Dell Reports Strong Profitability in Third Quarter

SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES

The tables on the following pages set forth, for the periods indicated, a reconciliation of 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”) to the most comparable GAAP financial measures. These non-GAAP financial measures may not be directly comparable to similarly titled measures reported by other companies. See “Use of Non-GAAP Financial Measures” following the tables for additional information regarding Dell’s reasons for including the non-GAAP financial measures and for material limitations with respect to the usefulness of these measures.



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

	Three Months Ended									% Growth Rates
	October 28,			July 29,			October 29,
	2011			2011			2010			Sequential		Yr. to Yr.


GAAP gross margin	$	3,469		$	3,525		$	3,003		(2	%)	16	%

Non-GAAP adjustments:
Amortization of intangibles		77			74			71
Severance and facility actions		-			-			4
Acquisition-related		-			26			-
Non-GAAP gross margin	$	3,546		$	3,625		$	3,078		(2	%)	15	%


GAAP operating expenses	$	2,327		$	2,379		$	1,979		(2	%)	18	%

Non-GAAP adjustments:
Amortization of intangibles		(23	)		(21	)		(18	)
Severance and facility actions		-			-			(27	)
Acquisition-related		(46	)		(61	)		(23	)
Non-GAAP operating expenses	$	2,258		$	2,297		$	1,911		(2	%)	18	%


GAAP operating income	$	1,142		$	1,146		$	1,024		0	%	12	%

Non-GAAP adjustments:
Amortization of intangibles		100			95			89
Severance and facility actions		-			-			31
Acquisition-related		46			87			23
Non-GAAP operating income	$	1,288		$	1,328		$	1,167		(3	%)	10	%


GAAP net income	$	893		$	890		$	822		0	%	9	%

Non-GAAP adjustments:
Amortization of intangibles		100			95			89
Severance and facility actions		-			-			31
Acquisition-related		46			87			23
Other ⁽¹⁾		-			-			(72	)
Aggregate adjustment for income taxes		(56	)		(66	)		(18	)
Non-GAAP net income	$	983		$	1,006		$	875		(2	%)	12	%


GAAP earnings per share - diluted	$	0.49		$	0.48		$	0.42		2	%	17	%
Non-GAAP adjustments per share - diluted		0.05			0.06			0.03
Non-GAAP earnings per share - diluted	$	0.54		$	0.54		$	0.45		0	%	20	%


GAAP Diluted WAS		1,828			1,871			1,949


Percentage of Total Net Revenue:

GAAP gross margin		22.6	%		22.5	%		19.5	%
Non-GAAP adjustment		0.5	%		0.7	%		0.5	%
Non-GAAP gross margin		23.1	%		23.2	%		20.0	%

GAAP operating expenses		15.2	%		15.2	%		12.8	%
Non-GAAP adjustment		(0.5	%)		(0.5	%)		(0.4	%)
Non-GAAP operating expenses		14.7	%		14.7	%		12.4	%

GAAP operating income		7.4	%		7.3	%		6.7	%
Non-GAAP adjustment		1.0	%		1.2	%		0.9	%
Non-GAAP operating income		8.4	%		8.5	%		7.6	%

GAAP net income		5.8	%		5.7	%		5.3	%
Non-GAAP adjustment		0.6	%		0.7	%		0.4	%
Non-GAAP net income		6.4	%		6.4	%		5.7	%

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

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