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DELL INC (4331)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 03/15/2011
Filed Period 01/28/2011

Table of contents

  • Page 1
    DELL INC (4331) 10-K Annual report pursuant to section 13 and 15(d) Filed on 03/15/2011 Filed Period 01/28/2011

  • Page 2
    ... is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ Approximate aggregate market value of the registrant's common stock held by non-affiliates as of July 30, 2010, based upon the last sale price reported for such date on the NASDAQ Global Select Market Number of shares of common...

  • Page 3
    ... DOCUMENT Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services 115...

  • Page 4
    ...," "intend," "plan," "aim," "seek" and similar expressions as they relate to us or our management are intended to identify these forward-looking statements. All statements by us regarding our expected financial position, revenues, cash flows and other operating results, business strategy, legal...

  • Page 5
    ...chain to best serve our global customer base, with a significant portion of our production capabilities performed by contract manufacturers. Dell Inc. is a holding company that conducts its business worldwide through its subsidiaries. Our global corporate headquarters is located in Round Rock, Texas...

  • Page 6
    ... value and focus on product leadership by developing next generation capabilities. Additionally, we will continue to deepen our skill sets and relationships within each of our business units with the goal of delivering best in-class products and services globally. Balancing Liquidity, Profitability...

  • Page 7
    ...and Note 16 of Notes to Consolidated Financial Statements included in "Part II - Item 8 - Financial Statements and Supplementary Data." Products and Services Our aim is to provide customers with integrated business solutions. We design, develop, manufacture, market, sell, and support a wide range of...

  • Page 8
    ... third-party software products, including operating systems, business and office applications, anti-virus and related security software, entertainment software, and products in various other categories. We operate an online software store, the Dell Download Store, for consumers and small and medium...

  • Page 9
    ... servicing customer receivables related to the purchase of Dell products. DFS offers private label credit financing programs, through an unrelated, nationally chartered bank, to qualified consumer and commercial customers and offers leases and fixedterm financing to commercial customers. Financing...

  • Page 10
    .... Sales and Marketing We sell our products and services directly to customers through our online store at www.dell.com, dedicated sales representatives, telephone-based sales, and a variety of indirect sales channels. Our customers include large global and national corporate businesses, public...

  • Page 11
    ...ongoing research and development activities. The inventions claimed in our patents and patent applications cover aspects of our current and possible future computer system products, manufacturing processes, and related technologies. Our product, business method, and manufacturing process patents may...

  • Page 12
    ... financial services regulations of the U.S. Federal Trade Commission and various state governmental agencies; the export regulatory activities of the U.S. Department of Commerce and the U.S. Department of Treasury; the import regulatory activities of U.S. Customs and Border Protection; the product...

  • Page 13
    ..., Public and Large Enterprise Vice Chairman, Operations and Technology President, Consumer, Small and Medium Business Senior Vice President and Chief Financial Officer Senior Vice President, Strategy Senior Vice President, Human Resources Senior Vice President and Chief Marketing Officer Senior...

  • Page 14
    ... and other public organizations make full use of information technology. Beginning in January of 2011, he has also assumed the responsibilities of the Large Enterprise business, leading the delivery of innovative and globally consistent Dell solutions and services to the world's largest corporate IT...

  • Page 15
    ...global Public business, from January 2008 to September 2010, and was responsible for driving global marketing strategies, product and pricing programs, communications and channel plans. She has also held various executive roles in Small and Medium Business marketing, Dell's Services and Supply Chain...

  • Page 16
    ... compliance departments. Before joining Dell, Mr. Tu served as Executive Vice President and General Counsel at NBC Universal for three years. Prior to his position at NBC, he was a partner with the law firm of O'Melveny & Myers LLP, where he focused on energy, technology, Internet, and media-related...

  • Page 17
    ...new products and services, customer demand for our solutions, products and services could diminish and our profitability could suffer. We are increasingly sourcing new products and transitioning existing products through our contract manufacturers and manufacturing outsourcing relationships in order...

  • Page 18
    ... result in greater net credit losses, which may require us to increase our reserves for customer receivables in the future. In addition, the implementation of new financial services regulation could unfavorably impact the profitability and cash flows of our consumer financing activities. • If we...

  • Page 19
    ... in the U.S. for general corporate purposes, including working capital, acquisitions, capital expenditures, funding of customer receivables, and share repurchases. In addition, we have customer financing relationships with some companies that rely on access to the capital markets to meet significant...

  • Page 20
    ... of financing receivables that we originate, or negatively affect the costs or terms on which we may be able to obtain capital. Any of these developments could unfavorably affect our net revenue, profitability, and cash flows. • Loss of government contracts could harm our business. Contracts with...

  • Page 21
    ... a computer virus, natural disaster, manufacturing failure, telecommunications system failure, defective or improperly installed new or upgraded business management systems, or intentional tampering or data-breach by a third party, we may be unable to receive or process orders, manufacture and ship...

  • Page 22
    ... space and leased the remaining 38%. Included in these amounts are approximately 2.1 million square feet that are either vacant or sublet. Our principal executive offices, including global headquarters, are located at One Dell Way, Round Rock, Texas. Our business centers, which include facilities...

