Business Description

Note about Forward Looking Statements 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 risk factors affecting our business and prospects, see “Part I — Item 1A — Risk Factors.”

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 computer systems (including desktops, notebooks, and x86 servers), and are based on information provided by IDC Worldwide Quarterly PC Tracker, February 17, 2009. Industry share data is for the full calendar year and all our growth rates are on a fiscal year-over-year basis. Unless otherwise noted, all references to time periods refer to our fiscal periods.

ITEM 1 — BUSINESS

General the globe. This includes our commitment to Dell listens to customers and delivers innovative environmental responsibility in all areas of our business. technology and services they trust and value. As a leading See “Part I — Item 1 — Business — Sustainability.” This technology company, we offer a broad range of product also includes our focus on maintaining a strong control categories, including mobility products, desktop PCs, environment, high ethical standards, and financial software and peripherals, servers and networking, reporting integrity. See “Part II — Item 9A — Controls and services, and storage. According to IDC, we are the Procedures.” number one supplier of computer systems in the United States and the number two supplier worldwide. Business Strategy Direct relationships with our customers give us an Our company is a Delaware corporation and was founded advantage of seeing changing customer requirements and in 1984 by Michael Dell on a simple concept: by selling needs earlier than companies who do not have the same computer systems directly to customers, we can best breadth of direct relationships. As a result, we are able to understand their needs and efficiently provide the most develop products with simpler and more productive effective computing solutions to meet those needs. Over technology to better serve our customers. As we continue time we have expanded our business model to include a to expand our global presence, we are further diversifying broader portfolio of products, including services, and we our revenue and profit streams. Our strategy is to focus have also added new distribution Partners, such as retail, on higher margin products, services, and solutions to system integrators, value added resellers, and increase overall profitability as we balance our liquidity, distributors, which allow us to reach even more end-users profitability, and growth. We are also focused on around the world. Our corporate headquarters are improving our competitiveness by reducing overall costs. located in Round Rock, Texas, and we conduct operations In May 2008, we announced a $3 billion cost reduction worldwide through our subsidiaries. To optimize our initiative, which includes both cost of goods sold and global supply chain to best serve our global customer operating expenses. In the fourth quarter of Fiscal 2009, base, we have manufacturing locations around the world we identified additional savings opportunities and have and are expanding our relationships with third-Party increased our cost-reduction target to $4 billion by the original equipment manufacturers. When we refer to our end of Fiscal 2011. Our growth strategy involves reaching company and its business in this report, we are referring more customers worldwide through new distribution to the business and activities of our consolidated Partners, such as retail, expanding our relationships with subsidiaries. We operate principally in one industry, and value-added resellers and distributors, and augmenting we manage our business in four operating segments: select areas of our business through targeted acquisitions. Americas Commercial; Europe, Middle East and Africa Our goal continues to be to optimize the balance of (“EMEA”) Commercial; Asia Pacific-Japan (“APJ”) liquidity, profitability, and growth with a focus on Commercial; and Global Consumer. increasing the mix of our product portfolio to higher margin products and recurring revenue streams. We are committed to managing and operating our business in a responsible and sustainable manner around • Provide great value to customers and Partners through to deliver new and relevant products and services to the direct relationships. We are committed to innovating market quickly and efficiently. We are continuing to without legacy, creating efficient solutions, and expand our use of original design manufacturing providing price, performance, and feature leadership Partnerships and manufacturing outsourcing relationships across all of our businesses. In addition, we will deliver to generate cost efficiencies, deliver products faster, and the power of cloud computing and connect with our better serve our customers in certain product categories, customers through the Internet. We are focused on customer segments, and geographical areas. Our helping customers identify and remove unnecessary research, development, and engineering expenses were cost and complexity in IT architecture and operations. $665 million for Fiscal 2009, $693 million for Fiscal 2008, In addition, we seek to broaden our profit stream to and $498 million for Fiscal 2007, including acquisition capture complementary opportunities in new solutions related in-process research and development of $2 for customers that include search, services, and 3G million for Fiscal 2009 and $83 million for Fiscal 2008. originations. To that end, during Fiscal 2009 we released a broad lineup of dedicated virtualization Products and Services solutions, including software, servers, services, and We design, develop, manufacture, market, sell, and storage. support a wide range of products that in many cases are customized to individual customer requirements. Our • Optimize the balance of liquidity, profitability, and product categories include mobility products, desktop growth with a focus on increasing the mix of our PCs, software and peripherals, servers and networking, product portfolio to higher margin products and services, and storage. See “Part II — Item 7 — recurring revenue streams. We will balance our mix of Management’s Discussion and Analysis of Financial products and services to increase profitability over Condition and Results of Operations — Revenue by time. We are committed to shifting our solutions Product and Service Categories” and Note 11 of Notes to portfolio to higher margin solutions and recurring Consolidated Financial Statements included in “Part II — revenue streams in software, servers, services, and Item 8 — Financial Statements and Supplementary Data.” storage. Our services business has growth opportunities both in driving attachment of services • Mobility — The XPSTM and AlienwareTM lines of onto existing product platforms and expanding into notebook computers are targeted at customers new solution offerings. We expect to expand our seeking the best experiences and designs available, presence in the enterprise solution arena as we add from sleek, elegant, thin, and light notebooks to the more capabilities that are attractive to existing and highest performance gaming systems. In Fiscal 2009, new customers. We are committed to improving our we introduced the new stylish Studio line of consumer storage and server products and services as evidenced notebooks with powerful multimedia elements. The by our new building IT-as-a-Service solution, an InspironTM line of notebook computers is designed for integrated service delivery platform that is simple, consumers seeking the latest technology and high modular, and flexible, and which provides businesses performance in a stylish and affordable package. In with remote and lifecycle management, e-mail backup, Fiscal 2009, we added the 3G enabled Mini, a light, and software license management, among other highly mobile notebook, to the Inspiron line. The services. In addition to services, system software LatitudeTM line is designed to help business, presents another opportunity for us to further government, and institutional customers manage their strengthen our portfolio. total cost of ownership through managed product lifecycles and the latest offerings in performance, Product Development security, and communications. The VostroTM line is We focus on developing standards-based technologies designed to customize technology, services, and that incorporate highly desirable features and capabilities expertise to suit the specific needs of small businesses. at competitive prices. We employ a collaborative The Dell PrecisionTM line of mobile workstations is approach to product design and development where our intended for professional users who demand engineers, along with direct customer input, design exceptional performance to run sophisticated innovative solutions and work with a global network of applications. This year, we also had the largest global technology companies to architect new system designs, product launch in our company’s history with our new influence the direction of future development, and E-Series commercial Latitude and Dell Precision integrate new technologies into our products. Through notebooks. this collaborative, customer-focused approach, we strive • Desktop PCs — The XPSTM and AlienwareTM lines of – Displays. We offer a broad line of branded and non- desktop computers are targeted at customers seeking branded display products, including flat panel the best experiences and designs available, from monitors and projectors. We continue to win multimedia capability to the highest gaming awards for quality, performance, and value across performance. The OptiPlexTM line is designed to help our monitors and projector product lines. The business, government, and institutional customers M109s on-the-go projector was the first pocket manage their total cost of ownership by offering a projector to ship in the industry at the end of portfolio of secure, manageable, and stable lifecycle calendar 2008 and won the prestigious CES products. The InspironTM line of desktop computers is Innovations 2009 award in January 2009. designed for mainstream PC users requiring the latest features for their productivity and entertainment • Servers and Networking — Our standards-based needs. The VostroTM line is designed to provide PowerEdgeTM line of servers is designed to offer technology and services to suit the specific needs of customers affordable performance, reliability, and small businesses. In July 2008, we introduced the scalability. Options include high performance rack, Studio line of compact and stylish consumer desktops, blade, and tower servers for enterprise customers and which includes the Hybrid, our most power efficient value tower servers for small organizations, networks, consumer desktop. and remote offices. We also offer customized Dell server solutions for very large data center customers. Dell PrecisionTM desktop workstations are intended for During the Fiscal 2009, we released a broad line-up of professional users who demand exceptional dedicated virtualization solutions, including new performance from hardware platforms optimized and servers, tools, and services. We expect to refresh our certified to run sophisticated applications, such as servers and networking product portfolio in Fiscal those needed for three-dimensional computer-aided 2010. design, digital content creation, geographic information systems, computer animation, software Our PowerConnectTM switches connect computers and development, computer-aided engineering, game servers in small-to-medium-sized networks. development, and financial analysis. PowerConnectTM products offer customers enterprise- class features and reliability at a high value for our • Software and Peripherals — We offer Dell-branded customers. printers and displays and a multitude of competitively priced third-Party peripheral products, including • Services — Our global services business offers a broad software titles, printers, televisions, notebook range of configurable IT services that help commercial accessories, networking and wireless products, digital customers and channel Partners plan, implement, and cameras, power adapters, scanners, and other manage IT operations and consumers install, protect, products. and maintain their computer systems and accessories. Our service solutions help customers simplify IT, thus – Software. We sell a wide range of third-Party maximizing the performance, reliability, and cost- software products, including operating systems, effectiveness of IT operations. business and office applications, anti-virus and related security software, entertainment software, – Infrastructure Consulting Services. Our consulting and products in various other categories. In Fiscal services help customers evaluate, design, and 2009, we launched the Dell Download Store, an implement standards-based IT infrastructures. online software store for consumers and small-and- These customer-oriented consulting services are medium-sized businesses. designed to be focused and efficient, providing customers access to our experience and guidance – Printers. We offer a wide array of Dell-branded on how to best architect and operate IT operations. printers, ranging from all-in-one ink jet printers for consumers to large multifunction devices for – Deployment Services. Our deployment services corporate workgroups. In Fiscal 2009, we further simplify and accelerate the deployment of expanded our product portfolio and launched the enterprise products and computer systems in world’s smallest color laser printer. Dell-branded customers’ environments. Our processes and printers continue to win awards for reliability and deployment technologies enable customers to get value. systems up and running quickly and reliably, with and value while reducing complexity in the enterprise. minimal end-user disruption. Our storage systems are easy to deploy, manage, and maintain. The flexibility and scalability offered by Dell – Asset Recovery and Recycling Services. We offer a PowerVaultTM, Dell EqualLogicTM, and Dell | EMC variety of flexible services for the secure and storage systems help organizations optimize storage environmentally safe recovery and disposal of for diverse environments with varied requirements. owned and leased IT equipment. Various options, During the fiscal year, we expanded our storage including resale, recycling, donation, redeployment, portfolio by adding increasingly flexible storage employee purchase, and lease return, help choices that allow customers to grow capacity, add customers retain value while facilitating regulatory performance and protect their data in a more compliance and minimizing storage costs. economical manner.

