Dell Reports Second Quarter Financial Results

  • Revenue of $14.5 billion
  • GAAP earnings of $0.42 per share, non-GAAP earnings of $0.50 per share
  • Dell Enterprise Solutions and Services revenue grew 6 percent year over year to $4.9 billion; now represents more than 50 percent of company margin and more than a third of revenue

ROUND ROCK, Texas--()--Dell announced fiscal 2013 second-quarter results today with revenue of $14.5 billion, GAAP operating income of $901 million, and earnings of $0.42 per share. Consistent with its strategy, Dell saw growth in its server, services and networking businesses.

“We’re transforming our business, not for a quarter or a fiscal year, but to deliver differentiated customer value for the long term,” said Michael Dell, chairman and CEO. “We’re clear on our strategy and we’re building a leading portfolio of solutions to help our customers achieve their goals.”

“Our performance in the second quarter provided another proof-point that our long-term strategy is right,” said Brian Gladden, Dell chief financial officer. “We continued our progress in shifting the mix of our business to higher-margin enterprise solutions, led by solid growth in our server, networking, services, and Dell IP storage businesses.

“Growth in our PC business was challenging, as we saw a tough macroeconomic and competitive environment, and continued to focus on higher-value solutions in this business,” Mr. Gladden said.

Results

  • Revenue in the quarter was $14.5 billion, an 8 percent decrease from the previous year as desktop and mobility revenue contracted.
  • GAAP operating income for the quarter was $901 million, or 6.2 percent of revenue. Non-GAAP operating income was $1.1 billion, or 7.8 percent of revenue. Gross margins for the quarter benefitted by approximately $70 million, or 50 basis points, primarily resulting from a vendor settlement.
  • GAAP earnings per share in the quarter was 42 cents, down 13 percent from the previous year; non-GAAP EPS was 50 cents, down 7 percent.
  • Cash flow from operations in the quarter was $637 million. Dell ended the quarter with $14.6 billion in cash and investments.

 

Fiscal-Year 2013 Second Quarter and Half Year Highlights

 
   

Second Quarter

     

Fiscal Year First Half

(in millions)

FY13

   

FY12

   

Change

FY13

   

FY12

   

Change

Revenue $ 14,483     $ 15,658     (8 %) $ 28,905     $ 30,675     (6 %)
 
Operating Income (GAAP) $ 901 $ 1,146 (21 %) $ 1,725 $ 2,358 (27 %)
Net Income (GAAP) $ 732 $ 890 (18 %) $ 1,367 $ 1,835 (26 %)
EPS (GAAP) $ 0.42 $ 0.48 (13 %) $ 0.77 $ 0.97 (21 %)
 
Operating Income (non-GAAP) $ 1,123 $ 1,328 (15 %) $ 2,133 $ 2,704 (21 %)
Net Income (non-GAAP) $ 875 $ 1,006 (13 %) $ 1,636 $ 2,056 (20 %)
EPS (non-GAAP) $ 0.50 $ 0.54 (7 %) $ 0.93 $ 1.08 (14 %)
 

Information about Dell’s use of non-GAAP financial information is provided under “Non-GAAP Financial Measures” below. Non-GAAP financial information excludes costs related primarily to the amortization of purchased intangibles, severance and facility-action costs, certain settlement costs and acquisition-related charges. All comparisons in this press release are year over year unless otherwise noted.

Strategic Highlights:

  • Dell Enterprise Solutions and Services revenue grew 6 percent year over year to $4.9 billion and comprised 34 percent of Dell’s consolidated revenue and more than 50 percent of its margin. This business is now approaching a $20 billion annual run rate.
  • Server and networking revenue grew 14 percent.
  • Revenue of Dell-owned storage increased 6 percent.
  • Dell Services revenue was $2.1 billion, up 3 percent, with new signings of more than $1 billion in the first half of the year, and $1.8 billion over the last 12 months.
  • Year to date Dell has announced six acquisitions and closed five, all of which will help drive a higher-value mix of solutions with more predictable revenue and margin streams. The company expects to close the pending acquisition of Quest Software in the second half of the third quarter.

Business Units and Regions:

  • Large Enterprise revenue was $4.5 billion in the quarter, a 3 percent decline. Operating income was $433 million, or 9.5 percent of revenue. Enterprise Solutions and Services revenue increased 9 percent on 17 percent growth in server and networking revenue and 5 percent increase in services.
  • Public revenue was $4.1 billion, a 6 percent decrease. Operating income for the quarter was $379 million, or 9.3 percent of revenue. Server and networking revenue increased 4 percent.
  • Small and Medium Business revenue was $3.3 billion, a 1 percent decline. Operating income was $382 million, or 11.7 percent of revenue. Enterprise solutions and services grew 15 percent led by an increase of 27 percent in services revenue and 16 percent in servers and networking.
  • Consumer revenue was $2.6 billion, a 22 percent decline. Operating income was $14 million or 0.5 percent of revenue.
  • Revenue in Americas was down 6 percent; EMEA was down 7 percent, and Asia-Pacific and Japan revenue was down 12 percent. Revenue in BRIC countries was down 15 percent.