  • Page 23
    ... space at competitive rates by extending expiring leases or by finding alternative space. As discussed in "Part I - Item 1 - Business," we have four operating segments identified as Large Enterprise, Public, SMB and Consumer. Because of the interrelation of the products and services offered in each...

  • Page 24
    ... of Directors. Purchases of Common Stock 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...

  • Page 25
    ... the cumulative total return on Dell's common stock during the last five fiscal years with the S&P 500 Index and the Dow Jones US Computer Hardware Index during the same period. The graph shows the value, at the end of each of the last five fiscal years, of $100 invested in Dell common stock or the...

  • Page 26
    ...Financial Statements and Supplementary Data" or in our previously filed Annual Reports on Form 10-K. January 28, 2011 Results of Operations: Net revenue Gross margin Operating income Income before income taxes Net income Earnings per share: Basic Diluted Number of weighted-average shares outstanding...

  • Page 27
    ... on improving the profitability of our client products by improving our supply chain execution and simplifying our product offerings. The majority of our products are now produced by contract manufacturers. All regions of our global business experienced revenue increases in Fiscal 2011. Emerging...

  • Page 28
    ... fiscal years: January 28, 2011 % of Dollars Revenue Net revenue: Product Services, including software related Total net revenue Gross margin: Product Services, including software related Total gross margin Operating expenses Operating income Net income Earnings per share - diluted Other Financial...

  • Page 29
    ...over-year increase in services revenue and an increase of 7% in software related services revenue during Fiscal 2011. The increase in services revenue was primarily due to our acquisition of Perot Systems in the fourth quarter of Fiscal 2010, which was integrated into our Public and Large Enterprise...

  • Page 30
    ... sales, offset by lower margin categories such as outsourcing and project-related services. Our extended warranty services are more profitable because we sell extended warranty offerings directly to customers rather than through a distribution channel. Total gross margin for Fiscal 2011 increased...

  • Page 31
    ... we negotiate for our product components. We account for rebates and other discounts as a reduction in cost of net revenue. Our total net cost includes supplier list prices reduced by vendor rebates and other discounts. We manage our costs on a total net cost basis. The terms and conditions of our...

  • Page 32
    ... by an increase in accounts receivable bad debt of $40 million resulting from the challenging business environment during Fiscal 2010. Research, Development, and Engineering - For Fiscal 2010, RD&E expenses remained at approximately 1% of revenue, consistent with prior years. • Total operating...

  • Page 33
    ...2010. Net income was positively impacted by increases in operating income and a lower effective income tax rate. In addition, on a GAAP basis, Interest and Other, net increased favorably by 44% for Fiscal 2011 due primarily to a $72 million merger termination fee we received during the third quarter...

  • Page 34
    ... of customer relationships, customer lists, acquired technology, trade names, and non-compete covenants purchased in connection with business acquisitions. We incur charges relating to the amortization of these intangibles, and those charges are included in our consolidated financial statements...

  • Page 35
    ... charges incurred during Fiscal 2009 related to the accelerated vesting of unvested "out-of-the-money stock options" (options that have an exercise price greater than the current market stock price) are excluded from the non-GAAP financial measures. Stock-based compensation costs unrelated to the...

  • Page 36
    ...past three fiscal years: Fiscal Year Ended January 29, % Change 2010 % Change (in millions, except percentages) January 28, 2011 January 30, 2009 GAAP gross margin Non-GAAP adjustments: Amortization of intangibles Severance and facility actions Acquisition-related Stock-option accelerated vesting...

  • Page 37
    ...6.0% Our four global business segments are Large Enterprise, Public, Small and Medium Business, and Consumer. Severance and facility action expenses, broad based long-term incentive expenses, amortization of purchased intangible assets costs, acquisition-related expenses, and charges related to our...

  • Page 38
    ... in part by a slight increase in gross margin percentage. The increase in operating expenses was a result of higher selling and marketing costs. • Small and Medium Business - During Fiscal 2011, SMB experienced a year-over-year increase in revenue with increases across all product and services...

  • Page 39
    ... higher price band offerings, improve our supply chain, and focus on delivering a superior customer service experience to position our Consumer business for sustained profitable growth. Fiscal 2010 compared to Fiscal 2009 • Large Enterprise - The decrease in Large Enterprise revenue during Fiscal...

  • Page 40
    ... contractual right to share in future revenues from product renewals sold by the vendor. Excluding this transaction, Consumer's Fiscal 2010 operating income percentage would have been 0.4% instead of 0.9%. Revenue by Product and Services Categories We design, develop, manufacture, market, sell, and...

  • Page 41
    ... net revenue by product and services categories for each of the past three fiscal years: January 28, 2011 % of Dollars Revenue Net revenue: Enterprise solutions and services: Enterprise solutions: Servers and networking Storage Services Software and peripherals Client: Mobility Desktop PCs Total net...