– Training Services. We help customers develop the Financial Services skills and knowledge of key technologies and We offer or arrange various customer financial services systems needed to increase their productivity. for our business and consumer customers in the U.S. Courses include hardware and software training as through Dell Financial Services L.L.C. (“DFS”), a wholly- well as computer system skills and professional owned subsidiary of Dell. DFS offers a wide range of development classes available through instructor- financial services, including originating, collecting, and led, virtual, or self-directed online courses. servicing customer receivables related to the purchase of Dell products. DFS offers private label credit financing – Support Services. Our suite of scalable support programs through CIT Bank to qualified consumer and services is designed for IT professionals and end- small business customers and offers leases and fixed-term users whose needs range from basic phone support financings to business customers. Financing through DFS to rapid response and resolution of complex is one of many sources of funding that our customers may problems. We offer flexible levels of support that select. For additional information about our financing span from desktop and notebook PCs to complex arrangements, see “Part II — Item 7 — Management’s servers and storage systems, helping customers Discussion and Analysis of Financial Condition and Results maximize uptime and stay productive. Our support of Operations — Financing Receivables and Off-Balance services include warranty services and proactive Sheet Arrangements” and Note 6 of Notes to maintenance offerings to help prevent problems as Consolidated Financial Statements included in “Part II — well as rapid response and resolution of problems. Item 8 — Financial Statements and Supplementary Data.” These services are supported by our network of Global Command Centers in the U.S., Ireland, Sales and Marketing China, Japan, and Malaysia, providing rapid, We sell our products and services directly to customers around-the-clock support for critical commercial through dedicated sales representatives, telephone-based systems. sales, online at www.dell.com, and through a variety of indirect sales channels. Our customers include large – Managed Services. We offer a full suite of managed corporate, government, healthcare, and education service solutions for companies who desire accounts, as well as small and medium businesses and outsourcing of some or all of their IT management. individual consumers. Within each of our geographic From planning to deployment to ongoing technical regions, we have divided our sales and marketing support, our managed services are modular in resources among these various customer groups. No nature so that customers can customize a plan single customer accounted for more than 10% of our based on their current and future needs. We can consolidated net revenue during any of the last three manage a portion of their IT tasks or provide an fiscal years. end-to-end solution. Our sales and marketing efforts are organized around the • Storage — We offer a comprehensive portfolio of evolving needs of our customers. Our direct business advanced storage solutions, including storage area model provides direct communication with our networks, network-attached storage, direct-attached customers; thereby allowing us to refine our products and storage, disk and tape backup systems, and removable marketing programs for specific customer groups. disk backup. With our advanced storage solutions for Customers may offer suggestions for current and future mainstream buyers, we offer customers functionality Dell products, services, and operations on an interactive portion of our website called Dell IdeaStorm. This Competition constant flow of communication allows us to rapidly We operate in an industry in which there are rapid gauge customer satisfaction and target new or existing technological advances in hardware, software, and service products. offerings and face on-going product and price competition in all areas of our business from branded and generic For large business and institutional customers, we competitors. We compete based on our ability to offer maintain a field sales force throughout the world. profitable and competitive solutions to our customers Dedicated account teams, which include field-based that provide the most current and desired product system engineers and consultants, form long-term features as well as customer service, quality, and relationships to provide our largest customers with a reliability. This is enabled by our direct relationships with single source of assistance, develop specific tailored customers, which allow us to recognize changing solutions for these customers, and provide us with customer needs faster than other companies. This customer feedback. For large, multinational customers, connection with our customers allows us to best serve we offer several programs designed to provide single customer needs and offers us a competitive advantage. points of contact and accountability with global account specialists, special global pricing, and consistent global According to IDC, we gained 0.2 points of share during service and support programs. We also maintain specific calendar 2008 as our 11.1% growth in units outpaced the sales and marketing programs targeted at federal, state, industry’s overall worldwide computer systems growth of and local governmental agencies, as well as at specific 9.7%. Our gain in share was driven by a strong overall healthcare and educational customers. performance in the first half of Fiscal 2009 followed by a decline in unit shipments in our commercial business in We market our products and services to small and the second half of the year, which was Partially offset by medium businesses and consumers primarily by strength in our global consumer business. Our commercial advertising on television and the Internet, advertising in a business’s slower unit growth in the second half of Fiscal variety of print media, and mailing or emailing a broad 2009 reflects our decision in an eroding demand range of direct marketing publications, such as environment to selectively pursue unit growth promotional materials, catalogs, and customer opportunities while protecting profitability. During the newsletters. second half of Fiscal 2009, the entire industry faced a challenging IT end-user demand environment as current Our business strategy also includes indirect sales economic conditions influenced global customer spending channels. Outside the U.S., we sell products indirectly behavior. through selected Partners to benefit from the Partner’s existing end-user customer relationships and valuable Technology companies grow by expanding product knowledge of traditional customs and logistics in the offerings and penetrating new geographies. To achieve country, to mitigate credit and country risk, and because this growth, companies innovate and will also lower price. sales in some countries may be too small to warrant a Our ability to maintain or gain share is predicated on our direct sales business unit. In the U.S., we sell products ability to be competitive on product features and indirectly through third-Party solution providers, system functionality, geographic penetration, and pricing. integrators, and third-Party resellers. PartnerDirect brings Additionally, our efforts to balance our mix of products our existing Partner initiatives under one umbrella and services to optimize profitability, liquidity, and growth globally. PartnerDirect includes Partner training and may put pressure on our industry unit share position in certification, deal registration, dedicated sales and the short-term. At the end of Fiscal 2009, we remained customer care, and a dedicated web portal. We also offer the number one supplier of computer systems in the U.S. select consumer products in retail stores in several and the number two supplier worldwide. countries in the Americas, EMEA, and APJ. Our goal is to have strategic relationships with a number of major Manufacturing and Materials retailers in our larger geographic regions. During Fiscal We manufacture many of the products we sell and have 2009, we continued to expand our global retail presence, manufacturing locations worldwide to service our global and we now reach over 24,000 retail locations worldwide. customer base. See “Part I — Item 2 — Properties” for information about our manufacturing locations. In Our retailers include Best Buy, Staples, Wal-Mart, GOME, addition, we are continuing to expand our use of original and Carrefour, among others.

