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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the Fiscal Year Ended
January 28, 2005 |
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period
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Commission File Number: 0-17017
Dell Inc.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other
jurisdiction of
incorporation or organization)
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74-2487834
(I.R.S. Employer
Identification No.)
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One Dell Way, Round Rock, Texas 78682
(Address of principal executive offices) (Zip Code)
(512) 338-4400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
None
Securities Registered Pursuant to Section 12(g) of the
Act:
Common Stock, par value $.01 per share
Preferred Stock Purchase Rights
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
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes x No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the
Act). Yes x No o
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Approximate aggregate market
value of the registrant’s common stock held by
non-affiliates as of July 30, 2004, based upon the closing
price reported for such date on The Nasdaq National
Market
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$79.9 billion |
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Number of shares of common stock
outstanding as of February 25, 2005
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2,459,003,783 |
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DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this report, to the
extent not set forth herein, is incorporated by reference from
the registrant’s definitive proxy statement relating to the
annual meeting of stockholders to be held in July 2005, which
definitive proxy statement will be filed with the Securities and
Exchange Commission within 120 days after the end of the
fiscal year to which this report relates.
TABLE OF CONTENTS
This report contains forward-looking statements that are
based on Dell’s current expectations. Actual results in
future periods may differ materially from those expressed or
implied by those forward-looking statements 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.”
All percentage amounts and ratios were calculated using
the underlying data in thousands. Unless otherwise noted, all
references to industry share and total industry growth data are
for personal computers (including desktops, notebooks and x86
servers), and are based upon information provided by IDC
Worldwide PC, Printer, and MFP Trackers, March 2005. Share data
is for the full calendar year and all Dell growth rates are on a
fiscal year-over-year basis.
PART I
General
Dell Inc., with fiscal 2005 net revenue of
$49.2 billion, is a premier provider of products and
services worldwide that enable customers to build their
information-technology and Internet infrastructures. Dell offers
a broad range of enterprise systems (servers, storage,
workstations, and networking products), client systems (notebook
and desktop computer systems), printing and imaging systems,
software and peripherals, and global services. During calendar
2004, Dell was the number one supplier of personal computer
systems worldwide as well as in the United States. Dell’s
global market leadership is the result of a persistent focus on
delivering the best possible customer experience by selling
products and services directly to customers.
Dell, a Delaware corporation, was founded in 1984 by Michael
Dell on a simple concept: by selling computer systems directly
to customers, Dell could best understand their needs and
efficiently provide the most effective computing solutions to
meet those needs. Dell is based in Round Rock, Texas, and
conducts operations worldwide through its subsidiaries. Unless
otherwise specified, references to Dell include its consolidated
subsidiaries. Dell operates principally in one industry and is
managed in three geographic segments: the Americas, Europe, and
Asia Pacific-Japan regions. See “Item 1 —
Business — Geographic Areas of Operations.”
Business Strategy
Dell’s business strategy combines its direct customer model
with a highly efficient manufacturing and supply chain
management organization and an emphasis on standards-based
technologies. This strategy enables Dell to provide customers
with superior value; high-quality, relevant technology;
customized systems; superior service and support; and products
and services that are easy to buy and use. The key tenets of
Dell’s business strategy are:
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A direct relationship is the most efficient path to the
customer. A direct customer relationship, also referred to
as Dell’s “direct business model,” eliminates
wholesale and retail dealers that add unnecessary time and cost
or diminish Dell’s understanding of customer expectations.
As a result, Dell is able to offer customers superior value by
avoiding expenditures associated with the retail channel such as
higher inventory carrying costs, obsolescence associated with
technology products, and retail mark-ups. In addition, direct
customer relationships provide a constant flow of information
about customers’ plans and requirements and enable Dell to
continually refine its product offerings. At www.dell.com,
customers may review, configure and price systems within
Dell’s entire product line; order systems online; and track
orders from manufacturing through shipping. |
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Customers can purchase custom-built products and
custom-tailored services. Dell believes the direct business
model is the most effective model for providing solutions that
address customer needs. In addition, Dell’s flexible,
build-to-order manufacturing process enables Dell to turn over
inventory every four days on average, and reduce inventory
levels. This allows Dell to rapidly introduce the latest
relevant technology more quickly than companies with
slow-moving, indirect distribution channels, and to rapidly pass
on component cost savings directly to customers. |
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Dell is the low-cost leader. Dell’s highly efficient
supply chain management and manufacturing organization,
efficient direct business model, and concentration on
standards-based technologies allow Dell to maintain the lowest
cost structure among its major competitors, and to pass those
savings to its customers. Dell’s relentless focus on
reducing its costs allows it to consistently provide customers
with superior value. |
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Dell provides a single point of accountability for its
customers. Dell recognizes that as technology needs become
more complex, it becomes more challenging for customers to
efficiently address their information technology needs. Dell
therefore strives to be the single point of accountability for
customers with complex technological challenges. Dell offers an
array of services designed to provide customers the ability to
maximize system performance, efficiency, and return on
investment. |
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Non-proprietary standards-based technologies deliver the best
value to customers. Dell believes that non-proprietary
standards-based technologies are critical to providing customers
with relevant, high-value products and services. Focusing on
standards gives customers the benefit of extensive research and
development from Dell and its entire supply chain, rather than a
single company. Unlike proprietary technologies, standards
provide customers with flexibility and choice while allowing
their purchasing decisions to be based on performance, cost, and
customer service. |
Product Development
Dell is focused on developing standards-based technologies that
incorporate highly desirable features and capabilities at
competitive prices. Management believes that Dell employs a
unique and inherently better collaborative approach to product
design and development. With direct customer input, Dell’s
engineers work with a global network of technology companies to
architect new system designs, influence the direction of future
development, and integrate new technologies into Dell’s
products. This collaborative approach enables Dell to quickly
and efficiently deliver new products and services to the market.
During fiscal 2005, Dell’s research, development, and
engineering expenses were $463 million, compared with
$464 million for fiscal 2004 and $455 million for
fiscal 2003.
Products
Dell designs, develops, manufactures, markets, sells, and
supports a wide range of products that are customized to
customer requirements. These include enterprise systems, client
systems, printing and imaging systems, software and peripherals.
