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DELL INC (4331)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 03/13/2012
Filed Period 02/03/2012

Table of contents

  • Page 1
    DELL INC (4331) 10-K Annual report pursuant to section 13 and 15(d) Filed on 03/13/2012 Filed Period 02/03/2012

  • Page 2
    ... o No R Approximate aggregate market value of the registrant's common stock held by non-affiliates as of July 29, 2011, based upon the last sale price reported for such date on the NASDAQ Global Select Market Number of shares of common stock outstanding as of March 7, 2012 $25.3 billion 1,762,044...

  • Page 3

  • Page 4
    ... Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related...

  • Page 5
    ...," "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 6
    ...channels. We are focused on providing technology solutions that are more efficient, more accessible, and easier to manage. Dell Inc. is a holding company that conducts its business worldwide through its subsidiaries. Our global corporate headquarters is located in Round Rock, Texas. When we refer to...

  • Page 7
    .... Outsourcing - Our outsourcing services business is designed to reduce customer costs and increase the efficiency and improve the quality of customer business operations. Our outsourcing services include data center and systems management, network management, life cycle application development and...

  • Page 8
    ... office administration, call center management, and other technical and administration services. • • Software and Peripherals We offer Dell-branded printers and displays and a multitude of competitively priced third-party peripheral products such as printers, televisions, notebook accessories...

  • Page 9
    ... "Part II -Item 8 Financial Statements and Supplementary Data." During Fiscal 2012, we acquired Dell Financial Services Canada Limited from CIT Group Inc. and we announced our entry into a definitive agreement to acquire CIT Vendor Finance's Dell-related assets and its sales and servicing functions...

  • Page 10
    ... contact and accountability with global account specialists, special global pricing, and consistent global service and support programs. We also maintain specific sales and marketing programs targeted at federal, state, and local governmental agencies, as well as healthcare and educational customers...

  • Page 11
    ... various software licensing agreements with other companies. We anticipate that our worldwide patent portfolio will be of value in negotiating intellectual property rights with others in the industry. We have obtained U.S. federal trademark registration for the DELL word mark and the Dell logo mark...

  • Page 12
    ... mailing address of our principal executive offices is One Dell Way, Round Rock, Texas 78682. Our telephone number is 1-800-BUY-DELL. We maintain an Internet website at www.dell.com. All of our reports filed with the SEC (including annual reports on Form 10-K, quarterly reports on Form 10-Q, current...

  • Page 13
    ... he led the team responsible for server, storage, peripheral, and infrastructure products. Before joining HP in 1996, Mr. Anderson held top management positions at Cray Research in executive staff, field marketing, sales, finance, and corporate marketing. Mr. Anderson earned a Bachelor of Science...

  • Page 14
    ...was responsible for driving global marketing strategies, product and pricing programs, communications and channel plans. She has also held various executive roles in SMB marketing and Dell's Services and Supply Chain Management teams since joining Dell in 2000. She came to Dell from Citigroup, where...

  • Page 15
    ... 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 16
    ... in various parts of Asia. A significant concentration of this outsourced manufacturing is currently performed by only a few of our contract manufacturers, often in single locations. We sell components to these contract manufacturers and generate large non-trade accounts receivables, an arrangement...

  • Page 17
    ...could adversely affect our profitability or operations, including distraction of management attention from a focus on our current business operations, insufficient new revenue to offset expenses, inadequate return of capital, integration challenges, retention of employees of acquired businesses, new...

  • Page 18
    ...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 debt and capital markets to meet significant funding...

  • Page 19
    ...securitization markets, changes in financial services regulation, or adverse changes in the economy could lead to reductions in debt availability and could limit our ability to continue asset securitizations or other financings from debt or capital sources, reduce the amount of financing receivables...

  • Page 20
    ... intellectual property or do not obtain or protect licenses to intellectual property developed by others on commercially reasonable and competitive terms. If we or our suppliers are unable to develop or protect desirable technology or technology licenses, we may be prevented from marketing products...

