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UNITED STATES

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

For the Quarterly Period Ended May 2, 2003

Commission file number: 0-17017

Dell Computer Corporation

One Dell Way

(512) 338-4400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months and (2) has been subject to such filing requirements for the past 90 days.     Yes þ     No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes þ     No

As of the close of business on May 30, 2003, 2,568,630,864 shares of common stock, par value $.01 per share, were outstanding.

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PART I — FINANCIAL INFORMATION

DELL COMPUTER CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DELL COMPUTER CORPORATION

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DELL COMPUTER CORPORATION

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DELL COMPUTER CORPORATION

Basis of Presentation — The accompanying unaudited condensed consolidated financial statements of Dell Computer Corporation (the “Company”) should be read in conjunction with the consolidated financial statements and notes thereto filed with the U.S. Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2003. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to present fairly the financial position of the Company and its consolidated subsidiaries at May 2, 2003 and January 31, 2003, and the results of their operations and their cash flows for the three months ended May 2, 2003 and May 3, 2002.

NOTE 3 — EARNINGS PER COMMON SHARE, INCLUDING PRO FORMA EFFECTS OF STOCK-BASED COMPENSATION

Basic earnings per share is based on the weighted effect of all common shares issued and outstanding and is calculated by dividing net income by the weighted average shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted average number of common shares used in the basic earnings per share calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive common shares outstanding.

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The following table sets forth the computation of basic and diluted earnings per share for the three months ended May 2, 2003 and May 3, 2002, and illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

Under SFAS No. 123, the value of each option is estimated on the date of grant using the Black-Scholes option pricing model, which was developed for use in estimating the value of freely traded options. Similar to other option pricing models, it requires the input of highly subjective assumptions, including stock price volatility. Because (1) the Company’s employee stock options have characteristics significantly different from those of traded options and (2) changes in the subjective input assumptions can materially affect the estimated fair value, management’s opinion is that the existing option pricing models (including Black-Scholes) do not provide a reliable measure of the fair value of the Company’s stock options.

The Company does not include equity instruments in its calculation of diluted weighted average shares if the effect of including such instruments is antidilutive. Consequently, equity put contracts (for the fiscal 2003 period only) and employee stock options exercisable for 180 million and 196 million have been excluded from the calculation for the first quarter of fiscal 2004 and 2003, respectively.

The Company’s comprehensive income is comprised of net income, foreign currency translation adjustments, unrealized gains (losses) on derivative financial instruments related to foreign currency hedging, and unrealized gains on marketable securities classified as available-for-sale. Comprehensive income for the three-month periods ended May 2, 2003 and May 3, 2002, was as follows:

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The Company conducts operations worldwide and is primarily managed on a geographic basis, with those geographic segments being the Americas, Europe, and Asia Pacific-Japan regions. The Americas region, which is based in Round Rock, Texas, covers the United States, Canada, South America, and Latin America. The Company has two reportable segments within the Americas: Business and U.S. Consumer. The Americas Business segment includes sales to commercial, government and education customers. The European region, which is based in Bracknell, England, covers the European countries and also some countries in the Middle East and Africa. The Asia Pacific-Japan region covers the Pacific Rim, including Australia and New Zealand, and is based in Singapore. The accounting policies of the Company’s reportable segments are the same as those described in the summary of significant accounting policies in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2003. The Company allocates resources to and evaluates the performance of its segments based on operating income Corporate expenses are included in the Company’s measure of segment operating income for management reporting purposes.

The table below presents information about the Company’s reportable segments for the three-month periods ended May 2, 2003 and May 3, 2002:

Changes in the Company’s aggregate product warranty liability are presented in the following table:

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The Company is currently a partner in Dell Financial Services L.P. (“DFS”), a joint venture with CIT Group, Inc. (“CIT”). The joint venture allows the Company to provide customers with various financing alternatives and asset management services as a part of the total service package offered to the customer. CIT, as a financial services company, is the entity that finances the transaction between DFS and the customer.

The Company may sell equipment directly to customers who, in turn, enter into loans with DFS to finance their purchases. The Company recognized revenue on equipment sold to end-user customers which was financed with DFS loans in the amount of $734 million and $446 million during the first quarter of fiscal 2004 and fiscal 2003, respectively. In addition, when the Company’s customers desire lease financing, the Company usually sells equipment to DFS, and DFS will enter into direct financing lease arrangements with the customers. The Company recognized revenue on sales to DFS in the amount of $282 million and $258 million during the first quarter of fiscal 2004 and 2003, respectively. Neither CIT nor DFS have any recourse or rights of return to the Company, except that end-user customers may return equipment pursuant to the Company’s standard return policy. The Company receives a referral fee from DFS for introducing customers to DFS for financing alternatives. Such fees were $30 million and $12 million for the first quarter of fiscal 2004 and fiscal 2003, respectively, and are included in net revenue.

In accordance with the partnership agreement between the Company and CIT, losses generated by DFS are allocated to CIT. Net income generated by DFS is allocated 70% to the Company and 30% to CIT, after CIT has recovered any cumulative losses. The Company’s share of DFS net income is reflected in investment and other income, net, and totaled $2 million and $300,000 of pretax earnings during the first quarter of fiscal 2004 and 2003, respectively. In the event DFS is terminated with a cumulative deficit, the Company is not obligated to fund any losses. Although the Company has a 70% equity interest in DFS, because the Company cannot and does not exercise control over DFS, the investment is accounted for under the equity method. The Company’s investment in DFS at May 2, 2003 was $44 million.

In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities (“VIE”). FIN 46 requires that if a company holds a controlling financial interest in a VIE, then the assets, liabilities and results of the VIE’s activities should be consolidated in the entity’s financial statements. As a result, Dell will be required to consolidate its existing master lease facilities effective during the third quarter of fiscal 2004. Dell expects to expend approximately $640 million to acquire the assets held in master lease facilities during fiscal 2004. Dell is currently assessing the impact that FIN 46 may have on its accounting for DFS.

In January 2003, the Securities and Exchange Commission (“SEC”) issued a final rule requiring enhanced disclosure of material off-balance sheet transactions, arrangements, and other relationships with unconsolidated entities that may have a material current or future effect on financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses. The rule also requires a tabular disclosure of future payments due under contractual commitments. The disclosure requirements will become effective for Dell’s fiscal 2004 annual report on Form 10-K. Dell does not expect this pronouncement to have a material impact on its consolidated results of operations or financial position.

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Statements in this Report that relate to future results and events are based on Dell’s current expectations. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties. For a discussion of factors affecting Dell’s business and prospects, see “Item 1 — Business — Factors Affecting Dell’s Business and Prospects” in Dell’s Annual Report on Form 10-K for the fiscal year ended January 31, 2003.

All percentage amounts and ratios were calculated using the underlying data in thousands. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full fiscal year. All market share references included in this discussion are according to IDC.

First Quarter Overview

During the first quarter of fiscal 2004, Dell’s performance once again significantly exceeded the industry, resulting in Dell regaining the position as the world’s No. 1 supplier of personal computer systems. Year-over-year unit shipments increased 29% while industry shipments declined 1% (excluding Dell), resulting in market share gains in every region and product line. Dell generated revenue of $9.5 billion in the first quarter while operating income grew by 37% year over year to $811 million. Conversely, Dell’s top competitors collectively continued to experience declining revenues in their per