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UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
    For the fiscal year ended: February 1, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
    For the transition period from
    
    to   Commission file
    number: 0-17017
  Dell Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

74-2487834(State or other jurisdiction of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)   One Dell Way, Round Rock, Texas 78682
 (Address of principal executive
    offices) (Zip Code)
  (512) 338-4400
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of each class

Name of each exchange on which
    registeredCommon Stock, par value $.01 per share


The NASDAQ Stock Market LLC   Securities
    Registered Pursuant to Section 12(g) of the Act: None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer þ

Accelerated
    filer oNon-accelerated
    filer o
    (do not check if smaller reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ
  Approximate aggregate market value of the registrants
    common stock held by non-affiliates as of
    August 3, 2007, based upon the closing price reported for
    such date on The NASDAQ Stock Market

$54.0 billionNumber of shares of common stock outstanding as of
    March 14, 2008

2,042,291,533




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DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 



Table of
    Contents
  Part I



PageItem 1.


Business


1Item 1A.


Risk Factors


11Item 1B.


Unresolved Staff Comments


15Item 2.


Properties


15Item 3.


Legal Proceedings


17Item 4.


Submission of Matters to a Vote of Security
    Holders


17Part IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


17Item 6.


Selected Financial Data


19Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


21Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


44Item 8.


Financial Statements and Supplementary Data


45Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


95Item 9A.


Controls and Procedures


95Item 9B.


Other Information


98Part III





98Part IVItem 15.


Exhibits, Financial Statement Schedules


99Signatures


101Exhibit Index


103Exhibits


(attached to the Report on
    Form 10-K)Amended and Restated 401(k) PlanForm of Performance Based Stock Unit Agreement for Executive OfficersForm of Nonstatutory Stock Option Agreement for Executive OfficersForm of Restricted Stock Unit Agreement for Executive OfficersSubsidiariesConsent of PricewaterhouseCoopers LLPCertification of Chairman and CEO, Pursuant to Section 302Certification of Vice Chairman and CFO, Pursuant to Section 302Certifications Pursuant to Section 906Item 4 - Submission of Matters to a Vote of Security Holders




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This report contains forward-looking statements that are
    based on Dells current expectations. Actual results in
    future periods may differ materially from those expressed or
    implied by those forward-looking statements because of a number
    of risks and uncertainties. For a discussion of risk factors
    affecting our business and prospects, see
    Part I  Item 1A Risk Factors.
  All percentage amounts and ratios were calculated using
    the underlying data in thousands. Unless otherwise noted, all
    references to industry share and total industry growth data are
    for personal computers (including desktops, notebooks, and x86
    servers), and are based on information provided by IDC Worldwide
    Quarterly PC Tracker, March 3, 2008. Share data is for the
    full calendar year and all our growth rates are on a fiscal
    year-over-year basis. Unless otherwise noted, all references to
    time periods refer to our fiscal periods.
  ITEM 1 
    BUSINESS  General
        Business
    Strategy
      
    We simplify information technology for
    customers.Making quality personal computers,
    servers, storage, and services affordable is Dells legacy.
    We are focused on making information technology affordable for
    millions of customers around the world. As a result of our
    direct relationships with customers, or customer
    intimacy, we are best positioned to simplify how customers
    implement and maintain information technology and deliver
    hardware, services, and software solutions tailored for their
    businesses and homes. 1




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
    We offer customers choice.  Customers can
    purchase systems and services from Dell via telephone, at a
    growing number of retail stores, and through our website,
    www.dell.com, where they may review, configure, and price
    systems within our entire product line; order systems online;
    and track orders from manufacturing through shipping. Customers
    may offer suggestions for current and future Dell products and
    services through an interactive portion of our website called
    Dell IdeaStorm. Commercial customers also can interact with
    dedicated account teams. We plan to continue to expand our
    recently launched indirect initiative by adding new distribution
    channels to reach additional consumers and small businesses
    through retail partners and value-added resellers globally.
    Customers can purchase custom-built products and
    custom-tailored services.Historically our
    flexible, build-to-order manufacturing process enabled us to
    turn over inventory quickly, thereby reducing inventory levels,
    and rapidly bring the latest technology to our customers. The
    global IT industry and our competition have evolved, and we are
    continuing to expand our utilization of original design
    manufacturers, manufacturing outsourcing relationships, and new
    distribution strategies to better meet customer needs and reduce
    product cycle times. Our goal is to introduce the latest
    relevant technology more quickly and to rapidly pass on
    component cost savings to a broader set of our customers
    worldwide.
    We are committed to being environmentally responsible in all
    areas of our business.We have built
    environmental consideration into every stage of the Dell product
    life cycle  from developing and designing
    energy-efficient products, to reducing the footprint of our
    manufacturing and operations, to customer use and product
    recovery.  Product
    Development
    Products
    and Services
    
    Desktop PCs The
    XPStm
    and Alienware lines are targeted at customers seeking the best
    experiences and designs available, from multimedia capability to
    the highest gaming performance. The
    OptiPlextm
    line is designed to help business, government, and institutional
    customers manage their total cost of ownership by offering a
    portfolio of secure, manageable, and stable lifecycle products.
    The
    Inspirontm
    line of desktop computers is designed for mainstream PC users
    requiring the latest features for their productivity and
    entertainment needs. In July 2007, we introduced the
    Vostrotm
    line, which is designed to provide technology and services to
    suit the specific needs of small businesses.  tm
 2




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
    Servers and Networking Our standards-based
    PowerEdgetm
    line of servers is designed to offer customers affordable
    performance, reliability, and scalability. Options include high
    performance rack, blade, and tower servers for enterprise
    customers and aggressively priced tower servers for small
    organizations, networks, and remote offices. We also offer
    customized Dell server solutions for very large data center
    customers.  tm tm
  
    Storage We offer a comprehensive portfolio of
    advanced storage solutions, including storage area networks,
    network-attached storage, direct-attached storage, disk and tape
    backup systems, and removable disk backup. With our advanced
    storage solutions for mainstream buyers, we offer customers
    functionality and value while reducing complexity in the
    enterprise. Our storage systems are easy to deploy, manage, and
    maintain. The flexibility and scalability offered by Dell
    PowerVaulttm,
    Dell EqualLogic, and Dell  EMC storage systems helps
    organizations optimize storage for diverse environments with
    varied requirements.
    Mobility The
    XPStm
    and Alienware lines of laptop computers are targeted at
    customers seeking the best experiences and designs available
    from sleek, elegant, thin, and light laptops to the highest
    performance gaming systems. In Fiscal 2008, we introduced the
    XPS M1330, an innovative mobile platform featuring a 13.3-inch
    high definition display and ultra-portable form factor that
    received awards for its unique design. The
    Inspirontm
    line of laptop computers is designed for users seeking the
    latest technology and high performance in a stylish and
    affordable package. The
    Latitudetm
    line is designed to help business, government, and institutional
    customers manage their total cost of ownership through managed
    product lifecycles and the latest offerings in performance,
    security, and communications. The
    Vostrotm
    line, introduced in July 2007, is designed to customize
    technology, services, and expertise to suit the specific needs
    of small businesses. The
    Precisiontm
    line of mobile workstations is intended for professional users
    who demand exceptional performance to run sophisticated
    applications.
    Software and Peripherals We offer
    Dell-branded printers and displays and a multitude of
    competitively priced third-party peripheral products, including
    software titles, printers, televisions, laptop accessories,
    networking and wireless products, digital cameras, power
    adapters, scanners, and other products.  
    Software.  We sell a wide range of third-party
    software products, including operating systems, business and
    office applications, anti-virus and related security software,
    entertainment software, and products in various other
    categories. We finalized the acquisition of ASAP Software
    Express Inc., a leading software solutions and licensing
    services provider, in the fourth quarter of Fiscal 2008. As a
    result of this acquisition, we now offer products from over
    2,000 software publishers.
    Printers.  We offer a wide array of
    Dell-branded printers, ranging from ink-jet
    all-in-one
    printers for consumers to large multifunction devices for
    corporate workgroups. All of our printers feature the Dell Ink
    and Toner Management
    Systemtm,
    which simplifies the purchasing process for supplies by
    displaying ink or toner levels on the status window during every
    print job and proactively prompting users to order replacement
    cartridges directly from Dell.
    Displays.We offer a broad line of branded and
    non-branded display products, including flat panel monitors and
    projectors. In Fiscal 2008, we extended our consumer monitor
    line-up and
    introduced new innovations such as True Life and
    integrated camera and microphone into some of our monitors. We
    added the 1201MP projector to our existing projector portfolio.
    Across our monitors and projector product lines, we continue to
    win awards for quality, performance, and value.  
    Services Our global services business offers
    a broad range of configurable IT services that help commercial
    customers and channel partners plan, implement and manage IT
    operations and consumers install, protect, and maintain their
    PCs and accessories. Our service solutions help customers
    simplify IT, maximizing the performance, reliability, and
    cost-effectiveness of IT operations. During Fiscal 2008, we
    acquired a number of service technologies and capabilities
    through strategic acquisitions of certain companies. These are
    being used to build-out our service capabilities.  
    Infrastructure Consulting Services.  Our
    consulting services help customers evaluate, design, and
    implement standards-based IT infrastructures. These
    customer-oriented consulting services are designed to be 3