Company Outlook:

Dell expects continued solid growth in Enterprise Solutions, Services and Software and also a challenging end-user computer environment in the second half of the year. Given the uncertain economic environment, competitive dynamics and soft Consumer business, Dell expects third-quarter revenue to be down 2-5 percent from second-quarter levels. In addition, the company is modifying its full-year earnings outlook to at least $1.70 per share on a non-GAAP basis, which includes a 2-to-3 cent dilutive impact from its pending acquisition of Quest Software.

About Dell

Dell Inc. (NASDAQ: DELL) listens to customers and delivers worldwide innovative technology, business solutions and services they trust and value. For more information, visit www.dell.com. The second-quarter analyst call with Michael Dell, chairman and CEO, and Brian Gladden, CFO, will be webcast live today at 4 p.m. CDT and archived at www.dell.com/investor. To monitor highlighted facts from the analyst call, follow on the Dell Investor Relations Twitter account at: http://twitter.com/dellshares or hashtag #DellEarnings. To communicate directly with Dell, go to www.dell.com/dellshares.

Segment Realignment:

In the first quarter of Fiscal 2013, Dell made certain segment realignments in order to conform to the way Dell internally manages segment performance. These realignments affected all of Dell's operating segments, but primarily consisted of the transfer of small office business customers from the Small and Medium Business segment to the Consumer Segment. Dell has recast prior period amounts to provide visibility and comparability. None of these changes impacts Dell's previously reported consolidated net revenue, gross margin, operating income, net income, or earnings per share.

Non-GAAP Financial Measures:

This press release includes information about non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share (collectively with non-GAAP gross margin and non-GAAP operating expenses, the “non-GAAP financial measures”), which are not measurements of financial performance prepared in accordance with U.S. generally accepted accounting principles. In the following tables, Dell has provided a reconciliation of each historical non-GAAP financial measure to the most directly comparable GAAP financial measure under the heading “Reconciliation of Non-GAAP Financial Measures.” Dell encourages investors to review the reconciliation in conjunction with Dell’s presentation of these non-GAAP financial measures.

Special Note on Forward Looking Statements:

Statements in this press release that relate to future results and events (including statements about Dell’s future financial and operating performance, trends relating to mix shift, macroeconomic challenges, effects of our acquisitions and success relating to strategic transformation, as well as the financial guidance with respect to revenue and non-GAAP earnings per share) are forward-looking statements and are based on Dell's current expectations. In some cases, you can identify these statements by such forward-looking words as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “confidence,” “may,” “plan,” “potential,” “should,” “will” and “would,” or similar expressions. Actual results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors, including: intense competition; Dell’s reliance on third-party suppliers for product components, including reliance on several single-sourced or limited-sourced suppliers; Dell’s ability to achieve favorable pricing from its vendors; weak global economic conditions and instability in financial markets; Dell’s ability to manage effectively the change involved in implementing strategic initiatives; successful implementation of Dell’s acquisition strategy; Dell’s cost-efficiency measures; Dell’s ability to effectively manage periodic product and services transitions; Dell’s ability to deliver consistent quality products and services; Dell’s ability to generate substantial non-U.S. net revenue; Dell’s product, customer, and geographic sales mix, and seasonal sales trends; the performance of Dell’s sales channel partners; access to the capital markets by Dell or its customers; weak economic conditions and additional regulation affecting our financial services activities; counterparty default; customer terminations of or pricing changes in services contracts, or Dell’s failure to perform as it anticipates at the time it enters into services contracts; loss of government contracts; Dell’s ability to obtain licenses to intellectual property developed by others on commercially reasonable and competitive terms; infrastructure disruptions; cyber-attacks or other data security breaches; Dell’s ability to hedge effectively its exposure to fluctuations in foreign currency exchange rates and interest rates; expiration of tax holidays or favorable tax rate structures, or unfavorable outcomes in tax audits and other compliance matters; impairment of portfolio investments; unfavorable results of legal proceedings; Dell’s ability to attract, retain, and motivate key personnel; Dell’s ability to maintain strong internal controls; changing environmental and safety laws; the effect of armed hostilities, terrorism, natural disasters, and public health issues; and other risks and uncertainties discussed in Dell’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for its fiscal year ended February 3, 2012. In particular, Dell’s expectations with regard to revenue and non-GAAP earnings per share for the full fiscal year ending Feb. 1, 2013 assume, among other matters, that there is no significant decline in economic conditions generally or demand growth specifically, that macroeconomic challenges do not materialize into more significant economic difficulties, no significant change in product mix patterns, and continued geographic customer demand trends. Dell assumes no obligation to update its forward-looking statements.

