, 2017, our remaining authorized amount for share repurchases was $23 million.

VMware, Inc. Class A Common Stock Repurchases — On December 15, 2016, we entered into a stock purchase agreement with VMware, Inc., pursuant to which VMware, Inc. agreed to repurchase for cash $500 million of shares of VMware, Inc. Class A common stock from a subsidiary of Dell Technologies. During the first quarter of Fiscal 2018, VMware, Inc. repurchased 1.4 million shares, and on February 15, 2017, the sale transaction under the stock purchase agreement was completed.

During January 2017, VMware, Inc.'s board of directors authorized the repurchase of up to an additional $1.2 billion of shares of VMware, Inc. Class A common stock through the end of Fiscal 2018. On March 29, 2017, we entered into a stock purchase agreement with VMware, Inc., pursuant to which VMware, Inc. repurchased for cash $300 million of shares of VMware, Inc.

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Class A common stock from a subsidiary of Dell Technologies. The proceeds from the sale were applied to the repurchase of shares of our Class V Common Stock under the stock repurchase program described above.

During the first quarter of Fiscal 2018, VMware, Inc. received an initial delivery of approximately 2.7 million shares of Class A common stock with a value of $240 million for $300 million in cash. On May 10, 2017, the sale transaction under the stock purchase agreement was completed and VMware, Inc. received an additional 0.7 million shares. This repurchase was pursuant to the January 2017 authorization. As of May 5, 2017, the cumulative authorized amount remaining for share repurchases by VMware, Inc. under the January 2017 authorization was $900 million.

For more information regarding share repurchase programs, see Note 17 of the Notes to the Condensed Consolidated Financial Statements included in this report, and "Part II — Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds."

Purchase Obligations — Purchase obligations are defined as contractual obligations to purchase goods or services that are enforceable and legally binding on us. These obligations specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Purchase obligations do not include contracts that may be canceled without penalty.

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. These purchase orders are typically fulfilled within 30 days and are entered into during the ordinary course of business in order to establish best pricing and continuity of supply for our production. Purchase orders are not included in the table above as they typically represent our authorization to purchase rather than binding purchase obligations.

As of May 5, 2017, we had $2.7 billion, $0.3 billion, and $0.4 billion in purchase obligations for Fiscal 2018, Fiscal 2019, and Fiscal 2020 and thereafter, respectively.

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ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Dell Technologies is exposed~~For quantitative and qualitative disclosures about market risk affecting us, see "Part II — Item 7A — Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended February 3, 2017. Our exposure to ~~a variety of~~market risks ~~including foreign currency exchange rate fluctuations and changes~~has not changed materially from that set forth in ~~the market value of investments. In the normal course of business, Dell Technologies employs established policies and procedures to manage these risks.~~

~~Foreign Currency Risk~~

During the second quarter and first six months of Fiscal 2017, the principal foreign currencies in which Dell Technologies transacted business were the Euro, Chinese Renminbi, Japanese Yen, British Pound, Canadian Dollar, and Australian Dollar. The objective of Dell Technologies in managing its exposures to foreign currency exchange rate fluctuations is to reduce the impact of adverse fluctuations associated with foreign currency exchange rate changes on earnings and cash flows. Accordingly, Dell Technologies utilizes foreign currency option contracts and forward contracts to hedge its exposure on forecasted transactions and firm commitments for certain currencies. Dell Technologies monitors its foreign currency exchange exposures to ensure the overall effectiveness of its foreign currency hedge positions. However, there can be no assurance that the foreign currency hedging activities will continue to substantially offset the impact of fluctuations in currency exchange rates on the results of operations and financial position in the future.

As of July 29, 2016, based on the outstanding foreign currency hedge instruments of Dell Technologies, which include designated and non-designated instruments, there was a maximum potential one-day loss at a 95% confidence level in fair value of approximately $19 million using a Value-at-Risk, referred to as VAR, model. By using market implied rates and incorporating volatility and correlation among the currencies of a portfolio, the VAR model simulates 10,000 randomly generated market prices and calculates the difference between the fifth percentile and the average as the Value-at-Risk. The VAR model is a risk estimation tool and is not intended to represent actual losses in fair value that will be incurred. Additionally, as Dell Technologies utilizes foreign currency instruments for hedging forecasted and firmly committed transactions, a loss in fair value for those instruments is generally offset by increases in the value of the underlying exposure.

~~Interest Rate Risk~~

Dell Technologies is exposed to interest rate risk related to its debt and investment portfolios and financing receivables. Dell Technologies mitigates the risk related to its structured financing debt through the use of interest rate swaps to hedge the variability in cash flows related to the interest rate payments on such debt. Based on the variable rate debt portfolio outstanding as of July 29, 2016, a 100 basis point increase in interest rates would have resulted in an increase of approximately $58 million in annual interest expense.