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
    Deployment Services.  Our deployment services
    simplify and accelerate the deployment of new systems, PCs, and
    TVs in customers environments. Our processes and
    deployment technologies enable customers to get systems up and
    running quickly and reliably, with minimal end-user disruption.
    Asset Recovery and Recycling Services.  We
    offer a variety of flexible services for the secure and
    environmentally safe recovery and disposal of owned and leased
    IT equipment. Various options, including resale, recycling,
    donation, redeployment, employee purchase, and lease return,
    help customers retain value while facilitating regulatory
    compliance and minimizing storage costs.
    Training Services.  We help customers develop
    the skills and knowledge of key technologies and systems needed
    to increase their productivity. Courses include hardware and
    software training as well as PC skills and professional
    development classes available through instructor-led, virtual,
    or self-directed online courses.
    Support Services.  Our suite of scalable
    support services is designed for IT professionals and end-users
    whose needs range from basic phone support to rapid response and
    resolution of complex problems. We offer flexible levels of
    support that span from desktop and laptop PCs to complex servers
    and storage systems, helping customers maximize uptime and stay
    productive. Our support services include warranty services and
    proactive maintenance offerings to help prevent problems as well
    as rapid response and resolution of problems. These services are
    supported by our network of Global Command Centers in the U.S.,
    Ireland, China, Japan, and Malaysia, providing rapid,
    around-the-clock support for critical commercial systems.
    Managed Services.  We offer a full suite of
    managed service solutions for companies who desire outsourcing
    of some or all of their IT management. From planning to
    deployment to ongoing technical support, our managed services
    are modular in nature so that customers can customize a plan
    based on their current and future needs. We can manage a portion
    of their IT tasks or provide an end-to-end solution.  Financial
    Services
    Sales and
    Marketing
     4




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Competition
          Manufacturing
    and Materials
   5




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Patents,
    Trademarks, and Licenses
          Employees
   6




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Government
    Regulation and Environment
    Sustainability
        Backlog
   7




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Geographic
    Areas of Operations
      non-U.S. revenue, non-U.S. Dell
    Trademarks
    and Service Marks
    Available
    Information
  Form 10-K, Form 10-Q, Form 8-K,
 8




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1-800-SEC-0330.
  Executive
    Officers of Dell
    Name

Age

TitleMichael S. Dell

43

Chairman of the Board and Chief Executive OfficerDonald J. Carty

61

Vice Chairman and Chief Financial OfficerBradley R. Anderson

48

Senior Vice President, Business Product GroupPaul D. Bell

47

Senior Vice President and President, AmericasMichael R. Cannon

55

President, Global OperationsJeffrey W. Clarke

45

Senior Vice President, Business Product GroupAndrew C. Esparza

49

Senior Vice President, Human ResourcesStephen J. Felice

50

Senior Vice President and President, Asia Pacific-JapanRonald G. Garriques

44

President, Global Consumer GroupMark Jarvis

44

Senior Vice President, Chief Marketing OfficerDavid A. Marmonti

48

Senior Vice President and President, Europe, Middle East, and
    AfricaStephen F. Schuckenbrock

47

Senior Vice President and President, Global Services and Chief
    Information OfficerLawrence P. Tu

53

Senior Vice President, General Counsel and Secretary     
    Michael S. Dell Mr. Dell currently
    serves as Chairman of the Board of Directors and Chief Executive
    Officer. He has held the title of Chairman of the Board since he
    founded the Company in 1984. Mr. Dell served as Chief
    Executive Officer of Dell from 1984 until July 2004 and resumed
    that role in January 2007. He serves on the Foundation Board of
    the World Economic Forum, serves on the executive committee of
    the International Business Council, and is a member of the
    U.S. Business Council. He also serves on the
    U.S. Presidents Council of Advisors on Science and
    Technology and sits on the governing board of the Indian School
    of Business in Hyderabad, India.
    Donald J. Carty Mr. Carty joined us as
    Vice Chairman and Chief Financial Officer in January 2007. In
    that role, he is responsible for all finance functions,
    including controller, corporate planning, tax, treasury
    operations, investor relations, corporate development, risk
    management, and internal audit. Mr. Carty has served as a
    member of our Board of Directors since 1992 and continues to
    serve in that capacity. Mr. Carty was the Chairman and
    Chief Executive Officer of AMR Corporation and American Airlines
    from 1998 until his retirement in 2003. Prior to that, he served
    in a variety of executive positions with AMR Airline Group and
    American Airlines from 1978 to 1985 and from 1987 to 1999.
    Mr. Carty was President and Chief Executive Officer of CP
    Air in Canada from 1985 to 1987. After his retirement from AMR
    and American in 2003, Mr. Carty engaged in numerous
    business and private investment activities with a variety of
    companies. Mr. Carty is a graduate of Queens
    University in Kingston, Ontario and of the Harvard Graduate
    School of Business Administration. He is also a director of CHC
    Helicopter Corp. and Barrick Gold Corporation and serves as
    Chairman of the Board of Virgin America Airlines.
    Bradley R. Anderson Mr. Anderson joined
    us in July 2005 and serves as Senior Vice President, Business
    Product Group. In this role, he is responsible for worldwide
    engineering, design, development, and marketing of our
    enterprise products, including servers, networking, and storage
    systems. Prior to joining Dell, Mr. Anderson was Senior
    Vice President and General Manager of the Industry Standard
    Servers business at Hewlett-Packard Company (HP),
    where he was responsible for HPs server solutions.
    Previously, he was Vice President of Server, Storage, and
    Infrastructure for HP, where he led the team responsible for
    server, storage, peripheral, and infrastructure products. Before
    joining HP in 1996, Mr. Anderson held top management
    positions at Cray Research in executive staff, field marketing,
    sales, finance, and corporate marketing. Mr. Anderson
    earned a 9




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bachelor of science in Petroleum Engineering from Texas A&M
    University and a Master of Business Administration from Harvard
    University. He serves on the Texas A&M Look College of
    Engineering Advisory Council.  
    Paul D. Bell Mr. Bell has been with us
    since 1996 and has served as Senior Vice President and
    President, Americas since March 2007. In this role,
    Mr. Bell is responsible for all sales and customer support
    operations across the Americas region other than our consumer
    business. From February 2000 until March 2007, Mr. Bell
    served as Senior Vice President and President, Europe, Middle
    East, and Africa. Prior to this, Mr. Bell served as Senior
    Vice President, Home and Small Business. Prior to joining Dell
    in July 1996, Mr. Bell was a management consultant with
    Bain & Company for six years, including two years as a
    consultant on our account. Mr. Bell received
    bachelors degrees in Fine Arts and Business Administration
    from Pennsylvania State University and a Master of Business
    Administration degree from the Yale School of Organization and
    Management.
    Michael R. Cannon Mr. Cannon joined us
    in February 2007 as President, Global Operations. In this role,
    he is responsible for our manufacturing, procurement, supply
    chain, and facilities activities worldwide. Prior to joining
    Dell, Mr. Cannon was President, Chief Executive Officer,
    and a director of Solectron Corporation from January 2003 to
    February 2007, and President, Chief Executive Officer, and a
    director of Maxtor Corporation (now a part of Seagate
    Technology) from July 1996 to January 2003. Mr. Cannon has
    also worked at IBMs Storage Systems Division. He began his
    career in engineering at The Boeing Company, where he held a
    management position with the Manufacturing Research and
    Development organization. Mr. Cannon studied mechanical
    engineering at Michigan State University and completed Harvard
    Business Schools Advanced Management Program. He currently
    serves on the board of Adobe Systems.
    Jeffrey W. Clarke Mr. Clarke has served
    as Senior Vice President, Business Product Group since January
    2003. In this role, he is responsible for worldwide engineering,
    design, development, and marketing of our business client
    products, including Dell
    OptiPlextm
    desktops,
    Latitudetm
    notebooks,
    Precisiontm
    workstations, and
    Vostrotm
    desktops and notebooks. Mr. Clarke joined Dell in 1987 as a
    quality engineer and has served in a variety of engineering and
    management roles. In 1995 Mr. Clarke became the director of
    desktop development, and from November 2001 to January 2003 he
    served as Vice President and General Manager, Relationship
    Product Group. Mr. Clarke received a bachelors degree
    in Electrical Engineering from the University of Texas at
    San Antonio.
    Andrew C. Esparza Mr. Esparza joined us
    in 1997 as a director of Human Resources in the Product Group.
    He was named Senior Vice President, Human Resources in March
    2007 and was named an executive officer in September 2007. In
    this role, he is responsible for driving the strategy and
    supporting initiatives to attract, motivate, develop, and retain
    world-class talent in support of our business goals and
    objectives. He also has responsibility for corporate security
    and corporate responsibility on a worldwide basis. He currently
    is an executive sponsor for aDellante, our internal networking
    group responsible for the development of Hispanic employees
    within the company. Prior to joining Dell, he held human
    resource positions with NCR Corporation from 1985 until 1997 and
    Bechtel Power Corporation from 1981 until 1985. Mr. Esparza
    earned a bachelors degree in business administration with
    a concentration in human resource management from San Diego
    State University.
    Stephen J. Felice Mr. Felice serves as
    Senior Vice President and President, Asia Pacific-Japan. He was
    named Senior Vice President in March 2007, after having served
    as Vice President, Asia Pacific-Japan since August 2005.
    Mr. Felice leads our operations throughout the APJ region,
    including sales and customer service centers in Penang,
    Malaysia, and Xiamen, China. Mr. Felice joined us in
    February 1999 and has held various executive roles in our sales
    and consulting services organizations. From February 2002 until
    July 2005, Mr. Felice was Vice President, Corporate
    Business Group, Dell Americas. Prior to joining Dell,
    Mr. Felice served as Chief Executive Officer and President
    of DecisionOne Corp. Mr. Felice also served as Vice
    President, Planning and Development, with Bell Atlantic Customer
    Services. He spent five years with Shell Oil in Houston.
    Mr. Felice holds a bachelors degree in business
    administration from the University of Iowa and a Master of
    Business Administration degree from the University of Houston.
    Ronald G. Garriques Mr. Garriques joined
    us in February 2007 as President, Global Consumer Group. In this
    role he is responsible for all aspects of our consumer business,
    including sales, marketing, and product design. 10




