INC. Darren Thomas, VP & GM of Enterprise Storage Business Raymond James IT Supply Chain Conference December 14, 2010 at 7:15 a.m. CT

Brian Alexander, Raymond James:

Good morning, everybody. Welcome to the Raymond James IT Supply Chain Conference. If I haven't met you, I'm Brian Alexander, and I'm one of the analysts at Raymond James. I cover the supply chain, which includes hardware distribution and EMS. Thanks, everybody, for coming. I think this is our 11th annual event here at Raymond James. The Conference has a long tradition prior to Raymond James. I think we've been doing this for about 20 plus years. Hopefully, you'll find the mix of companies will give you unique insights into demand trends and inventory trends and come away with a lot of good investment ideas. Many of you have come a long way and braved the weather, so we really appreciate all of you being here today.

Just a little bit about the lay of the land, we have a very full day. We have 18 company presentations, most of which are followed by breakout sessions. If you could refer to the pocket guides for details on times and presenters and whether there is a breakout. There are also signs outside the breakout rooms that'll let you know. We're running two tracks. Track One is this room, this is Aster Two, and breakouts for this room are right next door in Aster One. Track Two is the Whitney Room, which is just across the hall, and the breakouts for the Whitney Room are in the Manhattan Room. That's not in this area; it's actually near the entrance to the hotel. If you walk to the entrance of the hotel and you fact the street, it'll be on your right-hand side. We'll have lunch at 12:30 in the Park Avenue Room - that's on the lobby level right next to the Manhattan Room behind the lobby bar — and we're pleased to have Stephen Minton from IBC to discuss IBC's outlook for technology spending for 2011 as well as cloud computing's effect on the entire IT ecosystems, so it should be a pretty interesting discussion. If you have one-on-ones, you can pick up your schedule at the one-on- one desk, which you passed on the way in. Raymond James 12.14.10 Page 2

Our first two sessions are going to be 35 minutes, and these are single-track sessions with Dell, followed by Hewlett Packard. The rest of the day is going to be two tracks, as I mentioned before, and those sessions are going to be 30 minutes. The format for each section is going to a mix of presentation and fireside chat. It really just depends on that individual company and their preference.

Let me bring up Dell. We've got Darren Thomas who runs the storage business for Dell. He's Vice President and General Manager of the Enterprise Storage Business, which is obviously very topical in light of yesterday's news where Dell announced its intent to buy Compellent. We also have Rob Williams, Vice President of Investor Relations. They're going to kick it off with some introductory comments, and then we'll move into a fireside chat.

Rob Williams, Dell:

First of all, thanks for having us; it's always nice to be back at the Conference. I'll just make a couple of introductory comments and then turn it over to Darren. You know, we are executing a growth strategy at the company. I think the transformation of the business is well underway. If you look at the third quarter, our commercial business was about $12.4 billion. It's up 33%, obviously helped by the acquisition and closing of Perot last year in Q4. But the commercial business is doing very, very well, generating 9 to 10% operating income.

We have a differentiated view of how to win in the Enterprise, our Enterprise business is, on a run rate basis, about $17 billion. It generates roughly 30% of the revenue of the company and more than 50% of the gross margin dollars for the company. So, that business is doing very well. Darren will go into a bit more detail there.

We're also transforming our supply chain and optimizing our supply chain, and I think you can see traction really taking place there if you look at the mix of our own manufacturing within Dell facilities and our use of contract manufacturing, our use of air freight, land freight and over water freight, the simplification of our product portfolio. There's definitely some work Raymond James 12.14.10 Page 3 there and there's some traction that's really taking place and we're clearly benefiting from a very favorable component cost environment.

So, if you take those few parts of the growth strategy and roll them together, that gets us to our long-term value creation framework, which is 5 to 7% of new growth, operating income of 7% or better over time and continuing to generate very, very strong cash flow. That's growth in excess of IT spending and that's the strategy we're executing. I think we can safely say that at this point that strategy is well under way and we're pretty pleased with our progress. A lot more work to do, but that's kind of where we are. Darren?