Dell Technologies mitigates the risks related to its investment portfolio by investing primarily in high-quality credit securities, limiting the amount that can be invested in any single issuer and investing in short-to-intermediate-term investments. Due to the nature of our ~~investment portfolio as of July 29, 2016, a 100 basis point increase or decrease in interest rates would not have had a material impact on the fair value of this portfolio.~~Annual Report.

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 ~~or Exchange Act.~~(the "Exchange Act"). See Exhibits 31.1 and 31.2 tofiled with this report. 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 ~~July 29, 2016.~~May 5, 2017. Based on that evaluation, our management has concluded that our disclosure controls and procedures were effective as of ~~July 29, 2016.~~

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May 5, 2017.

Changes in Internal Control over Financial Reporting

~~There was~~On September 7, 2016, we completed our acquisition by merger of EMC Corporation as described elsewhere in this report. We continue to integrate policies, processes, people, technology, and operations relating to this transaction, and will continue to evaluate the impact of any related changes to our internal control over financial reporting. Except for any changes related to the integration of EMC, there were no ~~change~~changes in our internal control over financial reporting during the ~~second~~fiscal quarter ~~of Fiscal~~ended May 5, 2017 that have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

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”~~"Legal Matters" in Note 912 of the Notes to the ~~Unaudited~~ Condensed Consolidated Financial Statements included in ~~“Part~~"Part I — Item 1 — Financial Statements.”

~~On August 25, 2016, we changed our name from Denali Holding Inc., or Denali, to Dell Technologies Inc.~~ ~~Additional information on our commitments and conting~~encies can be found in "Denali Financial Statements" for our fiscal year ended January 29, 2016 included in the proxy statement/prospectus dated June 6, 2016, or Form S-4 proxy statement/prospectus, forming part of our registration statement on Form S-4 (Registration No. 333-208524) filed with the SEC. "

ITEM 1A — RISK FACTORS

In addition to the other information set forth in this report, the factors ~~described~~discussed in ~~the section titled "Risk Factors~~"Part I — Item 1A — Risk ~~Factors Relating to Denali, Dell and EMC — Risk Factors Relating to Denali and Dell" of~~Factors" in our Annual Report on Form 10-K for the ~~Form S-4 proxy statement/prospectus~~ fiscal year ended February 3, 2017 could materially affect our business, financial condition, or operating results. The risks described in ~~the~~our Annual Report on Form ~~S-4 proxy statement/prospectus~~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 also may ~~also~~ materially adversely affect our business, operating results, financial condition, or ~~operating results.~~prospects.

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

~~(a)~~ Sales of Unregistered Securities

From ~~January 30, 2016~~February 4, 2017 through ~~July 29, 2016,~~May 5, 2017, we issued to certain employees ~~an aggregate~~a total of ~~131,793~~283,505 shares of our ~~Series~~Class C ~~common stock at per share~~Common Stock for an aggregate purchase ~~prices ranging from $2.91 to $22.65~~price of approximately $4 million pursuant to exercises of stock options granted under ~~our~~the Dell Technologies Inc. 2013 Stock Incentive Plan, the Dell Technologies Inc. 2012 Long-Term Incentive Plan, and the Dell Inc.’s Amended and Restated 2002 Long-Term ~~Incentive~~ Plan. The foregoing transactions were effected in reliance on the exemption from ~~the~~ registration ~~requirements of~~under the Securities Act of 1933 afforded by Rule 701 thereunder as transactions pursuant to compensatory benefit plans or contracts relating to compensation as provided under such ~~rule~~.rule.

Purchases of Equity Securities

On September 7, 2016, our board of directors approved a stock repurchase program (the "DHI Group Repurchase Program") that authorizes us to use assets of the DHI Group to repurchase up to $1.0 billion of shares of our Class V Common Stock over a two-year period beginning on September 7, 2016. On December 13, 2016, our board of directors approved the suspension of the DHI Group Repurchase Program until such time as the board of directors authorizes the reinstatement of that program. On the same date, our board of directors approved a stock repurchase program (the "Class V Group Repurchase Program") that authorizes us to use assets of the Class V Group to repurchase up to $500 million of shares of our Class V Common Stock over a period of six months. On March 27, 2017, our board of directors approved an amendment of the Class V Group Repurchase Program to authorize us to use assets of the Class V Group to repurchase up to an additional $300 million of shares of our Class V Common Stock over a period of an additional six months. We may repurchase shares under the programs through open market purchases, block trades, or accelerated or other structured share repurchase programs. The following table sets forth information regarding our repurchases of shares of Class V Common Stock during the first quarter of Fiscal 2018 and the remaining authorized amount of future repurchases under the programs.



