Dell 2011 Annual Report Download - page 42

Table of Contents
services revenue was primarily a result of our acquisition of Perot Systems in Fiscal 2010. Revenue from servers and networking and storage increased 15%
and 8%, year-over-year, respectively. Software and peripherals revenue increased 10% year-over-year. Revenue from mobility and desktop PCs increased 5%
and 6%, year-over-year, respectively. Public's revenue grew during Fiscal 2011 across the Americas and the Asia-Pacific region, but declined in Europe due
to budgetary constraints on public spending.
Public's operating income percentage declined 60 basis points to 8.8% for Fiscal 2011 due to a year-over-year increase in operating expenses as a percentage
of revenue, offset in part by a slight increase in gross margin percentage. The increase in operating expenses was a result of higher selling and marketing
costs.
•Small and Medium Business — During Fiscal 2011, SMB experienced a year-over-year increase in revenue with increases across all product and services
categories. Servers and networking, and storage revenue increased 26% and 21% year-over-year, respectively. Revenue from mobility and desktop PCs
increased 20% and 23%, year-over-year, respectively, while software and peripherals revenue increased 16% year-over-year. The improved demand
environment was a major contributor to the increase in revenue for all product categories. Services revenue increased 6% year-over-year. SMB revenue
experienced year-over-year growth across all regions during Fiscal 2011. SMB revenue from BRIC grew 40% year-over-year.
Operating income percentage increased 160 basis points to 10.2%. The increase in operating income percentage was attributable to improved gross margins as
a result of lower component costs and an improved pricing environment, as well as to a decrease in operating expenses as a percentage of revenue due to
tighter spending controls.
•Consumer — Consumer's revenue increased 3% year-over-year during Fiscal 201l. Revenue from all product and services categories decreased year-
over-year for Fiscal 2011, except mobility. Consumer mobility revenue increased by 8% year-over-year, due to increase of 8% in notebook units sold,
while revenue from desktops PCs decreased by 1% due to a decline in desktop PC units of 2%. Average selling prices for Consumer mobility and
desktop PCs were relatively flat year-over-year during Fiscal 2011. The increase in mobility revenue was due to improved unit demand for Consumer
mobility products. Consumer services decreased 11% year-over-year and software and peripherals revenue decreased 10% for the same period. At a
country level, our U.S. Consumer revenue decreased 9% year-over-year due to softer demand, while our non-U.S. regions experienced 16% revenue
growth. Revenue from BRIC grew 46% year-over-year for Fiscal 2011.
For Fiscal 2011, Consumer's operating income percentage decreased 40 basis points year-over-year to 0.5%. The decrease in operating income percentage was
largely attributable to a decrease in gross margin percentage. Consumer gross margin decreased due to the shift in sales mix from direct sales to sales through
other distribution channels, which generally carry a lower gross margin, which was not entirely offset by decreases in operating expenses as a percentage of
revenue. Operating expenses as a percentage of revenue remained relatively flat year-over-year. In the second half of Fiscal 2011, Dell Financial Services,
which provides financing to our customers, experienced improved delinquency and charge-off rates that partially offset the decrease in Consumer 's operating
income percentage. From time to time, we monetize aspects of the Consumer business model with arrangements with vendors and suppliers, such as revenue
sharing arrangements, which we believe will continue to contribute to and improve Consumer's operating income over time. The impact of our vendor and
supplier arrangements was not material to our Fiscal 2011 results as compared to Fiscal 2010.
40