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Servers. Dell’s standards-based PowerEdge™ line
of servers is designed to provide customers affordable
performance, reliability, and scalability. Options include high
performance rack and tower servers for enterprise customers and
aggressively priced tower servers for small organizations and
networks. Dell ranks number one in the U.S. and number two
worldwide in shipments of x86 servers (based on standard Intel
architecture). During calendar 2004, Dell increased its share of
worldwide x86 server sales by 1.5 percentage points and
maintained its number two position in that category at 24.8%. |
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Storage. Dell/ EMC and Dell’s PowerVault™ lines
of storage products offer customers a comprehensive portfolio of
cost-effective hardware and software products to store, serve,
and protect |
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customer data. Dell offers external storage, tape backup
products, network attached storage, fibre channel arrays,
storage area networks, and rack solutions. Total storage revenue
grew 16% during fiscal 2005 and continues to be supported by
Dell’s four-year running partnership with EMC Corporation. |
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Workstations. Dell Precision™ desktop and mobile
workstations are intended for professional users who demand
exceptional performance to run sophisticated applications, such
as three-dimensional computer-aided design, digital content
creation, geographic information systems, computer animation,
software development, and financial analysis. In calendar 2004,
Dell held the number one position in the U.S. and worldwide for
branded workstation unit shipments. |
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Networking Products. Dell’s PowerConnect™
switches connect computers and servers in small- to medium-sized
networks. PowerConnect products offer customers enterprise-class
features and reliability at a low cost. |
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Notebook Computers. Dell offers two lines of notebook
computer systems. The Latitude™ line is designed to address
a wide range of business and organizational needs, including
powerful performance, portability, and flexibility. Latitude
offerings range from wireless-ready, highly expandable
full-featured models to thin, light ultra-portable models. The
Inspiron™ line is targeted to customers who require
high-performance computer systems at competitive prices. Typical
customers are individuals or small-to-medium sized businesses
that require optimum performance for their investment. Dell
ranked number one in the U.S. and worldwide in notebook computer
shipments in calendar 2004. |
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Desktop Computer Systems. Dell customers can select from
two lines of desktop computer systems. The OptiPlex™ line
is designed for corporate, institutional, and small business
customers who demand highly-reliable, stable, manageable, and
easily serviced systems within networked environments. The
Dimension™ line is designed for small businesses and home
users requiring fast technology turns and high-performance
computing. The Dimension line typically features the latest
high-performance components. Dimension customers include
corporate and institutional customers as well as small
businesses and home users. Dell ranked number one in the U.S.
and worldwide in desktop shipments in calendar 2004. |
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Printing and Imaging Systems. Dell offers a wide array of
Dell-branded printers, ranging from photo printers for consumers
to large multifunction lasers for corporate workgroups. The Dell
printer product line is focused on making printing easier to
buy, own, and use. All Dell printers feature the Dell Ink
Management System™ or Dell Toner Management System™,
which simplifies the purchasing process for supplies by
displaying ink or toner levels on the status window during every
print job and proactively prompting users to order replacement
cartridges directly from Dell. During fiscal 2005, Dell shipped
more than five million Dell-branded printers. |
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Software and Peripherals. Dell offers a multitude of
competitively priced software and peripherals products,
including a wide range of software titles, monitors, plasma and
LCD televisions, MP3 players, handhelds, notebook
accessories, networking and wireless products, memory, digital
cameras, projectors, power adapters and scanners. Dell
introduced several new peripherals products in fiscal 2005,
including a new line of plasma televisions. |
Services
By applying the direct business model to its global services
business, Dell seeks to simplify customers’ computing
experience by offering a full range of flexible, tailored
solutions. Dell offers a portfolio of services that help
customers maximize the value of their information technology
investments, rapidly deploy systems, and educate IT
professionals and consumers.
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Managed Services. Dell’s wide range of IT management
services allows customers to lower annual service costs and
enhance performance without sacrificing control of their
systems. Dell |
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Managed Services assists customers in planning, deployment,
maintenance, asset management, on-site field services, and other
related services. |
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Professional Services. Dell Professional Services helps
businesses utilize emerging technology, enhance efficiencies,
reduce business risk, and maximize return on technology
investment. Using its expertise and best practices in technology
consulting, application development, solutions integration, and
infrastructure design, Dell designs, develops, and implements
end-to-end technology solutions. |
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Deployment Services. Dell’s deployment services are
designed to rapidly configure and deploy Dell systems and
products into IT environments. Dell’s custom factory
integration services allow customers to configure systems to
meet their specific hardware and software needs. Additional
deployment services include asset management and recovery
services, custom delivery services, installation services,
managed deployment services, and image management services. |
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Support Services. Dell offers a variety of customized
services and support programs tailored to meet specific customer
requirements. Dell operates Enterprise Command Centers in the
United States, Ireland, China, and Japan to provide rapid,
around-the-clock support for critical enterprise systems.
Additionally, Dell provides a limited warranty for all computer
systems and offers limited 24-hour telephone and online
technical support. Dell also offers warranty upgrades and
services such as CompleteCare™ accidental damage service,
At Home Service for technical support service at home (provided
via third-party contract with the customer), Helpdesk for all
software and peripherals support, and Gold Technical Support for
advanced technical service. |
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Training and Certification Services. Dell offers training
and certification programs for business and consumer customers
worldwide. Dell’s online training programs feature over
1,200 courses for consumer, business, and IT professionals.
The courses are designed for all skill levels and range from
personal finance to business productivity to IT certification. |
Financial Services
Dell offers various financing alternatives, asset management
services, and other customer financial services for its business
and consumer customers in the U.S. through Dell Financial
Services L.P. (“DFS”), a joint venture between Dell
and CIT Group, Inc. (“CIT”). For additional
information about Dell’s financing arrangements, see
“Item 7 — Management’s Discussion and
Analysis of Financial Condition and Results of
Operations — Off-Balance Sheet Arrangements” and
Note 6 of Notes to Consolidated Financial Statements
included in “Item 8 — Financial Statements
and Supplementary Data.” Also see
“Item 1 — Business — Factors
Affecting Dell’s Business and Prospects” for
information about the risks associated with DFS.
Sales and Marketing
Dell sells its products and services directly to its customers
through dedicated sales representatives, telephone-based sales,
and online sales through www.dell.com. Dell’s customers
include large corporate, government, healthcare, and education
accounts, as well as small-to-medium businesses and individual
customers. Within each of Dell’s geographic regions, Dell
has divided its sales and marketing resources among these
various customer groups. No single customer accounted for more
than 10% of Dell’s consolidated net revenue during any of
the last three fiscal years. See “Item 1 —
Business — Factors Affecting Dell’s Business and
Prospects” for information about the risk associated with
government contracts.
Dell’s sales and marketing efforts are organized around the
needs, trends, and characteristics of Dell’s customers.
Dell’s direct business model provides direct and continuous
feedback from its customers, thereby allowing the company to
develop and refine its products and marketing programs for
specific customer groups. This constant flow of communication,
which is unique to the
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direct business model, also allows Dell to rapidly gauge
customer satisfaction and target new or existing products.
For large business and institutional customers, Dell maintains a
field sales force throughout the world. Dedicated account teams,
which include field-based system engineers and consultants, form
long-term relationships to provide our largest customers with a
single source of assistance and develop specific marketing
programs for these customers. For large, multinational
customers, Dell offers several programs designed to provide
single points of contact and accountability with global account
specialists, special global pricing, consistent service and
support programs across global regions, and access to central
purchasing facilities. Dell also maintains specific sales and
marketing programs targeted at federal, state, and local
governmental agencies as well as specific healthcare and
educational markets.
Dell markets its products and services to small-to-medium
businesses and consumers primarily by advertising on television
and the Internet, advertising in a variety of print media, and
by mailing a broad range of direct marketing publications, such
as promotional pieces, catalogs, and customer newsletters. In
certain states as well as non-U.S. locations, Dell also
operates Dell Direct Stores, which are kiosks typically located
within shopping centers, that allow customers to view Dell
products in person and purchase online from Dell with the
assistance of a Dell expert.