design manufacturing Partnerships and manufacturing research and development activities. The inventions outsourcing relationships to generate cost efficiencies, claimed in our patents and patent applications cover deliver products faster, and better serve our customers in aspects of our current and possible future computer certain segments and geographical areas. system products, manufacturing processes, and related technologies. Our product, business method, and Our manufacturing process consists of assembly, software manufacturing process patents may establish barriers to installation, functional testing, and quality control. Testing entry in many product lines. While we use our patented and quality control processes are also applied to inventions and also license them to others, we are not components, parts, sub-assemblies, and systems obtained substantially dependent on any single patent or group of from third-Party suppliers. Quality control is maintained related patents. We have entered into a variety of through the testing of components, sub-assemblies, and intellectual property licensing and cross-licensing systems at various stages in the manufacturing process. agreements. We have also entered into various software Quality control also includes a burn-in period for licensing agreements with other companies. We completed units after assembly, ongoing production anticipate that our worldwide patent portfolio will be of reliability audits, failure tracking for early identification of value in negotiating intellectual property rights with production and component problems, and information others in the industry. from customers obtained through services and support programs. We are certified worldwide by the We have obtained U.S. federal trademark registration for International Standards Organization to the requirements the DELL word mark and the Dell logo mark. We own of ISO 9001: 2000. This certification includes our design, registrations for 71 of our other marks in the U.S. At manufacture, and service of computer products in all of January 30, 2009, we had pending applications for our locations. registration of 45 other trademarks. We believe that establishment of the DELL word mark and logo mark in We purchase materials, supplies, product components, the U.S. is material to our operations. We have also and products from a large number of vendors. In some applied for or obtained registration of the DELL mark and cases, multiple sources of supply are not available and we several other marks in approximately 184 other countries. have to rely on single-source vendors. In other cases, we may establish a working relationship with a single source From time to time, other companies and individuals assert or a limited number of sources if we believe it is exclusive patent, copyright, trademark, or other advantageous due to performance, quality, support, intellectual property rights to technologies or marks that delivery, capacity, or price considerations. This are important to the technology industry or our business. relationship and dependency has not caused material We evaluate each claim relating to our products and, if disruptions in the past, and we believe that any disruption appropriate, seek a license to use the protected that may occur because of our dependency on single- or technology. The licensing agreements generally do not limited-source vendors would not disproportionately require the licensor to assist us in duplicating its patented disadvantage us relative to our competitors. See “Part I — technology, nor do these agreements protect us from Item 1A — Risk Factors” for information about the risks trade secret, copyright, or other violations by us or our associated with single- or limited-source suppliers. suppliers in developing or selling these products.