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
    Mark Jarvis Mr. Jarvis joined us in
    October 2007 as Senior Vice President, Chief Marketing Officer.
    He is responsible for our global marketing efforts, spanning the
    consumer and commercial businesses, and including global brand,
    online, and communications. From April 2007 until October 2007,
    Mr. Jarvis served as a consultant to Dell in the Chief
    Marketing Officer role. Prior to joining Dell, Mr. Jarvis
    spent 14 years at Oracle, where he launched numerous
    products and drove highly innovative marketing programs,
    including Oracles
    E-Business
    Network and Oracle Technology Network, and also managed
    Oracles showcase OpenWorld Conference.
    David A. Marmonti Mr. Marmonti serves as
    Senior Vice President and President, Europe, Middle East, and
    Africa, having been appointed to that position in March 2007. In
    this role, he is responsible for all business operations across
    the EMEA region, including sales and customer call centers in
    the region. Mr. Marmonti joined us in 1998 and has held a
    variety of roles, including Vice President and General Manager
    of our Public Business Group; Vice President and General Manager
    of our Mid-Markets and Preferred Corporate Accounts segments;
    Vice President and General Manager of our EMEA Home and Small
    Business division; Vice President of Marketing &
    e-business
    for the U.S. Consumer segment; and Director and General
    Manager of the U.S. Asset Recovery Business. Prior to
    joining Dell, Mr. Marmonti spent 16 years at AT&T
    in a variety of senior roles, including executive positions in
    sales and marketing, serving corporate customers.
    Mr. Marmonti holds a bachelors degree in business
    administration and marketing from the University of Missouri at
    St. Louis.
    Stephen F. Schuckenbrock Mr. Schuckenbrock joined us in January 2007
    as Senior Vice President and President, Global Services. In
    September 2007, he assumed the additional role of Chief
    Information Officer. He is responsible for all aspects of our
    services business, with worldwide responsibility for Dell
    enterprise service offerings, and is also responsible for our
    global information systems and technology structure. Prior to
    joining us, Mr. Schuckenbrock served as Co-Chief Operating
    Officer and Executive Vice President of Global Sales and
    Services for Electronic Data Systems Corporation
    (EDS). Before joining EDS in 2003, he was Chief
    Operating Officer of The Feld Group, an information technology
    consulting organization. Mr. Schuckenbrock served as Global
    Chief Information Officer for PepsiCo from 1998 to 2000.
    Mr. Schuckenbrock earned a bachelors degree in
    business administration from Elon University.
    Lawrence P. Tu Mr. Tu joined us as
    Senior Vice President, General Counsel and Secretary in July
    2004, and is responsible for overseeing Dells global legal
    department and governmental affairs. Before joining Dell,
    Mr. Tu served as Executive Vice President and General
    Counsel at NBC Universal for three years. Prior to his position
    at NBC, he was a partner with the law firm of
    OMelveny & Myers LLP, where he focused on high
    technology, internet, and media related transactions. He also
    served five years as managing partner of the firms Hong
    Kong office. Mr. Tus prior experience also includes
    serving as General Counsel Asia-Pacific for Goldman Sachs,
    attorney for the U.S. State Department, and law clerk for
    U.S. Supreme Court Justice Thurgood Marshall. Mr. Tu
    holds Juris Doctor and bachelor of arts degrees from Harvard
    University, as well as a masters degree from Oxford
    University, where he was a Rhodes Scholar.  ITEM 1A 
    RISK
    FACTORS   11




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
    Declining general economic, business, or industry conditions
    may cause reduced net revenue.We are a global
    company with customers in virtually every business and industry.
    If the economic climate in the U.S. or abroad deteriorates,
    customers or potential customers could reduce or delay their
    technology investments, which could impact our ability to manage
    inventory levels, collect customer receivables, and ultimately
    decrease our net revenue and profitability.
    Failure to reestablish a cost advantage may result in reduced
    market share, revenue, and profitability.Our
    success has historically been based on our ability to profitably
    offer products at a lower price than our competitors. However,
    we compete with many companies globally in all aspects of our
    business. If our increasing reliance on third-party original
    equipment manufacturers, original design manufacturing
    partnerships, and manufacturing outsourcing relationships fails
    to generate cost efficiencies, our profitability could be
    adversely impacted. Our profitability is also affected by our
    ability to negotiate favorable pricing with our vendors,
    including vendor rebates, marketing funds, and other vendor
    funding. Because these supplier negotiations are continuous and
    reflect the ongoing competitive environment, the variability in
    timing and amount of incremental vendor discounts and rebates
    can affect our profitability. An inability to reestablish our
    cost advantage or determine alternative means to deliver value
    to our customers may adversely affect our market share, revenue,
    and profitability.
    Our ability to generate substantial
    non-U.S. net
    revenue faces many additional risks and
    uncertainties.Sales outside the
    U.S. accounted for approximately 47% of our consolidated
    net revenue in Fiscal 2008. Our future growth rates and success
    are dependent on continued growth outside the U.S., including
    the key developing countries of Brazil, Russia, India, and China
    (BRIC). Our international operations face many risks
    and uncertainties, including varied local economic and labor
    conditions, political instability, and unexpected changes in the
    regulatory environment, trade protection measures, tax laws
    (including U.S. taxes on foreign operations), copyright
    levies, and foreign currency exchange rates. Any of these
    factors could adversely affect our operations and profitability.
    Our profitability may be affected by our product, customer,
    and geographic sales mix and by seasonal sales
    trends.Our profit margins vary among products,
    customers, and geographies. In addition, our business is subject
    to certain seasonal sales trends. For example, sales to
    government customers (particularly the U.S. federal
    government) are typically stronger in our third fiscal quarter,
    sales in EMEA are often weaker in our third fiscal quarter, and
    consumer sales are typically strongest during our fourth fiscal
    quarter. As a result of these factors, our overall profitability
    for any particular period will be affected by the mix of
    products, customers, and geographies reflected in our sales for
    that period, as well as by seasonality trends.
    Infrastructure failures and breaches in data security could
    harm our business.We depend on our information
    technology and manufacturing infrastructure to achieve our
    business objectives. If a problem, such as a computer virus,
    intentional disruption by a third party, natural disaster,
    manufacturing failure, or telephone system failure impairs our
    infrastructure, we may be unable to book or process orders,
    manufacture, and ship in a timely manner, or otherwise carry on
    our business. An infrastructure disruption could damage our
    reputation and cause us to lose customers and revenue, result in
    the unintentional disclosure of company or customer information,
    and require us to incur significant expense to eliminate these
    problems and address related data security concerns. The harm to
    our business could be even greater if it occurs during a period
    of disproportionately heavy demand.
    Our failure to effectively manage a product transition could
    reduce the demand for our products and the profitability of our
    operations.  Continuing improvements in technology
    mean frequent new product introductions, short product life
    cycles, and improvement in product performance characteristics.
    Product transitions present execution challenges and risks for
    any company. If we are unable to effectively manage a product
    transition, our business and results of operations could be
    unfavorably affected.
    Disruptions in component or product availability could
    unfavorably affect our performance.Our
    manufacturing and supply chain efficiencies give us the ability
    to operate with reduced levels of component and finished goods
    inventories. Our financial success is partly due to our supply
    chain management practices, including our ability to achieve
    rapid inventory turns. Because we maintain minimal levels of
    component and product 12




