Dell 2007 Annual Report Download - page 41

Table of Contents
for share repurchases and for cash payments made in connection with acquisitions. In Fiscal 2007 compared to Fiscal 2006, we had a
lower amount of proceeds from maturities and sales of investments, and this was partially offset by an increase in capital expenditures as
we continued to focus on investing in our global infrastructure in order to support our rapid global growth.
• Financing Activities — Cash used in financing activities during Fiscal 2008 was $4.1 billion, as compared to $2.6 billion in Fiscal
2007 and $6.3 billion in Fiscal 2006. Financing activities primarily consist of the repurchase of our common stock, partially offset by
proceeds from the issuance of common stock under employee stock plans and other items. In Fiscal 2008, the year-over-year increase
in cash used in financing activities was due primarily to the repurchase of our common stock as the temporary suspension of our
share repurchase program ended in the fourth quarter of Fiscal 2008. In Fiscal 2008, we repurchased approximately 179 million
shares at an aggregate cost of $4.0 billion. In Fiscal 2007, the year-over-year decrease in cash used in financing activities was due
primarily to the suspension of our share repurchase program in September 2006. During Fiscal 2007, we repurchased approximately
118 million shares at an aggregate cost of $3.0 billion compared to 204 million shares at an aggregate cost of $7.2 billion in Fiscal
2006.
We believe our ability to generate cash flows from operations on an annual basis will continue to be strong, driven mainly by our
profitability, efficient cash conversion cycle, and the growth in our deferred service offerings. In order to augment our liquidity and
provide us with additional flexibility, we implemented a commercial paper program with a supporting credit facility on June 1, 2006.
Under the commercial paper program, we issue, from time-to-time, short-term unsecured notes in an aggregate amount not to exceed
$1.0 billion. We use the proceeds for general corporate purposes. At February 1, 2008, there were no outstanding amounts or advances
under the commercial paper program or supporting credit facility.
We are increasingly relying upon access to the capital markets to fund financing for our customers and to provide sources of liquidity in
the U.S. for general corporate purposes, including share repurchases. We believe we will be able to access the capital markets to increase
the size of our existing commercial paper program and to meet our liquidity needs. Although we believe that we will be able to maintain
sufficient access to the capital markets, even in light of the current market conditions, changes in our credit ratings, deterioration in our
business performance, or adverse changes in the economy could limit our access to these markets. We intend to establish the appropriate
debt levels based upon cash flow expectations, cash requirements for operations, discretionary spending, including items such as share
repurchases and acquisitions, and the overall cost of capital. We do not believe that the overall credit concerns in the markets would
impede our ability to access the capital markets because of the overall strength of our financial position. See Note 2 of Notes to
Consolidated Financial Statements included in "Part II — Item 8 — Financial Statements and Supplementary Data" for further discussion
of our commercial paper program.
Capital Commitments
Redeemable Common Stock — In prior years, we inadvertently failed to register with the SEC the issuance of some shares under certain
employee benefit plans. As a result, certain purchasers of common stock pursuant to those plans may have the right to rescind their
purchases for an amount equal to the purchase price paid for the shares, plus interest from the date of purchase. At February 1, 2008 and
February 2, 2007, we have classified approximately 4 million shares ($94 million) and 5 million shares ($111 million), respectively, that
are subject to potential rescission rights outside of stockholders' equity because the redemption features are not within our control. We
may also be subject to civil and other penalties by regulatory authorities as a result of the failure to register. These shares have always
been treated as outstanding for financial reporting purposes. See "Item 5 — Market for Registrant's Common Equity, Related Stockholder
Matters, and Issuer Purchases of Equity Securities — Issuance of Unregistered Securities."
Share Repurchase Program — We have a share repurchase program that authorizes us to purchase shares of common stock in order to
increase shareholder value and manage dilution resulting from shares issued under our equity compensation plans. However, we do not
currently have a policy that requires the repurchase of common stock in conjunction with share-based payment arrangements. On
December 3, 2007, our Board of Directors approved a new authorization for an additional $10.0 billion for share repurchases.
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