Dell Corporate

We held our annual shareholder meeting for fiscal year 2008 today in Austin.  This was a great opportunity to introduce our new CFO Brian Gladden to our shareholders and to showcase some of the new products we have recently introduced.  If you haven't already done so, I would encourage you to check out our revamped website and new products like our XPS and Studio laptops, which are truly best-in-class.

At the meeting, Michael provided an update on the progress the company has made on the long-term goals he laid out at the analyst meeting in April, including the $3 billion cost opportunity and our five core growth priorities. Brian provided a financial update to shareholders including where we stand on the commitments that we made at the last shareholder meeting.  These initiatives are to improve our financial systems and processes, grow faster than the addressable opportunity, improve profitability and competitiveness, and maximize cash flow.

I'd like to elaborate a little on the commitment to maximize cash flow because cash flow generation is a critical measure of the success of any business and the preeminent driver of shareholder valuation creation.  By virtue of our business model, we have outstanding cash flow generation capabilities.  For example, our cash flow from operations over the past four quarters was $4.2 billion and more than $22 billion over the past five years, and through a tough business cycle, we grew cash flow from operations per share from $1.55 to $1.76 in the past five years.

So, what drives cash flow from operations?  Cash flow from operations, an accounting metric, is calculated by taking net income from the income statement and adjusting for balance sheet items that relate to operations - mostly working capital accounts such as accounts receivable, inventories, prepayments, accounts payables and accruals.  You can find cash flow from operations by looking at our cash flow statement.  The Primary working capital accounts - accounts receivable, inventories, and accounts payable collectively drive a company's cash conversion cycle (CCC) and at Dell, we have a negative CCC which is a favorable attribute.  It fundamentally means that we are highly efficient at managing these working capital accounts.

About now you are likely asking why does this all matter?  Well the answer is that the intrinsic value of any enterprise (or company security in this case) is equal to the discounted (present) value of the future stream of economic benefits that an investor expects to receive from the asset.  Said differently, investors discount the future cash flow streams back to present value and add them up to determine the current value of a company or stock.

Ultimately, our focus on cash flow generation stems from the recognition that it is used as a proxy for cash profits and as the primary input for determining value in fundamental securities analysis and we are confident in our ability to continue generating positive cash flows from operations going forward.  Michael and Brian both commented on this focus throughout their presentations today, so I encourage you to listen to the replay of the meeting.

We had five proxy proposals voted on this year.  The company presented three routine proposals including the election of directors, the ratification of our independent auditor, and the approval of the executive annual incentive bonus plan.  All three proposals passed with the number of favorable votes obtaining at least 89% of the total votes cast.  In addition, two stockholder proposals were presented this year:  Proposal 1 - Reimbursement of Proxy Expenses did not pass, receiving 63% votes "Against" and 33% votes "For" the proposal and Proposal 2 - Advisory Vote on Executive Compensation, which also failed to pass as results were 60% votes "Against" and 37% votes "For" the proposal.

The meeting may be over, but we value your feedback and questions.  We encourage you to be a part of the conversation through this blog as it provides an additional means of two-way communication outside of the traditional annual meeting.

In preparation of our upcoming Annual Meeting of Stockholders on July 18^th in Austin, we filed our proxy documents this week and began mailing ‘notice’ to shareholders.  In the past, we mailed shareholders paper documents, including an annual report, proxy statement and voting instructions.  As a result of a U.S. Securities and Exchange Commission e-proxy rule, public companies are now allowed to provide their proxy materials over the Internet, which is commonly referred to as ‘notice and access.’

Why are we blogging about it now?  It’s a big change and we wanted to make the transition as easy as possible.  We filed our proxy statement on Monday, June 2^nd and will begin mailing ‘notices’ to you this Friday, June 6^th.  Once you receive your notice in the mail, you can access the voting page online, where you will find:  the proxy statement, our annual report on form10-K, a link to our 2008 interactive year-in-review website and information on the time and location of our annual meeting of stockholders.

Proxy voting is an important means by which you as an investor can have a say in the business operations and activities of Dell.  Whether you plan to attend our annual meeting on July 18^th or not, we value your opinion and your vote.  Shareholder feedback enables us to serve you better.  We’re listening.

Today we announced that Brian Gladden will be joining Dell as Senior Vice President on May 20^th and he will assume the role of CFO on June 13.  Brian will succeed Don Carty, who has made a lasting positive impact on Dell's financial organization since stepping in as our CFO in early 2007. Don will remain on our board of directors continuing his long contribution to Dell.  Brian will be responsible for all aspects of Dell's finance function including accounting, financial planning and analysis, tax, treasury, audit, and investor relations.

Brian brings a wealth of experience to Dell as an operationally focused CFO who adds further experience with globally scaled companies to one of the deepest management benches in the industry. Brian joins us from SABIC Innovative Plastics Holding BV, formerly GE Plastics, where he was President and CEO of among the world's largest producers of high-performance polymers used by electronics, office equipment, computer, and automotive manufacturers. 

His responsibilities at SABIC spanned a global organization with revenues of $7 billion and some 10,000 employees operating 60 manufacturing and technology facilities in 20 countries. Brian's previous experience includes nearly 20 years with General Electric (GE) in a variety of financial and management roles. He served as Vice President and General Manager of GE Plastics' resin business; CFO of GE Plastics; and, Vice President and CFO of GE Medical Systems Healthcare IT business during his career with the company.  He was named a GE corporate officer while CFO of GE Plastics and had formerly served for five years as part of  GE's corporate audit staff.