Darren Thomas, Dell:

Well, thank you. I want to first apologize for my voice, I'm just getting over a cold. The storage industry is really kind of one of the highlights of the IT industry as a whole. A couple things have happened in the last 4 or 5 years that have really started to change the industry. It's in the middle of a lot of change right now and I think you're going to see that change continue going forward kind of at a complicated pace. The reason I said that is, there's a couple of things. First of all, storage is kind of the technology that our customers want to change the least, it's something that when they store data, they want to store it for a long time. They don't want to be moving it around, migrating it. That's very expensive to do. So they look for longer-term strategies. In the past, that strategy was they wanted lots of knobs to dial. They wanted to tune performance. They wanted to make the system just right for their environment, which meant they would do snapshots a certain way. They do replication a certain way. They would manage the performance of it either by using a lot of CPU horsepower, a lot of capacity. Every customer was a little bit different.

What we see coming through right now is an enormous amount of software ingenuity that's been applied into this industry that has caused the customer to turn away from dialing the knobs themselves in favor of automation that really dials the knobs better than they could have. It does it real time. As a result of doing it real time, the customer can't possibly tune that many systems that quickly and when I say tune, it's not always tuning for performance, sometimes it's optimizing for cost, sometimes it's optimizing for distance, sometimes it's Raymond James 12.14.10 Page 4 optimizing for more than one job stream they're trying to run. They're doing a backup at the same time. They're doing their normal business. Almost all companies are 24 by 7.

So, a lot of this opportunity that we're seeing right now is because the automation opportunity showing up. The way that really appears is not just in the storage device. You have the servers going through virtualization, allows them to be configured on the fly, literally in milliseconds. Even networking is now able to be configured for quality service and security, and of course storage for performance, for capacity, for the amount of bandwidth that goes to it. Then you see a lot of technology that's revolutionary. You actually have to go buy some new technology for this. Some of this is the desire to go to less expensive pipes. The network that we used before, Fibre Channel, has been the Enterprise class network, still dominates that space but iSCSI has come on really strong in the mid-range. A lot of companies are at least looking at iSCSI post-2009 when the economy got a little tight. They really were forced to look at better costed opportunities and so iSCSI took a big shot in the arm, got a lot of followers at that time. I think what you're going to see is FCoE, which is the Fibre Channel version of that protocol running on those same pipes, that same ten gigabit Ethernet pipe, is going to start gaining popularity. It's the technology that's holding it back right now. You're seeing people can't do FCoE across the continent like they can do Fibre Channel across the continent. FCoE has limitations just because all the switching capabilities not there yet. You can really only stay within an IT center today.

So that's kind of a brief overview of Dell’s strategy. We're moving towards an intelligent infrastructure, intelligent in the networking, intelligent in the servers, and obviously intelligent in the part that I play. All of our acquisitions in the storage place, starting with EqualLogic, was a very self-tuning device. The Compellent solution that you saw announced yesterday, very self-tuning, the industry’s leading tiering infrastructure so this ability to move to an appropriate tier, either for performance or cost, a lot of this technology that you see Dell acquiring is because of this opportunity for this opportunity for this intelligent infrastructure that allows us to stake a claim and become an IT owner in this opportunity. I'll stop there.

Brian Alexander, Raymond James: Raymond James 12.14.10 Page 5

Darren, for those that don't know you, maybe just a minute on your background, how long you been in the storage industry in a Dell specifically?

Darren Thomas, Dell:

OK. I’ve been in the storage industry about 25 years. I was kind of thrown into it back in the '80's when storage was just a peripheral, and the very first server that Compaq made in the late '80's needed some storage devices. So, I started at Compaq. I've been in the storage industry between Compaq and Dell and I went out and ran a start-up company out in California for a few years. So my background has been almost exclusively storage. Before that I was a pilot in the Air Force.

Brian Alexander, Raymond James:

Great. So well-qualified to talk about storage. We'll stick with the storage and the Enterprise theme for maybe the first half and then we could broaden it out, talk about Dell with Rob here. Just picking up on Compellent, what do they address for Dell? How scalable is the technology as we move upstream? I think the three part acquisition demonstrated your desire to be at the high end. Does Compellent potentially get you there? Just talk about the relationship with EMC, given your OEMing the Clariion, which is a competing product.

