TBR 4Q10 Dell Inc. Report
 

TBR 4Q10 Dell Inc. Report

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Technology Business Research is a different kind of research company. Our bottoms-up approach provides a look at the technology industry unlike anything you’ve seen before. We analyze company ...

Technology Business Research is a different kind of research company. Our bottoms-up approach provides a look at the technology industry unlike anything you’ve seen before. We analyze company performance in professional services, networking and mobility, computing and hardware, and software on a quarterly basis, leveraging our data to create industry benchmarks and landscapes that provide a business perspective on leaders and laggards and their business plans. We are experts in the business of technology.

Dell has prioritized improving profitability and is positioning its corporate initiatives and strategies –from acquisitions to sales approach – to help achieve this goal.

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TBR 4Q10 Dell Inc. Report TBR 4Q10 Dell Inc. Report Presentation Transcript

  • Technology Business ResearchAccelerating Customer Success Through Business Research TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .
  • COMPUTER BUSINESS QUARTERLYSMDell Inc.Fourth Calendar Quarter 2010Fourth Fiscal Quarter 2011 Ended Jan. 28, 2011 TBR OUTLOOK – NEUTRAL TBR SCORE (0-10 SCALE) 5.09Publish Date: March 14, 2011Author: Greg Richardson (greg.richardson@tbri.com),CBQ Analyst TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .Content Editor: John Spooner, CBQ Director
  • Contents TBR Company Analysis Company Data Models 3 Executive Summary 27 Income Statement 8 Strategic Overview 28 Balance Sheet 10 Corporate SWOT Analysis 29 Segment Revenue Model 14 Financial Model Strategy 30 Revenue Unit & ASP Model 17 Go-to-Market & Product Strategies 31 Geographic Model 20 Alliance & Acquisition Strategies 32 Operating Expense Model 21 Geographic Analysis 33 Financial Strategy Graphs 22 Resource Management Strategy 35 Resource Management Graphs 25 Future Outlook 36 Future Outlook Graph 37 Acquisition Table 40 Alliances Tables 43 Product Portfolio Table 46 About TBR3 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Executive Summary TBRDell will leverage expansion in China and increasing demand for mobiledevices to drive revenue growth in 2011 Key TBR Conclusions • Dell will no longer forfeit PC profitability to win on price. The company has committed to not waver from its pricing levels to augment unit growth, resulting in mostly flat Dell will give up PC ASPs year-to-year. unit growth at the expense of improved • Dell is leaning on ongoing supply chain simplification and changes to sales profitability compensation to trigger improved sales effectiveness and increase gross margin. • TBR expects Dell to leverage the increased capital flexibility from increased gross profits to invest in sales and marketing initiatives to create a longer runway to growth. • Dell is expanding its mobile device portfolio to capitalize on surging demand for Mobile devices will tablets and smartphones, and is leveraging the low-cost devices as vehicles for growth provide growth in emerging markets. opportunities in • TBR anticipates that Dell will benefit from higher demand for infrastructure clients, infrastructure supporting mobile devices, including servers and storage to handle increased Internet and services datacenter traffic and mobile device management solutions to work with new devices in business environments. • TBR believes Dell will leverage its 10-year, $100 billion investment in Western China to Western China is the expand its addressable market and drive growth by increasing the company’s “feet on next great growth the street” presence in tier-one and tier-two cities in Western China. frontier for Dell • Dell’s efforts to grow in China are aimed at reigniting global consumer demand, which has proved uncertain in recent quarters, particularly in mature markets.4 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Executive Summary TBRDell’s goal of improved profitability is the blueprint for all the company’sstrategic investments in 2011TBR Position: DELL 4Q10 PERFORMANCE VS. EXPECTATIONSDell has prioritized improving profitability and is (In $ Millions) Consensus Guidance Range Actualpositioning its corporate initiatives and strategies – Revenue $ 15,720 $15,480 - $16,040 $ 15,692from acquisitions to sales approach – to help achieve Operating Income $ 949 N/A $ 1,145this goal. Non-GAAP EPS $ 0.37 $0.33 - $0.43 $ 0.48 • Dell is demonstrating that it will no longer forfeit PC DELL 1Q11 GUIDANCE AND EXPECTATIONS profitability to win on price. Instead, the company is (In $ Millions) TBR Estimate Consensus Guidance Range focused on delivering improved gross margins in its Revenue $ 15,618 $ 15,490 $14,860 - $15,840 PC business, enabling additional investments in sales Operating Income $ 1,205 N/A N/A and R&D to create a longer runway for growth. Non-GAAP EPS N/A $ 0.34 $0.30 - $0.39 • Dell has taken its focus away from selling individual hardware products and placed it on integrating its menu of offerings into larger, need-based solutions. Dell Corporate Strategies The company will leverage this strategy to increase • Balance unit growth and profitability: Avoid the efficiency of its sales process, while unprofitable sales, except in instances of strategic simultaneously adding margin through higher-value share gain, such as cloud computing or retail. solutions. • Target the high end: Bundle professional services • Dell is leveraging acquisitions to expand its solutions with enterprise servers and storage to enhance the business, better positioning itself to achieve Dell value proposition to businesses. improved profitability. TBR expects Dell to maintain • Invest: Spend to improve Dell hardware and its acquisition momentum in 2011, targeting services through internal product development and companies that can play crucial roles in its acquisition. large, integrated solutions.5 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Executive Summary TBRA focus on innovation and providing customers with comprehensive,bundled solutions positions Dell for strong revenue and profit growthQuarterly Segment Performance 4Q10 Growth Segment Key Changes & Drivers Trends to Monitor Revenue Y/Y PC revenue growth decelerated in 4Q10, as consumer demand Dell’s device business will leverage remained weak and Dell redirected $8.4 new mobile offerings based on PCs 4.2% its revenue and profit growth billion Windows 7 and Android to drive investments to its solutions growth in 2011. business. Increased sales of peripherals and TBR expects Dell to add emphasis toSoftware & strong global demand, particularly $2.7 its S&P business in 2011, leveraging 7.0%Peripherals in APAC, contributed to S&P growth billion software as a key differentiator in its in 4Q10. solutions business. A better-than-expected pricing Dell will leverage investments in R&D environment, coupled with demand Servers & $2.1 and acquisitions to create high-value resulting from enterprise and SMB 15.9% Storage billion solutions that lead to cross-selling IT refresh cycles, led to double-digit opportunities. servers and storage growth in 4Q10. Increasing demand for large Services will remain integral to Dell in Enhanced enterprise enhanced services set $1.9 developing a portfolio of all-inclusive, 1.1% Services the stage for revenue and profit billion integrated solutions for increased growth in 4Q10. corporate profitability.6 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Executive Summary TBRDell will drive revenue and profit growth in 2011 by building integratedsolutions and improving internal efficienciesRevenue• Revenue increased 5.3% year-to-year to $15.7 billion in 4Q10, driven TBR DELL GLOBAL BUSINESS SEGMENT REVENUE by strong performance within Enterprise Solutions and Services. $16,000• Server revenue led in terms of segment revenue growth, increasing Revenue (In $ Mi llions) $4,197 $4,692 $12,000 Large Enterprise 15.9% year-to-year during the quarter. Public $3,973• Notebook unit shipments increased 4.0% from the year-ago quarter $8,000 $3,820 SMB to 6.1 million, with desktop unit shipments growing 3.2% to 5.0 $3,336 $3,749 Consumer $4,000 million in 4Q10. $3,547 $3,278Expenses $0 4Q09 4Q10• Dell’s operating expenses increased 9.5% year-to-year to $2.1 billion Ca l endar Quarter and to 13.7% of total revenue, compared to 13.1% in 4Q09, as the SOURCE: TBR AND DELL company invested in its solutions teams and sales capacity to position for revenue growth. DELL OPERATING METRICS TBR• TBR estimates Dell’s headcount increased by 2,000 employees as the $16,000 company integrated employees of acquired companies. $14,000• COGS fell to 79.0% of revenue from 83.4% in 4Q09 as a result of COGS $12,000 lower component costs and improved sales efficiencies. $10,000 SG&A $12,401Margins $8,000 $12,431 Operating Income In $ Millions• Dell’s focus on cost reduction and process optimization across its $6,000 R&D business segments drove strong gross and operating income