UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended January 28, 2000
Commission File Number: 0-17017
Dell Computer Corporation
(Exact name of registrant as specified in its charter)
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Delaware |
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74-2487834 |
(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer
Identification No.) |
One Dell Way, Round Rock, Texas 78682-2244
(Address, including Zip Code, of registrant’s principal
executive offices)
(512) 338-4400
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(g) of the
Act:
Common Stock, par value $.01 per share
Preferred Stock Purchase Rights
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 [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
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Aggregate market value of common stock held by non-affiliates
of the registrant as of March 24, 2000 |
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124,995,093,710 |
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Number of shares of common stock outstanding as of March
24, 2000 |
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2,586,748,307 |
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DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Report, to the
extent not set forth herein, is incorporated by reference from
the Registrant’s definitive proxy statement relating to the
annual meeting of stockholders to be held in July 2000,
which definitive proxy statement will be filed with the
Securities and Exchange Commission within 120 days after the
end of the fiscal year to which this Report relates.
Statements in this Report that relate to future results and
events are based on the Company’s current expectations.
Actual results in future periods may differ materially from those
currently expected or desired because of a number of risks and
uncertainties. For a discussion of factors affecting the
Company’s business and prospects, see
“Item 1 — Business — Factors
Affecting the Company’s Business and Prospects.”
PART I
ITEM 1 — BUSINESS
General
Dell Computer Corporation (the “Company”) is the
world’s largest direct computer systems company, with
revenues of $25.3 billion for the fiscal year ended
January 28, 2000. The Company was founded in 1984 by Michael
Dell on a simple concept: By selling computer systems directly
to customers, the Company could most efficiently understand and
satisfy the computing needs of customers. The Company offers its
customers a full range of computer systems, including desktop
computer systems, notebook computers, workstations, network
servers and storage products, as well as an extended selection of
peripheral hardware, computing software and related services.
Additionally, the Company offers an array of services to support
its customers’ online initiatives. The Company’s direct
model offers in-person relationships with corporate and
institutional customers, as well as telephone and Internet
purchasing, built-to-order computer systems, telephone and online
technical support and onsite product service. The Company sells
its products and services to large corporate, government,
healthcare and education customers, small-to-medium businesses
and individuals.
The Company is a Delaware corporation that was incorporated in
October 1987, succeeding to the business of a predecessor Texas
corporation that was originally incorporated in May 1984. Based
in Round Rock, Texas, the Company conducts operations worldwide
through wholly owned subsidiaries. See
“Item 1 — Business — Geographic
Areas of Operations.” Unless otherwise specified, references
herein to the Company are references to the Company and its
consolidated subsidiaries. The Company operates principally in
one industry segment.
The Company’s common stock, par value $.01 per share,
is listed on The Nasdaq National Market under the symbol DELL.
See “Item 5 — Market for Registrant’s
Common Equity and Related Stockholder Matters — Market
Information.”
Business Strategy
The Company’s business strategy is based on its direct
business model. The Company’s business model seeks to
deliver a superior customer experience through direct,
comprehensive customer relationships, cooperative research and
development with technology partners, computer systems
custom-built to customer specifications and service and support
programs tailored to customer needs. The Company believes that
the direct model provides it with several distinct competitive
advantages. The direct model eliminates the need to support an
extensive network of wholesale and retail dealers, thereby
avoiding dealer mark-ups; avoids the higher inventory costs
associated with the wholesale/retail channel and the competition
for retail shelf space; and reduces the high risk of obsolescence
associated with products in a rapidly changing technological
market. In addition, the direct model allows the Company to
maintain, monitor and update a customer database that can be used
to shape future product offerings and post-sale service and
support programs. This direct approach, combined with the
Company’s efficient procurement, manufacturing and
distribution processes, allows the Company to bring relevant
technology to its customers faster and more competitively priced
than many of its competitors.
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The Internet
The Company is committed to refining and extending the advantages
of its direct model approach by moving even greater volumes of
product sales, service and support to the Internet. The Internet,
perhaps the purest and most efficient form of the direct model,
provides greater convenience and efficiency to customers and, in
turn, to the Company. The Company receives in excess of
2.6 million visits per week to www.dell.com, where it
maintains more than 80 country-specific sites. Company
sales generated through the Internet reached nearly 50% of
revenue and averaged $40 million per day by the end of
fiscal year 2000. Through, www.dell.com, customers
and potential customers can access a wide range of information
about the Company’s product offerings, can configure and
purchase systems online and can access volumes of support and
technical information.
The Company also develops custom Internet sites, called Premier
PagesTM, for various corporate and institutional
customers, allowing these customers to simplify and accelerate
procurement and support processes. Through these custom sites,
the Company offers the customer paperless purchase orders,
approved product configurations, global pricing, real-time order
tracking, purchasing history and account team information. The
Company currently provides more than 40,000 Premier Pages
worldwide. The Company also provides an online virtual account
executive for its small business customers. And, for all domestic
customers, the Company provides a spare-parts ordering system,
and a virtual help desk featuring natural-language search
capabilities and direct access to technical support data.
In fiscal year 2000, the Company expanded its Internet
presence with the launch of www.gigabuys.com. This,
combined with the DellWare® program has created an online
source for more than 30,000 competitively-priced computer-related
products, including software and peripherals.
The Company recently announced a series of initiatives designed
to leverage the Company’s successful use of the Internet by
providing customers the servers, storage, and services required
to build, expand and enhance their own Internet infrastructure
capabilities. These initiatives include the bundling of
marketing, sales, services, support, and financing for Internet
customers through the Service Provider DirectTM
program; Dell Expert ServicesTM consulting services
and web hosting; the PowerAppTM line of web server
appliances; and strategic investments in Internet infrastructure
companies by Dell Ventures.
Comprehensive Customer Relationships
The Company develops and utilizes direct customer relationships
to understand end-users’ needs and to deliver high quality
computer products and services tailored to meet those needs. For
large corporate and institutional customers, the Company works
with the customer prior to the sale to plan a strategy to meet
that customer’s current and future technology needs. After
the sale, the Company continues the direct relationship by
establishing account teams, consisting of sales, customer service
and technical personnel, dedicated to the Company’s large
corporate and institutional customers. The Company also
establishes direct relationships with small-to-medium businesses
and individuals, through account representatives, telephone sales
representatives or Internet contact. These direct customer
relationships provide the Company with a constant flow of
information about its customer’s plans and requirements and
enable the Company to weigh its customer’s needs against
emerging technologies.
Cooperative Research and Development
The Company has successfully developed cooperative, working
relationships with many of the world’s most advanced
technology companies. Working with these companies, the
Company’s engineers manage quality, integrate technologies
and design and manage system architecture. This cooperative
approach allows the Company to determine the best method and
timing for delivering
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new technologies to the market. The Company’s goal is to
quickly and efficiently deliver the latest relevant technology to
its customers.
Custom-Built Computer Systems
The direct model is based on the principle that delivering
custom-built computer systems is the best business model for
providing solutions that are truly relevant to end-user needs.
This concept, together with the Company’s flexible,
build-to-order manufacturing process, enables the Company to
achieve faster inventory turnover and reduced inventory levels
and allows the Company to rapidly incorporate new technologies
and components into its product offerings.
Custom-Tailored Service and Support Programs
In the same way that the Company’s computer products are
built-to-order, service and support programs are designed to fit
specific customer requirements. The Company offers a broad range
of service and support programs through its own technical
personnel and its direct management of specialized service
suppliers. These services range from online support to onsite
customer-dedicated systems engineers.
The Company believes that it has significant opportunities for
continued growth in all parts of the world, in all customer
groups and in all product categories, ranging from enterprise
systems, such as network servers, high-end workstations and
storage, to home PCs. While the Company believes that its
business strategy provides it with competitive advantages, there
are many factors that may affect the Company’s business and
the success of its operations. For a discussion of these factors,
see “Item 1 — Business — Factors
Affecting the Company’s Business and Prospects.”
Geographic Areas of Operations
The Company conducts operations worldwide on a geographic basis,
with those geographic segments being the Americas, Europe and
Asia-Pacific and Japan regions. The Americas segment, which is
based in Round Rock, Texas, covers the U.S., Canada and Latin
America. The European segment, which is based in Bracknell,
England, covers the European countries and also some countries in
the Middle East and Africa. The Asia-Pacific and Japan segment
covers the Pacific Rim, including Japan, Australia and New
Zealand, and is based in Hong Kong (for areas other than Japan)
and Kawasaki, Japan (for Japan). See
“Item 1 — Business — Factors
Affecting the Company’s Business and Prospects” for
information about certain risks of international activities.
The Company’s corporate headquarters are located in Round
Rock, Texas, and its manufacturing facilities are located in
Austin, Texas; Nashville, Tennessee; Eldorado do Sul, Brazil;
Limerick, Ireland; Penang, Malaysia; and Xiamen, China. See
“Item 2 — Properties.”
For financial information about the results of the Company’s
operating segments for each of the last three fiscal years, see
Note 12 of Notes to Consolidated Financial Statements
included in “Item 8 — Financial Statements
and Supplementary Data.”
During fiscal year 2000, the Company expanded operations to
the Nashville, Tennessee area and opened a manufacturing facility
in Eldorado do Sol, Brazil, to serve Latin America. See
“Item 2 — Properties.”
Products and Services
The Company offers a wide range of products and services,
including desktop computer systems, notebook computers,
workstations, servers and storage products, as well as software,
peripherals and service and support programs.
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Desktop Computer Systems
The Company offers two primary lines of desktop computer systems.
The OptiPlex® line is designed for corporate and
institutional customers who require highly reliable systems
optimized for use in networked environments. The Dimension®
line of desktop computer systems is designed for small
businesses, workgroups and consumers, who generally demand fast
performance and the latest technology without the need for remote
manageability.
Notebook Computers
The Company offers two lines of notebook computer systems, each
designed for targeted customer needs. The Latitude® line is
targeted to business customers who require highly reliable and
durable systems with maximum connectivity for use in networked
environments. The Inspiron® line is targeted to home and
small business users who require the latest technology and
high-end multimedia performance.
Enterprise Systems
Workstations — The Dell Precision®
workstation product line is intended for professional users who
demand exceptional performance to run sophisticated applications,
such as computer-aided design, digital content creation,
geographic information systems, computer animation, software
development and financial analysis. In fiscal year 2000,
industry sources showed that the Dell Precision workstation
product line achieved the number one worldwide market share
position in Windows NT®-based workstations.
Servers — The PowerEdge® line of servers
consists of systems that can operate as file servers, database
servers, applications servers and communications/groupware
servers in a networked computing environment. PowerEdge systems
can be configured as desired for use in a range of networked
environments, from single workgroups to entire enterprises. The
Company also offers rack-mountable chassis for its network
servers and a full line of external storage systems for increased
disk capacity and data backup.
The Company recently began offering the PowerApp line of
appliance server products. These web server appliances are
designed to target the needs of companies that are developing or
enhancing their Internet infrastructure, including Internet
service providers and application service providers.
Storage — The PowerVault® line of storage
products is designed to drive high-end storage features into
standard computing environments, meeting a wide range of customer
storage needs. The Company offers a range of products within the
PowerVault line for differing customer needs. In fiscal
year 2000 the Company announced the PowerVault storage area
network solution, the first storage area network from a major
systems vendor for Windows NT environments.
Additionally, in fiscal year 2000 the Company acquired
ConvergeNet Technologies, Inc., a private storage area
network company based in San Jose, California. As a result
of the acquisition, the Company will develop products that will
enable current and future PowerVault storage devices and other
storage systems to connect to any Intel®- or
RISC®-based server running UNIX®, SolarisTM,
Windows NT®, Windows 2000®, NetWare® or
Linux® operating systems.
Software and Accessories
The Company maintains four primary software and accessory
programs to enhance its computer systems. These include DellWare,
Gigabuys®, DellPlusTM and ReadyWare®.
Through DellWare and Gigabuys, the Company offers a wide range of
software, peripherals and other accessories. Through the
DellPlus custom factory integration program, the Company provides
installation and configuration of customer hardware and software
and asset tagging and labeling. Through the ReadyWare program,
the Company offers factory-installed off-the-shelf software
applications.
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Service and Support
The Company enhances its product offerings with a number of
specialized services, including custom hardware and software
integration, leasing and asset management, network installation
and support and onsite service. The Company’s direct
relationships with customers and its extensive online
capabilities via www.dell.com enhance service delivery.
The Company is further developing its service capabilities with
Internet-based services that enhance the customer experience. For
additional discussion of the Company’s service and support
programs, see “Item 1 — Business —
Service and Support.”
Service Provider Direct and Dell Expert Services
As part of its initiative to provide its customers the resources
needed to build and enhance their Internet capabilities, the
Company has recently announced the Service Provider Direct and
Dell Expert Services programs.
The Service Provider Direct program consists of a comprehensive
package of service, support and business development programs
designed to meet the needs of the Company’s top-tier service
providers and Internet-intensive businesses. The Company offers
marketing, sales, services support and financing alternatives for
its customers through this program.
Through Dell Expert Services, the Company has developed a variety
of consulting and service alternatives for its
Internet-intensive customers. Service alternatives include
e-consulting services for large and medium businesses through
alliances with e-consulting firms such as Gen3 Partners,
Arthur Andersen and Lante Corporation; web hosting for small and
medium sized businesses through DellHost.com; and consulting and
other services for small businesses through DellEWorks.com.
Sales and Marketing
The Company’s customers range from large corporations,
government agencies and healthcare and educational institutions
to small businesses and individuals. In general, the Company uses
similar sales and marketing approaches across all customer
groups, as demand levels for each customer group are principally
driven by similar changes in market prices and overall general
economic conditions. Within each region, the Company has divided
its sales and marketing forces among the various customer groups
to better meet each customer group’s specific needs. No
single customer accounted for more than 10% of the Company’s
consolidated net revenues during any of the last three fiscal
years.
Relationship Customers
The Company has established a broad range of business based on
continuing relationships with large corporations, governmental,
healthcare and educational institutions and small-to-medium
businesses. The Company maintains a field sales force throughout
the world to call on business and institutional customers and
prospects. The Company develops marketing programs and services
specifically geared to these relationship customers. Dedicated
account teams, which include field based system engineers and
consultants, form long-term customer relationships to provide
each customer with a single source of assistance on various
issues, including technology needs assessment and technical
evaluation of Dell products; system configuration; image
development order placement; lifecycle cost management;
technology transition planning; installation assistance and
project management; and detailed product, service and financial
reporting. For customers with in-house maintenance organizations,
the Company offers a variety of programs, including specialized
computer training programs, a repair parts assistance program and
other customized programs to provide access to the
Company’s technical support team. Customized product
delivery and service programs are available on a worldwide basis.
See “Item 1 — Business — Service
and Support.”
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For multinational corporate customers, the Company offers several
programs designed to provide global capability, support and
coordination. Through these programs, the Company can provide
single points of contact and accountability with global account
specialists, special global pricing, consistent service and
support programs across global regions and access to central
purchasing facilities.
The Company also maintains specific sales and marketing programs
targeted at federal, state and local governmental agencies. The
Company maintains account teams dedicated to specific
governmental and educational markets. The Company holds a
U.S. General Services Administration Schedule contract,
through which it sells to U.S. federal governmental
agencies.
Transactional Customers
The Company has established a significant base of business among
small-to-medium businesses and individuals. The Company markets
its products and services to these customers by advertising on
the Internet and television, in trade and general business
publications and by mailing a broad range of direct marketing
publications, such as promotional pieces, catalogs and customer
newsletters. The Company believes these customers value its
ability to provide reliable, custom-built computer systems at
competitive prices, knowledgeable sales assistance, post-sale
support and onsite service offerings.
Internet Customers
An increasing portion of the Company’s business is being
conducted via the Internet. Through the Company’s World Wide
Web site at www.dell.com, customers and potential
customers can access a wide range of information about the
Company’s product and service offerings, configure and
purchase systems online and access volumes of support and
technical information. The Company receives in excess of
2.6 million visits per week to www.dell.com, where it
maintains more than 80 country-specific sites. The Company
currently maintains more than 40,000 customized Premier Page web
sites for its corporate and institutional customers.
Leasing and Asset Management Services
In fiscal year 1998, the Company formed Dell Financial
Services L.P. (“DFS”) as a joint venture with
Newcourt Credit Group Inc., now a subsidiary of The CIT
Group. DFS offers leasing and other financial services to the
Company’s customers. For additional information about DFS,
see Note 11 of Notes to Consolidated Financial Statements
included in “Item 8 — Financial Statements
and Supplementary Data.”
Service and Support
The Company offers a full line of warranty, service and support
options in all of its geographic markets. These options vary in
each of the countries in which the Company does business based on
local market and customer requirements. The following is a
description of the warranties, service and support generally
available to the Company’s customers in the United States.
Standard Programs
All systems include lifetime technical support, which is
primarily provided through automated and online avenues including
the Internet via www.support.dell.com, E-mail, online
subscription services and interactive bulletin boards. As of
March 1, 2000 the Company’s support site was receiving
in excess of 5 million page views per week. The support site
enables customers to select how they receive online help, based
on their comfort and experience with technology and the Internet.
Many of the Company’s systems include software that helps
customers diagnose and communicate system problems. Several
systems also include a built-in diagnostics program that can
provide
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online information about system malfunctions. The Company also
continues to provide toll free telephone support in most
countries. Technical specialists supporting all technical support
programs maintain close contact with the Company’s
manufacturing and product design groups and have online access to
each customer’s original system configuration and service
history.
All of the Company’s systems include a basic limited
warranty ranging from one to three years, which includes parts
and labor coverage. Additionally, most business customers have
systems that include next-business-day onsite service, which
provides customers with next-business-day parts delivery and a
Dell-trained, Dell-managed technician to diagnose and resolve
system issues.
Additional Options
The Company offers customers the opportunity to customize their
service and support programs through a wide selection of options.
For example, PowerEdge server customers may choose to extend
standard service contracts to include up to four additional years
of next-business-day, onsite service. Additionally, customers
may choose same day, two, four or six-hour response service
offerings. Notebook computer owners have access to service and
support in a multitude of countries in which the Company conducts
business, in the event a notebook customer is in need of service
or support while traveling outside of that customer’s home
country.
The Company’s Premier AccessTM program includes a
service and support program specifically designed for
information systems professionals who have technical expertise in
diagnosing and servicing computer systems. Customers can choose
their level of service under the program, including rapid service
and parts dispatches, direct access to advanced level technical
support, specialized online support, reimbursement for certain
labor costs and parts management assistance.
Through the DellPlus program, the Company offers specialized
services designed to satisfy customers’ unique hardware and
software integration requirements. With this program, a
customer’s particular integration requirements (whether
hardware related, such as specialized network cards, video and
graphic boards, modems, tape drives or hard drives; or software
related, such as customer proprietary software applications or
drivers) can be satisfied at the time the customer’s systems
are manufactured. This is in addition to the Company’s
ReadyWare program, a collection of popular software applications
and interface cards that can be factory-installed.
The Company also offers a variety of onsite installation services
that can be customized to meet the needs of each specific
customer. These services include basic installation and
orientation, system connectivity and functional testing, external
peripheral installation, internal device installation and file
server and advanced system installation.
Manufacturing
The Company operates manufacturing facilities in Austin, Texas;
Nashville, Tennessee; Limerick, Ireland; Penang, Malaysia;
Eldorado do Sul, Brazil; and Xiamen, China. The Company’s
manufacturing process consists of assembly, functional testing
and quality control of the Company’s computer systems.
Testing and quality control processes are also applied to
components, parts and subassemblies obtained from suppliers. The
Company’s build-to-order manufacturing process is designed
to allow the Company to quickly produce customized computer
systems and to achieve rapid inventory turnover and reduced
inventory levels, which lessens the Company’s exposure to
the risk of declining inventory values. This flexible
manufacturing process also allows the Company to incorporate new
technologies or components into its product offerings quickly.
Quality control is maintained through the testing of components,
parts and subassemblies at various stages in the manufacturing
process. Quality control also includes a burn-in period for
completed units after assembly, on-going production reliability
audits, failure tracking for early identification of production
and component problems and information from the Company’s
customers obtained
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through its direct relationships and service and support
programs. The Company conducts a voluntary vendor certification
program, under which qualified vendors commit to meet defined
quality specifications. With the exception of Brazil, all of the
Company’s manufacturing facilities have been certified as
meeting ISO 9002 quality standards. Brazil is expected to be ISO
9002 certified in fiscal year 2001.