Competition
The market for computer systems and services is subject to
intense price competition. In addition to several large branded
companies, there are other branded and generic competitors. Dell
competes primarily based on its technology, direct customer
relationships, value, performance, customer service, quality,
and reliability. Dell’s general practice is to aggressively
pass on cost declines to its customers in order to enhance
customer value while increasing global market share. Dell
expects that the competitive pricing environment will continue
to be challenging, and Dell expects to continue to reduce its
pricing as necessary in response to future competitive and
economic conditions. However, Dell believes that the strength of
Dell’s direct business model, as well as its strong
liquidity position, makes the company better positioned than its
competitors to continue profitable growth in any business
climate. See “Item 1 — Business —
Factors Affecting Dell’s Business and Prospects” for
information about the risks associated with competition.
Manufacturing and Materials
Dell manufactures most of the products it sells and has
manufacturing locations worldwide to service its global customer
base. See “Item 2 — Properties” for
information about Dell’s manufacturing locations. Dell
believes that its manufacturing processes and supply-chain
management techniques provide it a distinct competitive
advantage. Its build-to-order manufacturing process is designed
to allow Dell to significantly reduce cost while simultaneously
providing customers the ability to customize their product
purchases. In addition, Dell purchases some of its products from
third-party original equipment manufacturers and resells them
under the Dell name.
Dell’s manufacturing process consists of assembly, software
installation, functional testing, and quality control. Testing
and quality control processes are also applied to components,
parts, and subassemblies obtained from third-party suppliers.
Quality control is maintained through the testing of components,
subassemblies, and systems at various stages in the
manufacturing process. Quality control also includes a burn-in
period for completed units after assembly, on-going production
reliability audits, failure tracking for early identification of
production and component problems, and information from
Dell’s customers obtained through services and support
programs. Dell is certified, worldwide, by the International
Standards Organization to the requirements of ISO 9001:
2000. This includes the design, manufacture, and service of
computer products in all Dell regions.
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Dell purchases materials, supplies, and product components from
a large number of suppliers. However, in some cases, multiple
sources of supply are not available. In other cases, Dell may
establish a working relationship with a single source if it
believes it is advantageous due to performance, quality,
support, delivery, capacity, or price considerations. Dell
currently relies on Intel Corporation as a sole source supplier
of processors and Microsoft Corporation as a sole source for
various operating system and application software products.
These relationships and dependencies have not caused material
disruptions in the past, and Dell believes that any disruptions
that may occur would not disproportionately disadvantage Dell
relative to its competitors. Also see
“Item 1 — Business — Factors
Affecting Dell’s Business and Prospects” for
information about the risks associated with sole-source
suppliers.
Patents, Trademarks, and Licenses
Dell holds a portfolio of 1,128 U.S. patents and has
719 U.S. patent applications pending as of
January 28, 2005. The inventions claimed in those patents
and patent applications cover aspects of Dell’s current and
possible future computer system products, manufacturing
processes, and related technologies. Dell is developing a
portfolio of patents that it anticipates will be of value in
negotiating intellectual property rights with others in the
industry.
Dell has obtained U.S. federal trademark registration for
its DELL word mark and its Dell logo mark. Dell owns
registrations for 45 of its other marks in the U.S. As of
January 28, 2005, Dell had pending applications for
registration of 18 other trademarks. Dell believes that
establishment of the DELL mark and logo in the U.S. is
material to Dell’s operations. Dell has also applied for or
obtained registration of the DELL mark and several other marks
in approximately 180 other countries.
Dell has entered into a variety of intellectual property
licensing and cross-licensing agreements. In addition, Dell has
entered into nonexclusive licensing agreements with Microsoft
Corporation for various operating system and application
software. Dell has also entered into various software licensing
agreements with other companies.
From time to time, other companies and individuals assert
exclusive patent, copyright, trademark, or other intellectual
property rights to technologies or marks that are important to
the technology industry or Dell’s business. Dell evaluates
each claim relating to its products and, if appropriate, seeks a
license to use the protected technology. The licensing
agreements generally do not require the licensor to assist Dell
in duplicating its patented technology, nor do these agreements
protect Dell from trade secret, copyright, or other violations
by Dell or its suppliers in developing or selling these
products. See “Item 1 — Business —
Factors Affecting Dell’s Business and Prospects” for
information about the risks associated with intellectual
property rights.
Employees
As of January 28, 2005, Dell had approximately
55,200 regular employees, compared to approximately 46,000
as of the end of fiscal 2004. Approximately 24,600 of these
employees were located in the U.S., and approximately 30,600
were located in other countries. While Dell’s workforce
located both inside and outside the U.S. increased during
fiscal 2005, the proportion of Dell’s workforce located
outside the U.S. increased due to a number of factors,
including Dell’s rapid international growth. Dell has never
experienced a work stoppage due to labor difficulties, and
believes that its employee relations are good. Workforce
diversity is an essential part of Dell’s commitment to
quality and the future of Dell, as recognized by Dell’s
receipt of the U.S. Department of Labor’s Exemplary
Voluntary Achievement Award in 2003 for its industry-leading
workforce diversity efforts.
Government Regulation and Environment
Dell’s business is subject to regulation by various federal
and state governmental agencies. Such regulation includes the
radio frequency emission regulatory activities of the
U.S. Federal Communications Commission, the anti-trust
regulatory activities of the U.S. Federal Trade Commission
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Department of Justice, the consumer protection laws of the
Federal Trade Commission, the export regulatory activities of
the U.S. Department of Commerce and the
U.S. Department of Treasury, the import regulatory
activities of U.S. Customs and Border Protection, the
product safety regulatory activities of the U.S. Consumer
Products Safety Commission, and environmental regulation by a
variety of regulatory authorities in each of the areas in which
Dell conducts business. Dell is also subject to regulation in
other countries where it conducts business. Dell did not have
any material environmental remediation or other environmental
costs during fiscal 2005. See “Item 1 —
Business — Factors Affecting Dell’s Business and
Prospects” for information about the risks associated with
government regulation.
Backlog
Dell believes that backlog is not a meaningful indicator of net
revenue that can be expected for any period. There can be no
assurance that the backlog at any point in time will translate
into net revenue in any subsequent period, as unfilled orders
can generally be canceled at any time by the customer. At the
end of fiscal 2005, 2004, and 2003, backlog was not material.
Geographic Areas of Operations
Dell conducts operations worldwide and is managed in three
geographic segments: the Americas, Europe, and Asia
Pacific-Japan regions. The Americas region, which is based in
Round Rock, Texas, covers the U.S., Canada, and Latin America.
Within the Americas, Dell is further segmented into Business and
U.S. Consumer. The Americas Business segment includes sales
to corporate, government, healthcare, education, and small and
medium business customers while the U.S. Consumer segment
includes sales primarily to individual consumers. The European
region, which is based in Bracknell, England, covers Europe, the
Middle East, and Africa. The Asia Pacific-Japan region covers
the Pacific Rim, including Australia and New Zealand, and is
based in Singapore. In fiscal 2005, approximately 38% of
Dell’s consolidated net revenue was attributable to sales
outside the U.S.