growth $4,000 of 33.3% and 124.5% year-to-year, respectively. $2,000 $1,780 $1,977• Dell’s gross margin increased to 21.0% in 4Q10 from 16.6% in 4Q09 $- $510 $1,145 $179 $169 and 19.5% in 3Q10; operating margin grew 60 basis points 4Q09 4Q10 sequentially and 390 basis points annually to 7.3%. SOURCE: TBR AND DELL7 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Executive Summary TBRDell’s climb to profitability will remain slow, challenging its financialand overall TBR metrics through 1H11 TBR Company Average Standard TBR Company Average Standard FINANCIAL METRICS Score Figure in Class Deviation/2 GO-TO-MARKET & PRODUCT METRICS Score Figure in Class Deviation/2 Revenue (in $ Millions) 5.75 $ 15,692 $12,081 $4,796 Annual revenue per salesperson* 4.44 $3,615 $5,994 $4,240 Gross Margin 3.21 21.0% 36.4% 8.6% Cost per revenue dollar 5.42 $ 0.07 $ 0.09 $ 0.03 Cost per margin dollar 3.37 $ 0.34 $ 0.24 $ 0.06 SG&A (% of revenue) 6.19 12.6% 18.1% 4.6% Channel expense as a % of S&M expense 6.81 6.1% 19.8% 7.5% Sales & Marketing (% of revenue) 6.01 9.9% 14.2% 4.3% Marketing expense as a % of S&M expense 5.53 21.7% 26.3% 8.7% General & Admin (% of revenue) 6.36 2.7% 3.9% 0.9% Annual sales expense per sales employee* 5.39 $236 $280 $111 R&D (% of revenue) 7.03 1.1% 7.4% 3.1% Annual marketing expense per marketing employee* 5.16 $270 $282 $75 Operating Margin 4.45 7.3% 10.9% 6.5% TOTAL AVERAGE TBR SCORE 5.02 Net Margin 4.70 5.9% 7.7% 5.8% *in $ thousands Revenue Growth YTY 3.46 5.3% 20.4% 9.8% Gross Profit YTY change 5.11 33.3% 31.5% 15.6% TBR SCORING SUMMARY: 4Q09 1Q10 2Q10 3Q10 4Q10 SG&A YTY change 4.54 11.1% 7.0% 8.8% Sales & Marketing YTY change 5.02 8.2% 8.4% 10.5% Financial Model Strategy: 5.67 5.34 5.09 4.88 4.75 General & Admin YTY change 3.20 22.9% 3.1% 11.0% Go-to-Market & Product Strategy: 5.14 5.09 5.10 5.20 5.02 R&D YTY change 6.52 -5.6% 9.5% 9.9% Resource Management Strategy: 6.25 6.01 5.73 5.63 6.32 Operating income YTY change 4.71 124.5% 332.8% 725.5% TOTAL AVERAGE TBR SCORE: 5.68 5.45 5.25 5.15 5.09 Net Income YTY change 4.79 177.5% 599.1% 1973.3% TOTAL AVERAGE TBR SCORE 4.75 TBR Company Average Standard Dell’s strong resource management RESOURCE MANAGEMENT METRICS Score Figure in Class Deviation/2 metrics, particularly inventory turns and days Days sales outstanding 3.68 58.1 47.1 8.4 Turns on inventory 7.73 38.1 17.4 7.6 inventory outstanding, were hindered by Days inventory outstanding 7.42 9.6 36.6 11.2 underperformance in its financial metrics, as its Fixed asset turnover 6.44 32.1 16.1 11.1 Days cash outstanding 5.18 82.4 88.8 36.9 consumer PC business continues to run at a Total asset turnover 6.93 1.6 1.1 0.2 loss, resulting in weak corporate margins compared to Debt/asset ratio 4.85 0.6 0.6 0.1 Current ratio 4.67 1.5 1.6 0.3 peers. Return on assets 5.29 7.2% 6.2% 3.5% Key Return on equity 4.99 39.4% 40.1% 63.0% Headcount growth YTY 5.27 2.1% 4.1% 7.3% Represents an area where Dell is currently challenged Annual revenue per employee 4.88 $631 $670 $324 versus peers Annual G&A expense 5.96 $200 $259 $62 Represents an area where Dell is outperforming its peers Annual R&D expense per developer 6.54 $150 $296 $95 Represents an area where Dell is neither significantly TOTAL AVERAGE TBR SCORE 5.83 outperforming nor underperforming its peers *in $ thousands8 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Strategy Overview TBRDell will achieve profit goals via IT bundles and expense cutsFunction Key Strategies TBR Assessment • Dell has reignited its PC business, • Dell’s server business is benefiting from the company’s growing units while increasing solutions strategy, growing revenue by double digits in profits via expense cuts. 4Q10. • The company is making progressOverall • Hardware components plummeted during 4Q10, while in increasing profitability via improved restructuring efforts helped expand solutions sales of servers, storage manufacturing efficiencies, pushing gross margin 440 basis and services to enterprise points above 3Q09. customers. • Leverage Perot Systems to boost • Dell’s acquisition of Perot Systems has increased services services profit by increasing sales revenue by double digits on a year-to-year basis, but of servers, services, storage and growth will slow in 4Q10 due to less favorable compares. software.Financial • Dell’s gross margin experienced a revival in 4Q10 due to a • Leverage cost cuts to bolster PC streamlined supply chain and a drop in component costs. profitability and fund price cuts Dell has also been trimming the fat from its laptop lineup, to grow market share during the simplifying its consumer offerings to reduce costs. PC upgrade cycle. • Expand global emerging markets • Dell is pursuing growth by using its position in retail and presence by tapping retailers and the VAR channel to drive hardware and services sales in VARs. emerging markets. • Deliver client and enterpriseGo-to-Market • Dell will target commercial and public segments for products that address new bundled, needs-based solution. For instance, Dell is market niches, ranging from delivering a healthcare-specific archiving system based on smartphones to cloud its ObjectStore platform. computing.9 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Strategy Overview TBRDell is reshaping its business by using acquisitions to invest in expansionoutside the PC and x86 spacesFunction Key Strategies TBR Assessment • Mobile devices have failed to attract attention in the • Dell is directing R&D and consumer segment. Dell will be reabsorbing the segmentAlliances, acquisition activity to services, back into the company, while altering its strategy to cater toAcquisitions & computing appliances, public sector and enterprise.Resource smartphones and tablets to • It is too soon to tell whether Perot Systems will driveManagement capitalize on new opportunities sustained, high-double-digit growth of Dell servers and for revenue and profit growth. storage by encouraging Perot services-only customers to also purchase Dell hardware. • Dell is rearchitecting its PC designs and manufacturing to save on costs; the company • Dell’s efforts to outsource manufacturing and redesign its consolidated its European PC PC platforms to extricate unnecessary costs have resulted in production in Lodz, Poland andOperations & lower costs of goods sold. transferred its ownership toGlobal Delivery • Dell’s $100 billion investment in China over the next 10Model manufacturer Foxconn. years will help solidify Dell’s commitment to sustain growth • Dell is expanding its in region while aiming to reduce labor cost by bringing manufacturing operations to manufacturing to the region. China to improve costs of labor and increase unit sales in China’s fast-growing economy.10 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Corporate SWOT Analysis TBRDell will go where the growth is – to enterprise products and services –while expanding sales channels in global emerging markets Strengths Opportunities • Dell’s diverse product and services lineup and • Introduce Streak tablet to gain share in the large PC and server installed base creates growing tablet market opportunities to upsell professional services • Leverage acquisitions to create new • The Dell Data Center Solutions group’s cloud opportunities for revenue growth and computing business, with customers Amazon, Ask.com and Microsoft profitability • Dell’s Latitude E family of business notebooks • Target China’s fast-growing market by • Dell’s position as a green IT vendor investing $100 billion to expand its presence and capabilities within the region Weaknesses Threats • Dell’s lack of profitability in consumer PCs takes • Aggressive pricing in the cloud market will a toll on its PC gross margin limit profitability • Poor consumer adoption of Dell’s mobile • HP’s growing diversity in services and devices has forced the company to go in a new software threatens the Dell-on-Dell sales direction, threatening short-term revenue and profit opportunities approach • Dell’s presence in the retail space is weak • Despite sinking shipments, desktop PCs compared to high-end brands with competitive represent more than 20% of Dell’s quarterly pricing revenue11 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Scenario Analysis TBRDell will leverage mobile device demand to cultivate client andenterprise sales and drive growth across its portfolio in 2011Scenario Analysis: Leverage mobile device adoption to drive revenue and profit growth across business unitsKey takeaway: Tablets and smartphones will • Demand for tablets and smartphones provides Dell with a two-drive unit growth, creating a foundation for pronged opportunity for growth: devices and the infrastructureclient and datacenter sales in 2011 needed to support them. On the device side, we expect Dell to aggressively pursue share in both consumer and commercial mobile device markets to drive volume growth. Dell is setting the stage for expansion in the mobile device space byMobile device value-add across Dell’s portfolio delivering products based on Android and Windows 7 operating systems. TBR anticipates adoption between the two platforms