We are actively reviewing all aspects of our facilities, Employees logistics, supply chain, and manufacturing footprints. This At the end of Fiscal 2009, we had approximately 78,900 review is focused on identifying efficiencies and cost total employees (consisting of 76,500 regular employees reduction opportunities and migration to a more variable and 2,400 temporary employees), compared to cost manufacturing model, while maintaining a strong approximately 88,200 total employees (consisting of customer experience. Examples of these actions include 82,700 regular employees and 5,500 temporary the closure of our desktop manufacturing facility in employees) at the end of Fiscal 2008. Approximately Austin, Texas, the sale of our call center in El Salvador, the 25,900 of the regular employees at the end of Fiscal 2009 recent announcement of our migration and closure of were located in the U.S., and approximately 50,600 manufacturing operations from our Limerick, Ireland regular employees were located in other countries. facility to our Polish facility and to original design manufacturers, and the sale of our customer contact We continue to comprehensively review costs across all center in the Philippines. processes and organizations, from product development and procurement through service and support delivery, Patents, Trademarks, and Licenses with a goal to reduce costs, simplify structure, eliminate As of January 30, 2009, we held a worldwide portfolio of redundancies, and better align cost of goods sold and 2,253 patents and had an additional 2,514 patent operating expenses with the current business applications pending. We also hold licenses to use environment and strategic growth opportunities. As Part numerous third-Party patents. To replace expiring of this overall effort, we expect to further reduce our patents, we obtain new patents through our ongoing overall headcount; however, we may add headcount in (where reasonable alternatives exist) from our products certain strategic growth areas. We also may realign, sell, and working towards developing reliable, environmentally or close additional facilities depending on a number of sound, and commercially scalable solutions. We also factors, including end-user demand, capabilities, and our created a series of tools that help customers assess their migration to a more variable cost manufacturing model. current operations and uncover ways to achieve their These actions will result in additional business own environmental goals. realignment costs in the future, although no plans were finalized at January 30, 2009. Backlog We believe that backlog is not a meaningful indicator of Government Regulation and Environment net revenue that can be expected for any period. There Our business is subject to regulation by various federal can be no assurance that the backlog at any point in time and state governmental agencies. Such regulation will translate into net revenue in any subsequent period, includes the radio frequency emission regulatory activities as unfilled orders can generally be canceled at any time of the U.S. Federal Communications Commission; the anti- by the customer. Our business model generally gives us trust regulatory activities of the U.S. Federal Trade flexibility to manage backlog at any point in time by Commission, the DePartment of Justice, and the European expediting shipping or prioritizing customer orders Union; the consumer protection laws of the Federal Trade toward products that have shorter lead times, thereby Commission; the export regulatory activities of the U.S. reducing backlog and increasing current period revenue. DePartment of Commerce and the U.S. DePartment of Even though backlog at the end of Fiscal 2009 was higher Treasury; the import regulatory activities of U.S. Customs than at the end of Fiscal 2008 and Fiscal 2007, it was not and Border Protection; the product safety regulatory material. activities of the U.S. Consumer Product Safety Commission; the investor protection and capital markets Operating Business Segments regulatory activities of the Securities and Exchange We conduct operations worldwide. Effective the first Commission; and environmental regulation by a variety of quarter of Fiscal 2009, we combined our consumer regulatory authorities in each of the areas in which we businesses of EMEA, APJ, and Americas International conduct business. We are also subject to regulation in (formerly reported through Americas Commercial) with other countries where we conduct business. We were not assessed any environmental fines, nor did we have any our U.S. Consumer business and re-aligned our material environmental remediation or other management and financial reporting structure. As a environmental costs, during Fiscal 2009. result, effective May 2, 2008, our operating segments consisted of the following four segments: Americas Sustainability Commercial, EMEA Commercial, APJ Commercial, and Our focus on business efficiencies and customer Global Consumer. Our commercial business includes sales satisfaction drives our environmental stewardship to large corporate, government, healthcare, education, program in all areas of our business — reducing product small and medium business customers, and value-added energy consumption, reducing or eliminating materials for resellers and is managed through the Americas disposal, prolonging product life spans, and providing Commercial, EMEA Commercial, and APJ Commercial effective and convenient equipment recovery solutions. segments. The Americas Commercial segment, which is We are committed to becoming the “greenest technology based in Round Rock, Texas, encompasses the U.S., company on the planet” — a long-term initiative we announced in June 2007. This multi-faceted campaign Canada, and Latin America. The EMEA Commercial focuses on driving internal business innovations and segment, based in Bracknell, England, covers Europe, the efficiencies; enhancing customer satisfaction; and Middle East, and Africa; and the APJ Commercial segment, Partnering with suppliers, stakeholders, and people who based in Singapore, encompasses the Asian countries of care about the environment. the Pacific Rim as well as Australia, New Zealand, and India. The Global Consumer segment, which is based in In Fiscal 2008, we announced our commitment to Round Rock, Texas, includes global sales and product becoming carbon neutral in our operations. We were the development for individual consumers and retailers first company in our industry to offer a free worldwide around the world. We revised previously reported recycling program for our consumers. We also provided operating segment information to conform to our new no-charge recycling of any brand of used computer or operating segments in effect during the first quarter of printer with the purchase of a new Dell computer or printer. We have streamlined our transportation network Fiscal 2009. to reduce transit times, minimize air freight, and reduce emissions. When developing and designing products, we On December 31, 2008, we announced our intent during select materials guided by a precautionary approach. This Fiscal 2010 to move from geographic commercial means eliminating environmentally sensitive substances segments to global business units reflecting the impact of globalization on our customer base. Customer “Part II — Item 8 — Financial Statements and requirements now share more commonality based on Supplementary Data.” For information about percentages their sector rather than physical location. We expect to of revenue outside the U.S. for each of the last three fiscal combine our current Americas Commercial, EMEA years, see “Part II — Item 7 — Management’s Discussion Commercial, and APJ Commercial segments and realign and Analysis of Financial Condition and Results of our management structure. After this realignment, our Operations.” operating structure will consist of the following segments: Global Large Enterprise, Global Public, Global Small and Our corporate headquarters are located in Round Rock, Medium Business (“SMB”), and our existing Global Texas. Our manufacturing and distribution facilities are Consumer segment. We believe that these four distinct, located in Austin, Texas; Winston-Salem, North Carolina; global business organizations can capitalize on our Lebanon and Nashville, Tennessee; Miami, Florida; competitive advantages and strengthen execution. We Limerick and Athlone, Ireland; Penang, Malaysia; Xiamen, will begin reporting these four global businesses once we China; Hortolândia, Brazil; Chennai, India; and Lodz, complete the realignment of our management and Poland. For additional information, see “Part I — Item 2 financial reporting structure, which is expected to be in — Properties.” the first half of Fiscal 2010. Trademarks and Service Marks We have invested in high growth countries such as Brazil, Unless otherwise noted, trademarks appearing in this Russia, India, and China (“BRIC”) to design and report are trademarks owned by us. We disclaim manufacture products and support our customers, and proprietary interest in the marks and names of others. we expect to continue our global expansion in the years EMC is a registered trademark of EMC Corporation. ahead. Our continued expansion outside of the U.S. creates additional complexity in coordinating the design, Available Information development, procurement, manufacturing, distribution, We maintain an Internet website at www.dell.com. All of and support of our increasingly complex product and our reports filed with the Securities and Exchange service offerings. As a result, we plan to continue to add Commission (“SEC”) (including annual reports on Form 10- additional resources to our offices in Singapore to better K, quarterly reports on Form 10-Q, current reports on coordinate certain global activities, including the Form 8-K, and Section 16 filings) are accessible through management of our original design manufacturers and the Investor Relations section of our website utilization of non-U.S. Dell and supplier production at www.dell.com/investor, free of charge, as soon as capacity where most needed in light of product demand reasonably practicable after electronic filing. The public levels that vary by region. The expanded global operations may read and copy any materials that we file with the SEC in Singapore also coordinate product design and at the SEC’s Public Reference Room at 100 F Street, NE, development efforts with procurement activities and Room 1580, Washington, DC 20549. You may obtain sources of supply. We intend to continue to expand our information on the operation of the Public Reference global capabilities as our international business continues Room by calling the SEC at 1-800-SEC-0330. The SEC to grow. For financial information about the results of our maintains an Internet site that contains reports, proxy and reportable operating segments for each of the last three information statements, and other information regarding fiscal years, see “Part II — Item 7 — Management’s issuers that file electronically with the SEC Discussion and Analysis of Financial Condition and Results at www.sec.gov. Information on our website is not of Operations — Revenues by Segment” and Note 11 of incorporated by reference into this report. Notes to Consolidated Financial Statements included in

Executive Officers of Dell The following table sets forth the name, age, and position of each of the persons who were serving as our executive officers as of March 5, 2009:

Name Age Title Michael S. Dell ...... 44 Chairman of the Board and Chief Executive Officer Bradley R. Anderson ...... 49 Senior Vice President, Enterprise Product Group Paul D. Bell ...... 48 President, Global Public Jeffrey W. Clarke ...... 46 Vice Chairman, Operations and Technology Andrew C. Esparza ...... 50 Senior Vice President, Human Resources Stephen J. Felice ...... 51 President, Global Small and Medium Business Ronald G. Garriques ...... 45 President, Global Consumer Brian T. Gladden ...... 44 Senior Vice President and Chief Financial Officer Erin Nelson ...... 39 Vice President, Chief Marketing Officer Stephen F. Schuckenbrock ...... 48 President, Global Large Enterprise Lawrence P. Tu ...... 54 Senior Vice President, General Counsel and Secretary

Set forth below is biographical information about each of our executive officers.

