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Delaware | 3571 | 74-2487834 | ||
State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
One Dell Way Round Rock, Texas 78682 (512) 338-4400 | Lawrence P. Tu General Counsel and Secretary Dell Inc. One Dell Way Round Rock, Texas 78682 (512) 338-4400 | |
(Address, including zip code, and telephone number, including area code, of the registrant’s principal executive offices) | (Name, address, including ZIP code, and telephone number, including area code, of agent for service) |
Janet B. Wright Director – Corporate Legal Dell Inc. One Dell Way Round Rock, Texas 78682 (512) 338-4400 | Douglass M. Rayburn Baker Botts L.L.P. 2001 Ross Avenue Dallas, Texas 75201 (214) 953-6500 |
Large accelerated filer x | Accelerated filer o | |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Proposed | ||||||||||||
Maximum | Proposed | Amount of | ||||||||||
Title of Each Class of | Amount to be | Offering Price | Maximum Offering | Registration | ||||||||
Securities to be Registered | Registered | per Note | Aggregate Price | Fee(1) | ||||||||
4.700% Notes due 2013 | $600,000,000 | 100% | $600,000,000 | $23,580 | ||||||||
5.650% Notes due 2018 | $500,000,000 | 100% | $500,000,000 | $19,650 | ||||||||
6.500% Notes due 2038 | $400,000,000 | 100% | $400,000,000 | $15,720 | ||||||||
(1) | Determined in accordance with Rule 457(f) of the rules and regulations under the Securities Act of 1933, as amended. |
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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting any offer to buy these securities in any jurisdiction where the offer or sale is not permitted. |
that have been registered under the Securities Act of 1933, as amended (the “Securities Act”)
that have not been registered under the Securities Act
that have been registered under the Securities Act
that have not been registered under the Securities Act
that have been registered under the Securities Act
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• | failure to exchange your old notes may adversely affect their value because they may be more difficult to sell; | |
• | general economic, business and industry conditions; | |
• | our ability to reestablish a cost advantage over our competitors; | |
• | our ability to generate substantialnon-U.S. net revenue; | |
• | our ability to accurately predict product, customer and geographic sales mix and seasonal sales trends; | |
• | information technology and manufacturing infrastructure failures; | |
• | our ability to effectively manage periodic product transitions; | |
• | disruptions in component or product availability; | |
• | our reliance on vendors; | |
• | our reliance on third-party suppliers for quality product components, including reliance on several single-source or limited-source suppliers; | |
• | our ability to access the capital markets; | |
• | risks relating to our internal controls; | |
• | unfavorable results of legal proceedings could harm our business and result in substantial costs; | |
• | our acquisition of other companies; | |
• | our ability to properly manage the distribution of our products and services; | |
• | our cost-cutting measures; | |
• | effective hedging of our exposure to fluctuations in foreign currency exchange rates and interest rates; | |
• | obtaining licenses to intellectual property developed by others on commercially reasonable and competitive terms; | |
• | our ability to attract, retain and motivate key personnel; | |
• | loss of government contracts; | |
• | expiration of tax holidays or favorable tax rate structures; | |
• | changing environmental laws; | |
• | the effect of armed hostilities, terrorism, natural disasters and public health issues; | |
• | we may incur substantially more debt and increase the risks associated with our proposed leverage; | |
• | effective subordination of the notes may reduce amounts available for payment of the notes; | |
• | changes in our credit ratings may adversely affect the value of the notes; and | |
• | your ability to transfer the notes may be limited since there is no active trading market for them. |
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Old Notes | On April 17, 2008, we issued $600 million aggregate principal amount of our 4.700% Notes due 2013, $500 million aggregate principal amount of our 5.650% Notes due 2018 and $400 million aggregate principal amount of our 6.500% Notes due 2038. | |
New Notes | 4.700% Notes due 2013, 5.650% Notes due 2018 and 6.500% Notes due 2038. The terms of the new notes are substantially the same as the terms of the old notes, except that the transfer restrictions and registration rights relating to the old notes do not apply to the new notes. The new notes of each series offered hereby, together with any old notes of such series that remain outstanding after the completion of the exchange offer, will be treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. The new notes will have a CUSIP number different from that of any old notes that remain outstanding after the completion of the exchange offer. In the case of the new notes, all unpaid interest accrued on old notes from April 17, 2008 will be treated as having accrued on the new notes that are issued in exchange for the old notes. | |
Exchange Offer | We are offering to exchange up to $600 million aggregate principal amount of our 4.700% Notes due 2013, $500 million aggregate principal amount of our 5.650% Notes due 2018 and $400 million aggregate principal amount of our 6.500% Notes due 2038 that have been registered under the Securities Act of 1933, as amended, or the Securities Act, for an equal amount of our outstanding $600 million aggregate principal amount of our 4.700% Notes due 2013, $500 million aggregate principal amount of our 5.650% Notes due 2018 and $400 million aggregate principal amount of our 6.500% Notes due 2038, respectively, that have not been so registered to satisfy our obligations under the registration rights agreement that we entered into when we issued the old notes in a transaction exempt from registration under the Securities Act. | |
Expiration Date | The exchange offer will expire at 5:00 p.m., New York City time, on , 2008, unless we decide to extend it. | |
Conditions to the Exchange Offer | The registration rights agreement does not require us to accept old notes for exchange if the exchange offer or the making of any exchange by a holder of the old notes would violate any applicable law or interpretation of the staff of the SEC or if any legal action has been instituted or threatened that would impair our ability to proceed with the exchange offer. A minimum aggregate principal amount of old notes being tendered is not a condition to the exchange offer. |
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Please read “Exchange Offer—Conditions to the Exchange Offer” for more information about the conditions to the exchange offer. | ||
Procedures for Tendering Old Notes | All of the old notes are held in book-entry form through the facilities of The Depository Trust Company, or DTC. To participate in the exchange offer, you must follow the automatic tender offer program, or ATOP, procedures established by DTC for tendering notes held in book-entry form. The ATOP procedures require that the exchange agent receive, prior to the expiration date of the exchange offer, a computer-generated message known as an “agent’s message” that is transmitted through ATOP and that DTC confirm that: | |
• DTC has received instructions to exchange your old notes; and | ||
• you agree to be bound by the terms of the letter of transmittal included herewith. | ||
For more details, please read “Exchange Offer—Terms of the Exchange Offer” and “Exchange Offer—Procedures for Tendering.” | ||
Guaranteed Delivery Procedures | None. | |
Withdrawal of Tenders | You may withdraw your tender of old notes at any time prior to the expiration date. To withdraw, you must submit a notice of withdrawal to the exchange agent using ATOP procedures before 5:00 p.m., New York City time, on the expiration date of the exchange offer. Please read “Exchange Offer—Withdrawal of Tenders.” | |
Acceptance of Old Notes and Delivery of New Notes | If you fulfill all conditions required for proper acceptance of old notes, we will accept any and all old notes that you properly tender in the exchange offer before 5:00 p.m., New York City time, on the expiration date. We will return any old notes that we do not accept for exchange to you without expense promptly after the expiration date. We will deliver the new notes promptly after the expiration date and acceptance of the old notes for exchange. Please read “Exchange Offer—Terms of the Exchange Offer.” | |
Fees and Expenses | We will bear all expenses related to the exchange offer. Please read “Exchange Offer—Fees and Expenses.” | |
Use of Proceeds | The issuance of the new notes will not provide us with any new proceeds. We are making the exchange offer solely to satisfy our obligations under our registration rights agreement. | |
Consequences of Failure to Exchange Old Notes | If you do not exchange your old notes in the exchange offer, you will no longer be able to require us to register the old notes under the Securities Act, except in the limited circumstances provided under our registration rights agreement. In addition, you will not be able to resell, offer to resell or otherwise transfer the old notes unless we have registered the old notes under the Securities Act, or unless you resell, offer to resell or otherwise transfer them under an exemption from the registration requirements of, or in a transaction not subject to, the Securities Act. |
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U.S. Federal Income Tax Consequences | The exchange of new notes for old notes in the exchange offer will not be a taxable event for U.S. federal income tax purposes. Please read “Certain United States Federal Income Tax Considerations.” | |
Exchange Agent | We have appointed The Bank of New York Mellon Trust Company, N.A. as the exchange agent for the exchange offer. You should direct questions and requests for assistance and requests for additional copies of this prospectus (including the letter of transmittal) to the exchange agent addressed as follows: | |
Bank of New York Mellon Corporation Corporate Trust Operations Reorganization Unit 101 Barclay Street - 7 East New York, NY 10286 Telephone: (212) 815-5788 Facsimile: (212) 298-1915 |
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Issuer | Dell Inc. | |
Notes Offered | $600 million aggregate principal amount of 4.700% Notes due 2013 | |
$500 million aggregate principal amount of 5.650% Notes due 2018 | ||
$400 million aggregate principal amount of 6.500% Notes due 2038 | ||
Interest Rates | 4.700% for the Notes due 2013 | |
5.650% for the Notes due 2018 | ||
6.500% for the Notes due 2038 | ||
Interest Payment Dates | April 15 and October 15 of each year, beginning October 15, 2008 | |
Maturity Date | April 15, 2013 for the Notes due 2013 | |
April 15, 2018 for the Notes due 2018 | ||
April 15, 2038 for the Notes due 2038 | ||
Ranking | The new notes will be: | |
• our general unsecured obligations; | ||
• pari passu in right of payment with all of our existing and future unsecured senior indebtedness; | ||
• effectively junior to our secured indebtedness up to the value of the collateral securing such indebtedness; and | ||
• senior in right of payment to any of our future subordinated indebtedness. | ||
The notes will effectively rank junior to all indebtedness and other liabilities, including trade payables, of our subsidiaries with respect to the assets of those subsidiaries. In the event of bankruptcy, liquidation, or reorganization of any of these subsidiaries, the subsidiaries will pay the holders of their debt and other obligations, including trade creditors, before they will be able to distribute any of their assets to us. | ||
See “Capitalization,” Note 2 of Notes to Consolidated Financial Statements for the year ended February 1, 2008 (“Annual Consolidated Financial Statements”) and Note 12 of Notes to Condensed Consolidated Financial Statements for the three and six month periods ended August 1, 2008 (“Quarterly Condensed Consolidated Financial Statements”) for more information regarding our indebtedness. | ||
Optional Redemption | We may redeem the notes, in whole or in part, at any time and from time to time at 100% of the principal amount plus the “make- |
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whole premium” described under the heading “Description of New Notes - Optional Redemption.” | ||
Certain Covenants | The indenture governing the notes contains covenants that, among other things, limits our ability to: | |
• create certain liens; | ||
• enter into sale and lease-back transactions; and | ||
• consolidate or merge with, or convey, transfer or lease all or substantially all of our assets to, another person. | ||
However, each of these covenants is subject to a number of significant exceptions. You should read “Description of New Notes - Covenants” for a description of these covenants. | ||
Transfer Restrictions; Absence of a Public Market for the Notes | The new notes generally will be freely transferable, but will also be new securities for which there will not initially be a market. We do not intend to arrange for a trading market in the new notes after the exchange offer, and it is therefore unlikely that such a market will exist for the new notes. | |
Form of New Notes | The new notes will be represented by one or more global notes. Each global new note will be deposited with the trustee, as custodian for DTC. | |
Same-Day Settlement | The global new notes will be shown on, and transfers of the global new notes will be effected only through, records maintained in book-entry form by DTC and its direct and indirect participants. | |
The new notes are expected to trade in DTC’s Same Day Funds Settlement System until maturity or redemption. Therefore, secondary market trading activity in the new notes will be settled in immediately available funds. | ||
Trading | We do not expect to list the new notes for trading on any securities exchange. | |
Trustee, Registrar and Exchange Agent | The Bank of New York Mellon Trust Company, N.A. | |
Governing Law | The notes and the indenture relating to the notes are governed by, and construed in accordance with, the laws of the State of New York. |
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• | the number of holders of notes; | |
• | our operating performance and financial condition; | |
• | our ability to complete the offer to exchange the old notes for the new notes; | |
• | the market for similar securities; | |
• | the interest of securities dealers in making a market in the notes; and | |
• | prevailing interest rates. |
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• | you are not an “affiliate” of us within the meaning of Rule 405 under the Securities Act; | |
• | such new notes are acquired in the ordinary course of your business; and | |
• | you do not intend to participate in a distribution of the new notes. |
• | cannot rely on such interpretations by the staff of the SEC; and | |
• | must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. |
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• | to delay accepting for exchange any old notes; | |
• | to extend the exchange offer; or | |
• | to terminate the exchange offer |
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• | a book-entry confirmation of such old notes into the exchange agent’s account at DTC; and | |
• | a properly transmitted agent’s message. |
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• | any new notes that you receive will be acquired in the ordinary course of your business; | |
• | you have no arrangement or understanding with any person or entity to participate in the distribution (within the meaning of the federal securities laws) of the new notes; | |
• | you are not engaged in and do not intend to engage in the distribution (within the meaning of the federal securities laws) of the new notes; | |
• | if you are a broker-dealer that will receive new notes for your own account in exchange for old notes, you acquired those old notes as a result of market-making activities or other trading activities and you will deliver this prospectus, as required by law, in connection with any resale of the new notes; provided, however, that by acknowledging that you will deliver, and by delivering, a copy of this prospectus, you will not be deemed to admit that you are an underwriter within the meaning of the Securities Act; | |
• | you are not an “affiliate,” as defined in Rule 405 under the Securities Act, of us; and | |
• | you are not acting on behalf of any person or entity who could not truthfully make the statements set forth above. |
• | SEC registration fees; | |
• | fees and expenses of the exchange agent and trustee; |
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• | accounting and legal fees and printing costs; and | |
• | related fees and expenses. |
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• | are unsecured senior obligations of the Company; and | |
• | are senior in right of payment to any future subordinated obligations of the Company. |
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• | incurring any indebtedness or other obligation; | |
• | paying dividends or making distributions on its capital stock; or | |
• | purchasing or redeeming its capital stock. |
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• | change the stated maturity of the principal of, or installment of interest on, any note; | |
• | reduce the principal amount of, or the rate of interest on, any notes; | |
• | reduce any premium, if any, payable on the redemption of any note or change the date on which any note may or must be redeemed or repaid; | |
• | change the coin or currency in which the principal of, premium, if any, or interest on any note is payable; | |
• | impair the right of any holder to institute suit for the enforcement of any payment on or after the stated | |
• | maturity of any note; | |
• | reduce the percentage in principal amount of the outstanding notes, the consent of whose holders is required in order to take certain actions; | |
• | modify any of the provisions in the Indenture regarding the waiver of past Defaults and the waiver of certain covenants by the holders of notes except to increase any percentage vote required or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the holder of each note affected thereby; or | |
• | modify any of the above provisions. |
• | to cure any ambiguity, omission, defect or inconsistency; |
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• | to evidence the succession of another person to the Company and the assumption by any such successor of the obligations of the Company as described above under “— Covenants — Merger, Consolidation or Sale of Assets;” | |
• | to add any additional Events of Default; | |
• | to add to our covenants for the benefit of holders of the notes or to surrender any right or power conferred upon us; | |
• | to add one or more guarantees for the benefit of holders of the notes; | |
• | to add collateral security with respect to the notes; | |
• | to add or appoint a successor or separate trustee or other agent; | |
• | to provide for the issuance of the exchange notes, which will have terms substantially identical in all material respects to the notes (except that the transfer restrictions contained in the notes will be modified or eliminated, as appropriate, and there will be no registration rights), and which will be treated, together with any outstanding notes, as a single issue of securities; | |
• | to provide for the issuance of any additional notes; | |
• | to comply with any requirement in connection with the qualification of the Indenture under the Trust Indenture Act; | |
• | to comply with the rules of any applicable securities depository; | |
• | to provide for uncertificated notes in addition to or in place of certificated notes; and | |
• | to make any change if the change does not adversely affect the interests of any holder of notes. |
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Six | ||||||||||||||||||||||||
Months | ||||||||||||||||||||||||
Ended | Years Ended | |||||||||||||||||||||||
August 1, | February 1, | February 2, | February 3, | January 28, | January 30, | |||||||||||||||||||
2008 | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||||
Ratio of earnings to fixed charges | 33 | x | 47 | x | 49 | x | 90 | x | 128 | x | 96x |
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As of | ||||
August 1, | ||||
2008 | ||||
(in millions; unaudited) | ||||
Cash, cash equivalents and investments | $ | 9,534 | ||
Long-term debt: | ||||
2013 Notes offered hereby | $ | 600 | ||
2018 Notes offered hereby | 500 | |||
2038 Notes offered hereby | 400 | |||
Total Notes | 1,500 | |||
Other long-term debt | 340 | |||
Total long-term debt | 1,840 | |||
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 authorized: 7,000; shares issued: 3,332; shares outstanding: 1,960 | 10,781 | |||
Treasury stock at cost: 897 shares | (27,488 | ) | ||
Retained earnings | 19,599 | |||
Accumulated other comprehensive loss | (69 | ) | ||
Total stockholders’ equity | 2,823 | |||
Total capitalization | $ | 4,663 | ||
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Fiscal Year Ended | Six Months Ended | |||||||||||||||||||||||||||
February 1, | February 2, | February 3, | January 28, | January 30, | August 1, | August 3, | ||||||||||||||||||||||
2008(a) | 2007(a) | 2006(b) | 2005(c) | 2004 | 2008 | 2007 | ||||||||||||||||||||||
(in millions, except per share data) | ||||||||||||||||||||||||||||
Results of Operations: | ||||||||||||||||||||||||||||
Net revenue | $ | 61,133 | $ | 57,420 | $ | 55,788 | $ | 49,121 | $ | 41,327 | $ | 32,511 | $ | 29,498 | ||||||||||||||
Gross margin | 11,671 | 9,516 | 9,891 | 9,018 | 7,563 | 5,792 | 5,789 | |||||||||||||||||||||
Operating income | 3,440 | 3,070 | 4,382 | 4,206 | 3,525 | 1,718 | 1,835 | |||||||||||||||||||||
Income before income taxes | 3,827 | 3,345 | 4,608 | 4,403 | 3,711 | 1,861 | 2,009 | |||||||||||||||||||||
Net income | 2,947 | 2,583 | 3,602 | 3,018 | 2,625 | 1,400 | 1,502 | |||||||||||||||||||||
Earnings per common share: | ||||||||||||||||||||||||||||
Basic | $ | 1.33 | $ | 1.15 | $ | 1.50 | $ | 1.20 | $ | 1.02 | $ | 0.70 | $ | 0.67 | ||||||||||||||
Diluted | 1.31 | 1.14 | 1.47 | 1.18 | 1.00 | 0.69 | 0.66 | |||||||||||||||||||||
Number of weighted-average shares outstanding: | ||||||||||||||||||||||||||||
Basic | 2,223 | 2,255 | 2,403 | 2,509 | 2,565 | 2,013 | 2,236 | |||||||||||||||||||||
Diluted | 2,247 | 2,271 | 2,449 | 2,568 | 2,619 | 2,019 | 2,259 | |||||||||||||||||||||
Cash Flow Data: | ||||||||||||||||||||||||||||
Change in cash from operating activities | $ | 3,949 | $ | 3,969 | $ | 4,751 | $ | 5,821 | $ | 4,064 | $ | 1,251 | $ | 1,754 | ||||||||||||||
Balance Sheet Data (at period end): | ||||||||||||||||||||||||||||
Cash, cash equivalents and investments | $ | 9,532 | $ | 12,445 | $ | 11,756 | $ | 14,101 | $ | 11,921 | $ | 9,534 | $ | 13,822 | ||||||||||||||
Total assets | 27,561 | 25,635 | 23,252 | 23,318 | 19,340 | 28,407 | 28,054 | |||||||||||||||||||||
Short-term borrowings | 225 | 188 | 65 | 74 | 157 | 129 | 328 | |||||||||||||||||||||
Long-term debt | 362 | 569 | 625 | 662 | 645 | 1,840 | 378 | |||||||||||||||||||||
Total stockholders’ equity | 3,735 | 4,328 | 4,047 | 6,412 | 6,238 | 2,823 | 5,928 |
(a) | Results for Fiscal 2008 and Fiscal 2007 include stock-based compensation expense pursuant to Statement of Financial Accounting Standards No. 123 (revised 2004),Share-Based Payment(“SFAS 123(R)”). See Note 5 of Notes to Consolidated Financial Statements included elsewhere in this prospectus. | |
(b) | Results for Fiscal 2006 include charges aggregating $421 million ($338 million of other product charges and $83 million in selling, general and administrative expenses) related to the cost of servicing or replacing certain OptiPlextm systems that included a vendor part that failed to perform to |
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our specifications, workforce realignment, product rationalizations, excess facilities, and a write-off of goodwill recognized in the third quarter. The related tax effect of these items was $96 million. Fiscal 2006 also includes an $85 million income tax benefit related to a revised estimate of taxes on the repatriation of earnings under the American Jobs Creation Act of 2004 recognized in the second quarter. | ||
(c) | Results for Fiscal 2005 include an income tax charge of $280 million related to the repatriation of earnings under the American Jobs Creation Act of 2004 recorded in the fourth quarter. |
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
– | Global Consumer— In the first quarter of Fiscal 2009, we realigned our management and reporting structure to focus on worldwide sales to individual consumers and retailers as a part of an internal consolidation of our consumer business. Our global consumer business is comprised of on-line sales, sales over the phone, and sales through our retail channel. The global consolidation of this business will improve our global sales execution and coverage through better customer alignment, targeted sales force investments in rapidly growing countries, and improved marketing tools. We are also designing |
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new, innovative products with faster development cycles and competitive features including the new Studio line of notebooks, which allow consumers greater personalization and self expression. Finally, we have rapidly expanded our retail business in order to reach more consumers. |
– | Enterprise— In the enterprise, our solution mission is to help companies of all sizes simplify their IT environments. The complete solution includes servers, storage, services, and software. At the core of this simplification problem is complexity in IT architecture and operations developed over decades and ineffective services models that create unnecessary complexity and cost. We are focused on helping customers identify and remove this unnecessary cost and complexity. As a result of our “simplify IT” focus, we have become the industry leader in server virtualization, power, and cooling performance. We recently launched our broadest ever lineup of virtualization solutions combining PowerEdge servers, switches, EqualLogic SAN, along with VM Ware software enabling the virtual cloud. |
– | Notebooks— Our goal is to reclaim notebook leadership by creating the best products while shortening our development cycle and being the most innovative developer of notebooks. To help meet this goal, we have separated our consumer and commercial design functions to drive greater focus and launched several notebook products. Industry analysts expect the sale of notebook units globally to outpace that of desktops for the first time next year and for that trend to continue into the future. Recently, we had the largest global product launch in our company’s history with our new E Series commercial Latitude and Dell Precision notebooks. We expect to continue to launch a number of new notebook products throughout the remainder of Fiscal 2009, targeting various price and performance bands. |
– | Small and Medium Business— We are focused on providing small and medium businesses the simplest and most complete IT solution, customized for their needs, by extending our channel direct program (PartnerDirect) and expanding our offerings to mid-sized businesses. We are committed to improving our storage products and services as evidenced by our new Building IT-as-a-Service solution, which provides businesses with remote and lifecycle management,e-mail backup, and software license management. |
– | Emerging countries— We are focused on and investing resources in emerging countries — with an emphasis on Brazil, Russia, India, and China, from where we expect a majority of the worldwide growth will come in the next four years. We are also creating custom products and services to meet the preferences and demands of individual countries and various regions, including the new Vostro A notebooks and desktops designed specifically for cost sensitive growing businesses in emerging economies. |
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Share position | n | We shipped approximately 11.5 million units, resulting in a worldwide PC share position of 16.4%, an increase of approximately one percentage pointyear-over-year. | ||
Net revenue | n | Net revenue increased 11%year-over-year to $16.4 billion, with unit shipments up 19%year-over-year. | ||
Operating income | n | Operating income was $819 million for the current quarter, or 5.0% of revenue, as compared to $902 million or 6.1% of revenue for the second quarter of Fiscal 2008. | ||
Earnings per share | n | Earnings per share decreased 6% to $0.31 for the current quarter compared to $0.33 for the second quarter of Fiscal 2008. |
Share position | n | We shipped 40 million units for calendar year 2007 according to IDC, resulting in a worldwide PC share position of 14.9%. After leading the worldwide PC market for the past six years, we fell to the second position for calendar year 2007. We lost share, both in the U.S. and internationally, as our growth did not meet the overall PC growth. Our Global Consumer segment continued to underperform, which slowed our overall growth in unit shipments, revenue, and profitability. This was mainly due to intense competitive pressure, particularly in the lower priced desktops and notebooks where competitors offered aggressively priced products with better product recognition and more relevant feature sets. A slight decline in our worldwide desktop shipments also was a factor in our losing worldwide PC share position; worldwide desktop shipments grew 5% during calendar year 2007. | ||
Net revenue | n | Fiscal 2008 net revenue increased 6%year-over-year to $61.1 billion, with unit shipments up 5%year-over-year, as compared to Fiscal 2007 net revenue which increased 3%year-over-year to $57.4 billion on unit growth of 2% over Fiscal 2006 net revenue of $55.8 billion. | ||
Operating income | n | Operating income was $3.4 billion for Fiscal 2008, or 5.6% of net revenue compared to $3.1 billion for Fiscal 2007, or 5.4% of net revenue, and $4.4 billion or 7.9% of net revenue in Fiscal 2006. | ||
Net income | n | Net income was $2.9 billion for Fiscal 2008, or 4.8% of net revenue compared to $2.6 billion for Fiscal 2007, or 4.5% of net revenue, and $3.6 billion or 6.5% of net revenue in Fiscal 2006. | ||
Earnings per share | n | Earnings per share increased 15% to $1.31 for Fiscal 2008, compared to $1.14 for Fiscal 2007 and $1.47 for Fiscal 2006. |
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Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
August 1, 2008 | August 3, 2007 | August 1, 2008 | August 3, 2007 | |||||||||||||||||||||||||||||
% of | % of | % of | % of | |||||||||||||||||||||||||||||
Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | |||||||||||||||||||||||||
(in millions, except per share amounts and percentages) | ||||||||||||||||||||||||||||||||
Net revenue | $ | 16,434 | 100.0 | % | $ | 14,776 | 100.0 | % | $ | 32,511 | 100.0 | % | $ | 29,498 | 100.0 | % | ||||||||||||||||
