Dell Corporate

Dell announced first-quarter fiscal-year 2010 financial results on May 28^th. Brian Gladden, Senior Vice President and CFO, discusses the results and the company's outlook. Please review earnings materials on the Dell Investor Relations Q1 events page.  All comparisons are year-over-year unless otherwise noted.

We announced Q1 results today.  Revenue was down 23% to $12.3 billion.  EPS was $0.15 per share and cash from operations was $761 million.     

I am pleased to have Brian Gladden join us on Dell Shares to provide his view on the first quarter, the economy, industry demand, and the company's outlook. 

Also, we strongly encourage investors to read the full press release and earnings presentation; and listen to our conference call that can be found on the investor relations web site.   As always, we encourage you to ask questions or leave comments on Dell Shares.

Dell’s commitment to be the Greenest Technology Company on the Planet continues to make great progress.  This quarter, TBR announced that Dell topped its first-ever Corporate Sustainability Index Benchmark Report for 2009, which measures the environmental initiatives of 40 companies in the computer hardware, software, professional services and network and telecommunications sectors.  In addition, GreenFactor ranked Dell the #1 green technology brand where more than 3,500 enterprise IT decision makers were surveyed on their perception of 26 enterprise technology brands.  Both rankings provide some real world support for our efforts toward integrating environmental sustainability throughout our operations and products.

Beginning in July, we will also begin providing more transparency into Dell’s environmental metrics and for the first time will publish a list of our Tier One suppliers in this year’s Corporate Responsibility report.

Over the past year, we have participated in and held several stakeholder engagement meetings.  The first was the Electronics Goes Green Conference in Europe.  Next, there were a series of conference calls facilitated by CERES, which is a national network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges such as global climate change.  The calls were dedicated to specific topics around our environmental strategy, Enviro 2.0.  And lastly, a large group stakeholder meeting was held here in Round Rock where all previous attendees were invited onsite to present their views directly to Michael Dell.  From all of these meetings, we learned from our stakeholders that they wanted to have a broader and clearer understanding of our Enviro 2.0 strategy.  They also told us to strengthen our commitment by publishing environmental metrics and providing more information regarding our supply chain. 

In support of this feedback, we have since decided to publish the following metrics in the online version of our upcoming Corporate Responsibility report due out in July.  We are still in the process of deciding actual targets and will update this information online.

·        Resources:  Total Water, Total Paper, Percent FSC Paper

·        Recycle & Reuse:  Total Mfg Non-hazardous Waste, Percent Recycled and Percent Reused

·        Buildings:  LEED Score New Space

·        Future Consideration:  Hazardous Waste; Hazardous Waste Reduction; DELL Total Non-hazardous Waste, Percent Recycled and Percent Reused

The meetings we held with stakeholders at these events gave us an opportunity to really listen to what they needed to assess our commitment to the environment.   In some places we were in agreement, while in other areas we openly discussed the business challenges we face and sometimes agreed to disagree.  What was so inspiring was the fact that we all left the meetings with a better understanding of each other. 

We believe our decision to publish metrics that strengthen the five pillars of our Enviro 2.0 strategy makes sense to stakeholders, provides them with more confidence in our strategy, and increases their visibility to track our progress.

As always, we invite your feedback.

Tod Arbogast

Director, Dell Sustainable Business

We are scheduled to report our Fiscal 2010 first quarter earnings on May 28, 2009.  When you look at our financial tables you will notice a few key changes to how we report some of the information and I describe those changes below.  Our financial tables will also include our Fiscal 2009 results, by quarter, restated for these changes so that you can easily compare our year-over-year results.  As always, our IR team is here to answer your questions - so after we report our first quarter earnings we'd be happy to answer any questions you have about these changes.

Global Customer Segments

On December 31, 2008 we announced that to serve business customers with faster innovation and greater responsiveness we would change the organization of our commercial business from three geographic segments (Americas, Asia-Pacific and Japan and EMEA) to three global customer segments: Large Enterprise, Public and Small and Medium Business.  Our Consumer business, which was globalized in 2008, would remain unchanged.  In our first quarter, we completed our reorganization and changed our internal reporting to correspond to how we run our business.  As a result, we will now report revenue and operating income for four global customer segments.