Michael S. Dell — Mr. Dell currently serves as Chairman marketing, sales, finance, and corporate marketing. Mr. of the Board of Directors and Chief Executive Officer. He Anderson earned a Bachelor of Science in Petroleum has held the title of Chairman of the Board since he Engineering from Texas A&M University and a Master of founded the Company in 1984. Mr. Dell served as Chief Business Administration from Harvard University. He Executive Officer of Dell from 1984 until July 2004 and serves on the Texas A&M Look College of Engineering resumed that role in January 2007. He serves on the Advisory Council. Foundation Board of the World Economic Forum, serves on the executive committee of the International Business Paul D. Bell — Mr. Bell has been with us since 1996 and Council, and is a member of the U.S. Business Council. He currently serves as President, Global Public. In this role he also sits on the governing board of the Indian School of is responsible for leading the teams that help Business in Hyderabad, India. governments, education, healthcare and other public organizations make full use of Information Technology. Bradley R. Anderson — Mr. Anderson joined us in July From March 2007 until January 2009, Mr. Bell served as 2005 and has served as Senior Vice President, Enterprise Senior Vice President and President, Americas. In this Product Group since January 2009. In this role, he is role, Mr. Bell is responsible for all sales and customer responsible for worldwide engineering, design, support operations across the Americas region other than development and marketing of Dell’s enterprise products our consumer business. From February 2000 until March including servers, networking and storage systems. From 2007, Mr. Bell served as Senior Vice President and July 2005 until January 2009, Mr. Anderson served as President, Europe, Middle East, and Africa. Prior to this, Senior Vice President, Business Product Group. Prior to Mr. Bell served as Senior Vice President, Home and Small joining Dell, Mr. Anderson was Senior Vice President and Business. Prior to joining Dell in July 1996, Mr. Bell was a General Manager of the Industry Standard Servers management consultant with Bain & Company for six business at Hewlett-Packard Company (“HP”), where he years, including two years as a consultant on our account. was responsible for HP’s server solutions. Previously, he Mr. Bell received Bachelor’s degrees in Fine Arts and was Vice President of Server, Storage, and Infrastructure Business Administration from Pennsylvania State for HP, where he led the team responsible for server, University and a Master of Business Administration storage, peripheral, and infrastructure products. Before degree from the Yale School of Organization and joining HP in 1996, Mr. Anderson held top management Management. positions at Cray Research in executive staff, field

Jeffrey W. Clarke — Mr. Clarke currently serves as Vice Executive Officer and President of DecisionOne Corp. Mr. Chairman, Operations and Technology. In this role he is Felice also served as Vice President, Planning and responsible for worldwide engineering, design and Development, with Bell Atlantic Customer Services, and development of Dell’s business client products, including he spent five years with Shell Oil in Houston. Mr. Felice Dell OptiPlex Desktops, Latitude notebooks and Precision holds a Bachelor’s degree in Business Administration from Workstations, and production of all company products the University of Iowa and a Master of Business worldwide. From January 2003 until January 2009, Mr. Administration degree from the University of Houston. Clarke served as Senior Vice President, Business Product Group. Mr. Clarke joined Dell in 1987 as a quality engineer Ronald G. Garriques — Mr. Garriques joined us in and has served in a variety of engineering and February 2007 as President, Global Consumer Group. In management roles. In 1995 Mr. Clarke became the this role he is responsible for Dell’s portfolio of consumer director of desktop development, and from November products, including desktops, notebooks, software and 2001 to January 2003 he served as Vice President and peripherals as well as product design and sales. Before General Manager, Relationship Product Group. Mr. Clarke joining Dell, Mr. Garriques served in various leadership received a Bachelor’s degree in Electrical Engineering roles at Motorola from February 2001 to February 2007, from the University of Texas at San Antonio. where he was most recently Executive Vice President and President, responsible for the Mobile Devices division. He Andrew C. Esparza — Mr. Esparza joined us in 1997 as a was also Senior Vice President and General Manager of director of Human Resources in the Product Group. He the Europe, Middle East, and Africa region for the was named Senior Vice President, Human Resources in Personal Communications Services division, and Senior March 2007 and was named an executive officer in Vice President and General Manager of Worldwide September 2007. In this role, he is responsible for driving Products Line Management for the Personal the strategy and supporting initiatives to attract, Communications Services division. Prior to joining motivate, develop, and retain world-class talent in Motorola, Mr. Garriques held management positions at support of our business goals and objectives. He also has AT&T Network Systems, Lucent Technologies, and Philips responsibility for corporate security and corporate Consumer Communications. Mr. Garriques holds a responsibility on a worldwide basis. He currently is an Master’s degree in Business Administration from The executive sponsor for aDellante, our internal networking Wharton School at the University of Pennsylvania, a group responsible for the development of Hispanic master’s degree in Mechanical Engineering from Stanford employees within the company. Prior to joining Dell, he University, and a Bachelor’s degree in Mechanical held human resource positions with NCR Corporation Engineering from Boston University. from 1985 until 1997 and Bechtel Power Corporation from 1981 until 1985. Mr. Esparza earned a Bachelor’s Brian T. Gladden — Mr. Gladden serves as Senior Vice degree in Business Administration with a concentration in President and Chief Financial Officer (“CFO”). In this role, Human Resource Management from San Diego State he is responsible for all aspects of Dell’s finance function University. including accounting, financial planning and analysis, tax, treasury, audit, information technology, and investor Stephen J. Felice — Mr. Felice currently serves as relations, and is also responsible for our global President, Global Small and Medium Business. Mr. Felice information systems and technology structure. Prior to leads the Dell organization that creates and delivers joining Dell in June 2008, Mr. Gladden was President and specific solutions and technology to more than 72 million small and medium-sized businesses globally. From March CEO of SABIC Innovative Plastics Holding BV. Prior to 2007 until January 2009, Mr. Felice served as Senior Vice joining SABIC Innovative Plastics, Mr. Gladden spent President and President, Asia Pacific-Japan, after having nearly 20 years with General Electric (“GE”) in a variety of served as Vice President, Asia Pacific-Japan since August financial and management leadership roles. During his 2005. Mr. Felice was responsible for our operations career with the company, he served as Vice President and throughout the APJ region, including sales and customer General Manager of GE Plastics’ resin business, CFO of GE service centers in Penang, Malaysia, and Xiamen, China. Plastics and Vice President and CFO of GE Medical Mr. Felice joined us in February 1999 and has held various Systems Healthcare IT business. He was named a GE executive roles in our sales and consulting services corporate officer in 2002 and had formerly served on GE’s organizations. From February 2002 until July 2005, Mr. corporate audit staff for five years. Mr. Gladden earned a Felice was Vice President, Corporate Business Group, Dell Bachelor of Science degree in Business Administration and Americas. Prior to joining Dell, Mr. Felice served as Chief Finance from Millersville University in Millersville, PA.