  • Page 42
    ... combined year-over-year revenue increase of 15% for Fiscal 2011, while revenue from imaging products decreased by 6%. Software revenue from our S&P line of business, which includes stand alone sales of software license fees and related post-contract customer support, is reported in services revenue...

  • Page 43
    ...-over-year services revenue decline. Perot Systems primarily impacted our Public and Large Enterprise segments, with $418 million and $160 million in services revenue, respectively. Our deferred services revenue balance increased 6.5% year-over-year to $6.1 billion at January 29, 2010. - Software...

  • Page 44
    ...million decline in the fair market values of our deferred compensation plan investments during Fiscal 2010 and Fiscal 2009, respectively. The year-over-year decrease in foreign exchange for Fiscal 2010, as compared to Fiscal 2009, was primarily due to increased costs on our hedge program, as well as...

  • Page 45
    ...accounts receivable and continue to take actions to reduce our exposure to credit losses. DELL FINANCIAL SERVICES AND FINANCING RECEIVABLES DFS offers a wide range of financial services in the U.S., including originating, collecting, and servicing customer receivables related to the purchase of Dell...

  • Page 46
    ... acceptable return on capital. We maintain an allowance to cover expected financing receivable credit losses and evaluate credit loss expectations based on our total portfolio. For Fiscal 2011, Fiscal 2010, and Fiscal 2009, the principal charge-off rate for our total portfolio, excluding the effect...

  • Page 47
    ..., a loss in fair value for those instruments is generally offset by increases in the value of the underlying exposure. Cash and Investments At January 28, 2011, we had $15.1 billion of total cash, cash equivalents, and investments. The objective of our investment policy and strategy is to manage our...

  • Page 48
    ... the contractual terms, and that the decline in the market value is primarily due to changes in interest rates and not increased credit risk. The fair value of our portfolio is based on prices provided from national pricing services, which we currently believe are indicative of fair value, as our...

  • Page 49
    ... monitor and manage these activities depending on current and expected market developments. See "Part I - Item 1A - Risk Factors" for further discussion of risks associated with our use of counterparties. The impact on our Consolidated Financial Statements of any credit adjustments related to these...

  • Page 50
    ... less than 90 days. As of January 28, 2011, we did not have any amounts outstanding under the commercial paper program compared to $496 million as of January 29, 2010, and $100 million as of January 30, 2009. We issued structured financing-related debt to fund our financing receivables as previously...

  • Page 51
    ... on the ending net trade receivables and the most recent quarterly revenue for each period. DSO also includes the effect of product costs related to customer shipments not yet recognized as revenue that are classified in other current assets. DSO is calculated by adding accounts receivable, net of...

  • Page 52
    ... repurchase program that authorizes us to purchase shares of our common stock through a systematic program of open market purchases 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...

  • Page 53
    ... do not include contracts that may be canceled without penalty. We utilize several suppliers to manufacture sub-assemblies for our products. Our efficient supply chain management allows us to enter into flexible and mutually beneficial purchase arrangements with our suppliers in order to minimize...

  • Page 54
    ... implementation of our acquisition strategy; our product, customer, and geographic sales mix, or seasonal sales trends; access to the capital markets by us and some of our customers; loss of government contracts; temporary suspension or debarment from contracting with U.S. federal, state, and local...

  • Page 55
    ... our other accounting policies are also described in Note 1 of Notes to Consolidated Financial Statements included in "Part II - Item 8 - Financial Statements and Supplementary Data." Revenue Recognition and Related Allowances - We enter into contracts to sell our products, software and services and...

  • Page 56
    ... use tax planning strategies as a part of our global tax compliance program. Judgments and interpretation of statutes are inherent in this process. While we believe our tax return positions are sustainable, we recognize tax benefits from uncertain tax positions in the financial statements only when...

  • Page 57
    ... rights on commercially reasonable terms and conditions, our business, operating results, and financial condition could be materially and adversely affected. New Accounting Pronouncements Revenue Arrangements with Multiple Elements and Revenue Arrangements with Software Elements - In September 2009...

  • Page 58
    ... of Contents ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information required by this Item 7A is included in "Part II - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk" and is incorporated herein by reference. 54

  • Page 59
    ... DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated Statements of Financial Position at January 28, 2011, and January 29, 2010 Consolidated Statements of Income for the fiscal years ended January 28...

  • Page 60
    ... Registered Public Accounting Firm To the Board of Directors and Shareholders of Dell Inc.: In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Dell Inc. and its subsidiaries (the "Company") at...

  • Page 61
    ... Contents DELL INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in millions) January 28, January 29, 2011 2010 Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Financing receivables, net Inventories, net Other current assets Total current assets Property...

  • Page 62
    ... 2011 Net revenue: Products Services, including software related Total net revenue Cost of net revenue: Products Services, including software related Total cost of net revenue Gross margin Operating expenses: Selling, general, and administrative Research, development, and engineering Total operating...

  • Page 63
    ... on purchased financing receivables Acquisition of business, net of cash received Change in cash from investing activities Cash flows from financing activities: Repurchase of common stock Issuance of common stock under employee plans Issuance (repayment) of commercial paper (maturity 90 days or...