will be different, as consumers demand the content • In-demand products Consumer consumption-focused Android devices, and professionals devices • Added scale through larger volume demand the application interoperability of a Windows-based system. In 4Q10, Dell launched its Venue and Venue Pro devices and will follow up with 10-inch Windows and Android • Vertical-centric tablets in 1H11. Tablets and Enterprise solutions • TBR expects Dell to capitalize on the demand for datacenter smartphones devices • Interoperable with products that support the growing amount of data generated existing Windows by mobile devices. Expanding on its solutions strategy, Dell infrastructure unveiled mobile device management services for organizations that demand a tool to manage the onslaught of consumer- owned devices making their way onto networks. We anticipate • Demand for servers and storage for increased Dell will couple these services with compute and storage Enterprise solutions traffic infrastructure to drive high-margin, solutions sales in the • New services for mobile mobile device management space. device management12 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Scenario Analysis TBRAcquisitions enable Dell to remain in step with competitors and rapidlyexpand its portfolio to accommodate changing customer needs Scenario Analysis: Utilize acquisitions to build a high-margin solutions portfolio Key takeaway: Acquisitions accelerate Dell’s • TBR expects Dell to maintain its acquisition momentum in push into a cloud-and vertical-centric 2011, targeting firms that offer value-add, adjacent solutions focus, and enable Dell to keep pace technologies that enhance the capabilities of Dell’s core with growing competitors products. • Acquisitions enable Dell to rapidly augment its portfolio to Dell acquisitions in key growth areas accommodate key growth areas, such as cloud and vertical- centric computing, while helping establish the company as a Storage Software and solutions provider rather than point-product vendor. Compellent – Appliances • Acquisitions enable Dell to keep pace with key competitors, Virtualized-storage Scalent– Integration including HP, IBM and, increasingly, EMC, which are all Ocarina – management solutions aggressively escalating their solutions focus. Deduplication and ASAP software – compression Remote management • TBR expects competitive efforts in the acquisition space to EqualLogic – iSCSI- KACE – Systems remain strong through 2011, as IT purchasers are increasingly based storage arrays management appliance turning to IT providers as trusted advisors rather than simply product vendors. • Dell’s efforts to expand via acquisition were evidenced in 4Q10 Services Cloud by the following purchases: Perot – Professional Boomi – Professional • Compellent Technologies – Virtualized storage services services • SecureWorks Inc. – Security for cloud environments Allin – IT consulting for SecureWorks – Security • InSite One Inc. – Cloud-based medical archiving technology Microsoft for cloud environments environments InSite One – Cloud- • Boomi – Cloud integration services based medical archiving13 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Scenario Analysis TBRDell will expand its presence in emerging Chinese cities to drive volumegrowth and offset uncertain consumer demand in mature marketsScenario Analysis: Expand in Western China to capitalize on an underpenetrated, growing customer baseKey takeaway: Dell’s sales, marketing and • Dell is positioning for growth in second- and third-tier cities bycustomer service investments in Western investing $100 billion in manufacturing, customer service, salesChina are aimed at accelerating growth by and marketing over the next 10 years in Western China, whichbuilding a stronger local presence with more Dell sees as underpenetrated compared to the morefeet on the street. established regions surrounding Shanghai and Beijing. In January, Dell opened its first Western China Customer Service Center, located in Chengdu, as part of this investment. Map of Dell’s China facilities • TBR expects Dell to leverage its growing portfolio of low-cost Dalian – International devices to penetrate cost-sensitive markets in less-developed service center regions. In April, Dell will utilize a “smart” product launch in Shanghai – Beijing to demonstrate the capabilities of its smartphones, R&D and tablets and other mobile devices to the Chinese market. product Chengdu – design • Dell will open more than 1,000 “commercial experience Manufacturing and centers” in China during 2011 to reduce the company’s customer support centers traditional reliance on phone and web orders and increase its “feet on the street” presence in the region. • Dell is timing its push into China to charge head-first at Lenovo, which remains the incumbent share champion in the region, Xiamen – Two manufacturing facilities; while taking advantage of quality and customer service issues one enterprise command center that surfaced with HP in China in 2010. Existing Dell China location New Dell China location14 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Financial Model Strategy TBR Dell’s efforts to improve its cost structure while simultaneously investing in its product portfolio lay the foundation for new growth during 1H11 Revenue Performance Revenue and Growth Drivers DELLS NET REVENUE, GROWTH AND PROJECTIONS 4Q10 Revenue: $15.7 billion, 5.3% YTY TBR Net Revenue Growth Year-to-year $70 25.0% $60 20.5% 19.4% 21.7% 20.0% • Dell’s efforts to develop needs-based solutions to In $ Billions $50 $40 15.0% capitalize on the corporate refresh cycle and offset $30 $20 11.0% 5.3% 5.0% 16.2% 10.0% weak consumer spending drove corporate revenue $10 7.0% 5.0% growth during 4Q10. 5.0% $0 0.0% • Segment growth was led by Dell’s server business, 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 CY10 CY11 CY12 Est. Est. Est. which increased 15.9% YTY to $2.1 billion, or by 120 Revenue Revenue Growth Year-to-Year basis points, to 13.3% of revenue, and its SMB NOTE: Annual revenue and projections are for calendar 2010, 2011 and 2012, respectively. SOURCE: DELL AND TBR business, which rose 12.4% YTY to $3.7 billion, or by 150 basis points, to 23.9% of revenue.TBR DELL PERCENT REVENUE BY SEGMENT 50% Revenue & Growth OutlookPercent Apps Revenue 40% 30% • TBR estimates Dell’s corporate revenue will increase 20% by 5.0% annually in 1Q11, as the company works to 10% cut costs while simultaneously investing moderately 0% to position for future growth. 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. Global Consumer Americas Commercial EMEA Commercial APAC Commercial • A favorable cost environment and strong servicesSOURCE: TBR AND DELL backlog is expected to help overcome a historical seasonal dip in both public and consumer spending to result in a profitable 1Q11. 15 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Financial Model Strategy TBRReduced component and direct labor costs position Dell for revenueand margin growth going forward Cost & Margin Performance Cost Structure & Margin Performance 4Q10 Total OPEX: $2.1 billionTBR DELLS GROSS AND OPERATING PROFIT AND PROJECTIONS Gross and Operating Margin 25% 21.0% 21.5% 20% 16.6% 16.9% 16.6% 19.5% 18.5% 19.5% 18.0% • Dell’s COGS was 79.0% of revenue, down 15% from 80.5% in 3Q10 and 83.4% in 4Q09 as 10% 7.8% a result of reduced component costs and 4.8% 6.7% 7.3% 7.7% 5.6% 6.3% COGS, 5% 3.4% 3.5% efforts to consolidate its consumer and 0% Gross SMB businesses, both ultimately driving 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. CY10 CY11 Est. CY12 Est. Margin gross margin in 4Q10. Gross Margin Operating MarginNOTE: Annual gross and operating profit and projections are for calendar 2010 , 2011, and 2012,respectively. • Dell’s gross margin increased to 21.0% inSOURCE: TBR AND DELL 4Q10 from 16.6% in 4Q09. DELL HEADCOUNT TBR • SG&A expense increased 11.1% YTY and 4,300 4,300 4,300 4,500 4,500 accounted for 12.6% of 4Q10 revenue. 100,000 8,300 80,000 8,236 8,236 8,236 8,300 SG&A • Dell invested to expand its solutions and Total Headcount 17,029 17,029 17,029 18,800 18,800 sales capacity and improve its employee 60,000 20,425 20,425 20,425 21,400 21,400 compensation plans to drive growth. 