Dell 2005 Annual Report Download - page 24

Table of Contents
mobility and expect to continue to reduce our pricing as necessary in response to future competitive and economic conditions. We are focused
on attracting and retaining key personnel as well as further investing in our global information technology infrastructure to support our rapid
global growth and the increased complexity of our product and service offerings.
Fiscal Year Performance Highlights
Share position • We shipped an industry record 37.3 million units, resulting in a worldwide PC share position of 18.2%.
Revenue • Revenue increased 14% year-over-year to $55.9 billion, with unit shipments up 19% year-over-year.
Operating Income(a) • Operating income exceeded $4.3 billion for fiscal 2006, or 7.8% of revenue compared to $4.3 billion or 8.6% of
revenue in fiscal 2005.
Net Income(a) • Net income was $3.6 billion for fiscal 2006, or 6.4% of revenue compared to $3.0 billion or 6.2% of revenue in fiscal
2005.
Earnings Per Share(a) • Earnings per share increased 24% to $1.46 for fiscal 2006 compared to $1.18 for fiscal 2005.
Share Repurchases • We spent $7.2 billion to repurchase 204 million shares in fiscal 2006.
Results of Operations
The following table summarizes our consolidated results of operations for each of the past three fiscal years:
Fiscal Year Ended
February 3, % of January 28, % of January 30, % of
2006(a) Revenue 2005(b) Revenue 2004 Revenue
(Dollars in millions)
Net revenue $ 55,908 100.0% $ 49,205 100.0% $ 41,444 100.0%
Gross margin $ 9,950 17.8% $ 9,015 18.3% $ 7,552 18.2%
Operating expenses $ 5,603 10.0% $ 4,761 9.7% $ 4,008 9.7%
Operating income $ 4,347 7.8% $ 4,254 8.6% $ 3,544 8.6%
Income tax provision $ 1,002 1.8% $ 1,402 2.8% $ 1,079 2.6%
Net income $ 3,572 6.4% $ 3,043 6.2% $ 2,645 6.4%
Earnings per share — diluted $ 1.46 — $ 1.18 — $ 1.01 —
Consolidated Operations
In fiscal 2006, we grew revenue across all regions and product categories over the prior year periods, other than Desktop PCs in the Americas'
region, which declined 2% in fiscal 2006 compared to the prior year. This decline in Americas' Desktop PC revenue reflects continuing
reductions in average selling prices and an industry-wide shift to mobility products. In fiscal 2006, consolidated net revenue increased 14% to
$55.9 billion, which included an extra week of operations that contributed to almost one percentage point of added growth for the year and
almost three percentage points for the fourth quarter of fiscal 2006. International performance was also an important driver of this growth.
Revenue outside the U.S. represented 41% of fiscal 2006 consolidated revenue compared to 38% in the prior year. Outside the U.S., we
produced 21% year-over-year revenue growth for fiscal 2006.
(a) Results for fiscal 2006 include charges aggregating $442 million ($338 million of other product charges and $104 million in selling, general, and administrative expenses) related to the
cost of servicing or replacing certain OptiPlexTM systems 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 $104 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.
(b) 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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