Dell 2006 Annual Report Download - page 104

Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• Income Tax — Dell is currently under audit in various jurisdictions, including the United States. The tax periods open to
examination by the major taxing jurisdictions to which Dell is subject include Fiscal 1999 through Fiscal 2007. Dell does not
anticipate a significant change to the total amount of unrecognized benefits within the next 12 months.
Dell is involved in various other claims, suits, investigations, and legal proceedings that arise from time to time in the ordinary
course of its business. Although Dell does not expect that the outcome in any of these other legal proceedings, individually or
collectively, will have a material adverse effect on its financial condition or results of operations, litigation is inherently
unpredictable. Therefore, Dell could incur judgments or enter into settlements of claims that could adversely affect its
operating results or cash flows in a particular period.
Certain Concentrations — All of Dell's foreign currency exchange and interest rate derivative instruments involve elements of
market and credit risk in excess of the amounts recognized in the consolidated financial statements. The counterparties to
the 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, Dell monitors its positions with, and the credit quality of the counterparties to,
these financial instruments. Dell does not anticipate nonperformance by any of the counterparties.
Dell's investments in debt securities are placed with high quality financial institutions and companies. As part of its cash and
risk management processes, Dell performs periodic evaluations of the credit standing of the institutions in accordance with
its investment policy. Dell's investments in debt securities have effective maturities of less than five years. Management
believes that no significant concentration of credit risk for investments exists for Dell.
Dell markets and sells its products and services to large corporate clients, governments, healthcare and education accounts,
as well as small-to-medium businesses and individuals.
Dell purchases a number of components from single or limited sources. In some cases, alternative sources of supply are not
available. In other cases, Dell may establish a working relationship with a single source or a limited number of sources if Dell
believes it is advantageous due to performance, quality, support, delivery, capacity, or price considerations. If the supply of a
critical single- or limited-source material or component were delayed or curtailed, Dell's ability to ship the related product in
desired quantities and in a timely manner could be adversely affected. Even where alternative sources of supply are
available, qualification of the alternative suppliers and establishment of reliable supplies could result in delays and a possible
loss of sales, which may have an adverse effect on Dell's operating results.
NOTE 10 — Segment Information
Dell conducts operations worldwide and is managed in three geographic regions: the Americas; Europe, Middle East and
Africa ("EMEA"); and Asia Pacific-Japan ("APJ"). The Americas region, which is based in Round Rock, Texas, covers the
U.S., Canada, and Latin America. Within the Americas, Dell is further segmented into Business and U.S. Consumer. The
Americas Business ("Business") segment includes sales to corporate, government, healthcare, education, and small and
medium business customers, while the U.S. Consumer segment includes sales primarily to individual consumers. The EMEA
segment, based in Bracknell, England, covers Europe, the Middle East, and Africa. The APJ region, based in Singapore,
covers the Asian countries of the Pacific Rim as well as Australia, New Zealand, and India.
Corporate expenses are included in Dell's measure of segment operating income for management reporting purposes;
however, with the adoption of SFAS 123(R), beginning in Fiscal 2007, stock-based compensation expense is not allocated to
Dell's reportable segments. The asset totals disclosed by geography are directly managed by those regions and include
accounts receivable, inventory, certain fixed assets, and certain other assets. Assets are not allocated specifically to the
Business and U.S. Consumer
101