40,000 20,000 46,010 46,010 46,010 45,000 45,000 • Dell’s operating margin increased 390 basis points from 4Q09, and 60 basis points from 0 Operating 4Q09 1Q10 2Q10 3Q10 4Q10 3Q10, to 7.3% in 4Q10. Margin & • TBR estimates Dell’s operating margin will Research & Development General & Administrative Manufacturing Outlook continue to grow on year-to-year and Sales & Marketing Services & Support SOURCE: TBR AND DELL sequential bases, reaching 7.7% in 1Q11.16 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Financial Model Strategy TBRStrong commercial demand will help Dell overcome weak consumer spendand unfavorable compares in its services business and drive growth Segment Performance Segment Drivers Segment FinancialsTBR DELL PROFITABILITY AND GROWTH 25% 100% • Dell’s notebook PC revenue increased 4.2% 20% 80% year-to-year, with 4.3% unit shipment Revenue Growth 60% growth offsetting a slightly depressed ASP. 15% PCsMargins 40% • Dell’s desktop revenue grew 3.7% year-to- 20% 10% year, as 3.2% unit shipment growth 0% 5% augmented a slight uptick in ASP. -20% 0% -40% • Double-digit gains in server revenue 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. overcame a 4.2% YTY decline in external storage revenue to drive segment growth. Gross Margin Operating Margin Net Margin Revenue Growth Year-to-Year Servers &SOURCE:TBR AND DELL • Dell’s server revenue growth was driven by Storage strong demand for both blade and rack servers from enterprise and SMB TBR DELL SEGMENT CONTRIBUTIONS customers during the quarter. $599 $554 $624 $543 $574 $672 100% • Enhanced services revenue grew 1.1% YTY $1,922 $1,891 $1,915 $1,924 $1,943Percent of Total Revenue $2,100 80% $1,804 $1,785 $1,890 $1,844 $2,090 $1,999 in 4Q10, muted by an unfavorable compare 60% $2,477 $2,496 $2,535 $2,579 $2,651 $2,365 resulting from the Perot acquisition. Services • Dell’s service segment is expected to rise by 40% 20% $8,098 $8,148 $8,570 $8,504 $8,434 $8,482 70 basis points YTY to 13.4% of corporate 0% revenue in 1Q11. 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. Dell’s Software & Peripherals revenue grew Storage Services Server SW & Peripherals PC Software & 7.0% year-to-year in 4Q10 as demand for SOURCE: TBR AND DELL Peripherals additional displays remained strong. 17 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Go to Market & Product Strategies TBRDell leverages a strong solutions strategy to capitalize on a commercialIT refresh cycle and combat the effects of weak consumer spending Estimated Y/Y Segment Key Changes & Drivers Trends to Monitor Revenue Growth The Large Enterprise segment posted strong revenue growth and improved Dell will target continued profitability, as customers invested to momentum in the Large Large $4.7 refresh IT systems and resume projects 11.8% Enterprise market by focusing on Enterprise billion put on hold by the economic recession, vertical-specific and integrated and as the product mix shifted to solutions. solutions. The public sector will maintain Revenue from the public sector revenue and profit growth into increased to approximately 40% of $4.0 Public 4.0% 1H11, due to a shifting product Dell’s services revenue in 4Q10 despite billion mix toward solutions and tight customer spending in Europe. stabilizing demand. In 4Q10, SMB led Dell’s customer Dell will continue working to segments in revenue growth, as Dell $3.7 expand into emerging markets SMB 12.4% continued to leverage Perot to drive its billion like India and China to accelerate solutions business down the stack. SMB growth in 1H11. TBR estimates Dell’s consumer The consumer segment bucked revenue will grow 6.2% YTY in traditional seasonality and experienced 1Q11, though declining by 250 $3.3 Consumer revenue decline in 4Q10, primarily due –7.6% basis points as a percentage of billion to an unfavorable compare as a result revenue to 19.3%, as Dell ramps of a strong Windows 7 launch in 4Q09. investment to drive greater profitability from the segment.18 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Go to Market & Product Strategies TBRDell will ride a wave of demand for tablets to accelerate growth in theconsumer and commercial markets in 2011Tablets will provide Dell with tools to uncork growing portions of the consumer and commercial markets,positioning the company to inject unit and profit growth into its PC business • Dell will leverage tablets to buck recent headwinds in the consumer market. The company announced it will deliver 10-inch Android and Windows 7-based systems in 1H10, aiming to shed the image of its initial 7-inch Streak device, which faced adoption challenges. • TBR expects Dell to drive tablet expansion in the enterprise market with its Windows 7 tablet, due out in 1H11. We believe tablet adoption in the enterprise will increase with Windows, as users seek interoperability with common business applications. Additionally, we anticipate Dell will work to couple its mobile device management services with servers, storage and tablets as a larger solution. Indirect Sales Approach Dell Revenue Contributions Direct Sales Approach by Customer Segment • Leverage retail and VAR partners to • Deliver a range of business and sell consumer and business systems   reflects consumer PCs and services directly to increase or 21%  on a worldwide basis Consumer customers decrease as a • Utilize two to three top retailers in percent of • Provide a consultative sales approach each geography; focus on notebook overall 24%  to customers, including the best PCs revenue SMB elements of Dell’s product portfolio, during the • Support VAR partners with quarter regardless of geography geo-specific products (such as Vostro • Target top enterprise customers’ A), specialized pricing, marketing 25%  Public integrated product bundles while resources, training/certification and providing enhanced products and Dell support services services to SMBs and consumers • Offer VARs deal registration 30%  Large Enterprise19 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Go to Market & Product Strategies TBRDell is leveraging the combination of its products and services to createvertical-centric solutionsIndustries Products & Strategies Market ImplicationsGovernment Dell is targeting its solutions strategy to its government customers as the company leverages its products and services to provide support to the U.S. government and military.Education Dell is developing need-based solutions to address the particular customer pain points within the education industry, including the coupling of the infrastructure and client pieces of the company’s Dell is driving customer portfolio. adoption of its products and services throughHealthcare • Dell remains aggressively committed to developing comprehensive, providing integrated fully-integrated solutions that integrate Intelligent Data solutions that address Management with hardware, creating a patient-centric healthcare key vertical customer environment. pain points. • To bring this solutions concept to fruition, Dell continues to engage in acquisitions of solution-based companies, as evidenced by the purchase of InSite One, a developer of cloud-based medical archiving technologies, announced in December 2010. • Capitalizing on growing demand for mobility is key to Dell gaining traction in healthcare; the company piloted Mobile Clinical Computing solutions at 10 European hospitals in 4Q10.20 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Alliance & Acquisition Strategy TBRDell is dipping into its wallet to enhance its portfolio of enterprisesolutions to drive revenue and profit expansionTBR Assessment: Strategic acquisitions enable Dell to grow its enterprise storage, services and solutions businesses Acquisitions are paving the road to diverse revenue and profit growth • Dell continues to leverage acquisitions to expand outside of its core business areas. Through acquired companies, Dell is building an arsenal of solutions to attach to its standard hardware products, better positioning the company to compete with the likes of IBM and HP, which go to market with large, integrated solutions.Dell leverages • TBR believes the acquisitions will support Dell’s corporate profit growth. Offering hardwareacquisitions to and software that enable the development of virtualized environments as well as design,shed its M.O. of implementation and support services enable Dell to position itself as a solutions provider. Dellhigh-volume PC can use its strength in standard hardware to drive attached sales of higher-margin softwareand x86 server and services.manufacturer to • In December, Dell acquired SAN-vendor Compellent Technologies to round out its storagebecome a portfolio and add fuel to its push into the enterprise cloud and virtualization markets. Dellprovider of will leverage Compellent’s SAN portfolio combined with EqualLogic’s iSCSI portfolio andsolutions that Dell’s DAS and object-storage offerings to penetrate storage markets up and down its stack.offer functionality Dell will augment its x86 business with Compellent’s SAN portfolio to go to market withand position for stronger integrated datacenter solutions.diversified • Also in December, Dell announced its intent to purchase cloud-based medical archivingrevenue solutions developer InSite One. Dell will augment its proprietary hardware offerings with InSite One’s technology to develop patient-centric solutions and gain a stronger foothold in the rapidly growing vertical. • In February, Dell acquired Security-as-a-Service provider SecureWorks, which has expertise around Managed-Security Services, Security and Risk Consulting Services and Threat Intelligence.21 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Geographic Analysis TBRDell continues to develop integrated solutions offerings to gain a strongerfoothold in emerging markets and combat weakness in mature markets Y/Y Geo Key Changes & Drivers Revenue Trends to Monitor Growth The Americas region is Dell’s largest TBR anticipates the Americas will geographic revenue