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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JULY 30, 1995

COMMISSION FILE NUMBER:0-17017

DELL COMPUTER CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 74-2487834
(State of incorporation) (I.R.S. Employer ID No.)

2214 WEST BRAKER LANE, SUITE D
AUSTIN, TEXAS 78758-4053
(Address of principal executive offices)
(512) 338-4400
(Telephone number)

2112 KRAMER LANE, BUILDING 1
AUSTIN, TEXAS 78758-4012
(Former address)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING TWELVE MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES /X/ NO / /

AS OF SEPTEMBER 8, 1995, 45,882,212 SHARES OF THE REGISTRANT'S COMMON
STOCK, PAR VALUE $.01 PER SHARE, WERE OUTSTANDING.

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PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DELL COMPUTER CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)

ASSETS

JULY 30, JANUARY 29,
1995 1995
----------------- -----------------

Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 66,563 $ 42,953
Short-term investments . . . . . . . . . . . . . . . . . . . . . 503,271 484,294
Accounts receivable, net . . . . . . . . . . . . . . . . . . . 671,767 537,974
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . 381,962 292,925
Other current assets . . . . . . . . . . . . . . . . . . . . . . 104,800 112,215
----------------- -----------------
Total current assets . . . . . . . . . . . . . . . . . . . 1,728,363 1,470,361
Property, plant and equipment, net . . . . . . . . . . . . . . . . 145,185 116,981
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,738 6,658
----------------- -----------------
$ 1,885,286 $ 1,594,000
================= =================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . $ 454,874 $ 402,682
Accrued and other liabilities . . . . . . . . . . . . . . . . . 410,687 323,791
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 11,969 24,937
----------------- -----------------
Total current liabilities . . . . . . . . . . . . . . . . . 877,530 751,410

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . 113,359 113,429
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 91,542 77,425
Commitments and contingencies
Stockholders' equity:
Preferred stock: $.01 par value; shares authorized: 5,000,000;
shares issued and outstanding: 60,000 and 1,250,000,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . 1 13
Common stock: $.01 par value; shares authorized:
100,000,000; shares issued and outstanding: 45,760,831 and
39,679,638, respectively . . . . . . . . . . . . . . . . . . . 458 397
Additional paid-in capital . . . . . . . . . . . . . . . . . . . 403,092 361,181
Unrealized loss on short-term investments . . . . . . . . . . . (1,179) (2,628)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . 425,351 311,217
Unearned compensation . . . . . . . . . . . . . . . . . . . . . . (15,159) (4,413)
Cumulative translation adjustment . . . . . . . . . . . . . . . (9,709) (14,031)
----------------- -----------------
Total stockholders' equity . . . . . . . . . . . . . . . . 802,855 651,736
----------------- -----------------
$ 1,885,286 $ 1,594,000
================= =================

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DELL COMPUTER CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- ----------------------------
JULY 30, JULY 31, JULY 30, JULY 31,
1995 1994 1995 1994
------------- ------------- ------------- -------------

Net sales . . . . . . . . . . . . . . . . . . $ 1,205,593 $ 791,496 $ 2,341,526 $ 1,558,128
Cost of sales . . . . . . . . . . . . . . . . 942,952 621,859 1,842,732 1,218,659
------------- ------------- ------------- -------------
Gross margin . . . . . . . . . . . . . . . 262,641 169,637 498,794 339,469
Operating expenses:
Selling, general and administrative . . . . 147,327 102,646 274,938 197,523
Research, development and engineering . . . 24,647 15,930 45,526 30,900
------------- ------------- ------------- -------------
Total operating expenses . . . . . . . . 171,974 118,576 320,464 228,423
------------- ------------- ------------- -------------
Operating income . . . . . . . . . . . . 90,667 51,061 178,330 111,046
Financing and other income (expense), net . . 988 (9,671) 219 (42,202)
------------- ------------- ------------- -------------
Income before income taxes . . . . . . . . 91,655 41,390 178,549 68,844
Provision for income taxes . . . . . . . . . 26,580 12,831 51,776 21,312
------------- ------------- ------------- -------------
Net income . . . . . . . . . . . . . . . . 65,075 28,559 126,773 47,532
Preferred stock dividends . . . . . . . . . . 105 2,188 11,743 4,375
------------- ------------- ------------- -------------
Net income available to common
stockholders . . . . . . . . . . . . . . . $ 64,970 $ 26,371 $ 115,030 $ 43,157
============= ============= ============= =============
Earnings per common share:
Primary . . . . . . . . . . . . . . . . . . $ 1.32 $ 0.65 $ 2.43 $ 1.06
============= ============= ============= =============
Fully diluted . . . . . . . . . . . . . . . $ 1.31 $ 0.62 $ 2.36 $ 1.03
============= ============= ============= =============

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DELL COMPUTER CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

SIX MONTHS ENDED
---------------------------------
JULY 30, JULY 31,
1995 1994
------------- --------------

Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 126,773 $ 47,532
Charges to income not requiring cash outlays:
Depreciation and amortization . . . . . . . . . . . . . . . . 18,545 15,354
Net (gain) loss on short-term investments . . . . . . . . . . (299) 21,218
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,354 996
Changes in:
Operating working capital . . . . . . . . . . . . . . . . . . (75,345) (44,929)
Non-current assets and liabilities . . . . . . . . . . . . . 4,617 10,198
------------- --------------
Net cash provided by operating activities . . . . . . . . . 75,645 50,369
Cash flows from investing activities:
Short-term investments:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . (2,106,198) (1,925,730)
Maturities and other redemptions . . . . . . . . . . . . . . . 2,070,520 1,824,635
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,951 106,406
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . (45,787) (32,535)
------------- --------------
Net cash used in investing activities . . . . . . . . . . . (61,514) (27,224)
Cash flows from financing activities:
Preferred stock dividends paid . . . . . . . . . . . . . . . . . (12,638) (4,375)
Issuance of common stock under employee plans . . . . . . . . . . 28,948 12,006
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (389) (503)
------------- --------------
Net cash provided by financing activities . . . . . . . . . 15,921 7,128
Effect of exchange rate changes on cash . . . . . . . . . . . . . . (6,442) 1,773
------------- --------------
Net increase in cash . . . . . . . . . . . . . . . . . . . . . . . 23,610 32,046
Cash at beginning of period . . . . . . . . . . . . . . . . . . . . 42,953 3,355
------------- --------------
Cash at end of period . . . . . . . . . . . . . . . . . . . . . . $ 66,563 $ 35,401
============= ==============

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DELL COMPUTER CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 -- BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto filed with the Securities and Exchange Commission (the
"Commission") in the Company's Annual Report on Form 10-K for the fiscal year
ended January 29, 1995, as amended. In the opinion of management, the
accompanying condensed consolidated financial statements reflect all
adjustments (consisting only of normal recurring accruals) considered necessary
to present fairly the financial position of Dell Computer Corporation and its
consolidated subsidiaries at July 30, 1995 and January 29, 1995 and the results
of their operations for the three-month and six-month periods ended July 30,
1995 and July 31, 1994. Reclassification of certain prior period amounts has
been made for comparative purposes.

