Dell 2011 Annual Report Download - page 34

Table of Contents
Operating Expenses
The following table presents information regarding our operating expenses during each of the past three fiscal years:
Fiscal Year Ended
February 3, 2012 January 28, 2011 January 29, 2010
Dollars % of
Revenue %
Change Dollars % of
Revenue %
Change Dollars % of
Revenue
(in millions, except percentages)
Operating expenses:
Selling, general, and administrative $ 8,524 13.7% 17% $ 7,302 11.9% 13% $ 6,465 12.2%
Research, development, and engineering 856 1.5% 30% 661 1.0% 6% 624 1.2%
Total operating expenses $ 9,380 15.2% 18% $ 7,963 12.9% 12% $ 7,089 13.4%
Other Financial Information
Non-GAAP operating expenses (a) $ 9,030 14.5% 19% $ 7,582 12.3% 14% $ 6,675 12.6%
(a) For a reconciliation of non-GAAP operating expenses to operating expenses prepared in accordance with GAAP, see “Non-GAAP Financial Measures” below.
Fiscal 2012 compared to Fiscal 2011
•Selling, General, and Administrative — During Fiscal 2012, selling, general, and administrative ("SG&A") expenses increased $1.2 billion year-over-
year. The overall higher level of SG&A was largely attributable to the continued execution of our strategic transformation. Our strategic initiatives
have entailed organic investments in enterprise solution selling capabilities and other infrastructure spending as well as investments in enterprise
and services-focused acquisitions, which generally have higher expense structures. During Fiscal 2012, compensation-related expenses, excluding
severance-related expenses, increased approximately $967 million due to a 6% year-over-year increase in headcount, which was driven by our
organic and inorganic investments. We also experienced a year-over-year increase of $175 million in advertising, promotional, and other selling-
related expenses. In addition, higher SG&A expenses for Fiscal 2012 reflected increases in acquisition-related charges, which were offset in part by
decreases in severance and facility action costs, discussed below.
•Research, Development, and Engineering — During Fiscal 2012, research, development, and engineering expenses were 1.5% of net revenue, compared
to 1.0% during the prior year. We manage our research, development, and engineering spending by targeting those innovations and products that
we believe are most valuable to our customers and by relying upon the capabilities of our strategic relationships. We are increasing our focus on
research and development and will continue to shift our investment in RD&E activities to support our initiatives that grow our enterprise solutions
and services offerings.
Total operating expenses for Fiscal 2012 increased 18% to $9.4 billion on a GAAP basis and 19% to $9.0 billion on a non-GAAP basis over Fiscal 2011.
Operating expenses on a GAAP basis for Fiscal 2012 and Fiscal 2011 includes the effects of severance and facility action costs and acquisition-related
charges and amortization of intangible assets. These charges increased 45% to $350 million during Fiscal 2012 compared to Fiscal 2011, primarily due to an
increase in acquisition-related charges as a result of the larger acquisitions that were completed in Fiscal 2012 compared to Fiscal 2011. For Fiscal 2011,
operating expenses on a GAAP basis also included $140 million in settlements we incurred related to an SEC investigation and a securities litigation matter.
As set forth in the reconciliation under “Non-GAAP Financial Measures” below, non-GAAP operating expenses for Fiscal 2012 and for Fiscal 2011 excludes
the effects of severance and facility action costs and acquisition related charges, amortization of intangible assets, and, for Fiscal 2011, the settlements
referred to above.
Fiscal 2011 compared to Fiscal 2010
•Selling, General, and Administrative — During Fiscal 2011, SG&A expenses increased year-over-year, while SG&A expenses as a percentage of net
revenue decreased. The increase in SG&A expenses was primarily attributable to increases in compensation-related expenses and advertising and
promotional expenses. Compensation-related expenses, excluding severance-related expenses, increased approximately $679 million due to an increase
in performance-based compensation expense, which is tied to revenue and operating income growth, and cash flow targets, and an increase in headcount.
Our
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