As part of its global expansion efforts, Dell recently announced
a new manufacturing facility in North Carolina, with production
to begin in late fiscal year 2006, and new customer-contact
centers in Oklahoma, Canada, India, and El Salvador. Dell
intends to continue to expand its global infrastructure as its
international business continues to grow. See
“Item 1 — Business — Factors
Affecting Dell’s Business and Prospects” for
information about certain risks of international activities. For
financial information about the results of Dell’s operating
segments for each of the last three fiscal years, see
Note 9 of Notes to Consolidated Financial Statements
included in “Item 8 — Financial Statements
and Supplementary Data.”
Dell’s corporate headquarters are located in Round Rock,
Texas. Its manufacturing facilities are located in Austin,
Texas; Eldorado do Sul, Brazil; Nashville and Lebanon,
Tennessee; Limerick, Ireland; Penang, Malaysia; and Xiamen,
China. See “Item 2 — Properties.”
Factors Affecting Dell’s Business and Prospects
There are many factors that affect Dell’s business and the
results of its operations, some of which are beyond Dell’s
control. The following is a description of some of the important
factors that may cause the actual results of Dell’s
operations in future periods to differ materially from those
currently expected or desired.
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General economic, business, or industry conditions may result
in a decrease in net revenue. As a global company with
customers in virtually every business and industry, Dell’s
net revenue could deteriorate as a result of macroeconomic
trends in both the U.S. and abroad. If the economic climate
deteriorates, customers or potential customers could reduce or
delay their technology investments. As a result, Dell’s net
revenue and profitability could be negatively affected. |
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Dell’s business is extremely competitive and no
assurances can be offered that Dell can maintain its competitive
advantage. Dell’s success is based on its ability to
profitably offer its products at a lower price than its
competitors. However, Dell encounters aggressive competition
from numerous companies globally in all aspects of its business.
Accordingly, Dell cannot provide any assurance that it can
maintain or extend this advantage if its competitors alter their
cost structure or business model, or take other actions that
affect Dell’s current competitive advantage. If Dell is
unable to maintain its competitive advantage, a loss of market
share, revenue, or profitability may result. |
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A substantial portion of Dell’s net revenue is dependent
upon international sales, which are subject to risks and
uncertainties. Sales outside the U.S. accounted for
approximately 38% of Dell’s consolidated net revenue in
fiscal 2005. Dell’s future growth rates and success are
dependent on continued growth and success in international
markets. The success and profitability of Dell’s
international operations are subject to numerous risks and
uncertainties, including local economic and labor conditions,
political instability, unexpected changes in the regulatory
environment, trade protection measures, tax laws (including
U.S. taxes on foreign operations), and foreign currency
exchange rates, any of which could potentially adversely affect
Dell’s operations. Further, as Dell generates cash flows in
non-U.S. jurisdictions, the company may experience
difficulty transferring such funds to the U.S. in a tax
efficient manner. During the fourth quarter of fiscal 2005 Dell
determined that the company will repatriate $4.1 billion in
foreign earnings pursuant to a favorable tax incentive provided
by the American Jobs Creation Act of 2004. See
“Item 7 — Management’s Discussion and
Analysis of Financial Condition and Results of
Operations — Income Taxes.” |
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Dell’s overall profitability may not meet expectations
if its product, customer, and geographic mix is substantially
different than anticipated. The profit margins realized by
Dell vary among its products, customers, and geographies.
Consequently, if Dell’s mix of any of these is
substantially different from what it anticipates in any
particular period, Dell’s profitability could be less than
expected. |
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Dell’s net revenue may not meet expectations if it is
unable to accurately predict the effect of seasonality on its
business. Dell experiences seasonal trends in the sale of
its products and services. For example, during Dell’s third
fiscal quarter, sales to government customers (particularly the
U.S. federal government) are typically stronger than in
other quarters, while sales in Europe are often weaker than in
other quarters. Consumer sales are typically strongest during
Dell’s fourth fiscal quarter. As Dell increases its sales
in the highly seasonal consumer sector, this seasonal effect may
increase. If Dell is not able to accurately anticipate seasonal
trends, Dell’s net revenue and profitability could be less
than expected. |
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Infrastructure failures could have a material adverse effect
on Dell’s business. Dell is highly dependent on its
infrastructure in order to achieve its business objectives. If
Dell experiences a problem that impairs its infrastructure, such
as a computer virus, intentional disruption of IT systems by a
third-party, manufacturing failure, or telephone system failure,
the resulting disruptions could impede Dell’s ability to
book or process orders, manufacture, and ship in a timely manner
or otherwise carry on its business in the ordinary course. Any
such events could cause Dell to lose significant customers or
revenue and could require Dell to incur significant expense to
eliminate these problems and address related security concerns.
Further, because Dell’s sales are not generally linear
during any particular quarterly period, the potential adverse
effect resulting from any such events or any other disruption to
Dell’s business could be accentuated if it occurs during a
disproportionately heavy demand or shipping cycle during any
quarterly period. |
| |
| • |
A failure on the part of Dell to effectively manage a product
transition will directly affect the demand for Dell’s
products and the profitability of Dell’s operations.