Erin Nelson — Ms. Nelson currently serves as Vice information systems and technology structure. Prior to President and Chief Marketing Officer (“CMO”). In this joining us, Mr. Schuckenbrock served as Co-Chief role she is responsible for customer relationship Operating Officer and Executive Vice President of Global management, communications, brand strategy, core Sales and Services for Electronic Data Systems research and analytics, and overall marketing agency Corporation (“EDS”). Before joining EDS in 2003, he was management. Before becoming CMO in January 2009, Ms. Chief Operating Officer of The Feld Group, an information Nelson spent three years in Europe, most recently as Vice technology consulting organization. Mr. Schuckenbrock President of Marketing for Dell’s business in Europe, the served as Global Chief Information Officer for PepsiCo Middle East and Africa. Since joining Dell in 1999, she has from 1998 to 2000. Mr. Schuckenbrock earned a held progressive leadership positions in U.S. consumer Bachelor’s degree in Business Administration from Elon marketing, U.S. public sales, EMEA home and small- University. business marketing, as well as eBusiness. Prior to joining Dell, Ms. Nelson held positions in brand management at Lawrence P. Tu — Mr. Tu joined us as Senior Vice Procter & Gamble, corporate strategy at PepsiCo, and as a President, General Counsel and Secretary in July 2004, management consultant with A.T. Kearney. Ms. Nelson and is responsible for overseeing Dell’s global legal earned a Bachelor’s degree in Business Administration dePartment, governmental affairs and ethics dePartment. with a concentration in International Business and Before joining Dell, Mr. Tu served as Executive Vice Marketing from the University of Texas at Austin. President and General Counsel at NBC Universal for three years. Prior to his position at NBC, he was a Partner with Stephen F. Schuckenbrock — Mr. Schuckenbrock the law firm of O’Melveny & Myers LLP, where he focused currently serves as President, Global Large Enterprise, on energy, technology, internet, and media related leading the delivery of innovative and globally consistent transactions. He also served five years as managing Dell solutions and services to the world’s largest Partner of the firm’s Hong Kong office. Mr. Tu’s prior corporate IT users. Mr. Schuckenbrock joined us in experience also includes serving as General Counsel Asia- January 2007 as Senior Vice President and President, Pacific for Goldman Sachs, attorney for the U.S. State Global Services. In September 2007, he assumed the DePartment, and law clerk for U.S. Supreme Court Justice additional role of Chief Information Officer, and served in Thurgood Marshall. Mr. Tu holds Juris Doctor and those roles until January 2009. In those roles, he was Bachelor of Arts degrees from Harvard University, as well responsible for all aspects of our services business, with as a Master’s degree from Oxford University, where he worldwide responsibility for Dell enterprise service was a Rhodes Scholar. offerings, and was also responsible for our global

ITEM 1A — RISK FACTORS

There are many risk factors that affect our business and global economic growth and have resulted in results of operations, some of which are beyond our recessions in many countries, including the U.S. While control. The following is a description of some of the these global economic issues persist, there are likely to important risk factors that may cause our actual results in be a number of follow-on effects on our business, future periods to differ substantially from those we including customers or potential customers reducing currently expect or desire. or delaying their technology investments, insolvency of key suppliers resulting in product delays, counterparty failures negatively impacting our treasury operations, • Weakening global economic conditions and instability the inability of customers to obtain credit to finance in financial markets could harm our business and result in reduced net revenue and profitability. We are a purchases of our products, and customer insolvencies, all of which could reduce demand for our product and global company with customers in virtually every services, impact our ability to effectively manage business and industry. There has been an erosion of global consumer confidence amidst concerns over inventory levels and collect customer receivables, lengthen our cash conversion cycle and negatively declining asset values, fluctuating energy costs, geopolitical issues, the availability and cost of credit, impact liquidity, and ultimately decrease our net revenue and profitability. rising unemployment, and the stability and solvency of