Unless otherwise indicated, all references to years or quarters in
connection with financial information are references to the Company's fiscal
years and fiscal quarters, respectively.

NOTE 2 -- PREFERRED STOCK CONVERSION

On February 21, 1995, the Company offered to pay a cash premium of $8.25
for each outstanding share of its Series A Convertible Preferred Stock (the
"Preferred Stock") that was converted to common stock. The offer of premium
upon conversion was available to holders of the Preferred Stock through the
closing of the special conversion period on March 22, 1995. The Company also
offered to register the resale of the shares of common stock issued upon
conversion of the Preferred Stock with the Commission for a 50-day period,
which ended June 15, 1995. Holders of 1,190,000 shares of Preferred Stock
elected to convert and, as a result, received an aggregate of approximately 5.0
million shares of common stock and $9.8 million in cash during the first
quarter of 1996. The $9.8 million conversion premium and $0.5 million of
expenses of the conversion offer were treated as an additional dividend on the
Preferred Stock for financial reporting purposes. Accordingly, $11.7 million,
comprised of the conversion premium, conversion offer expenses and dividends,
were deducted from net income for the first six months of 1996 to determine the
net income available to common stockholders. In addition, the weighted average
shares outstanding used to compute primary earnings per common share for the
first six months of 1996 includes the shares of common stock issued upon
conversion from the closing of the conversion period until the end of the
six-month period.

NOTE 3 -- INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK

On July 21, 1995, the Company's stockholders approved an amendment to the
Company's Certificate of Incorporation to increase the number of shares of
common stock, par value $.01 per share, that the Company is authorized to issue
from 100 million to 300 million. The amendment was filed in the office of the
Secretary of State of the State of Delaware on August 3, 1995. In accordance
with the provisions of the Delaware General Corporation Law, such amendment
became effective upon filing.

NOTE 4 -- RESTRICTED STOCK

As discussed in the Company's Annual Report on Form 10-K for the fiscal
year ended January 29, 1995, as amended, the Company granted certain restricted
stock during 1995 that typically vests over a seven-year period. During the
first half of 1996, the Company granted approximately 260,000 additional
shares of restricted stock to employees pursuant to its long-term incentive
plan. The unearned compensation associated with restricted stock at July 30,
1995 has been presented separately in the Condensed Consolidated Statement of
Financial Position. In prior periods, the unearned compensation was combined
with additional paid-in capital, but the amount at January 29, 1995 has been
reclassified in the accompanying Condensed Consolidated Statement of Financial
Position to conform with the current period presentation.

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NOTE 5 -- COMMITMENTS AND CONTINGENCIES

The Company has been named as a defendant in 30 repetitive stress injury
lawsuits, most of which are in New York state courts or United States District
Courts for the New York City area. Several are in state courts in New Jersey.
One is in the Federal District Court for the Eastern District of Pennsylvania,
and one is in Federal District Court in Kansas. The allegations in all of
these lawsuits are similar. Each plaintiff alleges that he or she suffers from
symptoms generally known as "repetitive stress injury," which allegedly were
caused by the design or manufacture of the keyboard supplied with the computer
the plaintiff used. The Company has denied or is in the process of denying the
claims and intends to vigorously defend the suits. The suits naming the
Company are just a few of many lawsuits of this type that have been filed,
often naming Apple, Atex, Compaq, IBM, Keytronic and other major suppliers of
keyboard products. The Company currently is not able to predict the outcome of
these suits. It is possible that the Company may be named in additional suits.
Ultimate resolution of the litigation against the Company may depend on
progress in resolving this type of litigation overall. However, the Company
does not believe that the outcome of these matters will have a material adverse
effect on the Company's financial condition or results of operations.

In March 1995, the Company was named along with twelve other personal
computer or computer monitor manufacturers in a complaint filed by the District
Attorney for Merced County, California. The complaint alleges that each of the
defendants has engaged in false or misleading advertising with regard to the
size of computer monitor screens and seeks unspecified damages and injunctive
relief. In May 1995, several other district attorneys in other California
counties joined this lawsuit as co-plaintiffs. The Company is vigorously
contesting the allegations of the complaint and does not believe that the
litigation of the complaint or its outcome will have a material adverse effect
on the Company's financial condition or results of operations.

In May 1995, the Company was named, along with two other personal computer
manufacturers and one computer monitor vendor, in a class action complaint
filed in the California Superior Court for Marin County. This case has been
transferred to Orange County, California. A second class action complaint,
naming the Company and 47 other manufacturers or vendors of personal computer
monitors, was filed in Santa Clara County, California and was served on the
Company in August 1995. The complaints allege that each of the defendants has
engaged in false or misleading advertising with regard to the size of computer
monitor screens. The plaintiffs seek restitution in the form of refunds or
product exchange, damages, punitive damages and attorneys' fees. The Company
plans to vigorously contest the allegations of the complaints. This litigation
is currently at a preliminary stage, and no discovery has occurred to date. As
such, it is too early for the Company to adequately evaluate the likelihood of
the plaintiffs prevailing on their claims. There can be no assurance that an
adverse determination in this litigation would not have a material adverse
effect on the Company's financial condition or results of operations. Two
other similar class action complaints naming the Company and others as
defendants have been filed in Orange County, California; but as of September
11, 1995, the Company has not been served with summons or any other notice of
these additional actions.

On June 9, 1995, the Company was served with a class action complaint filed
in State District Court in Travis County, Texas. The complaint alleges that
the Company has included "used parts" in its "new" computer systems and has
failed to adequately inform its customers and prospective customers of that
practice. According to the complaint, these facts constitute fraud, negligent
misrepresentation, breach of contract and breach of warranty. The plaintiffs
seek refund of the purchase price for computer systems purchased from the
Company, damages in an unspecified amount, injunctive relief, interest and
attorneys' fees. The Company plans to vigorously contest the allegations of
the complaint. This litigation is currently at a preliminary stage, and no
discovery has occurred to date. As such, it is too early for the Company to
adequately evaluate the likelihood of the plaintiffs prevailing on their
claims. There can be no assurance that an adverse determination in this
litigation would not have a material adverse effect on the Company's financial
condition or results of operations.

NOTE 6 -- EARNINGS PER COMMON SHARE

Primary earnings per common share are computed by dividing net income
available to common stockholders by the weighted average number of common
shares and common stock equivalents (if dilutive) outstanding during each
period. Common stock equivalents include stock options. The Preferred Stock
is not a common stock equivalent for purposes of computing earnings per common
share. The number of common stock equivalents outstanding is computed using
the treasury stock method. The weighted average shares outstanding

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used to compute primary earnings per common share for the first six months of
1996 includes the shares of common stock issued upon conversion of the
Preferred Stock from the closing of the conversion period until the end of the
six-month period. Shares used in the calculation of fully diluted earnings per
common share have been adjusted for the assumed conversion of all of the
Company's outstanding Preferred Stock for all periods presented.