contributor, sustain moderate year-to-year U.S./ accounting for 58.8% of corporate $9.2 revenue growth in 1Q11, as Dell 3.0%Americas revenue and posting its fifth consecutive billion touts strong integrated enterprise quarter of year-to-year revenue growth solutions and as consumer demand following the recession. strengthens. Dell’s EMEA revenue declined by 50 basis TBE expects Dell to post double-digit points from 4Q09 to 22.2% of revenue, $3.5 growth in EMEA in 1Q11, as EMEA 3.0% due to continued reductions in billion economic recovery drives increased government spending within the region. public and consumer spending. Dell’s APAC revenue increased 180 basis TBR believes Dell’s APAC revenue will points year-to-year to 19.0% of total grow 100 basis points YTY to 18.1% revenue and maintained Dell’s strongest $3.0 APAC 16.5% of revenue in 1Q11, as Dell increases geographic growth rate in 4Q10, driven by billion its IT management solution offerings success in the emerging markets of to expand its traction in the region. Southeast Asia. The contribution to revenue from BRIC countries increased to Dell will work to drive sales of its 13% in 4Q10, growing 21% annually led by India, which rose enterprise-level products andEmerging 37%. Dell works to capitalize on consumer and commercial services to gain a stronger footholdMarkets demand brought about by strengthening economies via an and increase its margins in key increased channel presence and developing a competitive emerging markets globally. portfolio of integrated solution offerings.22 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Resource Management Strategy TBRInvestments in acquisitions will bring Dell new technologies and talentupon which it can build a solutions businessManagement Changes Investments• In December, Dell appointed Royal Philips Electronics Dell remains focused on leveraging acquisitions to President and CEO Gerard Kleisterlee to its board of inorganically expand its storage and services directors. TBR believes Kleisterlee’s experience leading capabilities and grow revenue the global operations of all facets of Philips’ business, • Dell announced its signings of definitive with a focus on Europe and Asia, will drive Dell’s global agreements to acquire Compellent Technologies, a expansion. virtual storage provider, and Security-as-a-Service• Additionally, Dell named Alex Mandl, a board member provider SecureWorks, in 4Q10. since 1997, as independent presiding director of the • In early January, Dell acquired InSite One Inc., a board, replacing Sam Nunn, who is scheduled to retire cloud-based medical archiving company. from the board in July. • In November, Dell announced its agreement to acquire Software-as-a-Service integration leader Dell’s Worldwide Operations Boomi. Headcount TBR expects Dell to increase • During 4Q10, Dell kept headcount flat sequentially, More than 40,000 of Dell’s its staff in China in 2011 to 98,000 full-time employees continue driving higher sales at 98,000 employees, up 2.1% year-to-year as it are located in the United in the emerging market. balances recent employee additions, namely States. Perot’s 23,000 employees, with streamlining More than 10,000 are efforts in less profitable areas. located in Dell’s Round Dell employs about 15,000 in India and China. • TBR anticipates the majority of Dell’s cost savings Rock, Texas facilities. will come from efforts to reduce COGS, outsource manufacturing to low-cost countries such as Mexico, and otherwise streamline business SOURCE: DELL AND TBR processes, rather than through headcount attrition in the future.23 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Resource Management Strategy TBRTBR anticipates minimal headcount growth in 1Q11, as Dell works tooptimize its expenses and drive profitability going forward Y/Y Function Key Changes & Drivers FTEs Trends to Monitor Growth Dell continued to grow its sales and TBR expects a deceleration to marketing headcount in 4Q10, to Dell’s sales and marketing Sales & enhance its capabilities (with a focus on 21,400 4.8% headcount growth entering 2011, Marketing enterprise solutions) and drive new unit as the company works to cut shipment growth. down on its costs. Dell’s G&A headcount remained nearly TBR anticipates null G&A stagnant on a year-to-year and headcount growth for Dell on a General & sequential basis due to the completion 8,300 0.8% year-to-year basis entering 1Q11, Admin. of the integration of Perot and ongoing as the company works to sustain efforts to streamline business processes. tight cost controls. Dell’s R&D headcount maintained We expect Dell to augment moderate growth in 4Q10, as the Research & strategic relationships with R&D company invested to shift its business 4,500 4.7%Development spend in upcoming quarters, as a mix toward sales of more profitable key lever for future growth. enterprise solutions. Dell will continue increasing its headcount in emerging markets Dell’s plans to open two manufacturing plants in Chengdu, Low-cost throughout future quarters to China in 2011, which will increase its headcount in the region Regions capitalize on the significant by approximately 3,000 people. potential for growth in the regions.24 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Resource Management Strategy TBRDell Inc. Organizational Chart Michael S. Dell Chairman of the Board Chief Executive Officer Stephen F. Schuckenbrock Paul D. Bell President President Dell Services Public and Large Enterprise Stephen J. Felice Jeffrey W. Clarke President, Vice Chairman Consumer and Operations & Technology Small and Medium Business Brian T. Gladden Senior Vice President Chief Financial Officer Brad R. Anderson Lawrence P. Tu Erin Nelson Ron Rose David L. Johnson Steve H. Price Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Enterprise Product Group General Counsel Chief Marketing Officer Dell.com Corporate Strategy Human ResourcesManagement Changes• On Jan. 1, 2011, Dell dissolved its Communications Group. The group’s former president, Ronald G. Garriques, will stay with Dell as a consultant throughout 2011.• Also in January, Stephen Schuckenbrock left his post as president of Dell’s Large Enterprise segment to succeed Peter Altabef as president of Dell Services upon the completion of the integration of Perot. Paul Bell, President of Dell’s Public segment, will lead the newly combined Public and Large Enterprise segment.25 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Future Outlook TBRDell will expand its storage and services business by leveragingacquisitions and alliancesTBR Outlook • To drive profitability, Dell continues to shift toward becoming a solutions provider rather than strictly a PC manufacturer by expanding its software and services capabilities, largely through Company strategic acquisitions, to bundle with its servers and storage systems for enterprise businesses. Strategy • Dell will evolve its mobile device business to increase scale and drive down cost by rolling it into the rest of the company’s operations. • Maintain a cost structure that is efficient and appropriate for demand. • Dell will continue to realize upward-trending gross margins in 2011 due to a better cost environment and operational improvements to its consumer business, including expanding its Resource manufacturing and design operations in low-cost regions. Management • As Dell invests to grow sales and its enterprise business, and reacts to increased demand, TBR expects operating expenses, particularly those related to sales and marketing and research and development business processes, to rise. • TBR expects Dell to continue to make targeted software and services acquisitions, both large and small, as the company expands its portfolio with integrated, end-to-end storage and services offerings to increase its competitiveness with rivals such as Hewlett-Packard and EMC. Acquisitions • We anticipate Dell will continue to leverage both acquisitions and alliances to augment its portfolio with vertical-specific technologies, to expand its traction in markets with high-growth potential, such as healthcare.26 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Future Outlook TBRHigh-growth emerging markets will capture Dell’s focus as maturemarkets continue to limit the company’s PC revenue growthTBR Outlook • China’s western province of Sichuan will become a focal point of growth for Dell. The company will invest $100 billion over the next 10 years in increasing its presence in the region. Geo • Dell will continue to experience rebounds in revenue growth across all geographies as economies recover and businesses and consumers increase IT spending. • The company remains focused on driving sales in BRIC countries, expanding upon the growth which reportedly drove its net revenues up 13% in 4Q10. • TBR believes Dell’s PC ASPs will continue rising as a result of an increasing mix of commercial PCs due to the global enterprise PC refresh cycle. Financial • We predict gross profit will improve as Dell continues to drive efficiency into its manufacturing processes while utilizing low-cost labor though outsourcing. • Dell