Dell 2009 Annual Report Download - page 32

Table of Contents
Fiscal 2009 compared to Fiscal 2008
• Operating Income — Operating income decreased 7% year-over-year to $3.2 billion in Fiscal 2009. The decrease was partially driven
by a shift in product mix that resulted in lower average selling prices. Additionally, operating income was impacted by higher cost of
sales, which lowered our gross margin percentage, partially offset by reduced operating expenses.
• Net Income — For Fiscal 2009, net income decreased 16% year-over-year to $2.5 billion. Net income was impacted by a 7%
year-over-year decline in operating income, a 65% decline in interest and other, net and an increase in our effective tax rate from
23.0% to 25.4%.
SEGMENT DISCUSSION
During the first quarter of Fiscal 2010, we reorganized our geographic commercial segments to global business units. Our four global
business segments are Large Enterprise, Public, Small and Medium Business, and Consumer, reflecting the impact of globalization on
our customer base.
Severance and facility action expenses, broad based long-term incentive expenses, in-process research and development, amortization of
purchased intangible assets costs, and acquisition-related expenses in relation to our acquisition of Perot Systems are not allocated to the
reporting segments. These costs totaled $1.2 billion during Fiscal 2010, $805 million during Fiscal 2009, and $650 million during Fiscal
2008. See Note 14 of Notes to Consolidated Financial Statements included in "Part II — Item 8 — Financial Statements and
Supplementary Data" for additional information and reconciliation of segment revenue and operating income to consolidated revenue and
operating income.
The following table presents our net revenue and operating income by our reportable global segments:
Fiscal Year Ended
January 29, 2010 January 30, 2009 February 1, 2008
% of % % of % % of
Dollars Revenue(a) Change Dollars Revenue(a) Change Dollars Revenue(a)
(in millions, except percentages)
Large Enterprise
Net revenue $ 14,285 27% (21%) $ 18,011 30% (4%) $ 18,833 31%
Operating income $ 819 6% (29%) $ 1,158 6% (13%) $ 1,331 7%
Public
Net revenue $ 14,484 27% (6%) $ 15,338 25% 4% $ 14,708 24%
Operating income $ 1,361 9% 8% $ 1,258 8% 0% $ 1,261 9%
Small and Medium Business
Net revenue $ 12,079 23% (19%) $ 14,892 24% (6%) $ 15,807 26%
Operating income $ 1,040 9% (18%) $ 1,273 9% (5%) $ 1,338 8%
Consumer
Net revenue $ 12,054 23% (6%) $ 12,860 21% 9% $ 11,785 19%
Operating income $ 107 1% (65%) $ 306 2% 91% $ 160 1%
(a) Operating income percentage of revenue is stated in relation to the respective segment.
Fiscal 2010 compared to Fiscal 2009
• Large Enterprise — The decrease in Large Enterprise's revenue during Fiscal 2010 was mainly due to a unit shipment decline of
23%. Large Enterprise's weak performance can generally be attributed to the global economic downturn that began in the second half
of Fiscal 2009. Many of our customers have either delayed or canceled IT projects as a result of the economic slowdown, which was
most pronounced in the commercial sector of the IT industry. During Fiscal 2010, revenue from desktop PCs, mobility products, and
storage items all declined approximately 30% year-over-year, and software and peripherals and servers and networking declined 19%
and 4%, respectively. Services revenue increased year-over-year by 2%, which is largely due to the 48% increase in fourth quarter
revenue, 36% of which was contributed by the acquisition of Perot Systems. Large Enterprise revenue decreased significantly
year-over-year across most countries due to the continued global
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