NOTE 7 -- SUPPLEMENTAL FINANCIAL INFORMATION (IN THOUSANDS)

Supplemental Condensed Consolidated Statement of Financial Position
Information:

JULY 30, JANUARY 29,
1995 1995
------------- -------------

Inventories:
Production materials . . . . . . . . . . . . . . . . . . . . . . $ 341,094 $ 262,150
Work-in-process and finished goods . . . . . . . . . . . . . . . 40,868 30,775
------------- -------------
$ 381,962 $ 292,925
============= =============
Accrued and other liabilities:
Book overdraft . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,114 $ 44,389
Accrued warranty costs . . . . . . . . . . . . . . . . . . . . . 72,505 65,468
Royalties and licensing . . . . . . . . . . . . . . . . . . . . . 45,392 34,815
Taxes other than income taxes . . . . . . . . . . . . . . . . . . 49,976 39,873
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 162,700 139,246
------------- -------------
$ 410,687 $ 323,791
============= =============

Supplemental Condensed Consolidated Statement of Income Information:

THREE MONTHS ENDED SIX MONTHS ENDED
------------------------- -----------------------
JULY 30, JULY 31, JULY 30, JULY 31,
1995 1994 1995 1994
---------- --------- -------- ----------

Financing and other income (expense), net:
Investment income (loss), net:
Short-term investments . . . . . . . . . $ 5,538 $ (5,323) $ 11,150 $ (16,073)
Investment derivatives . . . . . . . . . -- (1,341) -- (23,948)
Interest expense . . . . . . . . . . . . . (3,819) (2,388) (7,838) (4,558)
Foreign currency transactions . . . . . . . (756) 64 (2,087) 2,604
Other . . . . . . . . . . . . . . . . . . . 25 (683) (1,006) (227)
---------- --------- -------- ----------
$ 988 $ (9,671) $ 219 $ (42,202)
========== ========= ======== ==========
Weighted average shares used to compute
earnings per common share:
Primary . . . . . . . . . . . . . . . . . 49,121 40,620 47,309 40,533
========== ========= ======== ==========
Fully diluted . . . . . . . . . . . . . 49,610 46,047 49,430 46,056
========== ========= ======== ==========

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Supplemental Condensed Consolidated Statement of Cash Flows Information:

SIX MONTHS ENDED
--------------------------------------
JULY 30, JULY 31,
1995 1994
----------------- -----------------

Changes in operating working capital accounts:
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . $ (111,013) $ (17,356)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . (87,435) (18,199)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 26,653 5,559
Accrued and other liabilities . . . . . . . . . . . . . . . . . 101,283 17,967
Other current assets . . . . . . . . . . . . . . . . . . . . . . 6,983 (39,961)
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . (12,931) 3,911
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,115 3,150
----------------- -----------------
$ (75,345) $ (44,929)
================= =================

Changes in non-current assets and liabilities:
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ (4,439) $ 231
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . 9,056 9,967
----------------- -----------------
$ 4,617 $ 10,198
================= =================

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Unless otherwise indicated, all references to years and quarters in connection
with financial information are references to the Company's fiscal years and
fiscal quarters, respectively. All percentage amounts used in describing
operating results are based on the related dollar amounts rounded to the
nearest thousand which are set forth in the Condensed Consolidated Financial
Statements and related notes thereto. Operating results for the three-month and
six-month periods ended July 30, 1995 are not necessarily indicative of the
results that may be expected for the full fiscal year.

RESULTS OF OPERATIONS

For the second quarter of 1996, the Company reported net income of $65.1
million and primary earnings per common share of $1.32, compared with net
income of $28.6 million and primary earnings per common share of $0.65 for the
second quarter of 1995. For the first six months of 1996, net income was
$126.8 million and primary earnings per common share were $2.43, compared with
net income of $47.5 million and primary earnings per common share of $1.06 for
the first six months of 1995. The conversion of the Company's Series A
Convertible Preferred Stock (the "Preferred Stock") in the first quarter of
1996 had the effect of reducing primary earnings per common share in the second
quarter and the first six months of 1996 by $0.10 and $0.37, respectively. Net
income was reduced by $6.2 million, or $0.15 primary earnings per common share,
in the second quarter of 1995 and by $32.5 million, or $0.80 primary earnings
per common share, in the first half of 1995 due to after-tax losses on certain
investment derivatives and short-term investments. The Company discontinued
its investment derivative program in the second quarter of fiscal 1995.

The following table sets forth for the periods indicated the percentage of
consolidated net sales represented by certain items in the Company's condensed
consolidated statement of income.

PERCENTAGE OF CONSOLIDATED NET SALES
--------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ -----------------------
JULY 30, JULY 31, JULY 30, JULY 31,
1995 1994 1995 1994
-------- -------- -------- --------

Net sales:
Americas . . . . . . . . . . . . . . 64.8% 70.1% 63.4% 68.6%
Europe . . . . . . . . . . . . . . . 27.0 27.0 28.8 28.7
Other international . . . . . . . . . 8.2 2.9 7.8 2.7
------- ------- ------- -------
Consolidated net sales . . . . . . 100.0 100.0 100.0 100.0
Cost of sales . . . . . . . . . . . . . 78.2 78.6 78.7 78.2
------- ------- ------- -------
Gross margin . . . . . . . . . . . 21.8 21.4 21.3 21.8
Operating expenses:
Selling, general and administrative . 12.2 13.0 11.7 12.7
Research, development and engineering 2.1 2.0 2.0 2.0
------- ------- ------- -------
Total operating expenses . . . . . 14.3 15.0 13.7 14.7
------- ------- ------- -------
Operating income . . . . . . . . . 7.5 6.4 7.6 7.1
Financing and other income (expense),
net . . . . . . . . . . . . . . . . . . 0.1 (1.2) 0.0 (2.7)
------- ------- ------- -------
Income before income taxes . . . . . 7.6 5.2 7.6 4.4
Provision for income taxes . . . . . . 2.2 1.6 2.2 1.4
------- ------- ------- -------
Net income . . . . . . . . . . . . . 5.4 3.6 5.4 3.0
Preferred stock dividends . . . . . . . 0.0 0.3 0.5 0.3
------- ------- ------- -------
Net income available to common
stockholders . . . . . . . . . . . . . 5.4% 3.3% 4.9% 2.7%
======= ======= ======= =======

Net Sales

The second quarter of 1996 marked the Company's sixth consecutive quarter
of sequential growth in consolidated net sales. Consolidated net sales
increased 52% to $1.2 billion for the second quarter of 1996, compared with
$791.5 million in the second quarter of 1995. Consolidated net sales for the
first half of 1996

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increased 50% to $2.34 billion from $1.56 billion in the comparable period of
the prior year. Unit volumes increased 45% and 41% in the second quarter and
the first six months, respectively, of 1996 over the comparable periods in the
prior year due primarily to strong demand for the Company's Pentium(R)
processor-based products and notebook computers. Additionally, because these
systems are generally higher priced than the rest of the Company's product
portfolio (excluding servers), average total revenue per unit increased 5% and
7% in the second quarter and the first six months, respectively, of 1996,
compared to the corresponding periods of the prior year. After taking into
account the results of the Company's foreign currency hedging activities,
consolidated net sales (expressed in United States dollars) were not
significantly affected in the second quarter or in the first six months of 1996
as a result of fluctuations in foreign currency exchange rates.