Consolidated statements of income, financial position and cash flows and other financial data follow.

Dell is a trademark of Dell Inc. Dell disclaims any proprietary interest in the marks and names of others.

 
DELL INC.
Condensed Consolidated Statement of Income and Related Financial Highlights
(in millions, except per share data and percentages)
(unaudited)
     
Three Months Ended % Growth Rates
August 3,
2012
  May 4,
2012
  July 29,
2011
Sequential   Yr. to Yr.
Net revenue  
Products $ 11,403 $ 11,423 $ 12,610 0 % (10 )%
Services, including software related 3,080   2,999   3,048   3 % 1 %
 
Total net revenue 14,483   14,422   15,658   0 % (8 )%
Cost of net revenue
Products 9,280 9,330 9,935 (1 )% (7 )%
Services, including software related 2,065   2,025   2,198   2 % (6 )%
 
Total cost of net revenue 11,345   11,355   12,133   0 % (6 )%
Gross margin 3,138 3,067 3,525 2 % (11 )%
Operating expenses
Selling, general, and administrative 1,976 2,009 2,174 (2 )% (9 )%
Research, development, and engineering 261   234   205   12 % 27 %
Total operating expenses 2,237   2,243   2,379   0 % (6 )%
Operating income 901 824 1,146 9 % (21 )%
Interest and other, net (63 ) (32 ) (55 ) (101 )% (16 )%
Income before income taxes 838 792 1,091 6 % (23 )%
Income tax provision 106   157   201   (32 )% (47 )%
 
Net income $ 732   $ 635   $ 890   15 % (18 )%
 
Earnings per share:
Basic $ 0.42   $ 0.36   $ 0.48   17 % (13 )%
Diluted $ 0.42   $ 0.36   $ 0.48   17 % (13 )%
Weighted average shares outstanding:
Basic 1,747 1,759 1,858 (1 )% (6 )%
Diluted 1,753 1,774 1,871 (1 )% (6 )%
 

Percentage of Total Net Revenue:

Gross margin 21.6 % 21.3 % 22.5 %
Selling, general, and administrative 13.6 % 13.9 % 13.9 %
Research, development, and engineering 1.8 % 1.7 % 1.3 %
Operating expenses 15.4 % 15.6 % 15.2 %
Operating income 6.2 % 5.7 % 7.3 %
Income before income taxes 5.8 % 5.5 % 7.0 %
Net income 5.1 % 4.4 % 5.7 %
Income tax rate 12.7 % 19.8 % 18.4 %
 

Net Revenue by Product Category:

Servers and Networking $ 2,332 $ 2,017 $ 2,054 16 % 14 %
Storage 435 444 502 (2 )% (13 )%
Services 2,106 2,071 2,036 2 % 3 %
Software and Peripherals 2,338 2,386 2,569 (2 )% (9 )%
Mobility 3,870 4,236 4,761 (9 )% (19 )%
Desktop PCs 3,402   3,268   3,736   4 % (9 )%
Consolidated net revenue $ 14,483   $ 14,422   $ 15,658   0 % (8 )%
 

Percent of Total Net Revenue:

Servers and Networking 16 % 14 % 13 %
Storage 3 % 3 % 3 %
Services 15 % 14 % 13 %
Software and Peripherals 16 % 17 % 16 %
Mobility 27 % 29 % 31 %
Desktop PCs 23 % 23 % 24 %
 

Net Revenue by Global Segment: (1)

Large Enterprise $ 4,536 $ 4,436 $ 4,677 2 % (3 )%
Public 4,065 3,466 4,329 17 % (6 )%
Small and Medium Business 3,258 3,477 3,306 (6 )% (1 )%
Consumer 2,624   3,043   3,346   (14 )% (22 )%
Consolidated net revenue $ 14,483   $ 14,422   $ 15,658   0 % (8 )%
 

Percentage of Total Net Revenue: (1)

Large Enterprise 31 % 31 % 30 %
Public 28 % 24 % 28 %
Small and Medium Business 23 % 24 % 21 %
Consumer 18 % 21 % 21 %
 

Consolidated Operating Income: (1)

Large Enterprise $ 433 $ 402 $ 460
Public 379 271 466
Small and Medium Business 382 389 380
Consumer 14   32   103  
Segment operating income 1,208 1,094 1,409
Broad based long-term incentives (85 ) (84 ) (81 )
Amortization of intangible assets (150 ) (110 ) (95 )
Severance and facility actions and acquisition-related costs (72 ) (76 ) (87 )
Consolidated operating income $ 901   $ 824   $ 1,146  
 

Note: Percentage growth rates and ratios are calculated based on underlying data in thousands.