  • Page 64
    ...in net unrealized gain or loss on derivative instruments, net of taxes Total comprehensive income Stock issuances under employee plans and other(a) Repurchases of common stock Stock-based compensation expense Net tax benefit from employee stock plans Balances at January 30, 2009 Net income Change in...

  • Page 65
    ... and services. Dell sells its products and services directly to customers through dedicated sales representatives, telephone-based sales, and online at www.dell.com, and through a variety of indirect sales channels. Dell's business segments are Large Enterprise, Public, Small and Medium Business and...

  • Page 66
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Asset Securitization - Dell enters into securitization transactions to transfer certain financing receivables for fixed-term leases and loans to special purpose entities. During Fiscal 2011, Dell adopted the new accounting guidance that removes...

  • Page 67
    ... interests. Dell accounts for business combinations using the acquisition method of accounting and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. The excess of the purchase price over the estimated fair values is...

  • Page 68
    ...limited rights of return, price protection, rebates, and marketing development funds. Dell has generally limited the return rights through contractual caps. Dell's policy for sales through indirect channels is to defer the full amount of revenue relative to sales for which the rights of return apply...

  • Page 69
    ... of the software license and PCS elements, the revenue and related costs are generally recognized over the term of the agreement. As more fully explained in Recently Issued and Adopted Accounting Pronouncements below, effective with the first quarter of Fiscal 2011, certain Dell storage products are...

  • Page 70
    ... under sales-type leases as product revenue at the inception of the lease. Salestype leases also produce financing income, which is included in net revenue in the Consolidated Statement of Income and is recognized at consistent rates of return over the lease term. Customer revolving loan financing...

  • Page 71
    ... in the financial statements or tax returns, judgment and interpretation of statutes are required. Additionally, Dell uses tax planning strategies as a part of its global tax compliance program. Judgments and interpretation of statutes are inherent in this process. The accounting guidance for...

  • Page 72
    ...disclosures require information for both the financing receivables and the related allowance for credit losses at more disaggregated levels. Disclosures related to information as of the end of a reporting period became effective for Dell in Fiscal 2011. Specific disclosures regarding activities that...

  • Page 73
    ... money market funds, commercial paper, including corporate and asset-backed commercial paper, and U.S. government and agencies, all with original maturities of less than ninety days and are valued at fair value which approximates cost. The valuations of these securities are based on quoted prices in...

  • Page 74
    ... pool. Retained interest in securitized receivables was included in financing receivables, short-term and long-term, on the Consolidated Statements of Financial Position. During the first quarter of Fiscal 2011, Dell consolidated its previously unconsolidated special purpose entities and as a result...

  • Page 75
    ...in the Consolidated Statements of Financial Position. Fair Value Cost January 28, 2011 Unrealized Gain Unrealized Fair (Loss) Value (in millions) Cost January 29, 2010 Unrealized Gain Unrealized (Loss) Investments: U.S. government and agencies U.S. corporate International corporate Total short-term...

  • Page 76
    ... for its business and consumer customers in the U.S. through Dell Financial Services L.L.C. ("DFS"), a wholly-owned subsidiary of Dell. DFS's key activities include the origination, collection, and servicing of customer receivables related to the purchase of Dell products and services. New financing...

  • Page 77
    ...January 28, 2011 2010 Revolving Fixed-term Total Total (in millions) Allowance for financing receivable losses: Balance at the beginning of period Incremental allowance due to VIE consolidation Principal charge-offs Interest charge-offs Recoveries Provision charged to income statement Balance at end...

  • Page 78
    ... of January 28, 2011. For revolving loans to consumers, Dell makes credit decisions based on propriety scorecards which include the customer's credit history, payment history, credit usage, and other FICO-related elements. For Commercial customers, an internal grading system is utilized that assigns...

  • Page 79
    ...'s customer receivables: • Revolving loans - Revolving loans offered under private label credit financing programs provide qualified customers with a revolving credit line for the purchase of products and services offered by Dell. Revolving loans bear interest at a variable annual percentage rate...

  • Page 80
    ... TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Purchased Credit-Impaired Loans Purchased Credit-Impaired ("PCI") loans are acquired loans for which it is probable that Dell will not collect all contractually required principal and interest payments. During Fiscal 2011, Dell purchased a portfolio...

  • Page 81
    ...interest rate and an average duration of 12 to 36 months based on the terms of the underlying financing receivables. The maximum debt capacity related to the securitization programs was increased to $1.4 billion during Fiscal 2011. See Note 5 of the Notes to the Consolidated Financial Statements for...

  • Page 82
    ... fair value of the retained interest of the fixed term leases and loans at time of transfer within the fiscal year ended January 29, 2010 : Weighted Average Key Assumptions Monthly Payment Rates Time of transfer valuation of retained interest 5% Credit Losses (lifetime) 1% Discount Rates (annualized...

  • Page 83
    ... of interest rate swap terminations) Other India term loan: entered into on October 15, 2009 at 8.9% due October 2011 with interest payable monthly Structured financing debt Total long-term debt Short-Term Debt Commercial paper Structured financing debt Other Total short-term debt Total debt 79...