  • Page 21
    ... face risks relating to any inability to maintain strong internal controls. If management is not successful in maintaining a strong internal control environment, investors could lose confidence in our reported financial information. This could lead to a decline in our stock price, limit our ability...

  • Page 22
    ...comply with the new disclosure requirements of this law and may realize other costs relating to the sourcing and availability of minerals used in our products. Further, since our supply chain is complex, we may face reputational harm if our customers or other stakeholders conclude that we are unable...

  • Page 23
    ...sublet. Our principal executive offices, including global headquarters, are located at One Dell Way, Round Rock, Texas. Our business centers, which include facilities that contain operations for sales, technical support, administrative, and support functions, occupy 12.7 million square feet of space...

  • Page 24
    ... for Common Stock Our common stock is listed on the NASDAQ Global Select Market of The NASDAQ Stock Market LLC under the symbol DELL. Information regarding the high and low sales prices per share of our common stock for Fiscal 2012 and Fiscal 2011, as reported by the NASDAQ Global Select Market, is...

  • Page 25
    ...of Contents 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 that...

  • Page 26
    ... change in the value of our common stock relative to the indices at the end of each fiscal year and not for any interim period. Historical stock price performance is not necessarily indicative of future stock price performance. 2007 Dell Inc. S&P 500 Dow Jones US Computer Hardware S&P Information...

  • Page 27
    ..."Part II - Item 8 - Financial Statements and Supplementary Data" or in our previously filed Annual Reports on Form 10-K. Fiscal Year Ended February 3, 2012 Results of Operations: Net revenue Gross margin Operating income Income before income taxes Net income Earnings per share: Basic Diluted Number...

  • Page 28
    ...networking, systems management appliance, virtualized server and data center solutions, and software-as-a-service application integration, as well as enabled expansion of our customer financing activities. The comparability of our results of operations for Fiscal 2012, as compared to Fiscal 2011, is...

  • Page 29
    ... 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 nonGAAP gross margin, non-GAAP operating...

  • Page 30
    ...(in millions, except per share amounts and percentages) 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 10,217 3,594...

  • Page 31
    ...the product configuration mix we were able to sell. We prioritized high end-drives to our strategic customers, which reduced profitability in our Consumer segment. During the fourth quarter of Fiscal 2012, we entered into purchase commitments with certain HDD suppliers to ensure continuity of supply...

  • Page 32
    ..., better sales and supply chain execution, and improved quality resulting in favorable warranty experience contributed to the year-over-year increase in product gross margin percentage. Services, including software related - During Fiscal 2011, our services gross margin increased in absolute dollars...

  • Page 33
    ... 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 vendor rebate programs...

  • Page 34
    ...offset in part by decreases in severance and facility action costs, discussed below. Research, Development, and Engineering - During Fiscal 2012, research, development, and engineering expenses were 1.5% of net revenue, compared to 1.0% during the prior year. We manage our research, development, and...

  • Page 35
    ... in selling and marketing costs. Net Income - During Fiscal 2012, net income increased 33% to $3.5 billion on a GAAP basis and 27% to $4.0 billion on a non-GAAP basis over Fiscal 2011. Net income was positively impacted by increases in operating income and a lower effective tax rate, offset in part...

  • Page 36
    ... our current operating performance and comparisons to our past operating performance. Amortization of Intangible Assets - Amortization of purchased intangible assets consists primarily of amortization of customer relationships, acquired technology, non-compete covenants, and trade names purchased in...

  • Page 37
    ... of a merger agreement with us. During the first quarter of Fiscal 2011, we recorded a $100 million settlement amount for the SEC investigation into certain of our accounting and financial matters, which was initiated in 2005, and incurred $40 million for a securities litigation class action lawsuit...

  • Page 38
    ... and acquisition-related costs Other fees and settlements Aggregate adjustment for income taxes Non-GAAP net income $ 3,492 391 313 - (244) 33% $ 2,635 349 227 68 (173) 84% $ 1,433 205 597 - (181) $ 3,952 27% $ 3,106 51% $ 2,054 GAAP earnings per share - diluted Non-GAAP adjustments...