The technology industry is characterized by continuing
improvements in technology, which result in the frequent
introduction of new products, short product life cycles, and
continual improvement in product performance |
8
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characteristics. Product transitions present some of the
greatest execution challenges and risks for any technology
company. Accordingly, if Dell is unable to effectively manage a
product transition, its business and results of operations could
be negatively affected. In addition, continuing technological
advancement, which is a significant driver of customer demand,
is largely beyond Dell’s control. |
| |
| • |
Disruptions in component availability could unfavorably
affect Dell’s performance. Dell’s direct business
model gives it the ability to operate with reduced levels of
component and finished goods inventories. Dell’s financial
success in recent periods has been due in part to its supply
chain management practices, including its ability to achieve
rapid inventory turns. However, because Dell maintains only
minimal levels of component inventory, Dell’s financial
performance, as well as its ability to satisfy customer needs,
could be negatively affected if it suffers a disruption in
component availability. |
| |
| • |
Dell’s reliance on suppliers creates risks and
uncertainties. Dell’s manufacturing process requires a
high volume of quality components that are procured from
third-party suppliers. Reliance on suppliers, as well as
industry supply conditions, generally involves several risks,
including the possibility of defective parts (which can
adversely affect the reliability and reputation of Dell’s
products), a shortage of components and reduced control over
delivery schedules (which can adversely affect Dell’s
manufacturing efficiencies), and increases in component costs
(which can adversely affect Dell’s profitability). |
| |
| • |
Dell could experience manufacturing interruptions, delays, or
inefficiencies if it is unable to timely and reliably procure
components from certain single-sourced suppliers. Dell
maintains several single-source supplier relationships, either
because alternative sources are not available or the
relationship is advantageous due to performance, quality,
support, delivery, capacity, or price considerations. If the
supply of a critical single-source material or component were
delayed or curtailed, Dell’s ability to ship the related
product in desired quantities and in a timely manner could be
adversely affected. Even where alternative sources of supply are
available, qualification of the alternative suppliers and
establishment of reliable supplies could result in delays and a
possible loss of sales, which could adversely affect operating
results. |
| |
| • |
Dell’s results may be affected if it does not
effectively hedge its exposure to fluctuations in foreign
currency exchange rates and interest rates. Dell utilizes
derivative instruments to hedge its exposure to fluctuations in
foreign currency exchange rates and interest rates. Some of
these instruments and contracts may involve elements of market
and credit risk in excess of the amounts recognized in the
Consolidated Financial Statements. For additional information
about risk on financial instruments, see
“Item 7 — Management’s Discussion and
Analysis of Financial Condition and Results of
Operations — Market Risk.” Further, Dell may
experience a decrease in revenue from its international
operations if it is does not effectively hedge its exposure to
currency fluctuations. |
| |
| • |
Dell’s continued business success may be largely
dependent on its ability to obtain licenses to intellectual
property developed by others on commercially reasonable and
competitive terms. If Dell or its suppliers are unable to
obtain desirable technology licenses, Dell could be prohibited
from marketing products, could be forced to market products
without desirable features, or could incur substantial costs to
redesign its products, defend legal actions, or pay damages. |
| |
| • |
Dell’s failure to attract and retain qualified personnel
could lead to a loss of revenue or profitability. Dell
cannot provide any assurance that it will succeed in attracting
and retaining enough qualified personnel to support its
anticipated rapid international growth and its increasingly
complex product and service offerings. Dell relies in part on
the granting of equity awards to attract and retain qualified
personnel. New accounting regulations regarding the expensing of
stock options may affect both Dell’s ability to
successfully attract and retain qualified personnel and increase
Dell’s compensation costs. |
9
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| • |
Loss of government contracts could have a material adverse
effect on Dell’s business. Government contracts are
subject to future funding that may affect the extension or
termination of programs, and are subject to the right of the
government to terminate for convenience or non-appropriation. In
addition, if Dell violates legal or regulatory requirements, the
government could suspend or disbar Dell as a contractor.
Dell’s suspension or disbarment as a government contractor
would negatively affect Dell’s net revenue and
profitability. |
| |
| • |
Dell cannot provide any assurance that current environmental
laws, or any laws enacted in the future, will not have a
material adverse effect on Dell. Dell’s operations are
subject to environmental regulation in each of the jurisdictions
in which Dell conducts business. Some of Dell’s
manufacturing operations use substances that are regulated in
various jurisdictions. In addition, Dell must comply with new
regulations restricting the company’s ability to include
lead and certain other substances in its products. If Dell does
not comply with applicable rules and regulations in connection
with the use and sale of such substances, Dell could be subject
to liability. Dell could also face substantial costs and
liabilities in connection with product take-back legislation.
Beginning in August 2005, Dell will be subject to the European
Union Waste Electrical and Electronic Equipment Directive as
enacted by individual European Union countries (“WEEE
Legislation”), which makes producers of electrical goods,
including computers and printers, responsible for collection,
recycling, treatment and disposal of recovered products. Dell
does not expect that the impact of the WEEE Legislation and
other similar legislation adopted in Japan and California will
have a material adverse effect on Dell. |
| |
| • |
If DFS is unable to provide financing to Dell’s
customers, Dell would be forced to use alternative sources for
financing for its customers or self-finance these activities
and, as a result, could experience a decline in its cash flow
from operations. Should DFS experience an interruption in
operations, Dell would likely have to use alternative sources
for financing arrangements with its customers. Dell is currently
dependent upon DFS, a joint venture with CIT, to provide
financing for a significant number of customers who elect to
finance Dell products, and DFS is dependent in part upon CIT to
access the capital markets to provide funding for these
transactions. If CIT is unable to access the capital markets,
DFS may not be able to fully fund customer financing
arrangements. Upon any such interruption in services, Dell would
be forced to use alternative sources for financing for its
customers, or self-finance these activities. Although Dell has
sufficient alternative sources for financing these activities,
Dell could nonetheless experience a decline in its cash flow
from operations if it is unable to do so in a timely manner. |
| |
| • |
Armed hostilities, terrorism, natural disasters, or public
health issues could have a material adverse effect on
Dell’s business. Armed hostilities, terrorism, natural
disasters, or public health issues, whether in the U.S. or
abroad, could cause damage or disruption to Dell, its suppliers
or customers, or could create political or economic instability,
any of which could have a material adverse effect on Dell’s
business. Although it is impossible to predict the consequences
of any such events, such events could result in a decrease in
demand for Dell’s products, could make it difficult or
impossible for Dell to deliver products or for its suppliers to
deliver components, and could create delay and inefficiencies in
Dell’s supply chain. |
Trademarks and Service Marks
Unless otherwise noted, trademarks appearing in this report are
trademarks of Dell. Dell disclaims proprietary interest in the
marks and names of others. EMC is a registered trademark of EMC
Corporation.
Available Information
Dell maintains an Internet website at www.dell.com. Dell’s
reports filed with the Securities and Exchange Commission
(“SEC”) (including annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on
Form 8-K, any amendments to these reports, and
Section 16 filings)
10
are accessible through Dell’s Investor Relations website at
www.dell.com/investor, free of charge, as soon as reasonably
practicable after electronic filing. The public may read and
copy any materials filed by Dell with the SEC at the SEC’s
Public Reference Room at 450 Fifth Street, NW, Washington,
DC 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains an Internet site that contains reports, proxy
and information statements, and other information regarding
issuers that file electronically with the SEC at www.sec.gov.
Executive Officers of Dell
The following table sets forth the name, age, and position of
each of the persons who were serving as executive officers of
Dell as of March 7, 2005:
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| Name |
|
Age | |
|
Title |
| |
|
| |
|
|
|
Michael S. Dell
|
|
|
40 |
|
|
Chairman of the Board
|
|
Kevin B. Rollins
|
|
|
52 |
|
|
President and Chief Executive
Officer
|
|
William J. Amelio
|
|
|
47 |
|
|
Senior Vice President, Asia
Pacific-Japan
|
|
Paul D. Bell
|
|
|
44 |
|
|
Senior Vice President, Europe,
Middle East and Africa
|
|
Jeffrey W. Clarke
|
|
|
42 |
|
|
Senior Vice President, Product Group
|
|
Martin J. Garvin
|
|
|
52 |
|
|
Senior Vice President, Worldwide
Procurement and Global Customer Experience
|
|
Alexander Gruzen
|
|
|
42 |
|
|
Senior Vice President, Product Group
|
|
John S. Hamlin
|
|
|
39 |
|
|
Senior Vice President,
U.S. Consumer Business
|
|
Joseph A. Marengi
|
|
|
51 |
|
|
Senior Vice President, Americas
|
|
Paul D. McKinnon
|
|
|
54 |
|
|
Senior Vice President, Human
Resources
|
|
John K. Medica
|
|
|
46 |
|
|
Senior Vice President, Product Group
|
|
Randall D. Mott
|
|
|
48 |
|
|
Senior Vice President and Chief
Information Officer
|
|
Glenn E. Neland
|
|
|
56 |
|
|
Senior Vice President, Worldwide
Procurement and Global Customer Experience
|
|
Rosendo G. Parra
|
|
|
45 |
|
|
Senior Vice President, Americas
|
|
James M. Schneider
|
|
|
52 |
|
|
Senior Vice President and Chief
Financial Officer
|
|
Lawrence P. Tu
|
|
|
50 |
|
|
Senior Vice President, General
Counsel and Secretary
|
Michael S. Dell — Mr. Dell currently
serves as Chairman of the Board of Directors of Dell. He has
held this role since he founded the company in 1984.
