EXHIBIT 99.1
Dell Reports Preliminary Revenue of $14.4 Billion;
Preliminary Earnings Per Share of $0.30
Company Takes Action to Transform Business to Drive Long Term
Sustainable Performance
ROUND ROCK, Texas--(BUSINESS WIRE)--March 1, 2007--Dell
(NASDAQ:DELL) reported preliminary results for the fourth quarter of
fiscal year 2007, with revenue of $14.4 billion, operating income of
$801 million, and earnings per share of $0.30. Dell ended the quarter
with $12.5 billion in cash and investments.
In the quarter, several items impacted operating income and
earnings per share. First, the company will not be paying out the full
amount of accrued employee bonuses due to its failure to achieve its
operating targets for fiscal 2007. The reduction in the provision for
employee bonuses positively impacted operating income and earnings per
share by $184 million and $0.06, respectively. Second, costs
associated with the ongoing investigations into certain accounting and
financial reporting matters reduced operating income and earnings per
share by $89 million and $0.03, respectively. And third, a one-time
gain on the sale of real estate added $36 million pre-tax to financing
and other income, or $0.01 per share.
"We are disappointed with the company's results, but what matters
is our future plan of action. We are systematically moving to increase
efficiencies, improve execution and transform the company," said
Chairman and CEO Michael Dell. "Our business model will become more
aligned with the needs of our customers, which will improve their
experience and yield improved growth and profitability for the
long-term."
Transformation Under Way
The company said it is moving quickly to strengthen its management
team, unify business units, and eliminate redundancies, while
redeploying resources to drive greater value for customers. The
company also said it is moving to shorten product development cycles,
make decisions closer to the customer, and develop new approaches to
manufacturing and distribution to better reach and serve customers in
fast-growing and emerging markets.
Examples of these changes include the globalization, under new
leaders, of Dell's services organization, global operations
(manufacturing, supply chain and procurement) and its global consumer
business, including product design and development.
"We won't achieve our goals overnight, but we will achieve our
goals," added Mr. Dell. "We will be known again for strong operating
and financial performance and a great experience for our customers.
But it will take time to realize the future benefits of the
improvements we are making today."
Strong International Shipments and Growth in Enterprise and
Services Among Highlights
In the fourth quarter, international unit shipments exceeded U.S.
shipments for the first time in company history. This drove the mix of
revenue from outside the U.S. to a record 46 percent of Dell's
revenues.
Dell's server offerings, including the new 9G servers featuring
Intel and AMD processors, contributed $1.5 billion in revenues on two
percent unit growth over the prior fourth quarter. Revenue from
storage products was strong globally at $ 0.6 billion. Revenue from
mobility products declined two percent to $3.8 billion on a two
percent increase in units. Desktop revenues of $4.6 billion declined
year on year driven by an 18 percent decline in units. Enhanced
services revenues of $1.5 billion benefited from the addition of the
company's new Platinum Plus offerings for enterprise customers and
Dell on Call for consumers.
Dell launched Microsoft Vista for Consumers in the quarter,
offering systems equipped with the new operating system designed to
deliver a rich digital lifestyle experience, combined with secure
operations and ease of use.
Customer Experience Investments Deliver Results
The company's focus on customer experience yielded positive
results in fiscal year 2007. In the U.S., customer satisfaction with
Dell technical support improved significantly. The company reduced
call transfers, and improved "Resolve in One" first-contact resolution
of customer issues. Later this year, Dell will offer online
data-migration and backup capability preinstalled by Dell to further
strengthen its service and support offerings.
Company Outlook
The company is focused on transformational efforts that are
designed to yield improving operational results, customer experience,
financial performance and shareholder value. These investments in the
coming quarters should produce a more optimal balance of growth,
profitability and liquidity over the long term. In the next several
quarters, however, the company expects that growth and margins will
continue to be under pressure as it implements and refines these
actions.