Gross margin | 2,827 | 17.2 | % | 2,951 | 19.9 | % | 5,792 | 17.8 | % | 5,789 | 19.6 | % | ||||||||||||||||||||
Operating expenses | 2,008 | 12.2 | % | 2,049 | 13.8 | % | 4,074 | 12.5 | % | 3,954 | 13.4 | % | ||||||||||||||||||||
Operating income | 819 | 5.0 | % | 902 | 6.1 | % | 1,718 | 5.3 | % | 1,835 | 6.2 | % | ||||||||||||||||||||
Net income | 616 | 3.7 | % | 746 | 5.1 | % | 1,400 | 4.3 | % | 1,502 | 5.1 | % | ||||||||||||||||||||
Earnings per share diluted | 0.31 | N/A | 0.33 | N/A | 0.69 | N/A | 0.66 | N/A |
Fiscal Year Ended | ||||||||||||||||||||||||
February 1, 2008(a) | February 2, 2007(a) | February 3, 2006(b) | ||||||||||||||||||||||
Dollars | % of Revenue | Dollars | % of Revenue | Dollars | % of Revenue | |||||||||||||||||||
(in millions, except per share amounts and percentages) | ||||||||||||||||||||||||
Net revenue | $ | 61,133 | 100.0 | % | $ | 57,420 | 100.0 | % | $ | 55,788 | 100.0 | % | ||||||||||||
Gross margin | 11,671 | 19.1 | % | 9,516 | 16.6 | % | 9,891 | 17.7 | % | |||||||||||||||
Operating expenses | 8,231 | 13.5 | % | 6,446 | 11.2 | % | 5,509 | 9.8 | % | |||||||||||||||
Operating income | 3,440 | 5.6 | % | 3,070 | 5.4 | % | 4,382 | 7.9 | % | |||||||||||||||
Income tax provision | 880 | 1.4 | % | 762 | 1.3 | % | 1,006 | 1.8 | % | |||||||||||||||
Net income | 2,947 | 4.8 | % | 2,583 | 4.5 | % | 3,602 | 6.5 | % | |||||||||||||||
Earnings per share — diluted | 1.31 | N/A | 1.14 | N/A | 1.47 | N/A |
(a) | Results for Fiscal 2008 include stock-based compensation expense of $436 million, or $309 million ($0.14 per share) net of tax, and results for Fiscal 2007 include stock-based compensation expense of $368 million, or $258 million ($0.11 per share) net of tax, due to the implementation of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, (“SFAS 123(R)”). We implemented SFAS 123(R) using the modified prospective method effective February 4, 2006. For additional information, see Note 5 of Notes to Annual Consolidated Financial Statements included elsewhere in this prospectus. |
(b) | Results for Fiscal 2006 include charges aggregating $421 million ($338 million of other product charges and $83 million in selling, general, and administrative expenses) related to the cost of servicing or replacing certain OptiPlextm systems that include a vendor part that failed to perform to our specifications, workforce realignment, product rationalizations, excess facilities, and a write-off of goodwill recognized in the third quarter. The related tax effect of these items was $96 million. Fiscal 2006 also includes an $85 million income tax benefit related to a revised estimate of taxes on the repatriation of earnings under the American Jobs Creation Act of 2004 recognized in the second quarter. |
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Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
August 1, 2008 | August 3, 2007 | August 1, 2008 | August 3, 2007 | |||||||||||||||||||||||||||||
% of | % of | % of | % of | |||||||||||||||||||||||||||||
Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | |||||||||||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||||||||||||
Net revenue | ||||||||||||||||||||||||||||||||
Americas Commercial | $ | 8,096 | 49% | $ | 7,680 | 52% | $ | 15,394 | 47% | $ | 14,931 | 50% | ||||||||||||||||||||
EMEA Commercial | 3,503 | 21% | 3,162 | 21% | 7,309 | 22% | 6,479 | 22% | ||||||||||||||||||||||||
APJ Commercial | 2,054 | 13% | 1,765 | 12% | 4,078 | 13% | 3,472 | 12% | ||||||||||||||||||||||||
Global Consumer | 2,781 | 17% | 2,169 | 15% | 5,730 | 18% | 4,616 | 16% | ||||||||||||||||||||||||
Net revenue | $ | 16,434 | 100% | $ | 14,776 | 100% | $ | 32,511 | 100% | $ | 29,498 | 100% | ||||||||||||||||||||
Fiscal Year Ended | ||||||||||||||||||||||||
February 1, 2008 | February 2, 2007 | February 3, 2006 | ||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | |||||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||||
Net revenue | ||||||||||||||||||||||||
Americas Commercial | $ | 29,981 | 49% | $ | 28,289 | 49% | $ | 27,489 | 49% | |||||||||||||||
EMEA Commercial | 13,607 | 22% | 11,842 | 21% | 11,124 | 20% | ||||||||||||||||||
APJ Commercial | 7,167 | 12% | 6,223 | 11% | 5,547 | 10% | ||||||||||||||||||
Global Consumer | 10,378 | 17% | 11,066 | 19% | 11,628 | 21% | ||||||||||||||||||
Net revenue | $ | 61,133 | 100% | $ | 57,420 | 100% | $ | 55,788 | 100% | |||||||||||||||
• | Americas Commercial —Americas Commercial revenue increased 5% with unit shipments up by 7%year-over-year for the second quarter of Fiscal 2009. Growth in Latin America and increasing sales to the Federal government drove the majority of the increase in revenue in Americas Commercial. This growth was partially offset by weaker performance with our global customers andsmall-and-medium business customers. We anticipate continued conservative spending in the U.S. in the second half of Fiscal 2009. From a product perspective, the slow net revenue growth was due to decreases in desktop sales of 1% and 7% for the second quarter and first six months of Fiscal 2009, respectively, on desktop unit growth of 3% and 1%, for the second quarter and first half of Fiscal 2009, respectively. This was offset by strong revenue growth of services and software and peripherals, which grew 18% and 14%, respectively, during the second quarter of Fiscal 2009 and 22% and 14% for the first half of Fiscal 2009. Growth in Latin America was led by Brazil and Chile, which experienced a 38% and 35% respectively,year-over-year increase in revenue during the second quarter of Fiscal 2009 as compared to Fiscal 2008. |
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• | EMEA Commercial — EMEA Commercial had 11%year-over-year net revenue growth on unit shipment growth of 20%. The unit volume increases were the result of strong growth in mobility, with units up 52% and continued strength in emerging markets. The revenue growth was primarily a result of higher demand for mobility products, represented by a 33% increase in revenue. Growth in software and peripherals revenue also contributed to EMEA Commercial’s strong second quarter Fiscal 2009 revenue performance, with revenue growth of 21%year-over-year. These increases were partially offset by desktop sales with a revenue decrease of 6%year-over-year. EMEA experienced strong revenue growth in emerging countries andsmall-and-medium business. This growth, while consistent with our overall strategy, drove a mix shift in the EMEA Commercial revenue base coupled with softness in EMEA Commercial’s global and large commercial customers revenue. As a result, during the second quarter of Fiscal 2009, total average revenue per unit decreased 8%, which reflects our product and customer mix. |
• | APJ Commercial —During the second quarter and first six months of Fiscal 2009, APJ Commercial experienced a 16% and 17%year-over-year increase in revenue to $2.1 billion and $4.1 billion, respectively. For the second quarter and first half of Fiscal 2009, sales of mobility products and unit volume increasedyear-over-year by 24% and 27%, and 30% and 36%, respectively, compared to same period last year. Sales of mobility products grew due to the continued shift in customer preference from desktops to notebooks. APJ Commercial also reported 16% revenue growth in servers and networking on unit growth of 21% primarily due to our focus on delivering greater value within customer data centers with our rack optimized server platforms, whose average selling prices are higher than our tower servers. From a country perspective, Malaysia, Australia, and New Zealand experienced strong revenue growth during the second quarter of Fiscal 2009. Significant growth in India, and China during the second quarter of Fiscal 2009 contributed to a revenue growth rate of 31% and 19%, respectively, for these targeted BRIC countries. |
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• | Global Consumer —Global Consumer revenue increased 28% and 24%year-over-year for second quarter of Fiscal 2009 and first half of Fiscal 2009, respectively, on unit growth of 53% and 50% for the second quarter and first half of Fiscal 2009, respectively. We grew faster than the industry on a unit basis and increased our global share. This growth was led by APJ Consumer with 65%year-over-year increase in revenue. The increase in Global Consumer revenue is mainly due to strong mobility sales. Mobility revenue increased 62% and 56% in the second quarter and first six months of Fiscal 2009, respectively, on a unit increase of 101% and 90%, respectively as compared to the same periods last year. Software and peripherals revenue grew 24% and 26% during the second quarter and first half of Fiscal 2009, respectively. Our mobility growth in this segment can be primarily attributed to our entrance into retail distribution arrangements, which began in the second half of Fiscal 2008, and the continued shift of consumer preference from desktops to notebooks. Our software and peripherals growth is due to a strong performance in software licensing. These increases were offset by a 8% and 7% decrease in desktop revenue although desktop units grew 5% and 11% for the second quarter and first half of Fiscal 2009, respectively. |
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Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
August 1, 2008 | August 3, 2007 | August 1, 2008 | August 3, 2007 | |||||||||||||||||||||||||||||
% of | % of | % of | % of | |||||||||||||||||||||||||||||
Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | |||||||||||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||||||||||||
Net revenue | ||||||||||||||||||||||||||||||||
Desktop PCs | $ | 4,928 | 30% | $ | 5,017 | 34% | $ | 9,628 | 30% | $ | 9,959 | 34% | ||||||||||||||||||||
Mobility | 4,871 | 30% | 3,865 | 26% | 9,775 | 30% | 7,881 | 26% | ||||||||||||||||||||||||
Software & peripherals | 2,790 | 17% | 2,380 | 16% | 5,531 | 17% | 4,721 | 16% | ||||||||||||||||||||||||
Servers & networking | 1,702 | 10% | 1,618 | 11% | 3,355 | 10% | 3,211 | 11% | ||||||||||||||||||||||||
Services | 1,462 | 9% | 1,283 | 9% | 2,910 | 9% | 2,564 | 9% | ||||||||||||||||||||||||
Storage | 681 | 4% | 613 | 4% | 1,312 | 4% | 1,162 | 4% | ||||||||||||||||||||||||
Net revenue | $ | 16,434 | 100% | $ | 14,776 | 100% | $ | 32,511 | 100% | $ | 29,498 | 100% | ||||||||||||||||||||
Fiscal Year Ended | ||||||||||||||||||||||||
February 1, 2008 | February 2, 2007 | February 3, 2006 | ||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | |||||||||||||||||||
(in millions, except percentage) | ||||||||||||||||||||||||
Net revenue: | ||||||||||||||||||||||||
Desktop PCs | $ | 19,573 | 32% | $ | 19,815 | 34% | $ | 21,568 | 39% | |||||||||||||||
Mobility | 17,423 | 28% | 15,480 | 27% | 14,372 | 25% | ||||||||||||||||||
Software and peripherals | 9,908 | 16% | 9,001 | 16% | 8,329 | 15% | ||||||||||||||||||
Servers and networking | 6,474 | 11% | 5,805 | 10% | 5,449 | 10% | ||||||||||||||||||
Services | 5,320 | 9% | 5,063 | 9% | 4,207 | 8% | ||||||||||||||||||
Storage | 2,435 | 4% | 2,256 | 4% | 1,863 | 3% | ||||||||||||||||||
Net revenue | $ | 61,133 | 100% | $ | 57,420 | 100% | $ | 55,788 | 100% | |||||||||||||||
• | Desktop PCs –During the second quarter and first six months of Fiscal 2009, revenue from desktop PCs (which includes desktop computer systems and workstations) decreased 2% and 3%, respectively, from the same periods of Fiscal 2008. The decline was primarily due to the on-going competitive pricing pressure for lower priced desktops. The demand for desktops continues to decrease as customers’ preference shifts to mobility products. Consequently, our average selling price for desktops decreased 6% and 9%year-over-year during the first quarter and first half of Fiscal 2009, respectively, as we aligned our prices and product offerings with the marketplace. As a result of our pricing strategy, we were able to gain share during the second quarter and first half of calendar 2008. Average industry unit growth was 1% during those time periods compared to our unit growth of 5% and 7% during the second quarter and first six months of Fiscal 2009. Desktop revenue declined across all of our segments except for APJ Commercial, which experiencedyear-over-year revenue growth of 11% for both the second quarter and first six months of Fiscal 2009. Our Americas Commercial, EMEA Commercial, and Global Consumer segments experienced weaker performance in desktop sales withyear-over-year decreases of 1%, 6%, and 8%, respectively, for the second quarter of Fiscal 2009, and revenue decreases of 7%, 3%, and 7%, respectively, for the six months ending August 1, 2008. We are continuing to see rising user demand for mobility products that contributes to further slowing demand for desktop PCs as mobility growth is expected to outpace desktop growth at a rate of approximatelysix-to-one. |
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• | Mobility – During the second quarter and first half of Fiscal 2009, revenue from mobility products grew 26% and 24%, respectively, on unit growth of 44% for both periods. This unit growth rate outpaced the industry’syear-over-year unit growth of 37% and 38% for the second quarter and first six months of calendar 2008, respectively. We posted strong double-digit revenue growth across all segments, except for Americas Commercial, whose mobility revenue increasedyear-over-year only 4% and 1% for the second quarter and first six months of Fiscal 2009. We continued to see conservative spending in thesmall-and-medium business sector and with our large global customers in our Americas Commercial business; however, Americas Commercial experienced strong growth in its Federal government and Latin America sectors. Additionally, competitive pricing pressures, which were most pronounced in our Global Consumer and EMEA Commercial segments, drove our average unit pricing down in Fiscal 2009. For the second quarter of Fiscal 2009, mobility revenue in Global Consumer, APJ Commercial, and EMEA Commercial grew 62%, 24%, and 33%year-over-year, respectively, on unit growth of 101%, 27%, and 52%, respectively. For the six months ending August 1, 2008, mobility revenue in Global Consumer, APJ Commercial, and EMEA Commercial grew 56%, 30%, and 33%year-over-year, respectively, on unit growth of 90%, 36%, and 55%, respectively. Theyear-over-year growth in mobility was driven by our expansion into consumer retail and also increasing our notebook platforms by 50% this year. We recently announced a completely new line of Latitudetm and Dell Precision notebooks, ranging from the lightest ultra-portable in our history to the most powerful workstation. We also introduced the industry’s first convertible tablet with multi-touch capabilities on the Dell LatitudeTMXT. As notebooks become more affordable and wireless products become standardized, demand for our mobility products continues to be strong. |
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• | Software and Peripherals –Revenue from sales of software and peripherals (“S&P”) consists of Dell-branded printers, monitors (not sold with systems), projectors, and a multitude of competitively priced third-party peripherals including plasma and LCD televisions, software, and other products. This revenue grew 17%year-over-year for both the second quarter and first six months of Fiscal 2009 driven by strength in software licensing. The growth was driven by our acquisition of ASAP Software (“ASAP”) in the fourth quarter of Fiscal 2008. With ASAP, we now offer products from over 2,000 software publishers. At a segment level, Global Consumer led the revenue growth with a 24%year-over-year increase for the second quarter of Fiscal 2009 and a 26%year-over-year growth rate for the first half of Fiscal 2009. APJ Commercial, EMEA Commercial, and Americas Commercial also experienced strong revenue growth of 18%, 21%, and 14%, respectively, for the three months ending August 1, 2008, and 19%, 19%, and 14%, respectively, for the six months ending August 1, 2008. From a dollars perspective, Americas Commercial led S&P revenue growth withyear-over-year increases of $200 million and $375 million for the second quarter and first six months of Fiscal 2009, which reflects the strong performance of ASAP. Our S&P growth can also be attributed to improved performance in our displays business where we regained our number one position worldwide in flat panel displays. |
• | Servers and Networking –Revenue from sales of servers and networking products grew 5%year-over-year for both the second quarter and first six months of Fiscal 2009 on unit growth of 19% and 20%, respectively. Ouryear-over-year unit growth outpaced the industry’s growth of 13% and 11% during the second quarter and first six months of calendar 2008, respectively. Our server and networking revenue grew slower than units due to our pricing strategy as we shift our product offerings to lower price bands to drive growth. APJ Commercial, EMEA Commercial, and Americas Commercial contributed to the modest revenue growth, and in the second quarter and first half of calendar 2008, we were again ranked number one in the United States with a 39% and 37% share, respectively, in server units shipped. Servers and networking revenue growth benefited from the success of our cloud computing initiatives featuring energy-efficient Dell customer solutions. During the quarter, we released our broadest lineup of dedicated virtualization solutions ever, including more than a dozen new servers, tools, and services, as a part of our mission to help companies of all sizes to simplify their IT environments. |
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• | Services –Services consists of a wide range of services including assessment, design and implementation, deployment, asset recovery and recycling, training, enterprise support, client support, and managed lifecycle. Services revenue increased 14%year-over-year for the three and six-month periods ended August 1, 2008, to $1.5 billion and $2.9 billion, respectively, aided by our new ProSupport offerings, which distilled ten service offerings down to two customizable packages spanning our commercial product and solutions portfolios with flexible options for service level and proactive management. Americas Commercial and APJ Commercial drove the increase in services revenue with revenue growth of 18% and 17%, respectively, in the second quarter of Fiscal 2009 as compared to the second quarter of Fiscal 2008, and revenue growth of 22% and 18%, respectively, for the first half of Fiscal 2009 as compared to the first half of Fiscal 2008. EMEA Commercial contributed withyear-over-year revenue growth of 3% for the second quarter and 6% for the first six months of Fiscal 2009. EMEA Commercial’s services revenue is lower than our other segments mainly due to a higher level of deferred service revenue related to strategic changes in our service offerings. Theyear-over-year growth is attributed to the strong performance of our Lifecycle services in our Americas Commercial and APJ Commercial segments and amortization of deferred service revenue. During Fiscal 2008, we acquired a number of service technologies and capabilities through strategic acquisitions of certain companies. These capabilities are being used to build-out our mix of service offerings. We are continuing to make solid progress in services, including ProSupport, remote infrastructure management, and Software as a Service (SaaS), which are aimed at simplifying IT for our customers. Our deferred service revenue balance increased from $5.3 billion at February 1, 2008, to $5.7 billion at August 1, 2008, due to continued strength in as sold services sales. |
• | Storage –Revenue from sales of storage products increased 11% and 13%year-over-year for the second quarter and first six months of Fiscal 2009.Year-over-year storage growth was led by strength in our PowerVault line and the strong performance of our EqualLogic iSCSI networked storage solutions. To date since acquisition, EqualLogic’s business performance has met our expectations. The APJ |
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Commercial, EMEA Commercial, and Americas Commercial regions all contributed to the strongyear-over-year revenue growth. APJ Commercial led the revenue growth, with a 31% increase for the second quarter of Fiscal 2009; whereas, EMEA Commercial led storage revenue growth for the six-month period ending August 1, 2008, with a growth rate of 31%. |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
August 1, 2008 | August 3, 2007 | August 1, 2008 | August 3, 2007 | |||||||||||||||||||||||||||||
% of | % of | % of | % of | |||||||||||||||||||||||||||||
Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | |||||||||||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||||||||||||
Net revenue | $ | 16,434 | 100.0% | $ | 14,776 | 100.0% | $ | 32,511 | 100.0% | $ | 29,498 | 100.0% | ||||||||||||||||||||
Gross margin | $ | 2,827 | 17.2% | $ | 2,951 | 19.9% | $ | 5,792 | 17.8% | $ | 5,789 | 19.6% |
Fiscal Year Ended | ||||||||||||||||||||||||
February 1, 2008 | February 2, 2007 | February 3, 2006 | ||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | |||||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||||
Net revenue | $ | 61,133 | 100.0% | $ | 57,420 | 100.0% | $ | 55,788 | 100.0% | |||||||||||||||
Gross margin | $ | 11,671 | 19.1% | $ | 9,516 | 16.6% | $ | 9,891 | 17.7% |
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Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
August 1, 2008 | August 3, 2007 | August 1, 2008 | August 3, 2007 | |||||||||||||||||||||||||||||
% of | % of | % of | % of | |||||||||||||||||||||||||||||
Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | |||||||||||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Selling, general and administrative | $ | 1,840 | 11.2% | $ | 1,894 | 12.8% | $ | 3,752 | 11.5% | $ | 3,657 | 12.4% | ||||||||||||||||||||
Research, development and engineering | 168 | 1.0% | 155 | 1.0% | 320 | 1.0% | 297 | 1.0% | ||||||||||||||||||||||||
IPR&D | — | — | — | — | 2 | 0.0% | — | — | ||||||||||||||||||||||||
Operating expenses | $ | 2,008 | 12.2% | $ | 2,049 | 13.8% | $ | 4,074 | 12.5% | $ | 3,954 | 13.4% | ||||||||||||||||||||
Fiscal Year Ended | ||||||||||||||||||||||||
February 1, 2008 | February 2, 2007 | February 3, 2006 | ||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||
Dollars | Revenue | Dollars | Revenue | Dollars | Revenue | |||||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Selling, general, and administrative | $ | 7,538 | 12.4% | $ | 5,948 | 10.3% | $ | 5,051 | 9.0% | |||||||||||||||
Research, development, and engineering | 610 | 1.0% | 498 | 0.9% | 458 | 0.8% | ||||||||||||||||||
In-process research and development | 83 | 0.1% | — | — | — | — | ||||||||||||||||||
Operating expenses | $ | 8,231 | 13.5% | $ | 6,446 | 11.2% | $ | 5,509 | 9.8% | |||||||||||||||
• | Selling, General, and Administrative— During the second quarter of Fiscal 2009, selling, general, and administrative (“SG&A”) expenses decreased 3% to $1.8 billion compared to $1.9 billion in the same period of Fiscal 2008. The decrease in SG&A expenses from the second quarter of Fiscal 2008 to the second quarter of Fiscal 2009 is primarily due to a reduction in compensation and outside consulting expenses of approximately $50 million. This $50 million decrease is due to decreases in stock-based compensation expense, which in the second quarter of Fiscal 2008 also included $86 million of additional expense for cash payments for expiring stock options. Additionally, costs associated with the U.S. Securities and Exchange Commission (“SEC”) investigation and the Audit Committee’s independent investigation decreased by $49 million from the prior year. Partially offsetting these decreases was an increase in depreciation, maintenance, and amortization of intangibles expenses of approximately $45 millionyear-over-year. |
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• | Research, Development, and Engineering— During the second quarter and first six months of Fiscal 2009, research, development, and engineering (“RD&E”) expenses remained flat as a percentage of revenue. During the second quarter of Fiscal 2009, RD&E expenses increased approximately $13 million to $168 million, and for the six months ending August 1, 2008, RD&E expenses increased approximately $23 million to $320 million. |
• | In-Process Research and Development— We recognized in-process research and development (“IPR&D”) charges in connection with acquisitions accounted for as business combinations. For more discussion regarding our IPR&D accounting, see Note 7 of Notes to Annual Consolidated Financial Statements and Note 8 of Notes to Quarterly Condensed Consolidated Financial Statements included elsewhere in this prospectus. During the first half of Fiscal 2009, we recorded IPR&D charges of $2 million, primarily related to our acquisition of Message One, Inc. During Fiscal 2008, we |
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recorded IPR&D charges of $83 million. Prior to Fiscal 2008, there were no IPR&D charges related to acquisitions. |
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Three Months Ended | Six Months Ended | |||||||||||
August 1, | August 3, | August 1, | August 3, | |||||||||
2008 | 2007 | 2008 | 2007 | |||||||||
(in millions) | (in millions) | |||||||||||
Investment and other income, net: | ||||||||||||
Investment income, primarily interest | $ | 49 | $ | 123 | $ | 104 | $ | 239 | ||||
Gains (losses) on investments, net | (14) | 1 | (11) | 5 | ||||||||
Interest expense | (26) | (12) | (38) | (24) | ||||||||
CIT minority interest | — | (9) | — | (14) | ||||||||
Foreign exchange | 20 | (9) | 110 | (31) | ||||||||
Other | (11) | 2 | (22) | (1) | ||||||||
Investment and other income, net | $ | 18 | $ | 96 | $ | 143 | $ | 174 | ||||
Fiscal Year Ended | |||||||||
February 1, | February 2, | February 3, | |||||||
2008 | 2007 | 2006 | |||||||
(in millions) | |||||||||
Investment and other income, net: | |||||||||
Investment income, primarily interest | $ | 496 | $ | 368 | $ | 308 | |||
Gains (losses) on investments, net | 14 | (5) | (2) | ||||||
Interest expense | (45) | (45) | (29) | ||||||
CIT minority interest | (29) | (23) | (27) | ||||||
Foreign exchange | (30) | (37) | 3 | ||||||
Gain on sale of building | — | 36 | — | ||||||
Other | (19) | (19) | (27) | ||||||
Investment and other income, net | $ | 387 | $ | 275 | $ | 226 | |||
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February 1, | February 2, | |||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Cash, cash equivalents, and investments: | ||||||||
Cash and cash equivalents | $ | 7,764 | $ | 9,546 | ||||
Debt securities | 1,657 | 2,784 | ||||||
Equity and other securities | 111 | 115 | ||||||
Cash, cash equivalents and investments | $ | 9,532 | $ | 12,445 | ||||
Six Months Ended | Fiscal Year Ended | ||||||||||||||
August 1, | August 3, | February 1, | February 2, | February 3, | |||||||||||
2008 | 2007 | 2008 | 2007 | 2006 | |||||||||||
(in millions) | |||||||||||||||
Cash Flow from: | |||||||||||||||
Operating activities | $ | 1,251 | $ | 1,754 | $ | 3,949 | $ | 3,969 | $ | 4,751 | |||||
Investing activities | 579 | (121) | (1,763) | 1,003 | 4,149 | ||||||||||
Financing activities | (987) | (16) | (4,120) | (2,551) | (6,252) | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | 16 | 41 | 152 | 71 | (73) | ||||||||||
Net change in cash and cash equivalents | $ | 859 | $ | 1,658 | $ | (1,782) | $ | 2,492 | $ | 2,575 | |||||
n | Operating Activities— Cash provided by operating activities during the six-month period ended August 1, 2008, was $1.3 billion compared to $1.8 billion during the first six months of Fiscal 2008. The decrease in operating cash flows was primarily led by the deterioration of our cash conversion cycle, decrease in net income, and an increase in other assets due to pending receipt of international incentive claims and VAT receivables. |
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August 1, | August 3, | February 1, | February 2, | February 3, | ||||||||||||||||
2008 | 2007 | 2008 | 2007 | 2006 | ||||||||||||||||
Days of sales outstanding(a) | 38 | 35 | 36 | 31 | 29 | |||||||||||||||
Days of supply in inventory(b) | 7 | 7 | 8 | 5 | 5 | |||||||||||||||
Days in accounts payable(c) | (74) | (80) | (80) | (78) | (77) | |||||||||||||||
Cash conversion cycle | (29) | (38) | (36) | (42) | (43) | |||||||||||||||
(a) | Days of sales outstanding (“DSO”) calculates the average collection period of our receivables. DSO is based on the ending net trade receivables and the most recent quarterly revenue for each period. DSO also includes the effect of product costs related to customer shipments not yet recognized as revenue that are classified in other current assets. DSO is calculated by adding accounts receivable, net of allowance for doubtful accounts, and customer shipments in transit and dividing that sum by average net revenue per day for the current quarter (90 days). At August 1, 2008, and August 3, 2007, DSO and days of customer shipments not yet recognized were 35 and 3 days, and 32 and 3 days, respectively. At February 1, 2008, February 2, 2007, and February 3, 2006, DSO and days of customer shipments not yet recognized were 33 and 3 days, 28 and 3 days, and 26 and 3 days, respectively. |
(b) | Days of supply in inventory (“DSI”) measures the average number of days from procurement to sale of our product. DSI is based on ending inventory and most recent quarterly cost of sales for each period. DSI is calculated by dividing inventory by average cost of goods sold per day for the current quarter (90 days). |
(c) | Days in accounts payable (“DPO”) calculates the average number of days our payables remain outstanding before payment. DPO is based on ending accounts payable and most recent quarterly cost of sales for each period. DPO is calculated by dividing accounts payable by average cost of goods sold per day for the current quarter (90 days). |
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n | Investing Activities —Cash sourced from investing activities for the six-month period ended August 1, 2008, was $579 million, compared to cash used in investing activities of $121 million for the same period last year. Cash used in investing activities during Fiscal 2008 was $1.8 billion, as compared to $1.0 billion cash provided by investing activities during Fiscal 2007 and $4.1 billion provided in Fiscal 2006. Cash generated or used in investing activities principally consists of net maturities and sales or purchases of investments; net capital expenditures for property, plant, and equipment; and cash used to fund strategic acquisitions, which was approximately $165 million in the first half of Fiscal 2009 and $2.2 billion during Fiscal 2008. Considering continued capital market and interest rate volatility, we decided to increase liquidity and change the overall interest rate profile of the portfolio. As a result, in the first half of Fiscal 2009, we began repositioning our investment portfolio to shorter duration securities, thus increasing the volume of our sales and purchases of securities. In Fiscal 2008 as compared to Fiscal 2007, we re-invested a lower amount of our proceeds from the maturity or sales of investments to build liquidity for share repurchases and for cash payments made in connection with acquisitions. In Fiscal 2007 compared to Fiscal 2006, we had a lower amount of proceeds from maturities and sales of investments, and this was partially offset by an increase in capital expenditures as we continued to focus on investing in our global infrastructure in order to support our rapid global growth. | |