is streamlining its consumer PC business down to three models – XPS, Inspiron and Alienware – to increase efficiency and position itself for profitable growth. Go-to-Market • TBR expects Dell to continue evaluating opportunities for growth by realigning its tactics to capitalize on emerging markets and product areas, while streamlining its core businesses, such as consumer PCs, to improve profitability.27 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Income Statement TBR DELL INC. Consolidated Statement of Income In thousands except earnings per share data TBR CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. FISCAL QUARTER F4Q10 F1Q11 F2Q11 F3Q11 F4Q11 F1Q12 Es t. Net Sales $ 14,900,000 $ 14,874,000 $ 15,534,000 $ 15,394,000 $ 15,692,000 $ 15,618,000 Cost of Sales 12,431,000 12,358,000 12,948,000 12,391,000 12,401,000 12,260,000 Gross Profit 2,469,000 2,516,000 2,586,000 3,003,000 3,291,000 3,358,000 SG&A 1,780,000 1,830,000 1,679,000 1,816,000 1,977,000 1,983,000 R&D 179,000 167,000 162,000 163,000 169,000 170,000 Operating Income 510,000 519,000 745,000 1,024,000 1,145,000 1,205,000 Financing and Other (41,000) (68,000) (49,000) 52,000 (18,000) (21,000) Pre-Tax Income 469,000 451,000 696,000 1,076,000 1,127,000 1,184,000 Income Taxes 135,000 110,000 151,000 254,000 200,000 199,000 Net Income $ 334,000 $ 341,000 $ 545,000 $ 822,000 $ 927,000 $ 985,000 Earnings Per Share $ 0.17 $ 0.17 $ 0.28 $ 0.42 $ 0.48 AS A PERCENTAGE OF REVENUE Net Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of Sales 83.4% 83.1% 83.4% 80.5% 79.0% 78.5% Gross Margin 16.6% 16.9% 16.6% 19.5% 21.0% 21.5% SG&A 11.9% 12.3% 10.8% 11.8% 12.6% 12.7% R&D 1.2% 1.1% 1.0% 1.1% 1.1% 1.1% Operating Expenses 13.1% 13.4% 11.9% 12.9% 13.7% 13.8% Operating Margin 3.4% 3.5% 4.8% 6.7% 7.3% 7.7% Net Margin 2.2% 2.3% 3.5% 5.3% 5.9% 6.3% YEAR-TO-YEAR CHANGE Net Sales 11.0% 20.5% 21.7% 19.4% 5.3% 5.0% Cost of Sales 11.8% 21.5% 24.8% 16.2% -0.2% -0.8% Gross Profit 6.8% 16.1% 8.2% 34.5% 33.3% 33.5% SG&A 6.0% 13.5% 6.9% 21.0% 11.1% 8.4% R&D 1.7% 18.4% 8.7% 5.2% -5.6% 1.8% Operating Expenses 5.6% 13.9% 7.0% 19.5% 9.5% 7.8% Operating Income 11.6% 25.4% 11.0% 77.5% 124.5% 132.2% F/O 1266.7% 3300.0% 16.7% -182.5% -56.1% -69.1% Ebitda 3.3% 9.5% 10.7% 109.3% 140.3% 162.5% Income Taxes 31.1% -9.8% -3.8% 43.5% 48.1% 80.9% Net Income -4.8% 17.6% 15.5% 143.9% 177.5% 188.9% SOURCE: DELL INC.28 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Balance Sheet TBR DELL INC. Consolidated Balance Sheets (In Thous ands ) TBR CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 FISCAL QUARTER F4Q10 F1Q11 F2Q11 F3Q11 F4Q11 ASSETS Current Assets Cash and Cash equivalents $ 10,635,000 $ 10,255,000 $ 11,694,000 $ 12,889,000 $ 13,913,000 Short-term Investments 373,000 627,000 744,000 492,000 452,000 Accounts Receivable 5,837,000 5,880,000 6,565,000 6,407,000 6,493,000 Financing Receivables 2,706,000 3,221,000 3,272,000 3,588,000 3,643,000 Inventory 1,051,000 1,182,000 1,372,000 1,294,000 1,301,000 Other (Deferred Income Taxes, etc.) 3,643,000 3,619,000 3,562,000 3,118,000 3,219,000 Total Current Assets 24,245,000 24,784,000 27,209,000 27,788,000 29,021,000 Property, Plant, & Equipment 2,181,000 2,049,000 1,980,000 1,948,000 1,953,000 Equity Securities and Other Invest. 781,000 714,000 633,000 662,000 704,000 Long-term Financing Receivables 332,000 528,000 622,000 709,000 799,000 Other Non-current Assets 345,000 327,000 294,000 235,000 262,000 Total Assets $ 33,652,000 $ 34,241,000 $ 36,640,000 $ 37,154,000 $ 38,599,000 LIABILITIES AND EQUITY Current Liabilities Short-term Borrowings 663,000 1,079,000 1,627,000 826,000 851,000 Accounts Payable 11,373,000 11,402,000 12,465,000 11,278,000 11,293,000 Accrued Liabilities 3,884,000 3,449,000 3,812,000 3,898,000 4,181,000 Total Current Liabilities 18,960,000 18,880,000 20,913,000 19,095,000 19,483,000 Long-Term Debt 3,417,000 3,582,000 3,623,000 5,168,000 5,146,000 Other Non-current Liabilities 5,634,000 5,801,000 5,943,000 6,078,000 6,204,000 Total Liabilities 28,011,000 28,263,000 30,479,000 30,341,000 30,833,000 Total Stockholders Equity 5,641,000 5,978,000 6,161,000 6,813,000 7,766,000 Total Liabilities & Equity $ 33,652,000 $ 34,241,000 $ 36,640,000 $ 37,154,000 $ 38,599,000 SOURCE: DELL INC.29 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Financial Models TBR DELL REVENUE MODEL TBR CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. REVENUE (IN $ THOUSANDS) F4Q10 F1Q11 F2Q11 F3Q11 F4Q11 F1Q12 Est. Total $ 14,900,000 $ 14,874,000 $ 15,534,000 $ 15,394,000 $ 15,692,000 $ 15,618,000 System $ 10,501,000 $ 10,487,000 $ 11,084,000 $ 10,891,000 $ 11,098,000 $ 11,153,000 Peripheral Products $ 2,477,000 $ 2,496,000 $ 2,535,000 $ 2,579,000 $ 2,651,000 $ 2,365,000 Enhanced Services $ 1,922,000 $ 1,891,000 $ 1,915,000 $ 1,924,000 $ 1,943,000 $ 2,100,000 Gross Profit $ 2,469,000 $ 2,516,000 $ 2,586,000 $ 3,003,000 $ 3,291,000 $ 3,358,000 Gross Margin 16.6% 16.9% 16.6% 19.5% 21.0% 21.5% REVENUE MODEL Desktops $ 3,060,000 $ 3,185,000 $ 3,460,000 $ 3,226,000 $ 3,174,000 $ 3,124,000 Portables $ 4,503,000 $ 4,408,000 $ 4,540,000 $ 4,693,000 $ 4,690,000 $ 4,763,000 Workstations $ 535,000 $ 555,000 $ 570,000 $ 585,000 $ 570,000 $ 595,000 DT Workstation $ 385,000 $ 400,000 $ 410,000 $ 420,000 $ 410,000 $ 423,000 NB Workstations $ 150,000 $ 155,000 $ 160,000 $ 165,000 $ 160,000 $ 172,000 Servers $ 1,804,000 $ 1,785,000 $ 1,890,000 $ 1,844,000 $ 2,090,000 $ 1,999,000 External Storage $ 599,000 $ 554,000 $ 624,000 $ 543,000 $ 574,000 $ 672,000 Peripheral Products $ 2,477,000 $ 2,496,000 $ 2,535,000 $ 2,579,000 $ 2,651,000 $ 2,365,000 Enhanced Services $ 1,922,000 $ 1,891,000 $ 1,915,000 $ 1,924,000 $ 1,943,000 $ 2,100,000 Total $ 14,900,000 $ 14,874,000 $ 15,534,000 $ 15,394,000 $ 15,692,000 $ 15,618,000 PERCENTAGE OF TOTAL REVENUE Desktops 20.5% 21.4% 22.3% 21.0% 20.2% 20.0% Workstations 3.6% 3.7% 3.7% 3.8% 3.6% 3.8% Portables 30.2% 29.6% 29.2% 30.5% 29.9% 30.5% Servers 12.1% 12.0% 12.2% 12.0% 13.3% 12.8% External Storage 4.0% 3.7% 4.0% 3.5% 3.7% 4.3% Peripheral Products 16.6% 16.8% 16.3% 16.8% 16.9% 15.1% Services 12.9% 12.7% 12.3% 12.5% 12.4% 13.4% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% YEAR-TO-YEAR REVENUE GROWTH Desktops 1.7% 13.2% 17.1% 21.5% 3.7% 2.1% Workstations -25.2% 16.8% 15.2% 18.2% 6.5% 11.2% Portables 18.1% 17.5% 20.7% 15.6% 4.2% 5.8% Servers 26.1% 38.8% 34.7% 19.8% 15.9% 10.8% External Storage -14.8% 3.7% 13.2% 6.9% -4.2% 12.2% Peripheral Products -0.4% 11.1% 6.4% 7.7% 7.0% -4.5% Services 51.3% 52.7% 57.2% 54.7% 1.1% 9.3% Total 11.0% 20.5% 21.7% 19.4% 5.3% 4.8% SOURCE: TBR ESTIMATES AND DELL FINANCIALS30 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Financial Models TBR DELL PC & SERVER REVENUE, UNIT, AND ASP MODEL TBR CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 REVENUE (IN $ THOUSANDS) F4Q10 F1Q11 F2Q11 F3Q11 F4Q11 REVENUE MODEL 57.5% 56.0% 54.8% 57.1% 57.5% Total Desktop $ 3,445,000 $ 3,585,000 $ 3,870,000 $ 3,646,000 $ 3,584,000 Total Portable $ 4,653,000 $ 4,563,000 $ 4,700,000 $ 4,858,000 $ 4,850,000 Desktops $ 3,060,000 $ 3,185,000 $ 3,460,000 $ 3,226,000 $ 3,174,000 Portables $ 4,503,000 $ 4,408,000 $ 4,540,000 $ 4,693,000 $ 4,690,000 Workstations $ 535,000 $ 555,000 $ 570,000 $ 585,000 $ 570,000 DT Workstations $ 385,000 $ 400,000 $ 410,000 $ 420,000 $ 410,000 NB Workstations $ 150,000 $ 155,000 $ 160,000 $ 165,000 $ 160,000 Servers $ 1,804,000 $ 1,785,000 $ 1,894,050 $ 2,077,650 $ 2,090,000 Total $ 9,902,000 $ 9,933,000 $ 10,464,050 $ 10,581,650 $ 10,524,000 UNIT SHIPMENTS (IN THOUSANDS) Total Desktop 4,675 4,728 5,271 4,651 4,824 Total Portable 5,975 5,718 5,822 6,024 6,233 Desktops 4,465 4,511 5,045 4,419 4,599 Portables 5,907 5,649 5,731 5,931 6,143 Workstations 278 286 317 324 315 DT Workstations 210 217 226 231 225 NB Workstations 68 69 91 93 90 Servers 469 487 511 459 498 Total 11,119 10,933 11,604 10,768 11,147 UNIT SHIPMENT GROWTH YEAR-TO-YEAR Total Desktop 0.8% 12.3% 12.0% 13.0% 3.2% Total Portable 32.4% 26.7% 20.6% 10.4% 4.3% Desktops 2.1% 12.0% 11.8% 12.7% 3.0% Portables 33.5% 27.0% 20.3% 10.0% 4.0% Workstations -21.5% 17.7% 21.0% 23.8% 13.3% DT Workstations -20.8% 19.9% 15.9% 18.7% 7.1% NB Workstations -23.6% 11.3% 35.8% 38.7% 32.4% Servers 17.0% 30.0% 15.0% 4.0% 6.0% Total 16.4% 20.2% 16.3% 7.5% 0.2% PC HARDWARE AVERAGE SALES PRICE PC Total Desktop $ 737 $ 758 $ 734 $ 784 $ 743 Total Notebook $ 779 $ 798 $ 807 $ 806 $ 778 Desktops $ 685 $ 706 $ 686 $ 730 $ 690 Portables $ 762 $ 780 $ 792 $ 791 $ 763 Workstations $ 1,924 $ 1,941 $ 1,798 $ 1,804 $ 1,810 DT Workstations $ 1,833 $ 1,843 $ 1,814 $ 1,815 $ 1,822 NB Workstations $ 2,206 $ 2,246 $ 1,758 $ 1,775 $ 1,778 Servers $ 3,843 $ 3,667 $ 3,706 $ 4,529 $ 4,200 Dell AUP (w Peripherals/Services) $ 1,340 $ 1,360 $ 1,339 $ 1,430 $ 1,408 Dell Hardware AUP $ 891 $ 909 $ 902 $ 983 $ 944 SOURCE: TBR ESTIMATES AND DELL FINANCIALS31 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Financial Models TBR DELL REVENUE BREAKDOWN BY GEOGRAPHY TBR CALENDAR 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. IN $ MILLIONS F4Q10 F1Q11 F2Q11 F3Q11 F4Q11 F1Q12 Est. Total Revenue $ 14,900 $ 14,874 $ 15,534 $ 15,394 $ 15,692 $ 