(1) Segment Results for Fiscal 2012 have been recast to conform to segment realignments that were completed during the first quarter of Fiscal 2013. See Supplemental Segment Information at the end of these financial tables for more information.

     
DELL INC.

Condensed Consolidated Statement of Income and Related Financial Highlights (continued)

(in millions, except per share data and percentages)
(unaudited)
 
Six Months Ended % Growth Rates
August 3,
2012
  July 29,
2011
Yr. to Yr.
Net revenue
Products 22,826 $ 24,669 (7 )%
Services, including software related 6,079   6,006   1 %
Total net revenue 28,905   30,675   (6 )%
Cost of net revenue
Products 18,610 19,371 (4 )%
Services, including software related 4,090   4,347   (6 )%
Total cost of net revenue 22,700   23,718   (4 )%
Gross margin 6,205 6,957 (11 )%
Operating expenses
Selling, general, and administrative 3,985 4,199 (5 )%
Research, development, and engineering 495   400   24 %
Total operating expenses 4,480   4,599   (3 )%
Operating income 1,725 2,358 (27 )%
Interest and other, net (95 ) (97 ) 2 %
Income before income taxes 1,630 2,261 (28 )%
Income tax provision 263   426   (38 )%
 
Net income 1,367   $ 1,835   (26 )%
 
Earnings per share:
Basic $ 0.78   $ 0.97   (20 )%
Diluted $ 0.77   $ 0.97   (21 )%
Weighted average shares outstanding:
Basic 1,753 1,883 (7 )%
Diluted 1,764 1,897 (7 )%
 

Percentage of Total Net Revenue:

Gross margin 21.5 % 22.7 %
Selling, general, and administrative 13.8 % 13.7 %
Research, development, and engineering 1.7 % 1.3 %
Operating expenses 15.5 % 15.0 %
Operating income 6.0 % 7.7 %
Income before income taxes 5.6 % 7.4 %
Net income 4.7 % 6.0 %
Income tax rate 16.1 % 18.8 %
 

Net Revenue by Product Category:

Servers and Networking $ 4,349 $ 4,027 8 %
Storage 879 983 (11 )%
Services 4,177 4,020 4 %
Software and Peripherals 4,724 5,136 (8 )%
Mobility 8,106 9,477 (14 )%
Desktop PCs 6,670   7,032   (5 )%
Consolidated net revenue $ 28,905   $ 30,675   (6 )%
 

Percent of Total Net Revenue:

Servers and Networking 15 % 13 %
Storage 3 % 3 %
Services 15 % 13 %
Software and Peripherals 16 % 17 %
Mobility 28 % 31 %
Desktop PCs 23 % 23 %
 

Net Revenue by Global Segment: (1)

Large Enterprise 8,972 $ 9,264 (3 )%
Public 7,531 7,950 (5 )%
Small and Medium Business 6,735 6,661 1 %
Consumer 5,667   6,800   (17 )%
Consolidated net revenue $ 28,905   $ 30,675   (6 )%
 

Percentage of Total Net Revenue: (1)

Large Enterprise 31 % 30 %
Public 26 % 26 %
Small and Medium Business 23 % 22 %
Consumer 20 % 22 %
 

Consolidated Operating Income: (1)

Large Enterprise $ 835 $ 976
Public 650 818
Small and Medium Business 771 815
Consumer 46   273  
Segment operating income 2,302 2,882
Broad based long-term incentives (169 ) (178 )
Amortization of intangible assets (260 ) (187 )
Severance and facility actions and acquisition-related costs (148 ) (159 )
Consolidated operating income $ 1,725   $ 2,358  
 

Note: Percentage growth rates and ratios are calculated based on underlying data in thousands.

(1) Segment Results for Fiscal 2012 have been recast to conform to segment realignments that were completed during the first quarter of Fiscal 2013. See Supplemental Segment Information at the end of these financial tables for more information.