n | Financing Activities— Cash used for financing activities during the six-month period ended August 1, 2008, was $987 million, compared to use of $16 million during the same period last year. The year-over- year increase in cash used for financing activities is due primarily to repurchase of our common stock as our share repurchase program was reinstated during the fourth quarter of Fiscal 2008 after being suspended for the majority of Fiscal 2008, offset by proceeds from the issuance of long-term debt of $1.5 billion. During the first half of Fiscal 2009, we repurchased approximately 112 million shares at an aggregate cost of $2.5 billion; no shares were repurchased related to the program during the first six months of Fiscal 2008. We also paid the principal on the Senior Notes of $200 million that matured in April 2008 as discussed in Note 12 of Notes to Quarterly Condensed Consolidated Financial Statements included elsewhere in this prospectus. |
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Payments Due by Period | ||||||||||||||||||||
Fiscal | Fiscal | |||||||||||||||||||
Total | Fiscal 2009 | 2010-2011 | 2012-2013 | Beyond | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Contractual cash obligations: | ||||||||||||||||||||
Debt(a) | $ | 529 | $ | 227 | $ | 2 | $ | — | $ | 300 | ||||||||||
Operating leases | 487 | 92 | 138 | 92 | 165 | |||||||||||||||
Advances under credit facilities | 23 | 23 | — | — | — | |||||||||||||||
Purchase obligations | 893 | 544 | 348 | 1 | — | |||||||||||||||
Interest | 451 | 33 | 45 | 43 | 330 | |||||||||||||||
Current portion of uncertain tax positions(b) | 98 | 98 | — | — | — | |||||||||||||||
Contractual cash obligations | $ | 2,481 | $ | 1,017 | $ | 533 | $ | 136 | $ | 795 | ||||||||||
(a) | Changes in the fair value of the debt where the interest rate is hedged with interest rate swap agreements are not included in the contractual cash obligations for debt as the debt is expected to be settled at par at its scheduled maturity date. |
(b) | The current portion of uncertain tax positions does not include approximately $1.5 billion in additional liabilities associated with uncertain tax positions that are not expected to be liquidated in Fiscal 2009. We are unable to reliably estimate the expected payment dates for these additional non-current liabilities. |
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• | We simplify information technology for customers. Making quality personal computers, servers, storage, and services affordable is Dell’s legacy. We are focused on making information technology affordable for millions of customers around the world. As a result of our direct relationships with customers, or “customer intimacy”, we are best positioned to simplify how customers implement and maintain information technology and deliver hardware, services, and software solutions tailored for their businesses and homes. | |
• | We offer customers choice. Customers can purchase systems and services from Dell via telephone, at a growing number of retail stores, and through our website, www.dell.com, where they may review, configure, and price systems within our entire product line; order systems online; and track orders from manufacturing through shipping. Customers may offer suggestions for current and future Dell products and services through an interactive portion of our website called Dell IdeaStorm. Commercial customers also can interact with dedicated account teams. We plan to continue to expand our recently launched indirect initiative by adding new distribution channels to |
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reach additional consumers and small businesses through retail partners and value-added resellers globally. |
• | Customers can purchase custom-built products and custom-tailored services.Historically our flexible, build-to-order manufacturing process enabled us to turn over inventory quickly, thereby reducing inventory levels, and rapidly bring the latest technology to our customers. The global IT industry and our competition have evolved, and we are continuing to expand our utilization of original design manufacturers, manufacturing outsourcing relationships, and new distribution strategies to better meet customer needs and reduce product cycle times. Our goal is to introduce the latest relevant technology more quickly and to rapidly pass on component cost savings to a broader set of our customers worldwide. | |
• | We are committed to being environmentally responsible in all areas of our business.We have built environmental consideration into every stage of the Dell product life cycle – from developing and designing energy-efficient products, to reducing the footprint of our manufacturing and operations, to customer use and product recovery. |
• | Desktop PCs— The XPStm and Alienware lines are targeted at customers seeking the best experiences and designs available, from multimedia capability to the highest gaming performance. The OptiPlextm line is designed to help business, government, and institutional customers manage their total cost of ownership by offering a portfolio of secure, manageable, and stable lifecycle products. The Inspirontm line of desktop computers is designed for mainstream PC users requiring the latest features for their productivity and entertainment needs. In July 2007, we introduced the Vostrotm line, which is designed to provide technology and services to suit the specific needs of small businesses. |
• | Servers and Networking— Our standards-based PowerEdgetm line of servers is designed to offer customers affordable performance, reliability, and scalability. Options include high performance |
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rack, blade, and tower servers for enterprise customers and aggressively priced tower servers for small organizations, networks, and remote offices. We also offer customized Dell server solutions for very large data center customers. |
• | Storage— We offer a comprehensive portfolio of advanced storage solutions, including storage area networks, network-attached storage, direct-attached storage, disk and tape backup systems, and removable disk backup. With our advanced storage solutions for mainstream buyers, we offer customers functionality and value while reducing complexity in the enterprise. Our storage systems are easy to deploy, manage, and maintain. The flexibility and scalability offered by Dell PowerVaulttm, Dell EqualLogic, and Dell EMC storage systems helps organizations optimize storage for diverse environments with varied requirements. | |
• | Mobility— The XPStm and Alienware lines of notebook computers are targeted at customers seeking the best experiences and designs available from sleek, elegant, thin, and light notebooks to the highest performance gaming systems. In Fiscal 2008, we introduced the XPS M1330, an innovative mobile platform featuring a 13.3-inch high definition display and ultra-portable form factor that received awards for its unique design. The Inspirontm line of notebook computers is designed for users seeking the latest technology and high performance in a stylish and affordable package. The Latitudetm line is designed to help business, government, and institutional customers manage their total cost of ownership through managed product lifecycles and the latest offerings in performance, security, and communications. The Vostrotm line, introduced in July 2007, is designed to customize technology, services, and expertise to suit the specific needs of small businesses. The Precisiontm line of mobile workstations is intended for professional users who demand exceptional performance to run sophisticated applications. | |
• | Software and Peripherals— We offer Dell-branded printers and displays and a multitude of competitively priced third-party peripheral products, including software titles, printers, televisions, notebook accessories, networking and wireless products, digital cameras, power adapters, scanners, and other products. |
– | Software. We sell a wide range of third-party software products, including operating systems, business and office applications, anti-virus and related security software, entertainment software, and products in various other categories. We finalized the acquisition of ASAP Software Express Inc., a leading software solutions and licensing services provider, in the fourth quarter of Fiscal 2008. As a result of this acquisition, we now offer products from over 2,000 software publishers. | |
– | Printers. We offer a wide array of Dell-branded printers, ranging from ink-jetall-in-one printers for consumers to large multifunction devices for corporate workgroups. All of our printers feature the Dell Ink and Toner Management Systemtm, which simplifies the purchasing process for supplies by displaying ink or toner levels on the status window during every print job and proactively prompting users to order replacement cartridges directly from Dell. | |
– | Displays.We offer a broad line of branded and non-branded display products, including flat panel monitors and projectors. In Fiscal 2008, we extended our consumer monitorline-up and introduced new innovations such as “True Life” and integrated camera and microphone into some of our monitors. We added the 1201MP projector to our existing projector portfolio. Across our monitors and projector product lines, we continue to win awards for quality, performance, and value. |
• | Services— Our global services business offers a broad range of configurable IT services that help commercial customers and channel partners plan, implement and manage IT operations and consumers install, protect, and maintain their PCs and accessories. Our service solutions help customers simplify IT, maximizing the performance, reliability, and cost-effectiveness of IT |
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operations. During Fiscal 2008, we acquired a number of service technologies and capabilities through strategic acquisitions of certain companies. These are being used to build-out our service capabilities. |
– | Infrastructure Consulting Services. Our consulting services help customers evaluate, design, and implement standards-based IT infrastructures. These customer-oriented consulting services are designed to be focused and efficient, providing customers access to our experience and guidance on how to best architect and operate IT operations. | |
– | Deployment Services. Our deployment services simplify and accelerate the deployment of new systems, PCs, and TV’s in customers’ environments. Our processes and deployment technologies enable customers to get systems up and running quickly and reliably, with minimal end-user disruption. | |
– | Asset Recovery and Recycling Services.We offer a variety of flexible services for the secure and environmentally safe recovery and disposal of owned and leased IT equipment. Various options, including resale, recycling, donation, redeployment, employee purchase, and lease return, help customers retain value while facilitating regulatory compliance and minimizing storage costs. | |
– | Training Services. We help customers develop the skills and knowledge of key technologies and systems needed to increase their productivity. Courses include hardware and software training as well as PC skills and professional development classes available through instructor-led, virtual, or self-directed online courses. | |
– | Support Services. Our suite of scalable support services is designed for IT professionals and end-users whose needs range from basic phone support to rapid response and resolution of complex problems. We offer flexible levels of support that span from desktop and notebook PCs to complex servers and storage systems, helping customers maximize uptime and stay productive. Our support services include warranty services and proactive maintenance offerings to help prevent problems as well as rapid response and resolution of problems. These services are supported by our network of Global Command Centers in the U.S., Ireland, China, Japan, and Malaysia, providing rapid, around-the-clock support for critical commercial systems. | |
– | Managed Services.We offer a full suite of managed service solutions for companies who desire outsourcing of some or all of their IT management. From planning to deployment to ongoing technical support, our managed services are modular in nature so that customers can customize a plan based on their current and future needs. We can manage a portion of their IT tasks or provide an end-to-end solution. |
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Americas | Europe, Middle East, Africa | Asia Pacific, including Japan | ||
Round Rock, Texas | Bracknell, England | Singapore |
Description | Principal Locations | Owned (square feet) | Leased (square feet) | ||||||||||
Headquarters | n Round Rock, Texas | 2.1 million | — | ||||||||||
Business Centers(a) | n Brazil, El Dorado Do Sul n El Salvador - San Salvador n Oklahoma - Oklahoma City n Panama - Panama City n Tennessee - Nashville n Texas - Austin and Round Rock | 1.1 million | 1.7 million | ||||||||||
Manufacturing and Distribution | n Brazil - Hortolândia n Florida - Miami (Alienware) n North Carolina - Winston - Salem n Tennessee - Lebanon and Nashville n Texas - Austin | 2.9 million | 0.1 million | ||||||||||
Design Centers | n Texas - Austin and Round Rock n New Hampshire - Nashua n California - San Jose | 0.7 million | 0.2 million | ||||||||||
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Description | Principal Locations | Owned (square feet) | Leased (square feet) | ||||||||||
Headquarters | n Bracknell, England | 0.1 million | — | ||||||||||
Business Centers(a) | n Germany - Halle n France - Montpellier n Ireland - Dublin and Limerick n Morocco - Casablanca n Slovakia - Bratislava | 0.4 million | 1.6 million | ||||||||||
Manufacturing and Distribution | n Ireland - Limerick and Athlone (Alienware) n Poland - Lodz | 1.0 million | — | ||||||||||
Description | Principal Locations | Owned (square feet) | Leased (square feet) | ||||||||||
Headquarters | n Singapore | — | 25,000 | ||||||||||
Business Centers(a) | n China – Dalian and Xiamen n India – Bangalore, Gurgaon, Hyderabad and Mohali n Japan – Kawasaki n Malaysia – Penang and Kuala Lumpur n Philippines – Metro Manila | 0.3 million | 2.9 million | ||||||||||
Manufacturing and Distribution | n China – Xiamen n Malaysia – Penang n India – Chennai | 1.1 million | — | ||||||||||
Design Centers | n China – Shanghai n India – Bangalore n Singapore n Taiwan – Taipei | — | 0.7 million | ||||||||||
(a) | Business center locations include facilities with capacity greater than 1,000 people. Operations within these centers include sales, technical support, administrative, and support functions. Locations of smaller business centers are not listed; however, the smaller centers are included in the square footage. |
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n | Investigations and Related Litigation— In August 2005, the SEC initiated an inquiry into certain of Dell’s accounting and financial reporting matters and requested that Dell provide certain documents. The SEC expanded that inquiry in June 2006 and entered a formal order of investigation in October 2006. The SEC’s requests for information were joined by a similar request from the United States Attorney for the Southern District of New York (“SDNY”), who subpoenaed documents related to Dell’s financial reporting from and after Fiscal 2002. In August 2006, because of potential issues identified in the course of responding to the SEC’s requests for information, Dell’s Audit Committee, on the recommendation of management and in consultation with PricewaterhouseCoopers LLP, Dell’s independent registered public accounting firm, initiated an independent investigation, which was completed in the third quarter of Fiscal 2008. Although the Audit Committee investigation has been completed, the investigations being conducted by the SEC and the SDNY are ongoing. Dell continues to cooperate with the SEC and the SDNY. |
n | Copyright Levies —Proceedings against the IT industry in Germany seek to impose levies on equipment such as personal computers and multifunction devices that facilitate making private |
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copies of copyrighted materials. The total levies due, if imposed, would be based on the number of products sold and the per-product amounts of the levies, which vary. Dell, along with other companies and various industry associations, are opposing these levies and instead are advocating compensation to rights holders through digital rights management systems. |
n | Lucent v. Dell— In February 2003, Lucent Technologies, Inc. filed a lawsuit against Dell alleging that Dell infringed 12 patents owned by Lucent and seeking monetary damages and injunctive relief. The asserted patents are owned by two parties: Alcatel-Lucent and Multimedia Patent Trust (“MPT”). Dell settled with MPT, licensing the patents asserted by MPT in the lawsuit, but not with Alcatel-Lucent. Trial as to the Alcatel-Lucent owned patents resulted in a jury verdict on April 4, 2008. The verdict was in Dell’s favor except for a $51,000 liability for infringement of one of the Alcatel-Lucent owned patents (which is subject to indemnity by Microsoft). Given the recent favorable court rulings and the resolution of the indemnity coverage related to Microsoft products, Dell reduced its reserves by $55 million through cost of sales in the first quarter of Fiscal 2009. In a decision dated May 8, 2008, the Federal Circuit Court of Appeals reversed the claim interpretation and remanded to the District Court one of the patents on which Dell had won summary judgment (which is also subject to the Microsoft indemnity). Dell does not expect the outcome of this legal proceeding to have a material adverse effect on its financial condition or results of operations or cash flows. |
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Name | Age | Title | ||||
Michael S. Dell | 43 | Chairman of the Board and Chief Executive Officer | ||||
Donald J. Carty | 62 | Director | ||||
William H. Gray, III | 66 | Director | ||||
Sallie L. Krawcheck | 43 | Director | ||||
Alan (A.G.) Lafley | 61 | Director | ||||
Judy C. Lewent | 59 | Director | ||||
Thomas W. Luce, III | 68 | Director | ||||
Klaus S. Luft | 66 | Director | ||||
Alex J. Mandl | 64 | Director | ||||
Michael A. Miles | 69 | Director | ||||
Sam Nunn | 69 | Director | ||||
Bradley R. Anderson | 49 | Senior Vice President, Business Product Group | ||||
Paul D. Bell | 47 | Senior Vice President and President, Americas | ||||
Michael R. Cannon | 55 | President, Global Operations | ||||
Jeffrey W. Clarke | 45 | Senior Vice President, Business Product Group | ||||
Andrew C. Esparza | 50 | Senior Vice President, Human Resources | ||||
Stephen J. Felice | 51 | Senior Vice President and President, Asia Pacific-Japan | ||||
Ronald G. Garriques | 44 | President, Global Consumer Group | ||||
Brian T. Gladden | 43 | Senior Vice President and Chief Financial Officer | ||||
Mark Jarvis | 45 | Senior Vice President, Chief Marketing Officer | ||||
David A. Marmonti | 49 | Senior Vice President and President, Europe, Middle East, and Africa | ||||
Stephen F. Schuckenbrock | 48 | Senior Vice President and President, Global Services and Chief Information Officer | ||||
Lawrence P. Tu | 53 | Senior Vice President, General Counsel and Secretary |
• | Michael S. Dell —Mr. Dell currently serves as Chairman of the Board of Directors and Chief Executive Officer. He has held the title of Chairman of the Board since he founded the Company in 1984. Mr. Dell served as Chief Executive Officer of Dell from 1984 until July 2004 and resumed that role in January 2007. He serves on the Foundation Board of the World Economic Forum, serves on the executive committee of the International Business Council, and is a member of the U.S. Business Council. He also serves on the U.S. President’s Council of Advisors on Science and Technology and sits on the governing board of the Indian School of Business in Hyderabad, India. |
• | Donald J. Carty —Donald J. Carty has been a member of the Board since December 1992. He served as Dell’s vice chairman and chief financial officer from January 2007 until June 2008. Mr. Carty retired in 2003 as the chairman and CEO of AMR Corporation and American Airlines. He had served in that position since 1998. Prior to that he served as president of AMR Airline Group and American Airlines. Between 1989 and 1995, Mr. Carty was executive vice president-finance and planning for AMR and American Airlines. Mr. Carty had been American’s senior vice president and controller before leaving the airline in March 1985 to become president and CEO of CP Air in Canada. In March of 1987, he returned to American and was elected senior vice president-airline planning. Before joining American, Carty spent seven years in various management positions with Celanese Canada, Ltd., Air Canada, and the Canadian Pacific Railway. Mr. Carty is also a director of Barrick Gold Corp., Hawaiian Holdings and CHC Helicopter Corp. He also serves as Chairman of the Board of Virgin America Airlines and Porter Airlines of Canada. |
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• | William H. Gray, III— Mr. Gray has served as a member of our Board of Directors since November 2000. He is Chairman of the Amani Group (a consulting and advisory firm), a position he has held since August 2004. Mr. Gray was President and Chief Executive Officer of The College Fund/UNCF (educational assistance) from 1991 until he retired in June 2004. He was a member of the United States House of Representatives from 1979 to 1991. During his tenure, he was Chairman of the House Budget Committee, a member of the Appropriations Committee and Chairman of the House Democratic Caucus and Majority Whip. He is an ordained Baptist Minister and last pastored at Bright Hope Baptist Church of Philadelphia from 1972 until 2007. Mr. Gray is also a director of J.P. Morgan Chase & Co., Prudential Financial Inc., Visteon Corporation and Pfizer Inc. |
• | Sallie L. Krawcheck— Ms. Krawcheck has served as a member of our Board of Directors since July 2006. She is the Chairman and Chief Executive Officer, Citi Global Wealth Management. From 2002 until March 2007, Ms. Krawcheck served as Chief Financial Officer and Head of Strategy for Citigroup Inc. She is also a member of the Citi Management, Operating and Business Heads Committees. Ms. Krawcheck joined Citi in October 2002 as Chairman and Chief Executive Officer of Smith Barney. Prior to joining Citi, Ms. Krawcheck was Chairman and Chief Executive Officer of Sanford C. Bernstein & Company. She also served as an Executive Vice President of Bernstein’s parent company, Alliance Capital Management, from 1999 to 2001. Ms. Krawcheck is a member of the Board of Directors of the University of North Carolina at Chapel Hill Foundations, Inc., the Board of Directors of Carnegie Hall, the Board of Overseers of Columbia Business School and the Board of Trustees for the Economic Club of New York. |
• | Alan (A.G.) Lafley— Mr. Lafley has served as a member of our Board of Directors since July 2006. He is the Chairman of the Board and Chief Executive Officer of The Procter & Gamble Company. Mr. Lafley joined Procter & Gamble in 1977, and has served in a variety of executive level positions since 1992. He was named President and Chief Executive in 2000 and Chairman of the Board in 2002. Mr. Lafley also serves on the Board of General Electric Company, and on the Board of the Cincinnati Center City Development Corporation. He is a Trustee of Hamilton College and is a member of the Business Roundtable and the Business Council. |
• | Judy C. Lewent— Ms. Lewent has served as a member of our Board of Directors since May 2001. Until September 2007, Ms. Lewent served as the Executive Vice President, Chief Financial Officer of Merck & Co., Inc. She served as Chief Financial Officer of Merck starting in 1990 and also held various other financial and management positions after joining Merck in 1980. Ms. Lewent is also a director of Motorola, Inc. and Thermo Fisher Scientific Inc. Ms. Lewent is a trustee and the chairperson of the audit committee of the Rockefeller Family Trust, a life member of the Massachusetts Institute of Technology Corporation and a member of the American Academy of Arts and Sciences. |
• | Thomas W. Luce, III— Mr. Luce has served as a member of our Board of Directors from November 1991 to September 2005 and from September 2006 through the present. He currently serves as President, Chief Executive Officer, and Director of the National Math and Science Initiative Inc., a not-for-profit organization dedicated to expanding programs that have a proven positive impact on math and science education. He served as United States Assistant Secretary of Education for Planning, Evaluation and Policy Development from July 1, 2005, until his resignation September 1, 2006. From 1997 until 2005, Mr. Luce was a partner of the business advisory firm Luce & Williams, Ltd. Mr. Luce was a founding partner and managing partner of the law firm of Hughes & Luce, LLP from 1973 until his retirement from the firm in 1997, and was Of Counsel with that law firm until December 2003. |
• | Klaus S. Luft— Mr. Luft has served as a member of our Board of Directors since March 1995. He is the founder and Chairman of the Supervisory Board of Artedona AG, a privately held mail ordere-commerce company established in 1999 and headquartered in Munich, Germany. He is also owner and President of Munich-based MATCH — Market Access Services GmbH & Co., KG. Since August 1990, Mr. Luft has served as Vice Chairman and International Advisor to Goldman Sachs Europe Limited. From March 1986 to November 1989, he was Chief Executive Officer of Nixdorf Computer AG, where he served for more than 17 years in a variety of executive positions in marketing, manufacturing, and finance. Mr. Luft is the Honorary Consul of the Republic of Estonia in the State of Bavaria. |
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• | Alex J. Mandl— Mr. Mandl has served as a member of our Board of Directors since November 1997. He is currently the non-Executive Chairman of Gemalto, a company resulting from the merger of Axalto Holding N.V. and Gemplus International S.A. From June 2006 until December 2007, Mr. Mandl served as Executive Chairman of Gemalto. Before June 2006, Mr. Mandl was President, Chief Executive Officer and a member of the Board of Directors of Gemplus, positions he held since August 2002. He has served as Principal of ASM Investments, a company focusing on early stage funding in the technology sector, since April 2001. From 1996 to March 2001, Mr. Mandl was Chairman and CEO of Teligent, Inc., which offered business customers an alternative to the Bell Companies for local, long distance and data communication services. Mr. Mandl was AT&T’s President and Chief Operating Officer from 1994 to 1996, and its Executive Vice President and Chief Financial Officer from 1991 to 1993. From 1988 to 1991, Mr. Mandl was Chairman of the Board and Chief Executive Officer ofSea-Land Services Inc. Mr. Mandl is also a board member of Hewitt Associates, Inc., Horizon Lines, Inc. and Visteon Corporation. |
• | Michael A. Miles— Mr. Miles has served as a member of our Board of Directors since February 1995. He is a special limited partner and a member of the Advisory Board of the investment firm Forstmann Little and Co. He is the former Chairman of the Board and Chief Executive Officer of Philip Morris Companies Inc., having served in those positions from September 1991 to July 1994. Prior to September 1991, Mr. Miles was Vice Chairman and a member of the board of directors of Philip Morris Companies Inc. Mr. Miles is also a director of Time Warner Inc., AMR Corporation and Citadel Broadcasting Corp. and a trustee of Northwestern University. |
• | Sam Nunn— Mr. Nunn has served as a member of our Board of Directors since December 1999. He is Co-Chairman and Chief Executive Officer of the Nuclear Threat Initiative (NTI), a charitable organization working to reduce the global threats from nuclear, biological and chemical weapons. He was a Senior Partner at the law firm of King & Spalding, Atlanta, Georgia, from 1997 until 2003. From 1972 through 1996, he served as a United States Senator from Georgia. During his tenure as Senator, he served as Chairman of the Senate Armed Services Committee and the Permanent Subcommittee on Investigations. He also served on the Intelligence and Small Business Committees. Mr. Nunn also serves as a director of Chevron Corporation, TheCoca-Cola Company and General Electric Company. |
• | Bradley R. Anderson— Mr. Anderson joined us in July 2005 and serves as Senior Vice President, Business Product Group. In this role, he is responsible for worldwide engineering, design, development, and marketing of our enterprise products, including servers, networking, and storage systems. Prior to joining Dell, Mr. Anderson was Senior Vice President and General Manager of the Industry Standard Servers business at Hewlett-Packard Company (“HP”), where he was responsible for HP’s server solutions. Previously, he was Vice President of Server, Storage, and Infrastructure for HP, where he led the team responsible for server, storage, peripheral, and infrastructure products. Before joining HP in 1996, Mr. Anderson held top management positions at Cray Research in executive staff, field marketing, sales, finance, and corporate marketing. Mr. Anderson earned a bachelor of science in Petroleum Engineering from Texas A&M University and a Master of Business Administration from Harvard University. He serves on the Texas A&M Look College of Engineering Advisory Council. |
• | Paul D. Bell —Mr. Bell has been with us since 1996 and has served as Senior Vice President and President, Americas since March 2007. In this role, Mr. Bell is responsible for all sales and customer support operations across the Americas region other than our consumer business. From February 2000 until March 2007, Mr. Bell served as Senior Vice President and President, Europe, Middle East, and Africa. Prior to this, Mr. Bell served as Senior Vice President, Home and Small Business. Prior to joining Dell in July 1996, Mr. Bell was a management consultant with Bain & Company for six years, including two years as a consultant on our account. Mr. Bell received bachelor’s degrees 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. |
• | Michael R. Cannon —Mr. Cannon joined us in February 2007 as President, Global Operations. In this role, he is responsible for our manufacturing, procurement, supply chain, and facilities activities |
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worldwide. Prior to joining Dell, Mr. Cannon was President, Chief Executive Officer, and a director of Solectron Corporation from January 2003 to February 2007, and President, Chief Executive Officer, and a director of Maxtor Corporation (now a part of Seagate Technology) from July 1996 to January 2003. Mr. Cannon has also worked at IBM’s Storage Systems Division. He began his career in engineering at The Boeing Company, where he held a management position with the Manufacturing Research and Development organization. Mr. Cannon studied mechanical engineering at Michigan State University and completed Harvard Business School’s Advanced Management Program. He currently serves on the board of Adobe Systems. |