  • Page 39
    ... Fiscal Year Ended February 3, 2012 Percentage of Total Net Revenue GAAP gross margin Non-GAAP adjustments Non-GAAP gross margin 22.3 % 0.5 % 22.8 % 18.5 % 0.6 % 19.1 % 17.5 % 0.7 % 18.2 % January 28, 2011 January 29, 2010 GAAP operating expenses Non-GAAP adjustments Non-GAAP operating expenses...

  • Page 40
    ...-term incentive expenses, amortization of purchased intangible assets costs, and charges related to our settlement of the SEC investigation as well as a securities litigation class action lawsuit that were incurred during Fiscal 2011, are not allocated to the reporting segments as management does...

  • Page 41
    ..., during Fiscal 2012, we sold more units of higher-value client products, as compared to the prior year. Furthermore, we have experienced year-over-year increases in profitability from our customer financing arrangements, which benefited from improvements in consumer credit loss performance on our...

  • Page 42
    ... 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 43
    ... added Compellent products. During Fiscal 2012, sales of Dell-owned storage products increased 21% to 82% of our total storage revenue compared to 57% in the prior year. We believe Dell-owned storage offerings, which can be sold with service solutions will generate higher margins in the long-term...

  • Page 44
    ... sales of software license fees and related post-contract customer support, is reported in services revenue, including software related, on our Consolidated Statements of Income. Software and related support services revenue represented 32% and 33% of services revenue, including software related...

  • Page 45
    ... contracted services backlog, which is primarily related to our outsourcing services business, was $7.5 billion and $6.9 billion, as of January 28, 2011, and January 29, 2010, respectively. • Software and Peripherals - The 8% increase in S&P revenue for Fiscal 2011 was driven by overall customer...

  • Page 46
    ... Fiscal 2011 was primarily due to gains from revaluation of certain un-hedged foreign currency balances, the effect of which was partially offset by increases in the costs associated with the hedge program. Other includes a $72 million merger termination fee that we received during Fiscal 2011. 44

  • Page 47
    ... financial services companies. During Fiscal 2012, we acquired Dell Financial Services Canada Limited ("DFS Canada") from CIT Group Inc. In addition, we announced our entry into a definitive agreement to acquire CIT Vendor Finance's Dell-related financing assets portfolio and sales and servicing...

  • Page 48
    ...total portfolio was 4.6%, 7.5%, and 8.0%, respectively. The charge-off rate for Fiscal 2011 is annualized for a portfolio of receivables that consisted of revolving Dell U.S. customer account balances that was purchased during the third quarter of Fiscal 2011. The credit quality mix of our financing...

  • 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
    ... of tax planning and financing strategies with the objective of having our worldwide cash available in the locations where it is needed. The following table contains a summary of our Consolidated Statements of Cash Flows for the past three fiscal years: Fiscal Year Ended February 3, 2012 Net change...

  • Page 51
    ... accounts payable and most recent quarterly cost of sales for each period. DPO is calculated by dividing accounts payable by average cost of goods sold per day for the current quarter (97 days for Fiscal 2012; 90 days for Fiscal 2011 and Fiscal 2010). Our cash conversion cycle increased three days...

  • 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
    ... Statements under "Part II - Item 8 - Financial Statements and Supplementary Data." Operating Leases - We lease property and equipment, manufacturing facilities, and office space under non-cancellable leases. Certain of these leases obligate us to pay taxes, maintenance, and repair costs. Purchase...

  • Page 54
    ...; loss of government contracts; our ability to develop, obtain or protect licenses to intellectual property developed by us or by others on commercially reasonable and competitive terms; infrastructure disruptions; cyber attacks or other data security breaches; our ability to hedge effectively our...

  • Page 55
    ... price protection or return rights are not limited and a reliable estimate cannot be made, all of the revenue and related cost are deferred until the product has been sold to the end-user or the rights expire. We record estimated reductions to revenue or an expense for distribution channel programs...

