Dell's International and Enterprise Business Drives First Quarter Revenue Growth; Company Outlines Long-Term Growth Strategy; Dell to End Year with Broadest and Highest Quality Product Line in History.ROUND ROCK, Texas -- Dell's (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :DELL) expansion of business outside the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and its sales of servers, storage and enhanced services Enhanced service is service offered over commercial carrier transmission facilities used in interstate communications, that employs computer processing applications that act on the format, content, code, protocol, or similar aspects of the subscriber's transmitted information; drove revenue of $14.2 billion and earnings of 33 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. in the fiscal first-quarter 2007. Enhanced services revenue grew 28 percent year-over-year in the first quarter. Storage revenues increased 12 percent year-over-year. Shipments of Dell products were led by a 36 percent year-over-year increase in mobility units. Revenue outside the United States grew 12 percent and was 44 percent of Dell's overall revenue. Dell had operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $949 million, or 6.7 percent of revenue, in the quarter, which reflected investments in customer experience as well as pricing decisions the company believes will drive future growth. Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses was $1.0 billion for the quarter and Dell ended the quarter with $11.1 billion in cash and investments. During the quarter, Dell spent $1.7 billion to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. 58 million shares of common stock.
First Quarter
(in millions, except share data) FY'07(1) FY'06 Change
Revenue $14,216 $13,386 6%
Operating Income $949 $1,174 (19%)
Net Income $762 $934 (18%)
EPS $0.33 $0.37 (11%)
(1) Results for the three months ended May 5, 2006 include stock-based
compensation expense of $77 million net of tax, or $0.03 per
share, due to the implementation of Statement of Financial
Accounting Standard No. 123 (revised 2004) Share-Based Payments,
("SFAS 123(R)"). Dell implemented SFAS 123(R) using the modified
prospective method. Accordingly, net income prior to fiscal 2007
includes only compensation expense related to restricted stock
awards, but does not include stock-based compensation expense for
employee stock options or the purchase discount under Dell's
employee stock purchase plan.
"The competitive environment has been more intense than we had planned for or understood," said Kevin KEVIN Keepers of the Eternal Vigilance of the Islamic Nation (fictional, from White Teeth by Zadie Smith) Rollins Rol·lins , Theodore Walter Known as "Sonny." Born 1930. American jazz saxophonist and composer who originated the now standard practice of playing bop in three-quarter time. , Dell's chief executive officer. "Over the last year, we tried to achieve both growth and increased levels of profitability, which allowed our competitors to improve their relatively low levels of profitability and accelerate their growth. We have now taken action to reignite Verb 1. reignite - ignite anew, as of something burning; "The strong winds reignited the cooling embers" ignite, light - cause to start burning; subject to fire or great heat; "Great heat can ignite almost any dry matter"; "Light a cigarette" our growth and reassert reassert Verb 1. to state or declare again 2. reassert oneself to become significant or noticeable again: reality had reasserted itself Verb 1. the unique value of our Direct Model. We are re-establishing our price position, investing in customer sales, service and support, building our product and technology leadership and improving our cost structure and productivity. All of these actions will enable Dell to optimize optimize - optimisation the significant potential we have for global growth at a time when we expect our industry to undergo significant change and consolidation." Mr. Rollins said Dell is addressing the changes by reinvigorating its direct business model to provide greater value and service for customers. Specifically, Dell is focusing on three areas: Customer Service: --The company is investing more than $100 million to regain its leadership position in customer experience. --More than 2,000 new sales and support personnel have been hired in the U.S.; call centers have been added or expanded in Ottawa Ottawa, city, Canada Ottawa (ŏt`əwə), city (1991 pop. 313,987), capital of Canada, SE Ont., at the confluence of the Ottawa and Rideau rivers. Hull, Que. , Oklahoma City Oklahoma City (1990 pop. 444,719), state capital, and seat of Oklahoma co., central Okla., on the North Canadian River; inc. 1890. The state's largest city, it is an important livestock market, a wholesale, distribution, industrial, and financial center, and a farm , Manila Manila (mənĭl`ə), city (1990 pop. 1,601,234), capital of the Philippines, SW Luzon, on Manila