15,618 REVENUE BY REGION Americas $ 8,958 $ 9,076 $ 9,575 $ 9,464 $ 9,227 $ 9,215 EMEA $ 3,381 $ 3,255 $ 3,300 $ 3,245 $ 3,483 $ 3,581 APJ $ 2,560 $ 2,543 $ 2,658 $ 2,686 $ 2,982 $ 2,823 AS A PERCENTAGE OF REVENUE Americas 60.1% 61.0% 61.6% 61.5% 58.8% 59.0% EMEA 22.7% 21.9% 21.2% 21.1% 22.2% 22.9% APJ 17.2% 17.1% 17.1% 17.4% 19.0% 18.1% YEAR-TO-YEAR CHANGE Americas 10.8% 23.1% 17.0% 18.0% 3.0% 1.5% EMEA -3.0% 6.4% 24.0% 15.0% 3.0% 10.0% APJ 37.7% 33.1% 38.6% 30.7% 16.5% 11.0% SEQUENTIAL CHANGE Americas 11.7% 1.3% 5.5% -1.2% -2.5% -0.1% EMEA 19.8% -3.7% 1.4% -1.7% 7.3% 2.8% APJ 24.6% -0.7% 4.5% 1.0% 11.0% -5.3% SOURCE: TBR ESTIMATES AND DELL CORP.32 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Financial Models TBR DELL INC. OPERATING EXPENSE MODEL (IN $ THOUSANDS) TBR CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. Total Revenue $ 14,900,000 $ 14,874,000 $ 15,534,000 $ 15,394,000 $ 15,692,000 $ 15,618,000 SG&A Expense $ 1,780,000 $ 1,830,000 $ 1,679,000 $ 1,816,000 $ 1,977,000 $ 1,983,000 Sales & Marketing Expense $ 1,430,000 $ 1,390,000 $ 1,299,000 $ 1,416,000 $ 1,547,000 $ 1,553,000 General and Administrative Expense $ 350,000 $ 440,000 $ 380,000 $ 400,000 $ 430,000 $ 430,000 R&D Expense $ 179,000 $ 167,000 $ 162,000 $ 163,000 $ 169,000 $ 170,000 Total Operating Expense $ 1,959,000 $ 1,997,000 $ 1,841,000 $ 1,979,000 $ 2,146,000 $ 2,153,000 SALES AND MARKETING EXPENSE BREAKOUT (IN $ THOUSANDS) Sales Expense $ 1,030,000 $ 1,015,000 $ 889,000 $ 996,000 $ 1,117,000 $ 1,123,000 Partner and Channel Spending $ 95,000 $ 85,000 $ 85,000 $ 90,000 $ 95,000 $ 90,000 Marketing Spending $ 305,000 $ 290,000 $ 325,000 $ 330,000 $ 335,000 $ 340,000 Total Sales and Marketing Expense $ 1,430,000 $ 1,390,000 $ 1,299,000 $ 1,416,000 $ 1,547,000 $ 1,553,000 SPENDING AS A PERCENTAGE OF REVENUE Total Operating Expense 13.1% 13.4% 11.9% 12.9% 13.7% 13.8% Total SG&A Expense 11.9% 12.3% 10.8% 11.8% 12.6% 12.7% Sales and Marketing Expense 9.6% 9.3% 8.4% 9.2% 9.9% 9.9% Sales Expense 6.9% 6.8% 5.7% 6.5% 7.1% 7.2% Partner and Channel Spending 0.6% 0.6% 0.5% 0.6% 0.6% 0.6% Marketing Spending 2.0% 1.9% 2.1% 2.1% 2.1% 2.2% General and Administrative 2.3% 3.0% 2.4% 2.6% 2.7% 2.8% CORPORATEWIDE HEADCOUNT Sales 16,525 16,525 16,525 17,500 17,500 17,500 Direct Field Sales 4,025 4,025 4,025 4,500 4,500 4,500 Tele-Sales & Sales Support 12,500 12,500 12,500 13,000 13,000 13,000 Marketing 3,900 3,900 3,900 3,900 3,900 3,900 General and Administrative 8,236 8,236 8,236 8,300 8,300 8,300 Research and Development 4,300 4,300 4,300 4,500 4,500 4,500 Services 46,010 46,010 46,010 45,000 45,000 45,000 Technical Support 22,360 21,360 20,360 20,260 20,260 20,760 Deployment/Testing 2,740 3,740 4,740 4,740 4,740 4,740 Professional Services 20,910 20,910 20,910 20,000 20,000 19,500 Manufacturing/Assembly and Other 17,029 17,029 17,029 18,800 18,800 16,801 Total Employees 96,000 96,000 96,000 98,000 98,000 98,000 SOURCE: TBR ESTIMATES AND DELL FINANCIALS33 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Graphs TBRFinancial Strategy Graphs DELL TWO-YEAR QUARTERLY REVENUE AND GROWTH TBR DELL REVENUE AND OPERATING MARGINTBR $20,000 30% 10% $18,000 Revenue (in $ Millions) $16,000 20% $15,000 8% Operating Margin In $ Millions 10% $12,000 $12,000 6% 0% $9,000 $8,000 4% -10% $6,000 $4,000 -20% 2% $3,000 $0 -30% 0% $0 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. Revenue Y/Y Growth Rate Est.SOURCE: TBR AND DELL Revenue Operating Margin SOURCE: TBR AND DELL TBR DELL PERCENT EXPENSE BY FUNCTION 12% Percent Apps Revenue 10% 8% 6% 4% 2% 0% 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. S&M G&A R&D SOURCE: TBR AND DELL34 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Graphs TBRFinancial Strategy Graphs TBR YEAR-TO-YEAR REVENUE GROWTH TBR GROSS MARGIN 30% 40% 20.5% 21.7% 19.4% 20% 11.0% 30% 21.0% 19.5% 10% 5.3% 16.6% 20% 16.6% 16.9% 0% 10%-10%-20% 0% 4Q09 1Q10 2Q10 3Q10 4Q10 4Q09 1Q10 2Q10 3Q10 4Q10 DELL CBQ AVERAGE DELL CBQ AVERAGESOURCE: TBR AND DELL SOURCE: TBR AND DELL TBR OPERATING MARGIN 12% 10% 8% 6.7% 7.3% 6% 4.8% 3.4% 3.5% 4% 2% 0% 4Q09 1Q10 2Q10 3Q10 4Q10 DELL CBQ AVERAGE SOURCE: TBR AND DELL35 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Graphs TBRResource Management Strategy Graphs TBR ANNUAL REVENUE PER EMPLOYEE TBR ANNUAL G&A EXPENSE PER G&A EMPLOYEE $800 $645 $637 $634 $623 $631 $300 $600 In $ Thousands $200 In $ Thousands $181 $185 $190 $200 $171 $400 $200 $100 $0 $0 4Q09 1Q10 2Q10 3Q10 4Q10 4Q09 1Q10 2Q10 3Q10 4Q10 DELL CBQ AVERAGE DELL CBQ AVERAGE SOURCE: TBR AND DELL SOURCE: TBR AND DELL TBR ANNUAL R&D EXPENSE PER DEVELOPER $350 $280 In $ Thousands $210 $152 $146 $154 $154 $150 $140 $70 $0 4Q09 1Q10 2Q10 3Q10 4Q10 DELL CBQ AVERAGE SOURCE: TBR AND DELL36 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Graphs TBRFuture Outlook Graph TBR 4Q10 CBQ VENDOR POSITION AND PROJECTION: DELL INC. 10.00 9.00 Trailing 12-Month Average Growth for 8.00 RISC/Multi-platform Vendors = 20.4% CBQ Corporate Score 7.00 1Q11 Est. 6.00 3Q10 5.00 4.00 4Q10 3.00 2.00 1.00 0.00 0% 5% 10% 15% 20% 25% Quarterly Revenue Growth Year-to-year SOURCE: TBR AND DELL37 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Dell Acquisitions TBRAcquisitions drive Dell’s professional services and storage growth Dell AcquisitionsCompany Scope of Acquisition Deal SizeSecureWorks Dell acquired information security services provider SecureWorks to bolster its UndisclosedFebruary 2011 portfolio of IT-as-a-Service offerings and drive sales of bundled solutions globally.Compellent The acquisition of Compellent will expand Dell’s enterprise storage portfolio,Technologies better positioning the company to deliver need-based, integrated solutions; $820 million additionally, the nature of Compellent’s portfolio will better align Dell for growthDecember 2010 in the cloud.Boomi The November 2010 acquisition of Boomi will play an integral part in forming Dell’s cloud offering into a holistic solutions management business, moving the UndisclosedNovember 2010 company beyond hardware. The acquisition of Ocarina Networks will enhance Dell’s solutions portfolioOcarina Networks through the addition of deduplication and compression optimization technology for storage systems. The acquisition will allow Dell to focus on providing solution UndisclosedJuly 2010 efficiency while minimizing operational and data management costs for its customers. Dell has signed a definitive agreement to acquire Scalent, an advanced softwareScalent and dynamic infrastructure provider, to integrate into its Advanced Infrastructure Management (AIM) solution. The company will leverage Scalent’s easily UndisclosedJuly 2010 accessible data integration software to implement on Dell’s storage and network platforms.38 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Dell Acquisitions TBRAcquisitions drive Dell’s professional services and storage growth Dell AcquisitionsCompany Scope of Acquisition Deal Size • The acquisition of appliance solutions provider KACE Networks will expand Dell’s footprint in the public and SMB sectors by strengthening its System Undisclosed;Kace Networks Management portfolio. TBR estimatesFebruary 2010 • The acquisition of KACE and its KBOX appliance solutions will allow Dell to a deal below enhance its bundled services offering. $200 million • The deal is expected to close during 1Q10. Dell purchased the assets of Israel-based storage company Exanet in February.Exanet The acquisition will allow Dell to open its first R&D center in Israel and $12 millionFebruary 2010 strengthen its presence in the storage market and its product portfolio by utilizing Exanet’s storage technology. • Dell moved to acquire Perot Systems in September 2009 in an effort to jump- start its professional services revenue growth.Perot Systems • Perot Systems will become a subsidiary and will be known as “Perot Systems, a $3.9 billionSeptember 2009 Dell company.” • Following the deal, Dell’s combined services revenue will reach nearly $8 billion annually, up from $5 billion. • Dell purchased the Microsoft IT consulting and solutions segments of Allin Corp. in January 2009 to obtain consulting expertise around core MicrosoftAllin Corp. software, such as MS Exchange, as well as the software maker’s business Purchased for management products. $12 million inJanuary 2009 stock • Dell folded the two segments, and a total of 100 employees, into its Dell Global Services consulting group.39 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Dell Acquisitions TBRDell Acquisitions Dell AcquisitionsCompany Scope of Acquisition Deal Size • Dell’s acquisition of The Networked Storage Company, a storage-The Networked oriented services company located in Bracknell, England, Undisclosed; TBRStorage Company complements its storage business. estimates a deal of lessFebruary 2008 • The Networked Storage Company’s capabilities dovetail with those of than $200 million Dell’s largest acquisition to date: EqualLogic. • Dell’s January 2008 acquisition of EqualLogic gave the PC maker greater coverage of the storage systems market with EqualLogic iSCSIEqualLogic Valued at products, along with relationships with VARs.January 