       
DELL INC.
Condensed Consolidated Statement of Financial Position and Related Financial Highlights
(in millions, except for "Ratios")
(unaudited)
 
August 3,
2012
May 4,
2012
July 29,
2011

Assets:

Current assets:
Cash and cash equivalents $ 11,519 $ 12,814 $ 14,623
Short-term investments 372 901 509
Accounts receivable, net 6,829 6,289 6,752
Short-term financing receivables, net 3,174 3,200 3,385
Inventories, net 1,615 1,472 1,346
Other current assets 3,741   3,369   3,043  
Total current assets 27,250 28,045 29,658
Property, plant, and equipment, net 2,058 2,119 2,064
Long-term investments 2,738 3,501 1,048
Long-term financing receivables, net 1,344 1,342 1,252
Goodwill 7,558 6,005 5,431
Purchased intangible assets, net 2,609 1,801 1,866
Other non-current assets 540   476   285  
Total assets $ 44,097   $ 43,289   $ 41,604  
 

Liabilities and Stockholders' Equity:

Current liabilities:
Short-term debt $ 2,609 $ 3,186 $ 1,316
Accounts payable 11,193 10,970 11,628
Accrued and other 3,227 3,076 3,823
Short-term deferred services revenue 3,683   3,582   3,427  
Total current liabilities 20,712 20,814 20,194
Long-term debt 5,832 5,813 6,424
Long-term deferred services revenue 3,893 3,837 3,723
Other non-current liabilities 3,914   3,468   2,927  
Total liabilities 34,351 33,932 33,268
Total stockholders' equity 9,746   9,357   8,336  
Total liabilities and equity $ 44,097   $ 43,289   $ 41,604  
 

Ratios:

Days of sales outstanding (1) 46 43 42
Days supply in inventory 13 12 10
Days in accounts payable (89 ) (87 ) (86 )
Cash conversion cycle (30 ) (32 ) (34 )
 
Average total revenue/unit (approximate) $ 1,390 $ 1,360 $ 1,350
 

Note: Ratios are calculated based on underlying data in thousands.

(1) Days of sales outstanding ("DSO") is based on the ending net trade receivables and most recent quarterly revenue for each period. DSO includes the effect of product costs related to customer shipments not yet recognized as revenue that are classified as other current assets. At August 3, 2012, May 4, 2012, and July 29, 2011, DSO and days of customer shipments not yet recognized were 42 and 4 days, 39 and 4 days, and 39 and 3 days, respectively.

     
DELL INC.
Condensed Consolidated Statements of Cash Flows
(in millions, unaudited)
 
Three Months Ended Six Months Ended
August 3,
2012
  July 29,
2011
August 3,
2012
  July 29,
2011
Cash flows from operating activities:
Net income $ 732 $ 890 $ 1,367 $ 1,835
 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 281 230 529 446
Stock-based compensation 97 82 192 181
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies 25 (9 ) 15 (9 )
Deferred income taxes 30 7 77 (56 )
Provision for doubtful accounts — including financing receivables 58 70 121 117
Other 17 5 12
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable (633 ) (566 ) (472 ) (95 )
Financing receivables (60 ) (100 ) 11 (79 )
Inventories (122 ) (69 ) (190 ) (31 )
Other assets (369 ) 97 (321 ) 207
Accounts payable 231 1,186 (440 ) 261
Deferred services revenue 108 212 141 403
Accrued and other liabilities 242   339   (543 ) (341 )
Change in cash from operating activities 637   2,374   499   2,839  
Cash flows from investing activities:
Investments:
Purchases (517 ) (541 ) (1,190 ) (781 )
Maturities and sales 1,800 210 2,440 432
Capital expenditures (120 ) (159 ) (262 ) (296 )
Proceeds from sale of facility and land 34 34 12
Collections on purchased financing receivables 47 68 102 135
Acquisition of business, net of cash received (2,166 ) (428 ) (2,411 ) (1,901 )
Change in cash from investing activities (922 ) (850 ) (1,287 ) (2,399 )
Cash flows from financing activities:
Repurchase of common stock (400 ) (1,130 ) (724 ) (1,580 )
Issuance of common stock under employee plans 6 19 44 29
Issuance (repayment) of commercial paper (maturity 90 days or less), net 125 138
Proceeds from debt 555 503 1,151 2,433
Repayments of debt (1,241 ) (370 ) (2,104 ) (693 )
Other   (1 ) 8   2  
Change in cash from financing activities (955 ) (979 ) (1,487 ) 191  
Effect of exchange rate changes on cash and cash equivalents (55 ) 17   (58 ) 79  
Change in cash and cash equivalents (1,295 ) 562 (2,333 ) 710
Cash and cash equivalents at beginning of the period 12,814   14,061   13,852   13,913  
Cash and cash equivalents at end of the period $ 11,519   $ 14,623   $ 11,519   $ 14,623  
 

SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES

The following tables include information about non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share (collectively, the “non-GAAP financial measures”), which are not measurements of financial performance prepared in accordance with U.S. generally accepted accounting principles. Dell has provided a reconciliation of the historical non-GAAP financial measures to the most directly comparable GAAP measures in the below tables. A detailed discussion of Dell's reasons for including the non-GAAP financial measures and the limitations associated with those measures is presented in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Non-GAAP Financial Measures" in Dell's annual report on Form 10-K for the financial year ended February 3, 2012. Dell encourages investors to review the historical reconciliation and the non-GAAP discussion in conjunction with the presentation of non-GAAP financial measures.

