Dell 2009 Annual Report Download - page 27

Table of Contents
RESULTS OF OPERATIONS
Consolidated Operations
The following table summarizes our consolidated results of operations for each of the past three fiscal years:
Fiscal Year Ended
January 29, 2010 January 30, 2009 February 1, 2008
% of % % of % % of
Dollars Revenue Change Dollars Revenue Change Dollars Revenue
(in millions, except per share amounts and percentages)
Net revenue:
Product $ 43,697 82.6% (17%) $ 52,337 85.7% (3%) $ 53,728 87.9%
Services, including software related 9,205 17.4% 5% 8,764 14.3% 18% 7,405 12.1%
Total net revenue $ 52,902 100.0% (13%) $ 61,101 100.0% (0%) $ 61,133 100.0%
Gross margin
Product $ 6,163 14.1% (20%) $ 7,667 14.6% (11%) $ 8,579 16.0%
Services, including software related 3,098 33.7% (6%) 3,290 37.5% 6% 3,092 41.8%
Total Gross margin $ 9,261 17.5% (15%) $ 10,957 17.9% (6%) $ 11,671 19.1%
Operating expenses $ 7,089 13.4% (9%) $ 7,767 12.7% (6%) $ 8,231 13.5%
Operating income $ 2,172 4.1% (32%) $ 3,190 5.2% (7%) $ 3,440 5.6%
Net income $ 1,433 2.7% (42%) $ 2,478 4.1% (16%) $ 2,947 4.8%
Earnings per share — diluted $ 0.73 N/A (42%) $ 1.25 N/A (5%) $ 1.31 N/A
In Fiscal 2010, our overall net revenue decreased year-over-year due primarily to the global economic slowdown that began during the
second half of Fiscal 2009. The weakened economy continued to impact the IT spending of our Commercial customers, which accounted
for 77% of our overall revenue for Fiscal 2010. Our Consumer segment experienced significant unit demand growth year-over-year, but a
mix shift to lower-priced products and competitive pricing pressures resulted in a decrease in Consumer revenue and profitability. During
the second half of Fiscal 2010, the IT industry started to see signs of economic recovery, and as a result, our unit shipments during the
fourth quarter of Fiscal 2010 improved year-over-year for all of our segments. Overall, we have seen indications of strengthening demand
in the Commercial segments and continued growth in the Consumer segment, and we believe that, as the global economy continues to
recover, our revenue in Fiscal 2011 should improve relative to Fiscal 2010.
During Fiscal 2010, we focused on balancing liquidity, profitability, and growth by emphasizing areas that provided profitable growth
opportunities. We also took actions in this challenging demand environment to shift towards a more variable cost manufacturing
structure, reduce operating expenses, and improve our working capital management. We are beginning to see the positive impact of these
efforts and expect that the benefits of our strategy will carry into Fiscal 2011, with anticipated enhanced operating leverage should
revenue growth return. We will continue to work on additional cost reduction and efficiency efforts.
We will continue to focus our efforts on providing best-value solutions to our customers in all areas of enterprise, including servers,
storage, services, and software. We believe these solutions are customized to the needs of users, easy to use, and affordable. During the
fourth quarter of Fiscal 2010, we acquired Perot Systems, a worldwide provider of information technology and business solutions, and we
expect to increase our portfolio of solutions offerings to our customers. Additionally, we will continue our overall strategy of seeking to
balance profitability and liquidity with revenue growth.
Revenue
Fiscal 2010 compared to Fiscal 2009
• Product Revenue — Product revenue and unit shipments decreased year-over-year by 17% and 6%, respectively, for Fiscal 2010. Our
product revenue performance was primarily attributable to a decrease in customer demand from our Commercial segments and lower
average selling prices in our Consumer segment.
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