Product Development
The Company’s product development efforts are focused on
designing and developing competitively priced computer systems
that adhere to industry standards and incorporate the
technologies and features that the Company believes are most
desired by its customers. To accomplish this objective, the
Company must evaluate, obtain and incorporate new hardware,
software, storage, communications and peripherals technologies
that are primarily developed by others. The Company’s
product development team includes programmers, technical project
managers and engineers experienced in system architecture, logic
board design, sub-system development, mechanical engineering,
manufacturing processing and operating systems. This
cross-functional approach to product design has enabled the
Company to develop systems with improved functionality,
manufacturability, reliability, serviceability and performance,
while keeping costs competitive. The Company takes steps to
ensure that new products are compatible with industry standards
and that they meet cost objectives based on competitive pricing
targets.
The Company bases its product development efforts on cooperative,
meaningful relationships with the world’s most advanced
technology companies. These working partnerships allow the
Company to use its direct model and build-to-order manufacturing
process to deliver, on a timely and cost-effective basis, those
emerging technologies that are most relevant to its customers.
During fiscal year 2000, the Company incurred
$568 million in research, development and engineering
expenses, compared with $272 million for fiscal year 1999
and $204 million for fiscal year 1998. Fiscal year 2000
research, development and engineering expenses included a
$194 million charge for write-off of purchased in-process
research and development resulting from the acquisition of
ConvergeNet Technologies, Inc. The amount the Company spends
on research, development and engineering activities, which the
Company believes to be important to its continued success and
growth, is determined as part of the annual budget process and is
based on cost-benefit analyses and revenue forecasts. The
Company prioritizes activities to focus on projects that it
believes will have the greatest market acceptance and achieve the
highest return on the Company’s investment.
Dell Ventures
During fiscal year 2000 the Company began making equity
investments in companies in order to enhance and extend the
Company’s direct business model and core business
initiatives. The Company makes strategic investments in other
companies designed to yield greater access to leading-edge
technologies and services, expanded markets for the
Company’s products, insight into new markets, and financial
return. The Company generally invests in emerging technology
companies with business objectives built around the Internet,
services, server and storage products and communications. During
fiscal year 2000, the Company typically made mid- to
late-stage investments prior to a company’s initial public
offering. Subsequent to fiscal year 2000, the Company
announced the expansion of this group’s activities to
include investment in early-stage companies and business
incubation activities. For additional information about risk on
financial instruments, see “Item 7 —
Management’s Discussion and Analysis of Financial Condition
and Results of Operations — Market Risk.”
Patents, Trademarks and Licenses
The Company holds a portfolio of 510 U.S. patents and 431
U.S. patent applications pending, and has a number of
related foreign patents and patent applications pending. The
Company’s
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U.S. patents expire in years 2005 through 2018. The
inventions claimed in those patents and patent applications cover
aspects of the Company’s current and possible future
computer system products, manufacturing processes and related
technologies. The Company is developing a portfolio of patents
that it anticipates will be of value in negotiating intellectual
property rights with others in the industry.
The Company has obtained U.S. federal trademark registration
for its DELL word mark and its Dell logo mark. The Company owns
registrations for 27 of its other marks in the U.S. As of
March 1, 2000, the Company had pending applications for
registration of 39 other trademarks. The DELL word mark, Dell
logo and other trademark and service mark registrations in the
U.S. may be renewed as long as the mark continues to be used
in interstate commerce. The Company believes that establishment
of the DELL mark and logo in the U.S. is material to the
Company’s operations. The Company has also applied for or
obtained registration of the DELL mark and several other marks in
approximately 190 other countries or jurisdictions where the
Company conducts or anticipates expanding its international
business. The Company has also registered approximately 370
global domain names. In addition, the Company has registered in
excess of 200 country specific domain names. The Company has also
taken steps to reserve corporate names and to form non-operating
subsidiaries in certain foreign countries where the Company
anticipates expanding its international business.
The Company has entered into a variety of intellectual property
licensing and cross-licensing agreements. In addition, the
Company has entered into nonexclusive licensing agreements with
Microsoft Corporation for various operating system and
application software. The Company has also entered into various
software licensing agreements with other companies.
From time to time, other companies and individuals assert
exclusive patent, copyright, trademark or other intellectual
property rights to technologies or marks that are important to
the technology industry or the Company’s business. The
Company evaluates each claim relating to its products and, if
appropriate, seeks a license to use the protected technology. The
licensing agreements generally do not require the licensor to
assist the Company in duplicating its patented technology nor do
these agreements protect the Company from trade secret, copyright
or other violations by the Company or its suppliers in
developing or selling these products.
Infrastructure
Management Information Systems
The Company’s management information systems enable the
Company to track each unit sold from the initial sales contact,
through the manufacturing process to post-sale service and
support. The systems assist the Company in tracking key
information about its customers. Using its database to assess
purchasing trends, advertising effectiveness and customer and
product groupings, the Company targets marketing activities
specifically to particular types of customers. This database,
unique to the Company’s direct model, allows the Company to
gauge customer satisfaction issues and also provides the
opportunity to test new propositions in the marketplace prior to
product or service introductions.
Employees
On January 28, 2000, the Company had approximately 36,500
regular employees. Approximately 23,500 of those employees were
located in the U.S., and approximately 13,000 were located in
other countries. The Company has never experienced a work
stoppage due to labor difficulties and believes that its employee
relations are good.
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Government Regulation
The Company’s business is subject to regulation by various
federal and state governmental agencies. Such regulation includes
the radio frequency emission regulatory activities of the
U.S. Federal Communications Commission, the anti-trust
regulatory activities of the U.S. Federal Trade Commission
and Department of Justice, the import/ export regulatory
activities of the U.S. Department of Commerce and the
product safety regulatory activities of the U.S. Consumer
Products Safety Commission.
The Company also is required to obtain regulatory approvals in
other countries prior to the sale or shipment of products. In
certain jurisdictions, such requirements are more stringent than
in the U.S. Many developing nations are just beginning to
establish safety, environmental and other regulatory
requirements, which may vary greatly from U.S. requirements.
Backlog
At the end of fiscal year 2000, backlog was
$310 million, compared with backlog of $170 million at
the end of fiscal year 1999, and backlog of $215 million at
the end of fiscal year 1998. The Company does not believe that
backlog is a meaningful indicator of sales that can be expected
for any period, and there can be no assurance that the backlog at
any point in time will translate into sales in any subsequent
period.
Factors Affecting the Company’s Business and Prospects
There are many factors that affect the Company’s business
and the results of its operations, some of which are beyond the
control of the Company. The following is a description of some of
the important factors that may cause the actual results of the
Company’s operations in future periods to differ materially
from those currently expected or desired.
General economic and industry conditions
Any general economic, business or industry conditions that cause
customers or potential customers to reduce or delay their
investments in computer systems could have a negative effect on
the Company’s strength and profitability. For example, a
softening of demand for computer systems may result in decreased
revenues (or at least declining revenue growth rates) for
computer manufacturers in general and the Company in particular
and may result in pricing pressures for products that the Company
sells, which could have a negative effect on the Company’s
revenues and profitability.
Competition
The technology industry is highly competitive. The intense
competition inherent in the industry could result in the loss of
customers or pricing pressures, which would negatively affect the
Company’s results of operations.
International activities
The Company’s future growth rates and success are in-part
dependent on continued growth and success in international
markets. As is the case with most international operations, the
success and profitability of the Company’s international
operations are subject to numerous risks and uncertainties,
including local economic and labor conditions, political
instability, tax laws (including U.S. taxes on foreign
operations) and foreign currency exchange rates.
Product, customer and geographic mix
The profit margins realized by the Company vary somewhat among
its products, its customer business units and its geographic
markets. Consequently, the overall profitability of the
Company’s
10
operations in any given period is partially dependent on the
product, customer and geographic mix reflected in that
period’s revenues.
Seasonal trends
The Company experiences some seasonal trends in the sale of its
products. For example, sales to governments (particularly
U.S. federal sales) are often stronger in the Company’s
third quarter, European sales are often weaker in the third
quarter and consumer sales are often stronger in the fourth
quarter. Historically, the net result of seasonal trends has not
been material relative to the Company’s overall results of
operations, but many of the factors that create and affect
seasonal trends are beyond the Company’s control.
Technological changes and product transitions
The technology industry is characterized by continuing
improvements in technology, which result in the frequent
introduction of new products, short product life cycles and
continual improvement in product price/performance
characteristics. While the Company believes that its direct model
and asset management practices afford it an inherent competitive
advantage over some of its competitors, product transitions
present some of the greatest executional challenges and risks for
any computer systems company. A failure on the part of the
Company to effectively manage a product transition will directly
affect the demand for the Company’s products and the
profitability of the Company’s operations. In addition,
while the Company has meaningful relationships with some of the
world’s most advanced technology companies, continuing
technological advancement, which is a significant driver of
customer demand, is largely beyond the control of the Company.
Inventory management/supplies
The Company’s direct business model gives it the ability to
operate with reduced levels of component and finished goods
inventories, and the Company’s financial success in recent
periods has been due in part to its asset management practices,
including its ability to achieve rapid inventory turns. As
evidenced in the second half of fiscal year 2000, temporary
disruptions in component supply availability can unfavorably
affect the Company’s short term performance. While supply
conditions have generally been favorable both to the Company and
to the industry, in recent years less favorable supply
conditions, as well as other factors both within and beyond the
Company’s control, may require or result in increased
inventory levels in the future.
The Company’s manufacturing process requires a high volume
of quality components that are procured from third party
suppliers. Reliance on suppliers, as well as industry supply
conditions, generally involves several risks, including the
possibility of defective parts (which can adversely affect the
reliability and reputation of the Company’s products), a
shortage of components and reduced control over delivery
schedules (which can adversely affect the Company’s
manufacturing efficiencies) and increases in component costs
(which can adversely affect the Company’s profitability).
The Company has several single-sourced supplier relationships,
either because alternative sources are not available or the
relationship is advantageous due to performance, quality,
support, delivery, capacity or price considerations. If these
sources are unable to provide timely and reliable supply, the
Company could experience manufacturing interruptions, delays or
inefficiencies, adversely affecting its results of operations.
Risk on financial instruments
The Company regularly utilizes derivative instruments to hedge
its exposure to fluctuations in foreign currency exchange rates
and interest rates. In addition, the Company utilizes equity
instrument contracts to execute repurchases of its common stock
under its Board-authorized stock repurchase program. Some of
these instruments and contracts may involve elements of market
and
11
credit risk in excess of the amounts recognized in the financial
statements. For additional information about risk on financial
instruments, see “Item 7 — Management’s
Discussion and Analysis of Financial Condition and Results of
Operations — Market Risk.”
Strength of infrastructure
The Company has grown at a rapid pace, requiring enhancement and
expansion of its management team, information systems,
manufacturing operations and other aspects of its infrastructure.
The Company’s continued success and profitability partly
depends on its ability to continue to improve its infrastructure
(particularly personnel and information systems) to keep pace
with the growth in its overall business activities.
Patent rights
The Company’s continued business success may be largely
dependent on its ability to obtain licenses to intellectual
property developed by others on commercially reasonable and
competitive terms. If the Company or its suppliers are unable to
obtain desirable technology licenses, the Company could be
prohibited from marketing products, could be forced to market
products without desirable features or could incur substantial
costs to redesign its products, defend legal actions or pay
damages.
Trademarks and Service Marks
Several U.S. trademarks and service marks appear in this
Report. Dell, the Dell logo, Dimension, Latitude, OptiPlex, Dell
Precision, Inspiron and PowerEdge are registered trademarks of
the Company, and DellWare, Gigabuys, ReadyWare and SelectCare are
registered service marks. PowerApp, OptiFrame and PowerVault are
trademarks of the Company, and BusinessCare, BusinessCare Plus,
DellPlus, DirectLine, Premier Access and Premier Pages are
service marks. This Report may also contain trademarks and
tradenames of other entities; the Company disclaims proprietary
interest in the marks and names of others.
12
Executive Officers of the Company
The following table sets forth the name, age and position of each
of the persons who were serving as executive officers of the
Company as of March 31, 2000.
| |
|
|
|
|
|
|
| Name |
|
Age |
|
Position |
|
|
|
|
|
|
Michael S. Dell |
|
|
35 |
|
|
Chairman of the Board and Chief Executive Officer |
|
|
|
|
|
|
Kevin B. Rollins |
|
|
47 |
|
|
Vice Chairman |
|
|
|
|
|
|
James T. Vanderslice |
|
|
59 |
|
|
Vice Chairman |
|
|
|
|
|
|
David W. Allen |
|
|
39 |
|
|
Vice President, Worldwide Operations |
|
|
|
|
|
|
Paul D. Bell |
|
|
39 |
|
|
Senior Vice President; President, Europe, Middle East and Africa
and Co-General Manager, Worldwide Home and Small Business Group |
|
|
|
|
|
|
G. Carl Everett, Jr. |
|
|
49 |
|
|
Senior Vice President, Personal Systems Group |
|
|
|
|
|
|
Thomas B. Green |
|
|
45 |
|
|
Senior Vice President, Law and Administration and Secretary |
|
|
|
|
|
|
Michael D. Lambert |
|
|
53 |
|
|
Senior Vice President, Enterprise Systems Group |
|
|
|
|
|
|
Göran S. Malm |
|
|
52 |
|
|
Senior Vice President and Co-President, Asia-Pacific/ Japan |
|
|
|
|
|
|
Joseph A. Marengi |
|
|
46 |
|
|
Senior Vice President and General Manager, U.S.
Relationship Group |
|
|
|
|
|
|
Randall D. Mott |
|
|
43 |
|
|
Senior Vice President and Chief Information Officer |
|
|
|
|
|
|
Frank L. Muehleman |
|
|
43 |
|
|
Vice President and Co-General Manager, Worldwide Home and Small
Business Group |
|
|
|
|
|
|
Rosendo G. Parra |
|
|
40 |
|
|
Senior Vice President and General Manager, U.S. Public
Sector |
|
|
|
|
|
|
Lawrence A. Pentland |
|
|
41 |
|
|
Vice President and General Manager, Americas International Group |
|
|
|
|
|
|
Charles H. Saunders |
|
|
56 |
|
|
Vice President and Co-President, Asia-Pacific/ Japan |
|
|
|
|
|
|
James M. Schneider |
|
|
47 |
|
|
Senior Vice President and Chief Financial Officer |
|
|
|
|
|
|
Morton L. Topfer |
|
|
63 |
|
|
Counselor to the CEO and Director |
Set forth below is biographical information about each of the
Company’s executive officers.
Michael S. Dell — Mr. Dell has been
Chairman of the Board, Chief Executive Officer and a director of
the Company since May 1984. Mr. Dell shares the Office of
the Chief Executive Officer with Mr. Rollins and
Mr. Vanderslice. Mr. Dell founded the Company in 1984
while attending the University of Texas at Austin. He is a member
of the board of directors of the U.S. Chamber of Commerce,
the Computerworld/ Smithsonian Awards and the World Economic
Forum Foundation. Mr. Dell is also a member of the Business
Council and serves on the nominating committee for the National
Technology Medal of Honor.
Kevin B. Rollins — Mr. Rollins has
been Vice Chairman of the Company since December 1997, and shares
the Office of the Chief Executive Officer with Mr. Dell and
Mr. Vanderslice. Mr. Rollins joined the Company in
April 1996 as Senior Vice President, Corporate Strategy and was
named Senior Vice President, General Manager — Americas
in May 1996. For 12 years prior to joining the Company,
Mr. Rollins was employed by Bain & Company, an
international strategy consulting firm, most recently serving as
a director and partner. Mr. Rollins received a Master of
Business Administration degree and a Bachelor of Arts degree from
Brigham Young University. Mr. Rollins is also a member of
the National Advisory Council of Brigham Young University and a
member of the CEO Forum on Education and Technology.
James T. Vanderslice — Mr. Vanderslice
serves as Vice Chairman of the Company and shares the Office of
Chief Executive Officer with Mr. Dell and Mr. Rollins.
Prior to joining the Company, Mr. Vanderslice served as
Senior Vice President and Group Executive for IBM’s
Technology Group and was a member of IBM’s corporate
executive committee. Mr. Vanderslice was responsible for
IBM’s storage systems, microelectronics, networking-hardware
and printer-systems division. He
13
also provided functional guidance to the display and
technology-market development units, both based in Japan.
Mr. Vanderslice holds a Bachelor of Science degree in
Physics from Boston College and a PhD in Physics from Catholic
University. Mr. Vanderslice serves on the board of directors
of BroadStream Corporation.
David W. Allen — Mr. Allen has served
as Vice President, Worldwide Operations since June 1999.
Mr. Allen is responsible for overseeing all aspects of the
Company’s worldwide operations, including manufacturing
processes, logistics and supply-chain management. Mr. Allen
joined the Company in June 1999 from Frito-Lay, Inc., where
he served as Senior Vice President of Operations. He joined
Frito-Lay in 1991 as Vice President of Operations for its North
Division, and was later General Manager of a joint venture with
Sara Lee. Prior to joining Frito-Lay, Mr. Allen held various
other operations positions with Home Innovations, Inc.;
Booz, Allen & Hamilton; and Saturn Corporation.
Mr. Allen holds a bachelor’s degree in Electrical
Engineering from General Motors Institute and a master’s
degree in Business Administration from the Harvard Graduate
School of Business Administration.
Paul D. Bell — Mr. Bell joined the
Company in July 1996 and serves as Senior Vice President;
President, Europe, Middle East and Africa; and Co-General Manager
Worldwide Home and Small Business Group. As President of EMEA,
he is responsible for business operations in the Company’s
European regions, including the Company’s manufacturing
facilities in Limerick, Ireland. In the HSB role, he shares
responsibility for all related product development,
manufacturing, sale, marketing and customer-service activities
for the Company’s Home and Small Business Group. Prior to
joining the Company, Mr. Bell was with Bain &
Company, where he was a management consultant for six years,
including two years as a consultant for the Company.
Mr. Bell received a bachelor’s degree in Fine Arts and
Business Administration from Pennsylvania State University and a
Master of Business Administration degree from the Yale School of
Organization and Management.
G. Carl Everett, Jr. — Mr. Everett
joined the Company in February 1998 as Senior Vice President,
Desktops and Workstations, and currently serves as Senior Vice
President, Personal Systems Group. Mr. Everett is
responsible for worldwide development, marketing and strategic
technological direction for the Company’s desktop computer
systems and notebook computer product lines. Prior to joining the
Company, Mr. Everett was employed by Intel Corporation,
where he began in a field sales office and advanced into sales
and marketing management. He was appointed Vice President in 1989
and, until 1994, oversaw North American and then worldwide
sales. From 1994 to 1996, Mr. Everett served as Senior Vice
President and General Manager of the Desktop Products Group.
Prior to joining Intel in 1978, Mr. Everett held various
sales, marketing and customer support positions with Motorola
Semiconductor Products Group. Mr. Everett holds a
bachelor’s degree in Business Administration from New Mexico
State University.
Thomas B. Green — Mr. Green has been
Senior Vice President, Law and Administration since December
1997, and is responsible for overseeing the Company’s legal
and governmental affairs, human resources function and other
administrative departments. Mr. Green joined the Company in
August 1994 as General Counsel and Secretary. Before joining the
Company, Mr. Green served as Executive Vice President and
General Counsel of Chicago Title & Trust Company, where
he was employed from October 1992 to July 1994, and as Executive
Vice President and General Counsel of Trammell Crow Company from
October 1990 to October 1992. From February 1989 to October 1990,
Mr. Green was employed by the law firm of Jones, Day,
Reavis & Pogue, Dallas, Texas, last serving as a partner
in that firm. His background also includes a term as law clerk
to former United States Supreme Court Chief Justice Warren
Burger. Mr. Green received a Bachelor of Arts degree in
English and a Juris Doctor degree from the University of Utah.
Michael D. Lambert — Mr. Lambert
joined the Company in October 1996 as Senior Vice President,
Server Group, and currently serves as Senior Vice President,
Enterprise Systems Group. Mr. Lambert is responsible for
worldwide development and marketing of the Company’s server,
workstation and storage product lines. Prior to joining the
Company, Mr. Lambert held various
14
officer positions with Compaq Computer Corporation, last serving
as Vice President of North American Marketing. Prior to joining
Compaq in 1994, Mr. Lambert served four years as general
manager of the large computer products division for NCR
Corporation. Mr. Lambert received a bachelor’s degree
in Business Administration from the University of Kentucky in
Lexington. Mr. Lambert serves on the board of directors of
Storage Networks, Inc.
Göran S. Malm — Mr. Malm joined
the Company in November 1999 and serves as Senior Vice President
and Co-President Asia-Pacific/ Japan. In this role, Mr. Malm
shares with Mr. Sanders responsibility for the
Company’s operations in all markets in the Asia-Pacific/
Japan region, including the Company’s manufacturing and
customer service centers in Penang, Malaysia and Xiamen, China.
Prior to joining the Company, Mr. Malm served as Senior Vice
President of General Electric and President of GE Asia-Pacific.
