Dell 2010 Annual Report Download - page 27

Table of Contents
ITEM 7 — MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This section should be read in conjunction with "Part II — Item 8 — Financial Statements and Supplementary Data."
OVERVIEW
We are a leading integrated technology solutions provider in the IT industry. We built our reputation through listening to customers and
developing solutions that meet customer needs. We are focused on providing long-term value creation through the delivery of customized
solutions that make technology more efficient, more accessible, and easier to use. Customer needs are increasingly being defined by how
they use technology rather than where they use it, which is why our businesses are globally organized. Our four global business segments
are Large Enterprise, Public, Small and Medium Business ("SMB"), and Consumer. We also refer to our Large Enterprise, Public, and
SMB segments as "Commercial." Our globally organized business units reflect the impact of globalization on our customer base.
A key component of our business strategy is to continue shifting our portfolio to products and services that provide higher-margin and
recurring revenue streams over time. As part of this strategy, we emphasize expansion of our enterprise solutions and services. We group
our services with similar demand, economic and delivery profiles into three categories: transactional; outsourcing; and project-based. Our
enterprise products include servers, networking, and storage products. The growth of our enterprise solutions and services business has
contributed to improvements in our operating margins.
We are focusing on product leadership by developing next generation capabilities for client products, which include our mobility and
desktop PC products. We employ a collaborative approach to product design and development in which our engineers, with direct
customer input, design innovative solutions and work with a global network of technology companies to architect new system designs,
influence the direction of future development, and integrate new technologies into our products. Through this collaborative, customer-
focused approach, we strive to deliver new and relevant products and services to the market quickly and efficiently. We have also been
focusing 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 countries with a vast majority of the world's
population represent some of our most attractive growth markets. In recent years, we have increased our investment in Brazil, Russia,
India, and China and have tailored our products and services to meet the specific needs of customers in these countries.
We supplement organic growth with a disciplined acquisition program targeting businesses that will expand our portfolio of enterprise
solutions offerings. We emphasize acquisitions of companies with portfolios that we can leverage with our global customer base and
distribution. We followed our acquisition of Perot Systems Corporation ("Perot Systems") in late Fiscal 2010 with a number of
acquisitions throughout Fiscal 2011, which extended our core capabilities in a variety of enterprise solutions offerings, including storage,
systems management appliances, virtual infrastructure management, SaaS application integration, and cloud-based medical records
management. The comparability of our results of operations for Fiscal 2011 compared to Fiscal 2010 and Fiscal 2009 are affected by
these acquisitions, primarily our acquisition and ongoing integration of Perot Systems. See our Services discussion under "Results of
Operations — Revenue by Product and Services Categories" below for a comparison of Dell's Services revenue for Fiscal 2011 compared
to the prior years' results of Dell Services and Perot Systems.
Presentation of Supplemental Non-GAAP Financial Measures
In this management's discussion and analysis, we use supplemental measures of our performance, which are derived from our
consolidated financial information but which are not presented in our consolidated financial statements prepared in accordance with
accounting principles generally accepted in the United States of America ("GAAP"). These financial measures, which are considered
"non-GAAP financial measures" under SEC rules, include our non-GAAP gross margin, non-GAAP operating expenses, non-GAAP
operating income, non-GAAP net income and non-GAAP earnings per share. See "Results of Operations — Non-GAAP Financial
Measures"
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