Bay. Manila is the center of the country's largest metropolitan area, its chief port, and the focus of all governmental, commercial, industrial, and Nashville Nashville, city (1990 pop. 487,969), state capital, coextensive with Davidson co., central Tenn., on the Cumberland River, in a fertile farm area; inc. as a city 1806, merged with Davidson co. 1963. . --By the end of the fiscal year, Dell will have opened 14 new manufacturing, call center and design and development facilities over a two-year period. Product Leadership: --Dell will end the year with the broadest and highest quality product line in its history, including a new generation of servers, and new storage products, desktop and notebook computers A laptop computer that weighs in a range from five to seven pounds. The term originated when laptops were routinely more than 10 pounds, and those that became lighter were placed in a special "notebook" category. In practice, notebook computer and laptop computer are synonymous. , and printers. --In the enterprise, we will launch new ninth generation servers featuring Intel's Woodcrest microprocessors This is a list of microprocessors. Intel
adj. Informal 1. Appealing to sophisticated and discerning customers: a high-end department store; high-end video equipment. 2. of our server line. --On the client side, our focus on the XPS (1) See XML Paper Specification. (2) A brand name for certain models of Inspiron laptops from Dell. brand and acquisition of Alienware Alienware is an American computer hardware company and a wholly-owned subsidiary of Dell Computer Corporation. It mainly produces desktops and laptops that are specialized for video editing, audio editing, and especially gaming. signals a renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. vigor VIGOR Internal medicine A clinical study–Vioxx GI Outcomes Report comparing a proprietary COX-2 inhibitor to standard NSAIDs around product design and quality for desktops and notebooks. In mobility, we will enhance our line this fall with Intel's new energy-efficient Merom Intel's code name for the Core 2 Duo chip used in laptops. See Core 2. processor. And, we will have Intel's Conroe Conroe (kŏn`rō), city (1990 pop. 27,610), seat of Montgomery co., SE Tex.; inc. 1885. Long a pine-lumbering town, it prospered after oil was discovered in 1932. The Conroe oil field is one of the significant producers in the state. in our desktops and workstations later this year. Productivity and Cost Improvements: --Dell is accelerating plans to drive $3 billion of cost improvement in the year including structural material, component and transformational costs as well as improved warranty costs. "We are confident in our ability to continue growing globally, particularly when we remember that 95 percent of the world's population lives outside the U.S. and we have less share of market outside the U.S. than some of our competitors," Mr. Rollins said. "The growth associated with these initiatives will not be accomplished in just one or two quarters. We are positioning the company for the next three to five years and beyond." Dell is making key investments in its top countries, including China, India India, officially Republic of India, republic (2005 est pop. 1,080,264,000), 1,261,810 sq mi (3,268,090 sq km), S Asia. The second most populous country in the world, it is also sometimes called Bharat, its ancient name. India's land frontier (c. , Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). , Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. and the U.S., to ensure that it can design, manufacture and provide service close to its customers for the long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. . Dell ended its practice of providing specific quarterly guidance for revenue and earnings per share and said it would focus forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. on long-term specific company and industry factors influencing performance. Dell does expect financial results for the second fiscal quarter of fiscal 2007 to be similar to its first quarter results. Product Highlights Mobility revenue was up 12 percent on 36 percent unit growth year-over-year. Enhanced services revenue grew 28 percent year-over-year to $1.4 billion. Revenues for storage increased 12 percent year-over-year, while server shipments increased 8 percent. Revenue for imaging products increased 10 percent year-over-year on 54 percent growth of consumables, such as ink and toner An electrically charged ink used in copy machines and laser printers. It adheres to an invisible image that has been charged with the opposite polarity onto a plate or drum or onto the paper itself. cartridges