Darren Thomas, Dell:

OK. I'll see if I can remember all of those questions. First of all, one of the other things we're seeing -- a trend in the industry -- is a movement towards about the $50 to $150K selling point. Our storage industry is looked at by price band, rather than purely by technology. Those price bands, of $50 to $150K are lighting up right now. In the past, the price bands of $150 to $400 or $500K were the big price bands because the large, Enterprise-class storage solutions fit in that price band. What you see is the mid-range, if you will, of price bands has become a very capable set of solutions. As a matter of fact, almost all the innovation in technologies occurred in those price bands. So that's the first thing you see, and Compellent fits in that price band very well. Raymond James 12.14.10 Page 6

The second piece is that Dell had a desire to have a Fibre Channel solution as well, or obviously our iSCSI solution is EqualLogic. The Compellent device is multi-protocol device. It's both Fibre Channel FCoE and iSCSI. I said earlier FCiE, outside the data center is pretty difficult to do, but within a data center it's not hard to do at all. The Compellent product has that interface on it already. It is also a converged product, which means it has both block and file, and so the product is pretty well-rounded. It has a really strong appeal. It's won numerous industry awards because of its technology.

One of the technologies we like the most is its automatic tiering. This product, when a customer writes to the device -- quite often customers write to a very expensive piece of hardware in the beginning because they are trying to save the data, make sure it's persistent and never goes away. As a result, that data kind of gets trapped at that price point of that device. A lot of large IT companies literally have one or two tiers. They have a very expensive tier, and then just a slightly less expensive tier. That's kind of their model.

This device has multiple tiers within it, and it's all automated. So from the moment you start writing to the device, it starts moving the data around based on whether you're going to write to that device again -- like, as an example, if we do a snapshot, we don't ever write to that section of the drive again. We're preserving it. That's why it's called a snapshot. You're preserving that image, like a photograph. As a result, you don't write to that anymore. Once you're not going to write it, you can move that data to a much less expensive set of algorithms, because that device now -- all devices read about the same. You really get higher performance when you get to writing speeds.

So, they have taken all that opportunity and technology and built that in. So if you could imagine Dell's focus on cost — being a cost partner to customers — we look at a device like this, and it is literally an IT shop's best friend when it comes to minimizing storage costs. Maximizing the storage savings opportunity because it makes those decisions and does it automatically. So, it fits perfectly with our Dell strategy.

Raymond James 12.14.10 Page 7

Brian Alexander, Raymond James:

Maybe just expand on the overlap between Compellent and EqualLogic at the low end, and Clariion -- the relationship with EMC seems like it would obviously be affected by this.

Darren Thomas, Dell:

Yes. Let me start with the overlap. EqualLogic and Compellent overlap. The very top end of EqualLogic overlaps with the bottom end of Compellent, but that's what you want. You want customers to have an opportunity at that overlap space to actually make a choice, whether to have the top end of this technology, or the lower end of this. So that's not an issue for us at all. Actually, it's a perfect fit in that respect.

In terms of the EMC relationship, that overlaps with the Clariion solution, but not with the Symmetric. We have several other parts of our EMC relationship, the de-dupe technology. There's no overlap there. It's certainly problematic for the Clariion side, but it's extraordinarily compelling for us because it is the next generation of modular, high- performing, and optimized technology that's part of Dell's strategy. So, we chose to be consistent with our strategy. Regarding our relationship with EMC, the most important thing there is our common customer set. We've both agreed that we're going to do what's right for our customers. We're going to offer them the best solutions that they need for their situation. So, I won't say it's without its issues, but it's the appropriate evolution for our time and for Dell's relationship today.

Brian Alexander, Raymond James:

If you look at the storage portfolio going forward, are there any other holes that you think need to be addressed, whether it's on the NAS side, and then even more broadly the Enterprise stack that Dell has? If you want to expand that to include networking, which I know is not your direct area of responsibility any more, but where else do you think you guys need to fill out the capabilities, and potentially make some more acquisitions?

Raymond James 12.14.10 Page 8

Darren Thomas, Dell:

Well, there is a hole in NAS. Dell has focused on the SAN space for quite a while. I came to Dell about seven years ago, and we really didn't have a portfolio set at that time. It was almost all EMC, and we didn't have a low-end product. There are also price bands down to $5,000 to $15,000, and we had nothing in that space. We have now built a product line in that space. The MD, the PowerVault MD product set. Modular disc is what MD stands for. That product set has been extremely successful. So, below the EqualLogic product set, you can buy a very complete storage system with all the software values that you'd want, starting at around $12,000. That's below the EqualLogic price point. So we have that entry-level area covered very well. EqualLogic covers that mid, if you will, the remote office, the small, medium-sized companies. Compellent covers the large customers. It's a very scalable solution.