financial institutions, financial markets, businesses, and sovereign nations. These concerns have slowed • Weakening economic conditions and instability in short-term. As we continue to expand globally, we financial markets could harm our financial services may see new and increased competition in different activities. Our financial services activities are geographic regions. In addition, barriers to entry in our negatively affected in four major ways by the current businesses generally are low and products can be economic environment — spending softness, distributed broadly and quickly at relatively low cost. increasing loan delinquencies and defaults, increasing funding costs, and reduced availability of funding If our increasing reliance on third-Party original through securitizations. Decreased customer spending equipment manufacturers, original design directly reduces the potential sales revenue that we manufacturing Partnerships, and manufacturing can seek to finance. Loan delinquencies and defaults outsourcing relationships fails to generate cost impact our net credit losses and have been increasing efficiencies, our profitability could be adversely for more than a year. If this trend continues, we may impacted. Our profitability is also affected by our need to increase our reserves in our customer ability to negotiate favorable pricing with our vendors, receivables in the future. The debt and securitization including vendor rebates, marketing funds, and other markets have been experiencing and may continue to vendor funding. Because these supplier negotiations experience extreme volatility and disruption, resulting are continuous and reflect the ongoing competitive in higher credit spreads in the capital markets and environment, the variability in timing and amount of higher funding costs for us, as well as reduced incremental vendor discounts and rebates can affect availability of funding from securitizing our financing our profitability. Our inability to establish a cost and receivables. product advantage, or determine alternative means to deliver value to our customers, may adversely affect We have continued to utilize securitizations to fund our market share, revenue, and profitability. our financing activities. During Fiscal 2009 and Fiscal 2008, Dell transferred $1.4 billion and $1.2 billion, • Our ability to generate substantial non-U.S. net respectively, of fixed-term leases and loans and revenue faces many additional risks and uncertainties. revolving loans to unconsolidated qualified special Sales outside the U.S. accounted for approximately purpose entities to facilitate the funding of financing 48% of our consolidated net revenue in Fiscal 2009. receivables in the capital markets. Deterioration in our Our future growth rates and success are dependent on business performance, a credit rating downgrade, continued growth outside the U.S., including the key continued volatility in the securitization markets, or developing countries of Brazil, Russia, India, and China. adverse changes in the economy could lead to Our international operations face many risks and reductions in debt availability for the qualified special uncertainties, including varied local economic and purpose entities and could limit our ability to continue labor conditions, political instability, and changes in asset securitizations or other financing from debt or the regulatory environment, trade protection capital sources, reduce the amount of financing measures, tax laws (including U.S. taxes on foreign receivables that we originate, or could adversely affect operations), copyright levies, and foreign currency the costs or terms on which we may be able to obtain exchange rates. Any of these factors could adversely capital, which could unfavorably affect our profitability affect our operations and profitability. or cash flows. • Our profitability may be affected by our product, • We face strong competition, which may adversely customer, and geographic sales mix and by seasonal affect our market share, revenue, and profitability. We sales trends. Our profit margins vary among products, operate in an industry in which there are rapid customers, and geographies. In addition, our business technological advances in hardware, software and is subject to certain seasonal sales trends. For service offerings, and face aggressive product and example, sales to government customers (Particularly price competition from both branded and generic the U.S. federal government) are typically stronger in competitors. We compete based on our ability to our third fiscal quarter, sales in EMEA are often profitably offer competitive solutions with the most current and desired product features, as well as on weaker in our third fiscal quarter, and consumer sales customer service, quality and reliability. We expect are typically strongest during our fourth fiscal quarter. that competition will continue to be intense and that As a result of these factors, our overall profitability for our competitors’ products may be less costly, provide any Particular period will be affected by the mix of better performance or include additional features. Our products, customers, and geographies reflected in our efforts to balance our mix of products and services to sales for that period, as well as by seasonal trends. optimize profitability, liquidity, and growth may also put pressure on our industry unit share position in the • Infrastructure failures and breaches in data security of our higher margin offerings through selective could harm our business. We depend on our acquisitions. If we are unable to effectively transition information technology and manufacturing our sales capabilities and grow our product and infrastructure to achieve our business objectives. If a services offerings, our business and results of problem, such as a computer virus, intentional operations could be unfavorably affected. disruption by a third Party, natural disaster, manufacturing failure, telecommunications system • Disruptions in component or product availability could failure, or lost connectivity impairs our infrastructure, unfavorably affect our performance. Our we may be unable to book or process orders, manufacturing and supply chain efficiencies give us the manufacture, ship in a timely manner, or otherwise ability to operate with reduced levels of component carry on our business. An infrastructure disruption and finished goods inventories. Our financial success is could damage our reputation and cause us to lose Partly due to our supply chain management practices, customers and revenue, result in the unintentional including our ability to achieve rapid inventory turns. disclosure of company or customer information, and Because we maintain minimal levels of component and require us to incur significant expense to eliminate product inventories, a disruption in component or these problems and address related data security product availability could harm our financial concerns. The harm to our business could be even performance and our ability to satisfy customer needs. greater if it occurs during a period of disproportionately heavy demand. • Our reliance on vendors for products and components creates risks and uncertainties. We require a high • Our inability to effectively manage product and volume of quality products and components from third services transitions could reduce the demand for our Party vendors. In addition, we are continuing to products and the profitability of our operations. expand our use of original design manufacturing Continuing improvements in technology mean Partnerships and manufacturing outsourcing frequent new product introductions, short product life relationships in order to generate cost efficiencies, cycles, and improvement in product performance deliver products faster and better serve our customers characteristics. In addition, we are increasingly in certain segments and geographical areas. Our sourcing new products and transitioning existing increasing reliance on these vendors subjects us to a products through our original design manufacturing greater risk of shortages, and reduced control over Partnerships and manufacturing outsourcing delivery schedules of components and products (which relationships in order to generate cost efficiencies, can harm efficiencies), as well as a greater risk of deliver products faster and better serve our customers increases in product and component costs (which can in certain segments and geographical areas. These harm our profitability). In addition, defective parts and product transitions present execution challenges and products from these vendors could reduce product risks. If we are unable to effectively manage a new reliability and harm our reputation. product transition, our business and results of operations could be unfavorably affected. • We could experience manufacturing interruptions, delays, or inefficiencies if we are unable to timely and • Our growth strategy depends on our ability to reliably procure components and products from single- successfully transform our sales capability and to add source or limited-source suppliers. We maintain several to the scope of our product and services offerings. Our single-source or limited-source supplier relationships, growth strategy involves reaching more customers either because multiple sources are not available or worldwide through new distribution channels, such as the relationship is advantageous due to performance, consumer retail, expanding our relationships with quality, support, delivery, capacity, or price value-added resellers, and augmenting select areas of considerations. If the supply of a critical single- or our business through targeted acquisitions. Our goal limited-source product or component is delayed or continues to be to optimize the balance of liquidity, curtailed, we may not be able to ship the related profitability, and growth with a focus on moving the product in desired quantities and in a timely manner. weight of the product portfolio to higher margin Even where multiple sources of supply are available, products and recurring revenue streams. Our ability to qualification of the alternative suppliers and grow sales of these higher margin products, services establishment of reliable supplies could result in delays and solutions depends on our ability to successfully and a possible loss of sales, which could harm transition our sales capabilities and add to the breadth operating results. • Our business is increasingly dependent on our ability to 10 of Notes to Consolidated Financial Statements access the capital markets. We are increasingly included in “Part II — Item 8 — Financial Statements dependent on access to debt and capital sources to and Supplementary Data.” Additional legal claims or provide financing for our customers and to obtain regulatory matters may arise in the future and could funds in the U.S. for general corporate purposes, involve stockholder, consumer, antitrust, tax and other including share repurchases, funding customer issues on a global basis. Litigation is inherently receivables, and acquisitions. Additionally, we have unpredictable. Regardless of the merit of the claims, customer financing relationships with companies litigation may be both time-consuming and disruptive whose business models rely on accessing the capital to our business. Therefore, we could incur judgments markets. The inability of these companies to access or enter into settlements of claims that could such markets could force us to self-fund transactions adversely affect our operating results or cash flows in a or forgo customer financing opportunities, potentially Particular period. For example, we could be exposed to harming our financial performance. The debt and enforcement or other actions with respect to the capital markets have been experiencing and may continuing SEC investigation into certain accounting continue to experience extreme volatility and and financial reporting matters. In addition, if any disruption. These issues, along with significant write- infringement or other intellectual property claim made offs in the financial services sector, the re-pricing of against us by any third Party is successful, or if we fail credit risk, and the current weak economic conditions to develop non-infringing technology or license the have made, and will likely continue to make, it difficult proprietary rights on commercially reasonable terms to obtain funding. The cost of accessing debt and and conditions, our business, operating results, and capital markets has increased as many lenders and financial condition could be materially and adversely institutional investors require higher rates of return. affected. Lenders have also tightened lending standards, and reduced or ceased their lending to certain borrowers. • The acquisition of other companies may present new We believe that we will be able to obtain appropriate risks. We acquire companies as a Part of our overall financing from third Parties even in light of the current growth strategy. These acquisitions may involve market conditions; nevertheless, changes in our credit significant new risks and uncertainties, including ratings, deterioration in our business performance, or distraction of management attention away from our adverse changes in the economy could limit our ability current business operations, insufficient new revenue to obtain financing from debt or capital sources or to offset expenses, inadequate return of capital, could adversely affect the terms on which we may be integration challenges, new regulatory requirements, able to obtain capital, which could unfavorably affect and issues not discovered in our due diligence process. our net revenue and profitability. See “Part II — Item 7 No assurance can be given that such acquisitions will — Management’s Discussion and Analysis of Financial be successful and will not adversely affect our Condition and Results of Operations — Liquidity and profitability or operations. Capital Commitments — Liquidity.” • Failure to properly manage the distribution of our • We face risks relating to our internal controls. If products and services may result in reduced revenue management is not successful in maintaining a strong and profitability. We use a variety of distribution internal control environment, material weaknesses methods to sell our products and services, including could reoccur, causing investors to lose confidence in directly to customers and through select retailers and our reported financial information. This could lead to a third-Party value-added resellers. As we reach more decline in our stock price, limit our ability to access the customers worldwide through an increasing number of capital markets in the future, and require us to incur new distribution channels, such as consumer retail, additional costs to improve our internal control and continue to expand our relationships with value- systems and procedures. added resellers, inventory management becomes more challenging and successful demand forecasting • Unfavorable results of legal proceedings could harm becomes more difficult. Our inability to properly our business and result in substantial costs. We are manage and balance inventory levels and potential involved in various claims, suits, investigations, and conflicts among these various distribution methods legal proceedings that arise from time to time in the could harm our operating results. ordinary course of our business and that are not yet resolved, including those that are set forth under Note • If our cost cutting measures are not successful, we may rated AA and A. If an institution which is holding our become less competitive. A variety of factors could deposits fails, we could lose all uninsured funds in prevent us from achieving our goal of better aligning those accounts. our product and service offerings and cost structure with customer needs in the current business • Our continued business success may depend on environment through reducing our operating obtaining licenses to intellectual property developed by expenses; reducing total costs in procurement, others on commercially reasonable and competitive product design, and transformation; simplifying our terms. If we or our suppliers are unable to obtain structure; and eliminating redundancies. For example, desirable technology licenses, we may be prevented we may experience delays in the anticipated timing of from marketing products; could be forced to market activities related to our cost savings plans and higher products without desirable features; or could incur than expected or unanticipated costs to implement substantial costs to redesign products, defend legal them. As a result, we may not achieve our expected actions, or pay damages. While our suppliers may be cost savings in the time anticipated, or at all. In such contractually obligated to obtain such licenses and case, our results of operations and profitability may be indemnify us against such expenses, those suppliers negatively impaired, making us less competitive and could be unable to meet their obligations. In addition, potentially causing us to lose market share. our operating costs could increase because of copyright levies or similar fees by rights holders and • Failure to effectively hedge our exposure to collection agencies in European and other countries. fluctuations in foreign currency exchange rates and For a description of potential claims related to interest rates could unfavorably affect our copyright levies, see Note 10 of Notes to Consolidated performance. We utilize derivative instruments to Financial Statements included in “Part II — Item 8 — hedge our exposure to fluctuations in foreign currency Financial Statements and Supplementary Data — exchange rates and interest rates. Some of these Legal Matters — Copyright Levies.” instruments and contracts may involve elements of market and credit risk in excess of the amounts • Our success depends on our ability to attract, retain, recognized in our financial statements. and motivate our key employees. We rely on key personnel to support anticipated continued rapid • We are subject to counterParty default risks. We enter international growth and increasingly complex product into numerous financing arrangements, including and service offerings. There can be no assurance that foreign currency option contracts and forward we will be able to attract, retain, and motivate the key contracts, with a wide array of bank counterParties. As professional, technical, marketing, and staff resources a result, we are subject to the risk that the we need. counterParty to one or more of these contracts defaults, either voluntarily or involuntarily, on its • Loss of government contracts could harm our business. performance under the contract. In times of market Government contracts are subject to future funding distress, a counterParty may default rapidly and that may affect the extension or termination of without notice to us, and we may be unable to take programs and are subject to the right of the action to cover our exposure, either because we lack government to terminate for convenience or non- the contractual ability or because market conditions appropriation. In addition, if we violate legal or make it difficult to take effective action. In the event of regulatory requirements, the government could a counterParty default, we could incur significant suspend or disbar us as a contractor, which would losses, which could harm our business, results of unfavorably affect our net revenue and profitability. operations, and financial condition. In the event that one of our counterParties becomes insolvent or files • The expiration of tax holidays or favorable tax rate for bankruptcy, our ability to eventually recover any structures, or unfavorable outcomes in tax compliance losses suffered as a result of that counterParty’s and regulatory matters, could result in an increase of default may be limited by the liquidity of the our effective tax rate in the future. Portions of our counterParty or the applicable legal regime governing operations are subject to a reduced tax rate or are free the bankruptcy proceeding. In addition, our deposits at of tax under various tax holidays that expire in whole financial institutions are at risk. As of January 30, 2009, or in Part during Fiscal 2010 through Fiscal 2018. Many approximately 25% of our cash and cash equivalents of these holidays may be extended when certain were deposited with two large financial institutions conditions are met, or terminated if certain conditions are not met. If they are not extended, or if we fail to and regulations regarding the use and sale of such satisfy the conditions of the reduced tax rate, then our regulated substances, we could be subject to liability. effective tax rate would increase in the future. Our While we do not expect that the impact of these effective tax rate could also increase if our geographic environmental laws and other similar legislation sales mix changes. We are under audit in various tax adopted in the U.S. and other countries will have a jurisdictions. An unfavorable outcome in certain of substantial unfavorable impact on our business, the these matters could result in a substantial increase to costs and timing of costs under environmental laws our tax expense. In addition, changes in tax laws are difficult to predict. (including U.S. taxes on foreign operations) could adversely affect our operations and profitability. • Armed hostilities, terrorism, natural disasters, or public health issues could harm our business. Armed • Current environmental laws, or laws enacted in the hostilities, terrorism, natural disasters, or public health future, may harm our business. Our operations are issues, whether in the U.S. or abroad, could cause subject to environmental regulation in all of the areas damage or disruption to us, our suppliers or in which we conduct business. Our product design and customers, or could create political or economic procurement operations must comply with new and instability, any of which could harm our business. future requirements relating to the materials These events could cause a decrease in demand for composition, energy efficiency and collection, our products, could make it difficult or impossible for recycling, treatment, and disposal of our electronics us to deliver products or for our suppliers to deliver products, including restrictions on lead, cadmium, and components, and could create delays and other substances. If we fail to comply with the rules inefficiencies in our supply chain.