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##### Table of Contents



inventories, a disruption in component or product availability,
    such as the current industry shortage of laptop batteries, could
    harm our financial performance and our ability to satisfy
    customer needs.  
    Our reliance on vendors creates risks and
    uncertainties.Our manufacturing process requires
    a high volume of quality components from third-party suppliers.
    Defective parts received from these suppliers could reduce
    product reliability and harm the reputation of our products.
    Reliance on suppliers subjects us to possible industry shortages
    of components and reduced control over delivery schedules (which
    can harm our manufacturing efficiencies), as well as increases
    in component costs (which can harm our profitability).
    We could experience manufacturing interruptions, delays, or
    inefficiencies if we are unable to timely and reliably procure
    components and products from single-source or limited-source
    suppliers.We maintain several single-source or
    limited-source supplier relationships, either because multiple
    sources are not available or the relationship is advantageous
    due to performance, quality, support, delivery, capacity, or
    price considerations. If the supply of a critical single- or
    limited-source product or component is delayed or curtailed, we
    may not be able to ship the related product in desired
    quantities and in a timely manner. For example, the current
    industry shortage of notebook batteries could prevent us from
    meeting customer demand for notebooks. Even where multiple
    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
    harm operating results.
    Our business is increasingly dependent on our ability to
    access the capital markets.We are increasingly
    dependent on access to debt and capital sources to provide
    financing for our customers and to obtain funds in the
    U.S. for general corporate purposes, including share
    repurchases and acquisitions. Additionally, we have customer
    financing relationships with companies whose business models
    rely on accessing the capital markets. The inability of these
    companies to access such markets could force us to self-fund
    transactions or forgo customer financing opportunities,
    potentially harming our financial performance. We believe that
    we will be able to obtain appropriate financing from third
    parties even in light of the current market conditions;
    nevertheless, changes in our credit ratings, deterioration in
    our business performance, or adverse changes in the economy
    could limit our ability to obtain financing from debt or capital
    sources or could adversely affect the terms on which we may be
    able to obtain any such financing, which could unfavorably
    affect our net revenue and profitability. See
    Part II  Item 7 
    Managements Discussion and Analysis of Financial Condition
    and Results of Operations  Liquidity, Capital
    Commitments, and Contractual Cash Obligations 
    Liquidity.
    We face risks relating to our internal
    controls.  If management is not successful in
    maintaining a strong internal control environment, material
    weaknesses could reoccur, causing investors to lose confidence
    in our reported financial information. This could lead to a
    decline in our stock price, limit our ability to access the
    capital markets in the future, and require us to incur
    additional costs to improve our internal control systems and
    procedures.
    Unfavorable results of legal proceedings could harm our
    business and result in substantial costs  We are
    involved in various claims, suits, investigations, and legal
    proceedings that arise from time to time in the ordinary course
    of our business and that are not yet resolved, including those
    that are set forth under Note 10 of Notes to Consolidated
    Financial Statements included in Part II 
    Item 8  Financial Statements and Supplementary
    Data, and additional claims may arise in the future.
    Litigation is inherently unpredictable. Regardless of the merit
    of the claims, litigation may be both time-consuming and
    disruptive to our business. Therefore, we could incur judgments
    or enter into settlements of claims that could adversely affect
    our operating results or cash flows in a particular period. For
    example, we could be exposed to enforcement or other actions
    with respect to the continuing investigation into certain
    accounting and financial reporting matters being conducted by
    the SEC. In addition, if any infringement or other intellectual
    property claim made against us by any third party is successful,
    or if we fail to develop non-infringing technology or license
    the proprietary rights on commercially reasonable terms and
    conditions, our business, operating results, and financial
    condition could be materially and adversely affected.
    The acquisition of other companies may present new
    risks.We have begun to acquire companies as a
    part of our overall growth strategy. These acquisitions may
    involve significant new risks and uncertainties, including
    distraction of management attention away from our current
    business operations, insufficient new revenue to offset
    expenses, inadequate return of capital, integration challenges,
    new regulatory requirements, and issues not 13




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##### Table of Contents



discovered in our due diligence process. No assurance can be
    given that such acquisitions will be successful and will not
    adversely affect our profitability or operations.  
    Failure to properly manage the distribution of our products
    and services may result in reduced revenue and
    profitability.We use a variety of distribution
    methods to sell our products and services, including directly to
    customers and through select retailers and third-party
    value-added resellers. As we sell through an increasing number
    of indirect channels, inventory management becomes more
    challenging as successful demand forecasting becomes more
    difficult. Our inability to properly manage and balance
    inventory levels and potential conflicts among these various
    distribution methods could harm our operating results.
    If our cost cutting measures are not successful, we may
    become less competitive.A variety of factors
    could prevent us from achieving our goal of better aligning our
    product and service offerings and cost structure with customer
    needs in the current business environment through reducing our
    operating expenses; reducing total costs in procurement, product
    design, and transformation; simplifying our structure; and
    eliminating redundancies. For example, we may experience delays
    in the anticipated timing of activities related to our cost
    savings plans and higher than expected or unanticipated costs to
    implement them. As a result, we may not achieve our expected
    costs savings in the time anticipated, or at all. In such case,
    our results of operations and profitability may be negatively
    impaired, making us less competitive and potentially causing us
    to lose market share.
    Failure to effectively hedge our exposure to fluctuations in
    foreign currency exchange rates and interest rates could
    unfavorably affect our performance.We utilize
    derivative instruments to hedge our exposure to fluctuations in
    foreign currency exchange rates and interest rates. Some of
    these instruments and contracts may involve elements of market
    and credit risk in excess of the amounts recognized in our
    financial statements.
    Our continued business success may depend on obtaining
    licenses to intellectual property developed by others on
    commercially reasonable and competitive terms.  If
    we or our suppliers are unable to obtain desirable technology
    licenses, we may be prevented from marketing products; could be
    forced to market products without desirable features; or could
    incur substantial costs to redesign products, defend legal
    actions, or pay damages. While our suppliers may be
    contractually obligated to indemnify us against such expenses,
    those suppliers could be unable to meet their obligations. In
    addition, our operating costs could increase because of
    copyright levies or similar fees by rights holders and
    collection agencies in European and other countries. For a
    description of potential claims related to copyright levies, see
    Note 10 of Notes to Consolidated Financial Statements
    included in Part II 
    Item 8   Financial Statements and Supplementary
    Data  Copyright Levies.
    Our success depends on our ability to attract, retain, and
    motivate our key employees.  We rely on key
    personnel to support anticipated continued rapid international
    growth and increasingly complex product and service offerings.
    There can be no assurance that we will be able to attract,
    retain, and motivate the key professional, technical, marketing,
    and staff resources we need.
    Loss of government contracts could harm our
    business.  Government contracts are subject to
    future funding that may affect the extension or termination of
    programs and are subject to the right of the government to
    terminate for convenience or non-appropriation. In addition, if
    we violate legal or regulatory requirements, the government
    could suspend or disbar us as a contractor, which would
    unfavorably affect our net revenue and profitability.
    The expiration of tax holidays or favorable tax rate
    structures could result in an increase of our effective tax rate
    in the future.Portions of our operations are
    subject to a reduced tax rate or are free of tax under various
    tax holidays that expire in whole or in part during Fiscal 2010
    through Fiscal 2021. Many of these holidays may be extended when
    certain conditions are met. If they are not extended, then our
    effective tax rate would increase in the future. See Note 3
    of Notes to Consolidated Financial Statements included in
    Part II  Item 8  Financial
    Statements and Supplementary Data.
    Current environmental laws, or laws enacted in the future,
    may harm our business.  Our operations are subject
    to environmental regulation in all of the areas in which we
    conduct business. Our product design and procurement operations
    must comply with new and future requirements relating to the
    materials composition, energy efficiency and collection,
    recycling, treatment, and disposal of our electronics products,
    including restrictions on lead, cadmium, and other substances.
    If we fail to comply with the rules and regulations regarding 14




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##### Table of Contents



the use and sale of such regulated substances, we could be
    subject to liability. While we do not expect that the impact of
    these environmental laws and other similar legislation adopted
    in the U.S. and other countries will have a substantial
    unfavorable impact on our business, the costs and timing of
    costs under environmental laws are difficult to predict.  
    Armed hostilities, terrorism, natural disasters, or public
    health issues could harm our business.Armed
    hostilities, terrorism, natural disasters, or public health
    issues, whether in the U.S. or abroad, could cause damage
    or disruption to us, our suppliers or customers, or could create
    political or economic instability, any of which could harm our
    business. These events could cause a decrease in demand for our
    products, could make it difficult or impossible for us to
    deliver products or for our suppliers to deliver components, and
    could create delays and inefficiencies in our supply chain.  ITEM 1B 
    UNRESOLVED
    STAFF COMMENTS    ITEM 2 
    PROPERTIES      Americas


Europe, Middle East, Africa



Asia Pacific, including JapanRound Rock, Texas


Bracknell, England



Singapore   Americas
    Properties
  Owned


LeasedDescription


Principal Locations


(square feet)


(square feet)Headquarters


   Round Rock, Texas


2.1 million


Business
    Centers(a)


   Canada  Edmonton and
    Ottawa
       El Salvador 
    San Salvador
       Oklahoma  Oklahoma City
       Panama  Panama City
       Tennessee  Nashville
       Texas  Austin and Round Rock


1.1 million


1.9 millionManufacturing
    and Distribution


   Brazil  Hortolândia
       Florida  Miami (Alienware)
       North Carolina 
    Winston-Salem
       Ohio  West Chester
       Tennessee  Lebanon and
    Nashville
        Texas  Austin


2.9 million


700,000Design Centers


   Texas  Austin and Round Rock


700,000


100,000  15




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##### Table of Contents



EMEA
    Properties
  Owned


LeasedDescription


Principal Locations


(square feet)


(square feet)Headquarters


   Bracknell, England


100,000


100,000Business
    Centers(a)


   Germany  Halle
       France  Montpellier
       Ireland  Dublin and
    Limerick
       Morocco  Casablanca
       Slovakia  Bratislava


400,000


1.5 millionManufacturing
    and Distribution


   Ireland  Limerick and
    Athlone (Alienware)
       Poland  Lodz


1.0 million


   APJ
    Properties
  Owned


LeasedDescription


Principal Locations


(square feet)


(square feet)Headquarters


   Singapore





50,000Business
    Centers(a)


   China  Dalian and Xiamen
       India  Bangalore, Gurgaon,
    Hyderabad, and Mohali
       Japan  Kawasaki
       Malaysia  Penang and
    Kuala Lumpur
       Philippines  Metro Manila


300,000


3.2 millionManufacturing
    and Distribution


   China  Xiamen
       Malaysia  Penang
       India  Chennai


1.1 million


150,000Design Centers


   China  Shanghai
       India  Bangalore
       Singapore
       Taiwan  Taipei





500,000     (a)
    
    Business center locations include
    facilities with capacity greater than 1,000 people.
    Operations within these centers include sales, technical
    support, administrative, and support functions. Locations of
    smaller business centers are not listed; however, the smaller
    centers are included in the square footage.   16




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##### Table of Contents



ITEM 3 
    LEGAL
    PROCEEDINGS   ITEM 4 
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  Form 10-Q
 PART II ITEM 5 
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
    STOCKHOLDER
    MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES  Market
    Information
    Holders
    Dividends
    Issuance
    of Unregistered Securities
  Form 10-K
  
