Dell 2006 Annual Report Download - page 46

Table of Contents
year-over-year during both Fiscal 2007 and Fiscal 2006 which was offset by single-digit growth in the APJ region during the
same period. Desktop PCs, as compared to mobility products, led Fiscal 2007 in volume; however, business and consumer
demand continues to shift toward mobility products. Desktop PC average selling price decreased 3% from Fiscal 2006 to
Fiscal 2007 and decreased 7% from Fiscal 2005 to Fiscal 2006. In Fiscal 2007, we launched Quad-core processors on our
XPS 710 Extreme desktop as well as on Dell PrecisionTM workstations. In addition, we introduced our 64-bit dual core
DimensionTM and OptiplexTM systems featuring AMD processors. In Fiscal 2008, we introduced VostroTM desktops
specifically designed to meet the needs of small business customers. We will likely see rising user demand for mobility
products in the foreseeable future that will contribute to a slowing demand for desktop PCs.
• Mobility — In Fiscal 2007, revenue from mobility products (which includes notebook computers, mobile workstations, and
Dell-branded MP3 players) grew by 8% year-over-year, on unit growth of 18%, compared to a 20% revenue increase on
unit growth of 43% year-over-year in Fiscal 2006. The impact of this declining growth was particularly acute in the U.S. and
led to a loss of share as compared to the same period last year. The slow growth resulted from both our product feature set
and related value offering, particularly in the consumer business, as well as our inability to reach certain customer sets. Our
EMEA region led the growth in our mobility product category with 15% and 23% increases in Fiscal 2007 and Fiscal 2006,
respectively. During the year, we introduced Dell LatitudeTM and Dell InspironTM notebooks featuring AMD processors and in
Fiscal 2008, we introduced VostroTM notebooks, specifically designed to meet the needs of small business customers. As
notebooks become more affordable and wireless products become standardized, demand for our mobility products
continues to be strong, producing robust year-over-year revenue and unit growth. We are likely to see sustained growth in
our mobility products in the foreseeable future due to the continued industry-wide migration from desktop PCs to mobility
products.
• Software and Peripherals — In Fiscal 2007 revenue from software and peripherals ("S&P") (which includes Dell-branded
printers, monitors not sold with systems, plasma and LCD televisions, projectors, and a multitude of competitively priced
third-party printers, televisions, software, digital cameras, and other products) increased 8% year-over-year, compared to a
26% increase in Fiscal 2006. The overall improvement in Fiscal 2007 S&P revenue was led by the APJ region with growth
of 38% while U.S. consumer sales declined 8%. This increase was primarily attributable to a 12% year-over-year increase
in software revenue that was offset by declines in our imaging product revenue. We experienced strong performance in
Fiscal 2006 where software, imaging, and other hardware accessories produced double-digit growth.
• Servers and Networking — In Fiscal 2007, servers and networking revenue grew 7% on unit growth of 6% year-over-year,
compared to a 12% revenue increase in Fiscal 2006 on 20% unit growth year-over-year. Servers and networking remains a
strategic focus area. We competitively price our server products to facilitate additional sales of storage products and higher
margin enhanced services. During the year we introduced our new ninth generation (9G) PowerEdge servers with Intel's
latest Xeon 5100 series processors, and we began shipping two new PowerEdge servers featuring AMD OpteronTM
processors, providing our customers with an additional choice for high-performance two-socket and four-socket systems.
We also launched the industry's first standards-based Quad-Core processors for two-socket blade, rack, and tower servers.
These additions contributed to the 6% year-over-year revenue increase in Fiscal 2007 in the Americas Business segment
and in Fiscal 2006 we experienced close to 30% unit growth in our APJ region. We now provide the broadest selection of
industry-standard servers in our history.
• Enhanced Services — In Fiscal 2007, revenue from enhanced services (which includes the sale and servicing of our
extended product warranties) increased 20% year-over-year compared to a 35% increase in Fiscal 2006. As a result of
expanding our services offerings and capabilities globally, we experienced a 26% and 58% year-over-year growth in
revenues outside the Americas during Fiscal 2007 and Fiscal 2006, respectively. This growth increased our deferred
revenue by $514 million in Fiscal 2007, a 14% increase, and $803 million in Fiscal 2006, a 27% increase, to approximately
$4.2 billion and
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