Investigation Update; Preliminary Results Subject to Change
As previously announced, the U.S. Securities and Exchange
Commission (SEC) and the Company's Audit Committee are conducting
investigations into certain accounting and financial reporting
matters, including the possibility of misstatements in prior period
financial reports, and the company previously received a related
subpoena from the United States Attorney for the Southern District of
New York. Due to questions raised in connection with these ongoing
investigations, the Company has not filed the Form 10-Q for its fiscal
second quarter ended August 4, 2006, or the Form 10-Q for its fiscal
third quarter ended November 3, 2006. As a result, all financial
results described in this press release, as well as the previously
announced financial results for the second and third quarters, should
be considered preliminary, and are subject to change to reflect any
necessary corrections or adjustments, or changes in accounting
estimates, that are identified prior to the time the company is in a
position to complete these filings. In addition, the preliminary
results for the second, third and fourth quarters could be affected by
any restatements of prior period financial statements that are
required as a result of any conclusions reached by the investigations.
No determination has been made as to whether restatements of prior
period financial statements will be required.
The company is not currently able to predict the extent or
significance of any such changes, and those changes could materially
affect the preliminary results reported herein, as well as the
previously announced results for the second and third quarters. The
company is working diligently to file the quarterly reports for the
second and third quarters, as well as the annual report on Form 10-K
for fiscal 2007, as soon as possible. Additional information about the
investigations, as well as information about related private
litigation, can be found in the Current Report on Form 8-K filed with
the SEC concurrent with the issuance of this press release.
NASDAQ Listing Update
On February 28, 2007, Dell was informed that the NASDAQ Listing
and Hearing Review Council had decided to review the Listing
Qualifications Panel's January 17, 2007 decision, and had also stayed
any future action by the Panel to delist the company's common stock
pending further review by the Council. As a result of this decision,
Dell's common stock will remain listed on The NASDAQ Stock Market
pending completion of the Council's review. Dell has until May 4,
2007, to submit any additional information it wishes the Council to
consider.
About Dell
Dell Inc. (NASDAQ:DELL) listens to customers and delivers
innovative technology and services they trust and value. Uniquely
enabled by its direct business model, Dell is a leading global systems
and services company and No. 25 on the Fortune 500. For more
information, visit www.dell.com. To get Dell news direct, visit
www.dell.com/RSS.
Special Note
Statements in this press release that relate to future results and
events (including statements about Dell's reported preliminary results
and expected future financial and operating performance) are
forward-looking statements based on Dell's current expectations.
Actual results may differ materially from those estimated in these
forward-looking statements because of a number of risks and
uncertainties, including: general economic, business and industry
conditions; the level and intensity of competition in the technology
industry and the pricing pressures that have resulted; the outcome of
the ongoing investigations into certain accounting and financial
reporting matters that could result in management's determination that
restatements of the company's prior period financial statements are
required, or management's conclusion that there is a material weakness
in the company's internal controls over financial reporting and that
disclosure controls and procedures are not effective; Dell's failure
to meet NASDAQ requirements for continued listing as a result of its
delinquent periodic report filings; litigation and governmental
investigations or proceedings arising out of or related to accounting
and financial reporting matters, or any restatement of Dell's
financial statements; local economic and labor conditions, political
instability, unexpected regulatory changes, trade protection measures,
tax laws, copyright levies and fluctuations in foreign currency
exchange rates; the ability to accurately predict product, customer
and geographic sales mix; the ability to timely and effectively manage
periodic product transitions; reliance on third-party suppliers for
product components, including dependence on several single-source
supplier relationships; the ability to effectively manage operating
costs; the ability to attract and retain qualified personnel; the
level of demand for the products and services Dell offers; the ability
to manage inventory levels to minimize excess inventory, declining
inventory values and obsolescence; and the effect of armed
hostilities, terrorism, natural disasters and public health issues on
the economy generally, on the level of demand for Dell's products and
services and on Dell's ability to manage its supply and delivery
logistics in such an environment. Additional discussion of these and
other factors affecting Dell's business and prospects is contained in
Dell's periodic filings with the Securities and Exchange Commission.