  • Page 56
    ...statements or tax returns, judgment is required. Differences between the anticipated and actual outcomes of these future tax consequences could have a material impact on our consolidated results of operations or financial position. Additionally, we use tax planning strategies as a part of our global...

  • Page 57
    ... impairment test. Otherwise, the quantitative test becomes optional. This new guidance is effective for us for the first quarter of the fiscal year ending February 1, 2013. Early adoption is permitted. We do not expect that this new guidance will impact our Consolidated Financial Statements. 55

  • Page 58
    ... Notes to Consolidated Financial Statements included in "Part II - Item 8 - Financial Statements and Supplementary Data" for more information on our interest rate swaps. We mitigate the risks related to our investment portfolio by investing primarily in high credit quality securities, limiting the...

  • Page 59
    ...CONSOLIDATED FINANCIAL STATEMENTS Page Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated Statements of Financial Position at February 3, 2012, and January 28, 2011 Consolidated Statements of Income for the fiscal years ended February 3, 2012, January 28, 2011...

  • Page 60
    ... of Contents Report of Independent 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...

  • Page 61
    ... DELL INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in millions) February 3, January 28, 2012 2011 ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Short-term financing receivables, net Inventories, net Other current assets Total current assets...

  • Page 62
    ... INC. CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share amounts) Fiscal Year Ended February 3, 2012 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...

  • Page 63
    ...of effects from acquisitions: Accounts receivable Financing receivables Inventories Other assets Accounts payable Deferred services revenue Accrued and other liabilities Change in cash from operating activities Cash flows from investing activities: Investments: Purchases Maturities and sales Capital...

  • Page 64
    ...As these shares are held by a wholly-owned subsidiary, they are not included in outstanding shares in our Consolidated Financial Statements. (b) Stock issuance under employee plans is net of shares held for employee taxes. The accompanying notes are an integral part of these consolidated financial...

  • Page 65
    62

  • Page 66
    ... in Selling, general, and administrative expenses. Financing Receivables - Financing receivables consist of customer receivables and residual interest. Customer receivables include revolving loans and fixed-term leases and loans resulting primarily from the sale of Dell products and services. Based...

  • Page 67
    ...that it has a controlling financial interest in its special purpose entities, and therefore, consolidated them into Dell's Consolidated Statements of Financial Position as of February 3, 2012 and January 28, 2011. The asset securitizations in these special purpose entities are being accounted for as...

  • Page 68
    ... to its customer is fixed and determinable; and collection of the resulting receivable is reasonably assured. Dell classifies revenue and cost of revenue related to stand-alone software sold with Post Contract Support ("PCS") in the same line item as services on the Consolidated Statements of Income...

  • Page 69
    ... majority of these sales. To the extent price protection or return rights are not limited and a reliable estimate cannot be made, all of the revenue and related costs are deferred until the product has been sold to the end-user or the rights expire. Dell records estimated reductions to revenue or an...

  • Page 70
    ...lease. Sales-type leases also produce financing income, which is included in net revenue in the Consolidated Statements of Income and is recognized at consistent rates of return over the lease term. Dell also offers qualified customers revolving credit lines for the purchase of products and services...

  • Page 71
    ...tax and accounting purposes. In determining the future tax consequences of events that have been recognized 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...

  • Page 72
    ...from those estimates. See Note 14 of the Notes to Consolidated Financial Statements included for further discussion of stock-based compensation. Recently Issued Accounting Pronouncements Credit Quality of Financing Receivables and the Allowance for Credit Losses - In July 2010, the FASB issued a new...

  • Page 73
    ... Level 3 position as of January 28, 2011, represented a convertible debt security that Dell was unable to corroborate with observable market data. The investment was valued at cost plus accrued interest as this was management's best estimate of fair value. Due to events occurring in Fiscal 2012, the...

  • Page 74
    ... based on quoted prices in active markets. These investments were previously accounted for under the cost method. Derivative Instruments - Dell's derivative financial instruments consist primarily of foreign currency forward and purchased option contracts and interest rate swaps. The fair value of...