Consolidated net sales includes sales of computer systems (including
hardware, certain software and accessories); computer peripherals; other
hardware, software and accessories sold separately from computer systems; and
extended service contracts. Sales of computer systems ("system revenue")
amounted to 88% of consolidated net sales in the second quarter of 1996 and in
the first six months of both 1996 and 1995. System revenue amounted to 89% of
consolidated net sales in the second quarter of 1995. The Company's rapid
introduction of Pentium processor-based systems relative to its competitors and
increased customer acceptance of these systems resulted in a substantial
increase in sales of such systems. Sales of the Company's Pentium
processor-based products increased to 67% of system revenue in the second
quarter of 1996 from 55% of system revenue in the first quarter of 1996 and
from 24% of system revenue in the second quarter of 1995. Sales of Pentium
processor-based products in the second quarter of 1996 increased by $169.2
million or 31% from the first quarter of 1996 and by $538.2 million or 317%
from the second quarter of 1995. Sales of such systems represented 61% of
system revenue in the first half of 1996, compared with 17% in the first half
of 1995, an increase of $1.0 billion or 434%. Sales of the Company's 486-based
products comprised the remainder of system revenue and declined as a percentage
of system revenue directly in relation to the increases in revenue from the
sale of Pentium processor-based products.

Net sales of notebook computers as a percentage of system revenue decreased
from 17% in the first quarter of 1996 to 15% in the second quarter of 1996.
This decrease was primarily due to the mid-quarter transition of products
within the Company's Latitude(TM) family of notebook computers, during which
the Company sold through its existing supply of component parts for the old
products before it had achieved optimal production of its new products. In
conjunction with the introduction in May 1995 of its Latitude XPi notebook
computer line, which contains the Company's first Pentium processor-based
notebook computers, the Company also introduced its new Latitude LX notebook
computer line, which replaced the original Latitude notebook computer line, and
introduced several new models in its Latitude XP notebook computer line. The
Company began shipping its new Latitude XPi and LX products in the latter half
of June. Revenue from the Company's Latitude family of notebook computers
increased substantially in the second quarter and first half of 1996 over the
same periods in 1995, due primarily to strong customer demand for the Company's
Latitude XP line (introduced in August 1994) and the new Latitude XPi line.
Sales of notebook computers represented 15% of system revenue in the second
quarter of 1996, up from 5% in the second quarter of 1995. Sales of notebook
computers comprised 16% of system revenue in the first six months of 1996, up
from 4% in the same period of the prior year.

During the second quarter of 1996, the Company completed the transition of
its Dell Dimension(TM) family of desktop computers to Intel's Pentium
processor. Net sales from the Company's desktop product lines represented 82%
of system revenue (or $870.6 million) in the second quarter of 1996 versus 80%
of system revenue (or $789.4 million) in the first quarter of 1996 and 90% of
system revenue (or $628.8 million) in the second quarter of the prior year.
Sales of desktop products were 81% of system revenue (or $1.66 billion) in the
first six months of 1996, compared with 91% of system revenue (or $1.25
billion) in the first six months of 1995. Sales from the server product line
represented 3% of system revenue (or $30.1 million) in the second quarter of
1996, 3% of system revenue (or $25.6 million) in the first quarter of 1996 and
5% of system revenue (or $38.1 million) in the second quarter of 1995. Sales
of servers were 3% of system revenue (or $55.7 million) and 5% of system
revenue (or $66.8 million) in the first half of 1996 and 1995, respectively.

The Company believes that its future success is largely dependent upon
continued growth of its notebook product line, its ability to expand its
presence in the network server market and its ability to continue to
efficiently

9
11

manage the transition to Pentium processor-based computers and other
technological advancements as they become commercially available. There can be
no assurance that the Company's development activities will be successful, that
product technologies will be available to the Company, that the Company will be
able to deliver commercial quantities of computer products in a timely manner
or that such products will achieve market acceptance. Some new products
introduced by the Company are intended to replace existing products. Although
the Company monitors the products that are intended to be replaced and attempts
to phase out the manufacture of those products in a timely manner, there can be
no assurance that such transitions will be executed without adversely affecting
the Company's results of operations or financial condition.

Net sales from the Americas (United States, Canada and Latin America)
increased 41% to $780.4 million for the second quarter of 1996 from $554.7
million in the second quarter of 1995 and increased 11% from $706.2 million in
the first quarter of 1996. Americas' net sales increased 39% to $1.5 billion
in the first half of 1996 from the comparable period of the prior year. Net
sales from the Company's European operations increased 52% to $325.6 million in
the second quarter of 1996 from $214.2 million in the second quarter of 1995,
but decreased 7% from $348.4 million in the first quarter of 1996 primarily due
to a seasonal decline in European government sales. European net sales were
$674.0 million in the first six months of 1996, up 51% from the first six
months of 1995. Other international sales increased 341% to $99.6 million for
the second quarter of 1996 from $22.6 million in the second quarter of 1995 and
increased 330% to $180.9 million in the first half of 1996 from the comparable
period of the prior year, primarily due to sales growth in Japan, where revenue
has more than tripled compared to the second quarter and first half of 1995.
Other international sales increased 22% in the second quarter of 1996 from
$81.3 million in the first quarter of 1996. The Company believes that a
significant opportunity exists for continued growth in international
operations, and during the first quarter of 1996, the Company began
construction of a 238,000 square foot combination office and manufacturing
facility on a nine-acre site in Penang, Malaysia to meet the needs of its
expanding Asia-Pacific business. The Company anticipates completion of the
facility during the fourth quarter of 1996. Dell intends to continue to expand
its international activities by increasing its market presence in existing
markets through ongoing revisions and improvement of its marketing and sales
compensation programs to more effectively reach its customers, by improving its
support systems, by pursuing additional distribution opportunities and by
entering new markets. There can be no assurance that the Company's Malaysian
facility will meet the needs of the Company's expanding Asia-Pacific business
or that the Company will be successful in its efforts to expand its
international activities.

Consolidated net sales to national accounts, consisting of sales to major
corporate, government and education accounts and value-added resellers,
continue to comprise roughly two-thirds of consolidated net sales in 1996,
consistent with 1995. Sales to national accounts increased 44% to $787.8
million in the second quarter of 1996 from $545.6 million in the second quarter
of 1995 and increased 9% from $720.4 million in the first quarter of 1996.
Such sales were $1.5 billion in the first six months of 1996, an increase of
46% over the comparable period in the prior year. Sales to medium- to
small-sized businesses and individuals increased 70% to $417.8 million in the
second quarter of 1996 from $245.9 million in the second quarter of 1995 and
increased 60% to $833.2 million in the first half of 1996 from the first half
of 1995, despite the decline in sales to mass merchant and other consumer
retailers as a result of the discontinuation of traditional consumer retailer
sales in the United States and Canada in July 1994. Sales to medium- to
small-sized businesses and individuals increased 1% in the second quarter of
1996 from $415.5 million in the first quarter of 1996. Revenue from consumer
retailers in the United States and Canada represented 2% and 5% of consolidated
net sales in the second quarter and the first six months of 1995, respectively.