  • Page 84
    ...- As of January 28, 2011, Dell had $1.1 billion outstanding in structured financing related debt primarily through the fixed term lease and loan and revolving loan securitization programs. The weighted average interest rate for short-term structured financing debt for Fiscal 2011 was 0.44%. See Note...

  • Page 85
    ...-term debt based on market conditions at the time of financing. Dell's objective is to offset gains and losses resulting from these exposures with gains and losses on the derivative contracts used to hedge the exposures, thereby reducing volatility of earnings and protecting fair values of assets...

  • Page 86
    ...designated as fair value hedges to modify the market risk exposures in connection with long-term debt to achieve primarily LIBOR-based floating interest expense. In January 2011, Dell terminated its fair value interest rate swap agreements with notional amounts totaling $1 billion. Dell received $22...

  • Page 87
    ...a total purchase consideration of approximately $413 million. KACE is a systems management appliance company with 83 $ 181 (80) 101 63 (74) (11) 90 Other NonCurrent Assets $ 5 1 6 6 Other Current Liabilities (in millions) $ (9) (9) 2 (5) (3) (12) $ Other NonCurrent Liabilities $ Total Fair Value 186...

  • Page 88
    ... is expected to provide customers a broader range of IT services and solutions and better position Dell for its own immediate and long-term growth and efficiency. Perot Systems was primarily integrated into the Large Enterprise and Public segments for reporting purposes. Perot Systems' results of...

  • Page 89
    ... $35 million was assigned to the Large Enterprise, Public, and SMB segments, respectively. Identifiable intangible assets included customer relationships, internally developed software, non-compete agreements, and trade names and other assets. These intangible assets are being amortized over their...

  • Page 90
    ...: Fiscal Year Ended January 28, 2011 Small and Medium Public Business Consumer (in millions) $ 2,026 $ 389 $ 298 135 87 3 3 $ 2,164 $ 476 $ 301 January 29, 2010 Total $ $ 4,074 $ 284 7 4,365 $ Total 1,737 2,327 10 4,074 Large Enterprise Balance at beginning of period Goodwill acquired during the...

  • Page 91
    ... of its analysis of its intangible assets. Estimated future annual pre-tax amortization expense of finite-lived intangible assets as of January 28, 2011, over the next five fiscal years and thereafter is as follows: Fiscal Years 2012 2013 2014 2015 2016 Thereafter Total (in millions) $ 313 279 240...

  • Page 92
    ...accrued and other current and other non-current liabilities on the Consolidated Statements of Financial Position. Revenue from the sale of extended warranties is recognized over the term of the contract or when the service is completed, and the costs associated with these contracts are recognized as...

  • Page 93
    ... and to reduce costs. Dell continued to incur costs related to these activities during Fiscal 2011. The accruals related to these various cost reductions and efficiency actions are included in accrued and other liabilities in the Consolidated Statements of Financial Position. The following table...

  • Page 94
    ...January 28, 2011 Severance and facility action costs: Cost of net revenue Selling, general, and administrative Research, development, and engineering Total NOTE 11 - COMMITMENTS AND CONTINGENCIES Lease Commitments - Dell leases property and equipment, manufacturing facilities, and office space under...

  • Page 95
    ... of its commercial relationship with Intel Corporation ("Intel") and into separate accounting and financial reporting matters. The SEC agreed to settlements with both the company and Michael Dell, who serves as the company's Chairman and Chief Executive Officer. The company and Mr. Dell entered into...

  • Page 96
    ... member countries are expected to limit the scope of levy schemes and their applicability in the digital hardware environment. Dell, other companies and various industry associations have opposed the extension of levies to the digital environment and have advocated alternative models of compensation...

  • Page 97
    ...mark and related marks are used in connection with Sharp's sale of a wide variety of electrical and consumer electronic products. Sharp alleges that Dell has infringed the "SHARP" mark by using the "UltraSharp" and "Dell UltraSharp" marks to promote, advertise and sell computer monitors and notebook...

  • Page 98
    ... which certain peripheral product sales made to U.S. federal government customers under Dell's General Services Administration ("GSA") Schedule 70 Contract were not compliant with contract requirements implementing the Trade Agreements Act. Dell self-reported the discovery to the GSA's Office of the...

  • Page 99
    ... its financial institutions. Dell markets and sells its products and services to large corporate clients, governments, health care and education accounts, as well as small and medium-sized businesses and individuals. No single customer accounted for more than 10% of Dell's consolidated net revenue...

  • Page 100
    ... 29, 2011 2010 (in millions) Deferred tax assets: Deferred revenue Warranty provisions Provisions for product returns and doubtful accounts Leasing and financing Credit carryforwards Loss carryforwards Stock-based and deferred compensation Operating and compensation related accruals Capitalized...

  • Page 101
    ... ($.17 per share) in Fiscal 2011, $149 million ($.08 per share) in Fiscal 2010, and $338 million ($.17 per share) in Fiscal 2009. The effective tax rate differed from the statutory U.S. federal income tax rate as follows: January 28, 2011 35.0% (14.7) 1.4 1.0 (1.4) 21.3% 97 Fiscal Year Ended January...