     
DELL INC.
Reconciliation of Non-GAAP Financial Measures
(in millions, except per share data and percentages)
(unaudited)
 
Three Months Ended % Growth Rates
August 3,
2012
  May 4,
2012
  July 29,
2011
Sequential   Yr. to Yr.
GAAP gross margin $ 3,138 $ 3,067 $ 3,525 2 %   (11 )%
Non-GAAP adjustments:
Amortization of intangibles 109 88 74
Severance and facility actions and acquisition-related costs 23   12   26  
Non-GAAP gross margin $ 3,270   $ 3,167   $ 3,625   3 % (10 )%
 
GAAP operating expenses $ 2,237 $ 2,243 $ 2,379 0 % (6 )%
Non-GAAP adjustments:
Amortization of intangibles (41 ) (22 ) (21 )
Severance and facility actions and acquisition-related costs (49 ) (64 ) (61 )
Non-GAAP operating expenses $ 2,147   $ 2,157   $ 2,297   0 % (7 )%
 
GAAP operating income $ 901 $ 824 $ 1,146 9 % (21 )%
Non-GAAP adjustments:
Amortization of intangibles 150 110 95
Severance and facility actions and acquisition-related costs 72   76   87  
Non-GAAP operating income $ 1,123   $ 1,010   $ 1,328   11 % (15 )%
 
GAAP net income $ 732 $ 635 $ 890 15 % (18 )%
Non-GAAP adjustments:
Amortization of intangibles 150 110 95
Severance and facility actions and acquisition-related costs 72 76 87
Aggregate adjustment for income taxes (79 ) (60 ) (66 )
Non-GAAP net income $ 875   $ 761   $ 1,006   15 % (13 )%
 
GAAP earnings per share - diluted $ 0.42 $ 0.36 $ 0.48 17 % (13 )%
Non-GAAP adjustments per share - diluted 0.08   0.07   0.06  
Non-GAAP earnings per share - diluted $ 0.50   $ 0.43   $ 0.54   16 % (7 )%
 
Diluted WAS 1,753 1,774 1,871
 

Percentage of Total Net Revenue:

GAAP gross margin 21.6 % 21.3 % 22.5 %
Non-GAAP adjustment 1.0 % 0.7 % 0.7 %
Non-GAAP gross margin 22.6 % 22.0 % 23.2 %
 
GAAP operating expenses 15.4 % 15.6 % 15.2 %
Non-GAAP adjustment (0.6 )% (0.6 )% (0.5 )%
Non-GAAP operating expenses 14.8 % 15.0 % 14.7 %
 
GAAP operating income 6.2 % 5.7 % 7.3 %
Non-GAAP adjustment 1.6 % 1.3 % 1.2 %
Non-GAAP operating income 7.8 % 7.0 % 8.5 %
 
GAAP net income 5.1 % 4.4 % 5.7 %
Non-GAAP adjustment 0.9 % 0.9 % 0.7 %
Non-GAAP net income 6.0 % 5.3 % 6.4 %
 

Note: Percentage growth rates and ratios are calculated based on underlying data in thousands.

       
DELL INC.
Reconciliation of Non-GAAP Financial Measures
(in millions, except per share data and percentages)
(unaudited)

 

Six Months Ended % Growth Rates
August 3,
2012
  July 29,
2011
Yr. to Yr.
GAAP gross margin $ 6,205 $ 6,957 (11 )%
Non-GAAP adjustments:
Amortization of intangibles 197 145
Severance and facility actions and acquisition-related costs 35   34  
Non-GAAP gross margin $ 6,437   $ 7,136   (10 )%
 
GAAP operating expenses $ 4,480 $ 4,599 (3 )%
Non-GAAP adjustments:
Amortization of intangibles (63 ) (42 )
Severance and facility actions and acquisition-related costs (113 ) (125 )
Non-GAAP operating expenses $ 4,304   $ 4,432   (3 )%
 
GAAP operating income $ 1,725 $ 2,358 (27 )%
Non-GAAP adjustments:
Amortization of intangibles 260 187
Severance and facility actions and acquisition-related costs 148   159  
Non-GAAP operating income $ 2,133   $ 2,704   (21 )%
 