Mr. Malm joined GE in 1992 as President and CEO of GE
Medical Systems Asia, based in Tokyo. Before joining General
Electric, Mr. Malm held a variety of positions during a
20 year career at AB SKF, a Swedish multinational company
and world leader in automotive and industrial bearings design and
manufacturing. Mr. Malm earned a bachelor’s degree in
Economics and Business Administration from the Gothenburg School
of Economics.
Joseph A. Marengi — Mr. Marengi joined
the Company in July 1997 and serves as Senior Vice President and
General Manager, U.S. Relationship Group. In this position,
Mr. Marengi is responsible for the U.S. customer
groups serving global, enterprise, large corporate and medium
business customers. Prior to joining the Company,
Mr. Marengi worked at Novell, Inc., most recently
serving as President and Chief Operating Officer. He joined
Novell in 1989, beginning as Vice President of the Eastern region
and moving through successive promotions to become Executive
Vice President of Worldwide Sales and Field Operations. For ten
years prior to joining Novell, Mr. Marengi served as Vice
President of Channel Sales for Excelan, Inc. and in various
other executive, sales, information management positions. From
1978 through 1981, Mr. Marengi served in the United States
Coast Guard and Coast Guard Reserve, reaching the rank of
Lieutenant Commander. Mr. Marengi earned a bachelor’s
degree in Public Administration from the University of
Massachusetts and a master’s degree in Management from the
University of Southern California.
Randall D. Mott — Mr. Mott joined the
Company in February 2000 as Senior Vice President and Chief
Information Officer. Mr. Mott is responsible for managing
the Company’s global information-technology infrastructure.
Prior to joining the Company, Mr. Mott held numerous
technical and management positions at Wal-Mart, becoming an
officer of Wal-Mart in 1991. He was named Senior Vice President
and Chief Information Officer for Wal-Mart in 1994 and joined
Wal-Mart’s Executive Committee in 1997. Mr. Mott holds
a bachelor’s degree in Mathematics from the University of
Arkansas.
Frank L. Muehleman — Mr. Muehleman
joined the Company in September 1998 and serves as Vice President
and Co-General Manager of the Worldwide Home and Small Business
Group. He shares responsibility for all product development,
manufacturing, sales, marketing and customer service activities
within the Home and Small Business Group. Mr. Muehleman
previously served as Vice President and General Manager of the
Company’s Small Business Division of the Americas Region.
Prior to joining the Company, Mr. Muehleman served as
President of Psion Inc., where he was responsible for sales,
marketing, operations, technical support and customer services
for the United States and Canada. Prior to joining Psion,
Mr. Muehleman was employed by Bain & Company as a
consultant to large and small businesses, including two years as
a consultant to the Company. Mr. Muehleman holds a
master’s degree in Business Administration from Harvard
Business School and a Bachelor of Science degree in Mechanical
Engineering from Cornell University.
Rosendo G. Parra — Mr. Parra joined
the Company in August 1993 and serves as Senior Vice President
and General Manager, U.S. Public Sector. In that position,
Mr. Parra is responsible for the Company’s operations
in the federal, state and local government, K-12 and higher
education markets in the United States as well as the Austin
fulfillment campus, the Worldwide Public Council and the
Worldwide Services Council. Prior to joining the Company,
Mr. Parra held various sales and
15
general management positions with GRiD Systems Corporation,
including Regional Sales Director and Vice President and General
Manager of the PC Strategic Business Unit. Before his association
with GRiD, Mr. Parra spent nine years in various sales and
management positions for the business products division of Tandy
Corporation. Mr. Parra earned a bachelor’s degree in
Marketing from the University of Maryland.
Lawrence A. Pentland — Mr. Pentland
joined the Company in 1998 and serves as Vice President and
General Manager, Americas International. Mr. Pentland is
responsible for managing all operations of Canada, Latin America
and the Brazil Customer Center. Mr. Pentland was named Vice
President and General Manager of Dell Canada in 1998. Prior to
joining the Company, Mr. Pentland was an Executive Vice
President of Cott Corporation, a private label food and beverage
company, and a partner at Bain & Company.
Mr. Pentland holds a Masters of Business Administration from
the Wharton Business School, University of Pennsylvania. He also
holds an honors degree in business administration from the
University of Western Ontario. Mr. Pentland is a member of
the Information Technology Association of Canada, the Foundation
Board at George Brown College and the Young President’s
Association.
Charles H. Saunders — Mr. Saunders
joined the Company in May 1997 and serves as Vice President and
Co-President, Asia-Pacific/ Japan. In this role,
Mr. Saunders shares with Mr. Malm responsibility for
the Company’s operations in all markets in the
Asia-Pacific/Japan Region, including the Company’s
manufacturing and customer service centers in Penang, Malaysia
and Xiamen, China. Prior to joining the Company,
Mr. Saunders spent 25 years at Motorola, Inc.,
most recently holding the position of Corporate Vice President
and General Manager of the U.S./ Canada Division of the Land
Mobile Products Sector. Mr. Saunders holds a Bachelor of
Science degree in Business from East Tennessee State University.
James M. Schneider — Mr. Schneider
joined the Company in September 1996 as Vice President and Chief
Accounting Officer. Mr. Schneider was named Senior Vice
President in September 1998 and Chief Financial Officer in March
2000. During fiscal year 2000 and prior to being named Chief
Financial Officer, Mr. Schneider was responsible for
corporate planning, financial systems, facilities and the
Controller’s office. For three years prior to joining the
Company, Mr. Schneider was with MCI Communications
Corporation, last serving as Senior Vice President of Corporate
Finance. For 19 years prior to joining MCI,
Mr. Schneider was associated with Price Waterhouse LLP,
serving as a partner for 10 years. Mr. Schneider holds
a bachelor’s degree in Accounting from Carroll College in
Waukesha, Wisconsin, and is a Certified Public Accountant. He is
a member of the board of directors of General
Communications, Inc.
Morton L. Topfer — Since December 1999
Mr. Topfer has served as Counselor to the CEO and as a
Director of the Company. In this role, Mr. Topfer advises in
matters of critical importance to the Company such as
operations, quality and customer experience issues. From June
1994 until December 1999 Mr. Topfer served as Vice Chairman
of the Company. For 23 years prior to joining the Company,
Mr. Topfer held various positions with Motorola, Inc.,
last serving as Corporate Executive Vice President and President
of the Land Mobile Products Sector. Before joining Motorola in
1971, Mr. Topfer spent 11 years with RCA Laboratories
in various research and development and management positions. He
began his professional career as a research engineer with
Kollsman Instruments Corporation in New York.
Mr. Topfer holds a bachelor’s degree in Physics from
Brooklyn College and serves on the board of directors of British
Sky Broadcasting Ltd. Mr. Topfer also serves on the
advisory board of Singapore Technologies.
ITEM 2 — PROPERTIES
At January 28, 2000, the Company owned or leased a total of
approximately 8.1 million square feet of office,
manufacturing and warehouse space worldwide, 5.6 million
square feet of which is located in the U.S. and the remainder
located in various international areas.
16
The Company believes that it can readily obtain appropriate
additional space as may be required at competitive rates by
extending expiring leases or finding alternative space.
Domestic Properties
The Company’s principal offices and U.S. manufacturing
facilities are located in Central Texas. In fiscal 2000 the
Company began development in the Middle Tennessee area.
The Company owns 360 acres of land in Round Rock, Texas (north of
Austin), on which are located several office buildings completed
since August 1994 that contain an aggregate of approximately
2.2 million square feet of office space. This includes
approximately 900,000 square feet of owned office buildings
and 1.3 million square feet of leased office space. These
buildings, comprising the Company’s Round Rock campus, house
the Company’s sales, marketing and support staff for the
Americas region, as well as the Company’s executive
headquarters and administrative support functions.
The Company leases 570 acres of land in Austin, Texas on which
approximately 920,000 square feet of office and
manufacturing space are located, including a 320,000-square-foot
office building and two 300,000-square-foot manufacturing
facilities. Additional office space totaling 375,000 square
feet is currently under construction.
The Company leases approximately 2.1 million square feet of
office and manufacturing space at various locations throughout
Austin, Texas. These buildings house manufacturing, research and
development and support staff.
The Company also leases approximately 400,000 square feet of
space in the Middle Tennessee area. This includes a
300,000 square foot manufacturing facility in Lebanon,
Tennessee and approximately 100,000 square feet of office
space in Nashville, Tennessee. These buildings house sales and
manufacturing support staff. Additional office and manufacturing
space totaling 900,000 square feet is under construction in
Nashville, Tennessee.
International Properties
At January 28, 2000, the Company’s international
facilities consisted of approximately 2.5 million square
feet of office and manufacturing space in 33 countries.
Approximately 1.6 million square feet of this space is
leased property, with lease expiration dates ranging from April
2000 to December 2013.
The Company also owns approximately 888,000 square feet of
space, comprised of 238,000 square feet of combined office
and manufacturing space in Penang, Malaysia (located on land
leased until the year 2053 from the State Authority of Penang),
and approximately 650,000 square feet of manufacturing and
office space in Ireland. Over 300,000 square feet of
additional office and manufacturing space is under construction
in Xiamen, China.
ITEM 3 — LEGAL PROCEEDINGS
The Company is subject to various legal proceedings and claims
arising in the ordinary course of business. The Company’s
management does not expect that the results in any of these legal
proceedings will have a material adverse effect on the
Company’s financial condition, results of operations or cash
flows.
ITEM 4 — SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
No matter was submitted to a vote of the Company’s
stockholders, through the solicitation of proxies or otherwise,
during the fourth quarter of fiscal year 2000.
17
PART II
|
|
| ITEM 5 — |
MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS |
Market Information
The Company’s common stock is traded on The Nasdaq National
Market under the symbol DELL. Information regarding the market
prices of the Company’s common stock may be found in
Note 14 of Notes to Consolidated Financial Statements
included in “Item 8 — Financial Statements
and Supplementary Data.”
Holders
As of March 24, 2000, there were 34,781 holders of record of
the Company’s common stock.
Dividends
The Company has never paid cash dividends on its common stock and
does not anticipate paying any cash dividends on its common
stock for at least the next 12 months.
On each of March 6, 1998, September 4, 1998 and
March 5, 1999, the Company effected a two-for-one common
stock split by paying a 100% stock dividend to stockholders of
record as of February 27, 1998, August 28, 1998 and
February 26, 1999, respectively.
Sales of Unregistered Securities
The Company has an active stock repurchase program, which is more
fully described in Note 7 of Notes to Consolidated
Financial Statements included in “Item 8 —
Financial Statements and Supplementary Data.” One element of
the program is the purchase of call options and the sales of put
and call options. During fiscal year 2000, the Company sold
79 million put options and forwards to third party
financial intermediaries and received proceeds of
$59 million in connection with such sales. The Company also
sold 3.25 million call options to third party financial
intermediaries and received proceeds of $4 million in
connection with such sales. The put and call options entitle each
holder to sell or purchase, respectively, by physical delivery,
cash delivery or net-share settlement, at the Company’s
option, one share of common stock at a specified price. The put
options sold by the Company during the year expire on various
dates through September 2001 and have exercise prices ranging
from $25 to $47 per share with an average exercise price of
$39. The call options sold by the Company during the fiscal year
expire on various dates through July 2000 and have exercise
prices ranging from $48 to $87 per share, with an average
exercise price of $62.
All of these transactions were exempt from registration under
Section 4 (2) of the Securities Act of 1933. Each
transaction was privately negotiated, and each purchaser of
options was an accredited investor and qualified institutional
buyer. No public solicitation was made by the Company in the
placement of these securities.
18
ITEM 6 — SELECTED FINANCIAL DATA
The following selected financial data should be read in
conjunction “Item 7 — Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” and “Item 8 — Financial
Statements and Supplementary Data.”
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
January 28, |
|
January 29, |
|
February 1, |
|
February 2, |
|
January 28, |
|
|
2000 |
|
1999 |
|
1998 |
|
1997 |
|
1996 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except per share data) |
|
|
|
|
|
|
Results of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
$ |
25,265 |
|
|
$ |
18,243 |
|
|
$ |
12,327 |
|
|
$ |
7,759 |
|
|
$ |
5,296 |
|
|
|
|
|
|
|
Gross margin |
|
|
5,218 |
|
|
|
4,106 |
|
|
|
2,722 |
|
|
|
1,666 |
|
|
|
1,067 |
|
|
|
|
|
|
|
Operating income |
|
|
2,263 |
|
|
|
2,046 |
|
|
|
1,316 |
|
|
|
714 |
|
|
|
377 |
|
|
|
|
|
|
|
Income before extraordinary loss |
|
|
1,666 |
|
|
|
1,460 |
|
|
|
944 |
|
|
|
531 |
|
|
|
272 |
|
|
|
|
|
|
|
Net income |
|
|
1,666 |
|
|
|
1,460 |
|
|
|
944 |
|
|
|
518 |
|
|
|
272 |
|
|
|
|
|
|
|
Income before extraordinary loss per common share(a)(b): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.66 |
|
|
$ |
0.58 |
|
|
$ |
0.36 |
|
|
$ |
0.19 |
|
|
$ |
0.09 |
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.61 |
|
|
$ |
0.53 |
|
|
$ |
0.32 |
|
|
$ |
0.17 |
|
|
$ |
0.08 |
|
|
|
|
|
|
|
Number of weighted average shares outstanding(a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
2,536 |
|
|
|
2,531 |
|
|
|
2,631 |
|
|
|
2,838 |
|
|
|
2,863 |
|
|
|
|
|
|
|
|
Diluted |
|
|
2,728 |
|
|
|
2,772 |
|
|
|
2,952 |
|
|
|
3,126 |
|
|
|
3,158 |
|
|
|
|
|
|
|
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital(c) |
|
$ |
2,489 |
|
|
$ |
2,112 |
|
|
$ |
758 |
|
|
$ |
891 |
|
|
$ |
923 |
|
|
|
|
|
|
|
Total assets |
|
|
11,471 |
|
|
|
6,877 |
|
|
|
4,268 |
|
|
|
2,993 |
|
|
|
2,148 |
|
|
|
|
|
|
|
Long-term debt |
|
|
508 |
|
|
|
512 |
|
|
|
17 |
|
|
|
18 |
|
|
|
113 |
|
|
|
|
|
|
|
Total stockholders’ equity |
|
|
5,308 |
|
|
|
2,321 |
|
|
|
1,293 |
|
|
|
806 |
|
|
|
973 |
|
|
|
|
|
(a) |
|
All share and per share information has been
retroactively restated to reflect prior common stock splits. See
Note 7 of Notes to Consolidated Financial Statements. |
| |
|
(b) |
|
Excludes extraordinary loss of $0.01 basic
per common share for fiscal year 1997 related to repurchase of
debt instruments. |
| |
|
(c) |
|
All cash and investments information has been
retroactively restated to reflect the reclassification of cash
and cash equivalents, short term investments, long term
investments, and equity security and other investments. See
Note 1 of Notes to Consolidated Financial Statements. |
ITEM 7 — MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company’s objective is to maximize stockholder value by
executing a strategy that focuses on a balance of three
priorities: liquidity, profitability and growth. The following
discussion highlights the Company’s performance in the
context of these priorities. This discussion should be read in
conjunction with the Consolidated Financial Statements, including
the related notes.
19
Results of Operations
The following table summarizes the results of the Company’s
operations for each of the past three fiscal years. All
percentage amounts were calculated using the underlying data in
thousands.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
January 28, |
|
Percentage |
|
January 29, |
|
Percentage |
|
February 1, |
|
|
2000 |
|
Increase |
|
1999 |
|
Increase |
|
1998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in millions) |
|
|
|
|
|
|
Net revenue |
|
$ |
25,265 |
|
|
|
38 |
% |
|
$ |
18,243 |
|
|
|
48 |
% |
|
$ |
12,327 |
|
|
|
|
|
|
|
Gross margin |
|
$ |
5,218 |
|
|
|
27 |
|
|
$ |
4,106 |
|
|
|
51 |
|
|
$ |
2,722 |
|
|
|
|
|
|
|
Percentage of net revenue |
|
|
20.7 |
% |
|
|
|
|
|
|
22.5 |
% |
|
|
|
|
|
|
22.1 |
% |
|
|
|
|
|
|
Operating expenses |
|
$ |
2,955 |
|
|
|
43 |
|
|
$ |
2,060 |
|
|
|
47 |
|
|
$ |
1,406 |
|
|
|
|
|
|
|
Percentage of net revenue |
|
|
11.7 |
% |
|
|
|
|
|
|
11.3 |
% |
|
|
|
|
|
|
11.4 |
% |
|
|
|
|
|
|
Operating income |
|
$ |
2,263 |
|
|
|
11 |
|
|
$ |
2,046 |
|
|
|
56 |
|
|
$ |
1,316 |
|
|
|
|
|
|
|
Percentage of net revenue |
|
|
9.0 |
% |
|
|
|
|
|
|
11.2 |
% |
|
|
|
|
|
|
10.7 |
% |
|
|
|
|
|
|
Net income |
|
$ |
1,666 |
|
|
|
14 |
|
|
$ |
1,460 |
|
|
|
55 |
|
|
$ |
944 |
|
|
|
|
|
|
|
Percentage of net revenue |
|
|
6.6 |
% |
|
|
|
|
|
|
8.0 |
% |
|
|
|
|
|
|
7.7 |
% |
Net Revenue
The increase in net revenue for fiscal years 2000 and 1999 was
principally due to increased units sold. Unit sales grew 50% and
64% for fiscal years 2000 and 1999, respectively. Based on full
calendar year 1999 industry data, the Company’s shipments
ranked number one in the United States and number two worldwide,
as compared to the number two and number three positions for the
previous year, respectively.
Unit sales increased across all product lines during fiscal
year 2000. The Company’s enterprise systems, which
include servers, workstations and storage products, continued to
build a substantial presence in the marketplace, with enterprise
systems unit sales growing 81% during fiscal year 2000.
Notebook computer unit sales increased 61%, primarily as the
result of pricing actions and the launch of new notebook computer
products. Desktop computer systems unit sales increased 46%
during fiscal year 2000. This increase was primarily
attributable to the Company’s aggressive market penetration
of new and higher-end products.
Unit sales grew during fiscal year 1999, also the result of
increased demand for the Company’s products across all
product lines. During fiscal year 1999, on a unit sales basis,
enterprise systems grew 130%, notebooks grew 108% and desktops
grew 55%, as the Company continued to introduce products
utilizing the latest technology.
Average revenue per unit sold in fiscal year 2000 decreased
8% compared to fiscal year 1999, partially offsetting the effects
of the increase in unit sales on consolidated net revenue. The
decrease was primarily due to the Company’s pricing strategy
in the prevailing competitive environment.
Average revenue per unit sold in fiscal year 1999 decreased 10%
compared to fiscal year 1998, partially offsetting the effects of
the increase in unit sales on consolidated net revenue. The
decrease was primarily due to price reductions resulting from
component cost declines.
20
The Company experienced growth in net revenue in all geographic
regions in both fiscal years 2000 and 1999. The following table
summarizes the Company’s net revenue by geographic region
for each of the past three fiscal years:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
January 28, |
|
Percentage |
|
January 29, |
|
Percentage |
|
February 1, |
|
|
2000 |
|
Increase |
|
1999 |
|
Increase |
|
1998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in millions) |
|
|
|
|
|
|
Net revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
17,879 |
|
|
|
44 |
% |
|
$ |
12,420 |
|
|
|
46 |
% |
|
$ |
8,531 |
|
|
|
|
|
|
|
Europe |
|
|
5,590 |
|
|
|
20 |
|
|
|
4,674 |
|
|
|
58 |
|
|
|
2,956 |
|
|
|
|
|
|
|
Asia-Pacific and Japan |
|
|
1,796 |
|
|
|
56 |
|
|
|
1,149 |
|
|
|
37 |
|
|
|
840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net revenue |
|
$ |
25,265 |
|
|
|
|
|
|
$ |
18,243 |
|
|
|
|
|
|
$ |
12,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the Americas region, net revenue grew 44% and 46% in fiscal
years 2000 and 1999, respectively, as the Company continued its
efforts to strengthen its consumer, small-to-medium business and
large corporate customer groups. Net revenue for the Europe
region increased by 20% and 58% in fiscal years 2000 and 1999,
respectively. Year-over-year growth in Europe slowed during
fiscal 2000 with rates by country ranging generally between 15%
and 66%, as compared to fiscal 1999 when the majority of
countries experienced revenue growth in excess of 50%.
Asia-Pacific and Japan revenues increased 56% in fiscal
year 2000, compared to a 37% increase in fiscal year 1999.
Consolidated net revenue includes worldwide service revenue of
$1.8 million and $1 million for fiscal years 2000 and 1999,
respectively.