• | Jeffrey W. Clarke— Mr. Clarke has served as Senior Vice President, Business Product Group since January 2003. In this role, he is responsible for worldwide engineering, design, development, and marketing of our business client products, including Dell OptiPlextm desktops, Latitudetm notebooks, Precisiontm workstations, and Vostrotm desktops and notebooks. Mr. Clarke joined Dell in 1987 as a quality engineer and has served in a variety of engineering and management roles. In 1995 Mr. Clarke became the director of desktop development, and from November 2001 to January 2003 he served as Vice President and General Manager, Relationship Product Group. Mr. Clarke received a bachelor’s degree in Electrical Engineering from the University of Texas at San Antonio. |
• | Andrew C. Esparza— Mr. Esparza joined us in 1997 as a director of Human Resources in the Product Group. He was named Senior Vice President, Human Resources in March 2007 and was named an executive officer in September 2007. In this role, he is responsible for driving the strategy and supporting initiatives to attract, motivate, develop, and retain world-class talent in support of our business goals and objectives. He also has responsibility for corporate security and corporate responsibility on a worldwide basis. He currently is an executive sponsor for aDellante, our internal networking group responsible for the development of Hispanic employees within the company. Prior to joining Dell, he held human resource positions with NCR Corporation from 1985 until 1997 and Bechtel Power Corporation from 1981 until 1985. Mr. Esparza earned a bachelor’s degree in business administration with a concentration in human resource management from San Diego State University. |
• | Stephen J. Felice— Mr. Felice serves as Senior Vice President and President, Asia Pacific-Japan. He was named Senior Vice President in March 2007, after having served as Vice President, Asia Pacific-Japan since August 2005. Mr. Felice leads our operations throughout the APJ region, including sales and customer service centers in Penang, Malaysia, and Xiamen, China. Mr. Felice joined us in February 1999 and has held various executive roles in our sales and consulting services organizations. From February 2002 until July 2005, Mr. Felice was Vice President, Corporate Business Group, Dell Americas. Prior to joining Dell, Mr. Felice served as Chief Executive Officer and President of DecisionOne Corp. Mr. Felice also served as Vice President, Planning and Development, with Bell Atlantic Customer Services. He spent five years with Shell Oil in Houston. Mr. Felice holds a bachelor’s degree in business administration from the University of Iowa and a Master of Business Administration degree from the University of Houston. |
• | Ronald G. Garriques— Mr. Garriques joined us in February 2007 as President, Global Consumer Group. In this role he is responsible for all aspects of our consumer business, including sales, marketing, and product design. Before joining Dell, Mr. Garriques served in various leadership roles at Motorola from February 2001 to February 2007, where he was most recently Executive Vice President and President, responsible for the Mobile Devices division. He was also Senior Vice President and General Manager of the Europe, Middle East, and Africa region for the Personal Communications Services division, and Senior Vice President and General Manager of Worldwide Products Line Management for the Personal Communications Services division. Prior to joining Motorola, Mr. Garriques held management positions at AT&T Network Systems, Lucent Technologies, and Philips Consumer Communications. Mr. Garriques holds a master’s degree in business administration from The Wharton School at the University of Pennsylvania, a master’s degree in mechanical engineering from Stanford University, and a bachelor’s degree in mechanical engineering from Boston University. |
• | Brian T. Gladden— Mr. Gladden joined Dell effective May 20, 2008, as Senior Vice President and, effective June 13, 2008, as Chief Financial Officer. He was President and Chief Executive Officer of |
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SABIC Innovative Plastics, a business unit of Saudi Basic Industries Corporation (SABIC), since its formation in August 2007 until May 2008. His previous experience includes nearly 20 years with General Electric (GE) in a variety of financial and management leadership roles. From August 2005 until August 2007, Mr. Gladden was the Vice President and General Manager for the GE Plastics resins business. From 2002 until August 2005, Mr. Gladden served as Chief Financial Officer of GE Plastics. Prior roles include Vice President and Chief Financial Officer of GE Medical Systems Healthcare IT business. He received a Bachelor of Science degree in business administration and finance from Millersville University in Millersville, Pa. |
• | Mark Jarvis— Mr. Jarvis joined us in October 2007 as Senior Vice President, Chief Marketing Officer. He is responsible for our global marketing efforts, spanning the consumer and commercial businesses, and including global brand, online, and communications. From April 2007 until October 2007, Mr. Jarvis served as a consultant to Dell in the Chief Marketing Officer role. Prior to joining Dell, Mr. Jarvis spent 14 years at Oracle, where he launched numerous products and drove highly innovative marketing programs, including Oracle’sE-Business Network and Oracle Technology Network, and also managed Oracle’s showcase OpenWorld Conference. |
• | David A. Marmonti— Mr. Marmonti serves as Senior Vice President and President, Europe, Middle East, and Africa, having been appointed to that position in March 2007. In this role, he is responsible for all business operations across the EMEA region, including sales and customer call centers in the region. Mr. Marmonti joined us in 1998 and has held a variety of roles, including Vice President and General Manager of our Public Business Group; Vice President and General Manager of our Mid-Markets and Preferred Corporate Accounts segments; Vice President and General Manager of our EMEA Home and Small Business division; Vice President of Marketing &e-business for the U.S. Consumer segment; and Director and General Manager of the U.S. Asset Recovery Business. Prior to joining Dell, Mr. Marmonti spent 16 years at AT&T in a variety of senior roles, including executive positions in sales and marketing, serving corporate customers. Mr. Marmonti holds a bachelor’s degree in business administration and marketing from the University of Missouri at St. Louis. |
• | Stephen F. Schuckenbrock— Mr. Schuckenbrock joined us in January 2007 as Senior Vice President and President, Global Services. In September 2007, he assumed the additional role of Chief Information Officer. He is responsible for all aspects of our services business, with worldwide responsibility for Dell enterprise service offerings, and is also responsible for our global information systems and technology structure. Prior to joining us, Mr. Schuckenbrock served as Co-Chief Operating Officer and Executive Vice President of Global Sales and Services for Electronic Data Systems Corporation (“EDS”). Before joining EDS in 2003, he was Chief Operating Officer of The Feld Group, an information technology consulting organization. Mr. Schuckenbrock served as Global Chief Information Officer for PepsiCo from 1998 to 2000. Mr. Schuckenbrock earned a bachelor’s degree in business administration from Elon University. |
• | Lawrence P. Tu— Mr. Tu joined us as Senior Vice President, General Counsel and Secretary in July 2004, and is responsible for overseeing Dell’s global legal department and governmental affairs. Before joining Dell, Mr. Tu served as Executive Vice President and General Counsel at NBC Universal for three years. Prior to his position at NBC, he was a partner with the law firm of O’Melveny & Myers LLP, where he focused on high technology, internet, and media related transactions. He also served five years as managing partner of the firm’s Hong Kong office. Mr. Tu’s prior experience also includes serving as General Counsel Asia-Pacific for Goldman Sachs, attorney for the U.S. State Department, and law clerk for U.S. Supreme Court Justice Thurgood Marshall. Mr. Tu holds Juris Doctor and bachelor of arts degrees from Harvard University, as well as a master’s degree from Oxford University, where he was a Rhodes Scholar. |
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• | Reviewing with management and approving the compensation philosophy and core objectives of the compensation program for executive officers | |
• | Evaluating the performance of the Chairman and Chief Executive Officer in light of the current business environment and our strategic objectives | |
• | Reviewing and recommending to the full Board the amounts and types of compensation to be paid to the Chairman and Chief Executive Officer and reviewing and approving all forms of compensation to be provided to the other executive officers, including establishing target opportunity levels, setting performance goals and certifying results | |
• | Acting as administrator of our compensation plans, including granting awards to executive officers | |
• | Evaluating the need for, and provisions of, employment contracts or severance arrangements for the executive officers |
• | Providing compensation commensurate with the level of business performance achieved, ranging from above-average overall rewards for performance that exceeds that of our peers to below-average compensation for below-average performance; | |
• | Providing a total compensation opportunity that is competitive with similar high-tech and other large global companies that we compete with for talent; | |
• | Managing fixed costs by combining a conservative approach to base salaries and benefits, with a greater focus on performance-dependent short- and long-term incentives; | |
• | Recognizing and rewarding the achievement of both corporate and individual performance goals; and | |
• | Heavily weighting the compensation package towards long-term, performance-dependent incentives to better align the interests of executives with stockholders. |
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• | Better meeting the needs of small and medium business customers; | |
• | Better meeting the needs of consumers and improving profitability of our consumer business; | |
• | Improving notebook products and sales channels; | |
• | Better meeting the needs of enterprise customers; and | |
• | Growing in emerging countries. |
• | New products; | |
• | Operating expense reductions; | |
• | Expanded service offerings; | |
• | Renewed emphasis on customer satisfaction; | |
• | Global consumer business; and | |
• | Retail |
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• Advanced Micro Devices, Inc. | • Home Depot Inc. | |
• Apple Inc. | • Honeywell International Inc. | |
• Applied Materials Inc. | • Intel Corp. | |
• Best Buy Co., Inc. | • International Business Machines Corp. | |
• CDW Corp.a | • Johnson & Johnson | |
• Cisco Systems Inc. | • Lexmark International Inc. | |
• Citigroup Inc. | • Microsoft Corp. | |
• Computer Sciences Corp. | • Motorola, Inc. | |
• Electronic Data Systems Corp.b | • Oracle Corp. | |
• EMC Corp. | • Procter & Gamble Co. | |
• General Electric Company | • Texas Instruments Inc. | |
• Hewlett Packard Co. | • Wal Mart Stores Inc. |
(a) | CDW Corp. will cease to be a part of Dell’s peer group for Fiscal 2009 as a result of its acquisition by an entity controlled by investment funds affiliated with Madison Dearborn Partners, LLC and Providence Equity Partners Inc. | |
(b) | Electronic Data Systems Corp. will cease to be a part of Dell’s peer group for Fiscal 2009 as a result of its recent acquisition by Hewlett Packard Co. |
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Target Incentive as a% | ||||
Named Executive | of Base Salarya | |||
Mr. Dell | 200% | |||
Mr. Carty | 100% | |||
Mr. Cannon | 100% | |||
Mr. Garriques | 100% | |||
Mr. Jarvisb | 100% |
(a) | To qualify for tax deductibility under Section 162(m) of the Internal Revenue Code, the maximum payout for Fiscal 2008 was capped at 0.10% of consolidated net income for each named executive officer, with the exception of Mr. Dell, whose payout was capped at 0.20% of consolidated net income. | |
(b) | Because Mr. Jarvis commenced employment in October 2007, the committee did not include him in the Executive Annual Incentive Bonus Plan. His bonus amount was consistent with those under the Executive Annual Incentive Bonus Plan, but was paid pursuant to the bonus program available to non-executive officers. |
Threshold | Target | Maximum | ||||||||||
Operating Income | $ | 1.8 billion | $ | 2.8 billion | $ | 5.6 billion |
• | Achieving financial targets for the business segment or region |
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• | Reducing costs | |
• | Maintaining brand health | |
• | Addressing human capital needs | |
• | Meeting strategic objectives | |
• | Supporting the five focus areas defined in the “— Evaluating Performance — Environment” section above. |
• | Stock options; | |
• | Restricted stock units (“RSUs”); | |
• | Performance-based restricted stock units (“PBUs”); and | |
• | Long-term cash awards. |
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• | Options are generally granted at the closing price of Dell’s common stock on the date of grant. | |
• | All equity grants to executive officers require the approval of the Leadership Development and Compensation Committee. | |
• | In general, awards pursuant to Dell’s annual long-term incentive grant process are made on predetermined Board meeting dates and new hire grants are made on the day an individual commences employment. | |
• | Dell does not backdate options or grant options or other equity awards retroactively. | |
��� | Dell does not purposely schedule option awards or other equity grants prior to the disclosure of favorable information or after the announcement of unfavorable information. |
• | Stock Options – Stock options are designed to reward executive officers for the increase in Dell’s stock price over time. Options represent the high-risk and potential high-return component of our total long-term incentive program, as the realizable value of each option can fall to zero if the stock price is lower than the exercise price established on the date of grant. |
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• | RSUs– Like stock options, RSUs are designed to reward executives for increases in Dell’s stock price over time. RSUs also provide a deferral of vesting and payout to help retain executive officers. RSUs are denominated in full shares of the company’s common stock and, therefore, have a more stable value over time as the stock price goes up or down (as compared to options, which only have value if the stock price increases). Dell typically grants RSUs as part of executive new-hire packages in order to buy-out the approximate value of unvested long-term incentives at a previous employer. Dell may continue to grant RSUs to recently hired executives. | |
• | PBUs– PBUs are designed to reward participants for the achievement of near-term financial objectives, while also providing a deferral of vesting and payout to help retain executive officers. Like RSUs, PBUs are denominated in full shares of the company’s common stock and, therefore, have a more stable value over time as the stock price goes up or down. |
Performance Goals | Threshold | Target | Maximum | |||
Operating Income (in billions) | $2.3 | $2.8 | $3.3 | |||
Shares Earned | 80% | 100% | 120% |
• | 2006 Long-Term Cash Incentive Bonus Awards– None of the Named Executive Officers were eligible to receive an award under this previously approved program. The 2006 Long-Term Cash Incentive Bonus Program (“2006 LTCIP”) was established in March 2005, to motivate the executive team to achieve aggressive performance goals for Fiscal 2007 and 2008. Payouts under the 2006 LTCIP were based on the achievement of consolidated financial results through Fiscal 2008 and were subject to continued employment through Fiscal 2008. Based on the company’s performance in Fiscal 2007 and 2008, program financial goals were not achieved in either year. Since the company did not achieve the threshold financial targets specified under the program, the Leadership Development and Compensation Committee made no payouts to any executive officers participating in the program. | |
• | 2007 Long-Term Cash Engagement Awards– None of the Named Executive Officers were eligible to receive an award under this previously approved program. In March 2006, the Leadership Development and Compensation Committee implemented the 2007 Long-Term Cash Engagement Award Program. All executive officers employed at that time other than Mr. Dell were eligible for cash engagement awards under this program. As Dell has become recognized for our high-quality leaders, our executives have increasingly become targets for recruitment to key positions in other organizations. This program was intended to better balance our existing long-term compensation programs between cash and equity awards, and to enhance the overall retention value of our compensation package. |
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• | Alignment of compensation to market benchmarks; | |
• | Alignment of compensation to internal peers; | |
• | Value of annual incentive bonus forgone by leaving previous employer; | |
• | Value of unvested long-term incentives granted by previous employer; and | |
• | Desire to align interests with those of Dell’s stockholders through long-term incentive grants. |
Named Executive | Long-Term Cash | |||||||||||||||
Officer | Sign-on Bonus | Optionsa | RSUsb | Awardc | ||||||||||||
Mr. Cannon | $ | 2,000,000 | 1,500,000 | 375,000 | $ | 7,500,000 | ||||||||||
Mr. Garriques | 3,500,000 | 500,000 | 900,000 | 3,000,000 | ||||||||||||
Mr. Jarvis | 250,000 | — | 324,000 | 3,000,000 | ||||||||||||
(a) | Represents the number of options granted on the executive’s start date. The exercise price of these options was set at the fair market value on the date of grant ($23.965 at February 26, 2007, for Mr. Cannon, and $24.215 at February 19, 2007, for Mr. Garriques). The options for Mr. Cannon vest ratably over three years (33.33% per year) beginning on the first anniversary of the date of the award. The options for Mr. Garriques vest ratably over five years (20% per year) beginning on the first anniversary of the date of the award. See the “— Grants of Plan Based Awards in Fiscal 2008” below for details. | |
(b) | Represents the number of RSUs granted on the executive’s start date. The RSUs granted to Mr. Cannon and Mr. Jarvis vest ratably over three years (33.33% per year) beginning on the first anniversary of the date of the award. The RSUs for Mr. Garriques vest ratably over five years (20% per year) beginning on the first anniversary of the date of the award. See the “— Grants of Plan Based Awards in Fiscal 2008” below for details. | |
(c) | Mr. Cannon’s award vests and becomes payable ratably over five years (20% per year) beginning on the first anniversary of the date of the award. Mr. Garriques’ award vests and becomes payable ratably over three years (33.33% per year) beginning on the first anniversary of the date of the award. Mr. Jarvis’ award vests and becomes payable ratably quarterly over twelve quarters (8.33% per quarter) beginning three months after the date of grant. |
• | Fiscal 2009 – 150,000 stock options and 100,000 PBUs, vesting ratably over 3 years | |
• | Fiscal 2010 – 150,000 stock options and 75,000 PBUs, vesting ratably over 3 years | |
• | Fiscal 2011 – 150,000 stock options and 225,000 PBUs, vesting ratably over 2 years | |
• | Fiscal 2012 – 150,000 stock options and 75,000 PBUs, vesting after 1 year |
• | Fiscal2008-2012 – Grant each year of RSUs equal to 600% of the corresponding year’s annual base salary, vesting ratably over 3 years. At his current annual base salary of $700,000, the minimum award value is $4,200,000. |
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Amount of Severance | ||
If termination date falls between: | (less taxes and withholdings) | |
February 1, 2007 and January 31, 2008 | $12 million | |
February 1, 2008 and January 31, 2009 | $10 million | |
February 1, 2009 and January 31, 2010 | $8 million | |
February 1, 2010 and January 31, 2011 | $6 million | |
February 1, 2011 and January 31, 2012 | $4 million |
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Non-Equity | ||||||||||||||||||||||||||||||||
Name and | Fiscal | Stock | Option | Incentive Plan | All Other | |||||||||||||||||||||||||||
Principal Position | Year | Salary | Bonusa | Awardsb | Awardsb | Compensationc | Compensationd | Total | ||||||||||||||||||||||||
Michael S. Dell | 2008 | $ | 950,000 | — | — | $ | 338,207 | — | $ | 1,044,831 | $ | 2,333,038 | ||||||||||||||||||||
Chairman and Chief Executive Officer | 2007 | 950,000 | — | — | 2,485,008 | — | 1,060,881 | 4,495,889 | ||||||||||||||||||||||||
Donald J. Cartye | 2008 | 766,346 | — | $ | 317,874 | 294,131 | $ | 934,176 | 3,746,593 | 6,059,120 | ||||||||||||||||||||||
Former Vice Chairman and Chief Financial Officer | 2007 | 51,154 | — | 133,655 | 146,320 | — | 20,000 | 351,129 | ||||||||||||||||||||||||
Michael R. Cannon | 2008 | 646,154 | $ | 2,000,000 | 2,791,006 | 2,543,525 | 547,939 | 7,547,799 | 16,076,422 | |||||||||||||||||||||||
President, Global Operations | 2007 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Ronald G. Garriques | 2008 | 659,615 | 3,500,000 | 4,144,338 | 519,148 | 524,394 | 3,014,370 | 12,361,865 | ||||||||||||||||||||||||
President, Global Consumer | 2007 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Mark Jarvis | 2008 | 173,077 | 250,000 | 913,336 | — | 183,462 | 5,328,332 | 6,848,207 | ||||||||||||||||||||||||
Senior Vice President and Chief Marketing Officer | 2007 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
(a) | Represents amount paid as sign-on bonus at the commencement of employment. Because annual bonus payments under the Executive Annual Incentive Bonus Plan are performance-based, those amounts are shown under “Non-Equity Incentive Plan Compensation.” | |
(b) | Represents the dollar amount of equity compensation cost recognized for financial reporting purposes with respect to Fiscal 2008 and 2007, computed in accordance with SFAS 123(R), excluding the impact of estimated forfeitures for service-based vesting conditions. See Note 5 of Notes to Annual Consolidated Financial Statements included elsewhere in this prospectus for a description of the assumptions used in that computation. The actual value realized by the Named Executive Officer with respect to stock awards will depend on the market value of Dell common stock on the date the stock is sold, and with respect to option awards, will depend on the difference between the market value of Dell common stock on the date the option is exercised and the exercise price. The terms of these awards are described in footnote b to the “— Grants of Plan-Based Awards in Fiscal 2008” table below | |
(c) | Represents amounts earned under the Executive Annual Incentive Bonus Plan. | |
(d) | Includes New Hire Long-Term Cash Awards made to Mr. Cannon, Mr. Garriques, and Mr. Jarvis. The awards vest as follows: Mr. Cannon’s award vests ratably (20%) over five years, beginning on the first anniversary of the grant date, Mr. Garriques’ award vests ratably (33.3%) over three years, beginning on the first anniversary of the grant date, and Mr. Jarvis’ award vests ratably (8.3%) over twelve quarters, beginning three months after date of grant. | |
Also includes the cost of providing various perquisites and personal benefits, as well the value of our contributions to the company-sponsored 401(k) plan and deferred compensation plan, and the amount we paid for term life insurance coverage under health and welfare plans. As part the employment arrangement with Mr. Jarvis, we pay Mr. Jarvis’ commuting expenses for travel on chartered aircraft between our headquarters and his principal place of residence in Northern California. See “— Compensation Discussion and Analysis — Benefits and Perquisites.” |
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The following table provides detail for the aggregate “All Other Compensation” for each of the Named Executive Officers. |
Retirement | ||||||||||||||||||||||||||||||||||||||||||||
Plans | Personal | Payment for | Long-Term | |||||||||||||||||||||||||||||||||||||||||
Fiscal | Matching | Benefit | Financial | Annual | Commuting | Relocation | Expired Stock | Cash | Consulting | |||||||||||||||||||||||||||||||||||
Year | Contributions | Plans | Counseling | Physical | Security | Expenses | Expenses | Options | Awards | Fees | ||||||||||||||||||||||||||||||||||
Mr. Dell | 2008 | $ | 9,000 | $ | 1,081 | — | — | $ | 1,034,750 | — | — | — | — | — | ||||||||||||||||||||||||||||||
2007 | 8,800 | 1,081 | — | — | 1,051,000 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Mr. Carty | 2008 | — | 5,278 | — | $ | 1,923 | — | — | — | $ | 3,739,392 | — | — | |||||||||||||||||||||||||||||||
2007 | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Mr. Cannon | 2008 | 9,000 | 6,855 | — | — | — | — | $ | 31,944 | — | $ | 7,500,000 | — | |||||||||||||||||||||||||||||||
Mr. Garriques | 2008 | 9,000 | 690 | $ | 4,680 | — | — | — | — | — | 3,000,000 | — | ||||||||||||||||||||||||||||||||
Mr. Jarvis | 2008 | 2,077 | 1,930 | — | — | — | $ | 315,387 | — | — | 3,000,000 | $ | 2,008,938 |
The amounts shown for Mr. Dell’s security costs represent the amount of company-paid expenses relating to personal and residential security. This security is provided to Mr. Dell pursuant to a Board-authorized security program. The Board believes that Mr. Dell’s personal safety and security are of vital importance to the company’s business and prospects and, therefore, that these costs are appropriate corporate business expenses. Nevertheless, because these costs can be viewed as conveying personal benefits to Mr. Dell, they are reported as perquisites in this column. In conjunction with our security operations, we also provide certain security services to members of Mr. Dell’s immediate family and at locations other than Mr. Dell’s principal residence. Mr. Dell fully reimburses the company for the incremental costs attributable to such services. | ||
The amount shown for Mr. Carty under “Payment for Expired Stock Options” represents amount paid with respect to expired in-the-money stock options. After we delayed the filing of our Annual Report onForm 10-K for Fiscal 2007, we suspended the exercise of employee stock options. As a result, Mr. Carty had 192,000 options, granted in his capacity as a director prior to becoming an employee, that expired while he had no ability to exercise or otherwise prevent their expiration. As a result, Mr. Carty, along with other similarly situated directors, officers and employees, received payment equal to the in-the-money value of the options at expiration. See “Compensation Discussion and Analysis – Long-Term Incentives – Fiscal 2008 Equity Opportunities.” This amount is also included in the director compensation table, see “– Director Compensation” as it represents payments for options Mr. Carty received in his capacity as a director prior to becoming an executive officer. | ||
The amount show for Mr. Jarvis under “Consulting Fees” represents the amount we paid Mr. Jarvis pursuant to a consulting agreement prior to his becoming an executive officer in October 2007. | ||
(e) | Mr. Carty joined the company as Vice Chairman and Chief Financial Officer in January 2007, and was not eligible for any additional compensation for his Board service while he was a Dell employee. Amounts in this table reflect his director compensation earned for Fiscal 2008 and 2007. The amount under Stock Awards represents $44,461 (2008) and $112,597 (2007) for his director grants and $273,413 (2008) and $21,058 (2007) for his employee grants, and the amount under Options Awards represents $53,940 (2008) and $122,728 (2007) for his director grants and $240,191 (2008) and $23,592 (2007) for his employee grants. Mr. Carty’s $20,000 director retainer fee for Fiscal 2007 is reflected under “All Other Compensation.” |
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Estimated Future Payouts Under | ||||||||||||||||||||
Non-equity Incentive Plan Awardsa | ||||||||||||||||||||
All other | ||||||||||||||||||||
All Other | Options | Exercise | ||||||||||||||||||
Stock | Awards: | or | Closing | |||||||||||||||||
Awards: | Number of | Base Price | Price on | Grant | ||||||||||||||||
Number of | Securities | of | the Date | Date | ||||||||||||||||
Grant | Shares of | Underlying | Option | of | Fair | |||||||||||||||
Name | Date | Threshold | Target | Maximum | Stock Units | Options | Awardsb | Grantb | Value | |||||||||||
Mr. Dell | 3/8/07 | $ | 0 | $1,900,000 | $5,900,000 | |||||||||||||||
Mr. Carty | 3/8/07 | 0 | 766,346 | 2,950,000 | ||||||||||||||||
Mr. Cannon | 2/26/07 | 375,000c | $8,986,875 | |||||||||||||||||
2/26/07 | 1,500,000d | $23.97 | $23.80 | 9,375,000 | ||||||||||||||||
3/8/07 | 0 | 646,154 | 2,950,000 | |||||||||||||||||
Mr. Garriques | 2/19/07 | 900,000e | 21,793,500 | |||||||||||||||||
2/19/07 | 500,000f | 24.22 | 24.39 | 3,513,000 | ||||||||||||||||
3/8/07 | 0 | 659,615 | 2,950,000 | |||||||||||||||||
Mr. Jarvis | 10/15/07 | 0 | 173,077 | 519,231 | ||||||||||||||||
10/15/07 | 324,000e | 9,141,660 | ||||||||||||||||||
(a) | Because we exceeded revenue growth threshold goals, the company modifier was 106% for Fiscal 2008. For actual award amounts, see “— Summary Compensation Table — Non-Equity Incentive Plan Compensation.” For more information on the annual incentive bonus, see “— Compensation Discussion and Analysis — Individual Compensation Components — Annual Incentive Bonus.” | |
(b) | The exercise price is calculated using the average of the high and low sales prices for Dell common stock on the date of grant. For Mr. Garriques’ grant on February 19, 2007, the prices for February 16, 2007, the last trading day prior to February 19, 2007, were used due to the market holiday on February 19, 2007. | |
(c) | Represents restricted stock units that vest ratably over three years (33.3% per year) beginning on the first anniversary of the date of grant. All unvested restricted stock will forfeit upon resignation or termination as a Dell employee. | |
(d) | Represents stock options with an exercise price equal to the average of the high and low sales prices for Dell common stock on the date of grant. These options vest and become exercisable ratably over three years (33.3% per year) beginning on the first anniversary of the date of grant. All unvested options expire upon the termination of employment for any reason other than death or permanent disability. All unvested options vest immediately upon death or permanent disability, and all options expire one year later. If employment is terminated for conduct detrimental to the company, all options (whether or not vested) expire immediately. If employment is terminated as a result of normal retirement, vested options expire the third year after such retirement. If employment is terminated for any other reason, all vested options expire 90 days after such termination. In any event, the options expire ten years from the date of grant unless otherwise expired as described above. All options are transferable to family members under specified circumstances. | |