GAAP net income $ 1,367 $ 1,835 (26 )%
Non-GAAP adjustments:
Amortization of intangibles 260 187
Severance and facility actions and acquisition-related costs 148 159
Aggregate adjustment for income taxes (139 ) (125 )
Non-GAAP net income $ 1,636   $ 2,056   (20 )%
 
GAAP earnings per share - diluted $ 0.77 $ 0.97 (21 )%
Non-GAAP adjustments per share - diluted 0.16   0.11  
Non-GAAP earnings per share - diluted $ 0.93   $ 1.08   (14 )%
 
Diluted WAS 1,764 1,897
 

Percentage of Total Net Revenue:

GAAP gross margin 21.5 % 22.7 %
Non-GAAP adjustment 0.8 % 0.6 %
Non-GAAP gross margin 22.3 % 23.3 %
 
GAAP operating expenses 15.5 % 15.0 %
Non-GAAP adjustment (0.6 )% (0.6 )%
Non-GAAP operating expenses 14.9 % 14.4 %
 
GAAP operating income 6.0 % 7.7 %
Non-GAAP adjustment 1.4 % 1.1 %
Non-GAAP operating income 7.4 % 8.8 %
 
GAAP net income 4.7 % 6.0 %
Non-GAAP adjustment 1.0 % 0.7 %
Non-GAAP net income 5.7 % 6.7 %
 

Note: Percentage growth rates and ratios are calculated based on underlying data in thousands.

 
Dell Inc.
Supplemental Segment Information
Fiscal 2011
(in millions, unaudited)
     
Three Months Ended Fiscal Year Ended
April 30, 2010   July 30, 2010   October 29, 2010   January 28, 2011 January 28, 2011
As Reported   Recast   Variance As Reported   Recast   Variance As Reported   Recast   Variance As Reported   Recast   Variance As Reported   Recast   Variance

Net Revenue by Global Segment: (1)

                   
Large Enterprise $ 4,246 $ 4,341 $ 95 $ 4,549 $ 4,618 $ 69 $ 4,326 $ 4,389 $ 63 $ 4,692 $ 4,763 $ 71 $ 17,813 $ 18,111 $ 298
Public 3,856 3,708 (148 ) 4,580 4,467 (113 ) 4,442 4,340 (102 ) 3,973 3,862 (111 ) 16,851 16,377 (474 )
Small and Medium Business 3,524 3,096 (428 ) 3,535 3,083 (452 ) 3,665 3,179 (486 ) 3,749 3,250 (499 ) 14,473 12,608 (1,865 )
Consumer 3,248   3,729   481   2,870   3,366   496   2,961   3,486   525   3,278   3,817   539   12,357   14,398   2,041  
Consolidated net revenue $ 14,874   $ 14,874   $   $ 15,534   $ 15,534   $   $ 15,394   $ 15,394   $   $ 15,692   $ 15,692   $   $ 61,494   $ 61,494   $  
 

Percentage of Total Net Revenue: (1)

Large Enterprise 28 % 29 % 1 % 29 % 30 % 1 % 28 % 28 % 0 % 30 % 30 % 0 % 29 % 29 % 0 %
Public 26 % 25 % -1 % 30 % 29 % -1 % 29 % 28 % -1 % 25 % 25 % 0 % 27 % 27 % 0 %
Small and Medium Business 24 % 21 % -3 % 23 % 20 % -3 % 24 % 21 % -3 % 24 % 21 % -3 % 24 % 21 % -3 %
Consumer 22 % 25 % 3 % 18 % 21 % 3 % 19 % 23 % 4 % 21 % 24 % 3 % 20 % 23 % 3 %
 

Consolidated Operating Income:(1)

Large Enterprise $ 283 $ 293 $ 10 $ 288 $ 289 $ 1 $ 400 $ 398 $ (2 ) $ 502 $ 510 $ 8 $ 1,473 $ 1,490 $ 17
Public 298 280 (18 ) 369 363 (6 ) 451 450 (1 ) 366 353 (13 ) 1,484 1,446 (38 )
Small and Medium Business 313 301 (12 ) 323 298 (25 ) 391 365 (26 ) 450 419 (31 ) 1,477 1,383 (94 )
Consumer 17   37   20   (21 ) 9   30     29   29   69   105   36   65   180   115  
Segment operating income $ 911   $ 911   $   $ 959   $ 959   $   $ 1,242   $ 1,242   $   $ 1,387   $ 1,387   $   $ 4,499   $ 4,499   $  
 

(1) In the first quarter of Fiscal 2013, Dell made certain segment realignments in order to conform to the way Dell now internally manages segment performance. These realignments affected all of Dell's operating segments, but primarily consisted of the transfer of small office business customers from the Small and Medium Business segment to the Consumer Segment. Dell has recast prior period amounts to provide visibility and comparability. None of these changes impacts Dell's previously reported consolidated net revenue, gross margin, operating income, net income, or earnings per share.