Management believes that opportunity exists for continued
worldwide growth by increasing the Company’s market presence
in its existing markets, entering new markets and pursuing
additional product opportunities. The Company continues to expand
its product offerings to meet a variety of customer needs. Also,
the Company continues to enhance and improve the reputation,
quality and breadth of all of its product lines and services. The
Company is continuing its efforts to strengthen its position in
enterprise systems by introducing advanced technologies to serve
the growing needs for these products. To accommodate its growth
during fiscal year 2000, the Company opened a new
manufacturing facility near Nashville, Tennessee and added a new
manufacturing facility to its operations in Austin, Texas. The
Company also opened a new manufacturing facility and call center
in Eldorado do Sul, Brazil.
During fiscal year 2000, the Company increased its focus on
the Internet infrastructure market. This includes initiatives
such as the formation of the Internet Partner Division, which
will provide customers the servers, storage and services to
build, expand and enhance their own Internet infrastructures and
capabilities. Other offerings include web hosting services and an
Internet service provider operation called www.dellnet.com
. The Company also provides this market with server and
storage products, which comprised 13% of the Company’s
overall sales revenue, up from 10% in fiscal year 1999. The
Company was ranked number two in both the United States and
worldwide in server unit sales according to 1999 calendar year
industry data, and was number two and number four in
calendar 1998 for United States and worldwide server unit sales,
respectively.
Gross Margin
The decrease in gross margin as a percentage of consolidated net
revenue in fiscal year 2000 over fiscal year 1999 was
primarily attributable to increased component costs, in part due
to a higher than expected cost increase for memory components
during the last half of the year. The average revenue per unit
decreased 8% from fiscal 2000 over fiscal 1999, also contributing
to the decrease in gross margin.
21
The gross margin increase as a percentage of consolidated net
revenue in fiscal year 1999 from fiscal year 1998 resulted
primarily from component cost declines, manufacturing
efficiencies and an overall shift in mix to higher-end enterprise
systems and notebook computers.
Operating Expenses
The following table presents certain information regarding the
Company’s operating expenses during each of the last three
fiscal years:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
January 28, |
|
January 29, |
|
February 1, |
|
|
2000 |
|
1999 |
|
1998 |
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in millions) |
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
$ |
2,387 |
|
|
$ |
1,788 |
|
|
$ |
1,202 |
|
|
|
|
|
|
|
|
Percentage of net revenue |
|
|
9.4 |
% |
|
|
9.8 |
% |
|
|
9.8 |
% |
|
|
|
|
|
|
Research, development and engineering |
|
$ |
374 |
|
|
$ |
272 |
|
|
$ |
204 |
|
|
|
|
|
|
|
|
Percentage of net revenue |
|
|
1.5 |
% |
|
|
1.5 |
% |
|
|
1.6 |
% |
|
|
|
|
|
|
Purchased in-process research and development |
|
$ |
194 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
Percentage of net revenue |
|
|
0.8 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
|
|
|
|
Total operating expenses |
|
$ |
2,955 |
|
|
$ |
2,060 |
|
|
$ |
1,406 |
|
|
|
|
|
|
|
|
Percentage of net revenue |
|
|
11.7 |
% |
|
|
11.3 |
% |
|
|
11.4 |
% |
Selling, general and administrative expenses increased in
absolute dollar amounts but decreased as a percentage of
consolidated net revenue for fiscal year 2000 versus fiscal
year 1999, and remained flat for fiscal year 1999 versus fiscal
year 1998. The increase in absolute dollars was due primarily to
the Company’s increase in staffing and increased
infrastructure expenses, including information systems, to
support the Company’s continued growth. The decline in
selling, general and administrative expenses as a percentage of
net revenue for fiscal year 2000 resulted from significant
net revenue growth.
The Company continues to invest in research, development and
engineering activities to support its continued goal of improving
and developing efficient procurement, manufacturing and
distribution processes, and to develop and introduce new
products. As a result, research, development and engineering
expenses have increased each year in absolute dollars due to
increased staffing levels and product development costs. The
Company expects to continue to increase its research, development
and engineering spending in absolute dollar amounts. During
fiscal 2000, as a result of the acquisition of ConvergeNet
Technologies, Inc., purchased in-process research and
development in the amount of $194 million was expensed upon
acquisition because technological feasibility had not been
established and no future alternative uses existed.
The Company believes that its ability to manage operating
expenses is an important factor in its ability to remain
competitive and successful. The Company will continue to invest
in personnel, information systems and other infrastructure, and
in research, development and engineering activities, to support
its continued growth and to continue to develop new, competitive
products and more efficient methods of delivery. It is the
Company’s goal to manage operating expenses, over time,
relative to its net revenue and gross margin.
Income Taxes
The Company’s effective tax rate was 32% for fiscal
year 2000 compared to 30% for fiscal year 1999 and 31% for
fiscal year 1998. The differences in the effective tax rates
among fiscal years result from changes in the geographical
distribution of income and losses and certain non tax-deductible
charges. The Company’s effective tax rate is lower than the
U.S. federal statutory rate of 35%, principally resulting
from the Company’s geographical distribution of income.
22
Liquidity and Capital Resources
The following table presents selected financial statistics and
information for each of the past three fiscal years:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
January 28, |
|
January 29, |
|
February 1, |
|
|
2000 |
|
1999 |
|
1998 |
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in millions) |
|
|
|
|
|
|
Cash and Investments |
|
$ |
6,853 |
|
|
$ |
3,181 |
|
|
$ |
1,844 |
|
|
|
|
|
|
|
Working capital(a) |
|
|
2,489 |
|
|
|
2,112 |
|
|
|
758 |
|
|
|
|
|
|
|
Days of sales in accounts receivable |
|
|
34 |
|
|
|
36 |
|
|
|
36 |
|
|
|
|
|
|
|
Days of supply in inventory |
|
|
6 |
|
|
|
6 |
|
|
|
7 |
|
|
|
|
|
|
|
Days in accounts payable |
|
|
58 |
|
|
|
54 |
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash conversion cycle |
|
|
(18 |
) |
|
|
(12 |
) |
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
All cash and investments information has been
retroactively restated to reflect the reclassification of cash
and cash equivalents, short term investments, long term
investments, and equity securities and other investments. See
Note 1 of Notes to Consolidated Financial Statements. |
The Company ended fiscal year 2000 with $6.9 billion in
cash and investments, more than double the prior year level.
During fiscal year 2000, the Company generated
$3.9 billion in cash flows from operating activities, which
represents the Company’s principal source of cash. Cash
flows from operating activities resulted primarily from the
Company’s net income, changes in operating working capital
and income tax benefits resulting from the exercise of employee
stock options.
Throughout fiscal year 2000, the Company invested a
significant portion of its available cash in highly liquid
investments with maturities of three months or less at date of
acquisition to primarily minimize principal risk and maintain
liquidity. Additionally, the Company has approximately
$3 billion in other short-term and long-term investments at
the end of fiscal year 2000, as compared to approximately
$1.5 billion at year-end in fiscal 1999.
During fiscal year 2000, the Company continued to improve
upon its efficient asset management. Days of sales in accounts
receivable decreased two days from fiscal year 1999 to
34 days, while days of supply in inventory remained flat in
fiscal year 2000. This, combined with a four-day increase in
days in accounts payable, resulted in an improvement in the
Company’s cash conversion cycle to a negative 18 days
in fiscal year 2000 from a negative 12 days in fiscal
year 1999. As a result, the Company’s return on invested
capital, a key indicator of efficient asset management, increased
to 243%, excluding a charge for purchased in-process research
and development (as a result of the ConvergeNet acquisition), in
fiscal year 2000 from 120% (restated to reflect
reclassification of cash and investments in fiscal year 2000) in
fiscal year 1999.
During fiscal year 2000, the Company repurchased
56 million shares of common stock for an aggregate cost of
$1.1 billion, primarily to manage the dilution resulting
from shares issued under the Company’s employee stock plans.
The Company is currently authorized to repurchase up to
145 million additional shares of its outstanding common
stock and anticipates that repurchases will constitute a major
use of future cash resources. At January 28, 2000 and
January 29, 1999, the Company held equity instrument
contracts that relate to the purchase of 118 million and
49 million shares of common stock, respectively, at an
average cost of $41 and $14 per share, respectively.
Additionally, at January 28, 2000 and January 29, 1999,
the Company had outstanding put obligations covering
69 million and 33 million shares, respectively, at an
average exercise price of $39 and $11, respectively. For
additional information regarding the Company’s stock
repurchase program, see Note 7 of Notes to Consolidated
Financial Statements included in “Item 8 —
Financial Statements and Supplementary Data” below.
23
The Company utilized $397 million in cash during fiscal
year 2000 to improve and equip its manufacturing and office
facilities as the Company continues to grow. Cash flows for
similar capital expenditures for fiscal year 2001 are expected to
be approximately $500 million.
The Company maintains master lease facilities providing the
capacity to fund up to $820 million. The combined facilities
provide for the ability of the Company to lease certain real
property, buildings and equipment to be constructed or acquired.
At January 28, 2000, $365 million of the combined
facilities had been utilized.
In April 1998, the Company issued $200 million in Senior
Notes and $300 million in Senior Debentures. For additional
information regarding these issuances, see Note 3 of Notes
to Consolidated Financial Statements included in
“Item 8 — Financial Statements and
Supplementary Data” below.
The Company maintains a $250 million revolving credit
facility, which expires in June 2002. At January 28, 2000,
this facility was unused.
Management believes that the Company has sufficient resources
from cash provided from operations and available borrowings to
support its operations and capital requirements for at least the
next 12 months.
Market Risk
The Company is exposed to a variety of risks, including foreign
currency exchange rate fluctuations and changes in the market
value of its investments. In the normal course of business, the
Company employs established policies and procedures to manage
these risks.
Foreign Currency Hedging Activities
The Company’s objective in managing its exposure to foreign
currency exchange rate fluctuations is to reduce the impact of
adverse fluctuations in earnings and cash flows associated with
foreign currency exchange rate changes. Accordingly, the Company
utilizes foreign currency option contracts and forward contracts
to hedge its exposure on anticipated transactions and firm
commitments in most of the foreign countries in which the Company
operates. The principal currencies hedged during fiscal
year 2000 were the British pound, Japanese yen, Euro and
Canadian dollar. The Company monitors its foreign currency
exchange exposures daily to ensure the overall effectiveness of
its foreign currency hedge positions. However, there can be no
assurance the Company’s foreign currency hedging activities
will substantially offset the impact of fluctuations in currency
exchange rates on its results of operations and financial
position.
Based on the Company’s foreign currency exchange instruments
outstanding at January 28, 2000, the Company estimates a
maximum potential one-day loss in fair value of approximately
$17 million, using a Value-at-Risk (“VAR”) model.
The VAR model estimates were made assuming normal market
conditions and a 95% confidence level. The Company used a Monte
Carlo simulation type model that valued its foreign currency
instruments against a thousand randomly generated market price
paths. Anticipated transactions, firm commitments, receivables
and accounts payable denominated in foreign currencies were
excluded from the model. The VAR model is a risk estimation tool,
and as such is not intended to represent actual losses in fair
value that will be incurred by the Company. Additionally, as the
Company utilizes foreign currency instruments for hedging
anticipated and firmly committed transactions, a loss in fair
value for those instruments is generally offset by increases in
the value of the underlying exposure. Foreign currency
fluctuations did not have a material impact on the Company’s
results of operations and financial position during fiscal years
2000, 1999 and 1998.
24
On January 1, 1999, certain member countries of the European
Union established fixed conversion rates between their existing
currencies and the Euro. The transition period for the
introduction of the Euro ends June 30, 2002. Issues facing
the Company as a result of the introduction of the Euro include
converting information technology systems, reassessing currency
risk, negotiating and amending licensing agreements and
contracts, and processing tax and accounting records. The Company
is addressing these issues and does not expect the Euro to have
a material effect on the Company’s financial condition or
results of operations.
The fair value of the Company’s short-term, long-term and
equity investments at January 28, 2000, was approximately
$3 billion. The Company’s investment policy is to
manage its investment portfolio to preserve principal and
liquidity while maximizing the return on the investment portfolio
through the full investment of available funds. The Company
diversifies the investment portfolio by investing in multiple
types of investment-grade securities and through the use of
different investment brokers. The Company’s investment
portfolio is partially invested in short-term securities with at
least an investment grade rating to minimize interest rate and
credit risk as well as to provide for an immediate source of
funds. The Company also invests in equity investments in
companies in order to enhance and extend the Company’s
direct business model and core business initiatives. Based on the
Company’s investment portfolio and interest rates at
January 28, 2000, a 100 basis point increase or decrease in
interest rates would result in a decrease or increase of
$20 million, respectively, in the fair value of the
investment portfolio. Changes in interest rates may affect the
fair value of the investment portfolio; however, such gains or
losses would not be realized unless the investments are sold.
Factors Affecting the Company’s Business and Prospects
There are numerous factors that affect the Company’s
business and the results of its operations. These factors include
general economic and business conditions; the level of demand
for personal computers; the level and intensity of competition in
the technology industry and the pricing pressures that may
result; the ability of the Company to timely and effectively
manage periodic product transitions, as well as component
availability and cost; the ability of the Company to develop new
products based on new or evolving technology and the
market’s acceptance of those products; the ability of the
Company to manage its inventory levels to minimize excess
inventory, declining inventory values and obsolescence; the
product, customer and geographic sales mix of any particular
period; and the Company’s ability to continue to improve its
infrastructure (including personnel and systems) to keep pace
with the growth in its overall business activities. For a
discussion of these and other factors affecting the
Company’s business and prospects, see
“Item 1 — Business — Factors
Affecting the Company’s Business and Prospects.”
Year 2000
The following disclosure is a Year 2000 readiness disclosure
statement pursuant to the Year 2000 Readiness and
Disclosure Act.
The Company established a formal Year 2000 readiness program
in February 1997. The Company’s Year 2000 program
consisted of two separate initiatives, the Millennium Project and
the Product Group Y2K Project.
The purpose of the Millennium Project was to assess the
Year 2000 readiness of the Company’s component and
service providers and the Company’s internal systems and
devices. The Company identified and assessed its internal systems
and devices and, where appropriate, took steps to
25
make those systems Year 2000 ready. The Company completed
its assessment and renovation of all mission critical internal
systems and devices prior to the Year 2000 date change and
did not experience any material failures as a result of the date
change. The Company also identified, through the Millennium
Project, its critical component and service providers and
assessed each vendor’s Year 2000 readiness. The Company
assigned each such vendor a priority rating and developed
contingency plans for each vendor. The Company completed its
assessment and contingency plans prior to the Year 2000 date
change and did not experience any material failures as a result
of the date change.
Through the Product Group Y2K Project, the Company analyzed the
Year 2000 readiness status of the computer hardware
manufactured by the Company and implemented an ongoing
Year 2000 testing and monitoring program for all new
hardware offerings. The Company is not aware of any material
Year 2000 readiness issues associated with its hardware
offerings. The Company plans to continue to monitor the situation
closely.
Although the Company attempted to ascertain the Year 2000
status of third party software and peripherals loaded on or
distributed with Company computer systems, it does not and cannot
guarantee the Year 2000 status of any software or
peripherals provided by third parties.
Costs
The total costs of the Company’s Year 2000 readiness
program were not material to its financial condition or results
of operation. All costs were charged to expense as incurred, and
did not include potential costs related to any customer issues or
other claims or the cost of internal software and hardware
replaced in the normal course of business.
Risks/ Contingency Plans
Prior to the Year 2000 date change, the Company believed
that the most likely worst-case scenarios would have involved the
interruption of crucial suppliers as a result of infrastructure
failures or third party vendor failures. To date, no such
interruptions or failures have occurred. The Company currently
believes that the likelihood of the occurrence of any such events
due to the Year 2000 date change is low.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board
(“FASB”) issued Statement of Financial Accounting
Standards (“SFAS”) No. 133, “Accounting for
Derivative Instruments and Hedging Activities.” In June
1999, The FASB issued SFAS No. 137, in which it agreed to
defer for one year the implementation date of SFAS No. 133.
See Note 1 of Notes to Consolidated Financial Statements
included in “Item 8 — Financial Statements
and Supplementary Data.”
In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101, “Revenue Recognition
in Financial Statements.” See Note 1 of Notes to
Consolidated Financial Statements included in
“Item 8 — Financial Statements and
Supplementary Data.”
In March 2000, the Emerging Issues Task Force (“EITF”)
issued EITF Issue No. 00-7, Application of EITF Issue
No. 96-13, “Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a
Company’s Own Stock, to Equity Derivative Transactions That
Contain Certain Provisions That Require Cash Settlement If
Certain Events Occur.” See Note 1 of Notes to
Consolidated Financial Statements included in
“Item 8 — Financial Statements and
Supplementary Data.”
ITEM 7A — QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Response to this item is included in
“Item 7 — Management’s Discussion and
Analysis of Financial Condition and Results of
Operations — Market Risk.”
26
ITEM 8 — FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| |
|
|
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|
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|
|
Page |
|
|
|
|
Financial Statements: |
|
|
|
|
|
|
|
|
|
|
Report of Independent Accountants |
|
|
28 |
|
|
|
|
|
|
|
Consolidated Statement of Financial Position at January 28,
2000 and January 29, 1999 |
|
|
29 |
|
|
|
|
|
|
|
Consolidated Statement of Income for the three fiscal years ended
January 28, 2000 |
|
|
30 |
|
|
|
|
|
|
|
Consolidated Statement of Cash Flows for the three fiscal years
ended January 28, 2000 |
|
|
31 |
|
|
|
|
|
|
|
Consolidated Statement of Stockholders’ Equity for the three
fiscal years ended January 28, 2000 |
|
|
32 |
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|
|
|
|
|
|
Notes to Consolidated Financial Statements |
|
|
33 |
|
|
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|
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|
|
Financial Statement Schedule: |
|
|
|
|
|
For the three fiscal years ended January 28, 2000 |
|
|
|
|
|
|
|
|
|
|
|
Schedule II — Valuation and Qualifying Accounts |
|
|
55 |
|
All other schedules are omitted because they are not applicable.
27
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Dell Computer Corporation
In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in all material respects,
the financial position of Dell Computer Corporation and its
subsidiaries at January 28, 2000 and January 29, 1999,
and the results of their operations and their cash flows for each
of the three fiscal years in the period ended January 28,
2000, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement
schedule listed in the accompanying index, presents fairly, in
all material respects, the information required to be set forth
therein when read in conjunction with the consolidated financial
statements. These financial statements and financial statement
schedule are the responsibility of the Company’s management;
our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits of these statements in accordance with
generally accepted auditing standards, which require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1 to the consolidated financial
statements, in fiscal year 2000 the Company changed its
policy for determining which items are treated as cash
equivalents.