  • Page 75
    ...term investments in the Consolidated Statements of Financial Position. February 3, 2012 Fair Value Cost Unrealized Gain Unrealized (Loss) Fair Value (in millions) Investments: U.S. government and agencies Non- U.S. government and agencies Commercial paper U.S. corporate International corporate Total...

  • Page 76
    ... 6 to 12 months. At February 3, 2012, and January 28, 2011, receivables under these special programs were $328 million and $398 million, respectively. • Fixed-term sales-type leases and loans - Dell enters into sales-type lease arrangements with customers who desire lease financing. Leases with...

  • Page 77
    ... the second quarter of Fiscal 2012 , Dell acquired Dell Financial Services Canada Limited ("DFS Canada") from CIT Group Inc., which was accounted for as a business combination. The purchase included a portfolio of $367 million in gross contractual fixed-term leases and loans, Consumer installment...

  • Page 78
    ... 2012 , Dell entered into a definitive agreement to acquire CIT Vendor Finance's Dell-related financing assets portfolio and sales and servicing functions in Europe. The acquisition of these assets will enable global expansion of Dell's direct finance model. Subject to customary closing, regulatory...

  • Page 79
    ... 3, 2012 , and 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 credit agency-related elements. For Commercial customers, an internal grading system is...

  • Page 80
    Table of Contents DELL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Large Enterprise and Public receivables shown in the below table, Dell's internal credit level scoring has been aggregated to their most comparable external commercial rating agency equivalents. Investment ...

  • Page 81
    ... 31, 2011, between Dell and a trustee, with terms and conditions substantially the same as those governing the Notes outstanding as of January 28, 2011 (such outstanding Notes, together with the Issued Notes, the "Notes"). The estimated fair value of total debt at February 3, 2012, was approximately...

  • Page 82
    ... through the fixed-term lease and loan, and revolving loan securitization programs. Of the $1.4 billion outstanding in structured financing related debt, $964 million was current as of February 3, 2012 . See Note 4 and Note 6 of the Notes to Consolidated Financial Statements for further discussion...

  • Page 83
    ... financing debt. The interest rate swaps economically convert the variable rate on the structured financing debt to a fixed interest rate to match the underlying fixed rate being received on fixed term customer leases and loans. The duration of these contracts typically ranges from 30 to 42 months...

  • Page 84
    ... would have the right to terminate those derivative contracts where Dell is in a net liability position. As of February 3, 2012 , there had been no such triggering events. Effect of Derivative Instruments on the Consolidated Statements of Financial Position and the Consolidated Statements of Income...

  • Page 85
    ... in the Consolidated Statements of Financial Position due to the right of offset by its counterparties under master netting arrangements. The fair value of those derivative instruments presented on a gross basis as of each date indicated below is as follows: February 3, 2012 Other Current Assets...

  • Page 86
    ... these companies with Dell to provide Dell's customers with a broader range of IT solutions or, in the case of DFS Canada, to extend Dell's financial services capabilities. This goodwill is not deductible for tax purposes. Dell also recorded $753 million in intangible assets related to these...

  • Page 87
    ... who accepted positions with Dell related to the acceleration of Perot Systems unvested stock options and other cash compensation payments. These cash compensation payments were expensed as incurred and are recorded in Selling, general, and administrative expenses in the Consolidated Statements of...

  • Page 88
    ...079) $ $ Net Gross January 28, 2011 Accumulated Amortization $ (309) (322) (26) (31) (688) - - $ (688) $ $ Net (in millions) Customer relationships Technology Non-compete agreements Tradenames Amortizable intangible assets In-process research and development Indefinite lived intangible assets Total...

  • Page 89
    ... related to intangible assets for the fiscal years ended February 3, 2012, and January 28, 2011. Estimated future annual pre-tax amortization expense of finite-lived intangible assets as of February 3, 2012, over the next five fiscal years and thereafter is as follows: Fiscal Years 2013 2014 2015...

