EXHIBIT 99.1
Dell Reports Preliminary Revenue of $14.6 Billion;
Preliminary Earnings Per Share of $0.34
Company Transformation to Develop, Deliver Long-Term Technology
Solutions for Customers Under Way
ROUND ROCK, Texas--(BUSINESS WIRE)--May 31, 2007--Dell
(NASDAQ:DELL) reported preliminary results for the first quarter of
fiscal year 2008, with revenue of $14.6 billion, operating income of
$947 million and earnings per share of $0.34.
In the quarter, gross and operating income margins were positively
affected by a favorable decline in component costs. In addition, a
focus on more richly configured customer solutions and a better mix of
products and services yielded significantly higher average selling
prices and a better balance of profitability and revenue growth. In
the quarter, the company incurred approximately $46 million, or $0.02
per share, in costs associated with the ongoing investigations into
certain accounting and financial reporting matters.
"Our strategic intent is to simplify information technology for
our customers by removing cost and complexity," said Chairman and CEO
Michael Dell. "No other company is as well positioned to unlock value
for our customers - empowering them to implement simpler and smarter
technology solutions."
End-to-End Transformation
Dell's first-quarter performance demonstrates early progress the
company is making in its systematic effort to restore competitiveness
to the core business, re-ignite growth, and build solutions critical
to customer needs. As part of this transformation, over the past two
quarters Dell has:
-- Restructured the senior leadership team to enhance
accountability, bring clarity to the company's transformation
strategy and move decision-making closer to the customer.
-- Improved customer satisfaction ratings through increased
investment in technical support resources like Dell Support
Center and DellConnect. These investments helped the company
achieve a 66 percent decrease in the number of times customers
are transferred before their issue or question is resolved.
-- Strengthened the foundation for renewed growth in established
and emerging regions through innovative products tailored to
specific customer needs such as the EC280 system introduced
for China, and new manufacturing and development facilities in
high-growth regions like Brazil.
-- Globalized the services business around a strategy of
embedding supportability and serviceability into hardware,
simplifying and standardizing service options and delivery,
and enhancing remote monitoring and resolution capability to
minimize IT infrastructure costs for customers.
-- Initiated a comprehensive review of costs across all processes
and organizations from product development and procurement
through service and support delivery with the goal to simplify
structure, eliminate redundancies and better align operating
expenses with the current business environment and strategic
growth opportunities. As a part of this overall effort, Dell
will reduce headcount by approximately 10 percent over the
next 12 months. The reductions will vary across geographic
regions, customer segments, and functions, and will reflect
business considerations as well as local legal requirements.
"While reductions in headcount are always difficult for a company,
we know these actions are critical to our ability to deliver
unprecedented value to our customers now and in the future," Mr. Dell
said.
Higher Average Selling Prices Contribute to Better Revenue
The company took deliberate actions to concentrate on solutions
sales, realign pricing and drive a better mix of products and services
in the quarter. While these actions slowed overall unit growth, a 14
percent year-on-year improvement in average selling prices contributed
to improved gross margins, revenue growth of three percent and
operating margins of 6.5 percent. Cash and marketable securities were
down $200 million sequentially to $12.3 billion, driven largely by a
reduction in accounts payables levels and a more linear level of
business activity in the quarter. Going forward, the company believes
its ability to generate cash flow on an annual basis will continue to
be strong.
Focus on More Richly Configured Customer Solutions Drives Growth
in Enterprise
In the first quarter, server revenue led the enterprise with
growth of 19 percent year on year to $1.6 billion. For Q1, Dell was
again No. 1 in the United States in units shipped at 33.3 percent.
Storage revenues were up 13 percent year on year to $0.5 billion.
Revenue from mobility products increased seven percent to $4.0 billion
while desktop revenues of $4.9 billion were down six percent year on
year. Enhanced services delivered $1.3 billion in revenues and
software and peripherals revenue increased six percent year on year to
$2.3 billion.
In both products and services, Dell will introduce new
standards-based technologies, while reducing the complexity and cost
involved in implementing solutions and maintaining a secure and stable
infrastructure. Dell is demonstrating its renewed focus through
initiatives like the recently formed Dell Data Center Solutions
Division, which is delivering Dell's Cloud Computing service and
design model that allows customers to optimize their IT infrastructure
based on their specific needs.
Dell is also committed to delivering innovative solutions and
design to the client space by shortening product refresh cycles and
delivering robust systems with the latest technologies and
leading-edge industrial design. For example, the company was one of
the first to introduce flash-based, solid state drives (SSD) to its
portfolio as an alternative to hard disk drives on corporate
notebooks. SSDs, which have no moving parts, bring a new level of
reliability, performance and noise reduction to customers seeking the
best in mobility performance.
Company Outlook
While progress in the first quarter was encouraging, the company
is focused on transformational efforts aimed at IT simplification that
are designed to yield more robust and targeted customer solutions,
superior customer experience, and expanded growth opportunities in the
coming years. These efforts may cause short-term fluctuations in
operating performance, but the company believes they will produce a
more optimal and sustainable balance of growth, profitability and
liquidity in the long-term, driving sustainable returns for
shareholders. In the second quarter, operating margins will be under
pressure sequentially as the company enters the seasonally slower
quarter with elevated operating expenses and additional costs related
to the ongoing investigations. In addition, results for the year could
be affected by additional transformational actions, changing
competitive dynamics, a more aggressive pricing environment and higher
component costs in the second half of the year.