The Company was affected by certain industry-wide component shortages
during the second quarter, primarily component shortages on some high speed
semiconductors used in the Company's OptiPlex(TM) desktop line, which
contributed to the backlog of $186.5 million at quarter-end. Backlog was
$135.6 million at the end of the first quarter of 1996 and was $29.4 million at
the end of the second quarter of 1995. There can be no assurance that the
backlog at the end of a quarter will translate into sales in any subsequent
quarter, particularly in light of the Company's policy of allowing customers
to cancel or reschedule orders without penalty prior to commencement of
manufacturing. The Company anticipates that industry-wide shortages of certain
component parts will continue to be a factor affecting its business operations.

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Gross Margin

Gross margin increased $93.0 million in the second quarter of 1996 and
$159.3 million in the first six months of 1996 from the comparable periods in
the prior year primarily as a result of the increase in unit volumes. The
Company's gross margin as a percentage of consolidated net sales increased to
21.8% for the second quarter of 1996 from 21.4% for the second quarter of 1995
and 20.8% in the first quarter of 1996. The Company's gross margin percentage
for the first six months of 1996 was 21.3%, down from 21.8% for the comparable
period of the prior year. The improvement in gross margin percentage in the
second quarter of 1996 from the first quarter of 1996 was due primarily to a
relatively moderate pricing environment as well as certain cost improvements.
Gross margin percentage in the second quarter of 1996 improved slightly versus
the second quarter of 1995 due to improved warranty and inventory obsolescence
costs and certain economies of scale, partially offset by the Company's more
aggressive pricing strategy relative to the prior year. The slight decrease in
gross margin percentage in the first half of 1996 from the comparable period of
the prior year was due to the Company's more aggressive pricing strategy in
comparison to the prior year, partially offset by cost improvements and
economies of scale.

Several of the Company's competitors have recently announced price
reductions on some of their products. The Company believes that its product
offerings are competitively priced, even taking into account those competitor
pricing actions. Nevertheless, the Company may take pricing actions as it
attempts to maintain a competitive mix of price, performance and customer
services while managing its liquidity, profitability and growth. The Company
attempts to mitigate the effects of price reductions by improving product mix,
further reducing component costs and lowering operating costs. There can be no
assurance that pricing actions, if taken, will be effective in stimulating
higher levels of sales or that cost reduction efforts will offset the effects
of pricing actions on the Company's gross margins.

The Company's manufacturing process requires a high volume of quality
components that are procured from third party suppliers. Reliance on
suppliers, as well as industry supply conditions, generally involves several
risks, including the possibility of defective parts, a shortage of components,
increases in component costs and reduced control over delivery schedules, any
or all of which could have a material adverse effect on the Company's financial
results. The Company has several single supplier relationships, and the lack
of availability of timely and reliable supply of components from any of these
sources could have a material adverse effect on the Company's business.
Alternative sources of supply are not available for some of the Company's
single sourced components. Even when multiple suppliers are available, the
Company may establish a working relationship with a single source when the
Company believes it is advantageous due to performance, quality, support,
delivery, capacity or price considerations. While the Company has supply
agreements with certain suppliers, such agreements typically only specify
general terms and conditions, subject to release of purchase orders by the
Company and acceptance thereof by the component supplier. Where alternative
sources are available, qualification of the alternative suppliers and
establishment of reliable supplies of components from such sources may result
in delays and could have a material adverse effect on the Company's
manufacturing processes and results of operations. The Company occasionally
experiences delays in receiving certain components, which can cause delays in
the shipment of some products to customers, thereby increasing backlog.
Additionally, the Company has occasionally experienced certain defective
components, which can affect the reliability and reputation of its products.
There can be no assurance that the Company will be able to continue to obtain
supplies of reliable components in a timely or cost-effective manner. In
particular, the Company obtains its supply of microprocessors from Intel
Corporation, although certain comparable microprocessors are available from
other sources.

In November 1994, an inaccuracy in Intel's Pentium microprocessor was
publicized that, under certain circumstances, will cause errors in division.
Based on information from Intel Corporation, the Company believes only a
limited number of its Pentium microprocessor customers perform calculations
affected by the inaccuracy. Nonetheless, Intel has offered replacement
microprocessors to end-users for any Pentium microprocessor having the flawed
chip. By early February 1995, all of the Company's new shipments of Pentium
processor-based products contained the corrected Pentium microprocessors.
Although the Company previously shipped products which included Pentium
microprocessors that exhibited the inaccuracy, the Company believes that the
costs associated with the replacement of such microprocessors will not have a
material adverse effect on the Company's results of

11
13

operations or financial condition. Further, the Company has recently seen a
sharp decline in requests for replacement chips for affected Pentium
microprocessors and expects this replacement activity to reach a minimal level
in the very near future.

Operating Expenses

Over the last year, the Company has strengthened its management team and
increased staffing worldwide to meet the demands of its growth, resulting in
increased compensation-related expenses. Additional resources were also
expended relating to the Company's investment in global information systems.
These infrastructure expenditures resulted in an increase in selling, general
and administrative expenses of 44% to $147.3 million in the second quarter of
1996 from $102.7 million in the second quarter of the prior year and an
increase of 39% to $275.0 million in the first six months of 1996 from $197.5
million in the first six months of 1995. However, selling, general and
administrative expenses as a percentage of consolidated net sales decreased to
12.2% in the second quarter of 1996 from 13.0% in the second quarter of 1995
and to 11.7% in the first half of 1996 from 12.7% in the comparable period of
the prior year. The 12.2% for the second quarter of 1996 represented an
increase from the 11.3% reported for the first quarter of 1996. The Company
also increased headcount to support increased product development activities
and improved quality and time-to-market of its products. Furthermore, the
Company incurred additional development costs in conjunction with the
development of new notebook computer products. These expenditures resulted in
an increase in research, development and engineering expenses of 55% to $24.7
million in the second quarter of 1996 from $15.9 million in the second quarter
of 1995 and of 47% to $45.5 million in the first six months of 1996 from $30.9
million in the first six months of the prior year.

The Company believes that its ability to manage operating costs is an
important factor in its ability to remain price competitive. However, the
Company will invest in key global information systems through fiscal 1999 to
manage and support its growth. No assurance can be given that the Company's
efforts to manage future operating expenses will be successful.

Financing and Other Income (Expense), net

Financing and other income (expense), net was $1.0 million for the second
quarter of 1996 compared with ($9.7) million for the second quarter of 1995 and
was $0.2 million for the first six months of 1996 compared with ($42.2) million
for the comparable period in the prior year. The table below sets forth for
the periods indicated the components of financing and other income (expense),
net (in thousands):

THREE MONTHS ENDED SIX MONTHS ENDED
------------------------- -------------------------
JULY 30, JULY 31, JULY 30, JULY 31,
1995 1994 1995 1994
---------- --------- ---------- ----------

Short-term investment income (loss) was $5.5 million in the second quarter
of 1996 compared with ($5.3) million in the second quarter of 1995 and was
$11.1 million in the first half of 1996 compared with ($16.1) million in the
first half of the prior year. The investment losses for the second quarter and
the first six months of 1995 were primarily due to recognized losses of $7.6
million and $23.1 million, respectively, on certain of the Company's short-term
investments as a result of interest rate increases in the United States,
Canadian, Japanese and European interest rate markets. The Company accounts
for highly liquid investments with maturities of three months or less at date
of acquisition as short-term investments and reflects the related cash flows as
investing cash flows. As a result, significant portions of the Company's gross
investment maturities and purchases disclosed as investing cash flows are
related to highly liquid investments.

