Dell Corporate

Thanks for joining us on Dell Shares.  I recently sat down with Brian Gladden, Senior Vice President and CFO, to discuss our recent announced actions to further globalize our operations around four key customer segments including large enterprise, public, and small and medium businesses. In this conversation, I ask Brian about what this new organization means for Dell, its customers, and why now was the right time to make this change.  We also touch base on the impact of this announcement on our financial statements and reporting structure and how this affects our broader cost savings initiatives. 

I invite you to watch the v-log.  We will respond to your questions and comments posted on this blog site as well as via email and over the phone. We look forward to hearing from you!  Thanks!

Today we announced actions to further globalize our operations around four key customer segments including large enterprise, public, and small and medium businesses. The leadership for these new units will be Steve Schuckenbrock (large enterprise), Paul Bell (Public) and Steve Felice (Small & Medium Business).

The globalization of our customer segments began over a year ago with our Consumer business, led by Ron Garriques. Today’s announcement is a natural evolution for Dell as we heard from customers they are not bound by regional difference, rather they are bound together by their needs to simplify IT and deploy information technology in better ways to meet specific business requirements.

Dell has significantly improved its competitiveness, reengineered its supply chain, broadened the product portfolio and introduced Dell to more people in more places than ever before. Four distinct business organizations capitalize on the company’s competitive advantages and will strengthen our execution and increase collaboration going forward. By organizing globally around these additional three commercial customer segments we expect to accelerate innovation, increase responsiveness and drive competitiveness.

Realigning is nothing new to Dell. We have a history of segmenting as our clients’ IT needs often present opportunities for us to further improve how we serve them. These changes facilitate quicker decision making and each business group will possess greater global accountability and responsibility for responding to customer needs, and for anticipating and leading industry change. As a result of these changes our customers will benefit from more comprehensive solutions and products specific to their industries, and services that best meet their specialized requirements. And when we do the right thing for our customers, shareholders also benefit.

We speak to business opportunities and financial results in these terms as we move forward. As our new segmentation evolves, we plan to align our financial reporting to reflect this new structure during the first half of Dell’s fiscal-year 2010.

In a related move, the company announced that Mike Cannon, president, Global Operations, will retire from Dell effective Jan. 31, leaving many contributions to transforming the company’s supply chain and improving its cost competitiveness. Mr. Cannon will be succeeded by Jeff Clarke who, in addition to his responsibilities as head of Dell’s Business Client Product Group, will become vice chairman, Global Operations. Mr. Cannon will serve as a consultant to Dell. Also, having completed the transformation of Dell’s marketing organization, including revitalizing the brand and instilling new levels of marketing effectiveness and efficiency, Chief Marketing Officer, Mark Jarvis, will leave Dell this fiscal quarter and provide ongoing counsel to Dell through the consulting business that brought him to the company.

All of these actions are part and parcel of our efforts to streamline our operations and remove $3 billion plus in annualized costs from our business by fiscal-year 2011. Our cost optimization strategy remains unchanged and we will continue to look for opportunities to improve our operations and reduce costs in ways that benefit customers, add to our long-term success and drive value for shareholders.

I encourage you to read our press release today and as always, we will respond to your questions and comments posted on this blog site as well as via email and over the phone. So please feel free to post on this site or contact us directly. We look forward to hearing from you!

On Friday, we had our regular SRI update following our quarterly earnings announcement.  Unlike mainstream investor calls, we did a deep dive into key areas of our Corporate Responsibility Strategy.  Our two-hour call reviewed the progress and challenges we have in areas like global recycling, product stewardship, sustainable operations, political spending, giving and more.
__

We highlighted the fact that we have met our commitment of becoming carbon neutral ahead of schedule. Our first action to achieve this was to improve the efficiency of our internal operations.  The next step was to increase the amount of renewable energy we purchased world-wide. We increased our Green Powder from 13 Mm kWh to 116M kWh.  Finally, we responsibly off-set the remainder of our emissions by purchasing verified RECs and VERs. 
__

Another engaging discussion focused on the five new projects in our supply chain.  We also reviewed the audit program, specialized training and enhanced quarterly business reviews.  We completed a case study with our supplier Lite-On, which along with efforts with CSR Asia, focused on the EICC, Labor, Management Systems and Environmental Health and Safety. 
__

We discussed the status of legislation for global recycling, including where we are progressing and where we face challenges.  Annual recovery rates are back up, primarily driven by consumers both in the US and in Europe.  More exciting news on computer recycling occurred with the announcement of our partnership with Staples where we are offering free recycling in any of their 1,500 stores without having to make a purchase.
__

Finally, we addressed our stakeholder engagement strategy and gave a peek into the upcoming multi-part stakeholder engagement to vet out our strategy to become the greenest technology company on the planet.   
__

Today’s SRI call included participation mainly from firms in the investment world, but also a number of NGOs who attended at our invitation.  We are focusing these stakeholder engagements on material issues and holding discussions in regions where they are most important.  We are continuing in our goal to increase transparency with our stakeholders.  Thank you for your interest in Dell and I hope you found this session valuable.

