Dell 2006 Annual Report Download - page 42

Table of Contents
Fiscal 2007 Performance
Share position • According to IDC, we shipped an industry record of 39.1 million units for calendar year 2006, resulting
in a worldwide PC share position of 17.1%. However, we lost share in the U.S. Consumer segment,
which slowed our overall growth in unit shipments, revenue, and profitability. This was mainly due to
intense competitive pressure, particularly in the lower priced desktops and notebooks where
competitors offered aggressively priced products with better product recognition and more relevant
feature sets.
Net revenue • Fiscal 2007 revenue increased 3% year-over-year to $57.4 billion, with unit shipments up 2% year-over-
year, as compared to Fiscal 2006 revenue which increased 14% year-over-year to $55.8 billion on unit
growth of 19% over Fiscal 2005 revenue of $49.1 billion.
Operating income • Operating income was $3.1 billion for Fiscal 2007, or 5.4% of revenue, compared to $4.4 billion or 7.9%
of revenue in Fiscal 2006 and $4.2 billion or 8.6% of revenue in Fiscal 2005.
Net income • Net income was $2.6 billion for Fiscal 2007, or 4.5% of revenue, compared to $3.6 billion or 6.5% of
revenue in Fiscal 2006 and $3.0 billion or 6.1% of revenue in Fiscal 2005.
Earnings per share • Earnings per share decreased 23% to $1.14 for Fiscal 2007, compared to $1.47 for Fiscal 2006 and
$1.18 for Fiscal 2005.
Results of Operations
The following table summarizes our consolidated results of operations for each of the past three fiscal years:
Fiscal Year Ended
February 2, 2007(a) February 3, 2006(b) January 28, 2005(c)
% of % of % of
Dollars Revenue Dollars Revenue Dollars Revenue
As As As As
Restated Restated Restated Restated
(in millions, except per share amounts and percentages)
Net revenue $ 57,420 100.0% $ 55,788 100.0% $ 49,121 100.0%
Gross margin $ 9,516 16.6% $ 9,891 17.7% $ 9,018 18.4%
Operating expenses $ 6,446 11.2% $ 5,509 9.8% $ 4,812 9.8%
Operating income $ 3,070 5.4% $ 4,382 7.9% $ 4,206 8.6%
Income tax provision $ 762 1.3% $ 1,006 1.8% $ 1,385 2.8%
Net income $ 2,583 4.5% $ 3,602 6.5% $ 3,018 6.1%
Earnings per share — diluted $ 1.14 N/A $ 1.47 N/A $ 1.18 N/A
(a) Results for Fiscal 2007 include stock-based compensation expense of $368 million, or $258 million ($0.11 per share) net of tax, due to the
implementation of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, ("SFAS 123(R)"). We
implemented SFAS 123(R) using the modified prospective method effective February 4, 2006. For additional information, see Note 6 of Notes to
Consolidated Financial Statements included in "Part II — Item 8 — Financial Statements and Supplementary Data."
(b) Results for Fiscal 2006 include charges aggregating $421 million ($338 million of other product charges and $83 million in selling, general, and
administrative expenses) related to the cost of servicing or replacing certain OptiPlexTMsystems that include a vendor part that failed to perform
to our specifications, workforce realignment, product rationalizations, excess facilities, and a write-off of goodwill recognized in the third quarter.
The related tax effect of these items was $96 million. Fiscal 2006 also includes an $85 million income tax benefit related to a revised estimate of
taxes on the repatriation of earnings under the American Jobs Creation Act of 2004 recognized in the second quarter.
(c) Results for Fiscal 2005 include an income tax charge of $280 million related to the repatriation of earnings under the American Jobs Creation
Act of 2004 recorded in the fourth quarter.
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