    Employee Stock Purchase Plan Until February
    2008, we maintained an Employee Stock Purchase Plan (the
    ESPP) that was available to substantially all of our
    employees worldwide. In 1994, stockholders approved additional
    shares for issuance under the ESPP, and we discovered that the
    issuance of these additional shares was never registered.
    Consequently, we have inadvertently issued approximately
    54 million unregistered shares under this plan since 1996.
    Retirement Plans We maintain a 401(k)
    retirement savings plan that is available to substantially all
    of our U.S. employees and a separate retirement plan that
    is available to our employees in Canada. Both of those plans
    contain a Dell Stock Fund, and both plans allow
    participants to allocate some or all of their account balances
    to interests in the Dell Stock Fund. The Dell common stock held
    in the Dell Stock Funds is not purchased from Dell; rather, the
    plan trustees accumulate the plan contributions that are
    directed to the Dell Stock Funds and purchase for the Dell Stock
    Funds shares of Dell common stock in open market transactions.
    Nevertheless, because we sponsor the plans, we may have been
    required to register certain transactions in the plans related
    to shares of Dell common stock. We discovered that we may be
    deemed to have been required to file a
    Form S-8
    in July 2003 to register additional share transactions in the
    401(k) plan and a
    Form S-8
    to register share transactions in the Canada retirement plan in
    1999. Consequently, we may have inadvertently failed to register
    transactions in the two plans relating to up to approximately
    37 million shares. 17




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##### Table of Contents



Form S-8 Form S-8
      Purchases
    of Common Stock
  Share
    Repurchase Program
    Total

ApproximateNumber of

Dollar ValueShares

of Shares thatRepurchased

May Yet Beas Part of

RepurchasedTotal Number

Average

Publicly

Under theof Shares

Price Paid

Announced

AnnouncedPeriod

Repurchased

per Share

Plans

Plans(a)(in thousands, except average price paid per share)Repurchases from November 3, 2007 through November 30,
    2007


33

$
26.85




$
1,415,438Repurchases from December 1, 2007 through December 28,
    2007


60,390

$
24.40


60,352

$
9,942,709Repurchases from December 29, 2007 through February 1,
    2008


118,224

$
21.39


118,166

$
7,415,634Total


178,647

$
22.41


178,518     (a)
    
    On December 3, 2007, our Board
    of Directors approved a new authorization for an additional
    $10.0 billion for share repurchases. 18




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##### Table of Contents



Stock
    Performance Graph
    
  End of Fiscal Year2003

2004

2005

2006

2007

2008Dell Inc.

$
100

$
140

$
172

$
123

$
99

$
85S&P 500 Index


100


135


143


158


181


177Dow Jones US Computer Hardware Index


100


139


150


171


196


204  ITEM 6 
    SELECTED FINANCIAL DATA    Form 10-K
   19




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##### Table of Contents



Form 10-K
  Fiscal Year EndedFebruary 2,

February 3,

January 28,

January 30,February 1,
    2008(c)

2007(c)

2006(a)

2005(b)

2004unaudited(in millions, except per share data)Results of Operations:Net revenue

$
61,133

$
57,420

$
55,788

$
49,121

$
41,327Gross margin

$
11,671

$
9,516

$
9,891

$
9,018

$
7,563Operating income

$
3,440

$
3,070

$
4,382

$
4,206

$
3,525Income before income taxes

$
3,827

$
3,345

$
4,608

$
4,403

$
3,711Net income

$
2,947

$
2,583

$
3,602

$
3,018

$
2,625Earnings per common share:Basic

$
1.33

$
1.15

$
1.50

$
1.20

$
1.02Diluted

$
1.31

$
1.14

$
1.47

$
1.18

$
1.00Number of weighted-average shares outstanding:Basic


2,223


2,255


2,403


2,509


2,565Diluted


2,247


2,271


2,449


2,568


2,619Cash Flow & Balance Sheet Data:Net cash provided by operating activities

$
3,949

$
3,969

$
4,751

$
5,821

$
4,064Cash, cash equivalents and investments

$
9,532

$
12,445

$
11,756

$
14,101

$
11,921Total assets

$
27,561

$
25,635

$
23,252

$
23,318

$
19,340Short-term borrowings

$
225

$
188

$
65

$
74

$
157Long-term debt

$
362

$
569

$
625

$
662

$
645Total stockholders equity

$
3,735

$
4,328

$
4,047

$
6,412

$
6,238     (a)
    
    Results for Fiscal 2006 include
    charges aggregating $421 million ($338 million of
    other product charges and $83 million in selling, general
    and administrative expenses) related to the cost of servicing or
    replacing certain
    OptiPlextmsystems that included 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 $96 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.(c)
    
    Results for Fiscal 2008 and Fiscal
    2007 include stock-based compensation expense pursuant to
    Statement of Financial Accounting Standards No. 123
    (revised 2004), Share-Based Payment
    (SFAS 123(R)). See Note 5 of Notes to
    Consolidated Financial Statements included in
    Part II  Item 8  Financial
    Statements and Supplementary Data. 20




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##### Table of Contents



ITEM 7 
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
    AND RESULTS OF OPERATIONS  SPECIAL NOTE:  This section,
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations, contains
    forward-looking statements that are based on our current
    expectations. Actual results in future periods may differ
    materially from those expressed or implied by those
    forward-looking statements because of a number of risks and
    uncertainties. For a discussion of risk factors affecting our
    business and prospects, see Part I Item 1A  Risk
    Factors. This section should be read in conjunction with
    Part II  Item 8  Financial
    Statements and Supplementary Data.
  Overview
  Our
    Company
              
    Improving our current state We are focused on
    eliminating bureaucracy and improving competitiveness by
    enhancing our productivity and becoming more efficient while
    strengthening our operating processes and internal controls. Our
    new and experienced executive leadership team is working
    together to increase productivity and efficiency across all
    functions. We are focused on improving product innovation by 21




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##### Table of Contents



shortening our product development cycle time and examining our
    supply chain models. Lastly, we are examining our pricing and
    margin strategies to improve our profitability.  
    Reigniting growth We are enabling our growth
    strategy by focusing on five key areas:  
    Global Consumer In Fiscal 2009, our consumer
    segment will expand beyond the U.S. to include worldwide
    sales to individual consumers and select retailers as a part of
    an internal consolidation of our consumer business. The
    consolidation will improve our global sales execution and
    coverage through better customer alignment, targeted sales force
    investments in rapidly growing countries, and improved marketing
    tools. We are also designing new, innovative products with
    faster development cycles and competitive features. Lastly, we
    have rapidly expanded our retail business in order to reach more
    consumers.
    Enterprise We are focused on simplifying IT
    for our customers to allow customers to deploy IT faster, run IT
    at a total lower cost, and grow IT smarter. As a result of our
    simplify IT focus, we have become the industry
    leader in server virtualization, power, and cooling performance.
    Notebooks Our goal is to reclaim notebook
    leadership by creating the best products while shortening our
    development cycle and being the most innovative developer of
    notebooks. To help meet this goal, we have recently separated
    our consumer and commercial design functions and launched
    several notebook products. We expect to launch more notebook
    products in Fiscal 2009.
    Small and Medium Business We are focused on
    providing small and medium businesses the simplest and most
    complete IT solution by extending our channel direct program
    (PartnerDirect) and expanding our offerings to mid-sized
    businesses. We are committed to improving our storage products
    and services as evidenced by our new Building IT-as-a-Service
    solution, which provides businesses with remote and lifecycle
    management,
    e-mail
    backup, and software license management.
    Emerging countries As a part of our growth
    strategy, we are focusing on and investing resources in emerging
    countries  with an emphasis on Brazil, Russia, India,
    and China. We are also creating custom products and services to
    meet the preferences and demands of individual countries and
    various regions.    Fiscal
    2008 Performance
  Share position
    
      We shipped 40 million units for calendar year
    2007 according to IDC, resulting in a worldwide PC share
    position of 14.9%.  After leading the worldwide PC market for
    the past six years, we fell to the second position for calendar
    year 2007.  We lost share, both in the U.S. and internationally,
    as our growth did not meet the overall PC growth.  Our U.S.
    Consumer segment continued to underperform, which slowed our
    overall growth in unit shipments, revenue, and profitability.
    This was mainly due to intense competitive pressure,
    particularly in the lower priced desktops and notebooks where
    competitors offered aggressively priced products with better
    product recognition and more relevant feature sets. A slight
    decline in our worldwide desktop shipments also was a factor in
    our losing worldwide PC share position; worldwide desktop
    shipments grew 5% during calendar year 2007.Net revenue
    
      Fiscal 2008 net revenue increased 6%
    year-over-year to $61.1 billion, with unit shipments up 5%
    year-over-year, as compared to Fiscal 2007 net revenue
    which increased 3% year-over-year to $57.4 billion on unit
    growth of 2% over Fiscal 2006 net revenue of
    $55.8 billion. 22




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##### Table of Contents



Operating income
    
      Operating income was $3.4 billion for
    Fiscal 2008, or 5.6% of net revenue compared to
    $3.1 billion for Fiscal 2007, or 5.4% of net revenue, and
    $4.4 billion or 7.9% of net revenue in Fiscal 2006.Net income
    
      Net income was $2.9 billion for Fiscal
    2008, or 4.8% of net revenue compared to $2.6 billion for
    Fiscal 2007, or 4.5% of net revenue, and $3.6 billion or
    6.5% of net revenue in Fiscal 2006.Earnings per share
    
