Dell 2005 Annual Report Download - page 23

Table of Contents
ITEM 7 — MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Overview
Our Company
We are a leading global diversified technology provider, focused on providing custom solutions and the best customer experience in the industry. Through our
direct business model, we design, develop, manufacture, market, sell, and support a broad range of information technology systems and services that are
uniquely designed to satisfy specific customer requirements. Our direct model begins and ends with our customers. We believe in entering the market quickly
with new and relevant technology to meet changing customer needs, building systems to order, providing expert services tailored to differing customer needs,
and maintaining low levels of inventory and capital investment. The unique strengths of our direct model facilitate our consistent delivery of profitability and
strong performance across our business segments.
Areas of Emphasis
Our objective is to maximize stockholder value by maintaining a balance of three key financial metrics: liquidity, profitability, and growth. Our strategy
combines our direct business model with a highly efficient manufacturing and supply chain management organization and an emphasis on standards-based
technologies. Our business model provides us with a constant flow of information about trends in customers' plans and requirements. These trends have
shown an increased use of standards-based technologies as well as a push towards standardization of services. Unlike proprietary technologies promoted by
some of our top competitors, standards-based technologies provide customers with flexibility and choice while allowing their purchasing decisions to be based
on performance, cost, and customer service. Our business strategy continues to focus on our enterprise business and expanding our capabilities toward
smaller, more powerful standardized systems where Dell is uniquely positioned.
Business Environment
We believe that our business environment in fiscal 2007 will be similar to that of fiscal 2006. Our business environment is competitive, yet our growth
potential remains strong. Recent reports indicate the U.S. economy is reaching a level of sustainable and healthy economic expansion, resulting in a favorable
IT spending outlook in fiscal 2007. Economic conditions in our international markets, which are key to our expansion goals, continue to improve, highlighted
by strengthening economies in Western Europe, expansion in Asia-Pacific, and continued development in Latin America.
We believe that ample growth opportunities exist as standards-based technologies become more prevalent and we increase our presence in new and existing
geographical regions, expand into new locations, and pursue additional product and service opportunities.
We conduct operations worldwide, and we manage our business in three geographic segments: the Americas, EMEA, and APJ regions. During the year, we
began shipping products from our third U.S. manufacturing facility located in North Carolina, and opened new customer-contact facilities in Oklahoma City,
Canada, India, Germany and El Salvador. We expect to continue our global expansion in the years ahead. Our investment in international growth
opportunities contributed to an increase in our non-U.S. revenue, as a percentage of consolidated net revenue, from 38% in fiscal 2005 to 41% during fiscal
2006.
At calendar year end 2005, we were selling one of every three PC's sold in the United States. While desktop sales experience record low prices, we continue
to see notebook adoption accelerate. This trend of notebook adoption in the U.S. market is expected to remain strong well into the future. We expect the
competitive pricing environment to continue to be challenging mainly in desktop PCs and
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