Investigation Update
As previously announced, the Audit Committee of the company's
Board of Directors is conducting an independent investigation into
certain accounting and financial reporting matters. As a part of the
final phases of the investigation, the Audit Committee is in the
process of reviewing each of the identified accounting errors and the
proposed correcting adjustments. Upon completion of that review, the
Audit Committee will evaluate the impact and nature of the errors to
determine whether a restatement of any previously issued financial
statements will be required. To date, the Audit Committee has not
determined whether any restatements will be required, or whether any
identified control deficiencies constitute material weaknesses.
"We are continuing to move toward the conclusion of our
investigation," said Thomas W. Luce III, chairman of the Audit
Committee. "We are working closely with management and our independent
auditors to assess the accounting errors and control deficiencies that
have been identified, and have met and will be meeting further, with
the SEC to provide updates on the status of the investigation.
Although this process has taken us longer than we would have liked, it
is important to commit the time and resources required to ensure a
thorough and comprehensive review and resolution of all identified
issues and the implementation of appropriate remedial measures."
Management continues to be committed to resolving the issues
raised in connection with the investigation, and regaining compliance
with all SEC filing requirements and all NASDAQ listing requirements,
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.
Preliminary Results Subject to Change
Due to the questions raised in connection with the Audit Committee
investigation, the company has not filed the Form 10-Q for the second
quarter of fiscal 2007 (ended August 4, 2006), the Form 10-Q for the
third quarter of fiscal 2007 (ended November 3, 2006), or the Form
10-K for fiscal 2007 (ended February 2, 2007). As a result, all
financial results described in this press release, as well as the
previously announced financial results for the second, third and
fourth quarters of fiscal 2007, 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 of fiscal 2007 and the first quarter of fiscal
2008 could be affected by any restatements of prior period financial
statements that are required as a result of any conclusions reached by
the investigations. As stated above, 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, third and fourth quarters
of fiscal 2007. The company is working diligently to file the
quarterly reports for the second and third quarters of fiscal 2007, as
well as the annual report for fiscal 2007, as soon as possible.
NASDAQ Listing Update
On May 4, 2007, the company submitted information regarding the
status and certain preliminary results of the Audit Committee
investigation to the NASDAQ Listing and Hearing Review Council, and
requested the Council to extend the company's conditional listing
while it works to regain compliance with NASDAQ's listing
requirements.
Annual Meeting Update
Due to the delay in filing the annual report on Form 10-K for
fiscal 2007, the company has decided to reschedule its annual meeting
for stockholders, which was originally scheduled for July 20. Details
for the meeting will be announced publicly as soon as they are
available and will be distributed to stockholders in the notice of
meeting included in the proxy materials.
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. 34 on the Fortune 500. For more
information, visit www.dell.com, or to communicate directly with Dell
via a variety of online channels, go to www.dell.com/conversations. 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 preliminary 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
May 4,
2007
------------------
Net revenue $14,622
Cost of revenue 11,777
------------------
Gross margin 2,845
Total operating expenses 1,898
------------------
Operating income 947
Investment and other income, net 82
------------------
Income before income taxes 1,029
Income tax provision 270
------------------
Net income $759
==================
Earnings per common share:
Basic $0.34
==================
Diluted $0.34
==================
Weighted average shares outstanding:
Basic 2,234
Diluted 2,254
Percentage of Total Net Revenue:
- ---------------------------------------------------
Gross margin 19.5%
Operating expenses 13.0%
Operating income 6.5%
Income before income taxes 7.0%
Net income 5.2%
Income tax rate 26.3%
Net Revenue by Geographic Region (in billions):
- ---------------------------------------------------
Americas $8.9
Europe 3.7
Asia Pacific - Japan 2.0
Percentage of Total Net Revenue:
- ---------------------------------------------------
Americas 61%
Europe 26%
Asia Pacific - Japan 13%
Net Revenue by Product Category (in billions):
- ---------------------------------------------------
Desktop PCs $4.9
Mobility 4.0
Servers and Networking 1.6
Storage 0.5
Enhanced Services 1.3
Software and Peripherals 2.3
Percentage of Total Net Revenue:
- ---------------------------------------------------
Desktop PCs 33%
Mobility 27%
Servers and Networking 11%
Storage 4%
Enhanced Services 9%
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 Dell's financial
statements for the second, third and fourth quarters of fiscal 2007
and first quarter of fiscal 2008 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 Dell's
Audit Committee and the Securities and Exchange Commission. See
"Investigation Update" and "Preliminary Results Subject to Change" in
the accompanying press release.
DELL INC.
Financial Highlights -- Continued - PRELIMINARY (see Note)
(unaudited)
May 4,
2007
----------
Other Information:
- -----------------------------------------------------------
Regular headcount 82,800
Temporary headcount 5,300
----------
Total (1) 88,100
Average total revenue/unit (approximate) $1,620
Cash and investments (in billions) $12.3
Commercial paper borrowings (in billions) $0.1
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 Dell's financial
statements for the second, third and fourth quarters of fiscal 2007
and first quarter of fiscal 2008 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 Dell's
Audit Committee and the Securities and Exchange Commission. See
"Investigation Update" and "Preliminary Results Subject to Change" in
the accompanying press release.
(1) Previously only regular headcount was reported.
CONTACT: Dell Inc., Round Rock
Media Contacts:
Bob Pearson, 512-728-3256
bob_pearson@dell.com
or
David Frink, 512-728-2678
david_frink@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