Period	Total Number of Shares Purchased	Weighted Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
	(in millions, except average price paid per share)
Repurchases from February 4, 2017 to March 3, 2017	1	$	65.04	1	$	676
Repurchases from March 4, 2017 to March 31, 2017 (a)	—	$	—	—	$	976
Repurchases from April 1, 2017 to May 5, 2017 (b)	5	$	65.37	5	$	699
Total	6	$	65.30	6

____________________


(a)	As described above, on March 27, 2017, our board of directors approved an amendment of the Class V Group Repurchase Program to authorize the Company to use assets of the Class V Group to repurchase up to an additional $300 million of shares of our Class V Common Stock over a period of an additional six months.


(b)	As of May 5, 2017, the approximate dollar value of shares that may yet be purchased included $676 million authorized through the DHI Group Repurchase Program and $23 million authorized through the extended Class V Group Repurchase Program.

ITEM 6 — EXHIBITS

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

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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 TECHNOLOGIES INC.

	By:	/s/ MAYA MCREYNOLDS
		Maya McReynolds
		Senior Vice President, Corporate Finance and
		Chief Accounting Officer
		(On behalf of registrant and as principal accounting officer)

Date: ~~September 6, 2016~~June 9, 2017

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INDEX TO EXHIBITS



Exhibit ~~No.~~	Number	Description ~~of Exhibit~~
~~2.1~~10.1			~~Agreement~~First Refinancing and ~~Plan of Merger,~~Incremental Facility Amendment, dated as of ~~October 12, 2015, as amended by the First Amendment to Agreement and Plan of Merger, dated as of May 16, 2016,~~March 8, 2017, among ~~Dell Technologies~~Denali Intermediate Inc. ~~(the “Company”)~~, Dell Inc., ~~Universal Acquisition Co.~~Dell International L.L.C., EMC Corporation, Credit Suisse AG, Cayman Islands Branch, as Term Loan B Administrative Agent and ~~EMC Corporation. Incorporated~~Collateral Agent, JPMorgan Chase Bank, N.A., as Term Loan A/Revolver Administrative Agent, and the lenders party thereto (incorporated by reference to ~~Annex A~~Exhibit 10.1 to ~~the proxy statement/prospectus forming part of the Company’s Registration Statement~~Current Report on Form ~~S-4 (Registration No. 333-208524) (the “2016 Form S-4”)~~8-K of Dell Technologies Inc. filed with the Securities and Exchange Commission ~~(the “Commission”)~~ on ~~June 6, 2016.~~
~~4.1~~				Base Indenture, dated as of June 1, 2016, among Diamond 1 Finance Corporation and Diamond 2 Finance Corporation, as issuers, and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent. Incorporated by reference to Exhibit 4.14 of Amendment No. 6 to the Company’s 2016 Form S-4 filed with the Commission on June 3, 2016.
~~4.2~~				2019 Notes Supplemental Indenture No. 1, dated June 1, 2016, among Diamond 1 Finance Corporation, Diamond 2 Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent. Incorporated by reference to Exhibit 4.15 of Amendment No. 6 to the Company’s 2016 Form S-4 filed with the Commission on June 3, 2016.
~~4.3~~				~~Form of Global Note for 3.480% First Lien Notes due 2019 (contained in Exhibit 4.2).~~
~~4.4~~				2021 Notes Supplemental Indenture No. 1, dated June 1, 2016, among Diamond 1 Finance Corporation, Diamond 2 Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent. Incorporated by reference to Exhibit 4.17 of Amendment No. 6 to the Company’s 2016 Form S-4 filed with the Commission on June 3, 2016.
~~4.5~~				~~Form of Global Note for 4.420% First Lien Notes due 2021 (contained in Exhibit 4.4).~~
~~4.6~~				2023 Notes Supplemental Indenture No. 1, dated June 1, 2016, among Diamond 1 Finance Corporation, Diamond 2 Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent. Incorporated by reference to Exhibit 4.19 of Amendment No. 6 to the Company’s 2016 Form S-4 filed with the Commission on June 3, 2016.
~~4.7~~				~~Form of Global Note for 5.450% First Lien Notes due 2023 (contained in Exhibit 4.6).~~
~~4.8~~				2026 Notes Supplemental Indenture No. 1, dated June 1, 2016, among Diamond 1 Finance Corporation, Diamond 2 Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent. Incorporated by reference to Exhibit 4.21 of Amendment No. 6 to the Company’s 2016 Form S-4 filed with the Commission on June 3, 2016.
~~4.9~~				~~Form of Global Note for 6.020% First Lien Notes due 2026 (contained in Exhibit 4.8).~~
~~4.10~~				2036 Notes Supplemental Indenture No. 1, dated June 1, 2016, among Diamond 1 Finance Corporation, Diamond 2 Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent. Incorporated by reference to Exhibit 4.23 of Amendment No. 6 to the Company’s 2016 Form S-4 filed with the Commission on June 3, 2016.
~~4.11~~				~~Form of Global Note for 8.100% First Lien Notes due 2036 (contained in Exhibit 4.10).~~
~~4.12~~				2046 Notes Supplemental Indenture No. 1, dated June 1, 2016, among Diamond 1 Finance Corporation, Diamond 2 Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent. Incorporated by reference to Exhibit 4.25 of Amendment No. 6 to the Company’s 2016 Form S-4 filed with the Commission on June 3, 2016.
~~4.13~~				~~Form of Global Note for 8.350% First Lien Notes due 2046 (contained in Exhibit 4.12).~~
~~4.14~~				Base Indenture, dated as of June 22, 2016, among Diamond 1 Finance Corporation and Diamond 2 Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee. Incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8‑K filed with the Commission on June 22, 2016March 9, 2017) (Commission File No. ~~333-208524)~~001-37867).
~~4.15~~				2021 Notes Supplemental Indenture No. 1, dated June 22, 2016, among Diamond 1 Finance Corporation and Diamond 2 Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee. Incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed with the Commission on June 22, 2016 (Commission File No. 333-208524).
~~4.16~~				~~Form of Global Note for 5.875% Senior Notes due 2021 (contained in Exhibit 4.15).~~
~~4.17~~				2024 Notes Supplemental Indenture No. 1, dated June 22, 2016, among Diamond 1 Finance Corporation and Diamond 2 Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as trustee. Incorporated by reference to Exhibit 4.3 of the Company’s Current Report on Form 8-K filed with the Commission on June 22, 2016 (Commission File No. 333-208524).
~~4.18~~				~~Form of Global Note for 7.125% Senior Notes due 2024 (contained in Exhibit 4.17).~~