Mr. Dell also served as Chief Executive Officer of Dell
from 1984 until July 2004. He sits on the Foundation Board of
the World Economic Forum, serves on the executive committee of
the International Business Council, and is a member of the
U.S. Business Council. He also serves on the
U.S. President’s Council of Advisors on Science and
Technology and sits on the governing board of the Indian School
of Business in Hyderabad, India.
Kevin B. Rollins — Mr. Rollins currently
serves as President and Chief Executive Officer of Dell. In this
role, he is responsible for Dell’s day-to-day global
operations and establishes Dell’s strategic direction.
Mr. Rollins joined Dell in April 1996 as Senior Vice
President, Corporate Strategy, was named Senior Vice President,
General Manager — Americas in May 1996, and was named
Vice Chairman in 1997. In 2001, Mr. Rollins’ title was
changed from Vice Chairman to President and Chief Operating
Officer. He was named Chief Executive Office of Dell in July
2004. For 12 years prior to joining Dell, Mr. Rollins
was employed by Bain & Company, an international
strategy consulting firm, most recently serving as a director
and partner. Mr. Rollins received a Master of Business
Administration degree and a Bachelor of Arts degree from Brigham
Young University. Mr. Rollins is a member of the
university’s President’s Leadership Council and the
Marriott School National Advisory Council at Brigham Young
University, where he founded and continues to sponsor the
11
Rollins Center for E-Commerce. In April 2003, Mr. Rollins
was appointed by President George W. Bush to serve on the
Advisory Committee for Trade Policy and Negotiation, offering
counsel to the U.S. Trade Representative on matters of
policy affecting national interests, and is a member of the
Computer Systems Policy Project and the U.S. Business
Council. Mr. Rollins is also active in the American
Enterprise Institute and the Juvenile Diabetes Research
Foundation.
William J. Amelio — Mr. Amelio joined Dell
in March 2001 as Senior Vice President, Relationship Group, a
position he shared with Mr. Marengi, and was named Senior
Vice President, Asia Pacific-Japan in May 2001. In this
position, Mr. Amelio is responsible for Dell’s
operations in all markets in the Asia Pacific-Japan region,
including Dell’s manufacturing and customer-contact centers
in that region. Prior to joining Dell, Mr. Amelio was
employed by NCR Corp., last serving as Executive Vice
President and Chief Operating Officer of NCR’s Retail and
Financial Group. Prior to joining NCR, Mr. Amelio served as
the President and Chief Executive Officer for Honeywell
International Inc.’s transportation and power systems
divisions. Preceding that, he led the turbo charging systems
business at AlliedSignal Inc. before its merger with Honeywell.
His career also includes 18 years with International
Business Machines Corp. in a variety of senior-management
positions, including general manager of operations for
IBM’s personal computer company. Mr. Amelio holds a
master’s degree in Management from Stanford University and
a bachelor’s degree in Chemical Engineering from Lehigh
University.
Paul D. Bell — Mr. Bell joined Dell in
1996 and has served as Senior Vice President, Europe, Middle
East and Africa since February 2000. In this role, Mr. Bell
is responsible for Dell’s operations in all markets in the
Europe, Middle East and Africa region, including Dell’s
manufacturing and customer-contact centers in that region. Prior
to this, Mr. Bell served as Senior Vice President, Home and
Small Business. Prior to joining Dell in July 1996,
Mr. Bell was a management consultant with Bain &
Company for six years, including two years as a consultant for
Dell. Mr. Bell received bachelor’s degrees in Fine
Arts and Business Administration from Pennsylvania State
University and a Master of Business Administration degree from
the Yale School of Organization and Management.
Jeffrey W. Clarke — Mr. Clarke has served
as Senior Vice President, Product Group since January 2003. In
this role, he is responsible, along with Mr. Gruzen and
Mr. Medica, for the worldwide development, marketing,
quality, and delivery into manufacturing of all Dell client,
workstation, networking, server and storage systems, as well as
the strategic technology direction for these businesses.
Mr. Clarke joined Dell in 1987 as a quality engineer and
has served in a variety of engineering, and management roles. In
1995 Mr. Clarke became the director of desktop development,
and from November 2001 to January 2003 he served as Vice
President and General Manager, Relationship Product Group.
Mr. Clarke received a bachelor’s degree in Electrical
Engineering from the University of Texas at San Antonio.
Martin J. Garvin — Mr. Garvin is Senior
Vice President, Worldwide Procurement and Global Customer
Experience. In this role he shares responsibility with
Mr. Neland for procurement and supply chain activities and
for managing the customer experience initiative on a worldwide
basis. Mr. Garvin joined Dell in August 1997, and until
March 2003 served as Vice President, Worldwide Procurement where
he and Mr. Neland shared responsibility for global supply
chain optimization, including responsibility for cost, quality,
availability, technology, and service for all computer system
commodities and sub-systems. Prior to joining Dell,
Mr. Garvin held a variety of executive level positions at
Hewlett-Packard Company, Sun Microsystems Inc., and NetEdge
Systems, Inc. Mr. Garvin holds a master’s degree in
business administration and a bachelor’s degree in
biological sciences from California State University at
San Jose.
Alexander Gruzen — Mr. Gruzen joined Dell
as Senior Vice President, Product Group in August 2004. In this
role, he is responsible along with Mr. Clarke and
Mr. Medica for worldwide development, marketing, quality,
and delivery into manufacturing of Dell client, workstation,
networking, server and storage systems, as well as the strategic
technology direction for these businesses. Prior to joining
Dell, Mr. Gruzen was employed by Hewlett-Packard Company,
last serving as Senior Vice
12
President and General Manager of the Mobile Computing Global
Business Unit. Prior to the merger of Hewlett-Packard and Compaq
Computer Corporation in 2002, Mr. Gruzen was employed by
Compaq where he served as Vice President and General Manager,
Mobile Division, Access Business Group after holding the
position of Vice President, Asia Consumer Group. Mr. Gruzen
joined Compaq in 1999. Mr. Gruzen holds Bachelor of Science
and Master of Science degrees in Aeronautical and Astronautical
Engineering from the Massachusetts Institute of Technology, and
a Master of Business Administration degree from Harvard
University.