     
Dell Inc.
Supplemental Segment Information
Fiscal 2012
(in millions, unaudited)
 
Three Months Ended Fiscal Year Ended
April 29, 2011   July 29, 2011   October 28, 2011   February 3, 2012 February 3, 2012
As Reported   Recast   Variance As Reported   Recast   Variance As Reported   Recast   Variance As Reported   Recast   Variance As Reported   Recast   Variance

Net Revenue by Global Segment: (1)

                   
Large Enterprise $ 4,477 $ 4,587 $ 110 $ 4,584 $ 4,677 $ 93 $ 4,487 $ 4,540 $ 53 $ 4,909 $ 4,982 $ 73 $ 18,457 $ 18,786 $ 329
Public 3,767 3,621 (146 ) 4,457 4,329 (128 ) 4,375 4,287 (88 ) 3,949 3,833 (116 ) 16,548 16,070 (478 )
Small and Medium Business 3,768 3,355 (413 ) 3,709 3,306 (403 ) 3,712 3,326 (386 ) 3,977 3,560 (417 ) 15,166 13,547 (1,619 )
Consumer 3,005   3,454   449   2,908   3,346   438   2,791   3,212   421   3,196   3,656   460   11,900   13,668   1,768  
Consolidated net revenue $ 15,017   $ 15,017   $   $ 15,658   $ 15,658   $   $ 15,365   $ 15,365   $   $ 16,031   $ 16,031   $   $ 62,071   $ 62,071   $  
 

Percentage of Total Net Revenue: (1)

Large Enterprise 30 % 31 % 1 % 29 % 30 % 1 % 29 % 29 % 0 % 30 % 31 % 1 % 30 % 30 % 0 %
Public 25 % 24 % -1 % 28 % 28 % 0 % 29 % 28 % -1 % 25 % 24 % -1 % 27 % 26 % -1 %
Small and Medium Business 25 % 22 % -3 % 24 % 21 % -3 % 24 % 22 % -2 % 25 % 22 % -3 % 24 % 22 % -2 %
Consumer 20 % 23 % 3 % 19 % 21 % 2 % 18 % 21 % 3 % 20 % 23 % 3 % 19 % 22 % 3 %
 

Consolidated Operating Income:(1)

Large Enterprise $ 504 $ 516 $ 12 $ 448 $ 460 $ 12 $ 441 $ 446 $ 5 $ 461 $ 467 $ 6 $ 1,854 $ 1,889 $ 35
Public 370 352 (18 ) 484 466 (18 ) 463 454 (9 ) 327 312 (15 ) 1,644 1,584 (60 )
Small and Medium Business 463 435 (28 ) 404 380 (24 ) 386 367 (19 ) 412 399 (13 ) 1,665 1,581 (84 )
Consumer 136   170   34   73   103   30   76   99   23   39   61   22   324   433   109  
Segment operating income $ 1,473   $ 1,473   $   $ 1,409   $ 1,409   $   $ 1,366   $ 1,366   $   $ 1,239   $ 1,239   $   $ 5,487   $ 5,487   $  
 

(1) In the first quarter of Fiscal 2013, Dell made certain segment realignments in order to conform to the way Dell now internally manages segment performance. These realignments affected all of Dell's operating segments, but primarily consisted of the transfer of small office business customers from the Small and Medium Business segment to the Consumer Segment. Dell has recast prior period amounts to provide visibility and comparability. None of these changes impacts Dell's previously reported consolidated net revenue, gross margin, operating income, net income, or earnings per share.

Contacts

Dell
Media Contacts: 512-728-4100
David Frink, 512-728-2678
david_frink@dell.com
or
Jess Blackburn, 512-728-8295
jess_blackburn@dell.com
or
Investor Relations Contacts:
Robert Williams, 512-728-7570
robert_williams@dell.com
or
David Mehok, 512-728-4225
david_mehok@dell.com

Sharing

Contacts

Dell
Media Contacts: 512-728-4100
David Frink, 512-728-2678
david_frink@dell.com
or
Jess Blackburn, 512-728-8295
jess_blackburn@dell.com
or
Investor Relations Contacts:
Robert Williams, 512-728-7570
robert_williams@dell.com
or
David Mehok, 512-728-4225
david_mehok@dell.com