Dell 2001 Annual Report Download - page 20

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Table of Contents
ITEM 7 — MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Description of Business
The Company designs, develops, manufactures, markets, services and supports a wide range of computer systems, including enterprise systems (servers,
workstations, and storage and networking products), notebook computers and desktop computer systems, and also offers software, peripherals and service and
support programs. The Company is generally managed on a geographic basis. The three geographic regions are the Americas, Europe and Asia Pacific-Japan.
Within the Americas, the Company is further segmented into Business and U.S. Consumer. The Company markets and sells its computer products and
services under the Dell brand name directly to its various customer groups. These customer groups include large corporate, government, healthcare and
education accounts, as well as small-to-medium businesses and individuals. For a discussion of the Company's reportable segments, see Note 10 of Notes to
Consolidated Financial Statements included in "Item 8 — Financial Statements and Supplementary Data".
The Company's objective is to maximize stockholder value by executing a strategy that focuses on a balance of three priorities: liquidity, profitability and
growth. Management believes that opportunity exists for continued worldwide growth by increasing the Company's market presence in its existing markets,
entering new markets, and pursuing additional product and service opportunities.
The following discussion should be read in conjunction with the Consolidated Financial Statements, including the related notes. Statements in this Report that
relate to future results and events are based on the Company's current expectations. Actual results in future periods may differ materially from those currently
expected or desired because of a number of risks and uncertainties. For a discussion of factors affecting the Company's business and prospects, see "Item 1 —
Business — Factors Affecting the Company's Business and Prospects." All market share references included in this discussion are according to IDC.
Fiscal 2002 Overview
The Company achieved strong financial results in fiscal 2002 despite one of the most challenging years for the global personal computer industry, the
softening of the global economy, and the tragic events of September 11th. As the Company entered fiscal 2002, it was already evident that industry unit
demand was falling sharply. The Company responded to these market conditions by adopting an aggressive pricing strategy to maximize market share growth
and realize as much profit as possible in light of the conditions. In executing its strategy, the Company leveraged its low-cost structure and efficient direct-to-
customer model to aggressively discount prices across all product lines and quickly passed through rapidly falling component prices to its customers. The
Company also realigned its cost structure with reductions in workforce, facility consolidations and certain asset impairments. Management believes this
strategy maximized the Company's share of the industry profit pool and best positioned the Company for maximum success when the economy and industry
unit demand improve. The Company has demonstrated during its history that its market share gains are sustainable.
The Company achieved industry-leading results in fiscal 2002 as year-on-year unit shipments increased by 15% while industry shipments declined 5% (the
first ever year-on-year industry decline), resulting in market share gains in every region and product line. The Company attained and solidified its position as
the No. 1 personal computer systems company in the world. The Company generated relatively stable year-on-year net revenue of over $31 billion, and
achieved operating earnings of over $2 billion (excluding the impact of restructuring actions), whereas its five largest competitors collectively experienced
declining revenues and operating losses in their personal computer systems and related businesses. Additionally, an intense focus on operating expenses
resulted in the Company reducing operating expenses (excluding special charge) as a percent of revenues for the year.
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