  • Page 90
    ... the costs associated with these contracts are recognized as incurred. Deferred extended warranty revenue is included in deferred services revenue on the Consolidated Statements of Financial Position. Changes in Dell's liabilities for standard limited warranties and deferred services revenue related...

  • Page 91
    ... TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 10 - COMMITMENTS AND CONTINGENCIES Lease Commitments - Dell lease s property and equipment, manufacturing facilities, and office space under non-cancelable leases. Certain of these leases obligate Dell to pay taxes, maintenance, and repair costs...

  • Page 92
    ... residents who had purchased certain products advertised with a former sales price on the consumer segment of Dell's website during an approximately four year period between March 2003 and June 2007. During the first quarter of Fiscal 2012, the plaintiffs and Dell reached a class-wide settlement in...

  • Page 93
    ... of these parts are recognized as a reduction of cost of sales at the time of sale. Dell has net settlement agreements with the majority of these contract manufacturers that allow Dell to offset the accounts payable to the contract manufacturers from the amounts receivable from them. Gross non-trade...

  • Page 94
    ... and $48 million f or Fiscal 2012 and Fiscal 2011 , respectively, related to state income tax credit carryforwards. Dell has provided a valuation allowance of $29 million and $20 million related to net operating losses for Fiscal 2012 and Fiscal 2011, respectively. No valuation allowance has been...

  • Page 95
    ... Other non-current assets in the Consolidated Statements of Financial Position as of February 3, 2012, and January 28, 2011, respectively. During Fiscal 2012 and Fiscal 2011 , Dell recorded $124 million and $41 million , respectively, of deferred tax assets related to net operating loss and credit...

  • Page 96
    ...43) (32) (4) 2,194 Dell recorded net unrecognized tax benefits of $2.6 billion and $2.3 billion, which are included in Other non-current liabilities in its Consolidated Statements of Financial Position, as of February 3, 2012, and January 28, 2011, respectively. The unrecognized tax benefits in the...

  • Page 97
    ...that it has provided adequate reserves related to all matters contained in tax periods open to examination. 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...

  • Page 98
    ... share. Share Repurchase Program - Dell has a share repurchase program that authorizes it to purchase shares of common stock in order to increase shareholder value and manage dilution resulting from shares issued under Dell's equity compensation plans. However, Dell does not currently have a policy...

  • Page 99
    ... DELL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 14 - 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 Incentive Plan...

  • Page 100
    ... and options outstanding, the aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Dell's closing stock price on February 3, 2012 and the exercise price multiplied by the number of in-the-money options) that would have been received by the...

  • Page 101
    ... the total pre-tax intrinsic value (the difference between the stock price at exercise and the exercise price multiplied by the number of options exercised) that was received by the option holders who exercised their options during the fiscal year. At February 3, 2012, January 28, 2011, and...

  • Page 102
    ...and Fiscal 2010, respectively. Total payments for the employee's tax obligations to the taxing authorities were $6 million, $5 million, and $2 million in Fiscal 2012, 2011, and 2010, respectively, and are reflected as a financing activity within the Consolidated Statements of Cash Flows. For Fiscal...

  • Page 103
    ... Ended February 3, 2012 Stock-based compensation expense: Cost of net revenue Operating expenses Stock-based compensation expense before taxes Income tax benefit Stock-based compensation expense, net of income taxes Employee Benefit Plans 401(k) Plan - Dell has a defined contribution retirement plan...

  • Page 104
    ... of IT infrastructure and service solutions to large global and national corporate customers. Public includes sales to educational institutions, governments, health care organizations, and law enforcement agencies, among others. SMB includes sales of complete IT solutions to small and medium-sized...

  • Page 105
    Table of Contents DELL INC. NOTES 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. February 3, 2012 (in millions) Total assets: Corporate Large ...

  • Page 106
    ... DELL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table presents net revenue by product and services categories: Fiscal Year Ended February 3, 2012 Net revenue: Enterprise Solutions and Services: Enterprise Solutions: Servers and networking Storage Services Software...