      Earnings per share increased 15% to $1.31 for
    Fiscal 2008, compared to $1.14 for Fiscal 2007 and $1.47 for
    Fiscal 2006.  Results
    of Operations
    Fiscal Year EndedFebruary 1,
    2008(a)

February 2,
    2007(a)

February 3,
    2006(b)Dollars

% of Revenue

Dollars

% of Revenue

Dollars

% of Revenue(in millions, except per share amounts and percentages)Net revenue

$
61,133


100.0%

$
57,420


100.0%

$
55,788


100.0%Gross margin

$
11,671


19.1%

$
9,516


16.6%

$
9,891


17.7%Operating expenses

$
8,231


13.5%

$
6,446


11.2%

$
5,509


9.8%Operating income

$
3,440


5.6%

$
3,070


5.4%

$
4,382


7.9%Income tax provision

$
880


1.4%

$
762


1.3%

$
1,006


1.8%Net income

$
2,947


4.8%

$
2,583


4.5%

$
3,602


6.5%Earnings per share  diluted

$
1.31


N/A

$
1.14


N/A

$
1.47


N/A     (a)
    
    Results for Fiscal 2008 include
    stock-based compensation expense of $436 million, or
    $309 million ($0.14 per share) net of tax, and results for
    Fiscal 2007 include stock-based compensation expense of
    $368 million, or $258 million ($0.11 per share) net of
    tax, due to the implementation of Statement of Financial
    Accounting Standards No. 123 (revised 2004), Share-Based
    Payment,(SFAS 123(R)). We implemented
    SFAS 123(R) using the modified prospective method effective
    February 4, 2006. For additional information, see
    Note 5 of Notes to Consolidated Financial Statements
    included in Part II 
    Item 8  Financial Statements and Supplementary
    Data.(b)
    
    Results for Fiscal 2006 include
    charges aggregating $421 million ($338 million of
    other product charges and $83 million in selling, general,
    and administrative expenses) related to the cost of servicing or
    replacing certain
    OptiPlextmsystems 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
    $96 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.  Consolidated
    Operations
   23




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Revenues
    by Segment
     24




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##### Table of Contents



Fiscal Year EndedFebruary 1, 2008

February 2, 2007

February 3, 2006% of



% of



% ofDollars

Revenue

Dollars

Revenue

Dollars

Revenue(in millions, except percentages)Net revenueAmericas:Business

$
31,144


50.9%

$
29,311


51.1%

$
28,365


50.8%U.S. Consumer


6,224


10.2%


7,069


12.3%


7,960


14.3%Americas


37,368


61.1%


36,380


63.4%


36,325


65.1%EMEA


15,267


25.0%


13,682


23.8%


12,887


23.1%APJ


8,498


13.9%


7,358


12.8%


6,576


11.8%Net revenue

$
61,133


100.0%

$
57,420


100.0%

$
55,788


100.0%   
    Americas Americas Business represented
    the majority of our absolute dollar revenue growth in both
    Fiscal 2008 and Fiscal 2007. During Fiscal 2008, Americas
    revenues increased 3% year-over-year representing 61.1% of our
    total net sales as compared to 63.4% in Fiscal 2007. Revenue
    from sales of software and peripherals and mobility products led
    the regions growth during Fiscal 2008. The overall
    increase in net sales was partially offset by a decline in net
    sales of desktops. Revenue from the sale of mobility products
    led the regions growth and grew by single digits in both
    Americas Business and U.S. Consumer in Fiscal 2007.
    However, this growth was also offset by the continuing trend of
    declines in desktop PC sales as wireless capabilities, falling
    prices, and a growing need for mobility have increased the
    preference and demand for notebooks.  
    Business Americas Business grew
    revenue as well as units by 6% in Fiscal 2008, compared to 3%
    revenue growth on flat unit growth in Fiscal 2007. The increase
    in revenue in Fiscal 2008 resulted primarily from the sale of
    mobility products, which grew 11% in Fiscal 2008 compared to
    Fiscal 2007. The unit volume increases resulted from strong
    growth in laptops. Americas International, which includes
    countries in North America and Latin America other than the
    U.S., drove the majority of the increase in revenue in the
    Americas in both years. Americas International produced revenue
    growth of 17% year-over-year for Fiscal 2008 as compared to 19%
    revenue growth year-over-year in Fiscal 2007. In Fiscal 2007,
    the slow down of net revenue growth was due to desktop weakness,
    lower demand, and a significant decline in our Public business.  
    U.S. Consumer U.S. Consumer
    revenue and unit volume decreased 12% and 20%, respectively, in
    Fiscal 2008, compared to revenue and unit decreases of 11% and
    14%, respectively, in Fiscal 2007. U.S. Consumer revenue
    declined as compared to Fiscal 2007 primarily due to a 19% and
    29% decline in desktop revenue and unit volume, respectively. In
    Fiscal 2008, this segments average selling price increased
    10% year-over-year compared to a 3% year-over-year increase from
    a year ago, mainly due to realigning prices and selling a more
    profitable product mix. We continue to see a shift to mobility
    products in U.S. Consumer and our other segments as
    notebooks become more affordable. In response to this
    environment, we have updated our business model for
    U.S. Consumer and have entered into a limited number of
    retail distribution arrangements to complement and extend the
    existing direct business. In the fourth quarter of Fiscal 2008,
    the U.S. Consumer business began to improve and posted
    revenue growth of 12% over the fourth quarter of Fiscal 2007,
    which reflects changes we have made to the business to reignite
    growth, including introducing four notebook families for
    consumers in six months. In Fiscal 2009, we expect to continue
    to expand our product offerings by launching 50% more new
    notebooks than in Fiscal 2008. U.S. Consumer revenue and
    unit volume decreased 11% and 14%, respectively, in Fiscal 2007
    compared to revenue growth of 5% on unit growth of 9% in Fiscal
    2006. U.S. Consumer revenue growth slowed as compared to
    Fiscal 2006 primarily due to a 25% decline in both desktop
    revenue and unit volume.  
    EMEA During Fiscal 2008, EMEA
    represented 25% of our total consolidated net revenue as
    compared to 24% in Fiscal 2007. EMEA had 12% year-over-year net
    revenue growth as a result of unit shipment growth of 25




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##### Table of Contents



7%. Average price per unit increased 4%, which reflects the mix
    of products sold and a benefit from the strengthening of the
    Euro and British Pound against the U.S. dollar during
    Fiscal 2008, offset by our pricing strategy. The revenue growth
    was primarily a result of higher demand for mobility products,
    represented by a 20% increase in revenue on a unit shipment
    increase of 24%. Growth in services revenue also contributed to
    EMEAs strong Fiscal 2008 performance as EMEAs
    services revenue grew 30% year-over-year. These increases were
    partially offset by a 3% decrease in desktop sales. At a country
    level, Poland, Austria, Greece, France, and Germany experienced
    strong growth in Fiscal 2008. We recently reorganized our EMEA
    operations to focus our sales teams on specific customer types,
    as opposed to our previous country focus, to reignite growth and
    provide more consistent offerings to our customers.    
    Asia Pacific-Japan During Fiscal
    2008, APJs revenue continued to improve, with 15% revenue
    growth year-over-year. Consistent with the EMEA segment, these
    increases were mainly a result of strong growth in mobility.
    Sales of mobility products increased 33% year-over-year and unit
    volume increased 32% in Fiscal 2008. Sales of mobility products
    grew due to a shift in customer preference from desktops to
    notebooks as well as the strong reception of our
    Inspirontm
    and
    Vostrotm
    notebooks. APJ also reported 20% growth in servers and
    networking revenue on unit growth of 5% primarily due to our
    focus on delivering greater value within customer data centers
    with our rack optimized server platforms, whose average selling
    prices are higher than our tower servers. These increases were
    partially offset by a 10% decrease in services revenue. From a
    country perspective, India, Thailand, Taiwan, Malaysia, and
    China experienced significant revenue growth during Fiscal 2008.
    Significant growth in India and China during Fiscal 2008
    contributed to a revenue growth rate of approximately 27% for
    our targeted BRIC countries.     26




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##### Table of Contents



Revenue
    by Product and Services Categories
    Fiscal Year EndedFebruary 1, 2008