(2) (Mono) An open source implementation of the .NET environment for Linux, Unix and Windows platforms, sponsored by Novell. Mono includes a C# compiler and a Common Language Infrastructure (CLI) runtime engine. and multi-function laser printers. Regional Highlights Sales outside the U.S. were 44 percent of the company's overall revenue for the first quarter, up 12 percent year-over-year. Asia Pacific and Japan (APJ APJ Astrophysical Journal APJ Asia Pacific Japan APJ Aerospace Power Journal (USAF Air University) APJ Administrative Patent Judge APJ Australian Police Journal APJ Assistant Presiding Judge ) increased revenue in the quarter by 17 percent and units by 30 percent year-over-year or roughly twice the growth of the industry. In China, revenue grew 29 percent year-on-year with continued strong profitability. In other emerging businesses, revenue increased by 54 percent year-over-year in Korea Korea (kôrē`ə, kə–), Korean Hanguk or Choson, region and historic country (85,049 sq mi/220,277 sq km), E Asia. and 40 percent in India. Shipments increased 18 percent year-over-year in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , Middle
East and Africa (EMEA (Europe, Middle East, Africa) Refers to that region of the world. For example, one might see products packaged differently for the UK, EMEA and Asia Pacific markets. ). Revenue for enterprise products -- which
includes servers, storage, services and associated software and
peripherals -- increased 9 percent in the quarter year-over-year.Americas A·mer·i·cas , the See America. International -- all of the Americas excluding the U.S. -- had revenue growth of 26 percent year-over-year with 74 percent growth in Brazil. The U.S. maintained its number one position with 32 percent market share. Dell was recently selected the top equipment brand in a survey of information technology executives in the United States by ACNielsen ACNielsen is a global marketing research firm, based in Schaumburg, Illinois. This company was founded in 1923 in Chicago, Illinois, by Arthur C. Nielsen, Sr., in order to give marketers reliable and objective information on the impact of marketing and sales programs. who cited Dell's value and outstanding customer service. About Dell Dell Inc. (NASDAQ:DELL) listens to customers and delivers innovative technology and services they trust and value. Uniquely enabled by its direct business model, Dell sells more systems globally than any computer company, placing it No. 25 on the Fortune 500. Company revenue for the past four quarters was $56.7 billion. For more information, visit www.dell.com. To get Dell news direct, visit www.dell.com/RSS. Special Note Statements in this press release that relate to future results and events (including statements about Dell's anticipated financial and operating performance) are forward-looking statements based on Dell's current expectations. Actual results in future periods could differ materially from those projected in these forward-looking statements because of a number of risks and uncertainties, including: general economic, business and industry conditions; the level and intensity of competition in the technology industry and the pricing pressures that have resulted; local economic and labor conditions, political instability instability /in·sta·bil·i·ty/ (-stah-bil´i-te) lack of steadiness or stability. detrusor instability , unexpected regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. changes, trade protection measures, tax laws and fluctuations in foreign currency exchange rates; the ability to accurately predict product, customer and geographic sales mix sales mix See product mix. ; the ability to timely and effectively manage periodic product transitions; reliance on third-party suppliers for product components, including dependence on several single-source supplier relationships; the ability to effectively manage operating costs operating costs npl → gastos mpl operacionales ; the ability to attract and retain qualified personnel; the level of demand for the products and services Dell offers; the ability to manage inventory levels to minimize excess inventory, declining inventory values and obsolescence ob·so·les·cent adj. 1. Being in the process of passing out of use or usefulness; becoming obsolete. 2. Biology Gradually disappearing; imperfectly or only slightly developed. ; and the effect of armed hostilities hos·til·i·ty n. pl. hos·til·i·ties 1. The state of being hostile; antagonism or enmity. See Synonyms at enmity. 2. a. A hostile act. b. hostilities Acts of war; overt warfare. , terrorism, natural disasters and public health issues on the economy generally, on the level of demand for Dell's products and services and on Dell's ability to manage its supply and delivery logistics in such an environment. Additional discussion of these and other factors affecting Dell's business and prospects is contained in Dell's periodic filings with the Securities and Exchange Commission. Consolidated statements of income, financial position and cash flows 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 or as otherwise noted)
(unaudited)
Three Months Ended
-------------------------------
% Growth Rates
May 5, February 3, April 29, ---------------------
2006 (1) 2006 2005 Sequential Yr. to Yr.
