Dell 2002 Annual Report Download - page 51

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Table of Contents
Aggregate Product Warranty Liability — Changes in the Company's aggregate product warranty liability are presented in the following table:
Fiscal Year Ended
January 31, 2003
(in millions)
Aggregate liability at beginning of period $ 850
Cost accrued for standard warranties and separately priced extended warranty and service contracts issued during the period 1,327
Obligations honored during the period (868)
Aggregate liability at end of period $ 1,309
Current portion $ 674
Noncurrent portion 635
Aggregate liability at end of period $ 1,309
Legal Matters — The Company is subject to various legal proceedings and claims arising in the ordinary course of business. The Company's management
does not expect that the outcome in any of these legal proceedings, individually or collectively, will have a material adverse effect on the Company's financial
condition, results of operations or cash flows.
Certain Concentrations — All of the Company's foreign currency exchange and interest rate derivative instruments involve elements of market and credit risk
in excess of the amounts recognized in the consolidated financial statements. The counterparties to the financial instruments consist of a number of major
financial institutions. In addition to limiting the amount of agreements and contracts it enters into with any one party, the Company monitors its positions with
and the credit quality of the counterparties to these financial instruments. The Company does not anticipate nonperformance by any of the counterparties.
The Company's investments in debt securities are placed with high quality financial institutions and companies. The Company's investments in debt securities
primarily have maturities of less than three years. Management believes that no significant concentration of credit risk for investments exists for the
Company.
The Company markets and sells its products and services to large corporate, government, healthcare and education customers, small-to-medium businesses
and individuals. Its receivables from such parties are well diversified.
The Company purchases a number of components from single sources. In some cases, alternative sources of supply are not available. In other cases, the
Company may establish a working relationship with a single source, even when multiple suppliers are available, if the Company believes it is advantageous to
do so due to performance, quality, support, delivery, capacity or price considerations. If the supply of a critical single-source material or component were
delayed or curtailed, the Company's ability to ship the related product in desired quantities and in a timely manner could be adversely affected. Even where
alternative sources of supply are available, qualification of the alternative suppliers and establishment of reliable supplies could result in delays and a possible
loss of sales, which could affect operating results adversely.
NOTE 7 — Transactions With Leasing Affiliate
The Company is currently a partner in Dell Financial Services L.P. ("DFS"), a joint venture with CIT Group, Inc. ("CIT"). The joint venture allows the
Company to provide customers with various financing alternatives and asset management services as a part of the total service package offered to the
customer. CIT, as a financial services company, is the entity that finances the transaction between DFS and the customer.
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