What we find is that two clustered pairs of these systems running on the latest architecture are pretty fast. We have found very few customers who that doesn't satisfy all their performance needs. In terms of scalability, there are next generation technologies called Federating and in Federating you can get the pairs or sets of these clustered pairs working together, load balancing the information with all the automation you have. So, long term, this technology covers, you know, from top to bottom we're covered.

I think the area that we have the largest exposure is NAS. If you've seen our NAS strategy, we've focused on the Windows faced NAS, which is not the most popular NAS face. But, about a year ago, was right around December I think, we acquired the company in Israel, and Exanet at the time was a gateway. Gateway means they put their storage software on top of a server and they stick that server in front of another storage device and it makes all the storage file system reads and writes, but it uses the data behind it. It uses the capacity.

We bought that technology. We're right now in the process of deploying that technology inside of EqualLogic. We will deploy that product inside of Exanet if the acquisition goes through and I'm sorry inside of a Compellent if this acquisition goes through and so we have a great NAS story. So, what Exanet brought to the table was a clustered file system. So, it had a high performing, a literally HPC class scalable file system that ran on multiple nodes. Well, that's Raymond James 12.14.10 Page 9 exactly the way EqualLogic runs, on multiple nodes and, so, we are building a matching peer scaling multiple node NAS solution that will scale into literally any performance the customer wants.

This is a file system similar to what you see like the Lustre file system. Very high performing, used by the genomes and the life sciences folks. So, it's that kind of a file system, but the beauty of it is it also has the snap shots replication, which most of those HPC Lustre cluster — that class of file systems typically don't have that because the life sciences guys don't need that. So, this one has all the features that a data center class NAS customer would ask for, but it has the scaling and performance features that literally scale to anything that you've seen in this world today.

So, that's the reason why we bought the company, Exanet, and it's our intention to put that file system to make it the file system for Dell across all of our portfolio. So, it will appear in the PowerVault line, it will appear in the EqualLogic line and, assuming the acquisition goes through, it will appear in the Compellent line.

Brian Alexander, Raymond James:

Can you talk about another acquisition you made in Ocarina and what that brings to the table in terms of IP duplication and compression algorithms and when you might have some new products out there.

Darren Thomas, Dell:

Yeah, one of the other optimizations, we talked about tiering being an optimization. This is how customers can save money, move to lower cost devices. The other one is the software technology called dedupe, but everybody uses the word dedupe, or deduplication — my boss says the “deduplification,” but that's not the right word. I think that's the Harry Potter version of it.

Raymond James 12.14.10 Page 10

Dedupe is a technology. It's really more than one technology. There's two things happening. We compress the data. So, by compressing it, we go through it byte by byte, looking for two bytes that looks the same or 10 bytes that looks the same. You literally just compress it by taking those out and writing an algorithm that says when you go to rebuild this, put those two bytes, three bytes, four bytes back in.

So, that's the compression algorithm. You guys are probably familiar with compression if you use zip files and things like that. Then the second piece of this is actually looking for multiple copies. Somebody sends you a presentation like this, you copy it and five other people in your company copy it. Then your company does a backup tonight, and they find that they're copying that file 5 times, or 10 times, or 10,000 times.

So, that's the sum of the duplication. Everybody is pretty good at looking at the single instancing, getting rid of the multiple copies that's not as hard to do. The real hard thing to do is compressing better than the industry compresses today. Because, remember, we're talking lossless compression.

This is not like you compressing a video or an audio file where some of the data is being thrown away. We don't throw any of the data away. So, we have to be able to reconstruct the file exactly the way it was. This is digital data. There's no loss allowed. So, these are lossless compressions.

What Ocarina does is rewrites new algorithms. No company has been doing this for years. I mean there's, literally, very little of this in the entire industry. One of our Dell employees is now one of those crazy math scientists who sits and writes these algorithms again, and again, and again.

So, we have content specific unique algorithms for each type of file. We tune the algorithms to the file. This takes a little bit of time, but that's what Ocarina did. They have over 200 of Raymond James 12.14.10 Page 11 these algorithms already and they're working toward a thousand of these algorithms. So, as we come into contact with more and more file types, we do compression.

Now, if we run into a file type we've never seen before, our compressors are still better than the one you get off the internet today. But, when we customize it, we see, generally, a 30% to 40% increase over anybody else compression. So, now, think of compression. You can do compression anywhere. You can only single instance if the file, if you know where the beginning and the end of the file is. So, compression and single instancing have a lot of opportunities that have not been touched yet.