  • Page 107
    ... FINANCIAL INFORMATION Supplemental Consolidated Statements of Financial Position Information The following table provides information on amounts included in Accounts receivable, net, Inventories, net, Property, plant, and equipment, net, Accrued and other liabilities, and Other non-current...

  • Page 108
    ... Consolidated Statements of Financial Position Information (cont.) February 3, 2012 (in millions) Accrued and other current liabilities: Compensation Warranty liability Income and other taxes Other Total Other non-current liabilities: Warranty liability Unrecognized tax benefits, net Deferred tax...

  • Page 109
    ...Contents DELL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Valuation and Qualifying Accounts Fiscal Year Trade Receivables: 2012 2011 2010 2012 2011 2010 2012 2011 2010 (a) Description Balance at Beginning of Period 96 115 112 241 237 149 102 79 69 Charged to Income Statement 90...

  • Page 110
    ...The following tables present selected unaudited Consolidated Statements of Income for each quarter of Fiscal 2012 and Fiscal 2011: Fiscal Year 2012 First Quarter Net revenue Gross margin Net income Earnings per share: Basic Diluted Weighted-average shares outstanding: Basic Diluted 1,908 1,923 1,858...

  • Page 111
    ... "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, has evaluated whether any change in Dell's internal control over financial...

  • Page 112
    ...can be circumvented by individuals, acting alone or in collusion with each other, or by management override. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its...

  • Page 113
    ...reference to the 2012 proxy statement, including the information in the 2012 proxy statement appearing under the captions "Stock Ownership" and "Executive Compensation - Equity Compensation Plans." M 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information required...

  • Page 114
    ...filed as a part of this report under "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 February 3, 2012, and January 28, 2011 Consolidated Statements of...

  • Page 115
    ... Schedule II - Valuation and Qualifying Accounts for the three fiscal years ended February 3, 2012, January 28, 2011 , and January 29, 2010 is included in Note 16 of Notes to Consolidated Financial Statements included in "Part II - Item 8 - Financial Statements and Supplementary Data." All other...

  • Page 116
    ... 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 13, 2012 113

  • Page 117
    .... Name /s/ MICHAEL S. DELL Michael S. Dell /s/ JAMES W. BREYER James W. Breyer /s/ DONALD J. CARTY Donald J. Carty /s/ JANET F. CLARK Janet F. Clark /s/ LAURA CONIGLIARO Laura Conigliaro Director March 13, 2012 Director March 13, 2012 Director March 13, 2012 Chairman and Chief Executive Officer...

  • Page 118
    (principal financial officer) Brian T. Gladden /s/ THOMAS W. SWEET Thomas W. Sweet 114 Vice President, Corporate Finance and Chief Accounting Officer (principal accounting officer) March 13, 2012

  • Page 119
    ... Dell's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 2010, Commission File No. 0-17017) - Indenture, dated as of April 27, 1998, between Dell Computer Corporation and Chase Bank of Texas, National Association (incorporated by reference to Exhibit 99.2 of Dell's Current Report...

  • Page 120
    4.16 - Form of Floating Rate Notes due 2014 (incorporated by reference to Exhibit 4.2 of Dell's Current Report on Form 8-K filed March 31, 2011, Commission File No. 0-17017) - Form of 2.100% Notes due 2014 (incorporated by reference to Exhibit 4.3 of Dell's Current Report on Form 8-K filed March 31...

  • Page 121
    ...-Employee Directors under the Amended and Restated 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.12 of Dell's Annual Report on Form 10-K for the fiscal year ended January 28, 2011, Commission File No. 0-17017) - Form of Restricted Stock Unit Agreement for Executive Officers...

  • Page 122
    ....2 of Dell's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2010, Commission File No. 0-17017) - 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...

  • Page 123
    ...S. Dell, Chairman and Chief Executive Officer, and Brian T. Gladden, Senior Vice President and Chief Financial Officer, ...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...