-------- ----------- ---------- ---------- ----------
Net revenue $14,216 $15,183 $13,386 (6%) 6%
Cost of revenue 11,744 12,474 10,895 (6%) 8%
-------- ----------- ----------
Gross margin 2,472 2,709 2,491 (9%) (1%)
Selling, general
and
administrative 1,394 1,338 1,207 4% 15%
Research,
development and
engineering 129 125 110 3% 18%
-------- ----------- ----------
Total
operating
expenses 1,523 1,463 1,317 4% 16%
-------- ----------- ----------
Operating
income 949 1,246 1,174 (24%) (19%)
Investment and
other income,
net 50 57 59 (12%) (15%)
-------- ----------- ----------
Income before
income taxes 999 1,303 1,233 (23%) (19%)
Income tax
provision 237 291 299 (18%) (21%)
-------- ----------- ----------
Net income $762 $1,012 $934 (25%) (18%)
======== =========== ==========
Earnings per
common share:
Basic $0.33 $0.43 $0.38 (23%) (13%)
======== =========== ==========
Diluted $0.33 $0.43 $0.37 (23%) (11%)
======== =========== ==========
Weighted average
shares
outstanding:
Basic 2,297 2,350 2,456
Diluted 2,318 2,375 2,515
Percentage of
Total Net
Revenue:
---------
Gross margin 17.4% 17.8% 18.6%
Selling, general
and
administrative 9.8% 8.8% 9.0%
Research,
development and
engineering 0.9% 0.8% 0.8%
Operating
expenses 10.7% 9.6% 9.8%
Operating income 6.7% 8.2% 8.8%
Income before
income taxes 7.0% 8.6% 9.2%
Net income 5.4% 6.7% 7.0%
Income tax rate 23.8% 22.3% 24.2%
Net Revenue by
Geographic
Region (in
billions):
-----------
Americas $8.9 $9.8 $8.5 (8%) 4%
Europe 3.4 3.7 3.2 (9%) 6%
Asia Pacific -
Japan 1.9 1.7 1.7 11% 17%
Percentage of
Total Net
Revenue:
---------
Americas 63% 64% 64%
Europe 24% 24% 24%
Asia Pacific -
Japan 13% 12% 12%
Net Revenue by
Product
Category (in
billions):
-----------
Desktop PCs $5.1 $5.6 $5.3 (9%) (3%)
Mobility 3.7 3.8 3.3 (4%) 12%
Servers and
Networking 1.3 1.4 1.3 (7%) 3%
Storage 0.5 0.6 0.4 (16%) 12%
Enhanced
Services 1.4 1.4 1.1 2% 28%
Software and
Peripherals 2.2 2.4 2.0 (6%) 11%
Percentage of
Total Net
Revenue:
---------
Desktop PCs 36% 37% 40%
Mobility 26% 25% 24%
Servers and
Networking 9% 10% 10%
Storage 3% 4% 3%
Enhanced
Services 10% 9% 8%
Software and
Peripherals 16% 15% 15%
Note: Percentage growth rates and ratios are calculated based on
underlying data in thousands.
(1) Results for the three months ended May 5, 2006 include stock-based
compensation expense of $77 million, net of tax or $0.03 per
share, due to the implementation of Statement of Financial
Accounting Standards No. 123 (revised 2004), Share-Based Payments,
("SFAS 123(R)"). Dell implemented SFAS 123(R) using the modified
prospective method. Accordingly, net income prior to fiscal 2007
includes only compensation expense related to restricted stock
awards, but does not include stock-based compensation expense for
employee stock options or the purchase discount under Dell's
employee stock purchase plan.
DELL INC.
