Earnings

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

Dell announced second-quarter fiscal-year 2010 financial results on August 27th. Dell reported improved business performance with revenue up 3% sequentially to $12.8 billion.  EPS was $0.24 per share and operating expenses were down 14% versus Q2 last year.  In addition, cash flow from operations exceeded $1 billion.     

I strongly encourage you 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.

Best,

Rob

Dell Equity Analyst Meeting

Today more than 200 participants, including analysts and investors, joined us in Austin for Dell's Analyst meeting.  There were also a record breaking number of webcast attendees for this meeting, where we broke our record of 400, rising to nearly 500 participants. This meeting was an opportunity to hear directly from Dell's senior leadership on our near-term operating agenda and long-term strategy and address questions or concerns.  The presentations from this meeting are available for viewing online,

This year, the meeting and briefings took place the same day.  Dell executives discussed the company's strategy and operating agenda along with a financial overview and update on its four customer segments. 

We are competing in a rapidly changing environment.  As a result, we are improving our core business performance while expanding and extending across a broader set of customer solutions.   Key messages delivered today were Dell's differentiated view of how to win in enterprise, our strategic mission "to provide disruptively great value to our customers", and that both these items will be realized through a combination of internal investments, partnerships and inorganic growth.

The meeting was opened by Michael Dell, Chairman of the Board and CEO, where he discussed Dell's key assets, view on the enterprise, and long-term priorities.  Michael noted that Dell has a strong presence and currently holds #1 or #2 share position in most key segments.  He also covered strategic priorities to deliver operating income and cash flow growth as well as the requirements needed to win longer-term.

Brian Gladden, CFO, followed and built on striking the optimal balance between liquidity, profitability and growth.  Brian reviewed Dell's operating agenda, gave an update on the solid progress on $4B cost reductions, and provided a long-term value creation framework that articulated Dell's vision for revenue growth, profitability and cash flow generation.  He also stated that Dell is well positioned to benefit from an economic recovery and will continue to provide strong liquidity.

Steve Schuckenbrock, President of Large Enterprise, walked us through our higher-value & higher-margin enterprise vision which addresses innovation and virtualization in next-generation data centers vs. our competitors' full-stack approach.  He also reviewed how Dell is delivering steady growth in its core business while powering enterprise efficiency through innovation without legacy.  For example, we approach services very differently from our competitors.  We believe services should be customizable, a la carte, and available remotely.  We let customers choose which services they want and when they want them.  And we provide solutions where consultants are available - but not required. 

Paul Bell, President of Public Sector business, addressed how Dell is aligning its global organization for balanced geographic expansion via vertical solutions designed for three unique customer bases -Education, Government, and Healthcare.  Paul mentioned the challenges in this segment due to the macro environment, but also highlighted opportunities that exist internationally as well as those related to stimulus funds. Requirements needed to win in the Public sector include deep expertise in the sector-specific challenges, solutions investments, technology leadership, and solid partnerships.

Steve Felice, President of Small & Medium Business, presented Dell's plans to lead in the SMB space through innovative solutions and its go-to-market strategy.   Steve reviewed the varied needs across the customer base of Small Businesses and Medium Businesses as well as regional opportunities to grow the business. He highlighted the solutions and product offerings that will help drive growth in each of these areas along with the benefits offered through SMB's go-to-market strategy.  Having a multi-channel strategy will enable Dell to expand presence in under-represented geographies and drive incremental growth in enterprises and solutions.

Ron Garriques, President of Dell's Consumer Group, walked through consumer's brand architecture, its multi-channel customer portfolio and how it's bringing a disruptive approach to PCs.   Dell grew to 33,000 retail stores globally in two years.  Clearly, there is a lot of opportunity to continue to grow in this retail space.  Ron reviewed Consumer's plan to grow faster than the industry through aggressively managing costs to reflect the multi-channel infrastructure, expanding global presence, and offering competitive products.  He also reviewed plans to reinvigorate Dell.com to create a destination for all customers.

If you haven't already seen the presentations, I encourage you to watch a replay of them here. 

As always, we welcome any questions or comments.

-Rob

This afternoon after the close of the financial markets, we shared a press release announcing that year-over-year demand for our information-technology products appears to have stabilized, and that we expect to report a slight sequential revenue increase in our fiscal second-quarter 2010, which ends July 31.  In the announcement, we also said that we anticipate a modest decline in Q2 gross margins, the result of higher component costs, a competitive pricing environment, and an unfavorable mix of product and business-segment demand.  Also, we shared that over the longer horizon we are targeting 5-7 percent compounded annual sales growth, operating income at or above 7 percent of revenue, and cash flow from operations exceeding net income. It's important to point out that such results are dependent on broad global economic improvement accompanied by higher worldwide IT spending, including sustained double-digit growth rate in demand for computer systems.  As always is the case with announcements like these, I highly encourage you to read the complete press release for additional details and disclosures.

This news was released prior to our analyst meeting, which will take place Tuesday, July 14^th here in Austin, TX and is available live via webcast on Dell.com/Investor.  The analyst meeting is an opportunity for analysts, investors, and you to listen to Dell Leadership and review our strategy and financial overview, and ask questions directly to the executives which you can do via the web this year.   At the analyst meeting, Dell executives will discuss the company's strategy and operating agenda along with a financial overview and update on its four customer segments.

As always, our IR team is here to answer your questions.

 - Rob

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.

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.