PRICEWATERHOUSECOOPERS LLP
Austin, Texas
February 10, 2000
28
DELL COMPUTER CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(in millions)
| |
|
|
|
|
|
|
|
|
|
|
|
|
January 28, |
|
January 29, |
|
|
2000 |
|
1999 |
|
|
|
|
|
| ASSETS |
| |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
3,809 |
|
|
$ |
1,726 |
|
|
|
|
|
|
|
Short term investments |
|
|
323 |
|
|
|
923 |
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
2,608 |
|
|
|
2,094 |
|
|
|
|
|
|
|
Inventories |
|
|
391 |
|
|
|
273 |
|
|
|
|
|
|
|
Other |
|
|
550 |
|
|
|
791 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
7,681 |
|
|
|
5,807 |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
765 |
|
|
|
523 |
|
|
|
|
|
|
|
Long term investments |
|
|
1,048 |
|
|
|
532 |
|
|
|
|
|
|
|
Equity securities and other investments |
|
|
1,673 |
|
|
|
— |
|
|
|
|
|
|
|
Goodwill and other |
|
|
304 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
11,471 |
|
|
$ |
6,877 |
|
|
|
|
|
|
|
|
|
|
| |
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
| |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
3,538 |
|
|
$ |
2,397 |
|
|
|
|
|
|
|
Accrued and other |
|
|
1,654 |
|
|
|
1,298 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
5,192 |
|
|
|
3,695 |
|
|
|
|
|
|
|
Long term debt |
|
|
508 |
|
|
|
512 |
|
|
|
|
|
|
|
Other |
|
|
463 |
|
|
|
349 |
|
|
|
|
|
|
|
Commitments and contingent liabilities |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
6,163 |
|
|
|
4,556 |
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock and capital in excess of $.01 par value;
shares issued and outstanding: none |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
Common stock and capital in excess of $.01 par value; shares
issued and outstanding: 2,575 and 2,543, respectively |
|
|
3,583 |
|
|
|
1,781 |
|
|
|
|
|
|
|
Retained earnings |
|
|
1,260 |
|
|
|
606 |
|
|
|
|
|
|
|
Other comprehensive income |
|
|
533 |
|
|
|
(36 |
) |
|
|
|
|
|
|
Other |
|
|
(68 |
) |
|
|
(30 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity |
|
|
5,308 |
|
|
|
2,321 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
11,471 |
|
|
$ |
6,877 |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
29
DELL COMPUTER CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share amounts)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
January 28, |
|
January 29, |
|
February 1, |
|
|
2000 |
|
1999 |
|
1998 |
|
|
|
|
|
|
|
|
Net revenue |
|
$ |
25,265 |
|
|
$ |
18,243 |
|
|
$ |
12,327 |
|
|
|
|
|
|
|
Cost of revenue |
|
|
20,047 |
|
|
|
14,137 |
|
|
|
9,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
5,218 |
|
|
|
4,106 |
|
|
|
2,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
2,387 |
|
|
|
1,788 |
|
|
|
1,202 |
|
|
|
|
|
|
|
Research, development and engineering |
|
|
374 |
|
|
|
272 |
|
|
|
204 |
|
|
|
|
|
|
|
Purchased in-process research and development |
|
|
194 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
2,955 |
|
|
|
2,060 |
|
|
|
1,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
2,263 |
|
|
|
2,046 |
|
|
|
1,316 |
|
|
|
|
|
|
|
Financing and other |
|
|
188 |
|
|
|
38 |
|
|
|
52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
2,451 |
|
|
|
2,084 |
|
|
|
1,368 |
|
|
|
|
|
|
|
Provision for income taxes |
|
|
785 |
|
|
|
624 |
|
|
|
424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,666 |
|
|
$ |
1,460 |
|
|
$ |
944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.66 |
|
|
$ |
0.58 |
|
|
$ |
0.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.61 |
|
|
$ |
0.53 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
2,536 |
|
|
|
2,531 |
|
|
|
2,631 |
|
|
|
|
|
|
|
Diluted |
|
|
2,728 |
|
|
|
2,772 |
|
|
|
2,952 |
|
The accompanying notes are an integral part of these consolidated
financial statements.
30
DELL COMPUTER CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
January 28, |
|
January 29, |
|
February 1, |
|
|
2000 |
|
1999 |
|
1998 |
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,666 |
|
|
$ |
1,460 |
|
|
$ |
944 |
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
156 |
|
|
|
103 |
|
|
|
67 |
|
|
|
|
|
|
|
|
|
Tax benefits of employee stock plans |
|
|
1,040 |
|
|
|
444 |
|
|
|
164 |
|
|
|
|
|
|
|
|
|
Purchased in-process research and development |
|
|
194 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Other |
|
|
(24 |
) |
|
|
11 |
|
|
|
24 |
|
|
|
|
|
|
|
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating working capital |
|
|
812 |
|
|
|
367 |
|
|
|
365 |
|
|
|
|
|
|
|
|
Non-current assets and liabilities |
|
|
82 |
|
|
|
51 |
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
3,926 |
|
|
|
2,436 |
|
|
|
1,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases |
|
|
(3,101 |
) |
|
|
(1,938 |
) |
|
|
(1,492 |
) |
|
|
|
|
|
|
|
Maturities and sales |
|
|
2,319 |
|
|
|
1,304 |
|
|
|
1,022 |
|
|
|
|
|
|
|
Cash payments for acquisition, net of cash acquired |
|
|
(4 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
Capital expenditures |
|
|
(397 |
) |
|
|
(296 |
) |
|
|
(187 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(1,183 |
) |
|
|
(930 |
) |
|
|
(657 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of common stock |
|
|
(1,061 |
) |
|
|
(1,518 |
) |
|
|
(1,023 |
) |
|
|
|
|
|
|
Issuance of common stock under employee plans |
|
|
289 |
|
|
|
212 |
|
|
|
88 |
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt, net of issuance costs |
|
|
20 |
|
|
|
494 |
|
|
|
— |
|
|
|
|
|
|
|
Cash received from sale of equity options and other |
|
|
63 |
|
|
|
— |
|
|
|
37 |
|
|
|
|
|
|
|
Repayments of borrowings |
|
|
(6 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(695 |
) |
|
|
(812 |
) |
|
|
(898 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
35 |
|
|
|
(10 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash |
|
|
2,083 |
|
|
|
684 |
|
|
|
23 |
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
1,726 |
|
|
|
1,042 |
|
|
|
1,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
3,809 |
|
|
$ |
1,726 |
|
|
$ |
1,042 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
31
DELL COMPUTER CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(in millions)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock and |
|
|
|
|
|
|
|
|
|
|
Capital in Excess |
|
|
|
Other |
|
|
|
|
|
|
of Par Value |
|
|
|
Compre- |
|
|
|
|
|
|
|
|
Retained |
|
hensive |
|
|
|
|
|
|
Shares |
|
Amount |
|
Earnings |
|
Income |
|
Other |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at February 2, 1997 |
|
|
2,769 |
|
|
$ |
195 |
|
|
$ |
647 |
|
|
$ |
(14 |
) |
|
$ |
(22 |
) |
|
$ |
806 |
|
|
|
|
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
944 |
|
|
|
— |
|
|
|
— |
|
|
|
944 |
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(21 |
) |
|
|
— |
|
|
|
(21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
923 |
|
|
|
|
|
|
|
Stock issuance under employee plans, including tax benefits |
|
|
84 |
|
|
|
274 |
|
|
|
— |
|
|
|
— |
|
|
|
(11 |
) |
|
|
263 |
|
|
|
|
|
|
|
Purchase and retirement of 278 million shares |
|
|
(278 |
) |
|
|
(39 |
) |
|
|
(984 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,023 |
) |
|
|
|
|
|
|
Reclassification of put options |
|
|
— |
|
|
|
279 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
279 |
|
|
|
|
|
|
|
Other |
|
|
— |
|
|
|
38 |
|
|
|
— |
|
|
|
— |
|
|
|
7 |
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at February 1, 1998 |
|
|
2,575 |
|
|
|
747 |
|
|
|
607 |
|
|
|
(35 |
) |
|
|
(26 |
) |
|
|
1,293 |
|
|
|
|
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
1,460 |
|
|
|
— |
|
|
|
— |
|
|
|
1,460 |
|
|
|
|
|
|
|
Change in unrealized gain on investments, net of tax provision of
$2 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4 |
) |
|
|
— |
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,459 |
|
|
|
|
|
|
|
Stock issuance under employee plans, including tax benefits |
|
|
117 |
|
|
|
1,092 |
|
|
|
— |
|
|
|
— |
|
|
|
(7 |
) |
|
|
1,085 |
|
|
|
|
|
|
|
Purchase and retirement of 149 million shares |
|
|
(149 |
) |
|
|
(60 |
) |
|
|
(1,458 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,518 |
) |
|
|
|
|
|
|
Other |
|
|
— |
|
|
|
2 |
|
|
|
(3 |
) |
|
|
|
|
|
|
3 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at January 29, 1999 |
|
|
2,543 |
|
|
|
1,781 |
|
|
|
606 |
|
|
|
(36 |
) |
|
|
(30 |
) |
|
|
2,321 |
|
|
|
|
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
1,666 |
|
|
|
|
|
|
|
— |
|
|
|
1,666 |
|
|
|
|
|
|
|
Change in unrealized gain on investments, net tax provision of
$301 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
559 |
|
|
|
— |
|
|
|
559 |
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10 |
|
|
|
— |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,235 |
|
|
|
|
|
|
|
Stock issuance under employee plans, including tax benefits |
|
|
82 |
|
|
|
1,406 |
|
|
|
— |
|
|
|
— |
|
|
|
(46 |
) |
|
|
1,360 |
|
|
|
|
|
|
|
Purchase and retirement of 56 million shares |
|
|
(56 |
) |
|
|
(48 |
) |
|
|
(1,013 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,061 |
) |
|
|
|
|
|
|
Stock issued pursuant to acquisition |
|
|
6 |
|
|
|
334 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
334 |
|
|
|
|
|
|
|
Other |
|
|
— |
|
|
|
110 |
|
|
|
1 |
|
|
|
— |
|
|
|
8 |
|
|
|
119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at January 28, 2000 |
|
|
2,575 |
|
|
$ |
3,583 |
|
|
$ |
1,260 |
|
|
$ |
533 |
|
|
$ |
(68 |
) |
|
$ |
5,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
32
DELL COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — Description of Business and Summary of
Significant Accounting Policies
Description of Business — Dell Computer
Corporation, a Delaware corporation (including its consolidated
subsidiaries) (the “Company”), designs, develops,
manufactures, markets, services and supports a wide range of
computer systems, including desktop computer systems, notebook
computers and enterprise systems (includes servers, workstations
and storage products), and also markets software, peripherals and
service and support programs. The Company is managed on a
geographic basis with those geographic segments being the
Americas, Europe and Asia-Pacific and Japan regions. The Company
markets and sells its computer products and services under the
Dell® brand name directly to its various customer groups.
These customer groups include large corporate, government,
healthcare and education accounts, as well as small-to-medium
businesses and individuals and to some extent value-added
resellers. The Company conducts operations worldwide through
wholly owned subsidiaries; such operations are primarily
concentrated in the North America, Europe and Asia-Pacific and
Japan regions.
Fiscal Year — During fiscal year 1999, the
Company changed its fiscal year from the 52 or 53 week
period ending on the Sunday nearest January 31 to the Friday
nearest January 31. The change in fiscal year had no
material effect on the Company’s consolidated financial
statements.
Principles of Consolidation — The accompanying
consolidated financial statements have been prepared in
accordance with generally accepted accounting principles and
include the accounts of the Company. All significant intercompany
transactions and balances have been eliminated.
Use of Estimates — The preparation of financial
statements in accordance with generally accepted accounting
principles requires the use of management’s estimates. These
estimates are subjective in nature and involve judgements that
affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at fiscal year
end and the reported amounts of revenues and expenses during the
fiscal year. Actual results could differ from those estimates.
Cash and Cash Equivalents — During fiscal
year 2000, the Company changed the method of classifying
cash equivalents and has restated prior year balances to reflect
the change. All highly liquid investments with original
maturities of three months or less at date of purchase are
carried at cost and considered to be cash equivalents. These
investments were previously classified as marketable securities.
All other investments not considered to be a cash equivalent are
now separately categorized as investments.
Investments — The Company’s investments are
classified as available-for-sale securities and are reported at
fair value. Unrealized gains and losses are reported, net of
taxes, as a component of stockholders’ equity. Unrealized
losses are charged against income when a decline in fair value is
determined to be other than temporary. The specific
identification method is used to determine the cost of securities
sold. Realized gains and losses on investments are included in
Financing and Other when realized.
Inventories — Inventories are stated at the
lower of cost or market with cost being determined on a first-in,
first-out basis.
Property, Plant and Equipment — Property, plant
and equipment are carried at depreciated cost. Depreciation is
provided using the straight-line method over the estimated
economic lives of the assets, which range from 10 to
30 years for buildings and two to five years for all other
assets. Leasehold improvements are amortized over the shorter of
five years or the lease term.
Goodwill and Other Intangibles — Amortization of
goodwill and other intangibles is charged to income on a
straight-line basis over the periods estimated to benefit,
ranging from three to eight years. The Company periodically
performs reviews to evaluate the recoverability of goodwill and
33
other intangibles and takes into account events or circumstances
that warrant revised estimates of useful lives or that indicate
that an impairment exists.
Foreign Currency Translation — The majority of
the Company’s international sales are made by international
subsidiaries which have the U.S. dollar as their functional
currency. International subsidiaries which have the
U.S. dollar as the functional currency are remeasured into
U.S. dollars using current rates of exchange for monetary
assets and liabilities and historical rates of exchange for
nonmonetary assets. Gains and losses from remeasurement are
included in Financing and Other. The Company’s subsidiaries
that do not have the U.S. dollar as their functional
currency translate assets and liabilities at current rates of
exchange in effect at the balance sheet date. The resulting gains
and losses from translation are included as a component of
stockholders’ equity. Items of revenue and expense for the
Company’s international subsidiaries are translated using
the monthly average exchange rates in effect for the period in
which the items occur.
Foreign Currency Hedging Instruments — The
Company enters into foreign currency exchange contracts to hedge
its foreign currency risks. These contracts are designated at
inception as a hedge and measured for effectiveness both at
inception and on an ongoing basis. Realized and unrealized gains
or losses and premiums paid on foreign currency purchased option
contracts that are designated and effective as hedges of probable
anticipated, but not firmly committed, foreign currency
transactions are deferred and recognized in income as a component
of net revenue, cost of revenue and/or operating expenses in the
same period as the hedged transaction. Forward contracts
designated as hedges of probable anticipated or firmly committed
transactions are accounted for on a mark-to-market basis, with
realized and unrealized gains or losses recognized in the
accompanying Consolidated Statement of Income.
Equity Instruments Indexed to the Company’s Common Stock
— Proceeds received upon the sale of equity
instruments and amounts paid upon the purchase of equity
instruments are recorded as a component of stockholders’
equity. Subsequent changes in the fair value of the equity
instrument contracts are not recognized. If the contracts are
ultimately settled in cash, the amount of cash paid or received
is recorded as a component of stockholders’ equity.
Revenue Recognition — Sales revenue is
recognized at the date of shipment to customers. Provision is
made for an estimate of product returns and doubtful accounts and
is based on historical experience. Revenue from separately
priced service and extended warranty programs is deferred and
recognized over the respective service or extended warranty
period.
Warranty and Other Post-sales Support Programs —
The Company provides currently for the estimated costs that may
be incurred under its initial warranty and other post-sales
support programs.
Advertising Costs — Advertising costs are
charged to expense as incurred. Advertising expenses for fiscal
years 2000, 1999, and 1998 were $325 million,
$199 million, and $137 million, respectively.
Stock-Based Compensation — The Company applies
the intrinsic value method in accounting for its stock option and
stock purchase plans. Accordingly, no compensation expense has
been recognized for options granted with an exercise price equal
to market value at the date of grant or in connection with the
employee stock purchase plan.
Capitalized Software — During fiscal
year 2000, the Company adopted the American Institute of
Certified Public Accountants Statement of Position
(“SOP”) 98-1, “Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use.”
The Company capitalizes eligible software development costs
incurred subsequent to the completion of the preliminary project
stage. Prior to capitalization, policy requires that the project
has been authorized by management and it is probable that the
project will be completed and the software will be used to
perform the function intended. After all substantial testing and
deployment is completed and software is ready for its intended
use, development costs are amortized over the shorter of the
expected useful life of the software or five years. The impact on
both the Consolidated Statement of Financial Position and on
34
the Consolidated Statement of Income as of January 28, 2000
is not material. Prior to adoption of SOP 98-1, the Company
expensed these costs as incurred.
Income Taxes — The provision for income taxes is
based on income before taxes as reported in the accompanying
Consolidated Statement of Income. Deferred tax assets and
liabilities are determined based on the difference between the
financial statement and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the
differences are expected to reverse.
Earnings Per Common Share — Basic earnings per
share is based on the weighted effect of all common shares issued
and outstanding, and is calculated by dividing net income by the
weighted average shares outstanding during the period. Diluted
earnings per share is calculated by dividing net income by the
weighted average number of common shares used in the basic
earnings per share calculation plus the number of common shares
that would be issued assuming conversion of all potentially
dilutive common shares outstanding. The following table sets
forth the computation of basic and diluted earnings per share for
each of the past three fiscal years:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
January 28, |
|
January 29, |
|
February 1, |
|
|
2000 |
|
1999 |
|
1998 |
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except per share data) |
|
|
|
|
|
|
Net income |
|
$ |
1,666 |
|
|
$ |
1,460 |
|
|
$ |
944 |
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
2,536 |
|
|
|
2,531 |
|
|
|
2,631 |
|
|
|
|
|
|
|
Employee stock options and other |
|
|
192 |
|
|
|
241 |
|
|
|
321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
2,728 |
|
|
|
2,772 |
|
|
|
2,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.66 |
|
|
$ |
0.58 |
|
|
$ |
0.36 |
|
|
|
|
|
|
|
Diluted |
|
$ |
0.61 |
|
|
$ |
0.53 |
|
|
$ |
0.32 |
|
Comprehensive Income — The Company’s
comprehensive income is comprised of net income, foreign currency
translation adjustments and unrealized gains and losses on
investments held as available-for-sale investments.
Segment Information — The Company discloses
segment information in accordance with SFAS No. 131 which
uses the Management approach to determine reportable segments.
Recently Issued Accounting Pronouncements — In
June 1998, the Financial Accounting Standards Board
(“FASB”) issued SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities,” which
establishes accounting and reporting standards for derivative
instruments and hedging activities. SFAS No. 133 requires
that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure
those instruments at fair value. In June 1999, The FASB issued
Statement No. 137, in which it agreed to defer for one year
the implementation date of SFAS No. 133. SFAS No. 133,
as amended, is effective for all fiscal years beginning after
June 15, 2000. The Company is assessing the impact of SFAS
No. 133 on its consolidated financial statements.
In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 (“SAB 101”),
“Revenue Recognition in Financial Statements.” SAB 101
provides guidance on applying generally accepted accounting
principles to revenue recognition in financial statements. The
Company is currently assessing the impact of SAB 101 on its
consolidated financial statements, and believes that the effect,
if any, will not be material to the Company’s operating
results.
In March 2000, the Emerging Issues Task Force (“EITF”)
issued EITF Issue No. 00-7, “Application of EITF Issue
No. 96-13, Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company’s Own
Stock, to Equity Derivative Transactions That Contain Certain
Provisions That Require Cash Settlement If Certain Events
Occur.” EITF Issue No. 96-13
35
established the accounting standards for equity derivative
contracts indexed to and potentially settled in a company’s
own stock. It did not address embedded settlement features which
are contingent on events which are unlikely to occur.
EITF 00-7 addresses embedded settlement features and states
that contracts which could require cash payment cannot be
accounted for as equity of the issuer. EITF 00-7 is
effective on March 17, 2000 for new contracts. For contracts
executed prior to March 17, 2000, EITF-00-7 takes effect on
December 31, 2000. The Company is assessing the impact of
EITF 00-7 on its consolidated financial statements.
Reclassifications — Certain prior year amounts
have been reclassified to conform to the fiscal year 2000
presentation.
NOTE 2 — Business Combination
On October 20, 1999, the Company acquired all the
outstanding shares of ConvergeNet Technologies, Inc.
(“ConvergeNet”) in exchange for 6.9 million shares
of the Company’s common stock and $4.5 million cash
for total purchase consideration of $332 million.
ConvergeNet is a developer of storage domain management
technology for enterprise storage area networks. The consolidated
financial statements include the operating results of
ConvergeNet from the date of acquisition. Pro forma results of
operations have not been presented because the effect of the
acquisition was not material.
The ConvergeNet acquisition was recorded under the purchase
method of accounting. Accordingly, the purchase price was
allocated to the net assets acquired based on their estimated
fair values. The amount allocated to purchased research and
development of $194 million was determined based on an
appraisal completed by an independent third party using
established valuation techniques in the storage management
industry and expensed upon acquisition because technological
feasibility had not been established and no future alternative
uses existed. Additionally, ConvergeNet had not begun shipment of
its products as of the date of acquisition. Research and
development costs to bring ConvergeNet products to technological
feasibility are not expected to have a material impact on the
Company’s future results from operations or cash flows.
The excess of cost over net assets acquired of $132 million
was recorded as goodwill and included in other assets. Goodwill
and other intangible assets arising from this combination are
being amortized on a straight line basis over periods from three
to eight years.
NOTE 3 — Financial Instruments
Disclosures About Fair Values of Financial Instruments
The fair value of investments, long-term debt and related
interest rate derivative instruments has been estimated based
upon market quotes from brokers. The fair value of foreign
currency forward contracts has been estimated using market quoted
rates of foreign currencies at the applicable balance sheet
date. The estimated fair value of foreign currency purchased
option contracts is based on market quoted rates at the
applicable balance sheet date and the Black-Scholes options
pricing model. Considerable judgment is necessary in interpreting
market data to develop estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of the
amounts that the Company could realize in a current market
exchange. Changes in assumptions could significantly affect the
estimates.
Cash and cash equivalents, accounts receivable, accounts payable
and accrued and other liabilities are reflected in the
accompanying consolidated financial statements at fair value
because of the short-term maturity of these instruments.