I like to say in a baseball term, we're like at the bottom of the first inning in this contest of dedupe. Ocarina was the most advanced company we saw. They do file compression, specific to each file and then they single instance the data.

When we have seen the data before, and it runs through one of our very custom specific compressors on average, we compress the data around 30% to 40% more. So, you can imagine if compression works and deduping works, being able to do it that much better than anybody else is a huge feat.

Now, we're putting this algorithm, we're putting this technology also inside of our own unique appliances like you see the industry doing today. So, we will have a device that you can write to and store the data forever. And then we also have this ability to do it inside a server, inside a storage device, next to a storage device, create a special custom storage device, and what this means is people will be deduping in a lot of places. One of the other benefits of Ocarina is because the compression algorithms are unique, they store the algorithms in what they call a suitcase along with the data, which means we can now move the data from one place to another in its compressed form and only rehydrate the data at the end when you're ready to read it again. That technology isn't out there with anybody else today. That was the benefit with Ocarina and that's why we did it now. Now, you haven't seen these products come out yet because Ocarina was a very early stage company so we're still in the process of adding engineers to the team. We have five programs under way. The team was a team of Raymond James 12.14.10 Page 12 about 25 people. Our intention is to take that team up to probably closer to 100 people so that we can get all the products we really want.

So, it's a bit of a science project, if you will, but really if you want to get on the state of the art of this automation and optimization technology, sometimes you buy companies like EqualLogic and Compellent that are fully running and sometimes you buy companies like Exanet and Ocarina that are really horizontal technologies that have to be deployed inside everything else.

Brian Alexander, Raymond James:

So back to Compellent, doing $100 to $200 million in revenue today, when you bought EqualLogic, similar kind of run rate, you took that to $800, or at least that's the run rate, I think, today. Comparing and contrast the market size opportunity for Compellent, and do you think you could have similar or greater success in terms of expanding the revenue base like you did with EqualLogic for a short period of time?

Darren Thomas, Dell:

Yeah, when we acquired EqualLogic, the entire iSCSI market was expected to be around 3% or 4% of the entire storage market. Obviously the industry analysts were wrong, and we, alone, grew the market bigger than that. So, EqualLogic's opportunity was because there was a huge demand out there for easy to use, very simple, but very capable storage. You've heard our byline is simple, capable, affordable. Well, it's not any one of those by themselves, or even two of those buy themselves are interesting but all three of them are very compelling to a customer. Simple means that they can do it, they don't have to hire a professional IT staff. Capable means the equipment does the features and functions they need so it's beneficial and affordable - sometimes we'll use the word open but they generally imply the same thing - means that the product is going to be usable by a customer without having to change their entire infrastructure. They don't have to buy special switches and special networking devices, or special servers, or special even storage to use iSCSI.

Raymond James 12.14.10 Page 13

As a result, that combination was very successful. EqualLogic just kind of took the industry by storm and more than tripled the forecast that iSCSI had. What's interesting about Compellent, it's in the other side of the market. It's in the market that was the 97%. That's still at least 80% of the market. So, I see with EqualLogic, we had to kind of make a market. We had to go out there and convince customers that you could do this technology and iSCSI was OK. Compellent's core technology is on Fiber Channel and Fiber Channel is the core product today. So, I actually see it a little bit easier with Compellent now. There's probably a lot more competition in that space. Not probably, but there is a lot more competition.

Be that as it may, Dell operates in a space in the SMB in the mid-range where this product is, and we're pretty dominant in that space. I think with a product set like this that's compelling to customers, the opportunity to save that much money with the tiering infrastructure. It's a very easy to use product. It's actually based upon an Intel server architecture. It isn't even custom hardware to develop the solution.

I think the net-net of it is that we have a very similar opportunity with the Compellent that we had with EqualLogic. I see it as kind of a free reign to run in that space. It's not the first product in that space, but it's a very unique product in that space. I think we do well selling those kind of products.

Brian Alexander, Raymond James:

I'm going to bring Rob into the discussion and broaden out the topics to include more of Dell and storage, but before I do that, does anyone have any questions for Darren on the storage strategy, or maybe more broadly, the Enterprise strategy at Dell?

Question from Audience:

[Inaudible]

Raymond James 12.14.10 Page 14

Darren Thomas, Dell:

That references to the entire Company. That would be a combination of similar organic activity; organic activity on some acquisition.

