Dell 2004 Annual Report Download - page 25

Table of Contents
during fiscal 2005, compared to 23% in fiscal 2004, while net revenue increased 15% and 14% during fiscal 2005 and 2004, respectively.
Notebooks led the fiscal 2005 revenue growth, supported by an improvement in corporate spending during the year. Fiscal 2004 revenue
growth was broad-based, but primarily led by growth in enterprise systems of 28%.
In the Americas Business segment, which includes sales to small and medium businesses, government, and corporate accounts, net revenue
increased 16% and 13% during fiscal 2005 and 2004, respectively, as business technology spending steadily improved since the end of fiscal
2004. Specifically, Dell's small and medium business customers led the revenue growth during fiscal 2005 while notebook systems provided
about one-third of the revenue growth for the segment. Enterprise revenue growth during fiscal 2005 was 11%, with servers providing the
majority of the product group growth. Enterprise systems provided the majority of the growth in Dell's Americas Business segment during fiscal
2004, with servers contributing more than one-half of the increase during that fiscal year.
Dell's U.S. Consumer segment includes sales primarily to individual consumers. Net revenue grew 13% and 19% during fiscal 2005 and 2004,
respectively, and was led by Dell's printing and imaging products during fiscal 2005. The decrease in revenue growth during fiscal 2005,
compared to fiscal 2004, was partially due to relatively weak demand in the overall U.S. consumer segment toward the second half of fiscal
2005. Dell produced strong net unit growth in consumer notebooks of 29% during fiscal 2005; however, this growth was partially offset by an
11% decline in average revenue per-unit sold as product mix continued to shift toward lower-priced products. Revenue growth during fiscal
2004 was led by notebooks with net unit growth of 67%.
Europe — Dell produced strong performance in Europe, which includes the Middle East and Africa, maintaining its number two share position of
personal computer sales with 11.7% share during calendar 2004, compared to 10.5% during calendar 2003. Net unit shipments grew at a rate
of 31% during fiscal 2005 in a market that grew at a robust rate of 19% during calendar year 2004. The appreciation of the Euro and British
Pound helped stimulate overall market demand in Europe, as Dell and other companies generally passed on these foreign currency benefits to
customers through lower pricing of products and services. Net revenue during fiscal 2005 and 2004 increased by 27% and 23%, respectively.
Revenue during fiscal 2005 included combined net revenue growth of 30% in the United Kingdom and France. Dell's enterprise business
produced revenue growth of 29% and 35% during fiscal 2005 and 2004, respectively.
Asia Pacific-Japan — Dell's strong revenue growth in Asia Pacific-Japan of 26% during fiscal 2005 was supported by the company's strength
and demand growth in China. During calendar 2004, Dell generated share gains in Asia Pacific-Japan of 1.1 percentage points to 8.3% share
of personal computer sales, achieving the number three share position. During fiscal 2005, Dell's net unit growth was 29%, in an industry with
overall growth that increased only 13%. Dell's enterprise business produced revenue growth of 23% and 32% during fiscal 2005 and 2004,
respectively.
For additional information regarding Dell's segments, see Note 9 of "Notes to Consolidated Financial Statements" included in "Item 8 —
Financial Statements and Supplementary Data."
Gross Margin
Gross margin as a percentage of net revenue improved slightly to 18.3% during fiscal 2005, compared to 18.2% fiscal 2004 and 17.9% in fiscal
2003. The year-over-year improvement during fiscal 2005 and 2004 was primarily driven by Dell's continued cost savings initiatives. During
fiscal 2005, component costs continued to decline at a moderate pace that was relatively comparable to fiscal 2004. Management utilized these
cost declines to balance profitable growth while passing on cost savings to its customers. Management expects the component cost
environment to continue to be favorable during the first quarter of fiscal 2006. As part of management's focus on improving margins, Dell
remains committed to reducing costs through four primary cost reduction initiatives:
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