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14

Realized and unrealized net losses on interest rate derivatives recognized
in income were $1.3 million and $23.9 million in the second quarter and first
six months of 1995, respectively. The losses were primarily a result of
interest rate increases in the United States, Canadian, Japanese and European
interest rate markets. The Company closed all remaining investment derivatives
during the second quarter of fiscal 1995. Consequently, no gains or losses
associated with investment derivatives have been recognized in 1996. The
Company intends to use derivative financial instruments only to manage its
exposure to fluctuations in foreign currency exchange rates and to manage
market risk on components of its debt and equity.

All of the Company's foreign exchange and interest rate derivative
instruments involve elements of market and credit risk in excess of the amounts
recognized in the financial statements. The counterparties to financial
instruments consist of a number of major financial institutions. In addition
to limiting the amount of agreements and contracts it enters into with any one
party, the Company regularly monitors the credit quality of the financial
institutions that are counterparties to these financial instruments. The
Company does not anticipate nonperformance by the counterparties.

Interest expense increased in the second quarter of 1996 to $3.8 million
from $2.4 million in the second quarter of 1995 and increased in the first six
months of 1996 to $7.8 million from $4.6 million in the comparable period of
the prior year. The increase in interest expense in 1996 over 1995 was
primarily due to higher borrowings and higher interest rates in the second
quarter and first half of 1996. Concurrently with the issuance of the 11%
Senior Notes Due August 15, 2000 (the "Notes") in the third quarter of 1994,
the Company entered into interest rate swap agreements to manage the interest
costs associated with the Notes. The swap agreements effectively changed the
Company's interest rate exposure from a fixed-rate to a floating-rate basis.
However, in response to increasing interest rates, in August 1994, the Company
entered into offsetting swap agreements to effectively change its interest rate
exposure back to a fixed-rate basis. The interest rate swap agreements mature
on August 15, 1998, the first available redemption date of the Notes. At the
end of the second quarter of 1996, the Company had outstanding receive
fixed/pay floating interest rate swaps with an aggregate notional amount of
$100 million offset by receive floating/pay fixed interest rate swaps with an
aggregate notional amount of $100 million. The weighted average interest rate
on the Notes, adjusted by the swaps, was 13.8% for the second quarter and the
first six months of 1996 compared with 10.8% and 10.1% for the second quarter
and first six months of 1995, respectively.

Income Tax

The Company's effective tax rate was 29.0% for the second quarter and the
first six months of 1996 compared with 31.0% for the second quarter and first
six months of 1995. The change in the effective tax rate resulted from changes
in the geographical distribution of income and losses.

Fluctuations in Operating Results

The Company's operating results may fluctuate from period to period and
will depend on numerous factors, including customer demand and market
acceptance of the Company's products, new product introductions, product
obsolescence, component supply, component price fluctuations, varying product
mix, foreign currency exchange rates, foreign currency and interest rate
hedging and other factors. Net sales in a given quarter are primarily
dependent on customer orders received in that quarter, and operating
expenditures are primarily based on forecasts of customer demand. As a result,
if demand does not meet the Company's expectations in any given period, the
sales shortfall may result in an increased adverse effect on operating results
due to the Company's inability to adjust operating expenditures quickly enough
to compensate for the shortfall. The Company's business is sensitive to the
spending patterns of its customers, which in turn are subject to prevailing
economic conditions and other factors beyond the Company's control. Changes in
economic conditions or customer spending patterns for personal computer
products could have a material adverse effect on the Company's results of
operations.

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HEDGING ACTIVITIES

The results of the Company's international operations are affected by
changes in exchange rates between certain foreign currencies and the United
States dollar. The financial statements of the Company's international sales
subsidiaries have generally been measured using the local currency as the
functional currency. An increase in the value of the United States dollar
increases costs incurred by the Company's international operations because many
of its component purchases are denominated in the United States dollar.
Changes in exchange rates may negatively affect the Company's consolidated net
sales (as expressed in United States dollars) and gross margins from
international operations. Effective January 30, 1995, most of the Company's
European sales are made from a U.S. dollar functional currency entity.

The purpose of the Company's hedging program is to reduce the Company's
exposure to the risk that the dollar-value equivalent of anticipated cash flows
will be adversely affected by changes in foreign currency exchange rates. The
Company attempts to reduce its exposure to currency fluctuations involving
anticipated, but not firmly committed, transactions and involving transactions
with firm foreign currency commitments through the use of purchased foreign
currency option contracts and forward contracts.

Realized and unrealized gains or losses and premiums on foreign currency
purchased option contracts that are designated and effective as hedges of
probable anticipated, but not firmly committed, foreign currency transactions
are deferred and recognized in income in the same period as the hedged
transaction. The risk of loss associated with purchased options is limited to
premium amounts paid for the option contracts, which could be significant.
Forward contracts designated as hedges of anticipated transactions are
accounted for on a mark-to-market basis and included in income as a component
of net sales or cost of sales, depending upon which transaction is hedged.
Transaction exposures representing firm foreign currency commitments are
generally hedged using foreign exchange forward contracts. Forward contracts
related to transaction exposures are accounted for on a mark-to-market basis
with realized and unrealized gains or losses included in financing and other
income (expense) as an offset to the underlying hedged transaction. The risk
of loss associated with forward contracts is limited to the exchange rate
differential from the time the contract is made until the time it is settled.

The Company enters into foreign currency purchased options and, to a lesser
extent, forward contracts to hedge a portion of its anticipated, but not firmly
committed, transactions including sales by international subsidiaries, which
includes international sales by a U.S. dollar functional currency entity and
intercompany shipments to certain international subsidiaries, and foreign
currency denominated purchases of certain components. Foreign currency
purchased options generally expire in twelve months or less and forward
contracts generally mature in three months or less. The principal hedge
currencies are the German mark, the British pound and the Japanese yen. At
July 30, 1995, the Company held purchased option contracts that were designated
and effective as hedges of anticipated sales by international subsidiaries with
a total notional amount of $644.9 million and a combined net realized and
unrealized loss of $7.7 million. At July 30, 1995, the Company held purchased
options that were designated and effective as hedges of foreign currency
denominated purchases with a total notional amount of $84.2 million and a
combined net realized and unrealized gain of $8.6 million. Forward contracts
with maturity dates of less than three months designated to hedge foreign
currency transaction exposures of $143.9 million were outstanding at July 30,
1995.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash flow from operating activities for the first six months
of 1996 was $75.6 million and represented the Company's primary source of cash
during the six-month period, along with $28.9 million from the issuance of
common stock under employee plans. Working capital totaled $850.8 million at
July 30, 1995 compared with $719.0 million at January 29, 1995. Days in
accounts receivable at the end of the second quarter of 1996 increased to 50
days from 47 days at the end of 1995. Days in accounts payable decreased
slightly to 43 days at the end of the second quarter of 1996 from 44 days at
the end of 1995. Inventory levels increased to 36 days of supply at the end of
the second quarter of 1996 from 32 days at the end of 1995. Maintaining a low
inventory level is dependent upon the Company's ability to achieve targeted
revenue and product mix, to further minimize complexities in its product line
and to maximize commonality of parts. There can be no assurance that the
Company will be able to maintain low inventory levels in future periods.

