Fitch Affirms IDR at 'A' & Removes Dell from Rating Watch Negative.

NEW YORK -- Fitch Ratings has affirmed and removed Dell Inc.'s (Dell) ratings from Rating Watch Negative (RWN) as follows:

--Issuer Default Rating (IDR) 'A';

--Bank credit facility 'A';

--Senior unsecured debt 'A';

--Short-term IDR 'F1';

--Commercial paper (CP) 'F1'.

The Rating Outlook is Stable.

Approximately $1.5 billion of debt securities are affected by Fitch's action, including the company's undrawn $1 billion bank credit facility.

The removal of Dell's ratings from Rating Watch Negative follows the completion of the company's audit committee's independent internal investigation regarding certain accounting and financial reporting matters. The audit committee's internal investigation has concluded that Dell will need to restate financial statements relating to fiscal years 2003-2006 and the first quarter of fiscal 2007 as a result of accounting errors related to accruals, reserves and other balance sheet items. The cumulative change to net income for the restatement period is expected to be a reduction of between $50 million and $150 million. Most of the reductions relate to the timing of net income that would be or will be recognized in periods before and after the restatement period.

The Securities and Exchange Commission (SEC) investigation initiated in August 2005 into the company's revenue recognition and other accounting and financial reporting matters continues. In addition, the U.S. Attorney for the Southern District of New York has subpoenaed documents related to Dell's financial reporting practices from 2002 to the present. Despite these issues, Fitch believes Dell has strong liquidity and financial flexibility to meet upcoming debt maturities, fund the share repurchase program, and absorb a reasonable adverse settlement from currently outstanding shareholder litigation.

Dell's failure to successfully file current restated financial statements by November 2007, receive a waiver by bondholders and the bank group to extend the cure period (which currently expires on Sept. 19, 2007) for filing these statements by mid-November, or resolve the material weakness over internal control deficiencies could each result in negative rating actions.

The ratings reflect the company's significant liquidity and free cash flow, strong credit-protection measures, solid industry positions in personal computers (PC) and the low-end server and storage markets, and ability to successfully diversify into the services and printing markets. Fitch expects that Dell will benefit from continued international growth and expansion of its installed base, potentially improving the diversity of its operating profile.

Credit concerns center on: the potential for increased stock buyback activity following the conclusion of the internal investigation and successful financial filings in November 2007, consistent operational execution for the consumer and small and medium business markets, the on-going SEC investigation, slower long-term growth rates and the competitive nature of the computer hardware industry, and constant pricing pressures resulting in steadily declining PC average selling prices (ASPs).

Fitch expects Dell will continue to pursue an aggressive stock buyback plan in order to offset dilution and return excess cash to shareholders. Fitch anticipates the company will utilize free cash flow and perhaps available cash to repurchase common stock, particularly since Dell's share repurchase activity over the last year has been constrained by the internal investigation.

Strong financial flexibility is supported by $12.3 billion in cash and investments as of May 4, 2007, an undrawn five-year, $1 billion committed unsecured revolving credit facility expiring June 1, 2011 which serves primarily as a backstop for Dell's CP program, strong annual free cash flow, and an operating model with a negative cash conversion cycle. Dell's $1 billion CP program is designed to provide funding for general corporate purposes, including funding the expected growth of Dell Financial Services LP (DFS), due primarily to the fact that a majority of the company's cash position is located overseas. Fitch believes the rising non-U.S. cash balance reflects Dell's growth and increasing importance of non-U.S. markets to Dell's overall financial performance.

Total debt consists primarily of $200 million of senior notes due in 2008 and $300 million of senior debentures due in 2028. Fitch believes the company currently has no CP outstanding. As a result of its positive cash-flow-generating operating model, Dell's debt-financing needs have historically been minimal, and Fitch believes this will not change through the near term. In the intermediate term, the company's current rating and liquidity profile incorporate Dell potentially bringing DFS in-house and/or expanding the financing segment internationally without third party financing.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria, and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance, and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.