(e) | Represents restricted stock units that vest ratably over five years (20% per year) beginning on the first anniversary of the date of grant. All unvested restricted stock will forfeit upon resignation or termination of employment for any reason other than death or permanent disability. All unvested restricted stock units vest immediately upon death or permanent disability. | |
(f) | Represents stock options with an exercise price equal to the average of the high and low sales prices for Dell common stock on the date of grant. These options vest and become exercisable ratably over five years (20% per year) beginning on the first anniversary of the date of grant. All unvested options expire upon the termination of employment for any reason other than death or permanent disability. All unvested options vest immediately upon death or permanent disability, and all options expire one year later. If employment is terminated for conduct detrimental to the company, all options (whether or not vested) expire immediately. If employment is terminated as a result of normal retirement, vested options expire the third year after such retirement. If employment is terminated for any other reason, all vested options expire 90 days after such termination. In any event, the options expire ten years from the date of grant unless otherwise expired as described above. All options are transferable to family members under specified circumstances. |
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Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Number of Securities Underlying | ||||||||||||||||||||||||||||||||
Unexercised Options | Equity Incentive Plan Awards | |||||||||||||||||||||||||||||||
Market | Number of | Market | ||||||||||||||||||||||||||||||
Number of | value of | Unearned | Payout Value | |||||||||||||||||||||||||||||
Shares or | Shares or | Shares, Units | of Unearned | |||||||||||||||||||||||||||||
Units | Units of | or Other | Shares, Units | |||||||||||||||||||||||||||||
Option | Option | Stock that | Stock that | Rights That | or Other | |||||||||||||||||||||||||||
Exercise | Expiration | Have Not | Have Not | Have Not | Rights That | |||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | Price | Date | Vested | Vesteda | Vested | Have Vesteda | ||||||||||||||||||||||||
Mr. Dell | 4,800,000 | — | $ | 28.90 | 7/17/2008 | |||||||||||||||||||||||||||
805,595 | — | 44.69 | 9/23/2009 | |||||||||||||||||||||||||||||
900,000 | — | 43.44 | 3/2/2010 | |||||||||||||||||||||||||||||
145,555 | — | 45.90 | 3/24/2010 | |||||||||||||||||||||||||||||
350,000 | — | 37.59 | 8/22/2010 | |||||||||||||||||||||||||||||
500,000 | — | 22.94 | 2/12/2011 | |||||||||||||||||||||||||||||
307,285 | — | 21.72 | 3/23/2011 | |||||||||||||||||||||||||||||
500,000 | — | 24.09 | 6/18/2011 | |||||||||||||||||||||||||||||
500,000 | — | 27.64 | 3/7/2012 | |||||||||||||||||||||||||||||
64,940 | — | 21.39 | 3/22/2012 | |||||||||||||||||||||||||||||
320,000 | 80,000b | 26.19 | 3/6/2013 | |||||||||||||||||||||||||||||
400,000 | — | 34.24 | 9/4/2013 | |||||||||||||||||||||||||||||
400,000 | — | 32.99 | 3/4/2014 | |||||||||||||||||||||||||||||
Mr. Carty | 22,492c | — | 28.90 | 7/17/2008 | ||||||||||||||||||||||||||||
16,284c | — | 43.91 | 7/16/2009 | |||||||||||||||||||||||||||||
16,298c | — | 52.16 | 7/20/2010 | |||||||||||||||||||||||||||||
24,080c | — | 28.24 | 7/19/2011 | |||||||||||||||||||||||||||||
28,420c | — | 26.32 | 7/18/2012 | |||||||||||||||||||||||||||||
11,996c | — | 33.35 | 7/18/2013 | |||||||||||||||||||||||||||||
7,492c | — | 35.60 | 7/16/2014 | |||||||||||||||||||||||||||||
7,539c | — | 40.91 | 7/15/2015 | |||||||||||||||||||||||||||||
3,155c | 12,620d | 19.55 | 7/21/2016 | |||||||||||||||||||||||||||||
38,000 | 152,000e | 25.27 | 1/2/2017 | |||||||||||||||||||||||||||||
45,037f | $ | 916,503 | ||||||||||||||||||||||||||||||
Mr. Cannon | — | 1,500,000g | 23.97 | 2/26/2017 | 375,000h | 7,631,250 | ||||||||||||||||||||||||||
Mr. Garriques | — | 500,000i | 24.22 | 2/19/2017 | 900,000j | 18,315,000 | ||||||||||||||||||||||||||
Mr. Jarvis | — | — | — | — | 324,000k | 6,593,400 | ||||||||||||||||||||||||||
(a) | Value based on the closing stock price of Dell common stock on February 1, 2008 ($20.35). | |
(b) | These options vested on March 6, 2008. | |
(c) | These awards were granted to Mr. Carty in his capacity as a member of the Board of Directors prior to his becoming an executive officer. | |
(d) | The options become exercisable ratably on July 1 of 2008 through 2011. | |
(e) | These options become exercisable ratably on January 2 of 2009 through 2012. | |
(f) | Represents unvested restricted stock. Of these shares, 5,037 were granted to Mr. Carty in his capacity as a member of the Board of Directors prior to his becoming an executive officer, and vest as follows: 375 shares vest on July 16, 2008, and July 16, 2009; 1,166 shares vest on July 1 of 2008, 2009 and 2010; and 789 shares vest on July 1, 2011. The remaining 40,000 shares were granted to Mr. Carty as an employee and will vest ratably on January 2 of 2009, 2010, 2011 and 2012. | |
(g) | Of these options, 33.33% became exercisable on February 26, 2008, and the remainder become exercisable ratably on February 26 of 2009 and 2010. | |
(h) | Restricted stock, of which 33.33% vested on February 26, 2008, and the remainder vests ratably on February 26 of 2009 and 2010. |
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(i) | Of these options, 20% became exercisable on February 19, 2008, and the remainder become exercisable ratably on February 19 of 2009 through 2012. | |
(j) | Restricted stock, of which 20% vested on February 19, 2008, and the remainder vests ratably on February 19 of 2009 through 2012. | |
(k) | Restricted stock vesting ratably on October 15 of 2008 through 2010. |
Option Awards | Stock Awards | |||||||||||||||||||
Number of Shares | Value Realized | Number of Shares | Value Realized on | |||||||||||||||||
Name | Acquired on Exercise | upon Exercise | Acquired on Vesting | Vestinga | ||||||||||||||||
Mr. Dell | — | — | — | — | ||||||||||||||||
Mr. Cartyb | — | — | 15,375 | $ | 372,450 | |||||||||||||||
Mr. Cannon | — | — | — | — | ||||||||||||||||
Mr. Garriques | — | — | ||||||||||||||||||
Mr. Jarvis | — | — | — | — | ||||||||||||||||
(a) | Computed using the fair market value of the stock on the date of vesting. | |
(b) | Represents the vesting of restricted stock of which 5,375 shares ($129,100) shares were granted to Mr. Carty in his capacity as a member of the Board of Directors prior to his becoming an executive officer. The remaining 10,000 shares ($243,350) were granted to Mr. Carty during his service as an executive officer. |
Number of Securities | ||||||||||||
Remaining Available for | ||||||||||||
Future Issuance Under Equity | ||||||||||||
Number of Securities to be | Compensation Plans | |||||||||||
Issued Upon Exercise of | Weighted-Average Exercise | (excluding securities | ||||||||||
Plan Category | Outstanding Options | Price of Outstanding Options | reflected in first column) | |||||||||
Plans approved by Stockholders | 293,176,898 | $ | 32.18 | 292,945,664a | ||||||||
Plans not approved by stockholders | 4,435,015 | b | $ | 39.40 | 0 | c | ||||||
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(a) | Shares that were available for issuance under the 2002 Long-Term Incentive Plan. Of the shares available under the 2002 plan, 155,701,439 shares were available to be issued in the form of restricted stock. All information is as of the end of Fiscal 2008. | |
(b) | This is the number of shares that were issuable pursuant to options granted under the Broad Based Stock Option Plan and were outstanding as of the end of Fiscal 2008. | |
(c) | The Broad Based Stock Option Plan was terminated in November 2002, and, consequently, no shares are available for future awards. |
Aggregate | ||||||||||||||||||||
Executive | Company | Withdrawals/ | ||||||||||||||||||
Contributions in Last | Contributions in | Aggregate Earnings | Distributions in | Aggregate Balance | ||||||||||||||||
Name | Fiscal Year | Last Fiscal Year | in Last Fiscal Yeara | Last Fiscal year | at Fiscal Year-end | |||||||||||||||
Mr. Dell | — | — | 534,848 | — | $ | 6,451,603 | ||||||||||||||
Mr. Carty | — | — | -71,854 | — | 913,869 | |||||||||||||||
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Acceleration Benefit Death or | ||||||||
Named Executive Officer | Severance Paymenta | Permanent Disabilityb | ||||||
Mr. Dell | — | — | ||||||
Mr. Carty | $ | 1,550,000 | $ | 926,599 | ||||
Mr. Cannon | 10,000,000 | 7,631,250 | ||||||
Mr. Garriques | 10,000,000 | 14,652,000 | ||||||
Mr. Jarvis | 1,200,000 | 6,593,400 |
(a) | Severance payments under the executive officer severance agreements are only payable if the executive’s employment is terminated “without cause.” In general, an executive is terminated without cause under these agreements unless the executive is terminated for violating confidentiality obligations, violating certain laws, committing a felony or making a plea of guilty or nolo contendere with respect to a felony, committing gross negligence or insubordination, refusing to implement directives issued by the executive’s manager, breaching a fiduciary duty to Dell, violating Dell’s Code of Conduct, unsatisfactory job performance, chronic absenteeism, or misconduct. |
(b) | Represents the sum of (1) the in-the-money value of unvested stock options that were subject to vesting acceleration in the event of death or permanent disability and (2) the value of unvested restricted stock, restricted stock units, and performance-based units that were subject to vesting acceleration in the event of death or permanent disability. All values were computed as of the end of Fiscal 2008 are based on the closing price of Dell common stock on the last day of Fiscal 2008 ($20.35). |
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Fees Earned | Equity Awardsa | |||||||||||||||||||
or | Restricted | All Other | ||||||||||||||||||
Name | Paid in Cash | Stock/Units | Options | Compensation | Total | |||||||||||||||
Mr. Cartyb | — | $ | 44,461 | $ | 53,940 | $ | 3,739,392 | d | $ | 3,837,793 | ||||||||||
Mr. Gray | $ | 75,000 | 55,360 | 53,940 | — | 184,300 | ||||||||||||||
Ms. Krawcheck | — | 57,991 | 121,463 | — | 179,453 | |||||||||||||||
Mr. Lafley | 75,000 | c | 57,991 | 53,347 | — | 186,338 | ||||||||||||||
Ms. Lewent | — | 145,347 | 59,742 | — | 205,089 | |||||||||||||||
Mr. Luce | — | 136,515 | 32,936 | — | 169,451 | |||||||||||||||
Mr. Luft. | — | 130,338 | 66,858 | — | 197,196 | |||||||||||||||
Mr. Mandl | 75,000 | 55,360 | 53,940 | — | 184,300 | |||||||||||||||
Mr. Miles | 90,000 | 55,360 | 59,742 | 3,873,543 | d | 4,078,645 | ||||||||||||||
Mr. Nunn | — | 145,347 | 59,742 | — | 205,089 | |||||||||||||||
(a) | Represents the dollar amount of equity compensation cost recognized for financial statement reporting purposes with respect to Fiscal 2008 for awards granted in and prior to Fiscal 2008, computed in accordance with SFAS 123(R), excluding the impact of estimated forfeitures for service-based vesting conditions. See Note 5 of Notes to Annual Consolidated Financial Statements included elsewhere in this prospectus for a description of the assumptions used in that computation. The actual value realized by the director with respect to restricted stock and stock unit awards will depend on the market value of Dell common stock on the date the underlying stock is sold, and the actual value realized by the director with respect to option awards will depend on the difference between the market value of Dell common stock on the date the option is exercised and the exercise price. |
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Annual | Restricted | Stock | ||||
Restricted | Stock Units in | Options in | ||||
Stock Unit | Lieu of | Lieu of | ||||
Name | Award | Retainer | Retainer | |||
Mr. Carty | — | — | — | |||
Mr. Gray | 8,475 | — | — | |||
Ms. Krawcheck | 8,475 | — | 9,540 | |||
Mr. Lafley | 8,475 | — | — | |||
Ms. Lewent | 8,475 | 3,813 | — | |||
Mr. Luce | 8,475 | 4,023 | — | |||
Mr. Luft | 8,475 | 3,177 | — | |||
Mr. Mandl | 8,475 | — | — | |||
Mr. Miles | 8,475 | — | — | |||
Mr. Nunn | 8,475 | 3,813 | — |
The restricted stock units included in the Annual Restricted Stock Unit Award column vest ratably over three years (33.33% per year), so long as the director remains a member of the Board. The portion that is unvested at the time the director ceases to be a member of the Board (other than by reason of mandatory retirement, death or permanent disability) is forfeited. All unvested restricted stock units vest immediately upon mandatory retirement, death or permanent disability. The grant date fair value for these awards, computed in accordance with SFAS 123(R), was $200,010 for each of the Annual Restricted Stock Unit Awards. | ||
The restricted stock units included in the Restricted Stock Units in Lieu of Retainer column were granted pursuant to the director’s election to receive restricted stock units in lieu of their annual cash retainer. These units were fully vested at grant, but may not be sold or transferred for six months following the grant. The number of shares was determined by dividing the foregone retainer amount by the fair market value of Dell common stock on the date of grant ($23.60). The grant date fair value for these awards, computed in accordance with SFAS 123(R), was equal to the amount of the foregone retainer ($95,000 in the case of Mr. Luce, $90,000 in the case of Ms. Lewent and Mr. Nunn, and $75,000 in the case of Mr. Luft). | ||
The options included in the Stock Options in Lieu of Retainer column were granted pursuant to Ms. Krawcheck’s election to receive stock options in lieu of her $75,000 annual cash retainer. This option award vests immediately and becomes exercisable ratably over 5 years (20% per year). The options expire 10 years from the date of grant. The number of options was determined by dividing 300% of the foregone retainer amount by the exercise price which was set at the fair market value of the common stock on the date of grant ($23.60). The grant date fair value for this award, computed in accordance with SFAS 123(R), was $68,116. |
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The following table sets forth the number of shares of restricted stock or stock units and the number of shares underlying stock options held by each of the non-employee directors as of the end of Fiscal 2008. |
Restricted | ||||||||
Stock/Restricted | ||||||||
Name | Stock Units | Stock Options | ||||||
Mr. Carty | 5,037 | 150,376 | ||||||
Mr. Gray | 13,512 | 83,375 | ||||||
Ms. Krawcheck | 17,941 | 56,865 | ||||||
Mr. Lafley | 17,941 | 47,325 | ||||||
Ms. Lewent | 17,325 | 157,669 | ||||||
Mr. Luce | 17,178 | 37,208 | ||||||
Mr. Luft | 16,689 | 165,091 | ||||||
Mr. Mandl | 13,512 | 167,704 | ||||||
Mr. Miles | 13,512 | 162,514 | ||||||
Mr. Nunn | 17,325 | 182,549 |
The information for Mr. Carty reflects awards he received in his capacity as a director prior to becoming an executive officer. For information regarding awards he received as an executive officer, see “Executive Compensation”. | ||
(b) | The amount in the Equity Awards columns reflects expenses attributable to Mr. Carty’s awards granted in his capacity as a director prior to his becoming an executive officer. During his tenure as an executive officer, he was not eligible for additional compensation for concurrent service on the Board. For a description of Mr. Carty’s compensation as an executive officer, see “Executive Compensation”. | |
(c) | Mr. Lafley deferred his $75,000 retainer into the deferred compensation plan. | |
(d) | Represents amount paid with respect to expired in-the-money stock options. After we delayed the filing of our Annual Report onForm 10-K for Fiscal 2008, we suspended the exercise of stock options. As a result, Mr. Miles had 198,888 options that expired while he had no ability to exercise or otherwise prevent their expiration. Along with other similarly situated directors, officers and employees, Mr. Miles received payment equal to the in-the-money value of the options at expiration. For information on the amount paid to Mr. Carty, see “Executive Compensation — Summary Compensation Table.” |
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Director Independence | ||
Director | Statusa | |
Mr. Carty | Not Independentb | |
Mr. Dell | Not Independentc | |
Mr. Gray | Independent | |
Ms. Krawcheck | Independentd | |
Mr. Lafley | Independente | |
Ms. Lewent | Independent | |
Mr. Luce | Independentf | |
Mr. Luft | Independentg | |
Mr. Mandl | Independenth | |
Mr. Miles | Independenti | |
Mr. Nunn | Independent | |
(a) | Unless otherwise noted, the Board’s determination that a director is independent was made on the basis of the standards set forth in the Corporate Governance Principles that are located at on our website at www.dell.com/corporategovernance. | |
(b) | Mr. Carty served as our Vice Chairman and Chief Financial Officer until June 2008 and, therefore, is not independent in accordance with the standards set forth in the Corporate Governance Principles. | |
(c) | Mr. Dell serves as our Chairman of the Board and Chief Executive Officer and, therefore, is not independent in accordance with the standards set forth in the Corporate Governance Principles. | |
(d) | Ms. Krawcheck serves as Chairman and Chief Executive Officer of Citi Global Wealth Management. During Fiscal 2008, we were both a customer of and a supplier to Citi, and the Board considered those relationships in assessing Ms. Krawcheck’s independence. | |
(e) | Mr. Lafley serves as Chairman and Chief Executive Officer of The Procter & Gamble Co., and during Fiscal 2008, we were a supplier to Procter & Gamble. In addition, Mr. Lafley is a director of the United Negro College Fund, and we made contributions to the UNCF during Fiscal 2008. The Board considered those relationships in assessing Mr. Lafley’s independence. | |
(f) | Mr. Luce serves as the President and Chief Executive Officer and a director of the National Math and Science Initiative, Inc. (“NMSI”), a not-for-profit organization dedicated to expanding programs that have a proven impact on math and science. The Michael and Susan Dell Foundation donated $1,000,000 to NMSI in Fiscal 2008. After considering all the surrounding facts and circumstances, the Board concluded that this relationship is not material and does not otherwise impair, or appear to impair, Mr. Luce’s ability to make independent judgments and, therefore, does not prevent Mr. Luce from being considered an “independent” director. In addition to the small size of the contribution in relation to NMSI’s total expected funding, the Board considered the following facts: (a) NMSI’s charitable purposes are squarely within the historical philanthropic focus of The Michael and Susan Dell Foundation; and (b) Mr. Luce is not compensated by NMSI and, thus, derives no financial benefit from the contribution. | |
(g) | Mr. Luft serves as Vice Chairman and International Advisor to Goldman Sachs Europe Limited. During Fiscal 2008, we were a supplier to Goldman Sachs. The Board considered this relationship in assessing Mr. Luft’s independence. | |
(h) | Mr. Mandl is the non-Executive Chairman of Gemalto and during Fiscal 2008, was the Executive Chairman of Gemalto. During Fiscal 2008, we were a supplier to Gemalto. The Board considered this relationship in assessing Mr. Mandl’s independence. | |
(i) | Mr. Miles’ son, Michael Miles, Jr., is President and Chief Operating Officer of Staples, Inc. Dell supplies products to Staples which Staples sells to its retail customers. The Board considered this relationship in assessing Mr. Miles’ independence. |
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Total as a | ||||||||||||||||
Percentage of | ||||||||||||||||
Options | Total | Shares | ||||||||||||||
Number of | Exercisable | Beneficial | Outstanding | |||||||||||||
Beneficial Owner | Shares Owned | Within 60 Days | Ownership | (if 1% or more)a | ||||||||||||
Michael S. Dell | 217,739,577 | b | 10,073,375 | 227,812,952 | 11.22% | |||||||||||
One Dell Way | ||||||||||||||||
Round Rock, Texas 78682 | ||||||||||||||||
Southeastern Asset Management, Inc. | 118,477,541 | — | 118,477,541 | 5.3% | ||||||||||||
6410 Poplar Avenue, Suite 900 | ||||||||||||||||
Memphis, Tennessee 38119 | ||||||||||||||||
Donald J. Carty | 609,902 | 175,756 | 785,658 | — | ||||||||||||
William H. Gray, III | 12,380 | 70,755 | 83,135 | — | ||||||||||||
Sallie L. Krawcheck | 11,832 | 9,465 | 21,297 | — | ||||||||||||
Alan (A.G.) Lafley | 11,832 | 9,465 | 21,297 | — | ||||||||||||
Judy C. Lewent | 15,057 | 145,049 | 160,106 | — | ||||||||||||
Thomas W. Luce, III | 47,688 | c | 18,488 | 66,176 | — | |||||||||||
Klaus S. Luft | 10,020 | 152,435 | 162,455 | — | ||||||||||||
Alex J. Mandl | 11,088 | d | 155,084 | 166,172 | — | |||||||||||
Michael A. Miles | 278,003 | 149,894 | 427,897 | — | ||||||||||||
Sam Nunn | 15,371 | 169,929 | 185,300 | — | ||||||||||||
Michael R. Cannon | 84,705 | 500,000 | 584,705 | — | ||||||||||||
Ronald G. Garriques | 0 | 100,000 | 100,000 | — | ||||||||||||
Mark Jarvis | 0 | 0 | 0 | — | ||||||||||||
Directors and executive officers as a group (22 persons) | 219,172,336 | 20,507,002 | 239,679,338 | 11.74% | ||||||||||||
(a) | Other than the percentage reported for Southeastern Asset Management, Inc., the percentage is based on the number of shares outstanding (2,020,664,594) at the close of business on April 30, 2008. The percentage reported for Southeastern Asset Management, Inc. is based on their Form 13G filed with the SEC on February 13, 2008. | |
(b) | Includes 1,482,435 shares held in a trust for the benefit of Mr. Dell’s children of which he is the trustee. Does not include 26,449,112 shares held in a separate property trust for Mr. Dell’s spouse and 1,482,434 shares held in a trust for the benefit of his children of which his spouse is trustee. | |
(c) | Includes 39,778 shares held in a personal retirement plan. | |
(d) | Includes 6,051 shares held by Mr. Mandl’s spouse and 1,300 shares held in an IRA for Mr. Mandl’s spouse. |
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Executive Officer | Reimbursement Amount | |||||||||||
Fiscal 2008 | Fiscal 2007 | Fiscal 2006 | ||||||||||
Mr. Dell | $ | 2,853,444 | $ | 1,861,356 | $ | 1,172,337 | ||||||
Mr. Carty | 44,033 | — | — | |||||||||
Mr. Cannon | 74,640 | — | — | |||||||||
Mr. Garriques | 8,660 | — | — | |||||||||
Mr. Parra | — | 206,423 | 67,260 | |||||||||
Mr. Rollins | — | 2,489,321 | 2,485,652 | |||||||||
Mr. Schneider | — | 183,201 | 130,988 | |||||||||
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• | Impact Venture Advisors (wholly owned by Adam Dell) will receive approximately $966,000 ($904,000 attributable to its interest in Impact Venture Partners and $62,000 attributable to its interest in Impact Entrepreneurs Fund). | |
• | Michael Dell, Susan Dell and their children’s will receive collectively approximately $9.79 million (approximately $9.04 million attributable to their interest in Impact Venture Partners and approximately $750,000 attributable to their interest in Impact Entrepreneurs Fund). | |
• | Mr. Dell’s parents will receive approximately $450,000 (all attributable to their interest in Impact Entrepreneurs Fund). |
• | Michael Dell was excluded from the negotiations and all aspects of the decision-making process. | |
• | The independent members of our Board of Directors (i.e., the members of our Board other than Michael Dell and Don Carty) explored and analyzed in detail the process by which management identified, proposed, analyzed and negotiated the acquisition to ensure that management was acting independently and in the best interests of Dell Inc. and its stockholders. In addition, in accordance with their respective charters, the Finance Committee of the Board (made up entirely of independent directors) reviewed and analyzed all aspects of the transaction and recommended that the transaction be approved by the full Board and the Audit Committee (also made up entirely of independent directors), the committee charged with approval at the time, reviewed and analyzed the related-party aspects of the transaction and recommended that the transaction be approved by the full Board. | |
• | Our Board of Directors sought, received and relied upon an opinion from Morgan Stanley & Co. Incorporated to the effect that, as of February 11, 2008, and based upon and subject to the matters stated in its opinion, the consideration to be paid by Dell pursuant to the merger agreement was fair, from a financial point of view, to Dell Inc. |
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• | an individual who is a citizen or resident of the United States; | |
• | a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of Columbia; | |
• | an estate whose income is subject to United States federal income taxation regardless of its source; or | |
• | a trust (i) if it is subject to the supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (ii) that has a valid election in effect under applicable Treasury regulations to be treated as a United States person. |
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• | the amount of cash proceeds and the fair market value of any property received on such disposition (less any amount attributable to accrued and unpaid interest on the notes, which will generally be taxable as ordinary income if you have not previously included such interest in income); and | |
• | your adjusted tax basis in the notes (which will generally equal the cost of the notes to you, reduced by any previous payments of principal received by you). |
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• | do not own, actually or constructively, 10% or more of the combined voting power of all classes of our stock entitled to vote; | |
• | are not a controlled foreign corporation related to us through stock ownership; | |
• | are not a bank that is receiving the interest pursuant to a loan agreement entered into in the ordinary course of your trade or business; and | |
• | appropriately certify as to your foreign status. |
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• | you acquire the new notes in the ordinary course of your business; and | |
• | you are not engaged in, and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of such new notes. | |
• | You may not participate in the exchange offer if you are: | |
• | an “affiliate” (within the meaning of Rule 405 under the Securities Act) of us; or | |
• | a broker-dealer that acquired old notes directly from us. |
• | in the over-the-counter market; | |
• | in negotiated transactions; | |
• | through the writing of options on the new notes; or | |
• | a combination of such methods of resale; |
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Dell Inc. Unaudited Financial Statements: | ||||
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F-3 | ||||
F-4 | ||||
F-5 | ||||
Dell Inc. Audited Financial Statements: | ||||
F-24 | ||||
F-25 | ||||
F-26 | ||||
F-27 | ||||
F-28 | ||||
F-29 | ||||
F-30 | ||||
Financial Statement Schedule: | ||||
F-74 |
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August 1, | February 1, | |||||||
2008 | 2008 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 8,623 | $ | 7,764 | ||||
Short-term investments | 410 | 208 | ||||||
Accounts receivable, net | 6,451 | 5,961 | ||||||
Financing receivables, net | 1,629 | 1,732 | ||||||
Inventories, net | 1,104 | 1,180 | ||||||
Other | 3,559 | 3,035 | ||||||
Total current assets | 21,776 | 19,880 | ||||||
Property, plant, and equipment, net | 2,588 | 2,668 | ||||||
Investments | 501 | 1,560 | ||||||
Long-term financing receivables, net | 348 | 407 | ||||||
Goodwill | 1,753 | 1,648 | ||||||
Purchased intangible assets, net | 781 | 780 | ||||||
Other non-current assets | 660 | 618 | ||||||
Total assets | $ | 28,407 | $ | 27,561 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term debt | $ | 129 | $ | 225 | ||||
Accounts payable | 11,215 | 11,492 | ||||||
Accrued and other | 4,271 | 4,323 | ||||||
Short-term deferred service revenue | 2,572 | 2,486 | ||||||
Total current liabilities | 18,187 | 18,526 | ||||||
Long-term debt | 1,840 | 362 | ||||||
Long-term deferred service revenue | 3,117 | 2,774 | ||||||
Other non-current liabilities | 2,357 | 2,070 | ||||||
Total liabilities | 25,501 | 23,732 | ||||||
Commitments and contingencies (Note 10) | ||||||||
Redeemable common stock and capital in excess of $.01 par value; shares issued and outstanding: 4 and 4, respectively (Note 13) | 83 | 94 | ||||||
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 authorized: 7,000; shares issued: 3,332 and 3,320, respectively; shares outstanding: 1,960 and 2,060, respectively | 10,781 | 10,589 | ||||||
Treasury stock at cost: 897 and 785 shares, respectively | (27,488 | ) | (25,037 | ) | ||||
Retained earnings | 19,599 | 18,199 | ||||||
Accumulated other comprehensive loss | (69 | ) | (16 | ) | ||||
Total stockholders’ equity | 2,823 | 3,735 | ||||||
Total liabilities and equity | $ | 28,407 | $ | 27,561 | ||||
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts; unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
August 1, | August 3, | August 1, | August 3, | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Net revenue | $ | 16,434 | $ | 14,776 | $ | 32,511 | $ | 29,498 | ||||||||
Cost of net revenue | 13,607 | 11,825 | 26,719 | 23,709 | ||||||||||||
Gross margin | 2,827 | 2,951 | 5,792 | 5,789 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general, and administrative | 1,840 | 1,894 | 3,752 | 3,657 | ||||||||||||
Research, development, and engineering | 168 | 155 | 320 | 297 | ||||||||||||
In-process research and development | - | - | 2 | - | ||||||||||||
Total operating expenses | 2,008 | 2,049 | 4,074 | 3,954 | ||||||||||||
Operating income | 819 | 902 | 1,718 | 1,835 | ||||||||||||
Investment and other income, net | 18 | 96 | 143 | 174 | ||||||||||||
Income before income taxes | 837 | 998 | 1,861 | 2,009 | ||||||||||||
Income tax provision | 221 | 252 | 461 | 507 | ||||||||||||
Net income | $ | 616 | $ | 746 | $ | 1,400 | $ | 1,502 | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.31 | $ | 0.33 | $ | 0.70 | $ | 0.67 | ||||||||
Diluted | $ | 0.31 | $ | 0.33 | $ | 0.69 | $ | 0.66 | ||||||||
Weighted-average shares outstanding: | ||||||||||||||||
Basic | 1,991 | 2,237 | 2,013 | 2,236 | ||||||||||||
Diluted | 1,999 | 2,264 | 2,019 | 2,259 |
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Six Months Ended | ||||||||
August 1, | August 3, | |||||||
2008 | 2007 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 1,400 | $ | 1,502 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 381 | 271 | ||||||
Stock-based compensation | 128 | 194 | ||||||
Excess tax benefits from stock-based compensation | - | (12 | ) | |||||
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies | (110 | ) | 31 | |||||
Deferred income taxes | (19 | ) | (61 | ) | ||||
Other | 85 | 28 | ||||||
Changes in operating assets and liabilities, net of effects from acquisitions: | ||||||||