DELL INC.
Condensed Consolidated Statement of Income and Related Financial
Highlights - PRELIMINARY (see Note)
(in millions, except per share data or as otherwise noted)
(unaudited)
Three Months Ended
February 2,
2007 (a)
--------------------
Net revenue $14,402
Cost of revenue 11,934
--------------------
Gross margin 2,468
Total operating expenses 1,667
--------------------
Operating income 801
Investment and other income, net 105
--------------------
Income before income taxes 906
Income tax provision 233
--------------------
Net income $673
====================
Earnings per common share:
Basic $0.30
====================
Diluted $0.30
====================
Weighted average shares outstanding:
Basic 2,230
Diluted 2,251
Percentage of Total Net Revenue:
- --------------------------------------------------
Gross margin 17.1%
Operating expenses 11.6%
Operating income 5.5%
Income before income taxes 6.3%
Net income 4.7%
Income tax rate 25.7%
Net Revenue by Geographic Region (in billions):
- --------------------------------------------------
Americas $8.8
Europe 3.8
Asia Pacific - Japan 1.8
Percentage of Total Net Revenue:
- --------------------------------------------------
Americas 61%
Europe 27%
Asia Pacific - Japan 12%
Net Revenue by Product Category (in billions):
- --------------------------------------------------
Desktop PCs $4.6
Mobility 3.8
Servers and Networking 1.5
Storage 0.6
Enhanced Services 1.5
Software and Peripherals 2.4
Percentage of Total Net Revenue:
- --------------------------------------------------
Desktop PCs 32%
Mobility 26%
Servers and Networking 11%
Storage 4%
Enhanced Services 11%
Software and Peripherals 16%
Note: These preliminary results are subject to change to reflect any
necessary corrections or adjustments, or changes in accounting
estimates, that are identified prior to the time the company's
financial statements for the second, third and fourth quarters of
fiscal 2007 are finalized. In addition, these preliminary results
could be affected by any restatements of prior period financial
statements that are required as a result of conclusions reached by
the ongoing investigations concerning certain accounting and
financial reporting matters being conducted by the company's Audit
Committee and the Securities and Exchange Commission. See
"Investigation Update; Preliminary Results Subject to Change" in the
accompanying press release.
(a) Results for the three months ended February 2, 2007 include stock-
based compensation expense of $74 million, or $50 million ($0.02 per
share) net of tax, due to the implementation of Statement of
Financial Accounting Standard No. 123 (revised 2004), Share-Based
Payments, ("SFAS 123(R)"). Dell implemented SFAS 123(R) using the
modified prospective method effective February 4, 2006.
DELL INC.
Financial Highlights -- Continued - PRELIMINARY (see Note)
(unaudited)
February 2,
2007
-------------------
Other Information:
- --------------------------------------------------
Headcount (approximate) 82,200
Average total revenue/unit (approximate) $1,590
Cash and investments (in billions) $12.5
Commercial paper borrowings (in billions) $0.1
Ratios are calculated based on underlying data in
thousands.
Note: These preliminary results are subject to change to reflect any
necessary corrections or adjustments, or changes in accounting
estimates, that are identified prior to the time the company's
financial statements for the second, third and fourth quarters of
fiscal 2007 are finalized. In addition, these preliminary results
could be affected by any restatements of prior period financial
statements that are required as a result of conclusions reached by
the ongoing investigations concerning certain accounting and
financial reporting matters being conducted by the company's Audit
Committee and the Securities and Exchange Commission. See
"Investigation Update; Preliminary Results Subject to Change" in the
accompanying press release.
CONTACT: Dell Inc., Round Rock
Media Contacts:
Bob Pearson, 512-728-3256
bob_pearson@dell.com
or
Dwayne Cox, 512-728-6236
dwayne_cox@dell.com
or
Investor Contacts:
Lynn A. Tyson, 512-723-1130
lynn_tyson@dell.com
or
Robert Williams, 512-728-7570
robert_williams@dell.com