14
16

The Company used $45.8 million of cash during the first six months of 1996
to construct facilities and to acquire information systems and personal
computer office equipment. Capital expenditures for the second half of 1996
are expected to be approximately $75 million, primarily related to the
construction of manufacturing and administrative facilities, the acquisition
and development of an integrated management information system and the
acquisition of computer equipment for internal use. The Company believes that
its cash and short-term investments and its cash flow from operating activities
will be adequate to fund its capital expenditures planned for the remainder of
1996.

The Company has entered into a series of line of credit facilities, each
effective as of June 8, 1995. Each of the lines of credit bears interest at a
defined Base Rate or Eurocurrency Rate and has a covenant based on quarterly
maintenance of net worth. Maximum aggregate amounts available under the new
credit facilities are limited to $150 million less the aggregate of outstanding
letters of credit under these facilities. During the commitment period, the
Company is obligated to pay a fee on the unused portion of the credit
facilities. No borrowings or letters of credit were outstanding under these
credit facilities as of July 30, 1995, and the maximum available totaled $150
million.

The Company's subsidiary, Dell Receivables Corporation, has a Receivables
Purchase Agreement that expires June 22, 1996, pursuant to which the Company
may raise up to $100 million through the sale of interests in certain of its
accounts receivable. The Company is obligated to pay a commitment fee on the
unused portion of the amount available under the Receivables Purchase
Agreement. As of July 30, 1995, this facility was unused.

On July 21, 1995, the Company's stockholders approved a proposed amendment
to the Company's Certificate of Incorporation to increase the number of shares
of common stock, par value $.01 per share, that the Company is authorized to
issue from 100 million to 300 million. The additional authorized shares can be
used for any proper purpose approved by the Company's Board of Directors and
will provide the Company with the flexibility it may need in the future to
raise capital, negotiate acquisitions, restructure debt, issue stock dividends,
consummate stock splits or for other corporate purposes.

On February 21, 1995, the Company offered to pay a cash premium of $8.25
for each outstanding share of its Preferred Stock that was converted to common
stock. The offer of premium upon conversion was available to holders of the
Preferred Stock through the closing of the special conversion period on March
22, 1995. The Company also offered to register the resale of the shares of
common stock issued upon conversion of the Preferred Stock with the Securities
and Exchange Commission for a 50-day period, which ended June 15, 1995.
Holders of 1,190,000 shares of Preferred Stock elected to convert and, as a
result, received an aggregate of approximately 5.0 million shares of common
stock and $9.8 million in cash during the first quarter of 1996. The $9.8
million conversion premium and $0.5 million of expenses of the conversion offer
were treated as an additional dividend on the Preferred Stock for financial
reporting purposes.

During the first half of 1996, the Company granted approximately 260,000
shares of restricted stock to employees pursuant to its long-term incentive
plan. Due to the granting of these additional shares, the unearned
compensation associated with restricted stock grants has increased from $4.4
million at January 29, 1995 to $15.2 million at July 30, 1995. Such unearned
compensation is being amortized to expense over the vesting period of the
underlying restricted stock.

Repayment of the Company's $100 million in Notes, repayment of a loan in
the original amount of $14 million secured by one of its facilities in Round
Rock, Texas and payment of its operating lease commitments constitute the
Company's long-term commitments to use cash.

Management believes that sufficient resources will be available to meet the
Company's cash requirements through at least the next twelve months. Cash
requirements for periods beyond the next twelve months depend on the Company's
profitability, its ability to manage working capital requirements and its rate
of growth.

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17

PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In May 1995, the Company was named, along with two other personal computer
manufacturers and one computer monitor vendor, in a class action complaint
filed in the California Superior Court for Marin County. This case has been
transferred to Orange County, California. A second class action complaint,
naming the Company and 47 other manufacturers or vendors of personal
computer monitors, was filed in Santa Clara County, California and was served
on the Company in August 1995. The complaints allege that each of the
defendants has engaged in false or misleading advertising with regard to
the size of computer monitor screens. The plaintiffs seek restitution in
the form of refunds or product exchange, damages, punitive damages and
attorneys' fees. The Company plans to vigorously contest the allegations
of the complaints. This litigation is currently at a preliminary stage, and
no discovery has occurred to date. As such, it is too early for the Company
to adequately evaluate the likelihood of the plaintiffs prevailing on their
claims. There can be no assurance that an adverse determination in this
litigation would not have a material adverse effect on the Company's financial
condition or results of operations. Two other similar class action complaints
naming the Company and others as defendants have been filed in Orange County,
California; but as of September 11, 1995, the Company has not been served with
summons or any other notice of these additional actions.

For additional information about a Federal Trade Commission inquiry and a
State of California Attorney General investigation into the Company's
advertising and marketing claims regarding monitor screen sizes, see Item 3 of
the Company's Annual Report on Form 10-K for the fiscal year ended January 29,
1995.

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18

ITEM 2. CHANGES IN SECURITIES

The additional authorized shares can be used for any proper purpose
approved by the Company's Board of Directors. The Company's Board of Directors
believes that the availability of additional shares of authorized common stock
will provide the Company with the flexibility it may need in the future to
raise capital, negotiate acquisitions, restructure debt, issue stock dividends,
consummate stock splits or for other corporate purposes. The additional shares
of common stock will allow shares to be issued without the expense and delay of
a special stockholders' meeting. The Company's Board of Directors does not
currently intend to seek further stockholder approval to issue any such shares,
except as may be required by applicable law or the rules of any stock exchange
or automated quotation system on which the Company's securities may be listed
or traded. The issuance by the Company of additional shares of common stock
may, depending on the context in which they are issued, dilute the stock
ownership of the Company's existing stockholders. The Company's stockholders
do not have any preemptive or similar rights to subscribe for or purchase any
additional shares of common stock that may be issued in the future. Also, the
issuance of additional shares could make it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company, thereby
delaying, deferring or preventing a change in control of the Company.