Accounts receivable | (392 | ) | (565 | ) | ||||
Financing receivables | 19 | (118 | ) | |||||
Inventories | 77 | (311 | ) | |||||
Other assets | (473 | ) | 92 | |||||
Accounts payable | (328 | ) | 114 | |||||
Deferred service revenue | 405 | 440 | ||||||
Accrued and other liabilities | 78 | 149 | ||||||
Change in cash from operating activities | 1,251 | 1,754 | ||||||
Cash flows from investing activities: | ||||||||
Investments: | ||||||||
Purchases | (788 | ) | (1,765 | ) | ||||
Maturities and sales | 1,752 | 2,127 | ||||||
Capital expenditures | (264 | ) | (464 | ) | ||||
Proceeds from sale of facility and land | 44 | - | ||||||
Acquisition of business, net of cash received | (165 | ) | (19 | ) | ||||
Change in cash from investing activities | 579 | (121 | ) | |||||
Cash flows from financing activities: | ||||||||
Repurchase of common stock | (2,451 | ) | - | |||||
Issuance of common stock under employee plans | 68 | 21 | ||||||
Excess tax benefits from stock-based compensation | - | 12 | ||||||
Issuance (payment) of commercial paper, net | 100 | (40 | ) | |||||
Proceeds from issuance of debt | 1,519 | 25 | ||||||
Repayments of debt | (223 | ) | (29 | ) | ||||
Other | - | (5 | ) | |||||
Change in cash from financing activities | (987 | ) | (16 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 16 | 41 | ||||||
Change in cash and cash equivalents | 859 | 1,658 | ||||||
Cash and cash equivalents at beginning of period | 7,764 | 9,546 | ||||||
Cash and cash equivalents at end of period | $ | 8,623 | $ | 11,204 | ||||
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NOTE 1 — | BASIS OF PRESENTATION |
F-5
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NOTE 2 — | INVENTORIES |
August 1, | February 1, | |||||||
2008 | 2008(a) | |||||||
(in millions) | ||||||||
Inventories, net: | ||||||||
Production materials | $ | 573 | $ | 714 | ||||
Work-in-process | 182 | 144 | ||||||
Finished goods | 349 | 322 | ||||||
Inventories, net | $ | 1,104 | $ | 1,180 | ||||
(a) | Certain prior period amounts have been changed to conform to the current year presentation. There is no impact to the condensed consolidated financial statements as a result of this change. |
NOTE 3 — | EARNINGS PER COMMON SHARE |
F-6
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Three Months Ended | Six Months Ended | |||||||||||||||
August 1, | August 3, | August 1, | August 3, | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(in millions, except per share amounts) | ||||||||||||||||
Numerator: | ||||||||||||||||
Net income | $ | 616 | $ | 746 | $ | 1,400 | $ | 1,502 | ||||||||
Denominator: | ||||||||||||||||
Weighted-average shares outstanding: | ||||||||||||||||
Basic | 1,991 | 2,237 | 2,013 | 2,236 | ||||||||||||
Effect of dilutive options, restricted stock units, restricted stock, and other | 8 | 27 | 6 | 23 | ||||||||||||
Diluted | 1,999 | 2,264 | 2,019 | 2,259 | ||||||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.31 | $ | 0.33 | $ | 0.70 | $ | 0.67 | ||||||||
Diluted | $ | 0.31 | $ | 0.33 | $ | 0.69 | $ | 0.66 | ||||||||
NOTE 4 — | COMPREHENSIVE INCOME |
Three Months Ended | Six Months Ended | |||||||||||||||
August 1, | August 3, | August 1, | August 3, | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(in millions) | ||||||||||||||||
Comprehensive income: | ||||||||||||||||
Net income | $ | 616 | $ | 746 | $ | 1,400 | $ | 1,502 | ||||||||
Unrealized gains (losses) on foreign currency hedging instruments, net | 14 | 8 | (17) | (74) | ||||||||||||
Unrealized gains (losses) on marketable securities, net | 2 | 3 | (23) | 15 | ||||||||||||
Foreign currency translation adjustments | 28 | 3 | (13) | 4 | ||||||||||||
Comprehensive income | $ | 660 | $ | 760 | $ | 1,347 | $ | 1,447 | ||||||||
NOTE 5 — | FINANCIAL SERVICES |
F-7
Table of Contents
August 1, | February 1, | |||||||
2008 | 2008 | |||||||
(in millions) | ||||||||
Financing receivables, net: | ||||||||
Customer receivables: | ||||||||
Revolving loans, gross | $ | 784 | $ | 1,063 | ||||
Fixed-term leases and loans, gross | 698 | 654 | ||||||
Customer receivables, gross | 1,482 | 1,717 | ||||||
Customer receivables allowance | (102) | (96) | ||||||
Customer receivables, net | 1,380 | 1,621 | ||||||
Residual interest | 285 | 295 | ||||||
Retained interest | 312 | 223 | ||||||
Financing receivables, net | $ | 1,977 | $ | 2,139 | ||||
Short-term | $ | 1,629 | $ | 1,732 | ||||
Long-term | 348 | 407 | ||||||
Financing receivables, net | $ | 1,977 | $ | 2,139 | ||||
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• | Customer receivables are presented net of allowance for uncollectible accounts. The allowance is based on factors including historical experience, past due receivables, receivable type, and the risk composition of the receivables. |
– | Revolving loans offered under private label credit financing programs provide qualified customers with a revolving credit line for the purchase of products and services offered by Dell. Revolving loans bear interest at a variable annual percentage rate that is tied to the prime rate. From time to time, account holders may have the opportunity to finance their Dell purchases with special programs during which, if the outstanding balance is paid in full, no interest is charged. These special programs generally range from 3 to 12 months and have an average original term of approximately 12 months. At August 1, 2008, and February 1, 2008, $379 million and $668 million, respectively, were receivables under these special programs. | |
– | Leases with business customers have fixed terms of two to five years. Future maturities of minimum lease payments at August 1, 2008, are as follows: 2009: $94 million; 2010: $128 million; 2011: $77 million; 2012: $24 million; and 2013: $1 million. Fixed-term loans are also offered to qualified small businesses and primarily consist of loans with short-term maturities. |
• | Dell retains a residual interest in the leased equipment. The amount of the residual interest is established at the inception of the lease based upon estimates of the equipment value at the end of the lease term using historical studies, industry data, and futurevalue-at-risk demand valuation methods. On a periodic basis, Dell assesses the carrying amount of its recorded residual values for impairment. Anticipated declines in specific future residual values that are considered to be other-than-temporary are recorded in current earnings. |
• | Retained interests represent the residual beneficial interest Dell retains in certain pools of securitized financing receivables. Retained interests are stated at the present value of the estimated net beneficial cash flows after payment of all senior interests. Dell values the retained interest at the time of each receivable sale and at the end of each reporting period. All gains and losses are recognized in income immediately. The fair value of the retained interest is determined using a discounted cash flow model with various key assumptions, including payment rates, credit losses, discount rates, and the remaining life of the receivables sold. These assumptions are supported by both Dell’s historical experience and anticipated trends relative to the particular receivable pool. |
F-9
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Three Months Ended | Six Months Ended | ||||||||||||||||
August 1, | August 3, | August 1, | August 3, | ||||||||||||||
2008 | 2007 | 2008 | 2007 | ||||||||||||||
(in millions) | |||||||||||||||||
Retained interest: | |||||||||||||||||
Retained interest at beginning of period | $ | 317 | $ | 164 | $ | 223 | $ | 158 | |||||||||
Issuances | 76 | 37 | 232 | 80 | |||||||||||||
Distributions from conduits | (85) | (41) | (140) | (81) | |||||||||||||
Net accretion | 10 | 8 | 20 | 11 | |||||||||||||
Change in fair value for the period | (6) | 3 | (23) | 3 | |||||||||||||
Retained interest at end of period | $ | 312 | $ | 171 | $ | 312 | $ | 171 | |||||||||
Weighted Average Key Assumptions | ||||||||||||||||
Monthly | ||||||||||||||||
Payment | Credit | Discount | ||||||||||||||
Rates | Losses | Rates | Life | |||||||||||||
(lifetime) | (annualized) | (months) | ||||||||||||||
Time of sale valuation of retained interest | 11 | % | 7 | % | 15 | % | 14 | |||||||||
Valuation of retained interests | 8 | % | 11 | % | 14 | % | 12 |
F-10
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August 1, | ||||
2008 | ||||
(in millions) | ||||
Adverse change of: | ||||
Expected prepayment speed: 10% | $ | (9 | ) | |
Expected prepayment speed: 20% | $ | (14 | ) | |
Expected credit losses: 10% | $ | (12 | ) | |
Expected credit losses: 20% | $ | (23 | ) | |
Discount rate: 10% | $ | (5 | ) | |
Discount rate: 20% | $ | (9 | ) |
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NOTE 6 — | FAIR VALUE |
• | Level 1: Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date. |
• | Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
• | Level 3: Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instruments valuation. |
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Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Quoted | ||||||||||||||||
Prices in | Significant | |||||||||||||||
Active | Other | Significant | ||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||
Identical | Inputs | Inputs | ||||||||||||||
Assets | ||||||||||||||||
(in millions) | ||||||||||||||||
Investments - available for sale securities | $ | - | $ | 848 | $ | 26 | $ | 874 | ||||||||
Investments - trading securities | 2 | 104 | - | 106 | ||||||||||||
Retained interest | - | - | 312 | 312 | ||||||||||||
Derivative instruments | - | 77 | - | 77 | ||||||||||||
Total assets measured at fair value on recurring basis | $ | 2 | $ | 1,029 | $ | 338 | $ | 1,369 | ||||||||
Derivative instruments | - | 44 | - | 44 | ||||||||||||
Total liabilities measured at fair value on recurring basis | $ | - | $ | 44 | $ | - | $ | 44 | ||||||||
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Investments | ||||||||||||
Retained | Available | |||||||||||
Three Months Ended August 1, 2008 | Interest | for Sale | Total | |||||||||
(in millions) | ||||||||||||
Balance at May 2, 2008 | $ | 317 | $ | 25 | $ | 342 | ||||||
Net unrealized gains included in earnings | 4 | 1 | 5 | |||||||||
Issuances and settlements | (9) | - | (9) | |||||||||
Purchases | - | - | - | |||||||||
Balance at August 1, 2008 | $ | 312 | $ | 26 | $ | 338 | ||||||
Investments | ||||||||||||
Retained | Available | |||||||||||
Six Months Ended August 1, 2008 | Interest | for Sale | Total | |||||||||
(in millions) | ||||||||||||
Balance at February 1, 2008 | $ | 223 | $ | - | $ | 223 | ||||||
Net unrealized gains (losses) included in earnings | (3) | 1 | (2) | |||||||||
Issuances and settlements | 92 | - | 92 | |||||||||
Purchases | - | 25 | 25 | |||||||||
Balance at August 1, 2008 | $ | 312 | $ | 26 | $ | 338 | ||||||
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NOTE 7 — | WARRANTY LIABILITY AND RELATED DEFERRED SERVICE REVENUE |
Three Months Ended | Six Months Ended | |||||||||||||||
August 1, | August 3, | August 1, | August 3, | |||||||||||||
2008 | 2007(b) | 2008 | 2007(b) | |||||||||||||
(in millions) | ||||||||||||||||
Deferred service revenue: | ||||||||||||||||
Deferred service revenue at beginning of period | $ | 5,424 | $ | 4,408 | $ | 5,260 | $ | 4,221 | ||||||||
Revenue deferred for new extended warranty and service contracts sold | 1,055 | 923 | 2,007 | 1,747 | ||||||||||||
Revenue recognized | (790) | (669) | (1,578) | (1,306) | ||||||||||||
Deferred service revenue at end of period | $ | 5,689 | $ | 4,662 | $ | 5,689 | $ | 4,662 | ||||||||
Current portion | $ | 2,572 | $ | 2,223 | $ | 2,572 | $ | 2,223 | ||||||||
Non-current portion | 3,117 | 2,438 | 3,117 | 2,438 | ||||||||||||
Deferred service revenue at end of period | $ | 5,689 | $ | 4,662 | $ | 5,689 | $ | 4,662 | ||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
August 1, | August 3, | August 1, | August 3, | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(in millions) | ||||||||||||||||
Warranty liability : | ||||||||||||||||
Warranty liability at beginning of period | $ | 1,014 | $ | 889 | $ | 929 | $ | 958 | ||||||||
Costs accrued for new warranty contracts and changes in estimates for pre-existing warranties(a) | 315 | 308 | 667 | 560 | ||||||||||||
Service obligations honored | (251) | (283) | (518) | (604) | ||||||||||||
Warranty liability at end of period | $ | 1,078 | $ | 914 | $ | 1,078 | $ | 914 | ||||||||
Current portion | $ | 725 | $ | 643 | $ | 725 | $ | 643 | ||||||||
Non-current portion | 353 | 271 | 353 | 271 | ||||||||||||
Warranty liability at end of period | $ | 1,078 | $ | 914 | $ | 1,078 | $ | 914 | ||||||||
(a) | Changes in cost estimates related to pre-existing warranties are aggregated with accruals for new warranty contracts. Dell’s warranty liability process does not differentiate between estimates made for pre-existing warranties and new warranty obligations. |
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(b) | Prior period amounts have been changed to reflect a reclassification between the current portion and non-current portion of deferred service revenue. There is no impact to the Condensed Consolidated Statements of Income as a result of this change. |
NOTE 8 — | ACQUISITIONS |
NOTE 9 — | GOODWILL AND INTANGIBLE ASSETS |
Americas | EMEA | APJ | Global | |||||||||||||||||
Commercial | Commercial | Commercial | Consumer | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Balance at February 1, 2008 | $ | 822 | $ | 412 | $ | 127 | $ | 287 | $ | 1,648 | ||||||||||
Goodwill acquired | 72 | 34 | 20 | - | 126 | |||||||||||||||
Adjustments to goodwill | (18) | (6) | (7) | 10 | (21) | |||||||||||||||
Balance at August 1, 2008 | $ | 876 | $ | 440 | $ | 140 | $ | 297 | $ | 1,753 | ||||||||||
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August 1, 2008 | February 1, 2008 | |||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||
Gross | Amortization | Net | Gross | Amortization | Net | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Technology | $ | 524 | $ | (47) | $ | 477 | $ | 492 | $ | (16) | $ | 476 | ||||||||||||
Customer relationships | 248 | (27) | 221 | 231 | (9) | 222 | ||||||||||||||||||
Tradenames | 41 | (6) | 35 | 39 | (6) | 33 | ||||||||||||||||||
Covenantsnot-to-compete | 26 | (3) | 23 | 23 | (1) | 22 | ||||||||||||||||||
Amortizable intangible assets | $ | 839 | $ | (83) | $ | 756 | $ | 785 | $ | (32) | $ | 753 | ||||||||||||
Indefinite lived intangible assets | 25 | — | 25 | 27 | — | 27 | ||||||||||||||||||
Total intangible assets | $ | 864 | $ | (83) | $ | 781 | $ | 812 | $ | (32) | $ | 780 | ||||||||||||
Fiscal Years | (in millions) | |||
2009 (remaining 6 months) | $ | 54 | ||
2010 | 161 | |||
2011 | 145 | |||
2012 | 122 | |||
2013 | 100 | |||
Thereafter | 174 | |||
Total | $ | 756 | ||
NOTE 10 — | COMMITMENTS AND CONTINGENCIES |
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• | Investigations and Related Litigation— In August 2005, the SEC initiated an inquiry into certain of Dell’s accounting and financial reporting matters and requested that Dell provide certain documents. The SEC expanded that inquiry in June 2006 and entered a formal order of investigation in October 2006. The SEC’s requests for information were joined by a similar request from the United States Attorney for the Southern District of New York (“SDNY”), who subpoenaed documents related to Dell’s financial reporting from and after Fiscal 2002. In August 2006, because of potential issues identified in the course of responding to the SEC’s requests for information, Dell’s Audit Committee, on the recommendation of management and in consultation with PricewaterhouseCoopers LLP, Dell’s independent registered public accounting firm, initiated an independent investigation, which was completed in the third quarter of Fiscal 2008. Although the Audit Committee investigation has been completed, the investigations being conducted by the SEC and the SDNY are ongoing. Dell continues to cooperate with the SEC and the SDNY. |
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• | Copyright Levies— Proceedings against the IT industry in Germany seek to impose levies on equipment such as personal computers and multifunction devices that facilitate making private copies of copyrighted materials. The total levies due, if imposed, would be based on the number of products sold and the per-product amounts of the levies, which vary. Dell, along with other companies and various industry associations, are opposing these levies and instead are advocating compensation to rights holders through digital rights management systems. |
On December 29, 2005, Zentralstelle Für private Überspielungrechte (“ZPÜ”), a joint association of various German collection societies, instituted arbitration proceedings against Dell’s German subsidiary before the Arbitration Body in Munich. ZPÜ claims a levy of €18.4 per PC that Dell sold in Germany from January 1, 2002, through December 31, 2005. On July 31, 2007, the Arbitration Body recommended a levy of €15 on each PC sold during that period for audio and visual copying capabilities. Dell and ZPÜ rejected the recommendation, and on February 21, 2008, ZPÜ filed a lawsuit in the German Regional Court in Munich. Dell plans to continue to defend this claim vigorously and does not expect the outcome to have a material adverse effect on its financial condition or results of operations. Dell is currently not aware of any other pending levy cases before the German Federal Supreme Court that could reasonably be expected to have a material adverse impact on Dell. |
• | Lucent v. Dell— In February 2003, Lucent Technologies, Inc. filed a lawsuit against Dell alleging that Dell infringed 12 patents owned by Lucent and seeking monetary damages and injunctive relief. The asserted patents are owned by two parties: Alcatel-Lucent and Multimedia Patent Trust (“MPT”). Dell settled with MPT, licensing the patents asserted by MPT in the lawsuit, but not with Alcatel-Lucent. Trial as to the Alcatel-Lucent owned patents resulted in a jury verdict on April 4, 2008. The verdict was in Dell’s favor except for a $51,000 liability for infringement of one of the Alcatel-Lucent owned patents (which is subject to indemnity by Microsoft). Given the recent favorable court rulings and the resolution of the indemnity coverage related to Microsoft products, Dell reduced its reserves by $55 million through cost of sales in the first quarter of Fiscal 2009. In a decision dated May 8, 2008, the Federal Circuit Court of Appeals reversed the claim interpretation and remanded to the District Court one of the patents on which Dell had won summary judgment (which is also subject to the Microsoft indemnity). Dell does not expect the outcome of this legal proceeding to have a material adverse effect on its financial condition or results of operations or cash flows. |
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NOTE 11 — | SEGMENT INFORMATION |
F-20
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Three Months Ended | Six Months Ended | |||||||||||||||
August 1, | August 3, | August 1, | August 3, | |||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(in millions) | ||||||||||||||||
Net revenue: | ||||||||||||||||
Americas Commercial | $ | 8,096 | $ | 7,680 | $ | 15,394 | $ | 14,931 | ||||||||
EMEA Commercial | 3,503 | 3,162 | 7,309 | 6,479 | ||||||||||||
APJ Commercial | 2,054 | 1,765 | 4,078 | 3,472 | ||||||||||||
Global Consumer | 2,781 | 2,169 | 5,730 | 4,616 | ||||||||||||
Net revenue | $ | 16,434 | $ | 14,776 | $ | 32,511 | $ | 29,498 | ||||||||
Consolidated operating income: | ||||||||||||||||
Americas Commercial | $ | 700 | $ | 757 | $ | 1,288 | $ | 1,401 | ||||||||
EMEA Commercial | 72 | 202 | 293 | 484 | ||||||||||||
APJ Commercial | 157 | 142 | 288 | 228 | ||||||||||||
Global Consumer | (5 | ) | 5 | 30 | 23 | |||||||||||
Consolidated segment operating income | 924 | 1,106 | 1,899 | 2,136 | ||||||||||||
Stock-based compensation expense | (78 | ) | (204 | ) | (128 | ) | (301 | ) | ||||||||
In-process research and development | - | - | (2 | ) | - | |||||||||||
Amortization of intangible assets | (27 | ) | - | (51 | ) | - | ||||||||||
Consolidated operating income | $ | 819 | $ | 902 | $ | 1,718 | $ | 1,835 | ||||||||
NOTE 12 — | DEBT |
F-21
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F-22
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NOTE 13 — | REDEEMABLE COMMON STOCK |
F-23
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F-24
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F-25
Table of Contents
February 1, | February 2, | |||||||
2008 | 2007 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 7,764 | $ | 9,546 | ||||
Short-term investments | 208 | 752 | ||||||
Accounts receivable, net of allowance | 5,961 | 4,622 | ||||||
Financing receivables, net of allowance | 1,732 | 1,530 | ||||||
Inventories, net of allowance | 1,180 | 660 | ||||||
Other | 3,035 | 2,829 | ||||||
Total current assets | 19,880 | 19,939 | ||||||
Property, plant, and equipment, net of depreciation | 2,668 | 2,409 | ||||||
Investments | 1,560 | 2,147 | ||||||
Long-term financing receivables, net of allowance | 407 | 323 | ||||||
Goodwill | 1,648 | 110 | ||||||
Intangible assets, net of amortization | 780 | 45 | ||||||
Other non-current assets | 618 | 662 | ||||||
Total assets | $ | 27,561 | $ | 25,635 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term borrowings | $ | 225 | $ | 188 | ||||
Accounts payable | 11,492 | 10,430 | ||||||
Accrued and other | 4,323 | 5,141 | ||||||
Short-term deferred service revenue | 2,486 | 2,032 | ||||||
Total current liabilities | 18,526 | 17,791 | ||||||
Long-term debt | 362 | 569 | ||||||
Long-term deferred service revenue | 2,774 | 2,189 | ||||||
Other non-current liabilities | 2,070 | 647 | ||||||
Total liabilities | 23,732 | 21,196 | ||||||
Commitments and contingencies (Note 10) | ||||||||
Redeemable common stock and capital in excess of $.01 par value; shares issued and outstanding: 4 and 5, respectively (Note 4) | 94 | 111 | ||||||
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 authorized: 7,000; shares issued: 3,320 and 3,307, respectively; shares outstanding: 2,060 and 2,226, respectively | 10,589 | 10,107 | ||||||
Treasury stock at cost: 785 and 606 shares, respectively | (25,037 | ) | (21,033 | ) | ||||
Retained earnings | 18,199 | 15,282 | ||||||
Accumulated other comprehensive loss | (16 | ) | (28 | ) | ||||
Total stockholders’ equity | 3,735 | 4,328 | ||||||
Total liabilities and stockholders’ equity | $ | 27,561 | $ | 25,635 | ||||
F-26
Table of Contents
Fiscal Year Ended | ||||||||||||
February 1, | February 2, | February 3 | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Net revenue | $ | 61,133 | $ | 57,420 | $ | 55,788 | ||||||
Cost of net revenue(1) | 49,462 | 47,904 | 45,897 | |||||||||
Gross margin | 11,671 | 9,516 | 9,891 | |||||||||
Operating expenses: | ||||||||||||
Selling, general, and administrative(1) | 7,538 | 5,948 | 5,051 | |||||||||
In-process research and development | 83 | - | - | |||||||||
Research, development, and engineering(1) | 610 | 498 | 458 | |||||||||
Total operating expenses | 8,231 | 6,446 | 5,509 | |||||||||
Operating income | 3,440 | 3,070 | 4,382 | |||||||||
Investment and other income, net | 387 | 275 | 226 | |||||||||
Income before income taxes | 3,827 | 3,345 | 4,608 | |||||||||
Income tax provision | 880 | 762 | 1,006 | |||||||||
Net income | $ | 2,947 | $ | 2,583 | $ | 3,602 | ||||||
Earnings per common share: | ||||||||||||
Basic | $ | 1.33 | $ | 1.15 | $ | 1.50 | ||||||
Diluted | $ | 1.31 | $ | 1.14 | $ | 1.47 | ||||||
Weighted-average shares outstanding: | ||||||||||||
Basic | 2,223 | 2,255 | 2,403 | |||||||||
Diluted | 2,247 | 2,271 | 2,449 |
(1) | Cost of net revenue and operating expenses for the fiscal years ended February 1, 2008 and February 2, 2007, include stock-based compensation expense pursuant to Statement of Financial Accounting Standards No. 123 (revised 2004),Share-Based Payment,(“SFAS 123(R)”). See Note 5 of Notes to Consolidated Financial Statements for additional information. |
F-27
Table of Contents
Fiscal Year Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 2,947 | $ | 2,583 | $ | 3,602 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 607 | 471 | 394 | |||||||||
Stock-based compensation | 329 | 368 | 17 | |||||||||
In-process research and development charges | 83 | - | - | |||||||||
Excess tax benefits from stock-based compensation | (12 | ) | (80 | ) | - | |||||||
Tax benefits from employee stock plans | - | - | 224 | |||||||||
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies | 30 | 37 | (3 | ) | ||||||||
Other | 133 | 61 | 157 | |||||||||
Changes in: | ||||||||||||
Operating working capital | (519 | ) | 397 | (53 | ) | |||||||
Non-current assets and liabilities | 351 | 132 | 413 | |||||||||
Net cash provided by operating activities | 3,949 | 3,969 | 4,751 | |||||||||
Cash flows from investing activities: | ||||||||||||
Investments: | ||||||||||||
Purchases | (2,394 | ) | (8,343 | ) | (6,796 | ) | ||||||
Maturities and sales | 3,679 | 10,320 | 11,692 | |||||||||
Capital expenditures | (831 | ) | (896 | ) | (747 | ) | ||||||
Acquisition of business, net of cash received | (2,217 | ) | (118 | ) | - | |||||||
Proceeds from sale of building | - | 40 | - | |||||||||
Net cash (used in) provided by investing activities | (1,763 | ) | 1,003 | 4,149 | ||||||||
Cash flows from financing activities: | ||||||||||||
Repurchase of common stock | (4,004 | ) | (3,026 | ) | (7,249 | ) | ||||||
Issuance of common stock under employee plans | 136 | 314 | 1,051 | |||||||||
Excess tax benefits from stock-based compensation | 12 | 80 | - | |||||||||
(Repayment) issuance of commercial paper, net | (100 | ) | 100 | - | ||||||||
Repayments of borrowings | (165 | ) | (63 | ) | (81 | ) | ||||||
Proceeds from borrowings | 66 | 52 | 55 | |||||||||
Other | (65 | ) | (8 | ) | (28 | ) | ||||||
Net cash used in financing activities | (4,120 | ) | (2,551 | ) | (6,252 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | 152 | 71 | (73 | ) | ||||||||
Net (decrease) increase in cash and cash equivalents | (1,782 | ) | 2,492 | 2,575 | ||||||||
Cash and cash equivalents at beginning of year | 9,546 | 7,054 | 4,479 | |||||||||
Cash and cash equivalents at end of year | $ | 7,764 | $ | 9,546 | $ | 7,054 | ||||||
F-28
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Common Stock and | Accumulated | |||||||||||||||||||||||||||||||||||||||
Capital in Excess of | Other | |||||||||||||||||||||||||||||||||||||||
Par Value | Treasury Sock | Comprehensive | ||||||||||||||||||||||||||||||||||||||
Issued Shares | Amount | Shares | Amount | Retained Earnings | Loss | Other | Total | |||||||||||||||||||||||||||||||||
Balances at January 28, 2005 | 2,769 | $ | 8,195 | 284 | $ | (10,758 | ) | $ | 9,097 | $ | (78 | ) | $ | (44 | ) | $ | 6,412 | |||||||||||||||||||||||
Net income | - | - | - | - | 3,602 | - | - | 3,602 | ||||||||||||||||||||||||||||||||
Change in net unrealized loss on investments, net of taxes | - | - | - | - | - | (24 | ) | - | (24 | ) | ||||||||||||||||||||||||||||||
Foreign currency translation adjustments | - | - | - | - | - | (8 | ) | - | (8 | ) | ||||||||||||||||||||||||||||||
Change in net unrealized loss on derivative instruments, net of taxes | - | - | - | - | - | 9 | - | 9 | ||||||||||||||||||||||||||||||||
Total comprehensive income | - | - | - | - | - | - | - | 3,579 | ||||||||||||||||||||||||||||||||
Stock issuances under employee plans, including tax benefits | 49 | 1,308 | - | - | - | - | - | 1,308 | ||||||||||||||||||||||||||||||||
Repurchases | - | - | 204 | (7,249 | ) | - | - | - | (7,249 | ) | ||||||||||||||||||||||||||||||
Other | - | - | - | - | - | - | (3 | ) | (3 | ) | ||||||||||||||||||||||||||||||
Balances at February 3, 2006 | 2,818 | $ | 9,503 | 488 | $ | (18,007 | ) | $ | 12,699 | $ | (101 | ) | $ | (47 | ) | $ | 4,047 | |||||||||||||||||||||||
Net income | - | - | - | - | 2,583 | - | - | 2,583 | ||||||||||||||||||||||||||||||||
Change in net unrealized loss on investments, net of taxes | - | - | - | - | - | 31 | - | 31 | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | - | - | - | - | - | (11 | ) | - | (11 | ) | ||||||||||||||||||||||||||||||
Change in net unrealized gain on derivative instruments, net of taxes | - | - | - | - | - | 30 | - | 30 | ||||||||||||||||||||||||||||||||
Valuation of retained interests in securitized assets, net of taxes | - | - | - | - | - | 23 | - | 23 | ||||||||||||||||||||||||||||||||
Total comprehensive income | - | - | - | - | - | - | - | 2,656 | ||||||||||||||||||||||||||||||||
Stock issuances under employee plans(b) | 14 | 196 | - | - | - | - | - | 196 | ||||||||||||||||||||||||||||||||
Repurchases | - | - | 118 | (3,026 | ) | - | - | - | (3,026 | ) | ||||||||||||||||||||||||||||||
Stock-based compensation expense under SFAS 123(R) | - | 368 | - | - | - | - | - | 368 | ||||||||||||||||||||||||||||||||
Tax benefit from employee stock plans | - | 56 | - | - | - | - | - | 56 | ||||||||||||||||||||||||||||||||
Other and shares issued to subsidiaries | 475 | (16 | ) | - | - | - | - | 47 | 31 | |||||||||||||||||||||||||||||||
Balances at February 2, 2007 | 3,307 | $ | 10,107 | 606 | $ | (21,033 | ) | $ | 15,282 | $ | (28 | ) | $ | - | $ | 4,328 | ||||||||||||||||||||||||
Net income | - | - | - | - | 2,947 | - | - | 2,947 | ||||||||||||||||||||||||||||||||
Impact of adoption of SFAS 155 | - | - | - | - | 29 | (23 | ) | 6 | ||||||||||||||||||||||||||||||||
Change in net unrealized gain on investments, net of taxes | - | - | - | - | - | 56 | - | 56 | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | - | - | - | - | - | 17 | - | 17 | ||||||||||||||||||||||||||||||||
Change in net unrealized loss on derivative instruments, net of taxes | - | - | - | - | - | (38 | ) | - | (38 | ) | ||||||||||||||||||||||||||||||
Total comprehensive income | - | - | - | - | - | - | - | 2,988 | ||||||||||||||||||||||||||||||||
Impact of adoption of FIN 48 | - | (3 | ) | - | - | (59 | ) | - | (62 | ) | ||||||||||||||||||||||||||||||
Stock issuances under employee plans(a) | 13 | 153 | - | - | - | - | - | 153 | ||||||||||||||||||||||||||||||||
Repurchases | - | - | 179 | (4,004 | ) | - | - | - | (4,004 | ) | ||||||||||||||||||||||||||||||
Stock-based compensation expense under SFAS 123(R) | - | 329 | - | - | - | - | - | 329 | ||||||||||||||||||||||||||||||||
Tax benefit from employee stock plans | - | 3 | - | - | - | - | - | 3 | ||||||||||||||||||||||||||||||||
Balance at February 1, 2008 | 3,320 | $ | 10,589 | 785 | $ | (25,037 | ) | $ | 18,199 | $ | (16 | ) | $ | - | $ | 3,735 | ||||||||||||||||||||||||
(a) | Includes 1 million shares and $17 million related to redeemable common stock. See Note 4 of Notes to Consolidated Financial Statements. | |
(b) | Excludes 5 million shares and $111 million related to redeemable common stock. See Note 4 of Notes to Consolidated Financial Statements. |
F-29
Table of Contents
NOTE 1 — | DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-30
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
F-31
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
• | persuasive evidence of an arrangement exists; | |
• | delivery has occurred or services have been rendered; | |
• | Dell’s fee to its customer is fixed or determinable; and | |
• | collection of the resulting receivable is reasonably assured. |
F-32
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
F-33
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
F-34