Service and Product Revenue

There will be two primary changes to the reporting of our product and service revenue. One will affect our profit and loss (P&L) presentation and the other will change our supplemental line of business financial information for enhanced services and products.

• First, the Securities and Exchange Commission Rules (SEC) require enhanced service revenue and cost of goods sold (COGS) associated with those revenues to be presented separately on the P&L once that revenue reaches 10% of a company's total revenue. As a result of our strategy to diversify our revenue and profit streams we have hit that percentage and will now break out the services revenue and COGS. With the change in our P&L presentation we will classify revenue and COGS related to software with post contract customer support in the same line item as enhanced services in our P&L.
• Second, as a part of our review of our services disclosure we identified certain offerings that had previously been reported in services revenue that are substantially more similar to our standard warranty offerings, or "attached to the box" and therefore that revenue is more appropriately classified as product revenue and will be included in the product revenue in the future.

Organizational Effectiveness Expenses (OE)

Global customer segment operating income will no longer reflect the impact of OE expenses which include items such as severance and facility closure expenses. 

Compensation

Stock compensation expense has historically been excluded from the operating income of our segment disclosure.  In FY 2010 we have shifted a portion of our broad based long-term performance compensation from equity to cash.  The cash portion of the long-term performance compensation will be included along with stock compensation and excluded from segment operating income.  

Dell announced fourth-quarter fiscal-year 2009 financial results on Feb. 26. Brian Gladden, Senior Vice President and CFO, discusses the results and the company's outlook. Please review earnings materials on Dell Investor Relations Q4 events page.  All comparisons are year-over-year unless otherwise noted.

We announced Q4 results today.  Revenue was down 16% to $13.4 billion.  EPS was $0.18 per share and cash from operations was $729 million.  For the full year fiscal 2009, revenue was $61.1B and EPS was $1.25. Cash flow from operations was $1.9B, and we completed the year with $9.5B in cash and investments.

Each quarter we evolve the format here on Dell Shares to provide you with a little more insight into what is going on in our business.   This quarter, instead of writing our traditional earnings blog, I am pleased to have Brian Gladden join us on Dell Shares to provide his view on the fourth quarter, the economy, industry demand and the company's outlook. 

 Also, we strongly encourage investors to read the full press release and earnings presentation; and listen to a replay of our conference call that can be found on the investor relations web site after the earnings call.   As always, we encourage you to ask questions or leave comments on Dell Shares.

In March last year, we announced actions to enhance the company's competitiveness, improve our cost structure and optimize operations.  At that point, we announced the closure of desktop manufacturing in Austin.  More recently, we announced a new global segmentation and the migration of computer systems production in EMEA to Dell facilities in Poland and contract manufacturers by the beginning of Dell's fiscal 2011.  The combination of these efforts, in addition to a revitalization of our entire product and service portfolio , continue to help us drive toward delivering on $3 billion in annualized cost savings by the end of fiscal 2011.

Today we announced that we expect to recognize in our fiscal 2009 fourth quarter a pretax expense of $135 million associated with further optimizing our global manufacturing and distribution network, and the continued rationalization of Dell's workforce. 

In addition, we will incur $145 million in pretax, non-cash stock option expense, including $106 million in accelerated vesting of previously awarded stock options.   Dell routinely evaluates its compensation program, including the use of stock options.  The acceleration, effective Jan. 23, covers 20.4 million shares with a weighted-average exercise price of $22.02.  The action means Dell will recognize all expenses associated with these options in Q4, rather than over time.  This action is a non-cash expense based on SFAS 123R stock option accounting.  The remaining $39 million of stock expense is related to an annual true-up of full-year stock-based compensation forfeitures. 

Together the cost-reduction and stock-option actions will total pretax $280 million, or 11 cents per share.  The company will announce its Q4 and full fiscal-year 2009 financial results on Feb. 26.