On May 18, 1995, the Company's Board of Directors approved two amendments
to the Company's Bylaws. The first amendment specifies that directors are
elected by plurality of votes of the shares present in person or represented by
proxy at stockholder meetings (rather than a majority of the voting power of
such shares) and effects certain other clarifying changes to the provision
dealing with quorum, adjournment and the vote required at stockholder meetings.
The second amendment eliminates the requirement that the annual stockholder
meeting be held within 13 months after the last annual stockholder meeting and
provides that the meeting may be held at such time as shall be designated by
the Board of Directors. Such amendment also effects certain clarifying changes
to the provision dealing with the calling of the annual stockholder meeting.
The Company does not believe that either of these amendments to the Bylaws has
a material effect on the rights of the Company's stockholders.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The annual meeting of the Company's stockholders was held on July 21, 1995.
At that meeting, five separate proposals were submitted to a vote of the
Company's stockholders. Proposal 1 was a proposal to elect three Class I
directors (with Donald J. Carty, Paul O. Hirschbiel, Jr. and Thomas W. Luce III
being the nominees), one Class II director (with Klaus S. Luft being the
nominee) and one Class III director (with Michael A. Miles being the nominee).
Proposal 2 was a proposal to amend the Company's Certificate of Incorporation
to increase the number of authorized shares of common stock from 100 million to
300 million. Proposal 3 was a proposal to approve the Company's Executive
Incentive Bonus Plan. Proposal 4 was a proposal to approve an amendment to the
Dell Computer Corporation Incentive Plan to (a) increase the number of shares
of common stock that may be issued or transferred pursuant to awards thereunder
by 4 million shares (from 4,500,923 to 8,500,923) and (b) increase the minimum
exercise price for "nonstatutory" stock options and stock appreciation rights
issued thereunder to 75% (from 50%) of the fair market value of the common
stock on the date of grant, and to approve such plan as amended. Proposal 5
was a proposal to ratify the selection of Price Waterhouse LLP as the Company's
independent accountants for fiscal 1996.

At the close of business on the record date for the meeting (which was June
1, 1995), there were 45,243,441 shares of common stock issued and outstanding
and entitled to vote at the meeting. Holders of 41,388,957 shares of common
stock (representing a like number of votes) were present at the meeting, either
in

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person or by proxy. The following table sets forth the results of the voting
on each of the five proposals (including, in the case of Proposal 1, the
results of the voting with respect to each nominee):

NUMBER OF VOTES
--------------------------------------------------------------------
BROKER
FOR AGAINST (A) ABSTAIN NON-VOTE
----------------- --------------- ------------- ------------

Proposal 1 -- Election of Directors:
Donald J. Carty . . . . . . . . . . 41,348,174 40,783 -- --
Paul O. Hirschbiel, Jr. . . . . . . 41,348,233 40,724 -- --
Thomas W. Luce III . . . . . . . . . 41,347,874 41,083 -- --
Klaus S. Luft . . . . . . . . . . . 41,347,704 41,253 -- --
Michael A. Miles . . . . . . . . . . 41,348,003 40,954 -- --
Proposal 2 -- Amendment to
Certificate of Incorporation . . . . 29,024,748 12,201,935 162,274 --
Proposal 3 -- Approval of Executive
Incentive Bonus Plan . . . . . . . . 38,586,196 1,346,204 201,728 1,254,829
Proposal 4 -- Approval of Amendment
to Incentive Plan . . . . . . . . . 25,150,428 9,185,168 210,465 6,842,896
Proposal 5 -- Ratification of Selection
of Independent Accountants . . . . . 41,256,040 34,188 98,729 --

__________

(a) In the case of Proposal 1 -- Election of Directors, constitutes number
of votes cast to withhold authority to vote in favor of the nominees.

Consequently, all of the proposals were passed by the stockholders. For
additional discussion concerning Proposal 2 -- Amendment to Certificate of
Incorporation, see "Item 2 -- Changes in Securities" above.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

The following exhibits are filed as a part of this Report:

EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------

3.1 Certificate of Incorporation, dated October 21, 1987 and filed October 22, 1987
3.2 Certificate of Amendment to the Certificate of Incorporation, dated May 6, 1988 and filed
May 9, 1988
3.3 Certificate of Amendment to the Certificate of Incorporation, dated June 19, 1991 and filed
June 21, 1991
3.4 Certificate of Amendment to the Certificate of Incorporation, dated June 19, 1992 and filed
July 10, 1992
3.5 Certificate of Designation of Series A Convertible Preferred Stock, dated August 24, 1993
and filed August 25, 1993
3.6 Certificate of Correction Filed to Correct Certain Errors in the Certificate of Amendment of
Certificate of Incorporation Filed in the Office of the Secretary of State of Delaware on
May 9, 1988, and in the Certificate of Amendment of Certificate of Incorporation Filed in
the Office of the Secretary of State of Delaware on July 10, 1992, dated April 27, 1994 and
filed May 5, 1994
3.7 Certificate of Amendment to Certificate of Incorporation, dated July 31, 1995 and filed
August 3, 1995
3.8 Bylaws, dated October 22, 1987
3.9 Amendments to the Bylaws, adopted June 19, 1991
3.10 Amendments to the Bylaws, adopted May 18, 1995

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10.1 Committed Credit Line Agreement, dated as of June 8, 1995, between NationsBank of Texas,
N.A. and the Company and certain of its subsidiaries, along with schedule identifying
substantially identical agreements and material differences between such other agreements
and the agreement filed
10.2 Severance Agreement, dated June 15, 1995, between the Company and Thomas L. Thomas
10.3 First Amendment to Dell Computer Corporation Incentive Plan, dated as of July 21, 1995
11 Statement Re Computation of Per Share Earnings
27 Financial Data Schedule

(b) Reports on Form 8-K

On June 2, 1995, the Company filed a Current Report on Form 8-K dated
May 2, 1995, which reported under Item 5 recent developments in certain legal
proceedings that are described under Item 1 of Part II of this Report.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

DELL COMPUTER CORPORATION

September 12, 1995 /s/ Thomas J. Meredith
-----------------------------------
Thomas J. Meredith
Senior Vice President
(On behalf of the registrant and as
principal financial officer)

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EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------

3.1 -- Certificate of Incorporation, dated October 21, 1987 and filed October 22, 1987
3.2 -- Certificate of Amendment to the Certificate of Incorporation, dated May 6, 1988 and filed
May 9, 1988
3.3 -- Certificate of Amendment to the Certificate of Incorporation, dated June 19, 1991 and filed
June 21, 1991
3.4 -- Certificate of Amendment to the Certificate of Incorporation, dated June 19, 1992 and filed
July 10, 1992
3.5 -- Certificate of Designation of Series A Convertible Preferred Stock, dated August 24, 1993
and filed August 25, 1993
3.6 -- Certificate of Correction Filed to Correct Certain Errors in the Certificate of Amendment
of Certificate of Incorporation Filed in the Office of the Secretary of State of Delaware
on May 9, 1988, and in the Certificate of Amendment of Certificate of Incorporation Filed
in the Office of the Secretary of State of Delaware on July 10, 1992, dated April 27, 1994
and filed May 5, 1994
3.7 -- Certificate of Amendment to Certificate of Incorporation, dated July 31, 1995 and filed
August 3, 1995
3.8 -- Bylaws, dated October 22, 1987
3.9 -- Amendments to the Bylaws, adopted June 19, 1991
3.10 -- Amendments to the Bylaws, adopted May 18, 1995
10.1 -- Committed Credit Line Agreement, dated as of June 8, 1995, between NationsBank of Texas,
N.A. and the Company and certain of its subsidiaries, along with schedule identifying
substantially identical agreements and material differences between such other agreements
and the agreement filed
10.2 -- Severance Agreement, dated June 15, 1995, between the Company and Thomas L. Thomas
10.3 -- First Amendment to Dell Computer Corporation Incentive Plan, dated as of July 21, 1995
11 -- Statement Re Computation of Per Share Earnings
27 -- Financial Data Schedule