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
F-35
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fiscal Year Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions, except per share amounts) | ||||||||||||
Numerator: | ||||||||||||
Net income | $ | 2,947 | $ | 2,583 | $ | 3,602 | ||||||
Denominator: | ||||||||||||
Weighted-average shares outstanding: | ||||||||||||
Basic | 2,223 | 2,255 | 2,403 | |||||||||
Effect of dilutive options, restricted stock units, restricted stock, and other | 24 | 16 | 46 | |||||||||
Diluted | 2,247 | 2,271 | 2,449 | |||||||||
Earnings per common share: | ||||||||||||
Basic | $ | 1.33 | $ | 1.15 | $ | 1.50 | ||||||
Diluted | $ | 1.31 | $ | 1.14 | $ | 1.47 |
F-36
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2 — | FINANCIAL INSTRUMENTS |
F-37
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
February 1, 2008 | February 2, 2007 | |||||||||||||||||||||||||||||||
Fair | Unrealized | Unrealized | Fair | Unrealized | Unrealized | |||||||||||||||||||||||||||
Value | Cost | Gain | (Loss) | Value | Cost | Gain | (Loss) | |||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||||||||||
U.S. government and agencies | $ | 1,013 | $ | 991 | $ | 23 | $ | (1 | ) | $ | 1,424 | $ | 1,449 | $ | - | $ | (25 | ) | ||||||||||||||
U.S. corporate | 571 | 569 | 10 | (8 | ) | 1,163 | 1,170 | - | (7 | ) | ||||||||||||||||||||||
International corporate | 68 | 67 | 1 | - | 156 | 159 | - | (3 | ) | |||||||||||||||||||||||
State and municipal governments | 5 | 5 | - | - | 41 | 41 | - | - | ||||||||||||||||||||||||
Debt securities | 1,657 | 1,632 | 34 | (9 | ) | 2,784 | 2,819 | - | (35 | ) | ||||||||||||||||||||||
Equity and other securities | 111 | 111 | - | - | 115 | 109 | 6 | - | ||||||||||||||||||||||||
Investments | $ | 1,768 | $ | 1,743 | $ | 34 | $ | (9 | ) | $ | 2,899 | $ | 2,928 | $ | 6 | $ | (35 | ) | ||||||||||||||
Short-term | $ | 208 | $ | 206 | $ | 2 | $ | - | $ | 752 | $ | 756 | $ | - | $ | (4 | ) | |||||||||||||||
Long-term | 1,560 | 1,537 | 32 | (9 | ) | 2,147 | 2,172 | 6 | (31 | ) | ||||||||||||||||||||||
Investments | $ | 1,768 | $ | 1,743 | $ | 34 | $ | (9 | ) | $ | 2,899 | $ | 2,928 | $ | 6 | $ | (35 | ) | ||||||||||||||
F-38
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Less Than 12 Months | ||||||||||||||||||||||||
Unrealized | 12 Months or Greater | Total | ||||||||||||||||||||||
Fair Value | Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
U.S. government and agencies | $ | 29 | $ | (1 | ) | $ | 59 | $ | (0 | ) | $ | 88 | $ | (1 | ) | |||||||||
U.S. corporate | 38 | (8 | ) | 27 | (0 | ) | 65 | (8 | ) | |||||||||||||||
International corporate | - | - | 2 | - | 2 | - | ||||||||||||||||||
State and municipal governments | - | - | - | - | - | - | ||||||||||||||||||
Total debt securities | $ | 67 | $ | (9 | ) | $ | 88 | $ | (0 | ) | $ | 155 | $ | (9 | ) | |||||||||
Fiscal Year Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Gains | $ | 17 | $ | 9 | $ | 13 | ||||||
Losses | (3 | ) | (14 | ) | (15 | ) | ||||||
Net realized gain (loss) | $ | 14 | $ | (5 | ) | $ | (2 | ) | ||||
F-39
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
F-40
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fiscal Year Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Aggregate unrealized net gain (loss) at beginning of year | $ | 13 | $ | (17 | ) | $ | (26 | ) | ||||
Net (losses) gains reclassified to earnings | (392 | ) | (260 | ) | 225 | |||||||
Change in fair value of cash flow hedges | 354 | 290 | (216 | ) | ||||||||
Aggregate unrealized net (loss) gain at end of year | $ | (25 | ) | $ | 13 | $ | (17 | ) | ||||
February 1, 2008 | February 2, 2007 | |||||||||||||||
Gross | Gross | |||||||||||||||
Notional | Net Asset (Liability) | Notional | Net Asset (Liability) | |||||||||||||
(in millions) | ||||||||||||||||
Cash flow hedges | $ | 7,772 | $ | (9 | ) | $ | 7,443 | $ | 80 | |||||||
Other derivatives | (1,338 | ) | 8 | (1,125 | ) | (5 | ) | |||||||||
$ | 6,434 | $ | (1 | ) | $ | 6,318 | $ | 75 | ||||||||
F-41
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
F-42
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3 — | INCOME TAXES |
Fiscal Year Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Current: | ||||||||||||
Domestic | $ | 901 | $ | 846 | $ | 1,141 | ||||||
Foreign | 287 | 178 | 263 | |||||||||
Tax repatriation benefit | - | - | (85 | ) | ||||||||
Deferred | (308 | ) | (262 | ) | (313 | ) | ||||||
Provision for income taxes | $ | 880 | $ | 762 | $ | 1,006 | ||||||
F-43
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fiscal Year Ended | ||||||||
February 1, | February 2, | |||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Deferred tax assets: | ||||||||
Deferred revenue | $ | 597 | $ | 440 | ||||
Inventory and warranty provisions | 46 | 128 | ||||||
Investment impairments and unrealized gains | 10 | - | ||||||
Provisions for product returns and doubtful accounts | 61 | 51 | ||||||
Capital loss | 7 | 13 | ||||||
Leasing and financing | 302 | 222 | ||||||
Credit carryforwards | 3 | 22 | ||||||
Stock-based and deferred compensation | 188 | 145 | ||||||
Operating accruals | 58 | 34 | ||||||
Other | 134 | 125 | ||||||
Deferred tax assets | 1,406 | 1,180 | ||||||
Deferred tax liabilities: | ||||||||
Property and equipment | (105 | ) | (96 | ) | ||||
Acquired intangibles | (199 | ) | (16 | ) | ||||
Other | (21 | ) | (39 | ) | ||||
Deferred tax liabilities | (325 | ) | (151 | ) | ||||
Valuation allowance | - | (28 | ) | |||||
Net deferred tax asset | $ | 1,081 | $ | 1,001 | ||||
Current portion (included in other current assets) | $ | 596 | $ | 445 | ||||
Non-current portion (included in other non-current assets) | 485 | 556 | ||||||
Net deferred tax asset | $ | 1,081 | $ | 1,001 | ||||
F-44
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fiscal Year Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
Effective tax rate: | ||||||||||||
U.S. federal statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
Foreign income taxed at different rates | (18.2 | ) | (17.8 | ) | (13.9 | ) | ||||||
Tax repatriation benefit | - | - | (1.9 | ) | ||||||||
Foreign earnings subject to U.S. taxation | 4.6 | 2.9 | 1.6 | |||||||||
Imputed intercompany charges | - | 2.0 | 1.2 | |||||||||
In-process research and development | 0.8 | - | - | |||||||||
Other | 0.8 | 0.7 | (0.2 | ) | ||||||||
Effective tax rate | 23.0 | % | 22.8 | % | 21.8 | % | ||||||
Total | |||||
(in millions) | |||||
Balance at February 3, 2007 | $ | 1,096 | |||
Increases related to tax positions of the current year | 390 | ||||
Increases related to tax positions of prior years | 34 | ||||
Reductions for tax positions of prior years | (13 | ) | |||
Lapse of statue of limitations | (6 | ) | |||
Settlements | (18 | ) | |||
Balance at February 1, 2008 | $ | 1,483 | |||
F-45
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4 — | CAPITALIZATION |
F-46
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
F-47
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Weighted- | ||||||||||||||||
Weighted- | Average | |||||||||||||||
Number | Average | Remaining | Aggregate | |||||||||||||
of | Exercise | Contractual | Intrinsic | |||||||||||||
Options | Price | Term | Value | |||||||||||||
(in millions) | (per share) | (in years) | (in millions) | |||||||||||||
Options outstanding — February 2, 2007 | 314 | $ | 32.16 | |||||||||||||
Granted | 12 | 24.45 | ||||||||||||||
Exercised | (7 | ) | 18.99 | |||||||||||||
Forfeited | (5 | ) | 26.80 | |||||||||||||
Cancelled/expired | (50 | ) | 32.01 | |||||||||||||
Options outstanding — February 1, 2008 | 264 | $ | 32.30 | |||||||||||||
Vested and expected to vest (net of estimated forfeitures) — February 1, 2008(a) | 259 | $ | 32.43 | 4.5 | $ | 13 | ||||||||||
Exercisable — February 1, 2008 | 242 | $ | 32.89 | 4.2 | $ | 12 |
Weighted- | ||||||||||||||||
Weighted- | Average | |||||||||||||||
Number | Average | Remaining | Aggregate | |||||||||||||
of | Exercise | Contractual | Intrinsic | |||||||||||||
Options | Price | Term | Value | |||||||||||||
(in millions) | (per share) | (in years) | (in millions) | |||||||||||||
Options outstanding — February 3, 2006 | 343 | $ | 31.86 | |||||||||||||
Granted | 10 | 25.97 | ||||||||||||||
Exercised | (13 | ) | 14.09 | |||||||||||||
Forfeited | (4 | ) | 25.84 | |||||||||||||
Cancelled/expired | (22 | ) | 36.43 | |||||||||||||
Options outstanding — February 2, 2007 | 314 | $ | 32.16 | |||||||||||||
Vested and expected to vest (net of estimated forfeitures) — February 2, 2007(a) | 309 | $ | 32.26 | 5.2 | $ | 148 | ||||||||||
Exercisable — February 2, 2007(a) | 284 | $ | 32.74 | 5.1 | $ | 145 |
(a) | For options vested and expected to vest and options exercisable, the aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Dell’s closing stock price on February 1, 2008 and February 2, 2007, and the exercise price multiplied by the number of in-the-money options) that would have been received by the option holders had the holders exercised their options on February 1, 2008 and February 2, 2007. The intrinsic value changes based on changes in the fair market value of Dell’s common stock. |
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Fiscal Years Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions, except per option data) | ||||||||||||
Weighted-average grant date fair value of stock options granted per option | $ | 6.29 | $ | 6.90 | $ | 10.22 | ||||||
Total fair value of options vested(a) | $ | 208 | $ | 415 | $ | 2,029 | ||||||
Total intrinsic value of options exercised(b) | $ | 64 | $ | 171 | $ | 688 |
(a) | Includes the Fiscal 2006 acceleration of vesting of certain unvested and “out-of-the-money” stock options with exercise prices equal to or greater than the $30.75 per share previously awarded under equity compensation plans. | |
(b) | The total intrinsic value of options exercised represents the total pre-tax intrinsic value (the difference between the stock price at exercise and the exercise price multiplied by the number of options exercised) that was received by the option holders who exercised their options during the fiscal year. |
Weighted- | ||||||||
Number | Average | |||||||
of | Grant Date | |||||||
Shares | Fair Value | |||||||
(in millions) | (per share) | |||||||
Non-vested restricted stock — February 2, 2007 | 17 | $ | 28.76 | |||||
Granted | 26 | 22.85 | ||||||
Vested | (3 | ) | 28.79 | |||||
Forfeited | (4 | ) | 24.71 | |||||
Non-vested restricted stock — February 1, 2008 | 36 | $ | 24.90 | |||||
Weighted- | ||||||||
Number | Average | |||||||
of | Grant Date | |||||||
Shares | Fair Value | |||||||
(in millions) | (per share) | |||||||
Non-vested restricted stock — February 3, 2006 | 2 | $ | 34.66 | |||||
Granted | 21 | 28.36 | ||||||
Vested | (1 | ) | 28.84 | |||||
Forfeited | (5 | ) | 29.29 | |||||
Non-vested restricted stock — February 2, 2007 | 17 | $ | 28.76 | |||||
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Fiscal Years Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions, except per share data) | ||||||||||||
Weighted-average grant date fair value of restricted stock awards granted | $ | 22.85 | $ | 28.36 | $ | 39.70 | ||||||
Total estimated fair value of restricted stock awards vested | $ | 103 | $ | 16 | $ | - |
Fiscal Year Ended | ||||||||||
February 1, | February 2, | |||||||||
2008 | 2007 | |||||||||
(in millions) | ||||||||||
Stock-based compensation expense: | ||||||||||
Cost of net revenue | $ | 62 | $ | 59 | ||||||
Operating expenses | 374 | 309 | ||||||||
Stock-based compensation expense before taxes | 436 | 368 | ||||||||
Income tax benefit | (127 | ) | (110 | ) | ||||||
Stock-based compensation expense, net of income taxes | $ | 309 | $ | 258 | ||||||
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Fiscal Year Ended | |||||
(in millions, except per share data) | February 3, 2006 | ||||
Net income | $ | 3,602 | |||
Deduct: Total stock options and stock purchase plans employee compensation determined under fair value method for these awards, net of related tax effects | (1,094 | ) | |||
Net income — pro forma | $ | 2,508 | |||
Earnings per common share: | |||||
Basic | $ | 1.50 | |||
Basic — pro forma | $ | 1.04 | |||
Diluted | $ | 1.47 | |||
Diluted — pro forma | $ | 1.02 |
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Fiscal Years Ended | ||||||
February 1, | February 2, | February 3, | ||||
2008 | 2007 | 2006 | ||||
Expected term: | ||||||
Stock options | 3.5 years | 3.6 years | 3.8 years | |||
Employee stock purchase plan | N/A(a) | 3 months | 3 months | |||
Risk-free interest rate (U.S. Government Treasury Note) | 4.4% | 4.8% | 3.9% | |||
Volatility | 27% | 26% | 25% | |||
Dividends | 0% | 0% | 0% |
(a) | No purchase rights were granted under the ESPP in Fiscal 2008 due to Dell suspending the ESPP on April 4, 2007, and subsequently discontinuing the plan effective the first quarter of Fiscal 2009 as a part of an overall assessment of its benefits strategy. |
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NOTE 6 — | FINANCIAL SERVICES |
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Fiscal Year Ended | ||||||||||
February 1, | February 2, | |||||||||
2008 | 2007 | |||||||||
(in millions) | ||||||||||
Financing receivables, net: | ||||||||||
Customer receivables: | ||||||||||
Revolving loans, gross | $ | 1,063 | $ | 805 | ||||||
Fixed-term leases and loans, gross | 654 | 632 | ||||||||
Customer receivables, gross | 1,717 | 1,437 | ||||||||
Customer receivables allowance | (96 | ) | (39 | ) | ||||||
Customer receivables, net | 1,621 | 1,398 | ||||||||
Residual interest | 295 | 296 | ||||||||
Retained interest | 223 | 159 | ||||||||
Financing receivables, net | $ | 2,139 | $ | 1,853 | ||||||
Short-term | $ | 1,732 | $ | 1,530 | ||||||
Long-term | 407 | 323 | ||||||||
Financing receivables, net | $ | 2,139 | $ | 1,853 | ||||||
• | Customer receivables are presented net of allowance for uncollectible accounts. The allowance is based on factors including historical experience, past due receivables, receivable type, and the risk composition of the receivables. The composition and credit quality varies from investment grade commercial customers to subprime consumers. Subprime receivables comprise less than 20% of the net customer receivable balance at February 1, 2008. Financing receivables are charged to the allowance at the earlier of when an account is deemed to be uncollectible or when an account is 180 days delinquent. Recoveries on customer receivables previously charged off as uncollectible are recorded to the allowance for uncollectible accounts. The following is a description of the components of financing receivables. |
– | Revolving loans offered under private label credit financing programs provide qualified customers with a revolving credit line for the purchase of products and services offered by Dell. Revolving loans bear interest at a variable annual percentage rate that is tied to the prime rate. From time to time, account holders may have the opportunity to finance their Dell purchases with special programs during which, if the outstanding balance is paid in full, no interest is charged. These special programs generally range from 3 to 12 months and have an average original term of approximately 11 months. At February 1, 2008 and February 2, 2007, $668 million and $694 million, respectively, were receivables under these special programs. | |
– | Leases with business customers generally have fixed terms of two to three years. Future maturities of minimum lease payments at February 1, 2008, are as follows: 2009: $137 million; 2010: $74 million; |
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2011: $30 million; and 2012: $4 million. Fixed-term loans are also offered to qualified small businesses and primarily consist of loans with short-term maturities. |
Fiscal Year Ended | ||||||||||||||||
February 1, 2008 | February 2, 2007 | |||||||||||||||
Dollars | % | Dollars | % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Net credit losses of customer financing receivables | $ | 40 | 2.7 | %(a) | $ | 20 | 1.5 | %(a) | ||||||||
Customer financing receivables 60 days or more delinquent | $ | 34 | 2.1 | %(b) | $ | 10 | 0.7 | %(b) |
(a) | Net credit losses as a percentage of the outstanding average customer receivables balance over the year. | |
(b) | Customer financing receivables 60 days or more delinquent divided by the ending customer financing receivables balance. |
• | Dell retains a residual interest in the leased equipment. The amount of the residual interest is established at the inception of the lease based upon estimates of the value of the equipment at the end of the lease term using historical studies, industry data, and futurevalue-at-risk demand valuation methods. On a periodic basis, Dell assesses the carrying amount of its recorded residual values for impairment. Anticipated declines in specific future residual values that are considered to be other-than-temporary are recorded in current earnings. |
• | Retained interests represent the residual beneficial interest Dell retains in certain pools of securitized financing receivables. Retained interests are stated at the present value of the estimated net beneficial cash flows after payment of all senior interests. In estimating the value of retained interests, Dell makes a variety of financial assumptions, including pool credit losses, payment rates, and discount rates. These assumptions are supported by both Dell’s historical experience and anticipated trends relative to the particular receivable pool. Dell reviews its investments in retained interests periodically for impairment, based on estimated fair value. In the first quarter of Fiscal 2008, Dell adopted SFAS 155, and as a result, all gains and losses are recognized in income immediately. |
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Fiscal Year Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Retained interest: | ||||||||||||
Retained interest at beginning of year | $ | 159 | $ | 90 | $ | 24 | ||||||
New sales | 173 | 167 | 97 | |||||||||
Distributions from conduits | (132 | ) | (142 | ) | (37 | ) | ||||||
Net accretion | 31 | 17 | 4 | |||||||||
Change in fair value for the period | (8 | ) | 27 | 2 | ||||||||
Retained interest at end of year | $ | 223 | $ | 159 | $ | 90 | ||||||
Cash flows during the periods: | ||||||||||||
Proceeds from new securitizations | $ | 538 | $ | 607 | $ | 446 | ||||||
Other cash flows received on retained interests | 132 | 142 | 36 | |||||||||
Servicing and administration fees received | 15 | 9 | - | |||||||||
Repurchases of ineligible contracts | (11 | ) | (7 | ) | (4 | ) | ||||||
Cash flows during the period | $ | 674 | $ | 751 | $ | 478 | ||||||
Weighted Average Key Assumptions | ||||||||||||||||
Monthly Payment | Credit | Discount | ||||||||||||||
Rates | Losses | Rates | Life | |||||||||||||
(lifetime) | (annualized) | (months) | ||||||||||||||
Time of sale valuation of retained interest | 9% | 8% | 14% | 14 | ||||||||||||
Valuation of retained interests | 8% | 10% | 16% | 12 |
Fiscal Year Ended | ||||||||
February 1, | February 2, | |||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Adverse change of: | ||||||||
Expected prepayment speed: 10% | $ | (17 | ) | $ | (2 | ) | ||
Expected prepayment speed: 20% | $ | (27 | ) | $ | (4 | ) | ||
Expected credit losses: 10% | $ | (8 | ) | $ | (7 | ) | ||
Expected credit losses: 20% | $ | (15 | ) | $ | (14 | ) | ||
Discount rate: 10% | $ | (7 | ) | $ | (4 | ) | ||
Discount rate: 20% | $ | (13 | ) | $ | (8 | ) |
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Fiscal Year Ended | ||||||||||||||||
February 1, 2008 | February 2, 2007 | |||||||||||||||
Dollars | % | Dollars | % | |||||||||||||
(in millions, except percentages) | ||||||||||||||||
Net credit losses of securitized financing receivables | $ | 81 | 7.0% | (a) | $ | 31 | 3.8% | (a) | ||||||||
Securitized financing receivables 60 days or more delinquent | $ | 54 | 4.4% | (b) | $ | 33 | 3.4% | (b) |
(a) | Net credit losses as a percentage of the average outstanding securitized financing receivables over the year. | |
(b) | Securitized financing receivables 60 days or more delinquent divided by ending securitized financing receivables balance. |
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NOTE 7 — | ACQUISITIONS |
(in millions) | |||||
Cash, cash equivalents and short-term investments | $ | 21 | |||
Other tangible assets | 57 | ||||
Liabilities | (243 | ) | |||
Total net liabilities assumed | (165 | ) | |||
Amortizable intangible assets | 486 | ||||
Goodwill | 969 | ||||
IPR&D | 75 | ||||
Total purchase price | $ | 1,365 | |||
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Weighted-Average | ||||||||
Useful Life | ||||||||
(in millions) | (years) | |||||||
Technology | $ | 424 | 6.0 | |||||
Customer relationships | 46 | 7.6 | ||||||
Covenants not-to-compete | 16 | 4.2 | ||||||
Total amortizable intangible assets | $ | 486 | 6.1 | |||||
(in millions) | |||||
Cash, cash equivalents and short-term investments | $ | 2 | |||
Other tangible assets | 175 | ||||
Liabilities | (125 | ) | |||
Total net assets acquired | 52 | ||||
Amortizable intangible assets | 171 | ||||
Goodwill | 130 | ||||
Total purchase price | $ | 353 | |||
Weighted-Average | ||||||||
Useful Life | ||||||||
(in millions) | (years) | |||||||
Technology | $ | 18 | 4.9 | |||||
Customer relationships | 144 | 10.8 | ||||||
Tradenames | 8 | 5.3 | ||||||
Covenants not-to-compete | 1 | 1.1 | ||||||
Total amortizable intangible assets | $ | 171 | 9.9 | |||||
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(in millions) | |||||
Cash and short-term investments | $ | 9 | |||
Other tangible assets | 7 | ||||
Liabilities | (14 | ) | |||
Total net assets acquired | 2 | ||||
Amortizable intangible assets | 78 | ||||
Indefinite lived intangible assets(a) | 27 | ||||
Total purchased intangibles | 105 | ||||
Goodwill | 438 | ||||
IPR&D | 8 | ||||
Total purchase price | $ | 553 | |||
(a) | Indefinite-lived intangible assets represent tradename related to DFS, which is valued at approximately $27 million at February 1, 2008. |
Weighted-Average | ||||||||||
Useful Life | ||||||||||
(in millions) | (years) | |||||||||
Technology | $ | 42 | 3.8 | |||||||
Customer relationships | 30 | 5.0 | ||||||||
Covenants not-to-compete | 5 | 3.4 | ||||||||
Other | 1 | 3.4 | ||||||||
Total amortizable intangible assets | $ | 78 | 4.2 | |||||||
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NOTE 8 — | GOODWILL AND INTANGIBLE ASSETS |
Fiscal Year Ended | ||||||||
February 1, | February 2, | |||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Balance at beginning of the year | $ | 110 | $ | - | ||||
Goodwill acquired during the period | 1,538 | 110 | ||||||
Balance at end of the year | $ | 1,648 | $ | 110 | ||||
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Accumulated | ||||||||||||
As of February 1, 2008 | Gross | Amortization | Net | |||||||||
(in millions) | ||||||||||||
Technology | $ | 491 | $ | (15 | ) | $ | 476 | |||||
Customer relationships | 231 | (9 | ) | 222 | ||||||||
Tradenames | 39 | (6 | ) | 33 | ||||||||
Covenants not-to-compete | 23 | (1 | ) | 22 | ||||||||
Other | 1 | (1 | ) | - | ||||||||
Amortizable intangible assets | $ | 785 | $ | (32 | ) | $ | 753 | |||||
Indefinite lived intangible assets | 27 | - | 27 | |||||||||
Total intangible assets | $ | 812 | $ | (32 | ) | $ | 780 | |||||
Accumulated | ||||||||||||
As of February 2, 2007 | Gross | Amortization | Net | |||||||||
(in millions) | ||||||||||||
Technology | $ | 7 | $ | (2 | ) | $ | 5 | |||||
Customer relationships | 11 | (1 | ) | 10 | ||||||||
Tradenames | 31 | (2 | ) | 29 | ||||||||
Covenants not-to-compete | 1 | - | 1 | |||||||||
Total amortizable intangible assets | $ | 50 | $ | (5 | ) | $ | 45 | |||||
Fiscal Years | (in millions) | |||
2009 | $ | 102 | ||
2010 | 154 | |||
2011 | 135 | |||
2012 | 113 | |||
2013 | 92 | |||
Thereafter | 157 | |||
Total | $ | 753 | ||
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NOTE 9 — | WARRANTY LIABILITY AND RELATED DEFERRED SERVICE REVENUE |
Fiscal Year Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Deferred service revenue: | ||||||||||||
Deferred service revenue at beginning of year | $ | 4,221 | $ | 3,707 | $ | 2,904 | ||||||
Revenue deferred for new extended warranty and service contracts sold | 3,646 | 3,135 | 2,830 | |||||||||
Revenue recognized | (2,607 | ) | (2,621 | ) | (2,027 | ) | ||||||
Deferred service revenue at end of year | $ | 5,260 | $ | 4,221 | $ | 3,707 | ||||||
Current portion | $ | 2,486 | $ | 2,032 | $ | 1,842 | ||||||
Non-current portion | 2,774 | 2,189 | 1,865 | |||||||||
Deferred service revenue at end of year | $ | 5,260 | $ | 4,221 | $ | 3,707 | ||||||
Fiscal Year Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Warranty liability: | ||||||||||||
Warranty liability at beginning of year | $ | 958 | $ | 951 | $ | 722 | ||||||
Costs accrued for new warranty contracts and changes in estimates for pre-existing warranties(a) | 1,141 | 1,242 | 1,391 | |||||||||
Service obligations honored | (1,170 | ) | (1,235 | ) | (1,162 | ) | ||||||
Warranty liability at end of year | $ | 929 | $ | 958 | $ | 951 | ||||||
Current portion | $ | 690 | $ | 768 | $ | 714 | ||||||
Non-current portion | 239 | 190 | 237 | |||||||||
Warranty liability at end of year | $ | 929 | $ | 958 | $ | 951 | ||||||
(a) | Changes in cost estimates related to pre-existing warranties are aggregated with accruals for new warranty contracts. Dell’s warranty liability process does not differentiate between estimates made for pre-existing warranties and new warranty obligations. |
NOTE 10 — | COMMITMENTS AND CONTINGENCIES |
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• | Investigations and Related Litigation — In August 2005, the SEC initiated an inquiry into certain of Dell’s accounting and financial reporting matters and requested that Dell provide certain documents. The SEC expanded that inquiry in June 2006 and entered a formal order of investigation in October 2006. The SEC’s requests for information were joined by a similar request from the United States Attorney for the Southern District of New York (“SDNY”), who subpoenaed documents related to Dell’s financial reporting from and after Fiscal 2002. In August 2006, because of potential issues identified in the course of responding to the SEC’s requests for information, Dell’s Audit Committee, on the recommendation of management and in consultation with PricewaterhouseCoopers LLP, Dell’s independent registered public accounting firm, initiated an independent investigation, which was completed in the third quarter of Fiscal 2008. Although the Audit Committee investigation has been completed, the investigations being conducted by the SEC and the SDNY are ongoing. Dell continues to cooperate with the SEC and the SDNY. |
• | Copyright Levies— Proceedings against the IT industry in Germany seek to impose levies on equipment, such as personal computers and multifunction devices that facilitate making private copies of copyrighted |
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materials. The total levies due, if imposed, would be based on the number of products sold and the per-product amounts of the levies, which vary. Dell, along with other companies and various industry associations are opposing these levies and instead are advocating compensation to rights holders through digital rights management systems. |
• | Lucent v. Dell — In February 2003, Lucent Technologies, Inc. filed a lawsuit against Dell in the United States District Court for Delaware, and the lawsuit was subsequently transferred to the United States District Court for the Southern District of California. The lawsuit alleges that Dell infringed 12 patents owned by Lucent and seeks monetary damages and injunctive relief. In April 2003, Microsoft Corporation filed a declaratory judgment action against Lucent in the United States District Court for the Southern District of California, asserting that Microsoft products do not infringe patents held by Lucent, including 10 of the 12 patents at issue in the lawsuit involving Dell and Microsoft. These actions were consolidated for discovery purposes with a previous suit that Lucent filed against Gateway, Inc. In September 2005, the court granted a summary judgment of invalidity with respect to one of the Lucent patents asserted against Dell. In subsequent decisions, the court granted summary judgment of non-infringement with respect to five more of the Lucent patents asserted against Dell. Fact and expert discovery has closed, and the three actions have been consolidated. The asserted patents are owned by two parties: Alcatel-Lucent and Multimedia Patent Trust (MPT). Prior to trial, Gateway settled with both Alcatel-Lucent and MPT. Dell settled with MPT, licensing the patents asserted by MPT in the lawsuit, but not with Alcatel-Lucent. Dell has satisfactorily resolved its indemnity coverage related to Microsoft products it uses or distributes and has determined that, in conjunction with the MPT license, such indemnity substantially reduces Dell’s exposure to the Alcatel-Lucent lawsuit. Trial as to those Alcatel-Lucent owned patents began February 20, 2008, in San Diego federal court. Microsoft and Dell are defending these claims at trial, which is scheduled to end no later the April 4, 2008. Separately, Dell filed a lawsuit against Lucent in the United States District Court for the Eastern District of Texas, alleging that Lucent infringes two patents owned by Dell and seeking monetary damages and injunctive relief. That case went to trial ending in a jury verdict on February 1, 2008, that the patents were valid but not infringed. Dell is considering its options for challenging the verdict and appeal. |
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NOTE 11 — | SEGMENT INFORMATION |
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Fiscal Year Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
Net revenue | 2008 | 2007 | 2006 | |||||||||
(in millions) | ||||||||||||
Americas Commercial | $ | 29,981 | $ | 28,289 | $ | 27,489 | ||||||
EMEA Commercial | 13,607 | 11,842 | 11,124 | |||||||||
APJ Commercial | 7,167 | 6,223 | 5,547 | |||||||||
Global Consumer | 10,378 | 11,066 | 11,628 | |||||||||
Net revenue | $ | 61,133 | $ | 57,420 | $ | 55,788 | ||||||
Fiscal Year Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
Consolidated operating income | 2008 | 2007 | 2006 | |||||||||
(in millions) | ||||||||||||
Americas Commercial | $ | 2,566 | $ | 2,351 | $ | 2,924 | ||||||
EMEA Commercial | 978 | 622 | 867 | |||||||||
APJ Commercial | 424 | 335 | 493 | |||||||||
Global Consumer | 2 | 130 | 519 | |||||||||
Consolidated segment operating income | 3,970 | 3,438 | 4,803 | |||||||||
Stock-based compensation expense(a) | (436 | ) | (368 | ) | — | |||||||
Other product charges(b) | — | — | (338 | ) | ||||||||
Selling, general, and administrative charges(c) | — | — | (83 | ) | ||||||||
In-process research and development(d) | (83 | ) | — | — | ||||||||
Amortization of intangible assets(d) | (11 | ) | — | — | ||||||||
Consolidated operating income | $ | 3,440 | $ | 3,070 | $ | 4,382 | ||||||
(a) | Stock compensation of $17 million for Fiscal 2006 is included in the total consolidated segment operating income. Stock-based compensation expense for Fiscal 2008 includes $107 million of cash expense for expired stock options. See Note 5 of Notes to Consolidated Financial Statements for additional information. | |