  • Page 102
    .... Dell's U.S. federal income tax returns for fiscal years 2007 through 2009 are currently under examination by the Internal Revenue Service ("IRS"). The IRS issued a Revenue Agent's Report ("RAR") for fiscal years 2004 through 2006 proposing certain assessments primarily related to transfer pricing...

  • Page 103
    ...rule against it. The incentives are based upon the number of jobs Dell maintains within the state. Recently, Dell settled two cases related to warranties and software under a taxpayer amnesty program utilizing the incentive credits instead of cash to minimize the impact to its consolidated financial...

  • Page 104
    ...28, 2011, Dell's remaining authorized amount for share repurchases was $3.7 billion. NOTE 15 - STOCK-BASED COMPENSATION AND BENEFIT PLANS Stock-based Compensation Description of the Plans Employee Stock Plans - Dell is currently issuing stock grants under the Dell Amended and Restated 2002 Long-Term...

  • Page 105
    ... Stock Plans at January 28, 2011, January 29, 2010, and January 30, 2009, respectively. To satisfy stock option exercises and vested restricted stock awards, Dell has a policy of issuing new shares as opposed to repurchasing shares on the open market. Stock Option Agreements - The right to purchase...

  • Page 106
    ... STATEMENTS (Continued) Stock Option Activity The following table summarizes stock option activity for the Stock Plans during Fiscal 2011: WeightedWeighted- Average Number Average Remaining Aggregate of Exercise Contractual Intrinsic Options Price Term Value (in millions) (per share) (in years...

  • Page 107
    ... TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table summarizes stock option activity for the Stock Plans during Fiscal 2009: WeightedWeighted- Average Number Average Remaining Aggregate of Exercise Contractual Intrinsic Options Price Term Value (in millions) (per share) (in years...

  • Page 108
    ... Expected term (in years) Risk-free interest rate (U.S. Government Treasury Note) Volatility Dividends Restricted Stock Awards Non-vested restricted stock awards and activities were as follows: Fiscal 2011 Fiscal 2010 Fiscal 2009 WeightedWeightedWeightedNumber Average Number Average Number Average...

  • Page 109
    ... CONSOLIDATED FINANCIAL STATEMENTS (Continued) Stock-based Compensation Expense Stock-based compensation expense was allocated as follows: January 28, 2011 Stock-based compensation expense: Cost of net revenue Operating expenses Stock-based compensation expense before taxes Income tax benefit Stock...

  • Page 110
    ..., 2011 Net revenue: Large Enterprise Public Small and Medium Business Consumer Total Consolidated operating income: Large Enterprise Public Small and Medium Business Consumer Consolidated segment operating income Severance and facility actions Broad based long-term incentives(a) In-process research...

  • Page 111
    ...TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table presents assets by Dell's reportable global segments. Segment assets primarily consist of accounts receivable and inventories. January 28, 2011 (in millions) Total assets: Corporate Large Enterprise Public Small and Medium Business...

  • Page 112
    ... single customer accounted for more than 10% of Dell's consolidated net revenue during Fiscal 2011, Fiscal 2010, or Fiscal 2009. The following table presents net revenue by product and services categories: January 28, 2011 Net revenue: Enterprise Solutions and Services: Enterprise Solutions: Servers...

  • Page 113
    ...28, January 29, 2011 2010 (in millions) Accounts receivable, net: Gross accounts receivable Allowance for doubtful accounts Total Inventories, net: Production materials Work-in-process Finished goods Total Prepaid expenses(a) Property, plant, and equipment, net: Computer equipment Land and buildings...

  • Page 114
    ... DELL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Supplemental Consolidated Statements of Financial Position Information (cont.) January 28, 2011 (in millions) Accrued and other current liabilities: Compensation Warranty liability Income and other taxes Other Total Other non-current...

  • Page 115
    ... Year Description Trade Receivables: 2011 Allowance for doubtful accounts 2010 Allowance for doubtful accounts 2009 Allowance for doubtful accounts Customer Financing Receivables(a): 2011 Allowance for doubtful accounts 2010 Allowance for doubtful accounts 2009 Allowance for doubtful accounts Trade...

  • Page 116
    ... tables present selected unaudited Consolidated Statements of Income for each quarter of Fiscal 2011 and Fiscal 2010: First Quarter Net revenue Gross margin Net income Earnings per share: Basic Diluted Weighted-average shares outstanding: Basic Diluted $ $ $ $ $ Fiscal Year 2011 Second Third...

  • Page 117
    ... public accounting firm, as stated in their report, which is included in "Part II - Item 8 - Financial Statements and Supplementary Data." Changes in Internal Control over Financial Reporting Dell's management, with the participation of Dell's Chief Executive Officer and Chief Financial Officer...

  • Page 118
    ... Controls Our system of controls is designed to provide reasonable, not absolute, assurance regarding the reliability and integrity of accounting and financial reporting. Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will...