John S. Hamlin — Mr. Hamlin has been in
charge of the U.S. Consumer business since May 2000, and
was named Senior Vice President, U.S. Consumer Business in
January 2003. In that role, he has full profit and loss
responsibility for the U.S. consumer business. In February
2004, Mr. Hamlin was assigned management responsibility for
Dell’s international customer-contact centers. Prior to his
current role, Mr. Hamlin served as Vice President, Home and
Small Business in Japan, and managed Dell’s preferred
accounts segment in Japan. Mr. Hamlin joined Dell in March
1996, and held a variety of positions within Dell prior to
moving to Japan. Prior to joining Dell, Mr. Hamlin was in
venture capital for three years and was a management consultant
for Bain & Company for six years. Mr. Hamlin is a
graduate of Dartmouth College and holds a master’s degree
in Business Administration from Harvard Business School.
Joseph A. Marengi — Mr. Marengi joined
Dell in 1997 and serves as Senior Vice President, Americas. In
this position, Mr. Marengi shares responsibility with
Mr. Parra for Dell’s Americas business units, serving
large and small corporate, government, education, healthcare,
and small and medium business customers in the U.S., Canada, and
Latin America. He is also responsible for Dell’s services
business and for Dell’s manufacturing operations in Austin,
Nashville, and Brazil. Prior to joining Dell, Mr. Marengi
worked at Novell, Inc., most recently serving as its President
and Chief Operating Officer. Prior to joining Novell in 1989,
Mr. Marengi served as Vice President of Channel Sales for
Excelan, Inc. and in various other executive, sales, and
information management positions. From 1978 through 1981,
Mr. Marengi served in the U.S. Coast Guard and Coast
Guard Reserve, reaching the rank of Lieutenant Commander.
Mr. Marengi earned a bachelor’s degree in Public
Administration from the University of Massachusetts and a
master’s degree in Management from the University of
Southern California. Mr. Marengi serves on the Corporate
Advisory Board of the USC Marshall School of Business.
Paul D. McKinnon — Mr. McKinnon joined
Dell in November 1997 as Vice President, Human Resources. He was
named Senior Vice President, Human Resources in May 2000 and
continues to serve in that role. He is responsible for all human
resources functions and activities as well as security, global
diversity, and corporate communications. From July 1994 to
November 1997, Mr. McKinnon was a principal of McKinnon
Consulting. Prior to July 1994, Mr. McKinnon was partner of
Novations Group and Harbridge House Inc., and from 1982 to 1986
was an Assistant Professor at the University of Virginia. He
holds a bachelor’s degree in History and a master’s
degree in Organizational Behavior from Brigham Young University,
and a doctorate in Organizational Studies from Massachusetts
Institute of Technology.
John K. Medica — Mr. Medica was named
Senior Vice President, Product Group in January 2003. In this
role, he is responsible, along with Mr. Clarke and
Mr. Gruzen, for the worldwide development, marketing,
quality, and delivery into manufacturing of all Dell client,
workstation, networking, server, and storage systems, as well as
the strategic technology direction for these businesses.
Mr. Medica joined Dell in 1993 as Vice President, Portable
Systems. In 1996, Mr. Medica was named President and Chief
Operating Officer of Dell’s Japan division. Mr. Medica
returned to the U.S. as Vice President, Procurement in
August 1997 and later served as Vice President, Web Products
Group and Vice President and General Manager, Transactional
Product Group. Prior to joining Dell, Mr. Medica held a
variety of development and operations positions over a ten-year
period at Apple Computer, Inc. Mr. Medica graduated from
Wake Forest University with a master’s degree in Business
Administration and holds a bachelor’s degree in Electrical
Engineering from Manhattan College.
13
Randall D. Mott — Mr. Mott serves as
Senior Vice President and Chief Information Officer. He is
responsible for managing Dell’s global information
technology infrastructure, including the backbone of its
extensive Internet and Web-based capabilities. Prior to joining
Dell in March 2000, Mr. Mott served as Senior Vice
President and Chief Information Officer of Wal-Mart Stores, Inc.
from 1994 to February 2000. He joined Wal-mart in 1978, where he
served in numerous technical and management positions.
Mr. Mott holds a bachelor’s degree in Mathematics from
the University of Arkansas.
Glenn E. Neland — Mr. Neland is Senior
Vice President, Worldwide Procurement and Global Customer
Experience. In this role he shares responsibility with
Mr. Garvin for procurement and supply chain activities and
for managing Dell’s customer experience initiatives on a
worldwide basis. He joined Dell in September 1997, and until
March 2003 served as Vice President, Worldwide Procurement,
Commodities, where he and Mr. Garvin shared responsibility
for global supply chain optimization, including responsibility
for cost, quality, availability, technology, and service for all
computer system commodities and sub-systems. Mr. Neland was
also responsible for notebook operations and portables
procurement. Before joining Dell, Mr. Neland held various
positions at Texas Instruments Incorporated, including General
Manager for notebooks, Vice President and General Manager of
Printing Systems, as well as other operations and engineering
positions. He holds a bachelor’s degree in electrical
engineering from the University of Illinois. Mr. Neland
serves on the Board of Directors of International Displayworks,
Inc.
Rosendo G. Parra — Mr. Parra joined Dell
in 1993 and serves as Senior Vice President, Americas. In this
position, he shares responsibility with Mr. Marengi for
Dell’s Americas business units, serving large and small
corporate, government, education, healthcare, and small and
medium business customers in the U.S., Canada, and Latin
America. He is also responsible for Dell’s services
business and for Dell’s manufacturing operations in Austin,
Nashville, and Brazil. Prior to joining Dell, Mr. Parra
held various sales and general management positions with GRiD
Systems Corporation, including Regional Sales Director and Vice
President and General Manager of the PC Strategic Business Unit.
Before his association with GRiD, Mr. Parra spent nine
years in various sales and management positions for the business
products division of RadioShack Corporation. Mr. Parra
earned a bachelor’s degree in Marketing from the University
of Maryland.
James M. Schneider — Mr. Schneider serves
as Senior Vice President and Chief Financial Officer. In this
role, he is responsible for Dell’s finance function for all
business units worldwide, including the controller function,
corporate planning, tax, treasury, investor relations, corporate
development, real estate, risk management, and internal audit.
Mr. Schneider joined Dell in 1996 as Vice President of
Finance and Chief Accounting Officer, was named Senior Vice
President in 1998 and Chief Financial Officer in 2000. For three
years prior to joining Dell, Mr. Schneider was employed by
MCI Communications Corporation, last serving as Senior Vice
President of Corporate Finance. For 19 years prior to
joining MCI, Mr. Schneider was associated with Price
Waterhouse LLP, serving as a partner for 10 years.
Mr. Schneider holds a bachelor’s degree in Accounting
from Carroll College in Waukesha, Wisconsin, and is a Certified
Public Accountant. He is a member of the board of directors of
General Communications, Inc. and Gap, Inc. Mr. Schneider is
also a member of the Financial Executives Institute.