2008 $1.4 billion • Dell has since leveraged EqualLogic, along with its relationship with EMC, to drive higher storage revenue. • Dell’s December 2007 acquisition of remote service providerEverdream Everdream gave the PC maker the framework it needed to provide Undisclosed; TBR remote management of hardware and software. estimates a deal of lessDecember 2007 than $200 million • Everdream is the backbone of Dell’s remote managed services. • Dell’s November 2007 acquisition of ASAP gave the PC maker aASAP Software platform for remotely managing software licensing. Valued at $340 millionNovember 2007 • ASAP’s large catalog of software titles also drives significant revenue for Dell’s Software & Peripherals business. • Dell acquired SilverBack Technologies in July 2007 to gain its remoteSilverBack monitoring technology for PCs, servers, storage and networking Undisclosed; TBRTechnologies products. estimates a deal of lessJuly 2007 • SilverBack technology became the main component of Dell’s remote than $200 million hardware management service.40 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Dell Retail Partners TBRDell has partnered with top retailers in each geography Dell North America Retail PartnersRetailer RelationshipBest Buy Best Buy began offering Dell consumer PCs, including Dell XPS models, in its 900 stores in the United States in January 2008.Costco U.S.-based big box store Costco began offering Dell PCs in its stores in 1Q08.Wal-Mart Wal-Mart offers Dell PCs in more than 4,000 of its Wal-Mart and Sam’s Club locations in the United States, Argentina, Brazil and Mexico. Staples, which began offering Dell PCs and printers in 1,400 stores in November 2007, is currently Dell’s exclusiveStaples U.S. retail partner for printers; Staples also offers free recycling of Dell PCs, monitors, printers and peripherals at its store locations. Dell EMEA Retail PartnersCarrefour Group Carrefour began stocking Dell PCs in its stores in France, Belgium and Spain in January 2008.Tesco Dell partnered with Tesco, Britain’s largest retailer, in December 2007 to offer Dell PCs and displays in Tesco stores in the United Kingdom, Ireland, Poland, Czech Republic and Slovakia.DSG International DSGI, best known for its Dixons brand, sells Dell consumer PCs in approximately 1,300 stores in Europe. Dell APAC Retail PartnersBic Camera Bic Camera and its Sofmap subsidiary offer Dell XPS and Inspiron desktops and notebooks to consumers in Japan. Bic Camera operates 22 stores, while its Sofmap subsidiary has 14.Courts LTD Courts, Singapore’s largest seller of electronics, began selling Dell consumer PCs in the fall of 2007.Croma Croma, which currently operates 21 electronics megastores in India’s largest cities, began offering Dell’s consumer PCs in April 2008.Gome Gome, China’s largest electronics retailer, offers Dell Inspiron and XPS products in about 900 of its stores, including its 50 flagship stores in China’s Tier 1 cities.Officeworks Officeworks offers a broad selection of Dell hardware, ranging from XPS notebooks to printers, ink and displays, throughout its 104 stores across Australia.Suning Suning, a top Chinese electronics retailer, began offering Dell PCs in 300 stores across China in 1Q08.41 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Key Alliances TBRPartners help Dell deliver a range of products and services Key Dell PartnersCompany Partnership Impact on DellAdvanced PC and server AMD provides Dell with an alterative to Intel processors for both consumer and business-Micro processors, oriented PCs, while AMD’s ATI division provides Dell with graphics for its desktops andDevices PC graphics notebooks. • Intel provides processors and chipsets for Dell desktops, notebooks and servers. PC and serverIntel processors • Dell offers Intel’s processors across all of its business and consumer PC lines, as well as servers, Precision workstations and Alienware gaming systems. Server-based • Citrix provides Dell with server-based computing environments, consulting services and operating technical support.Citrix systems software, • Citrix is Dell’s primary partner for thin-client deployments. Citrix also provides software to consulting Dell for remote access. • Dell began factory-installing the Ubuntu Linux OS, a free OS sponsored by Canonical, on Linux operating its consumer PCs in May 2007.Canonical system software • Ubuntu is an important part of Dell’s emerging market strategy, as many of the low-cost PCs it offers in markets such as China come with Linux as the default OS.Cyber-Ark The two companies formed a global OEM alliance through which Cyber-Ark’s Privileged OEM partnerSoftware Identity Management Suite is bundled with Dell’s PowerEdge R410 and R610 rack servers. • Dell and EMC have a close alliance spanning hardware and software. Storage hardwareEMC • EMC provides a suite of software tools to manage Dell-EMC CX storage products. and software • Dell also offers EMC’s Legato, VMware and Documentum software. • The PC maker pre-installs Google’s software on its systems and also sells Google’s search Software and appliances, including the Google Mini.Google search • Dell also serves as the manufacturer of the Google Search Appliance (GSA) 6.0 for technology enterprise customers.42 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Key Alliances TBRDell Alliances Key Dell PartnersCompany Partnership Impact on Dell • Dell partners with McAfee for its antivirus technology.McAfee Antivirus software • The companies’ partnership also spans anti-spyware and home firewall software. • Microsoft provides Dell with a range of software – from Office to Microsoft SQL Software and Server to Exchange, Visio, Project and SharePoint.Microsoft services • Microsoft also provides Dell with PC, server and NAS storage operating systems. PC and workstation • NVIDIA provides Dell with a broad range of graphics processors for Dell desktops,NVIDIA notebooks and workstations. graphics hardware • Dell and Oracle perform joint product development and collaborate on on-site Database, support for customers, including software migration and tuning, under a partnershipOracle development and designed to promote Oracle’s 9i, 10g and RAC database solutions. support • Dell also pre-installs Oracle 10g on Dell PowerEdge servers. • Dell and Red Hat have been partners in a development and service and support Linux operating alliance aimed at businesses since 2000.Red Hat system software • Dell pre-installs Red Hat Linux on its workstations and PowerEdge servers. • Dell and SAP jointly market SAP software for Dell PowerEdge servers.SAP ERP software • Dell also collaborates with SAP to offer service and support for joint customers. • Dell and Symantec have a broad partnership under which Dell offers Symantec’s Norton antivirus and anti-spam software, backup and recovery, disk managementSymantec Antivirus software and Veritas tape backup software with its hardware. • Dell has also partnered with Symantec’s Altiris to co-develop the Dell Unified Manageability Architecture, a management console for Dell PCs and servers.43 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Dell Product Lineup TBRDell’s Product Portfolio: Consumer PCs Dell XPS, Alienware and Adamo desktops and notebooks Full size Starting price range for notebooks: $950 to $1,799 Starting price range for desktops: $950 to $3,100 Dell Studio desktop and notebooks: Model Line Starting price range for notebooks: Thin-light $620 to $950 Starting price range for desktops: $500 to $950 Inspiron desktops and notebooks Starting price range for notebooks: $400 to $1,075 Starting price range for desktops: Entry-level $250 to $1,128 Inspiron Mini netbook Starting price range: $300 to $583 Price and Functionality44 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Dell Product Lineup TBRDell’s Product Portfolio: Business PCs Performance Latitude XFR notebook Fully rugged notebook Starting price range: $3,704 to $4,379 Precision desktops and notebook workstations Starting price range for desktops: Model Lineup $840 to $1,899 Starting price range for notebooks: Mainstream $1,728 to $2,109 Value/ OptiPlex desktops Latitude E Family notebooks Starting price range for desktops: $425 to $1,361 Starting price range for notebooks: $744 to $2,356 Vostro desktops and notebooks Starting price range for desktops: $278 to $976 OptiPlex 160: Entry Starting price: $568 Starting price range for notebooks: $399 to $1,091 Price and Functionality45 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
  • Appendix – Dell Product Lineup TBRDell’s Product Portfolio: Enterprise Servers Blade PowerEdge M Series: Two-way blade servers Starting price: $4,300 to $5,300 PowerEdge R Series: Rack-mount Model Line Family of 1-way, 2-way and 4-way rack- mount servers Starting price range: $1,800 to $14,800 PowerEdge 1950, 2900, 2950: Family of 2-way rack-mount servers Starting price: $1,800 to $2,000 PowerEdge T Series Tower Family of tower servers Starting price range: $1,300 to $7,400 Price and Functionality46 Dell Inc. 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.
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