February 2, 2007

February 3, 2006% of



% of



% ofDollars

Revenue

Dollars

Revenue

Dollars

Revenue(in millions, except percentage)Net revenue:Desktop PCs

$
19,573


32%

$
19,815


34%

$
21,568


39%Mobility


17,423


28%


15,480


27%


14,372


25%Software and peripherals


9,908


16%


9,001


16%


8,329


15%Servers and networking


6,474


11%


5,805


10%


5,449


10%Services


5,320


9%


5,063


9%


4,207


8%Storage


2,435


4%


2,256


4%


1,863


3%Net revenue

$
61,133


100%

$
57,420


100%

$
55,788


100%   
    Desktop PCs During Fiscal 2008,
    revenue from desktop PCs (which includes desktop computer
    systems and workstations) decreased slightly from Fiscal 2007
    revenue on a unit decline of 2% even though worldwide industry
    unit sales grew 5% during calendar 2007. The decline was
    primarily due to us being out of product feature and price
    position and consumers migration to mobility products. Our
    U.S. Consumer segment continued to perform below
    expectation in Fiscal 2008 with a 19% decrease in desktop
    revenue year-over-year; however, in the fourth quarter of Fiscal
    2008, desktop revenues for U.S. Consumers grew 5% over the
    fourth quarter of Fiscal 2007. U.S. Consumer was the
    primary contributor to our worldwide full year decline in
    desktop revenue with EMEA also contributing to the decline with
    a 3% decrease in revenue during Fiscal 2008 as compared to
    Fiscal 2007. The decline in revenue in our U.S. Consumer and
    EMEA segments was offset by a strong performance in APJ, where
    desktop sales increased 12% during Fiscal 2008 over prior year,
    while desktop sales in our Americas Business segment remained
    relatively flat during the same time period. We will likely see
    rising user demand for mobility products in the foreseeable
    future that will contribute to a slowing demand for desktop PCs
    as mobility growth is expected to outpace desktop growth at a
    rate of approximately six-to-one. In Fiscal 2008, we introduced
    Vostrotm
    desktops specifically designed to meet the needs of small
    business customers.    
    Mobility In Fiscal 2008, revenue from
    mobility products (which includes notebook computers and mobile
    workstations) grew 13% year-over-year on unit growth of 16%. All
    segments experienced strong growth except U.S. Consumer,
    whose revenue and units declined 10% during Fiscal 2008 as
    compared to Fiscal 2007. During the same period mobility revenue
    in APJ grew 33% on unit growth of 32%; EMEA revenue grew 20% on
    unit growth of 24%; and Americas Business revenue grew 11% on
    17% unit growth. Even though we posted double-digit mobility
    growth during Fiscal 2008, according to IDC, industry mobility
    shipments grew 34% during calendar 2007. To capitalize on the
    industry growth in mobility, we have separated our consumer and
    commercial design functions  focusing our consumer
    team on innovation and shorter design cycles. As a result, we
    have launched four consumer notebook families in the past six
    months, including
    Inspirontm
    color laptops and
    XPStm
    laptops, for which the demand has been better than expected. As
    a result, the fourth quarter of Fiscal 2008 mobility revenues
    for U.S. Consumer grew 25% over the fourth quarter of
    Fiscal 2007. We also introduced
    Vostrotm
    laptops, specifically designed to meet the needs of small
    business customers. During the fourth quarter of Fiscal 2008, we
    launched our first tablet  the
    Latitudetm
    XT, the industrys only sub-four pound convertible tablet
    with pen and touch capability. As notebooks become more
    affordable and wireless 27




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##### Table of Contents



products become standardized, demand for our mobility products
    continues to be strong, producing robust year-over-year revenue
    and unit growth. We are likely to see sustained growth in our
    mobility products in the foreseeable future due to the continued
    industry-wide migration from desktop PCs to mobility products.    
    Software and Peripherals In Fiscal
    2008, revenue from software and peripherals
    (S&P) (which includes Dell-branded printers,
    monitors not sold with systems, plasma and LCD televisions,
    projectors, and a multitude of competitively priced third-party
    printers, televisions, software, digital cameras, and other
    products) increased 10% year-over-year. EMEA lead S&P
    revenue growth with a year-over-year increase of 14%, and
    Americas Business and APJ revenue growth was 11% and 10%,
    respectively, during Fiscal 2008 as compared to Fiscal 2007. The
    increase in S&P revenue is primarily attributable to
    strength in imaging and printing, digital displays, and software
    licensing. With the acquisition of ASAP, a leading software
    solutions and licensing services provider, in the fourth quarter
    of Fiscal 2008, we now offer products from over 2,000 software
    publishers.    
    Servers and Networking In Fiscal 2008,
    servers and networking revenue grew 12% on unit growth of 6%
    year-over-year as compared to industry unit growth of 8%. Our
    unit growth was slightly behind the growth in the overall
    industry, while we improved our product feature sets by
    transitioning to new platforms, and as we managed through the
    realignment of certain portions of our sales force to address
    sales execution deficiencies. A significant portion of the
    revenue growth is due to higher average selling prices, which
    increased 5% during Fiscal 2008 as compared to the prior year.
    Fourth quarter year-over-year revenue growth of 2% was below
    industry growth and our expectations as conservatism in the
    U.S. commercial sectors affected sales of our server
    products. All regions experienced strong year-over-year revenue
    growth with APJ leading the way with 20% growth on unit growth
    of 5%; additionally, server and networking revenue increased 16%
    and 8% in EMEA and the Americas, respectively. For Fiscal 2008,
    we were again ranked number one in the United States with a 34%
    share in server units shipped; worldwide we were second with a
    25% share. Servers and networking remains a strategic focus
    area. Late in the fourth quarter, we launched our 10G blade
    servers  the most energy efficient blade server
    solution on the market. Our PowerEdge servers are ranked number
    one in server benchmark testing for overall performance, energy
    efficiency, and price.  tm
  
    Services In Fiscal 2008, revenue from
    services (which includes the sale and servicing of our extended
    product warranties) increased 5% year-over-year compared to a
    20% increase in Fiscal 2007. EMEA drove services revenue growth
    with a 30% increase in Fiscal 2008 as compared to Fiscal 2007,
    and Americas Business contributed with 3% revenue growth. This
    growth was offset by revenue declines in U.S. Consumer and
    APJ of 16% and 10%, respectively. Strong Fiscal 2008 services
    sales increased our deferred service revenue balance by
    approximately $1.0 billion in Fiscal 2008, a 25% increase
    to approximately $5.3 billion. In Fiscal 2007, our deferred
    service revenue increased $514 million or 14% to
    approximately $4.2 billion. During Fiscal 2008, we acquired
    a number of service technologies and capabilities through
    strategic acquisitions of certain companies. These capabilities
    are being used to build-out our mix of service offerings. In the
    first quarter of Fiscal 2009, we 28




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
    Storage In Fiscal 2008, storage
    revenue increased 8% as compared to a 21% increase in Fiscal
    2007. All regions contributed to the revenue growth, led by
    EMEA, which experienced strong growth of 18%; additionally, APJ
    and the Americas increased 10% and 5%, respectively. In Fiscal
    2008, we expanded both our PowerVault and Dell  EMC
    solutions that drove both additional increases in performance
    and customer value. During the fourth quarter of Fiscal 2008, we
    completed the acquisition of EqualLogic, Inc., an industry
    leader in iSCSI SANs. With this acquisition, we now provide much
    broader product offerings for small and medium business
    consumers. Industry analysts believe that the iSCSI SAN space is
    expected to grow over 125% annually over the next five years.    Gross
    Margin
    Fiscal Year EndedFebruary 1, 2008

February 2, 2007

February 3, 2006% of



% of



% ofDollars

Revenue

Dollars

Revenue

Dollars

Revenue(in millions, except percentages)Net revenue

$
61,133


100.0%

$
57,420


100.0%

$
55,788


100.0%Gross margin

$
11,671


19.1%

$
9,516


16.6%

$
9,891


17.7%    29




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##### Table of Contents



Operating
    Expenses
    Fiscal Year EndedFebruary 3, 2006February 1, 2008

February 2, 2007



% ofDollars

% of Revenue

Dollars

% of Revenue

Dollars

Revenue(in millions, except percentages)Operating expenses:Selling, general, and administrative

$
7,538


12.4%

$
5,948


10.3%

$
5,051


9.0%Research, development, and engineering


610


1.0%


498


0.9%


458


0.8%In-process research and development


83


0.1%


-


-


-


-Operating expenses

$
8,231


13.5%

$
6,446


11.2%

$
5,509


9.8%   
    Selling, General, and
    Administrative During Fiscal 2008,
    selling, general, and administrative expenses increased 27% to
    $7.5 billion. The increase was primarily due to
    investigation costs, higher compensation and benefits expense,
    and increased outside consulting fees. Expenses related to the
    United States Securities and Exchange Commission
    (SEC) and Audit Committee investigations were
    $160 million and $100 million for Fiscal 2008 and
    Fiscal 2007, respectively. Fiscal 2008 results also include
    $76 million (of the total of $107 million) of
    additional expense for cash payments for expiring stock options,
    and selling, general, and administrative expenses related to
    headcount and infrastructure reductions were $92 million.
    In addition, compensation related expenses, which includes the
    aforementioned expiring stock options expense and headcount
    reductions, increased in Fiscal 2008 compared to Fiscal 2007.
    Employee bonus expense also increased substantially in Fiscal
    2008 compared to Fiscal 2007 when bonuses were paid at a reduced
    amount.    
    Research, Development, and
    Engineering Research, development, and
    engineering expenses increased 22% to $610 million compared
    to $498 million in Fiscal 2007. The increase in research,
    development, and engineering was primarily driven by
    significantly higher compensation costs. The higher compensation
    costs are partially attributed to increased focused investments
    in research and development (R&D), which are
    critical to our future growth and competitive position in the
    marketplace. During Fiscal 2008, we implemented our
    Simplify IT initiative for our customers. R&D
    is the foundation for this initiative, which is aimed at
    allowing customers to deploy IT faster, run IT at a lower total
    cost, and grow IT smarter. In Fiscal 2007, research,
    development, and engineering expense increased in absolute
    dollars compared to Fiscal 2006 due to increased staffing
    levels, product development costs, and stock-based compensation
    expense resulting from the adoption of SFAS 123(R). 30




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##### Table of Contents




    In-Process Research and
    Development We recognized in-process
    research and development (IPR&D) charges in
    connection with acquisitions accounted for as business
    combinations, as more fully described in Note 7 of Notes to
    Consolidated Financial Statements included in
    Part II  Item 8  Financial
    Statements and Supplementary Data. During Fiscal 2008, we
    recorded IPR&D charges of $83 million. Prior to Fiscal
    2008, there were no IPR&D charges related to acquisitions.    Stock-Based
    Compensation
    Accounting for Stock Issued to Employees,
    Form 10-K
 31




