Dell 1998 Annual Report Download - page 21

acceptance of those products; the ability of the Company to manage its inventory
levels to minimize excess inventory, declining inventory values and
obsolescence; the product, customer and geographic sales mix of any particular
period; the Company's ability to continue to improve its infrastructure
(including personnel and systems) to keep pace with the growth in its overall
business activities; and the Company's ability to ensure its products and
internal systems and devices will be Year 2000 ready and to assess the Year 2000
readiness and risk to the Company of its third party providers, and implement
effective contingency plans where needed. For a discussion of these and other
factors affecting the Company's business and prospects, see "Item 1
-- Business -- Factors Affecting the Company's Business and Prospects."
YEAR 2000
The following disclosure is a Year 2000 readiness disclosure statement pursuant
to the Year 2000 Readiness and Disclosure Act.
State of Readiness
The Company established a formal Year 2000 readiness program in February 1997.
The Company's Year 2000 program consists of two separate initiatives, the
Millennium Project and the Product Group Y2K Project.
The purpose of the Millennium Project is to assess the Year 2000 readiness of
the Company's component and service providers and the Company's internal systems
and devices. The Company identified and assessed its internal systems and
devices and, where remedial steps were required to make those systems Year 2000
ready, prioritized the remedial steps to be taken. As of March 31, 1999, the
Company had completed its assessment and renovation of all mission critical
internal systems and devices and believes all are substantially Year 2000 ready.
However, because the full ramifications of the Year 2000 issue will not be fully
realized until after the Year 2000 date change, the Company can provide no
assurances that its internal systems and devices will not be adversely affected
by the Year 2000 date change.
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The Company has also identified, through the Millennium Project, its critical
component and service providers and is contacting each such vendor to assess
that vendor's Year 2000 readiness. The Company has assigned each such vendor a
priority rating based on the criticality of the function it provides to the
Company. The Company is assessing the Year 2000 readiness of each critical
vendor. Through March 31, 1999, the Company had received written responses from
approximately 50% of its critical vendors, and expects to complete a review of
all of its critical vendors by no later than June 30, 1999. Because the Company
is relying on information provided to it by third parties to assess the Year
2000 readiness of such vendors, the Company cannot provide assurances that all
of its critical vendors are or will be Year 2000 ready. Therefore, the Company
cannot provide assurances that the Company will not be adversely affected by the
Year 2000 date change.
Through the Product Group Y2K Project, the Company is analyzing the Year 2000
readiness status of the computer hardware manufactured by the Company, to
provide an effective means of communicating the readiness status to customers,
and to implement an ongoing testing and monitoring program to help enable all
new Dell computer hardware offerings to meet the Company's Year 2000 readiness
standards. The Company has analyzed and continues to analyze the Year 2000
status of the computer hardware manufactured by the Company. All Dell-branded
hardware products shipped after January 1, 1997 meet the Company's Year 2000
readiness standards. Dell-branded hardware manufactured prior to that time can
generally be updated to meet the Company's Year 2000 readiness standards through
BIOS upgrades or software patches. The Company has created a Web site at
www.dell.com/year2000, which contains detailed information about the Year 2000
issue, the Company's Year 2000 readiness standards and its Year 2000 program.
Through the Web site, customers can assess the Year 2000 readiness of their
hardware and can obtain software patches and BIOS upgrades from the Company,
free of charge, to help prepare the hardware for the Year 2000 rollover.
Customers without Internet access may request free copies of the software
patches and BIOS upgrades by telephone or mail. The Company's Year 2000
readiness program applies only to Dell-branded hardware manufactured and
Dell-branded software developed by the Company. Although the Company has
attempted to ascertain the Year 2000 status of third party software and
peripherals loaded on or distributed with Company computer systems, it does not
and cannot guarantee the Year 2000 status of any software or peripherals
provided by third parties.
Costs
The Company currently does not expect that the total costs of its Year 2000
readiness program will be material to its financial condition or results of
operation. All costs are charged to expense as incurred, and do not include
potential costs related to any customers or other claims or the cost of internal
software and hardware replaced in the normal course of business.
Risks/Contingency Plans