(b) | Other product charges include $307 million for estimated warranty costs of servicing or replacing certain OptiPlextm systems that include a vendor part that failed to perform to Dell’s specifications, as well as additional charges for product rationalizations and workforce realignment. | |
(c) | Charges relate to workforce realignment expenses, primarily for severance and related costs of $50 million, cost of operating leases on office space no longer utilized of $4 million, and a write-off of goodwill of $29 million. Management did not hold the operating segments accountable for these charges in Fiscal 2006. | |
(d) | Prior to the fourth quarter of Fiscal 2008, amortization of intangibles and IPR&D expenses of $16 million and $5 million are included in total consolidated segment operating income in Fiscal 2008 and 2007, respectively. |
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Fiscal Year Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Depreciation and amortization expense: | ||||||||||||
Americas Commercial | $ | 286 | $ | 214 | $ | 172 | ||||||
EMEA Commercial | 124 | 95 | 80 | |||||||||
APJ Commercial | 86 | 71 | 59 | |||||||||
Global Consumer | 103 | 91 | 83 | |||||||||
Depreciation and amortization expense | $ | 599 | $ | 471 | $ | 394 | ||||||
Fiscal Year Ended | ||||||||
February 1, | February 2, | |||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Assets: | ||||||||
Corporate | $ | 15,336 | $ | 16,694 | ||||
Americas | 6,524 | 4,981 | ||||||
EMEA | 3,597 | 2,401 | ||||||
APJ | 2,104 | 1,559 | ||||||
Total assets | $ | 27,561 | $ | 25,635 | ||||
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Fiscal Year Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
Net revenue: | 2008 | 2007 | 2006 | |||||||||
(in millions) | ||||||||||||
United States | $ | 32,687 | $ | 32,361 | $ | 32,949 | ||||||
Foreign countries | 28,446 | 25,059 | 22,839 | |||||||||
Net revenue | $ | 61,133 | $ | 57,420 | $ | 55,788 | ||||||
Fiscal Year Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
Long-lived assets: | 2008 | 2007 | 2006 | |||||||||
(in millions) | ||||||||||||
United States | $ | 1,622 | $ | 1,538 | $ | 1,440 | ||||||
Foreign countries | 1,046 | 871 | 553 | |||||||||
Long-lived assets | $ | 2,668 | $ | 2,409 | $ | 1,993 | ||||||
Fiscal Year Ended | ||||||||||||
February 1, | February 2, | February 3, | ||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Net revenue: | ||||||||||||
Desktop PCs | $ | 19,573 | $ | 19,815 | $ | 21,568 | ||||||
Mobility | 17,423 | 15,480 | 14,372 | |||||||||
Software and peripherals | 9,908 | 9,001 | 8,329 | |||||||||
Servers and networking | 6,474 | 5,805 | 5,449 | |||||||||
Enhanced services | 5,320 | 5,063 | 4,207 | |||||||||
Storage | 2,435 | 2,256 | 1,863 | |||||||||
Net revenue | $ | 61,133 | $ | 57,420 | $ | 55,788 | ||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12 — | SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION |
Fiscal Year Ended | ||||||||
Supplemental Consolidated Statements of | February 1, | February 2, | ||||||
Financial Position Information: | 2008 | 2007 | ||||||
(in millions) | ||||||||
Accounts receivable: | ||||||||
Gross accounts receivable | $ | 6,064 | $ | 4,748 | ||||
Allowance for doubtful accounts | (103 | ) | (126 | ) | ||||
Accounts receivable | $ | 5,961 | $ | 4,622 | ||||
Inventories: | ||||||||
Production materials | $ | 744 | $ | 353 | ||||
Work-in-process | 160 | 106 | ||||||
Finished goods | 276 | 201 | ||||||
Inventories | $ | 1,180 | $ | 660 | ||||
Property, plant, and equipment: | ||||||||
Computer equipment | $ | 1,968 | $ | 1,596 | ||||
Land and buildings | 1,635 | 1,480 | ||||||
Machinery and other equipment | 1,011 | 973 | ||||||
Total property, plant, and equipment | 4,614 | 4,049 | ||||||
Accumulated depreciation and amortization | (1,946 | ) | (1,640 | ) | ||||
Property, plant, and equipment | $ | 2,668 | $ | 2,409 | ||||
Accrued and other current liabilities: | ||||||||
Warranty liability | 690 | 768 | ||||||
Income taxes | 99 | 1,141 | ||||||
Compensation | 1,131 | 861 | ||||||
Other | 2,403 | 2,371 | ||||||
Accrued and other current liabilities | $ | 4,323 | $ | 5,141 | ||||
Other non-current liabilities: | ||||||||
Warranty liability | 239 | 190 | ||||||
Tax liability | 1,463 | - | ||||||
Other | 368 | 457 | ||||||
Other non-current liabilities | $ | 2,070 | $ | 647 | ||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fiscal Year Ended | ||||||||||||
Supplemental Consolidated Statements of | February 1, | February 2, | February 3, | |||||||||
Income Information: | 2008 | 2007 | 2006 | |||||||||
(in millions) | ||||||||||||
Investment and other income, net: | ||||||||||||
Investment income, primarily interest | $ | 496 | $ | 368 | $ | 308 | ||||||
Gains (losses) on investments, net | 14 | (5 | ) | (2 | ) | |||||||
Interest expense | (45 | ) | (45 | ) | (29 | ) | ||||||
CIT minority interest | (29 | ) | (23 | ) | (27 | ) | ||||||
Foreign exchange | (30 | ) | (37 | ) | 3 | |||||||
Gain on sale of building | - | 36 | - | |||||||||
Other | (19 | ) | (19 | ) | (27 | ) | ||||||
Investment and other income, net | $ | 387 | $ | 275 | $ | 226 | ||||||
Fiscal Year Ended | ||||||||||||
Supplemental Consolidated Statements of | February 1, | February 2, | February 3, | |||||||||
Cash Flows Information: | 2008 | 2007 | 2006 | |||||||||
(in millions) | ||||||||||||
Changes in operating working capital accounts: | ||||||||||||
Accounts receivable, net | $ | (990 | ) | $ | (542 | ) | $ | (602 | ) | |||
Short-term financing receivables, net | (310 | ) | (165 | ) | (378 | ) | ||||||
Inventories | (498 | ) | (72 | ) | (72 | ) | ||||||
Accounts payable | 837 | 505 | 1,018 | |||||||||
Accrued and other liabilities | 787 | 955 | 853 | |||||||||
Other, net | (345 | ) | (284 | ) | (872 | ) | ||||||
Changes in operating working capital accounts | $ | (519 | ) | $ | 397 | $ | (53 | ) | ||||
Income taxes paid | $ | 767 | $ | 652 | $ | 996 | ||||||
Interest paid | $ | 54 | $ | 57 | $ | 39 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 13 — | UNAUDITED QUARTERLY RESULTS AND STOCK PRICES |
Fiscal Year 2008 | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
(in millions except per share data) | ||||||||||||||||
Net revenue | $ | 14,722 | $ | 14,776 | $ | 15,646 | $ | 15,989 | ||||||||
Gross margin | $ | 2,838 | $ | 2,951 | $ | 2,888 | $ | 2,994 | ||||||||
Net income | $ | 756 | $ | 746 | $ | 766 | $ | 679 | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.34 | $ | 0.33 | $ | 0.34 | $ | 0.31 | ||||||||
Diluted | $ | 0.34 | $ | 0.33 | $ | 0.34 | $ | 0.31 | ||||||||
Weighted-average shares outstanding: | ||||||||||||||||
Basic | 2,234 | 2,237 | 2,236 | 2,184 | ||||||||||||
Diluted | 2,254 | 2,264 | 2,266 | 2,201 | ||||||||||||
Stock sales price per share: | ||||||||||||||||
High | $ | 25.95 | $ | 29.61 | $ | 30.77 | $ | 30.37 | ||||||||
Low | $ | 21.61 | $ | 24.64 | $ | 24.96 | $ | 18.87 |
Fiscal Year 2007 | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
(in millions except per share data) | ||||||||||||||||
Net revenue | $ | 14,320 | $ | 14,211 | $ | 14,419 | $ | 14,470 | ||||||||
Gross margin | $ | 2,508 | $ | 2,138 | $ | 2,391 | $ | 2,479 | ||||||||
Net income | $ | 776 | $ | 480 | $ | 601 | $ | 726 | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.34 | $ | 0.21 | $ | 0.27 | $ | 0.33 | ||||||||
Diluted | $ | 0.33 | $ | 0.21 | $ | 0.27 | $ | 0.32 | ||||||||
Weighted-average shares outstanding: | ||||||||||||||||
Basic | 2,297 | 2,264 | 2,229 | 2,230 | ||||||||||||
Diluted | 2,318 | 2,278 | 2,238 | 2,251 | ||||||||||||
Stock sales price per share: | ||||||||||||||||
High | $ | 32.00 | $ | 26.43 | $ | 24.62 | $ | 27.62 | ||||||||
Low | $ | 25.32 | $ | 19.91 | $ | 20.99 | $ | 23.52 |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14 — | SUBSEQUENT EVENTS |
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Balance at | Charged to | Write-Offs | Balance | |||||||||||||||||
Fiscal | Beginning | Income | Charged to | at End of | ||||||||||||||||
Year | Description | of Period | Statement | Allowance | Period | |||||||||||||||
Trade Receivables: | ||||||||||||||||||||
2008 | Allowance for doubtful accounts | $ 126 | $ 82 | $ 105 | $ 103 | |||||||||||||||
2007 | Allowance for doubtful accounts | $ 96 | $ 107 | $ 77 | $ 126 | |||||||||||||||
2006 | Allowance for doubtful accounts | $ 79 | $ 101 | $ 84 | $ 96 | |||||||||||||||
Customer Financing Receivables: | ||||||||||||||||||||
2008 | Allowance for doubtful accounts | $ 39 | $ 105 | $ 48 | $ 96 | |||||||||||||||
2007 | Allowance for doubtful accounts | $ 22 | $ 40 | $ 23 | $ 39 | |||||||||||||||
2006 | Allowance for doubtful accounts | $ 1 | $ 22 | $ 1 | $ 22 | |||||||||||||||
Trade Receivables: | ||||||||||||||||||||
2008 | Allowance for customer returns | $ 53 | $ 475 | $ 437 | $ 91 | |||||||||||||||
2007 | Allowance for customer returns | $ 57 | $ 387 | $ 391 | $ 53 | |||||||||||||||
2006 | Allowance for customer returns | $ 45 | $ 384 | $ 372 | $ 57 |
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that have been registered under the Securities Act
that have not been registered under the Securities Act
that have been registered under the Securities Act
that have not been registered under the Securities Act
that have been registered under the Securities Act
that have not been registered under the Securities Act
Table of Contents
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. | Indemnification of Directors and Officers. |
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Item 21. | Exhibits and Financial Statement Schedules |
2.1 | — | Agreement and Plan of Merger, dated November 4, 2007, by and among Dell International Incorporated, DII — Elephant Inc. and EqualLogic, Inc. (incorporated by reference to Exhibit 2.1 of Dell’s Current Report on Form 8-K filed on November 8, 2007, Commission File No. 0-17017) | ||
3.1 | — | Restated Certificate of Incorporation, filed February 1, 2006 (incorporated by reference to Exhibit 3.3 of Dell’s Current Report on Form 8-K filed on February 2, 2006, Commission File No. 0-17017) | ||
3.2 | — | Restated Bylaws, as amended and effective March 8, 2007 (incorporated by reference to Exhibit 3.1 of Dell’s Current Report on Form 8-K filed on March 13, 2007, Commission File No. 0-17017) | ||
4.1 | — | Indenture, dated as of April 27, 1998, between Dell Computer Corporation and Chase Bank of Texas, National Association (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017) | ||
4.2 | — | Officers’ Certificate pursuant to Section 301 of the Indenture establishing the terms of Dell’s 7.10% Senior Debentures Due 2028 (incorporated by reference to Exhibit 99.4 of Dell’s Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017) | ||
4.3 | — | Form of Dell’s 7.10% Senior Debentures Due 2028 (incorporated by reference to Exhibit 99.6 of Dell’s Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017) | ||
4.4 | — | Indenture, dated as of April 17, 2008, between Dell Inc. and The Bank of New York Mellon Trust Company, N.A. (formerly The Bank of New York Trust Company, N.A.), as trustee (including the form of notes) (incorporated by reference to Exhibit 4.1 of Dell’s Current Report on Form 8-K filed April 17, 2008, Commission File No. 0-17017) | ||
4.5 | — | Exchange and Registration Rights Agreement, dated as of April 17, 2008, among Dell Inc. and Barclays Capital Inc., Goldman, Sachs & Co. and J.P. Morgan Securities Inc., as representatives of the several purchasers named therein (incorporated by reference to Exhibit 4.2 of Dell’s Current Report on Form 8-K filed April 17, 2008, Commission File No. 0-17017) | ||
5.1† | — | Opinion of Baker Botts L.L.P. as to the validity of the securities being registered. | ||
10.1* | — | Amended and Restated Dell Computer Corporation 1994 Incentive Plan (incorporated by reference to Exhibit 99 of Dell’s Registration Statement on Form S-8, filed October 31, 2000, Registration No. 333-49014) | ||
10.2* | — | Amended and Restated Dell Computer Corporation 1998 Broad Based Stock Option Plan (incorporated by reference to Exhibit 99 of Dell’s Registration Statement on Form S-8, filed October 31, 2000, Registration No. 333-49016) | ||
10.3* | — | Dell Computer Corporation 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 of Dell’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 2, 2002, Commission File No. 0-17017) | ||
10.4* | — | Dell Inc. Amended and Restated 2002 Long-Term Incentive Plan (incorporated by reference to Appendix A of Dell’s 2007 proxy statement filed on October 31, 2007, Commission File No. 0-17017) | ||
10.5* | — | Amended and Restated Dell Inc. 401(k) Plan, adopted effective as of January 1, 2007 (incorporated by reference to Exhibit 10.5 to Dell’s Annual Report on Form 10-K for the fiscal year ended February 1, 2008, Commission File No. 0-17017) | ||
10.6* | — | Amended and Restated Dell Computer Corporation Deferred Compensation Plan (incorporated by reference to Exhibit 10.6 to Dell’s Annual Report on Form 10-K for the fiscal year ended January 30, 2004, Commission File No. 0-17017) |
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10.7* | — | Executive Incentive Bonus Plan, adopted July 18, 2003 (incorporated by reference to Exhibit 10.1 of Dell’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 1, 2003, Commission File No. 0-17017) | ||
10.8* | — | Form of Indemnification Agreement between Dell and each Non-Employee Director of Dell (incorporated by reference to Exhibit 10.11 to Dell’s Annual Report on Form 10-K for the fiscal year ended January 31, 2003, Commission File No. 0-17017) | ||
10.9* | — | Form of Performance Based Stock Unit Agreement for employees under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed March 14, 2006, Commission File No. 0-17017) | ||
10.10* | — | Form of Restricted Stock Agreement for Non-Employee Directors under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.1 of Dell’s Current Report on Form 8-K filed July 27, 2006, Commission File No. 0-17017) | ||
10.11* | — | Form of Restricted Stock Unit Agreement for Non-Employee Directors under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed July 27, 2006, Commission File No. 0-17017) | ||
10.12 | — | Form of Nonstatutory Stock Option Agreement for Non-Employee Directors under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.3 of Dell’s Current Report on Form 8-K filed July 27, 2006, Commission File No. 0-17017) | ||
10.13* | — | Form of Nonstatutory Stock Option Agreement for grant to Donald J. Carty under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.1 of Dell’s Current Report on Form 8-K filed December 20, 2006, Commission File No. 0-17017) | ||
10.14* | — | Form of Stock Unit Agreement for grant to Donald J. Carty under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed December 20, 2006, Commission File No. 0-17017) | ||
10.15* | — | Form of Restricted Stock Unit Agreement for Non-Employee Directors under the Amended and Restated 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.10 of Dell’s Quarterly Report on Form 10-Q filed October 30, 2007, Commission File No. 0-17017) | ||
10.16* | — | Form of Nonstatutory Stock Option Agreement for Non-Employee Directors under the Amended and Restated 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.11 of Dell’s Quarterly Report on Form 10-Q filed October 30, 2007, Commission File No. 0-17017) | ||
10.17* | — | Form of Performance Based Stock Unit Agreement for Executive Officers under the Amended and Restated 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.17 to Dell’s Annual Report on Form 10-K for the fiscal year ended February 1, 2008, Commission File No. 0-17017) | ||
10.18* | — | Form of Nonstatutory Stock Option Agreement for Executive Officers under the Amended and Restated 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.18 to Dell’s Annual Report on Form 10-K for the fiscal year ended February 1, 2008, Commission File No. 0-17017) | ||
10.19* | — | Form of Restricted Stock Unit Agreement for Executive Officers under the Amended and Restated 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.19 to Dell’s Annual Report on Form 10-K for the fiscal year ended February 1, 2008, Commission File No. 0-17017) | ||
10.20* | — | Form of Protection of Sensitive Information, Noncompetition and Nonsolicitation Agreement for Executive Officers (incorporated by reference to Exhibit 10.1 of Dell’s Current Report on Form 8-K filed on July 16, 2007, Commission file No. 0-17017) | ||
10.21* | — | Form of Release Agreement between Dell and Current and Former Executive Officers with respect to Expired Stock Options (incorporated by reference to Exhibit 10.1 of Dell’s Current Report on Form 8-K filed July 16, 2007, Commission file No. 0-17017) |
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10.22* | — | Protection of Sensitive Information, Noncompetition and Nonsolicitation Agreement between Kevin B. Rollins and Dell Inc. (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed February 20, 2007, Commission File No. 0-17017) | ||
10.23* | — | Letter Agreement regarding Severance Benefits between Michael R. Cannon and Dell Inc. (incorporated by reference to Exhibit 99.1 of Dell’s Current Report on Form 8-K filed February 21, 2007, Commission File No. 0-17017) | ||
10.24* | — | Letter Agreement regarding Severance Benefits between Ronald G. Garriques and Dell Inc. (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed February 21, 2007, Commission File No. 0-17017) | ||
10.25* | — | Form of Protection of Sensitive Information, Noncompetition and Nonsolicitation Agreement (incorporated by reference to Exhibit 99.3 of Dell’s Current Report on Form 8-K filed February 21, 2007, Commission File No. 0-17017) | ||
10.26* | — | Form of Protection of Sensitive Information, Noncompetition and Nonsolicitation Agreement for Executive Officers (incorporated by reference to Exhibit 10.1 of Dell’s Current Report on Form 8-K filed on September 12, 2007, Commission file No. 0-17017) | ||
10.27* | — | Separation Agreement and Release between Kevin B. Rollins and Dell Inc. (incorporated by reference to Exhibit 99.1 of Dell’s Current Report on Form 8-K filed February 20, 2007, Commission File No. 0-17017) | ||
12.1† | — | Computation of ratio of earnings to fixed charges | ||
21.1 | — | Subsidiaries of Dell (incorporated by reference to Exhibit 21 of Dell’s Annual Report on Form 10-K for the fiscal year ended February 2, 2007, Commission File No. 0-17017). | ||
23.1† | — | Consent of PricewaterhouseCoopers LLP | ||
23.2† | — | Consent of Baker Botts L.L.P. (contained in Exhibit 5.1) | ||
24.1† | — | Power of Attorney (set forth on signature page) | ||
25.1† | — | Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of the Trustee under the Indenture | ||
99.1† | — | Form of Letter of Transmittal | ||
99.2† | — | Form of Letter from Dell Inc. to Registered Holders and the Depository Trust Company | ||
99.3† | — | Form of Letter to Clients |
* | Compensatory Plan or Arrangement | |
† | Furnished or filed herewith | |
+ | Confidential information has been omitted from this exhibit and filed separately with the SEC pursuant to a confidential treatment request underRule 24(b)-2. |
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Item 22. | Undertakings |
(1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
(ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; | |
(iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
(2) | That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fideoffering thereof. | |
(3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. | |
(4) | That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
(i) | any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; | |
(ii) | any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; | |
(iii) | the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and | |
(iv) | any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
(b) | The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is |
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incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fide offering thereof. |
(c) | Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of any registrant pursuant to the foregoing provisions, or otherwise, such registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by any registrant of expenses incurred or paid by a director, officer or controlling person of such registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, such registrant will, unless, in the opinion of its counsel, the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. |
(d) | The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. |
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By: | /s/ Michael S. Dell |
Signature | Title | Date | ||||
/s/ Michael S. Dell Michael S. Dell | Chairman and Chief Executive Officer (principal executive officer) | September 11, 2008 | ||||
/s/ Donald J. Carty Donald J. Carty | Director | September 11, 2008 | ||||
/s/ William H. Gray, III William H. Gray, III | Director | September 11, 2008 | ||||
/s/ Sallie L. Krawcheck Sallie L. Krawcheck | Director | September 11, 2008 | ||||
/s/ Alan G. Lafley Alan G. Lafley | Director | September 11, 2008 | ||||
/s/ Judy C. Lewent Judy C. Lewent | Director | September 11, 2008 | ||||
/s/ Thomas W. Luce III Thomas W. Luce III | Director | September 11, 2008 | ||||
/s/ Klaus S. Luft Klaus S. Luft | Director | September 11, 2008 | ||||
/s/ Alex J. Mandl Alex J. Mandl | Director | September 11, 2008 |
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Signature | Title | Date | ||||
/s/ Michael A. Miles Michael A. Miles | Director | September 11, 2008 | ||||
/s/ Samuel A. Nunn, Jr. Samuel A. Nunn, Jr. | Director | September 11, 2008 | ||||
/s/ Brian T. Gladden Brian T. Gladden | Senior Vice President, Chief Financial Officer (principal financial officer) | September 11, 2008 | ||||
/s/ Thomas W. Sweet Thomas W. Sweet | Vice President, Corporate Finance (principal accounting officer) | September 11, 2008 |
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2.1 | — | Agreement and Plan of Merger, dated November 4, 2007, by and among Dell International Incorporated, DII — Elephant Inc. and EqualLogic, Inc. (incorporated by reference to Exhibit 2.1 of Dell’s Current Report on Form 8-K filed on November 8, 2007, Commission File No. 0-17017) | ||
3.1 | — | Restated Certificate of Incorporation, filed February 1, 2006 (incorporated by reference to Exhibit 3.3 of Dell’s Current Report on Form 8-K filed on February 2, 2006, Commission File No. 0-17017) | ||
3.2 | — | Restated Bylaws, as amended and effective March 8, 2007 (incorporated by reference to Exhibit 3.1 of Dell’s Current Report on Form 8-K filed on March 13, 2007, Commission File No. 0-17017) | ||
4.1 | — | Indenture, dated as of April 27, 1998, between Dell Computer Corporation and Chase Bank of Texas, National Association (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017) | ||
4.2 | — | Officers’ Certificate pursuant to Section 301 of the Indenture establishing the terms of Dell’s 7.10% Senior Debentures Due 2028 (incorporated by reference to Exhibit 99.4 of Dell’s Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017) | ||
4.3 | — | Form of Dell’s 7.10% Senior Debentures Due 2028 (incorporated by reference to Exhibit 99.6 of Dell’s Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017) | ||
4.4 | — | Indenture, dated as of April 17, 2008, between Dell Inc. and The Bank of New York Mellon Trust Company, N.A. (formerly The Bank of New York Trust Company, N.A.), as trustee (including the form of notes) (incorporated by reference to Exhibit 4.1 of Dell’s Current Report on Form 8-K filed April 17, 2008, Commission File No. 0-17017) | ||
4.5 | — | Exchange and Registration Rights Agreement, dated as of April 17, 2008, among Dell Inc. and Barclays Capital Inc., Goldman, Sachs & Co. and J.P. Morgan Securities Inc., as representatives of the several purchasers named therein (incorporated by reference to Exhibit 4.2 of Dell’s Current Report on Form 8-K filed April 17, 2008, Commission File No. 0-17017) | ||
5.1† | — | Opinion of Baker Botts L.L.P. as to the validity of the securities being registered. | ||
10.1* | — | Amended and Restated Dell Computer Corporation 1994 Incentive Plan (incorporated by reference to Exhibit 99 of Dell’s Registration Statement on Form S-8, filed October 31, 2000, Registration No. 333-49014) | ||
10.2* | — | Amended and Restated Dell Computer Corporation 1998 Broad Based Stock Option Plan (incorporated by reference to Exhibit 99 of Dell’s Registration Statement on Form S-8, filed October 31, 2000, Registration No. 333-49016) | ||
10.3* | — | Dell Computer Corporation 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 of Dell’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 2, 2002, Commission File No. 0-17017) | ||
10.4* | — | Dell Inc. Amended and Restated 2002 Long-Term Incentive Plan (incorporated by reference to Appendix A of Dell’s 2007 proxy statement filed on October 31, 2007, Commission File No. 0-17017) | ||
10.5* | — | Amended and Restated Dell Inc. 401(k) Plan, adopted effective as of January 1, 2007 (incorporated by reference to Exhibit 10.5 to Dell’s Annual Report on Form 10-K for the fiscal year ended February 1, 2008, Commission File No. 0-17017) | ||
10.6* | — | Amended and Restated Dell Computer Corporation Deferred Compensation Plan (incorporated by reference to Exhibit 10.6 to Dell’s Annual Report on Form 10-K for the fiscal year ended January 30, 2004, Commission File No. 0-17017) | ||
10.7* | — | Executive Incentive Bonus Plan, adopted July 18, 2003 (incorporated by reference to Exhibit 10.1 of Dell’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 1, 2003, Commission File No. 0-17017) |
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10.8* | — | Form of Indemnification Agreement between Dell and each Non-Employee Director of Dell (incorporated by reference to Exhibit 10.11 to Dell’s Annual Report on Form 10-K for the fiscal year ended January 31, 2003, Commission File No. 0-17017) | ||
10.9* | — | Form of Performance Based Stock Unit Agreement for employees under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed March 14, 2006, Commission File No. 0-17017) | ||
10.10* | — | Form of Restricted Stock Agreement for Non-Employee Directors under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.1 of Dell’s Current Report on Form 8-K filed July 27, 2006, Commission File No. 0-17017) | ||
10.11* | — | Form of Restricted Stock Unit Agreement for Non-Employee Directors under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed July 27, 2006, Commission File No. 0-17017) | ||
10.12 | — | Form of Nonstatutory Stock Option Agreement for Non-Employee Directors under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.3 of Dell’s Current Report on Form 8-K filed July 27, 2006, Commission File No. 0-17017) | ||
10.13* | — | Form of Nonstatutory Stock Option Agreement for grant to Donald J. Carty under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.1 of Dell’s Current Report on Form 8-K filed December 20, 2006, Commission File No. 0-17017) | ||
10.14* | — | Form of Stock Unit Agreement for grant to Donald J. Carty under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed December 20, 2006, Commission File No. 0-17017) | ||
10.15* | — | Form of Restricted Stock Unit Agreement for Non-Employee Directors under the Amended and Restated 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.10 of Dell’s Quarterly Report on Form 10-Q filed October 30, 2007, Commission File No. 0-17017) | ||
10.16* | — | Form of Nonstatutory Stock Option Agreement for Non-Employee Directors under the Amended and Restated 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.11 of Dell’s Quarterly Report on Form 10-Q filed October 30, 2007, Commission File No. 0-17017) | ||
10.17* | — | Form of Performance Based Stock Unit Agreement for Executive Officers under the Amended and Restated 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.17 to Dell’s Annual Report on Form 10-K for the fiscal year ended February 1, 2008, Commission File No. 0-17017) | ||
10.18* | — | Form of Nonstatutory Stock Option Agreement for Executive Officers under the Amended and Restated 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.18 to Dell’s Annual Report on Form 10-K for the fiscal year ended February 1, 2008, Commission File No. 0-17017) | ||
10.19* | — | Form of Restricted Stock Unit Agreement for Executive Officers under the Amended and Restated 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.19 to Dell’s Annual Report on Form 10-K for the fiscal year ended February 1, 2008, Commission File No. 0-17017) | ||
10.20* | — | Form of Protection of Sensitive Information, Noncompetition and Nonsolicitation Agreement for Executive Officers (incorporated by reference to Exhibit 10.1 of Dell’s Current Report on Form 8-K filed on July 16, 2007, Commission file No. 0-17017) | ||
10.21* | — | Form of Release Agreement between Dell and Current and Former Executive Officers with respect to Expired Stock Options (incorporated by reference to Exhibit 10.1 of Dell’s Current Report on Form 8-K filed July 16, 2007, Commission file No. 0-17017) | ||
10.22* | — | Protection of Sensitive Information, Noncompetition and Nonsolicitation Agreement between Kevin B. Rollins and Dell Inc. (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed February 20, 2007, Commission File No. 0-17017) | ||
10.23* | — | Letter Agreement regarding Severance Benefits between Michael R. Cannon and Dell Inc. (incorporated by reference to Exhibit 99.1 of Dell’s Current Report on Form 8-K filed February 21, 2007, Commission File No. 0-17017) |
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10.24* | — | Letter Agreement regarding Severance Benefits between Ronald G. Garriques and Dell Inc. (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed February 21, 2007, Commission File No. 0-17017) | ||
10.25* | — | Form of Protection of Sensitive Information, Noncompetition and Nonsolicitation Agreement (incorporated by reference to Exhibit 99.3 of Dell’s Current Report on Form 8-K filed February 21, 2007, Commission File No. 0-17017) | ||
10.26* | — | Form of Protection of Sensitive Information, Noncompetition and Nonsolicitation Agreement for Executive Officers (incorporated by reference to Exhibit 10.1 of Dell’s Current Report on Form 8-K filed on September 12, 2007, Commission file No. 0-17017) | ||
10.27* | — | Separation Agreement and Release between Kevin B. Rollins and Dell Inc. (incorporated by reference to Exhibit 99.1 of Dell’s Current Report on Form 8-K filed February 20, 2007, Commission File No. 0-17017) | ||
12.1† | — | Computation of ratio of earnings to fixed charges | ||
21.1 | — | Subsidiaries of Dell (incorporated by reference to Exhibit 21 of Dell’s Annual Report on Form 10-K for the fiscal year ended February 2, 2007, Commission File No. 0-17017). | ||
23.1† | — | Consent of PricewaterhouseCoopers LLP | ||
23.2† | — | Consent of Baker Botts L.L.P. (contained in Exhibit 5.1) | ||
24.1† | — | Power of Attorney (set forth on signature page) | ||
25.1† | — | Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of the Trustee under the Indenture | ||
99.1† | — | Form of Letter of Transmittal | ||
99.2† | — | Form of Letter from Dell Inc. to Registered Holders and the Depository Trust Company | ||
99.3† | — | Form of Letter to Clients |
* | Compensatory Plan or Arrangement | |
† | Furnished or filed herewith | |
+ | Confidential information has been omitted from this exhibit and filed separately with the SEC pursuant to a confidential treatment request underRule 24(b)-2. |