When Dell announced Q2 financial results on Aug. 28, 2008, we reported continued conservatism in IT spending in the U.S., which had extended into Western Europe and several countries in Asia. The company is seeing further softening in global end-user demand in the current quarter and we felt it was important to share that with investors.

Dell will continue to execute against its five growth priorities of global consumer, small and medium business, enterprise, notebooks and emerging countries. The company expects to incur costs as it realigns its business to improve competitiveness, reduce headcount and invest in infrastructure and acquisitions, but is committed to working aggressively on cost initiatives that will benefit its P&L over time with improved growth, profitability and cash flow. The company grew unit shipments faster than the industry in the first half of calendar 2008 and expects to grow faster than the industry for the full year. 

In addition, Dell Senior Vice President & CFO, Brian T. Gladden, will address investors at the Bank of America Conference in San Francisco today, Tuesday, September 16.  Brian will talk about the company's strategic priorities and then take questions from the audience.  Brian's remarks will be Webcast live at 1:00 p.m. CT, and then be accessible via replay online at  http://www.dell.com/investor. I encourage you to listen in. In addition, the company will report third quarter fiscal year 2009 results Nov. 20, 2008, after the close of market.

Each quarter as earnings approaches, I get an opportunity to discuss our sustainability efforts at Dell.  This quarter, I'm excited about presenting our first ever Corporate Responsibility report - Listen - Commit - Deliver for fiscal year 2008.  Actually, we have had an Environmental Responsibility report since fiscal year 1998; in fiscal year 2004 we changed this report to a Sustainability report, and today we take it one evolution further as a Corporate Responsibility report. 

At Dell, our commitment to corporate responsibility is something we take seriously.  Our sustainability programs are not created in a vacuum.  Management regularly meets with investors to discuss issues Dell is working on and what new issues we should put on our agenda. As we celebrate our successes and strive to reach new goals, it is important that our stakeholder's validate that we are setting and reaching the right goals and objectives. 

With this year's report we are also pleased to announce Dell is a member of the following indexes:  Dow Jones Sustainability Indexes, FTSE4Good and several KLD Indexes, including the Domini 400 Social Index.  We believe inclusion in these indexes is evidence of external recognition of our commitment to listen and execute against objectives management has set for the company.

Michael's letter to stakeholders describes our strategic initiatives and priorities across the environment and supply chain and in corporate governance for fiscal year 2008. These include our commitments to:

• be the greenest technology company on the planet and the first computer company to achieve carbon-neutral operations by the end of 2008, which we accomplished ahead of schedule
• continue leadership with our climate strategy and global recycling programs
• partner with our customers in energy-efficiency and climate-protection initiatives
• broaden our Global Citizenship commitment
• recommit our efforts to improve sustainability governance

The following information highlights some of the commitments we have made after listening to internal and external perspectives and how we have progressed toward meeting those commitments. Not every goal can be achieved in one year. Therefore, we will continue to report some multiyear efforts going forward.

Becoming the Greenest Technology Company on the Planet

In 2007 we launched a long-term, global effort to partner with our customers to become the greenest technology company on Earth. Our Zero-Carbon Initiative maximizes the energy efficiency of our products and also includes the efforts of Dell operations, employees and suppliers. Our environmental commitment means we will also continue to take a precautionary approach to chemicals management and to reducing waste generated in our operations.

Global Citizenship Commitments

Our Global Citizenship program continues to evolve. In 2007, Dell drove more awareness about the Electronic Industry Citizenship Coalition (EICC) Code of Conduct (the Code) with our suppliers, holding two supplier education workshops. Our approach is not only to audit, but also to educate, share best practices and partner with Dell's supply base to implement the Code.

The Fight against HIV/AIDS

We joined the (PRODUCT)RED^TM campaign, an organization which raises funds to buy anti-retroviral drugs for HIV-positive individuals in Africa. This pandemic affects our customers, employees, suppliers and communities around the globe, and the increase in infection rates is of great concern.

Continued Philanthropic Commitment

Dell and the Dell Foundation contribute to our communities through grants, event sponsorships, in-kind donations and employee volunteerism. In 2007, close to 30,000 employees volunteered in their communities and participated in many Dell-sponsored events.  The financial impact of donations and in-kind work from Dell, the Dell Foundation and employee giving reached over $26 million dollars.

Building Customer Partnerships

We believe that it is critical for our customers to be engaged in reducing environmental impact from our products. By partnering with the ReGeneration, a group of people of all ages from around the globe who believe this as well, we are empowering millions of customers through conversations and communities. 

We launched ReGeneration.org, a meeting place to engage experts, advocates, visionaries, authors and customers in an effort to foster dialogue on the environment - dialogue that will lead to action and results.

The goals and achievements highlighted in this report would not be possible without the counsel and guidance of stakeholders like you. Let me conclude by thanking you for your support over the past year. 

I welcome your continued feedback on this report, and look forward to our continued partnership on this journey.