36
Investments
The following table summarizes by major security type the fair
market value and cost of the Company’s investments.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 28, 2000 |
|
January 29, 1999 |
|
|
|
|
|
|
|
Fair |
|
|
|
Fair |
|
|
|
|
Market |
|
|
|
Market |
|
|
|
|
Value |
|
Cost |
|
Value |
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
Equity securities |
|
$ |
1,451 |
|
|
$ |
595 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
Mutual funds, principally invested in debt securities |
|
|
— |
|
|
|
— |
|
|
|
936 |
|
|
|
936 |
|
|
|
|
|
|
|
Preferred stock |
|
|
56 |
|
|
|
56 |
|
|
|
107 |
|
|
|
107 |
|
|
|
|
|
|
|
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. corporate and bank debt |
|
|
1,200 |
|
|
|
1,186 |
|
|
|
84 |
|
|
|
84 |
|
|
|
|
|
|
|
State and municipal securities |
|
|
115 |
|
|
|
117 |
|
|
|
295 |
|
|
|
293 |
|
|
|
|
|
|
|
U.S. government and agencies |
|
|
192 |
|
|
|
195 |
|
|
|
33 |
|
|
|
33 |
|
|
|
|
|
|
|
International corporate and bank debt |
|
|
30 |
|
|
|
30 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities |
|
|
1,537 |
|
|
|
1,528 |
|
|
|
412 |
|
|
|
410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments |
|
$ |
3,044 |
|
|
$ |
2,179 |
|
|
$ |
1,455 |
|
|
$ |
1,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At January 28, 2000, debt securities with a carrying amount
of $309 million mature within one year; the remaining debt
securities mature within five years. Gross realized gains for
fiscal year 2000 were $81 million. Gross realized and
unrealized losses for fiscal year 2000 were not material.
The Company’s gross realized gains and losses on the sale of
investments for fiscal years 1999 and 1998 were not material.
Gross unrealized gains on January 28, 2000 were
$879 million. Gross unrealized losses on January 28,
2000 were $13 million. Gross unrealized gains and losses at
January 29, 1999 were not material.
Foreign Currency Instruments
The Company uses foreign currency purchased option contracts to
reduce its exposure to currency fluctuations involving probable
anticipated, but not firmly committed, transactions. It also uses
forward contracts to reduce exposure to transactions with firm
foreign currency commitments. These transactions include
international sales by U.S. dollar functional currency
entities, foreign currency denominated purchases of certain
components and intercompany shipments to certain international
subsidiaries. The risk of loss associated with purchased options
is limited to premium amounts paid for the option contracts.
Foreign currency purchased options generally expire in 12 months
or less. At January 28, 2000, the Company held purchased
option contracts with a notional amount of $2 billion, a net
asset value of $75 million and a combined net realized and
unrealized deferred gain of $5 million. At January 29,
1999, the Company held purchased option contracts with a notional
amount of $1 billion, a net asset value of $48 million
and a combined net realized and unrealized deferred loss of
$21 million. 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.
Transactions with firm foreign currency commitments are generally
hedged using foreign currency forward contracts for periods not
exceeding three months. At January 28, 2000, the Company
held forward contracts with a notional amount of
$818 million, a net asset value of $17 million and a
net realized and unrealized deferred gain of $490 million.
At January 29, 1999, the Company held forward contracts with
a notional amount of $1 billion, a net liability value of
$24 million and a combined net realized and unrealized
deferred gain of $1 million.
Long-term Debt and Interest Rate Risk Management
In April 1998, the Company issued $200 million 6.55% fixed
rate senior notes due April 15, 2008 (the “Senior
Notes”) and $300 million 7.10% fixed rate senior
debentures due April 15, 2028 (the
37
“Senior Debentures”). Interest on the Senior Notes and
Senior Debentures is paid semi-annually. The Senior Notes and
Senior Debentures are redeemable, in whole or in part, at the
election of the Company for principal, any accrued interest and a
redemption premium based on the present value of interest to be
paid over the term of the debt agreements. The Senior Notes and
Senior Debentures generally contain no restrictive covenants,
other than a limitation on liens on the Company’s assets and
a limitation on sale-leaseback transactions.
Concurrent with the issuance of the Senior Notes and Senior
Debentures, the Company entered into interest rate swap
agreements converting the Company’s interest rate exposure
from a fixed rate to a floating rate basis to better align the
associated interest rate characteristics to its cash and
investments portfolio. The interest rate swap agreements have an
aggregate notional amount of $200 million maturing
April 15, 2008 and $300 million maturing April 15,
2028. The floating rates are based on three-month London
interbank offered rates (“LIBOR”) plus .41% and .79%
for the Senior Notes and Senior Debentures, respectively. As a
result of the interest rate swap agreements, the Company’s
effective interest rates for the Senior Notes and Senior
Debentures were 6.01% and 6.34%, respectively, for fiscal
year 2000.
The Company has designated the issuance of the Senior Notes and
Senior Debentures and the related interest rate swap agreements
as an integrated transaction. Accordingly, the differential to be
paid or received on the interest rate swap agreements is accrued
and recognized as an adjustment to interest expense as interest
rates change.
The difference between the Company’s carrying amounts and
fair value of its long-term debt and related interest rate swaps
was not material at January 28, 2000 and January 29,
1999.
NOTE 4 — Income Taxes
The provision for income taxes consists of the following:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
January 28, |
|
January 29, |
|
February 1, |
|
|
2000 |
|
1999 |
|
1998 |
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic |
|
$ |
1,008 |
|
|
$ |
567 |
|
|
$ |
362 |
|
|
|
|
|
|
|
Foreign |
|
|
84 |
|
|
|
86 |
|
|
|
41 |
|
|
|
|
|
|
|
Deferred |
|
|
(307 |
) |
|
|
(29 |
) |
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
$ |
785 |
|
|
$ |
624 |
|
|
$ |
424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and extraordinary loss included
approximately $449 million, $529 million, and
$309 million related to foreign operations in fiscal years
2000, 1999, and 1998, respectively.
The Company has not recorded a deferred income tax liability of
approximately $541 million for additional taxes that would
result from the distribution of certain earnings of its foreign
subsidiaries if they were repatriated. The Company currently
intends to reinvest indefinitely these undistributed earnings of
its foreign subsidiaries.
38
The components of the Company’s net deferred tax asset are
as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
January 28, |
|
January 29, |
|
February 1, |
|
|
2000 |
|
1999 |
|
1998 |
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred service contract revenue |
|
$ |
125 |
|
|
$ |
118 |
|
|
$ |
124 |
|
|
|
|
|
|
|
Inventory and warranty provisions |
|
|
60 |
|
|
|
45 |
|
|
|
24 |
|
|
|
|
|
|
|
Provisions for product returns and doubtful accounts |
|
|
30 |
|
|
|
25 |
|
|
|
20 |
|
|
|
|
|
|
|
Loss carryforwards |
|
|
219 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
Credit carryforwards |
|
|
101 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
535 |
|
|
|
188 |
|
|
|
168 |
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investments |
|
|
(303 |
) |
|
|
(2 |
) |
|
|
— |
|
|
|
|
|
|
|
Other |
|
|
(74 |
) |
|
|
(49 |
) |
|
|
(62 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(377 |
) |
|
|
(51 |
) |
|
|
(62 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross and net deferred tax asset |
|
$ |
158 |
|
|
$ |
137 |
|
|
$ |
106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax loss carryforwards will generally expire between 2018 and
2020. Credit carryforwards will generally expire between 2003 and
2020.
The effective tax rate differed from statutory U.S. federal
income tax rate as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
January 28, |
|
January 29, |
|
February 1, |
|
|
2000 |
|
1999 |
|
1998 |
|
|
|
|
|
|
|
|
U.S. federal statutory rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
|
|
|
|
Foreign income taxed at different rates |
|
|
(6.0 |
) |
|
|
(7.0 |
) |
|
|
(4.6 |
) |
|
|
|
|
|
|
Nondeductible purchase of in-process technology |
|
|
2.8 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
|
|
|
|
Other |
|
|
0.2 |
|
|
|
2.0 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rates |
|
|
32.0 |
% |
|
|
30.0 |
% |
|
|
31.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 5 — Financing Arrangements
The Company maintains a $250 million revolving credit
facility, which expires in June 2002. Commitment fees for this
facility are payable quarterly and are based on specific
liquidity requirements. Commitment fees paid in fiscal years
2000, 1999, and 1998 were not material. At January 28, 2000
and January 29, 1999, this facility was unused.
NOTE 6 — Preferred Stock
Authorized Shares — The Company has the
authority to issue five million shares of preferred stock, par
value $.01 per share. At January 28, 2000 and
January 29, 1999, no shares of preferred stock were issued
or outstanding.
Series A Junior Participating Preferred Stock
— In conjunction with the distribution of Preferred
Share Purchase Rights (see Note 9 — Preferred
Share Purchase Rights), the Company’s Board of Directors
designated 200,000 shares of preferred stock as
Series A Junior Participating Preferred Stock (“Junior
Preferred Stock”) and reserved such shares for issuance upon
exercise of the Preferred Share Purchase Rights. At
January 28, 2000 and January 29, 1999, no shares of
Junior Preferred Stock were issued or outstanding.
39
NOTE 7 — Common Stock
Authorized Shares — On July 16, 1999, the
Company’s stockholders approved an amendment to the
Company’s Certificate of Incorporation to increase the
number of shares of common stock, par value $.01 per share,
that the Company is authorized to issue from three billion to
seven billion.
Stock Splits — On each of March 6, 1998,
September 4, 1998 and March 5, 1999, the Company
effected a two-for-one common stock split by paying a 100% stock
dividend to stockholders of record as of February 27, 1998,
August 28, 1998 and February 26, 1999, respectively.
All share and per share information included in the accompanying
consolidated financial statements and related notes has been
restated to reflect these stock splits.
Stock Repurchase Program — The Board of
Directors has authorized the Company to repurchase up to one
billion shares of its common stock in open market or private
transactions. During fiscal years 2000 and 1999, the Company
repurchased 56 million and 149 million shares of its
common stock, respectively, for an aggregate cost of
$1.1 billion and $1.5 billion, respectively. As of
January 28, 2000, the Company was authorized to repurchase
up to 145 million additional shares of its outstanding
common stock. The Company utilizes equity instrument contracts to
facilitate its repurchase of common stock. At January 28,
2000 and January 29, 1999, the Company held equity
instrument contracts that relate to the purchase of
118 million and 49 million shares of common stock,
respectively, at an average cost of $41 and $14 per share,
respectively. On January 28, 2000 and January 29, 1999,
the Company had outstanding put obligations covering 69 million
and 33 million shares, respectively, at an average exercise
price of $39 and $11, respectively. The equity instruments are
exercisable only at date of expiration, with the expiration dates
ranging from the first quarter of fiscal year 2001 through the
third quarter of fiscal year 2002. The outstanding put
obligations at January 28, 2000 and January 29, 1999
permitted net-share settlement at the Company’s option and,
therefore, did not result in a put obligation liability on the
accompanying consolidated statement of financial position. The
equity instruments did not have a material effect on diluted
earnings per common share for fiscal years 2000 and 1999.
NOTE 8 — Benefit Plans
Incentive and Employee Stock Purchase Plans —
The Dell Computer Corporation Incentive Plan (the “Incentive
Plan”), which is administered by the Compensation Committee
of the Board of Directors, provides for the granting of
incentive awards in the form of stock options, stock appreciation
rights (“SARs”), restricted stock, stock and cash to
directors, executive officers and key employees of the Company
and its subsidiaries, and certain other persons who provide
consulting or advisory services to the Company.
Options granted may be either incentive stock options within the
meaning of Section 422 of the Internal Revenue Code or
nonqualified options. The right to purchase shares under the
existing stock option agreements typically vest pro-rata at each
option anniversary date over a five-year period. Stock options
must be exercised within 10 years from date of grant. Stock
options are generally issued at fair market value. Under the
Incentive Plan, each nonemployee director of the Company
automatically receives nonqualified stock options annually.
In addition, the Dell Computer Corporation 1998 Broad Based Stock
Option Plan provides for the award of nonqualified stock options
to non-executive employees of the Company.
40
The following table summarizes stock option activity:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
|
|
|
|
|
|
|
January 28, 2000 |
|
January 29, 1999 |
|
February 1, 1998 |
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
Weighted |
|
|
|
Weighted |
|
|
Number |
|
Average |
|
Number |
|
Average |
|
Number |
|
Average |
|
|
Of |
|
Exercise |
|
Of |
|
Exercise |
|
Of |
|
Exercise |
|
|
Shares |
|
Price |
|
Shares |
|
Price |
|
Shares |
|
Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(share data in millions) |
|
|
|
|
|
|
Outstanding at beginning of year |
|
|
363 |
|
|
$ |
2.27 |
|
|
|
439 |
|
|
$ |
2.25 |
|
|
|
451 |
|
|
$ |
0.97 |
|
|
|
|
|
|
|
Granted |
|
|
50 |
|
|
$ |
42.86 |
|
|
|
60 |
|
|
$ |
19.94 |
|
|
|
86 |
|
|
$ |
6.80 |
|
|
|
|
|
|
|
Canceled |
|
|
(16 |
) |
|
$ |
9.89 |
|
|
|
(26 |
) |
|
$ |
2.63 |
|
|
|
(19 |
) |
|
$ |
1.55 |
|
|
|
|
|
|
|
Exercised |
|
|
(77 |
) |
|
$ |
2.48 |
|
|
|
(110 |
) |
|
$ |
1.29 |
|
|
|
(79 |
) |
|
$ |
0.76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year |
|
|
320 |
|
|
$ |
11.39 |
|
|
|
363 |
|
|
$ |
5.40 |
|
|
|
439 |
|
|
$ |
2.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at year-end |
|
|
112 |
|
|
$ |
3.96 |
|
|
|
103 |
|
|
$ |
2.27 |
|
|
|
98 |
|
|
$ |
0.84 |
|
The following is additional information relating to options
outstanding as of January 28, 2000:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding |
|
Options Exercisable |
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
Average |
|
|
|
Weighted |
|
|
Number |
|
Average |
|
Remaining |
|
Number |
|
Average |
|
|
Of |
|
Exercise |
|
Contractual |
|
Of |
|
Exercise |
| Exercise Price Range |
|
Shares |
|
Price |
|
Life (Years) |
|
Shares |
|
Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(share data in millions) |
|
|
|
|
|
|
$ 0.01-$ 0.99 |
|
|
83 |
|
|
$ |
0.62 |
|
|
|
4.85 |
|
|
|
44 |
|
|
$ |
0.65 |
|
|
|
|
|
|
|
$ 1.00-$ 2.49 |
|
|
71 |
|
|
$ |
1.51 |
|
|
|
6.25 |
|
|
|
29 |
|
|
$ |
1.49 |
|
|
|
|
|
|
|
$ 2.50-$ 4.99 |
|
|
34 |
|
|
$ |
3.68 |
|
|
|
6.84 |
|
|
|
16 |
|
|
$ |
3.53 |
|
|
|
|
|
|
|
$ 5.00-$12.49 |
|
|
41 |
|
|
$ |
9.08 |
|
|
|
7.32 |
|
|
|
11 |
|
|
$ |
9.34 |
|
|
|
|
|
|
|
$12.50-$41.55 |
|
|
91 |
|
|
$ |
32.77 |
|
|
|
8.93 |
|
|
|
12 |
|
|
$ |
18.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
320 |
|
|
|
|
|
|
|
|
|
|
|
112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During fiscal years 2000, 1999, and 1998, the Company granted
1.4 million shares, 1 million shares, and
2 million shares, respectively, of restricted stock. For
substantially all restricted stock grants, at the date of grant,
the recipient has all rights of a stockholder, subject to certain
restrictions on transferability and a risk of forfeiture.
Restricted shares typically vest over a seven-year period
beginning on the date of grant. The Company records unearned
compensation equal to the market value of the restricted shares
on the date of grant and charges the unearned compensation to
expense over the vesting period.
There were 264 million, 162 million, and
40 million shares of common stock available for future
grants under the Incentive Plan at January 28, 2000,
January 29, 1999, and February 1, 1998, respectively.
The Company also has an employee stock purchase plan that
qualifies under Section 423 of the Internal Revenue Code and
permits substantially all employees to purchase shares of common
stock. Participating employees may purchase common stock through
payroll deductions at the end of each participation period at a
purchase price equal to 85% of the lower of the fair market value
of the common stock at the beginning or the end of the
participation period. Common stock reserved for future employee
purchases under the plan aggregated 44 million shares at
January 28, 2000, 47 million shares at January 29,
1999, and 52 million shares at February 1, 1998.
Common stock issued under this plan totaled three million shares
in fiscal year 2000, five million shares in fiscal year
1999, and nine million shares in fiscal year 1998.
The weighted average fair value of stock options at date of grant
was $22.64, $11.77, and $4.06 per option for options
granted during fiscal years 2000, 1999, and 1998, respectively.
Additionally, the weighted average fair value of the purchase
rights under the employee stock purchase plan granted
41
in fiscal years 2000, 1999, and 1998 was $11.12, $2.51, and
$1.53 per right, respectively. The weighted average fair
value of options and purchase rights under the employee stock
purchase plan was determined based on the Black-Scholes model,
utilizing the following assumptions:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
January 28, 2000 |
|
January 29, 1999 |
|
February 1, 1998 |
|
|
|
|
|
|
|
|
Expected term: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
5 years |
|
|
|
5 years |
|
|
|
5 years |
|
|
|
|
|
|
|
Employee stock purchase plan |
|
|
6 months |
|
|
|
6 months |
|
|
|
6 months |
|
|
|
|
|
|
|
Interest rate |
|
|
5.81% |
|
|
|
5.42% |
|
|
|
6.28% |
|
|
|
|
|
|
|
Volatility |
|
|
51.03% |
|
|
|
52.12% |
|
|
|
54.92% |
|
|
|
|
|
|
|
Dividends |
|
|
0% |
|
|
|
0% |
|
|
|
0% |
|
Had the Company accounted for its Incentive Plan and employee
stock purchase plan by recording compensation expense based on
the fair value at the grant date on a straight-line basis over
the vesting period, stock-based compensation costs would have
reduced pretax income by $329 million ($224 million,
net of taxes), $194 million ($136 million, net of
taxes), and $100 million ($69 million, net of taxes) in
fiscal years 2000, 1999, and 1998, respectively. The pro forma
effect on basic earnings per common share would have been a
reduction of $0.09, $0.05, and $0.03 for fiscal years 2000, 1999,
and 1998, respectively. The pro forma effect on diluted earnings
per common share would have been a reduction of $0.08, $0.05,
and $0.02 for fiscal years 2000, 1999, and 1998, respectively.
401(k) Plan — The Company has a defined
contribution retirement plan that complies with
Section 401(k) of the Internal Revenue Code. Substantially
all employees in the U.S. are eligible to participate in the
plan. The Company matches 100% of each participant’s
voluntary contributions, subject to a maximum Company
contribution of 3% of the participant’s compensation. The
Company’s contributions during fiscal years 2000, 1999, and
1998 were $51 million, $21 million, and
$20 million, respectively.
NOTE 9 — Preferred Share Purchase Rights
On November 29, 1995, the Board of Directors declared a
dividend of one Preferred Share Purchase Right
(“Right”) for each outstanding share of common stock.
The distribution of the Rights was made on December 13,
1995, to the stockholders of record on that date. Each Right
entitles the holder to purchase one thirty-two thousandth of a
share of Junior Preferred Stock at an exercise price of
$225 per one-thousandth of a share.
If a person or group acquires 15% or more of the outstanding
common stock, each Right will entitle the holder (other than such
person or any member of such group) to purchase, at the
Right’s then current exercise price, the number of shares of
common stock having a market value of twice the exercise price
of the Right. If exercisable, the Rights contain provisions
relating to merger or other business combinations.
In certain circumstances, the Board of Directors may, at its
option, exchange part or all of the Rights (other than Rights
held by the acquiring person or group) for shares of common stock
at an exchange rate of one share of common stock for each Right.
The Company will be entitled to redeem the Rights at
$.001 per Right at any time before a 15% or greater position
has been acquired by any person or group. Additionally, the
Company may lower the 15% threshold to not less than the greater
of (a) any percentage greater than the largest percentage of
common stock known by the Company to be owned by any person
(other than Michael S. Dell) or (b) 10%. The Rights
expire on November 29, 2005.
Neither the ownership nor the further acquisition of common stock
by Michael S. Dell will cause the Rights to become
exercisable or nonredeemable or will trigger the other features
of the Rights.
42
NOTE 10 — Commitments, Contingencies and
Certain Concentrations
Lease Commitments — The Company maintains master
lease facilities providing the capacity to fund up to
$782 million. The combined facilities provide for the
ability of the Company to lease certain real property, buildings
and equipment (collectively referred to as the
“Properties”) to be constructed or acquired. Rent
obligations for the Properties commence on various dates. At
January 28, 2000, $365 million of the combined
facilities had been utilized.
The leases have initial terms of five years with an option to
renew for two successive years, subject to certain conditions.