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~~10.1~~						Third Amended and Restated Facilities Commitment Letter, dated May 27, 2016, among the Company, Denali Intermediate Inc., Dell Inc. and the commitment parties party thereto. Incorporated by reference to Exhibit 10.18 of Amendment No. 6 to the Company’s 2016 Form S-4 filed with the Commission on June 3, 2016.
31.1†						Certification of Michael S. Dell, Chairman and Chief Executive Officer, pursuant to Rule 13a-14(a) or Rule 15d-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 Thomas W. Sweet, ~~Senior~~Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) or Rule 15d-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 Thomas W. Sweet, ~~Senior~~Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~101~~99.1†		Unaudited Attributed Financial Information for Class V Group.
101 .INS†	—				XBRL Instance Document.
101		.SCH†	—			XBRL Taxonomy Extension Schema Document.
101		.CAL†	—			XBRL Taxonomy Extension Calculation Linkbase Document.
101		.DEF†	—			XBRL Taxonomy Extension Definition Linkbase Document.
101		.LAB†	—			XBRL Taxonomy Extension Label Linkbase Document.
101		.PRE†	—			XBRL Taxonomy Extension Presentation Linkbase Document.



†		Filed with this report.
††		Furnished with this report.

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	Client Solutions		Enterprise Solutions Group		Corporate		Total
	(in millions)
Balances at January 29, 2016	$	4,428	$	3,907	$	71	$	8,406
Goodwill recognized during the period	—		—		—		—
Adjustments	—		—		—		—
Balances at July 29, 2016	$	4,428	$	3,907	$	71	$	8,406



	Dell Technologies Stockholders' Equity			Non-Controlling Interest			Total Stockholders' Equity
	(in millions)
Balances at January 29, 2016	$	1,466		$	—		$	1,466
Net income (loss)	628			(1		)	627
Issuance of common stock of subsidiary upon public offering, net of offering costs	—			124			124
Foreign currency translation adjustments	42			—			42
Cash flow hedges, net change	(26		)	—			(26		)
Stock-based compensation expense	30			3			33
Revaluation of redeemable shares	(73		)	—			(73		)
Treasury stock repurchases and other	(2		)	—			(2		)
Balances at July 29, 2016	$	2,065		$	126		$	2,191