Dell Reports Strong Profitability in Third Quarter

⁽¹⁾Interest and other, net for the three months ended October 29, 2010 includes Dell’s receipt of a $72 million merger termination fee.



DELL INC.
Condensed Consolidated Statement of Income and Related Financial Highlights
(in millions, except per share data and percentages)
(unaudited)

	Nine Months Ended						% Growth Rates
	October 28,			October 29,
	2011			2010			Yr. to Yr.

Net revenue
Products	$	36,981		$	37,251		(1	%)
Services, including software related		9,059			8,551		6	%
Net revenue		46,040			45,802		1	%

Cost of net revenue
Products		29,168			31,731		(8	%)
Services, including software related		6,446			5,966		8	%
Total cost of net revenue		35,614			37,697		(6	%)

Gross margin		10,426			8,105		29	%

Selling, general and administrative		6,306			5,325		18	%
Research, development and engineering		620			492		26	%
Total operating expenses		6,926			5,817		19	%

Operating income		3,500			2,288		53	%

Interest and other, net ⁽¹⁾		(167	)		(65	)	(157	%)
Income before income taxes		3,333			2,223		50	%
Income tax provision		605			515		17	%
Net income	$	2,728		$	1,708		60	%

Earnings per share:
Basic	$	1.47		$	0.88		67	%
Diluted	$	1.46		$	0.87		68	%

Weighted average shares outstanding:
Basic		1,860			1,950		(5	%)
Diluted		1,874			1,961		(4	%)

Percentage of Total Net Revenue:
Gross margin		22.6	%		17.7	%
Selling, general and administrative		13.7	%		11.6	%
Research and development		1.3	%		1.1	%
Operating expenses		15.0	%		12.7	%
Operating income		7.6	%		5.0	%
Income before income taxes		7.2	%		4.9	%
Net income		5.9	%		3.7	%
Income tax rate		18.2	%		23.2	%

Net Revenue by Product Category:
Servers and Networking	$	6,116		$	5,519		11	%
Storage		1,443			1,721		(16	%)
Services		6,143			5,730		7	%
Software and Peripherals		7,664			7,610		1	%
Mobility		14,227			14,121		1	%
Desktop PCs		10,447			11,101		(6	%)
Consolidated net revenue	$	46,040		$	45,802		1	%

Percentage of Total Net Revenue:
Servers and Networking		13	%		12	%
Storage		3	%		4	%
Services		13	%		12	%
Software and Peripherals		17	%		17	%
Mobility		31	%		31	%
Desktop PCs		23	%		24	%

Net Revenue by Global Segment:
Large Enterprise	$	13,548		$	13,121		3	%
Public		12,599			12,878		(2	%)
Small and Medium Business		11,189			10,724		4	%
Consumer		8,704			9,079		(4	%)
Consolidated net revenue	$	46,040		$	45,802		1	%

Percentage of Total Net Revenue:
Large Enterprise		30	%		29	%
Public		27	%		28	%
Small and Medium Business		24	%		23	%
Consumer		19	%		20	%

Consolidated Operating Income:
Large Enterprise	$	1,393		$	971
Public		1,317			1,118
Small and Medium Business		1,253			1,027
Consumer		285			(4	)
Segment operating income		4,248			3,112
Severance and facility actions		(19	)		(112	)
Broad based long-term incentives		(256	)		(249	)
Amortization of intangible assets		(287	)		(264	)
Acquisition-related		(186	)		(59	)
Other ⁽²⁾		-			(140	)
Consolidated operating income	$	3,500		$	2,288


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

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