The Company may, at its option, purchase the Properties during or
at the end of the lease term for 100% of the then outstanding
amounts expended by the lessor to complete the Properties. If the
Company does not exercise the purchase option, the Company will
guarantee a residual value of the Properties as determined by the
agreement (approximately $310 million and $189 million
at January 28, 2000 and January 29, 1999,
respectively).
The Company leases other property and equipment, manufacturing
facilities and office space under non-cancelable leases. Certain
leases obligate the Company to pay taxes, maintenance and repair
costs.
Future minimum lease payments under all non-cancelable leases as
of January 28, 2000 are as follows: $46 million in
2001; $34 million in 2002; $29 million in 2003;
$183 million in 2004; $405 million in 2005; and
$26 million thereafter. Rent expense under all leases
totaled $81 million, $58 million and $36 million
for fiscal years 2000, 1999, and 1998, respectively.
Legal Matters — The Company is subject to
various legal proceedings and claims arising in the ordinary
course of business. The Company’s management does not expect
that the outcome in any of these legal proceedings, individually
or collectively, will have a material adverse effect on the
Company’s financial condition, results of operations or cash
flows.
Certain Concentrations — All of the
Company’s foreign currency exchange and interest rate
derivative instruments involve elements of market and credit risk
in excess of the amounts recognized in the financial statements.
The counterparties to the financial instruments consist of a
number of major financial institutions. In addition to limiting
the amount of agreements and contracts it enters into with any
one party, the Company monitors its positions with and the credit
quality of the counterparties to these financial instruments.
The Company does not anticipate nonperformance by any of the
counterparties.
The Company’s investments in debt securities are placed with
high quality financial institutions and companies. The
Company’s investments in debt securities primarily have
maturities of less than three years. Management believes that no
significant concentration of credit risk for investments exists
for the Company.
The Company markets and sells its products and services to large
corporate, government, healthcare and education customers,
small-to-medium businesses and individuals and value-added
resellers. Its receivables from such parties are well
diversified.
The Company purchases a number of components from single sources.
In some cases, alternative sources of supply are not available.
In other cases, the Company may establish a working relationship
with a single source, even when multiple suppliers are available,
if the Company believes it is advantageous to do so due to
performance, quality, support, delivery, capacity or price
considerations. If the supply of a critical single-source
material or component were delayed or curtailed, the
Company’s ability to ship the related product in desired
quantities and in a timely manner could be adversely affected.
Even where alternative sources of supply are available,
qualification of the alternative suppliers and establishment of
reliable supplies could result in delays and a possible loss of
sales, which could affect operating results adversely.
43
NOTE 11 — Related Party Transactions
During fiscal year 1998, the Company and Newcourt Credit
Group Inc. (“Newcourt”), formed a joint venture,
Dell Financial Services L.P. (“DFS”), to provide
leasing and asset management services to the Company’s
customers. Newcourt’s ultimate parent is The CIT
Group, Inc. The Company has a 70% equity interest in DFS;
however, as the Company does not exercise control over DFS, it
accounts for the investment under the equity method. During
fiscal year 2000, DFS originated financing arrangements for
the Company’s customers totaling $1.8 billion as
compared to originations of $895 million in fiscal year
1999. The Company’s investment in DFS at January 28,
2000 and January 29, 1999, was not material to the
Company’s financial position or results of operations.
NOTE 12 — Segment Information
As described in Note 1, the Company adopted SFAS
No. 131 in fiscal year 1999. The Company has three
reportable business segments: the Americas, Europe and
Asia-Pacific and Japan regions.
The Company conducts operations worldwide and is managed on a
geographic basis, with those geographic segments being the
Americas, Europe and Asia-Pacific and Japan regions. The Americas
segment, which is based in Round Rock, Texas, covers the United
States, Canada and Latin America. The European segment, which is
based in Bracknell, England, covers the European countries and
also some countries in the Middle East and Africa. The
Asia-Pacific and Japan segment covers the Pacific Rim, including
Japan, Australia and New Zealand, and is based in Hong Kong (for
areas other than Japan) and Kawasaki, Japan (for Japan). The
Company’s operations are primarily concentrated in the North
America, Europe and Asia-Pacific regions.
The accounting policies of the geographic segments are the same
as those described in the summary of significant accounting
policies. The Company allocates resources to and evaluates
performance of its geographic segments based on operating income.
Transfers between geographic areas are recorded using internal
transfer prices set by the Company.
The table below presents information about the Company’s
reportable segments:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2000 |
|
|
|
|
|
|
|
Eliminations |
|
|
|
|
|
|
and |
|
|
|
|
|
|
Purchased |
|
|
|
|
|
|
Asia Pacific |
|
Research & |
|
|
|
|
Americas |
|
Europe |
|
and Japan |
|
Development |
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
Sales to unaffiliated customers |
|
$ |
17,879 |
|
|
$ |
5,590 |
|
|
$ |
1,796 |
|
|
$ |
— |
|
|
$ |
25,265 |
|
|
|
|
|
|
|
Transfers between geographic areas |
|
|
48 |
|
|
|
5 |
|
|
|
2 |
|
|
|
(55 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales |
|
$ |
17,927 |
|
|
$ |
5,595 |
|
|
$ |
1,798 |
|
|
$ |
(55 |
) |
|
$ |
25,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
2,173 |
|
|
$ |
403 |
|
|
$ |
97 |
|
|
$ |
(194 |
) |
|
$ |
2,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(216 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
$ |
82 |
|
|
$ |
41 |
|
|
$ |
14 |
|
|
$ |
— |
|
|
$ |
137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets |
|
$ |
2,456 |
|
|
$ |
1,147 |
|
|
$ |
413 |
|
|
$ |
— |
|
|
$ |
4,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General corporate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
11,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 1999 |
|
|
|
|
|
|
|
Asia Pacific |
|
|
|
|
Americas |
|
Europe |
|
and Japan |
|
Eliminations |
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
Sales to unaffiliated customers |
|
$ |
12,420 |
|
|
$ |
4,674 |
|
|
$ |
1,149 |
|
|
$ |
— |
|
|
$ |
18,243 |
|
|
|
|
|
|
|
Transfers between geographic areas |
|
|
33 |
|
|
|
5 |
|
|
|
1 |
|
|
|
(39 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales |
|
$ |
12,453 |
|
|
$ |
4,679 |
|
|
$ |
1,150 |
|
|
$ |
(39 |
) |
|
$ |
18,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
1,802 |
|
|
$ |
446 |
|
|
$ |
78 |
|
|
$ |
— |
|
|
$ |
2,326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(280 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
$ |
59 |
|
|
$ |
29 |
|
|
$ |
8 |
|
|
$ |
— |
|
|
$ |
96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets |
|
$ |
1,640 |
|
|
$ |
1,017 |
|
|
$ |
234 |
|
|
$ |
— |
|
|
$ |
2,891 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General corporate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,877 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 1998 |
|
|
|
|
|
|
|
Asia Pacific |
|
|
|
|
Americas |
|
Europe |
|
and Japan |
|
Eliminations |
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
Sales to unaffiliated customers |
|
$ |
8,531 |
|
|
$ |
2,956 |
|
|
$ |
840 |
|
|
|
— |
|
|
$ |
12,327 |
|
|
|
|
|
|
|
Transfers between geographic areas |
|
|
67 |
|
|
|
17 |
|
|
|
— |
|
|
|
(84 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales |
|
$ |
8,598 |
|
|
$ |
2,973 |
|
|
$ |
840 |
|
|
$ |
(84 |
) |
|
$ |
12,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
1,152 |
|
|
$ |
255 |
|
|
$ |
33 |
|
|
$ |
— |
|
|
$ |
1,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(124 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
$ |
42 |
|
|
$ |
16 |
|
|
$ |
5 |
|
|
$ |
— |
|
|
$ |
63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total depreciation and
amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets |
|
$ |
1,363 |
|
|
$ |
605 |
|
|
$ |
172 |
|
|
$ |
— |
|
|
$ |
2,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General corporate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
The following is net revenues and long-lived asset information by
geographic region:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
January 28, 2000 |
|
January 29, 1999 |
|
February 1, 1998 |
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
Net revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
16,878 |
|
|
$ |
11,668 |
|
|
$ |
7,987 |
|
|
|
|
|
|
|
Foreign countries |
|
|
8,387 |
|
|
|
6,575 |
|
|
|
4,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues |
|
$ |
25,265 |
|
|
$ |
18,243 |
|
|
$ |
12,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
January 28, 2000 |
|
January 29, 1999 |
|
February 1, 1998 |
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
Long-lived assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
481 |
|
|
$ |
348 |
|
|
$ |
258 |
|
|
|
|
|
|
|
Foreign countries |
|
|
284 |
|
|
|
175 |
|
|
|
84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets |
|
$ |
765 |
|
|
$ |
523 |
|
|
$ |
342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign net revenue is based on the location of the customers.
Net revenue and long-lived assets from no single foreign country
was material to the Company’s consolidated net revenues and
long-lived assets for fiscal years 2000, 1999 and 1998.
The following is net revenues by product groups:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
January 28, 2000 |
|
January 29, 1999 |
|
February 1, 1998 |
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
Desktop computer systems |
|
$ |
13,568 |
|
|
$ |
10,979 |
|
|
$ |
8,022 |
|
|
|
|
|
|
|
Notebook computers |
|
|
5,847 |
|
|
|
3,859 |
|
|
|
2,210 |
|
|
|
|
|
|
|
Enterprise systems |
|
|
3,828 |
|
|
|
2,193 |
|
|
|
1,028 |
|
|
|
|
|
|
|
Other |
|
|
2,022 |
|
|
|
1,212 |
|
|
|
1,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
25,265 |
|
|
$ |
18,243 |
|
|
$ |
12,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue by product group includes worldwide service revenue.
No single customer accounted for more than 10% of the
Company’s consolidated net revenues during fiscal years
2000, 1999 and 1998.
NOTE 13 — Supplemental Consolidated Financial
Information
| |
|
|
|
|
|
|
|
|
|
|
|
January 28, |
|
January 29, |
|
|
2000 |
|
1999 |
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
Supplemental Consolidated Statement of Financial Position
Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross accounts receivable |
|
$ |
2,652 |
|
|
$ |
2,124 |
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
|
(44 |
) |
|
|
(30 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
2,608 |
|
|
$ |
2,094 |
|
|
|
|
|
|
|
|
|
|
|
Inventories: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production materials |
|
$ |
335 |
|
|
$ |
234 |
|
|
|
|
|
|
|
Work-in-process and finished goods |
|
|
56 |
|
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
391 |
|
|
$ |
273 |
|
|
|
|
|
|
|
|
|
|
46
| |
|
|
|
|
|
|
|
|
|
|
|
January 28, |
|
January 29, |
|
|
2000 |
|
1999 |
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
Other current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refundable income taxes |
|
$ |
70 |
|
|
$ |
387 |
|
|
|
|
|
|
|
Other |
|
|
480 |
|
|
|
404 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
550 |
|
|
$ |
791 |
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land and buildings |
|
$ |
229 |
|
|
$ |
172 |
|
|
|
|
|
|
|
Computer equipment |
|
|
277 |
|
|
|
205 |
|
|
|
|
|
|
|
Machinery and other equipment |
|
|
383 |
|
|
|
252 |
|
|
|
|
|
|
|
Leasehold improvements |
|
|
251 |
|
|
|
146 |
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment |
|
|
1,140 |
|
|
|
775 |
|
|
|
|
|
|
|
Accumulated depreciation and amortization |
|
|
(375 |
) |
|
|
(252 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
765 |
|
|
$ |
523 |
|
|
|
|
|
|
|
|
|
|
|
Accrued and other current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued compensation |
|
$ |
337 |
|
|
$ |
355 |
|
|
|
|
|
|
|
Deferred revenue on warranty contracts |
|
|
190 |
|
|
|
204 |
|
|
|
|
|
|
|
Other |
|
|
1,127 |
|
|
|
739 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,654 |
|
|
$ |
1,298 |
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue on warranty contracts |
|
$ |
271 |
|
|
$ |
237 |
|
|
|
|
|
|
|
Other |
|
|
192 |
|
|
|
112 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
463 |
|
|
$ |
349 |
|
|
|
|
|
|
|
|
|
|
47
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
January 28, |
|
January 29, |
|
February 1, |
|
|
2000 |
|
1999 |
|
1998 |
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
Supplemental Consolidated Statement of Income Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research, development and engineering expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses |
|
$ |
292 |
|
|
$ |
209 |
|
|
$ |
145 |
|
|
|
|
|
|
|
Purchased research and development |
|
|
194 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
Engineering expenses |
|
|
82 |
|
|
|
63 |
|
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
568 |
|
|
$ |
272 |
|
|
$ |
204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing and other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
$ |
(34 |
) |
|
$ |
(26 |
) |
|
$ |
(3 |
) |
|
|
|
|
|
|
Investment and other income, net |
|
|
222 |
|
|
|
64 |
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
188 |
|
|
$ |
38 |
|
|
$ |
52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Consolidated Statement of Cash Flows Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in operating working capital accounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
$ |
(394 |
) |
|
$ |
(598 |
) |
|
$ |
(638 |
) |
|
|
|
|
|
|
Inventories |
|
|
(123 |
) |
|
|
(41 |
) |
|
|
16 |
|
|
|
|
|
|
|
Accounts payable |
|
|
988 |
|
|
|
743 |
|
|
|
638 |
|
|
|
|
|
|
|
Accrued and other liabilities |
|
|
416 |
|
|
|
255 |
|
|
|
644 |
|
|
|
|
|
|
|
Other, net |
|
|
(75 |
) |
|
|
8 |
|
|
|
(295 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
812 |
|
|
$ |
367 |
|
|
$ |
365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid |
|
$ |
(363 |
) |
|
$ |
138 |
|
|
$ |
180 |
|
|
|
|
|
|
|
Interest paid |
|
|
34 |
|
|
|
19 |
|
|
|
3 |
|
NOTE 14 — Unaudited Quarterly Results
The following tables contain selected unaudited Consolidated
Statement of Income and stock sales price data for each quarter
of fiscal years 2000 and 1999.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2000 |
|
|
|
|
|
4th |
|
3rd |
|
2nd |
|
1st |
|
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except per share data) |
|
|
|
|
|
|
Net revenues |
|
$ |
6,801 |
|
|
$ |
6,784 |
|
|
$ |
6,142 |
|
|
$ |
5,537 |
|
|
|
|
|
|
|
Gross margin |
|
|
1,304 |
|
|
|
1,370 |
|
|
|
1,354 |
|
|
|
1,190 |
|
|
|
|
|
|
|
Net income |
|
|
436 |
|
|
|
289 |
|
|
|
507 |
|
|
|
434 |
|
|
|
|
|
|
|
Earnings per common share (a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.17 |
|
|
$ |
0.11 |
|
|
$ |
0.20 |
|
|
$ |
0.17 |
|
|
|
|
|
|
|
Diluted |
|
$ |
0.16 |
|
|
$ |
0.11 |
|
|
$ |
0.19 |
|
|
$ |
0.16 |
|
|
|
|
|
|
|
Weighted average shares outstanding (a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
2,559 |
|
|
|
2,538 |
|
|
|
2,524 |
|
|
|
2,528 |
|
|
|
|
|
|
|
Diluted |
|
|
2,731 |
|
|
|
2,724 |
|
|
|
2,725 |
|
|
|
2,738 |
|
|
|
|
|
|
|
Stock sales prices per share (a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
$ |
53.97 |
|
|
$ |
49.94 |
|
|
$ |
45.06 |
|
|
$ |
55.00 |
|
|
|
|
|
|
|
Low |
|
$ |
37.06 |
|
|
$ |
37.38 |
|
|
$ |
31.38 |
|
|
$ |
35.38 |
|
48
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 1999 |
|
|
|
|
|
4th |
|
3rd |
|
2nd |
|
1st |
|
|
Quarter |
|
Quarter |
|
Quarter |
|
Quarter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except per share data) |
|
|
|
|
|
|
Net revenues |
|
$ |
5,173 |
|
|
$ |
4,818 |
|
|
$ |
4,331 |
|
|
$ |
3,920 |
|
|
|
|
|
|
|
Gross margin |
|
|
1,161 |
|
|
|
1,086 |
|
|
|
985 |
|
|
|
873 |
|
|
|
|
|
|
|
Net income |
|
|
425 |
|
|
|
384 |
|
|
|
346 |
|
|
|
305 |
|
|
|
|
|
|
|
Earnings per common share (a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.17 |
|
|
$ |
0.15 |
|
|
$ |
0.14 |
|
|
$ |
0.12 |
|
|
|
|
|
|
|
Diluted |
|
$ |
0.15 |
|
|
$ |
0.14 |
|
|
$ |
0.12 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
Weighted average shares outstanding (a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
2,527 |
|
|
|
2,527 |
|
|
|
2,529 |
|
|
|
2,547 |
|
|
|
|
|
|
|
Diluted |
|
|
2,749 |
|
|
|
2,762 |
|
|
|
2,785 |
|
|
|
2,799 |
|
|
|
|
|
|
|
Stock sales prices per share (a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
$ |
50.19 |
|
|
$ |
34.63 |
|
|
$ |
29.56 |
|
|
$ |
21.06 |
|
|
|
|
|
|
|
Low |
|
$ |
29.78 |
|
|
$ |
20.38 |
|
|
$ |
19.31 |
|
|
$ |
12.61 |
|
|
|
|
|
(a) |
|
Earnings per common share are computed independently for each of
the quarters presented. Therefore, the sum of the quarterly per
common share information may not equal the annual earnings per
common share. All share, per share and stock sales price
information has been retroactively restated to reflect prior
common stock splits. See Note 7 — Common Stock. |
49
|
|
| ITEM 9 — |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE |
None.
PART III
The information called for by Part III of Form 10-K
(consisting of Item 10 — Directors and Executive
Officers of the Registrant, Item 11 — Executive
Compensation, Item 12 — Security Ownership of
Certain Beneficial Owners and Management and
Item 13 — Certain Relationships and Transactions),
to the extent not set forth herein under
“Item 1 — Business — Executive
Officers of the Company,” is incorporated by reference from
the Company’s definitive proxy statement, which will be
filed with the Securities and Exchange Commission within
120 days after the end of the fiscal year to which this
Report relates.
PART IV
ITEM 14 — EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
Financial Statements
The following financial statements are filed as a part of this
Report under “Item 8 — Financial Statements
and Supplementary Data”:
| |
|
|
|
|
|
|
Page |
|
|
|
|
Report of Independent Accountants |
|
|
28 |
|
|
|
|
|
|
|
Consolidated Statement of Financial Position at January 28,
2000 and January 29, 1999 |
|
|
29 |
|
|
|
|
|
|
|
Consolidated Statement of Income for the three fiscal years ended
January 28, 2000 |
|
|
30 |
|
|
|
|
|
|
|
Consolidated Statement of Cash Flows for the three fiscal years
ended January 28, 2000 |
|
|
31 |
|
|
|
|
|
|
|
Consolidated Statement of Stockholders’ Equity for the three
fiscal years ended January 28, 2000 |
|
|
32 |
|
|
|
|
|
|
|
Notes to Consolidated Financial Statements |
|
|
33 |
|
Financial Statement Schedules
The following financial statement schedule is filed as a part of
this Report under Schedule II immediately preceding the
signature page: Schedule II — Valuation and
Qualifying Accounts for the three fiscal years ended
January 28, 2000. All other schedules called for by
Form 10-K are omitted because they are inapplicable or the
required information is shown in the financial statements, or
notes thereto, included herein.
50
Exhibits
The following exhibits are filed as a part of this Report, with
each exhibit that consists of or includes a management contract
or compensatory plan or arrangement being identified with an
“*”:
| |
|
|
|
|
| Exhibit |
|
|
| No. |
|
Description of Exhibit |
|
|
|
|
3.1 |
|
|
— Certificate of Incorporation, dated October 21,
1987 and filed October 22, 1987 (incorporated by reference
to Exhibit 3.1 to the Company’s Quarterly Report on
Form 10-Q for the fiscal quarter ended July 30, 1995,
Commission File No. 0-17017) |
|
3.2 |
|
|
— Certificate of Amendment to the Certificate of
Incorporation, dated May 6, 1988 and filed May 9, 1988
(incorporated by reference to Exhibit 3.2 to the
Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended July 30, 1995, Commission File No.
0-17017) |
|
3.3 |
|
|
— Certificate of Amendment to the Certificate of
Incorporation, dated June 19, 1991 and filed June 21,
1991 (incorporated by reference to Exhibit 3.3 to the
Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended July 30, 1995, Commission File No.
0-17017) |
|
3.4 |
|
|
— Certificate of Amendment to the Certificate of
Incorporation, dated June 19, 1992 and filed July 10,
1992 (incorporated by reference to Exhibit 3.4 to the
Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended July 30, 1995, Commission File No.
