Exhibit 99.1
Dell Reports Q2 Preliminary Revenue of $14.8
Billion; Preliminary Earnings Per Share of $0.32
Quarter Highlighted by Improved Growth and Profitability Across
All Regions and Strength in Enterprise Products
ROUND ROCK, Texas--(BUSINESS WIRE)--Aug. 30, 2007--Dell
(NASDAQ:DELL) today reported preliminary results for its second
quarter of fiscal year 2008, with revenue of $14.8 billion, operating
income of $896 million and earnings per share of $0.32. Strength in
enterprise products and services, improved average selling prices and
favorable component costs drove profitability in the quarter. Cash and
marketable securities were $13.8 billion at the end of the quarter.
"We continue to invest in company initiatives that align our
products and services around customers' needs in order to drive
long-term, sustainable performance and extend our position as a
trusted technology partner," said Chairman and CEO Michael Dell.
"While our results demonstrate we've made progress against our goals,
we are still in the early stages of transforming our company's
structure, costs and operations."
Operating Profit Impacted by Higher Expenses
Several factors adversely impacted operating expenses in the
quarter, including $102 million, or $0.03 per share, in incremental
compensation expense related to payments for expired in-the-money
stock options; $59 million, or $0.02 per share, in costs associated
with the Audit Committee's investigation into certain accounting and
financial reporting matters; and higher headcount and associated costs
related to investments in sales and customer support.
As the company continues to implement its transformation program,
the priority is to drive profitable growth while reducing operating
expenses as a percentage of revenue. The company expects to accomplish
this by improving front-line productivity, reducing headcount where
appropriate and investing in infrastructure and key growth
initiatives. The company is focused on the optimal alignment of
resources, coupled with scaling via growth initiatives and cost
reduction, and continues to pursue reductions in headcount.
Transformation Update
Several actions during the second quarter reflected Dell's ongoing
strategy to simplify IT for its customers by reducing the cost, time
and complexity of managing information technology, including:
-- The launch of the Vostro(TM) brand of notebook and desktop
computers, the first product line designed for the unique
needs of small businesses, featuring simple-to-use tools that
address problems such as data back-up and PC performance and
health, and dedicated customer support. Vostro products do not
include "trialware" and feature specialized networking support
for customers who don't have dedicated IT staffs.
-- The introduction of our new flagship ultra-portable notebook,
the XPS(TM) M1330, the world's thinnest 13.3-inch notebook,
featuring cutting-edge design elements and a durable magnesium
alloy chassis with brushed aluminum accents. In addition, new
Inspiron notebook systems feature mobile broadband, widescreen
displays, built-in webcams and eight color choices.
-- Agreements to acquire ASAP Software, a leading software
solutions and licensing services provider; privately held
SilverBack Technologies, Inc., a service delivery platform
provider for remote monitoring and management of information
technology infrastructure such as servers, storage, networks,
desktops and notebooks; and Zing Systems Inc., a consumer
technology and services company that focuses on
always-connected audio and entertainment devices.
-- Announced plans to reach more customers globally via indirect
distribution channels through partnerships with Wal-Mart and
Sam's Clubs in North and South America, Bic Camera Inc. of
Japan and Carphone Warehouse in the United Kingdom.
Product Performance Driven by Continued Focus on Server and
Storage Solutions
Server revenue in the second quarter was $1.6 billion. For Q2,
Dell was again No. 1 in the United States in server units shipped with
32.7 percent share. Storage revenues were $0.6 billion. During the
quarter, Forrester Consulting(1) issued a report that demonstrated how
Dell's new IT simplification solutions, which include server
consolidation and virtualization solutions, increased the ROI benefits
for one of Dell's customers.
Dell also announced a partnership with Emerson Network Power and
its Liebert power and cooling business to help customers lower their
datacenter power and cooling requirements by up to 42 percent and
increase systems performance by up to 80 percent compared to prior
generations of Dell servers.
Revenue from mobility products was $3.9 billion while desktop
revenue was $5.0 billion. During the quarter, the company ran a
higher-than-normal product backlog, driven by better-than-expected
demand for the new Inspiron and XPS color notebooks coupled with
supply constraints for several colors, and a tightening in supply of
certain flat-panel displays. The company believes the supply
environment will improve in the second half of the year. Enhanced
services revenue was $1.3 billion and software and peripherals revenue
was $2.4 billion.
Company Outlook
The company is focused on IT simplification for its customers,
including transforming its business to provide better value to
customers while expanding its growth opportunities. These efforts set
the stage for a more sustainable balance of liquidity, profitability
and growth. During this period of transformation, operating results
will vary as the company focuses on making investments and realigning
the business. Near-term results could be adversely impacted by a
slower decline in component costs in the second half of the year. The
company does not expect to resume its share repurchase program until
after it has filed its fiscal year 2007 Form 10-K, which is expected
to occur by the first week of November.
Preliminary Results Subject to Change
As previously announced on Aug. 16, 2007, Dell will restate its
previously issued financial statements for fiscal 2003, 2004, 2005 and
2006 (including the interim periods within those years), and the first
quarter of fiscal 2007. In addition, the company has not filed its
Forms 10-Q for the second and third quarters of fiscal 2007 and the
first quarter of fiscal 2008 or its Form 10-K for fiscal 2007.
Consequently, 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 and first quarter of 2008,
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 completes
the restatement and these filings.
NASDAQ Listing Update
As previously announced, on Aug. 17, 2007, the Board of Directors
of The NASDAQ Stock Market issued its decision to give the company
until Nov. 12, 2007 to file its past due periodic reports and regain
compliance with NASDAQ's listing requirements. Dell previously
announced that it expects to file its past due periodic reports by the
first week of November.