Question from Audience

[Inaudible]

Darren Thomas, Dell:

We've never articulated a specific target for organic. It's a combination of the two. I can add a little context there for you. It's our intention to do somewhere in the neighborhood of, it's going to vary year-to-year, but seven to ten acquisitions a year. The vast majority of those will be smaller acquisitions, many private, and then the occasional larger acquisition of a company. If you look at the biggest acquisition to date in terms of revenue, that would be Perot Systems, which was closed a year ago in December. That was about $2.4 billion in revenue on a trailing basis.

Again, EqualLogic was $125 million. If we can close Compellent, that's about $125 million on a trailing basis, and most of the smaller acquisitions that we've done with companies like KACE and some others that actually had revenue were very small — $10 million. Sure.

Brian Alexander, Raymond James:

We have a question in the back?

Question from Audience:

[Inaudible]

Raymond James 12.14.10 Page 15

Darren Thomas, Dell:

It is today. Most dedupe products are file-based because they operate on the single instancy principle that really you need file-based technology to operate on, yes.

Question from Audience:

[Inaudible]

Darren Thomas, Dell:

Well, first of all, we are actually implementing our product in both block and file. There's a bit of a misnomer that you'll see people say they do dedupe off of what they call rolling block and you hear the word block in there. But that's not the same block. That's actually a different term in our usage. In block-based data, the data is fairly randomized on the disc. The disc solution does not know where the beginning and the end of the file is. The file system does in any system.

So, the difference between what we call file and block in the storage world is in our block world, the server has the file system. The server understands where the file system is, not the storage device. In file-based the storage device understands where the file system is, not the server. So they're both file system-based and they're both block-based and so we storage people do a great job of kind of confusing the whole industry on this. So the way dedupe works is you have to know where the file starts and then within a file there's this nomenclature called the block. It's that block. It's not the same block as a block in a disc. So the fundamental is we will be able to dedupe both file and block. You typically compress block data on a disc and you dedupe and compress file data because you can.

Brian Alexander, Raymond James:

I'll just ask Robert a demand question. I mean Dell's obviously in a great position to see what's going on globally with respect to the PC cycle and server cycle. Just give us kind of your latest thoughts on where you think we are in both of those cycles and how you're thinking about next year from an industry prospective. Raymond James 12.14.10 Page 16

Rob Williams, Dell:

Sure. Well, we continue to see very strong demand in the commercial segments of our businesses, whether it's small business or public or LE. It's been pretty consistent for now going on four quarters. If you look at kind of where we are and I'll ask Darren to comment on this as well. We had a really strong cycle, technology cycle and servers last year about this time. It was actually October, November when we had Nehalem launch from Intel. It was a tremendous improvement in performance, much better return on investment. Lower cost associated with that, energy savings as well. That was followed on with EX earlier this year.

So we've had a real strong server cycle, but there's still a lot to be done. I'll give you for example. I think we're now about five years into the virtualization of servers, and we're still not even halfway there in terms of servers that are virtualized. We're probably in the 40% range. So I think there's a tremendous amount of opportunity there. We're going to continue to see a lot of virtualization going on.

I think the interesting this is the demand continues to grow. So if you go back five years ago, the prognostications of many of the industry analysts would have predicted that server demand would have tailed off and been pretty anemic, but that hasn't happened; in fact, been pretty strong. I do think we'll probably return back to a little bit more of a normalized trend in servers over the course of the next several quarters. You can't have 25%, 30% growth forever in any business. We'd all like to think that that would happen, but that's just doesn't work. So I think we do have a trending back to a more normalized trend. I think our best guess would be for the industry in the high single digits in revenue, maybe the low teens. That's kind of how we're thinking about the server business.

On the client side, we're again, in the very, very early stages of Windows 7 migration. I mean, I just ask of the people in the room, who's running Windows 7 on your office system right now? OK, about I'll say somewhere in the neighborhood of about 3% of the folks.

Raymond James 12.14.10 Page 17

Darren Thomas, Dell:

That's the corporate environment. Not for personal use, not for home use.

Rob Williams, Dell:

Right. So, the statistic is, as of September, Windows 7 had 17% of installed base of operating systems. That is heavily dominated by consumer. Consumer is maybe in the 40% to 50% range, or maybe not quite that high. So, you can see that even though we've had a pretty nice replacement cycle on the hardware side, there's still a lot of work to be done of the OS side.