0-17017) |
|
3.6 |
|
|
— Certificate of Correction Filed to Correct Certain
Errors in the Certificate of Amendment of Certificate of
Incorporation Filed in the Office of the Secretary of State of
Delaware on May 9, 1988, and in the Certificate of Amendment
of Certificate of Incorporation Filed in the Office of the
Secretary of State of Delaware on July 10, 1992, dated
April 27, 1994 and filed May 5, 1994 (incorporated by
reference to Exhibit 3.6 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended
July 30, 1995, Commission File No. 0-17017) |
|
3.7 |
|
|
— Certificate of Amendment to Certificate of
Incorporation, dated July 31, 1995 and filed August 3,
1995 (incorporated by reference to Exhibit 3.7 to the
Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended July 30, 1995, Commission File No.
0-17017) |
|
3.8 |
|
|
— Certificate of Designations of Series A Junior
Participating Preferred Stock, dated November 29, 1995 and
filed December 4, 1995 (incorporated by reference to
Exhibit 3.1 to the Company’s Quarterly Report on
Form 10-Q for the fiscal quarter ended October 29,
1995, Commission File No. 0-17017) |
|
3.9 |
|
|
— Certificate of Amendment to Certificate of
Incorporation, dated and filed July 18, 1997 (incorporated
by reference to Exhibit 3 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended
August 3, 1997, Commission File No. 0-17017) |
|
3.10 |
|
|
— Certificate of Amendment to Certificate of
Incorporation, dated and filed August 12, 1998 (incorporated
by reference to Exhibit 4 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended
August 12, 1998, Commission File No. 0-17017) |
51
| |
|
|
|
|
| Exhibit |
|
|
| No. |
|
Description of Exhibit |
|
|
|
|
3.11 |
|
|
— Certificate of Amendment to Certificate of
Incorporation, dated July 16, 1999 and filed July 22,
1999 (incorporated by reference to Exhibit 4 to the
Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended July 30, 1999, Commission File
No. 0-17017) |
|
3.12 |
|
|
— Restated Bylaws, as adopted on November 29, 1995
(incorporated by reference to Exhibit 3.3 to the
Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended October 29, 1995, Commission File No.
0-17017) |
|
4.1 |
|
|
— Rights Agreement, dated as of November 29, 1995
(incorporated by reference to Exhibit 4 to the
Company’s Quarterly Report on Form 8-K, dated
November 29, 1995, and filed with the Securities and
Exchange Commission on November 30, 1995) |
|
4.2 |
|
|
— Indenture, dated as of April 27, 1998, between
Dell Computer Corporation and Chase Bank of Texas, National
Association (incorporated by reference to Exhibit 99.2 of
the Company’s Current Report on Form 8-K filed
April 28, 1998, Commission File No. 0-17017 |
|
4.3 |
|
|
— Officers’ Certificate pursuant to
Section 301 of the Indenture establishing the terms of the
Company’s 6.55% Senior Notes Due 2008 (incorporated by
reference to Exhibit 99.3 of the Company’s Current
Report on Form 8-K filed April 28, 1998, Commission
File No. 0-17017) |
|
4.4 |
|
|
— Officers’ Certificate pursuant to
Section 301 of the Indenture establishing the terms of the
Company’s 7.10% Senior Debentures Due 2028
(incorporated by reference to Exhibit 99.3 of the
Company’s Current Report on Form 8-K filed
April 28, 1998, Commission File No. 0-17017) |
|
4.5 |
|
|
— Form of the Company’s 6.55% Senior Notes
Due 2008 (incorporated by reference to Exhibit 99.5 of the
Company’s Current Report on Form 8-K filed
April 28, 1998, Commission File No. 0-17017) |
|
4.6 |
|
|
— Form of the Company’s 7.10% Senior
Debentures Due 2028 (incorporated by reference to
Exhibit 99.6 of the Company’s Current Report on
Form 8-K filed April 28, 1998, Commission File
No. 0-17017) |
|
10.1* |
|
|
— Dell Computer Corporation 1986 Incentive Stock Option
Plan, as amended (incorporated by reference to Exhibit 4c
to the Company’s Registration Statement on Form S-8,
Registration No. 33-24621) |
|
10.2* |
|
|
— Dell Computer Corporation 1987 Incentive Stock Option
Plan, as amended (incorporated by reference to Exhibit 4c
to the Company’s Registration Statement on Form S-8,
Registration No. 33-24621) |
|
10.3* |
|
|
— Dell Computer Corporation 1987 Non-qualified Stock
Option Plan, as amended, including the UK Scheme (incorporated by
reference to Exhibit 4e to the Company’s Registration
Statement on Form S-8, Registration No. 33-24621) |
|
10.4* |
|
|
— Dell Computer Corporation 1989 Stock Option Plan, as
amended and restated (incorporated by reference to Exhibit 10.4
to the Company’s Annual Report on Form 10-K for the
fiscal year ended January 31, 1993, Commission File No.
0-17017) |
|
10.5* |
|
|
— Dell Computer Corporation 1993 Stock Option Plan
(incorporated by reference to Exhibit 10.36 to the
Company’s Registration Statement on Form S-4,
Registration No. 33-69680) |
52
| |
|
|
|
|
| Exhibit |
|
|
| No. |
|
Description of Exhibit |
|
|
|
|
10.6* |
|
|
— Dell Computer Corporation Incentive Plan
(incorporated by reference to Exhibit 4.6 to the
Company’s Registration Statement on Form S-8,
Registration No. 33-54577) |
|
10.7* |
|
|
— First Amendment to Dell Computer Corporation
Incentive Plan, dated as of July 21, 1995 (incorporated by
reference to Exhibit 10.3 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended July
30, 1995, Commission File No. 0-17071) |
|
10.8* |
|
|
— Second Amendment to Dell Computer Corporation
Incentive Plan, dated as of November 29, 1995 (incorporated
by reference to Exhibit 10.8 to the Company’s Annual
Report on Form 10-K for the fiscal year ended
January 28, 1996, Commission File No. 0-17017) |
|
10.9* |
|
|
— Third Amendment to Dell Computer Corporation
Incentive Plan, dated as of July 18, 1997 (incorporated by
reference to Exhibit 10 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended
August 3, 1997, Commission File No. 0-17017) |
|
10.10 |
* |
|
— Fourth Amendment to Dell Computer Corporation
Incentive Plan, dated as of September 12, 1997 (incorporated
by reference to Exhibit 10 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended
November 2, 1997, Commission File No. 0-17017) |
|
10.11 |
* |
|
— Fifth Amendment to Dell Computer Corporation
Incentive Plan, dated as of November 21, 1997 (incorporated
by reference to Exhibit 10 to the Company’s Quarterly
Report on Form 10-K for the fiscal year ended February
1, 1998, Commission File No. 0-17017) |
|
10.12 |
* |
|
— Dell Computer Corporation Deferred Compensation Plan
(incorporated by reference to Exhibit 10.8 to the
Company’s Annual Report on Form 10-K for the fiscal
year ended February 3, 1991, Commission File
No. 0-17017) |
|
10.13 |
* |
|
— Amendment to Deferred Compensation Plan, adopted on
August 25, 1995 (incorporated by reference to Exhibit
10.10 to the Company’s Annual Report on Form 10-K for
the fiscal year ended January 28, 1996, Commission File
No. 0-17017) |
|
10.14 |
* |
|
— Executive Incentive Bonus Plan, adopted July 17,
1998 (incorporated by reference to Exhibit 10.14 to the
Company’s Annual Report on Form 10-K for the fiscal
year ended January 29, 1999, Commission File No.
0-17017) |
|
10.15 |
* |
|
— Amended and Restated Dell Computer Corporation 1998
Broad Based Stock Option Plan, effective October 30, 1998
(incorporated by reference to Exhibit 99 to the
Company’s report on Form 10-Q for the fiscal quarter
ended November 1, 1998, Commission File No. 0-17017) |
|
10.16 |
*† |
|
— Employment Agreement, dated December 10, 1999,
between the Company and James T. Vanderslice |
|
18† |
|
|
— Letter from PricewaterhouseCoopers LLP regarding
change in accounting principle |
|
21† |
|
|
— Subsidiaries of the Company |
|
23† |
|
|
— Consent of PricewaterhouseCoopers LLP |
|
27† |
|
|
— Financial Data Schedule |
53
|
|
|
| |
* |
Identifies Exhibit that consists of or includes a management
contract or compensatory plan or arrangement. |
Reports on Form 8-K
None.
54
SCHEDULE II
DELL COMPUTER CORPORATION
Valuation and Qualifying Accounts
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-Offs |
|
|
|
|
|
|
Balance at |
|
Charged to |
|
Charged |
|
Balance |
| Fiscal |
|
|
|
Beginning |
|
Bad Debt |
|
to |
|
at End of |
| Year |
|
Description |
|
of Period |
|
Expense |
|
Allowance |
|
Period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
|
|
|
|
2000 |
|
Allowance for doubtful accounts |
|
$ |
30 |
|
|
$ |
29 |
|
|
$ |
15 |
|
|
$ |
44 |
|
|
|
|
|
|
|
1999 |
|
Allowance for doubtful accounts |
|
$ |
28 |
|
|
$ |
13 |
|
|
$ |
11 |
|
|
$ |
30 |
|
|
|
|
|
|
|
1998 |
|
Allowance for doubtful accounts |
|
$ |
31 |
|
|
$ |
10 |
|
|
$ |
13 |
|
|
$ |
28 |
|
55
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 COMPUTER CORPORATION |
|
|
| |
|
| |
Michael S. Dell |
| |
Chairman of the Board and |
| |
Chief Executive Officer |
Date: April 14, 2000
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
| |
|
|
|
|
| Name |
|
Title |
|
Date |
|
|
|
|
|
| |
/s/ MICHAEL S. DELL
Michael S. Dell |
|
Chairman of the Board, Chief Executive Officer (principal
executive officer) and Director |
|
April 14, 2000 |
/s/ DONALD J. CARTY
Donald J. Carty |
|
Director |
|
April 14, 2000 |
/s/ MICHAEL H. JORDAN
Michael H. Jordan |
|
Director |
|
April 14, 2000 |
/s/ THOMAS W. LUCE III
Thomas W. Luce III |
|
Director |
|
April 14, 2000 |
/s/ KLAUS S. LUFT
Klaus S. Luft |
|
Director |
|
April 14, 2000 |
/s/ CLAUDINE B. MALONE
Claudine B. Malone |
|
Director |
|
April 14, 2000 |
/s/ ALEX J. MANDL
Alex J. Mandl |
|
Director |
|
April 14, 2000 |
/s/ MICHAEL A. MILES
Michael A. Miles |
|
Director |
|
April 14, 2000 |
/s/ SAMUEL A. NUNN
Samuel A. Nunn |
|
Director |
|
April 14, 2000 |
/s/ MARY ALICE TAYLOR
Mary Alice Taylor |
|
Director |
|
April 14, 2000 |
/s/ MORTON L. TOPFER
Morton L. Topfer |
|
Director |
|
April 14, 2000 |
| |
/s/ JAMES M. SCHNEIDER
James M. Schneider |
|
Senior Vice President and Chief Financial Officer (principal
accounting and financial officer) |
|
April 14, 2000 |
56
EXHIBIT INDEX
| |
|
|
|
|
| Exhibit |
|
|
| No. |
|
Description of Exhibit |
|
|
|
|
3.1 |
|
|
— Certificate of Incorporation, dated October 21,
1987 and filed October 22, 1987 (incorporated by reference
to Exhibit 3.1 to the Company’s Quarterly Report on
Form 10-Q for the fiscal quarter ended July 30, 1995,
Commission File No. 0-17017) |
|
3.2 |
|
|
— Certificate of Amendment to the Certificate of
Incorporation, dated May 6, 1988 and filed May 9, 1988
(incorporated by reference to Exhibit 3.2 to the
Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended July 30, 1995, Commission File No.
0-17017) |
|
3.3 |
|
|
— Certificate of Amendment to the Certificate of
Incorporation, dated June 19, 1991 and filed June 21,
1991 (incorporated by reference to Exhibit 3.3 to the
Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended July 30, 1995, Commission File No.
0-17017) |
|
3.4 |
|
|
— Certificate of Amendment to the Certificate of
Incorporation, dated June 19, 1992 and filed July 10,
1992 (incorporated by reference to Exhibit 3.4 to the
Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended July 30, 1995, Commission File No.
0-17017) |
|
3.6 |
|
|
— Certificate of Correction Filed to Correct Certain
Errors in the Certificate of Amendment of Certificate of
Incorporation Filed in the Office of the Secretary of State of
Delaware on May 9, 1988, and in the Certificate of Amendment
of Certificate of Incorporation Filed in the Office of the
Secretary of State of Delaware on July 10, 1992, dated
April 27, 1994 and filed May 5, 1994 (incorporated by
reference to Exhibit 3.6 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended
July 30, 1995, Commission File No. 0-17017) |
|
3.7 |
|
|
— Certificate of Amendment to Certificate of
Incorporation, dated July 31, 1995 and filed August 3,
1995 (incorporated by reference to Exhibit 3.7 to the
Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended July 30, 1995, Commission File No.
0-17017) |
|
3.8 |
|
|
— Certificate of Designations of Series A Junior
Participating Preferred Stock, dated November 29, 1995 and
filed December 4, 1995 (incorporated by reference to
Exhibit 3.1 to the Company’s Quarterly Report on
Form 10-Q for the fiscal quarter ended October 29,
1995, Commission File No. 0-17017) |
|
3.9 |
|
|
— Certificate of Amendment to Certificate of
Incorporation, dated and filed July 18, 1997 (incorporated
by reference to Exhibit 3 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended
August 3, 1997, Commission File No. 0-17017) |
|
3.10 |
|
|
— Certificate of Amendment to Certificate of
Incorporation, dated and filed August 12, 1998 (incorporated
by reference to Exhibit 4 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended
August 12, 1998, Commission File No. 0-17017) |
|
3.11 |
|
|
— Certificate of Amendment to Certificate of
Incorporation, dated July 16, 1999 and filed July 22,
1999 (incorporated by reference to Exhibit 4 to the
Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended July 30, 1999, Commission File
No. 0-17017) |
| |
|
|
|
|
| Exhibit |
|
|
| No. |
|
Description of Exhibit |
|
|
|
|
3.12 |
|
|
— Restated Bylaws, as adopted on November 29, 1995
(incorporated by reference to Exhibit 3.3 to the
Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended October 29, 1995, Commission File No.
0-17017) |
|
4.1 |
|
|
— Rights Agreement, dated as of November 29, 1995
(incorporated by reference to Exhibit 4 to the
Company’s Quarterly Report on Form 8-K, dated
November 29, 1995, and filed with the Securities and
Exchange Commission on November 30, 1995) |
|
4.2 |
|
|
— Indenture, dated as of April 27, 1998, between
Dell Computer Corporation and Chase Bank of Texas, National
Association (incorporated by reference to Exhibit 99.2 of
the Company’s Current Report on Form 8-K filed
April 28, 1998, Commission File No. 0-17017 |
|
4.3 |
|
|
— Officers’ Certificate pursuant to
Section 301 of the Indenture establishing the terms of the
Company’s 6.55% Senior Notes Due 2008 (incorporated by
reference to Exhibit 99.3 of the Company’s Current
Report on Form 8-K filed April 28, 1998, Commission
File No. 0-17017) |
|
4.4 |
|
|
— Officers’ Certificate pursuant to
Section 301 of the Indenture establishing the terms of the
Company’s 7.10% Senior Debentures Due 2028
(incorporated by reference to Exhibit 99.3 of the
Company’s Current Report on Form 8-K filed
April 28, 1998, Commission File No. 0-17017) |
|
4.5 |
|
|
— Form of the Company’s 6.55% Senior Notes
Due 2008 (incorporated by reference to Exhibit 99.5 of the
Company’s Current Report on Form 8-K filed
April 28, 1998, Commission File No. 0-17017) |
|
4.6 |
|
|
— Form of the Company’s 7.10% Senior
Debentures Due 2028 (incorporated by reference to
Exhibit 99.6 of the Company’s Current Report on
Form 8-K filed April 28, 1998, Commission File
No. 0-17017) |
|
10.1* |
|
|
— Dell Computer Corporation 1986 Incentive Stock Option
Plan, as amended (incorporated by reference to Exhibit 4c
to the Company’s Registration Statement on Form S-8,
Registration No. 33-24621) |
|
10.2* |
|
|
— Dell Computer Corporation 1987 Incentive Stock Option
Plan, as amended (incorporated by reference to Exhibit 4c
to the Company’s Registration Statement on Form S-8,
Registration No. 33-24621) |
|
10.3* |
|
|
— Dell Computer Corporation 1987 Non-qualified Stock
Option Plan, as amended, including the UK Scheme (incorporated by
reference to Exhibit 4e to the Company’s Registration
Statement on Form S-8, Registration No. 33-24621) |
|
10.4* |
|
|
— Dell Computer Corporation 1989 Stock Option Plan, as
amended and restated (incorporated by reference to Exhibit 10.4
to the Company’s Annual Report on Form 10-K for the
fiscal year ended January 31, 1993, Commission File No.
0-17017) |
|
10.5* |
|
|
— Dell Computer Corporation 1993 Stock Option Plan
(incorporated by reference to Exhibit 10.36 to the
Company’s Registration Statement on Form S-4,
Registration No. 33-69680) |
|
10.6* |
|
|
— Dell Computer Corporation Incentive Plan
(incorporated by reference to Exhibit 4.6 to the
Company’s Registration Statement on Form S-8,
Registration No. 33-54577) |
| |
|
|
|
|
| Exhibit |
|
|
| No. |
|
Description of Exhibit |
|
|
|
|
10.7* |
|
|
— First Amendment to Dell Computer Corporation
Incentive Plan, dated as of July 21, 1995 (incorporated by
reference to Exhibit 10.3 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended July
30, 1995, Commission File No. 0-17071) |
|
10.8* |
|
|
— Second Amendment to Dell Computer Corporation
Incentive Plan, dated as of November 29, 1995 (incorporated
by reference to Exhibit 10.8 to the Company’s Annual
Report on Form 10-K for the fiscal year ended
January 28, 1996, Commission File No. 0-17017) |
|
10.9* |
|
|
— Third Amendment to Dell Computer Corporation
Incentive Plan, dated as of July 18, 1997 (incorporated by
reference to Exhibit 10 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended
August 3, 1997, Commission File No. 0-17017) |
|
10.10 |
* |
|
— Fourth Amendment to Dell Computer Corporation
Incentive Plan, dated as of September 12, 1997 (incorporated
by reference to Exhibit 10 to the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended
November 2, 1997, Commission File No. 0-17017) |
|
10.11 |
* |
|
— Fifth Amendment to Dell Computer Corporation
Incentive Plan, dated as of November 21, 1997 (incorporated
by reference to Exhibit 10 to the Company’s Quarterly
Report on Form 10-K for the fiscal year ended February
1, 1998, Commission File No. 0-17017) |
|
10.12 |
* |
|
— Dell Computer Corporation Deferred Compensation Plan
(incorporated by reference to Exhibit 10.8 to the
Company’s Annual Report on Form 10-K for the fiscal
year ended February 3, 1991, Commission File
No. 0-17017) |
|
10.13 |
* |
|
— Amendment to Deferred Compensation Plan, adopted on
August 25, 1995 (incorporated by reference to Exhibit
10.10 to the Company’s Annual Report on Form 10-K for
the fiscal year ended January 28, 1996, Commission File
No. 0-17017) |
|
10.14 |
* |
|
— Executive Incentive Bonus Plan, adopted July 17,
1998 (incorporated by reference to Exhibit 10.14 to the
Company’s Annual Report on Form 10-K for the fiscal
year ended January 29, 1999, Commission File No.
0-17017) |
|
10.15 |
* |
|
— Amended and Restated Dell Computer Corporation 1998
Broad Based Stock Option Plan, effective October 30, 1998
(incorporated by reference to Exhibit 99 to the
Company’s report on Form 10-Q for the fiscal quarter
ended November 1, 1998, Commission File No. 0-17017) |
|
10.16 |
*† |
|
— Employment Agreement, dated December 10, 1999,
between the Company and James T. Vanderslice |
|
18† |
|
|
— Letter from PricewaterhouseCoopers LLP regarding
change in accounting principle |
|
21† |
|
|
— Subsidiaries of the Company |
|
23† |
|
|
— Consent of PricewaterhouseCoopers LLP |
|
27† |
|
|
— Financial Data Schedule |
|
|
|
| |
* |
Identifies Exhibit that consists of or includes a management
contract or compensatory plan or arrangement. |