  • Page 119
    ... Chief Financial Officer of Dell, having held that office from January 2007 until June 2008. In that role, he was responsible for all finance functions, including controller, corporate planning, tax, treasury operations, investor relations, corporate development, risk management, and corporate audit...

  • Page 120
    ... Narayen (Age 47) - Mr. Narayen is President and Chief Executive Officer of Adobe Systems Incorporated, a software company. From January 2005 until December 2007, Mr. Narayen was Adobe's President and Chief Operating Officer. Previously, he held key product research and development positions within...

  • Page 121
    ... accounting officer or controller, or persons performing similar functions, on our website within four business days following any such amendment or waiver, or within any other period that may be required under SEC rules from time to time. See "Part I - Item 1 - Business - Executive Officers of Dell...

  • Page 122
    ... to the 2011 proxy statement, including the information in the 2011 proxy statement appearing under the captions "Proposal 1 - Elections of Directors" and "Additional Information - Certain Relationships and Related Transactions." ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES Information required...

  • Page 123
    ... "Part II - Item 8 - Financial Statements and Supplementary Data": Page Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated Statements of Financial Position at January 28, 2011, and January 29, 2010 Consolidated Statements of Income for the fiscal years ended...

  • Page 124
    ... Schedule II - Valuation and Qualifying Accounts for the three fiscal years ended January 28, 2011, January 29, 2010, and January 30, 2009 is included in Note 17 of Notes to Consolidated Financial Statements included in "Part II - Item 8 - Financial Statements and Supplementary Data". All other...

  • Page 125
    ...(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DELL INC. By: /s/ MICHAEL S. DELL Michael S. Dell Chairman and Chief Executive Officer (Duly authorized officer) Date: March 15, 2011 121

  • Page 126
    ..., 2011 Director March 15, 2011 Director March 15, 2011 Director March 15, 2011 Director March 15, 2011 Title Chairman and Chief Executive Officer (principal executive officer) Director Date March 15, 2011 March 15, 2011 Vice President, March 15, 2011 Corporate Finance and Chief Accounting Officer...

  • Page 127
    ... Computer Corporation ("Dell") and Chase Bank of Texas, National Association (incorporated by reference to Exhibit 99.2 of Dell's Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017) 4.2 - Officers' Certificate pursuant to Section 301 of the Indenture establishing the terms...

  • Page 128
    ... Dell's Annual Report on Form 10-K for the fiscal year ended January 30, 2009, Commission File No. 0-17017) 10.6* - Amended and Restated Dell Inc. Deferred Compensation Plan for Non-Employee Directors effective as of January 1, 2005 (incorporated by reference to Exhibit 10.8 of Dell's Annual Report...

  • Page 129
    ...April 30, 2010, Commission File No. 0-17017) 10.21* - Form of Nonstatutory Stock Option Agreement for Non-Employee Directors under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.3 of Dell's Current Report on Form 8-K filed July 27, 2006, Commission File No. 0-17017) 10.22...

  • Page 130
    ...Linkbase Document Identifies Exhibit that consists of or includes a management contract or compensatory plan or arrangement. Filed with this report. Furnished with this report. Furnished with this report. In accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be...

  • Page 131
    ... 10.12 Director Annual Restricted Stock Unit Agreement Amended & Restated 2002 Plan DELL INC. Restricted Stock Unit Agreement Recipient: Date of Grant: Identification No.: Number of Units: Dell Inc., a Delaware Corporation (the "Company"), is pleased to grant you units representing shares of the...

  • Page 132
    ... by accessing the prospectus at http://inside.us.dell.com/legal/corporate.htm. Additionally, you may request a copy of the prospectus free of charge from the Company by contacting Stock Option Administration in writing at Stock Option Administration, One Dell Way, Mail Stop 8038, Round Rock, Texas...

  • Page 133
    ... with adequate protection through insurance or indemnification (or both) against claims against them arising out of their service and activities as directors. Uncertainties relating to the availability of adequate insurance for directors and officers have increased the difficulty for corporations to...

  • Page 134
    ... employee benefit plan (or related trust) of the Company or the corporation resulting from such Business Combination and any Person referred to in clause (D) of paragraph (i) above) beneficially owns, directly or indirectly, 15% or more of, respectively, the then outstanding shares of common stock...

  • Page 135
    ... director, officer, employee, member, manager, trustee, fiduciary or agent (collectively, a "Representative") of any Controlled Affiliate or other corporation, limited liability company, partnership, joint venture, employee benefit plan, trust or other entity or enterprise, whether or not for profit...

  • Page 136
    ... payment of Expenses by the Company under any provision of this Agreement or under any other agreement or provision of the Constituent Documents now or hereafter in effect relating to Indemnifiable Claims or (b) recovery under any directors' and officers' liability insurance policies maintained...

  • Page 137
    ... under Section 7(b) to make the Standard of Conduct Determination shall not have made a determination within 30 days after the later of (A) receipt by the Company of written notice from Indemnitee advising the Company of the final disposition of the applicable Indemnifiable Claim (the date of such...