ITEM 1B — UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 2 — PROPERTIES

At January 30, 2009, we owned or leased a total of meet our requirements for additional space at approximately 16.8 million square feet of office, competitive rates by extending expiring leases or by manufacturing, and warehouse space worldwide, finding alternative space. approximately 7.4 million square feet of which is located in the U.S. Approximately 1.0 million square feet, Our principal executive offices, including global primarily in the U.S. and Canada, is vacant or sublet. We headquarters, are located at One Dell Way, Round Rock, believe that our existing properties are suitable and Texas, United States of America. adequate for our current needs and that we can readily

Americas Properties Description Principal Locations Owned (square feet) Leased (square feet) Headquarters Round Rock, Texas 2.1 million - Business Centers(a) Brazil - El Dorado Do Sul Oklahoma - Oklahoma City Panama - Panama City 1.1 million 1.0 million Tennessee - Nashville Texas - Austin and Round Rock Manufacturing and Brazil - Hortolândia Distribution Florida - Miami (Alienware) North Carolina - Winston-Salem 2.6 million 100,000 Tennessee - Lebanon and Nashville Texas – Austin Design Centers Texas - Austin and Round Rock New Hampshire - Nashua 700,000 100,000 California - SanJose

EMEA Properties Description Principal Locations Owned (square feet) Leased (square feet) Business Centers(a) England - Bracknell Germany - Halle France - Montpellier 500,000 1.5 million Ireland - Dublin and Limerick Morocco - Casablanca Slovakia - Bratislava Manufacturing Ireland - Limerick and Athlone (Alienware) - and Distribution Poland - Lodz 1.0 million

APJ Properties Description Principal Locations Owned (square feet) Leased (square feet) Business China - Dalian and Xiamen Centers(a) India - Bangalore, Gurgaon, Hyderabad, and Mohali 300,000 3.2 million Japan - Kawasaki Malaysia - Penang and Kuala Lumpur Philippines - Metro Manila Manufacturing China - Xiamen and Distribution Malaysia - Penang 1.1 million - India - Chennai Design Centers China - Shanghai India - Bangalore - 500,000 Singapore Taiwan - Taipei ______

(a) Business center locations include facilities with capacity greater than 1,000 people. Operations within these centers include sales, technical support, administrative, and support functions. Locations of smaller business centers are not listed; however, the smaller centers are included in the square footage.

In general, our Americas, EMEA, and APJ regions use We plan to migrate all production of computer systems properties within their geographies. However, business for customers in EMEA from our Limerick, Ireland centers in the Philippines and India, which house sales, manufacturing facility to our facility in Poland and third- customer care, technical support, and administrative Party manufacturing Partners over the next year. The support functions, are used by each of our geographic manufacturing migration and subsequent closure of our regions. During Fiscal 2009, we closed a manufacturing Limerick facility will be completed in a phased transition plant in Austin, Texas and business centers in Ottawa and during calendar 2009. We may realign, sell, or close Edmonton, Canada, and we sold our call center in El additional facilities depending on a number of factors, Salvador and our small package hub operations in West including end-user demand, capabilities, and our Chester, Ohio. At the end of Fiscal 2009, a business center migration to a more variable cost manufacturing model. in Casablanca, Morocco was under construction. These actions will result in additional business Additionally, we announced the disposition of the sale of realignment costs in the future, although no plans were our customer contact center in the Philippines in Fiscal finalized at January 30, 2009. 2010.

ITEM 3 — LEGAL PROCEEDINGS

The information required by this Item is set forth under Supplementary Data”, and is incorporated herein by Note 10 of Notes to Consolidated Financial Statements reference. included in “Part II — Item 8 — Financial Statements and

ITEM 4 — SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of our stockholders, through the solicitation of proxies or otherwise, during the fourth quarter of Fiscal 2009.