When you combine that with Office 2010 and some other things that are going on with Exchange, we think that there's a pretty powerful cycle that will continue to play out over the next couple of years. Darren, if you have some thoughts on the Enterprise side of that?

Darren Thomas, Dell:

Well, on the storage the cycles are, we're really just beginning to get in to them. This transition, if Fibre Channel is going to go to FCoE or going to 10 gigabit Ethernet. Most of the world today is 1 gig E, so there's an opportunity for IT centers to be able to take their bandwidth up by 10X, just by changing some switches in the protocol.

Once you go to 10 gig E, you're going to want to go to DCB. It's this data center bridging. It allows the IT device, the gigabit Ethernet device to operate in a quality of service mode exactly like Fibre Channel does. So, for storage devices that's really important. Instead it being a first come, first serve Ethernet bus, it becomes a quality of service driven bus like Fibre Channel.

So, those several of these transitions that are going on. Probably, everybody is familiar with SSD drives versus hard disk drives. So, you've got that transition where customers have the ability to move to very, very high speed drives that are an order of magnitude, sometimes 200% faster than a regular hard drive. Raymond James 12.14.10 Page 18

So, you've got that transition occurring. I think for storage we're just now beginning to get to some of the real benefits in technology. You have to remember, storage customers haven't changed. They still don't want to change their technology. This is not an 18 month refresh cycle. Storage lasts a long time. They don't want to change their storage that often.

But at some point when you take a bus speed and do 10X, and when you take disk speed and do 25X, and you do things like that, it's so compelling that customer have to look at, or at least go to those deployments on their new deployment.

Rob Williams, Dell:

Yeah. So, I mean, just to kind of close up on that, commercial feels pretty good. There are some pockets that we are watching, and we have frankly been watching for the last year, year and a half.

We've talked about those as an industry. Places like certain parts of Europe and the government, state and local governments here in the United States where there are some challenges with some budget deficits. But, by and large, I think for the industry commercial feels pretty good. Consumer on the other hand, I think overall consumer electronics demand is OK. We do see a little bit of softness on the PC hardware side. Part of that is due to a lot of interest in some of the tablet launches that are happening and have happened. That's probably the one area of our business, and I think a number of company's businesses, where demand is a little bit softer than we ideally like it to be, and that's on the Consumer side.

Brian Alexander, Raymond James:

Why don't we end with a question from Bob Reitzes.

Bob Reitzes, JP Morgan:

[Inaudible]

Raymond James 12.14.10 Page 19

Brian Alexander, Raymond James:

Budget flushes for this year, do you have any perspective?

Bob Reitzes, JP Morgan:

[Inaudible]

Brian Alexander, Raymond James:

Secular growth rate for storage, assuming external storage? All external storage combined?

Rob Williams, Dell:

We're probably not the experts on budget flushes. It tends to be a little bit more of an Enterprise question, but I can tell you that if you look at last year, we actually saw commercial demand pick up in Q4 last year. Quite frankly, it was a bit of a surprise. It was a little bit better than we expected. There was definitely some pent up demand given all the concerns in the economy last year, and a pretty strong spinning of budgets at the end of last year.

I think this year is a bit more normalized, but again I would go back and tell you that our outlook for the commercial side of the business is pretty healthy. It's the value creation framework for the company. It's where the cash flow will get generated and where value will get generated for this company, not only in the current and the coming fiscal year, but over the next three to five years. So that's where we are going to put most of our focus.

Darren Thomas, Dell:

I think the storage question was what's the overall storage growth rate? Storage is such a broad market. If you look at internal and external storage, you look at storage by band, you'll get Fibre Channel as the main-frame class. I'm not the expert at main-frame class because it's not an area where Dell focuses. That market growth rate has been in the low single digits: 1%, 2%, 3%, 4% for years and years. The markets that we're looking at probably across the board, Raymond James 12.14.10 Page 20 you're looking at they’re not single digits, but low double digits, like, 10% to 14%. It's very different whether Gartner IDC is telling you the answer, and it's very different if you're leaning a little into iSCSI or you believe their numbers on Fibre Channel.

Probably the more interesting thesis is the $15 to $150K price point space that's growing the fastest, which is the area where Dell has dominated. We see a lot of opportunity there because the markets that we're the most interested in and the one we participate in are the ones that are leading that growth right now.

Brian Alexandar, Raymond James:

We're going to leave it right there. Rob and Darren are going to be available next door for a break after session. Thank you very much.

~ E N D ~