Lawrence P. Tu — Mr. Tu joined Dell as
Senior Vice President, General Counsel and Secretary in July
2004, and is responsible for overseeing Dell’s global legal
department and governmental affairs. Before joining Dell,
Mr. Tu served as Executive Vice President and General
Counsel at NBC Universal for three years. Prior to his position
at NBC, he was a partner with the law firm of
O’Melveny & Myers LLP, where he focused on high
technology, Internet and media related transactions, and where
he served five years as managing partner of the firm’s Hong
Kong office. Mr. Tu’s prior experience also includes
serving as General Counsel Asia-Pacific for Goldman Sachs,
attorney for the U.S. State Department and law clerk for
U.S. Supreme Court Justice Thurgood Marshall. Mr. Tu
holds Juris Doctor and Bachelor of Arts degrees from Harvard
University, as well as a Bachelor of Arts degree from Oxford
University, where he was a Rhodes Scholar.
14
As of January 28, 2005, Dell owned or leased a total of
approximately 11.7 million square feet of office,
manufacturing, and warehouse space worldwide, approximately
7.3 million square feet of which is located in the U.S. and
the remainder located in other countries. Dell believes that it
can readily meet its requirements for additional space at
competitive rates by extending expiring leases or by finding
alternative space.
Dell’s principal offices are located in Round Rock, Texas
(north of Austin), and its U.S. manufacturing facilities
are located in Austin, Texas and Middle Tennessee.
Dell owns approximately 340 acres of land in Round Rock,
Texas, on which are located six office buildings. These
buildings, comprising Dell’s Round Rock campus, contain an
aggregate of approximately 2.1 million square feet of
office and lab space. Dell’s sales, marketing, and support
staff for the Americas region, as well as the corporate
headquarters and support functions, are located on the Round
Rock campus.
Dell also owns approximately 550 acres of land in Austin,
Texas, referred to as the Parmer Campus. Approximately
2.0 million square feet of office, lab, manufacturing, and
distribution space are located on the campus, including office
and lab buildings totaling 1.1 million square feet and
manufacturing/distribution facilities totaling
900,000 square feet. Approximately 220,000 square feet
of the manufacturing/distribution space is currently leased to a
third-party.
Dell leases approximately 1.2 million square feet of space
in Middle Tennessee. This includes a 355,000 square foot
office building in Nashville, Tennessee that houses sales,
technical support, and administrative support; a
300,000 square foot manufacturing facility in Lebanon,
Tennessee; and a 300,000 square foot manufacturing facility
in Nashville, Tennessee. Approximately 205,000 square feet
of warehouse/distribution space is subleased to a third-party.
In addition to the campuses, Dell also leases approximately
1.9 million square feet of additional space, in various
locations within the U.S. Approximately 790,000 square
feet is used for manufacturing and distribution and
315,000 square feet houses customer-contact center and
professional services sites. The remaining 830,000 square
feet of office and manufacturing space, with lease expiration
dates ranging from March 2005 to December 2010, has been taken
out of service and has either been subleased or is being
marketed for sale or sublease.
In November 2004, Dell announced that a new 500,000 square
feet manufacturing facility would be constructed in North
Carolina with production to begin in late fiscal year 2006. In
addition, Dell began operating a customer-contact center in
Oklahoma City, Oklahoma in August 2004 and is currently
constructing a 120,000 square feet facility in Oklahoma
City on approximately 62 acres that will be operational
later in fiscal year 2006.
As of January 28, 2005, Dell’s
non-U.S. facilities consisted of approximately
4.4 million square feet of office and manufacturing space
in approximately 43 countries. Approximately 2.5 million
square feet of this space is leased property, with lease
expiration dates ranging from February 2005 to June 2024. Dell
owns approximately 1.9 million square feet of space.
Dell has manufacturing and office facilities in Eldorado do Sul,
Brazil; Limerick, Ireland; Penang, Malaysia; and Xiamen, China.
Approximately 100,000 square feet is leased in Eldorado do
Sul. Dell has approximately 865,000 square feet of office
and manufacturing space in Ireland, the majority of which is
owned. Dell owns two facilities in Penang, Malaysia totaling
580,000 square feet of office and manufacturing space. Both
facilities are located on land leased from the State Authority
of Penang. Dell owns approximately 367,000 square feet of
office and manufacturing space in Xiamen,
15
China. Dell also leases approximately 795,000 square feet
of office space in Bangalore and Hyderabad, India.
Dell has established technical and customer support and related
operations in India, Panama, Slovakia, Morocco, China, as well
as design centers in Brazil, Singapore, China, and Taiwan.
Facilities are currently under design or construction in
Edmonton, Canada, Mohali, India and San Salvador, El
Salvador which will be leased by Dell for technical and customer
support operations in early fiscal year 2006.
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| ITEM 3 — |
LEGAL PROCEEDINGS |
Dell is subject to various legal proceedings and claims arising
in the ordinary course of business. Dell’s management does
not expect that the results in any of these legal proceedings
will have a material adverse effect on Dell’s financial
condition, results of operations, or cash flows.
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| ITEM 4 — |
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
No matter was submitted to a vote of Dell’s stockholders,
through the solicitation of proxies or otherwise, during the
fourth quarter of fiscal 2005.
PART II
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| ITEM 5 — |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market Information
Dell’s common stock is listed on The Nasdaq National Market
under the symbol DELL. Information regarding the market prices
of Dell’s common stock may be found in Note 11 of
Notes to Consolidated Financial Statements included in
“Item 8 — Financial Statements and
Supplementary Data.”
Holders
As of February 25, 2005, there were 34,625 holders of
record of Dell’s common stock.
Dividends
Dell has never declared or paid any cash dividends on shares of
its common stock and currently does not anticipate paying any
cash dividends in the immediate future. Any future determination
to pay cash dividends will be at the discretion of Dell’s
Board of Directors.
Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
Dell has a share repurchase program that authorizes the company
to purchase shares of common stock in order to both distribute
cash to stockholders and manage dilution resulting from shares
issued under Dell’s equity compensation plans. However,
Dell does not currently have a policy that requires the
repurchase of common stock in conjunction with share-based
payment arrangements. As of January 28, 2005, Dell’s
share repurchase program authorized the purchase of up to
1.25 billion shares of common stock at an aggregate cost
not to exceed $20 billion. Subsequent to fiscal 2005, on
March 3, 2005, the Board of Directors of Dell approved an
amendment to the plan to increase the number of authorized
shares available for repurchase by 250 million to
1.5 billion, and
16
the aggregate dollar cost threshold by $10 billion to
$30 billion. The following details repurchases under this
program during the fourth quarter of fiscal 2005:
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Total Number of | |
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Maximum Number of | |
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Total Number of | |
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Shares Repurchased as | |
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Shares that May Yet Be | |
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Shares | |
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Average Price Paid | |
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Part of Publicly | |
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Repurchased Under the | |
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Repurchased(a) | |
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per Share | |
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Announced Plan | |
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Announced Plan(b) | |
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(In millions, except average price paid per share) | |
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Repurchases from October 30,
2004 through November 26, 2004
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9 |
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$ |
37.33 |
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9 |
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90 |
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Repurchases from November 27,
2004 through December 24, 2004
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5 |
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$ |
41.72 |
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5 |
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85 |
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Repurchases from December 25,
2004 through January 28, 2005
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8 |
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$ |
40.77 |
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