Condensed Consolidated Statement of Financial Position and Related
Financial Highlights
(in millions, except for "Ratios" and "Other information")
(unaudited)
May 5, February 3, April 29,
2006 2006 2005
---------- ------------ -----------
Assets:
-------
Current assets:
Cash and cash equivalents $6,877 $7,042 $5,874
Short-term investments 1,579 2,016 3,967
Accounts receivable, net 4,332 4,089 3,741
Financing receivables, net (2) 1,451 1,363 710
Inventories, net 636 576 483
Other 2,522 2,620 2,277
---------- ------------ -----------
Total current assets 17,397 17,706 17,052
Property, plant and equipment,
net 2,074 2,005 1,741
Investments 2,690 2,691 3,533
Long-term financing receivables,
net (2) 256 325 196
Other non-current assets 454 382 165
---------- ------------ -----------
Total assets $22,871 $23,109 $22,687
========== ============ ===========
Liabilities and Stockholders'
Equity:
--------
Current liabilities:
Accounts payable $10,069 $9,840 $9,057
Accrued and other 6,251 6,087 5,332
---------- ------------ -----------
Total current liabilities 16,320 15,927 14,389
Long-term debt 503 504 504
Other non-current liabilities 2,674 2,549 2,170
---------- ------------ -----------
Total liabilities 19,497 18,980 17,063
Stockholders' equity 3,374 4,129 5,624
---------- ------------ -----------
Total liabilities and
stockholders' equity $22,871 $23,109 $22,687
========== ============ ===========
Ratios:
-------
Days supply in inventory 5 4 4
Days of sales outstanding (1) (2) 30 29 28
Days in accounts payable 77 77 75
---------- ------------ -----------
Cash conversion cycle (42) (44) (43)
Other Information:
------------------
Headcount (approximate) 69,700 65,200 57,600
Average total revenue/unit
(approximate) $1,430 $1,490 $1,520
Note: Ratios are calculated based on underlying data in thousands.
(1) Days of sales outstanding include the effect of product costs
related to customer shipments not yet recognized as revenue that
are classified in other current assets. At May 5, 2006, February
3, 2006, and April 29, 2005, days of sales in accounts receivable
and days of customer shipment not yet recognized were 27 and 3
days, 26 and 3 days, and 25 and 3 days, respectively.
(2) Financing receivables, net have been separately classified on the
balance sheet as of May 5, 2006 and February 3, 2006. The April
29, 2005 balance sheet has been reclassified to conform to the
current presentation and days of sales outstanding have been
recalculated to reflect the reclassification of certain items
previously included in accounts receivable to financing
receivables.
DELL INC.
Condensed Consolidated Statement of Cash Flows
(in millions)
(unaudited)
Three Months Ended
------------------
May 5,
2006
------------------
Cash flows from operating activities:
Net income $762
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 106
Stock-based compensation expense 112
Tax benefits from stock-based compensation 3
Effects of exchange rate changes on monetary
assets and liabilities denominated in foreign
currencies (64)
Other 48
Changes in:
Operating working capital (113)
Non-current assets and liabilities 168
------------------
Net cash provided by operating activities 1,022
Cash flows from investing activities:
Investments:
Purchases (3,087)
Maturities and sales 3,548
Capital expenditures (184)
------------------
Net cash provided by investing activities 277
Cash flows from financing activities:
Purchases of common stock (1,691)
Issuance of common stock under employee plans 138
Excess tax benefits from stock-based compensation 23
Other (3)
------------------
Net cash used in financing activities (1,533)
Effect of exchange rate changes on cash and cash
equivalents 69
------------------
Net decrease in cash and cash equivalents (165)
Cash and cash equivalents at beginning of period 7,042
------------------
Cash and cash equivalents at end of period $6,877
==================
Additional supplemental information is available on our website at
http://www.dell.com/downloads/global/corporate/conferences/
q1fy07_earnings_pres.pdf (Due to its length, this URL may need to be
copied/pasted into your Internet browser's address field. Remove the
extra space if one exists.)
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