Annual Meeting and Analyst Meeting Update
The company's annual meeting of shareholders is being planned for
Dec. 4, 2007. The company plans to hold a strategy call on Nov. 29,
2007 when it releases fiscal third quarter 2008 earnings. The company
also plans to hold a full analyst meeting on April 2 and 3, 2008, in
Round Rock, Texas.
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.
(1) The Total Economic Impact(TM) Of Dell's Server Consolidation
And Virtualization Solutions Single Company Analysis A Commissioned
Study Conducted by Forrester Consulting on Behalf of Dell. The
complete report may be accessed at www.dell.com/research.
Special Note
Statements in this press release that relate to future results and
events (including statements about our preliminary and expected future
financial and operating performance) are forward-looking statements
based on our current expectations. Actual results may differ
materially from the forward-looking statements because of a number of
risks and uncertainties, including: the risk that additional
information may arise during the completion of our work on the
restatement, our independent auditor's review of the investigation and
completion of its audit work, the Audit Committee's final review of
the investigation and the restated financial statements, and as a
result of other subsequent events; any additional issues or matters
arising from the ongoing SEC investigation; our ability to
successfully remediate identified internal control deficiencies; our
ability to meet NASDAQ requirements for continued listing as a result
of our past due periodic report filings; general economic, business
and industry conditions; our ability to maintain a cost advantage over
our competitors; local economic and labor conditions, political
instability, unexpected regulatory changes, trade protection measures,
tax laws, copyright levies and fluctuations in foreign currency
exchange rates; our ability to accurately predict product, customer
and geographic sales mix and seasonal sales trends; information
technology and manufacturing infrastructure failures; our ability to
effectively manage periodic product transitions; our reliance on
third-party suppliers for quality product components, including
reliance on several single-source or limited-source suppliers; our
ability to access the capital markets; litigation and governmental
investigations or proceedings arising out of or related to accounting
and financial reporting matters; our acquisition of other companies;
our ability to properly manage the distribution of our products and
services; effective hedging of our exposure to fluctuations in foreign
currency exchange rates and interest rates; obtaining licenses to
intellectual property developed by others on commercially reasonable
and competitive terms; our ability to attract, retain and motivate key
personnel; loss of government contracts; expiration of tax holidays or
favorable tax rate structures; changing environmental laws; and the
effect of armed hostilities, terrorism, natural disasters and public
health issues. Additional discussion of 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
Aug. 3,
2007
--------------------
Net revenue $ 14,771
Cost of revenue 11,828
--------------------
Gross margin 2,943
Total operating expenses 2,047
--------------------
Operating income 896
Investment and other income, net 97
--------------------
Income before income taxes 993
Income tax provision 260
--------------------
Net income $ 733
====================
Earnings per common share:
Basic $ 0.33
====================
Diluted $ 0.32
====================
Weighted average shares outstanding:
Basic 2,236
Diluted 2,264
Percentage of Total Net Revenue:
- -------------------------------------------------
Gross margin 19.9%
Operating expenses 13.9%
Operating income 6.0%
Income before income taxes 6.7%
Net income 4.9%
Income tax rate 26.3%
Net Revenue by Geographic Region (in billions):
- -------------------------------------------------
Americas $ 9.2
Europe 3.5
Asia Pacific - Japan 2.1
Percentage of Total Net Revenue:
- -------------------------------------------------
Americas 62%
Europe 24%
Asia Pacific - Japan 14%
Net Revenue by Product Category (in billions):
- -------------------------------------------------
Desktop PCs $ 5.0
Mobility 3.9
Servers and Networking 1.6
Storage 0.6
Enhanced Services 1.3
Software and Peripherals 2.4
Percentage of Total Net Revenue:
- -------------------------------------------------
Desktop PCs 34%
Mobility 26%
Servers and Networking 11%
Storage 4%
Enhanced Services 9%
Software and Peripherals 16%
Note: As previously announced on Aug. 16, 2007, Dell will restate its
previously issued financial statements for fiscal 2003, 2004, 2005
and 2006 (including the interim periods within those years), and the
first quarter of fiscal 2007. In addition, the company has not filed
its Forms 10-Q for the second and third quarter of fiscal 2007 and
the first quarter of fiscal 2008 or its Form 10-K for fiscal 2007.
Consequently, 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 and first quarter of 2008,
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 completes the restatement and these filings. See "Preliminary
Results Subject to Change" and "Special Note" in the accompanying
press release.
DELL INC.
Financial Highlights -- Continued - PRELIMINARY (see Note)
(unaudited)
Aug. 3,
2007
-------------
Other Information:
- --------------------------------------------------------
Regular headcount 83,300
Temporary headcount 7,100
-------------
Total (1) 90,400
Average total revenue/unit (approximate) $ 1,520
Cash and investments (in billions) $ 13.8
Commercial paper borrowings (in billions) $ 0.1
Note: As previously announced on Aug. 16, 2007, Dell will restate its
previously issued financial statements for fiscal 2003, 2004, 2005
and 2006 (including the interim periods within those years), and the
first quarter of fiscal 2007. In addition, the company has not filed
its Forms 10-Q for the second and third quarter of fiscal 2007 and
the first quarter of fiscal 2008 or its Form 10-K for fiscal 2007.
Consequently, 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 and first quarter of 2008,
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 completes the restatement and these filings. See "Preliminary
Results Subject to Change" and "Special Note" 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