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##### Table of Contents



Investment
    and Other Income, net
    Fiscal Year EndedFebruary 1,

February 2,

February 3,2008

2007

2006(in millions)Investment and other income, net:Investment income, primarily interest

$
496


$
368


$
308Gains (losses) on investments, net


14



(5
)


(2
)Interest expense


(45
)


(45
)


(29
)CIT minority interest


(29
)


(23
)


(27
)Foreign exchange


(30
)


(37
)


3Gain on sale of building


-



36



-Other


(19
)


(19
)


(27
)Investment and other income, net

$
387


$
275


$
226     Income
    Taxes
    Accounting for Uncertainty in
    Income Taxes   an Interpretation of FASB Statement
    No. 109 Accounting for Income Taxes
 32




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##### Table of Contents



Financing
    Receivables and Off-Balance Sheet Arrangements
  Financing Receivables  
      small-and-medium and/or
  Asset Securitization
 33




---



##### Table of Contents



Accounting for
    Transfers and Servicing of Financial Assets and Extinguishment
    of Liabilities
          Liquidity,
    Capital Commitments, and Contractual Cash Obligations
  Liquidity
   34




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##### Table of Contents



Fiscal Year EndedFebruary 1,

February 2,2008

2007(in millions)Cash, cash equivalents, and investments:Cash and cash equivalents

$
7,764

$
9,546Debt securities


1,657


2,784Equity and other securities


111


115Cash, cash equivalents and investments

$
9,532

$
12,445   Fiscal Year EndedFebruary 1,

February 2,

February 3,2008

2007

2006(in millions)Net cash flow provided by (used in):Operating activities

$
3,949


$
3,969


$
4,751Investing activities


(1,763
)


1,003



4,149Financing activities


(4,120
)


(2,551
)


(6,252
)Effect of exchange rate changes on cash and cash equivalents


152



71



(73
)Net (decrease) increase in cash and cash equivalents

$
(1,782
)

$
2,492


$
2,575   
    Operating Activities Cash flows from
    operating activities during Fiscal 2008, 2007, and 2006 resulted
    primarily from net income, which represents our principal source
    of cash. In Fiscal 2008, the slight decrease in operating cash
    flows was primarily due to changes in working capital slightly
    offset by the increase in net income. In Fiscal 2007, the
    decrease in operating cash flows was primarily led by a decrease
    in net income, slightly offset by changes in working capital.
    See discussion of our cash conversion cycle in Key
    Performance Metrics below.   35




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##### Table of Contents



Key Performance Metrics
  February 1,

February 2,

February 3,2008

2007

2006Days of sales
    outstanding(a)


36



31



29Days of supply in
    inventory(b)


8



5



5Days in accounts
    payable(c)


(80
)


(78
)


(77
)Cash conversion cycle


(36
)


(42
)


(43
)
     (a)
    
    Days of sales outstanding
    (DSO) calculates the average collection period of
    our receivables. DSO is based on the ending net trade
    receivables and the most recent quarterly revenue for each
    period. DSO also includes the effect of product costs related to
    customer shipments not yet recognized as revenue that are
    classified in other current assets. DSO is calculated by adding
    accounts receivable, net of allowance for doubtful accounts, and
    customer shipments in transit and dividing that sum by average
    net revenue per day for the current quarter (90 days). At
    February 1, 2008, February 2, 2007, and
    February 3, 2006, DSO and days of customer shipments not
    yet recognized were 33 and 3 days, 28 and 3 days, and
    26 and 3 days, respectively.(b)
    
    Days of supply in inventory
    (DSI) measures the average number of days from
    procurement to sale of our product. DSI is based on ending
    inventory and most recent quarterly cost of sales for each
    period. DSI is calculated by dividing inventory by average cost
    of goods sold per day for the current quarter (90 days).(c)
    
    Days in accounts payable
    (DPO) calculates the average number of days our
    payables remain outstanding before payment. DPO is based on
    ending accounts payable and most recent quarterly cost of sales
    for each period. DPO is calculated by dividing accounts payable
    by average cost of goods sold per day for the current quarter
    (90 days).  two-day
  two-day one-day
    
    Investing Activities Cash used in investing
    activities during Fiscal 2008 was $1.8 billion, as compared
    to $1.0 billion cash provided by investing activities
    during Fiscal 2007 and $4.1 billion provided in Fiscal
    2006. Cash generated or used in investing activities principally
    consists of net maturities and sales or purchases of
    investments; net capital expenditures for property, plant, and
    equipment; and cash used to fund strategic acquisitions, which
    was approximately $2.2 billion during Fiscal 2008. In
    Fiscal 2008 as compared to Fiscal 2007, we re-invested a lower
    amount of our proceeds from the maturity or sales of investments
    to build liquidity 36




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##### Table of Contents




    Financing Activities Cash used in financing
    activities during Fiscal 2008 was $4.1 billion, as compared
    to $2.6 billion in Fiscal 2007 and $6.3 billion in
    Fiscal 2006. Financing activities primarily consist of the
    repurchase of our common stock, partially offset by proceeds
    from the issuance of common stock under employee stock plans and
    other items. In Fiscal 2008, the year-over-year increase in cash
    used in financing activities was due primarily to the repurchase
    of our common stock as the temporary suspension of our share
    repurchase program ended in the fourth quarter of Fiscal 2008.
    In Fiscal 2008, we repurchased approximately 179 million
    shares at an aggregate cost of $4.0 billion. In Fiscal
    2007, the year-over-year decrease in cash used in financing
    activities was due primarily to the suspension of our share
    repurchase program in September 2006. During Fiscal 2007, we
    repurchased approximately 118 million shares at an
    aggregate cost of $3.0 billion compared to 204 million
    shares at an aggregate cost of $7.2 billion in Fiscal 2006.      Capital
    Commitments
  Redeemable Common Stock
  Share Repurchase Program
 37




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##### Table of Contents



Capital Expenditures
  Restricted Cash
  Contractual
    Cash Obligations
    Payments Due by PeriodFiscal

Fiscal 2010-

Fiscal 2012-Total

2009

2011

2013

Beyond(in millions)Contractual cash obligations:Debt(a)

$
529

$
227

$
2

$
-

$
300Operating leases


487


92


138


92


165Advances under credit facilities


23


23


-


-


-Purchase obligations


893


544


348


1


-Interest


451


33


45


43


330Current portion of uncertain tax
    positions(b)


98


98


-


-


-Contractual cash obligations

$
2,481

$
1,017

$
533

$
136

$
795     (a)
    
    Changes in the fair value of the
    debt where the interest rate is hedged with interest rate swap
    agreements are not included in the contractual cash obligations
    for debt as the debt is expected to be settled at par at its
    scheduled maturity date.(b)
    
    The current portion of uncertain
    tax positions does not include approximately $1.5 billion
    in additional liabilities associated with uncertain tax
    positions that are not expected to be liquidated in Fiscal 2009.
    We are unable to reliably estimate the expected payment dates
    for these additional non-current liabilities.  Debt
   38




---



##### Table of Contents



Operating Leases
  Advances Under Credit Facilities
  Purchase Obligations
      Interest
  Market
    Risk
    Foreign
    Currency Hedging Activities
   39




---



##### Table of Contents



one-day Value-at-Risk
  Cash and
    Investments
      A-1
    Fair Value
    Measurements
 40




---



##### Table of Contents



Debt
  Accounting for Derivative Instruments
    and Hedging Activities, as amended
    Risk
    Factors Affecting Our Business and Prospects
    
    general economic, business, and industry conditions;
    our ability to reestablish a cost advantage over our competitors;
    local economic and labor conditions, political instability,
    unexpected regulatory changes, trade protection measures, tax
    laws, copyright levies, and fluctuations in foreign currency
    exchange rates;
    our ability to accurately predict product, customer, and
    geographic sales mix and seasonal sales trends;
    information technology and manufacturing infrastructure failures;
    our ability to effectively manage periodic product transitions;
    our ability to maintain a strong internal control environment;
    disruptions in component or product availability could
    unfavorably affect our performance;
    our reliance on third-party suppliers for quality product
    components, including reliance on several single-source or
    limited-source suppliers;
    our ability to access the capital markets;
    risks relating to our internal controls;
    unfavorable results of legal proceedings could harm our business
    and result in substantial costs;
    our acquisition of other companies may present new risks;
    our ability to properly manage the distribution of our products
    and services;
    our success in achieving the benefits of our cost cutting
    measures;
    effective hedging of our exposure to fluctuations in foreign
    currency exchange rates and interest rates;
    obtaining licenses to intellectual property developed by others
    on commercially reasonable and competitive terms;
    our ability to attract, retain, and motivate key personnel;
    loss of government contracts;
    expiration of tax holidays or favorable tax rate structures;
    changing environmental laws; and
    the effect of armed hostilities, terrorism, natural disasters,
    and public health issues.   41




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##### Table of Contents



Critical
    Accounting Policies
    Revenue Recognition and Related Allowances and/or 99-19, Reporting Revenue Gross as a Principal versus Net as an
    Agent.
      Business Combinations and Intangible Assets Including
    Goodwill 
   42




---



##### Table of Contents



Warranty
  Income Taxes
  Stock-Based Compensation Accounting for Stock-Based
    Compensation
        Loss Contingencies
 43




---



##### Table of Contents



Recently
    Issued Accounting Pronouncements
    The
    Fair Value Option for Financial Assets and Financial Liabilities
  Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
 ITEM 7A 
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK   44




---



##### 



ITEM 8 
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
   
 PageFinancial Statements:