  • Page 124
    ... EARNINGS TO FIXED CHARGES Fiscal Year Ended February 3, 2012 January 28, 2011 January 29, 2010 January 30, 2009 February 1, 2008 (in millions, except ratios) Earnings Pre-tax income from continuing operations Add: Fixed Charges adjusted for capitalized interest Add: Noncontrolling interest Total...

  • Page 125
    ... Dell International Holdings I L.L.C. Dell International L.L.C. Dell Marketing Corporation Dell Marketing GP L.L.C. Dell Marketing L.P. Dell Marketing LP L.L.C. Dell Products Corporation Dell Products GP L.L.C. Dell Products L.P. Dell Products LP L.L.C. Dell Protective Services Inc. Dell Receivables...

  • Page 126
    1

  • Page 127
    ... Perot Systems Government Solutions, Inc. Perot Systems Healthcare Solutions, Inc. Perot Systems Revenue Cycle Solutions, Inc. PrSM Corporation PSC GP Corporation PSC Healthcare Software, Inc. PSC LP Corporation PSC Management Limited Partnership QSS Group, Inc. SecureWorks Holding Corp. SecureWorks...

  • Page 128
    ... Dell Puerto Rico Corp. Dell Quebec Inc. Dell Technology Services Inc. S.R.L. Dell Trinidad and Tobago Limited Force10 Networks Mexico SA de CV Force10 International, Ltd. Perot Systems TSI (Bermuda) Ltd. TXZ Holding Company Limited Jurisdiction Costa Rica Canada Canada Venezuela Argentina Canada...

  • Page 129
    ...Limited Representative Office - Lebanon Dell Emerging Markets (EMEA) Limited Trade Representative Office (Bulgaria) Dell FZ - LLC Dell FZ-LLC - Bahrain Branch Dell FZ -LLLC - Qatar Branch Dell Gesm.b.H. Dell Global B.V. Dell Global Holdings II BV Dell Global Holdings III BV Dell Global International...

  • Page 130
    ... Dell International Services SRL Dell L.L.C. Dell N.V. Dell Products Dell Products (Europe) B.V. Dell Products (Poland) Sp. z o.o Dell Products Manufacturing Ltd. Dell Research Dell (Switzerland) GmbH 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...

  • Page 131
    ...Perot Systems Europe Limited Perot Systems Investments B.V. Perot Systems Nederland B.V. Perot Systems S.r.l. Perot Systems TSI (Hungary) Liquidity Management LLC Perot Systems TSI (Mauritius) Pvt. Ltd. Perot Systems TSI (Middle East) FZ-LLC Perot Systems TSI (Netherlands) B.V. SCI Siman SecureWorks...

  • Page 132
    ...) Dell Global BV (Vietnam Representative Office) Dell Global Procurement Malaysia Sdn. Bhd. Dell Global Pte. Ltd. Dell Hong Kong Limited Dell India Private Ltd. Dell India (Sales & Marketing) Private Limited Dell International Inc. Dell International Services Philippines Inc. Dell Japan Inc. Dell...

  • Page 133
    .... Bhd. Perot Systems (Shanghai) Consulting Co., Limited Perot Systems (Singapore) Pte. Ltd. Perot Systems Holdings Pte. Ltd Dell International Services India Private Limited (f.k.a. Perot Systems TSI (India) Private Limited) Dell (Chengdu) Company Limited Dell Services (China) Company Limited Dell...

  • Page 134
    ...100342, 333-111214, 333-147882, 333-158216 and 333-177202) of Dell Inc. of our report dated March 13, 2012 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 13...

  • Page 135
    ...; 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. /s/ MICHAEL S. DELL Michael S. Dell Chairman and Chief Executive Officer (a) (b) (c) (d) 5. (a) (b) March 13, 2012

  • Page 136
    ..., whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ BRIAN T. GLADDEN Brian T. Gladden Senior Vice President and Chief Financial Officer (a) (b) (c) (d) 5. (a) (b) March 13, 2012

  • Page 137
    ... 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 February 3, 2012, as filed with the Securities and Exchange Commission, fully complies with the requirements...