  • Page 138
    ... any Indemnifiable Losses, then the Company shall pay to Indemnitee, within five business days after the later of (x) the Notification Date with respect to the Indemnifiable Claim or portion thereof to which such Indemnifiable Losses are related, out of which such Indemnifiable Losses arose or...

  • Page 139
    ... of Payments - The Company shall not be liable under this Agreement to make any payment to Indemnitee with respect to any Indemnifiable Losses to the extent Indemnitee has otherwise actually received payment (net of Expenses incurred in connection therewith) under any insurance policy, the...

  • Page 140
    ... place. This Agreement shall be binding upon and inure to the benefit of the Company and any successor to the Company, including any person acquiring directly or indirectly all or substantially all the business or assets of the Company whether by purchase, merger, consolidation, reorganization or...

  • Page 141
    ... or defense of Indemnitee's rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to Indemnitee hereunder. Accordingly, without limiting the generality or effect of any other provision hereof...

  • Page 142
    In witness whereof, Indemnitee has executed, and the Company has caused its duly authorized representative to execute, this Agreement as of the date first above written. DELL INC. Address: One Dell Way Round Rock, Texas 78682 Facsimile: By: Lawrence P. Tu Senior Vice President, General Counsel and ...

  • Page 143
    ... 45 39 84 47 January 28, 2011 Earnings Pre-tax income from continuing operations Add: Fixed Charges adjusted for capitalized interest Add: Noncontrolling interest Total Interest Expense Capitalized interest Estimate of interest in rent expense Total Ratio of Earnings to Fixed Charges Fixed Charges...

  • Page 144
    ... Federal Systems Corporation Dell Federal Systems GP L.L.C. Dell Federal Systems L.P. Dell Federal Systems LP L.L.C. Dell Financial Services L.L.C. Dell Funding L.L.C. Dell Global Holdings IV L.L.C. Dell Global Holdings IX L.L.C. Dell Global Holdings L.L.C. Dell Global Holdings VI L.L.C. Dell Global...

  • Page 145
    ... Dell Protective Services Inc. Dell Receivables Corporation Dell Receivables GP L.L.C. Dell Receivables L.P. Dell Receivables LP L.L.C. Dell Revolver Company L.P. Dell Revolver Funding L.L.C. Dell Revolver GP. L.L.C. Dell Services Engineering Corp. Dell Trinity Holdings Corp. Dell USA Corporation...

  • Page 146
    ... de C.V. Dell Panama S. de R.L. Dell Perú, SAC Dell Puerto Rico Corp. Dell Quebec Inc. Dell Technology Services Inc. S.R.L. Dell Trinidad and Tobago Limited EqualLogic Canada Perot Systems (Canada) Corporation Perot Systems TSI (Bermuda) Ltd. TXZ Holding Company Limited Europe, Middle East & Africa...

  • Page 147
    Europe, Middle East & Africa Jurisdiction Dell Corporation Limited Dell Corporation Limited - Northern Ireland Place of Business Dell DFS Holdings Kft. Dell Direct Dell Distribution (EMEA) Limited External Company (Ghana) Dell Distribution Maroc (Succ) Dell Emerging Market (EMEA) Ltd (Russia ...

  • Page 148
    ..., Middle East & Africa Jurisdiction Dell Products (Poland) Sp. z o.o Dell Products Manufacturing Ltd. Dell Research Dell S.A. Dell S.A. Dell S.p.A. Dell s.r.o. Dell SA Dell SAS Dell Services S.r.l. DELL SOLUTIONS (UK) LTD Dell Sp.z.o.o Dell Taiwan B.V Dell Technology & Solutions (Nigeria) Limited...

  • Page 149
    ...of Perot Systems (Singapore) Pte. Ltd. Bearing Point Management Consulting (Shanghai) Ltd. Dell (China) Company Limited Dell (China) Company Limited, Beijing Branch Dell (China) Company Limited, Beijing Liaison Office Dell (China) Company Limited, Chengdu Branch Dell (China) Company Limited, Chengdu...

  • Page 150
    ... Ltd. Perot Systems (Malaysia) Sdn. Bhd Perot Systems (Shanghai) Consulting Co., Limited Perot Systems (Singapore) Pte. Ltd. Perot Systems Business Process Solutions India Private Limited Perot Systems Holdings Pte. Ltd Perot Systems TSI (India) Private Limited PT Dell Indonesia 7 China China China...

  • Page 151
    ...-69726, 333-100342, 333-111214, 333-147882 and 333-158216) of Dell Inc. of our report dated March 15, 2011 relating to the financial statements, and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PRICEWATERHOUSECOOPERS LLP Austin, Texas March 15...

  • Page 152
    ... report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. (b) March 15, 2011 /s/ MICHAEL S. DELL Michael S. Dell Chairman and Chief Executive Officer

  • Page 153
    ...'s ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. (b) March 15, 2011 /s/ BRIAN T. GLADDEN Brian...

  • Page 154
    ... PRESIDENT AND CHIEF FINANCIAL OFFICER, PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 The undersigned officers of Dell Inc. hereby certify that (a) Dell Inc.'s Annual Report on Form 10-K for the fiscal year ended January 28, 2011, as filed...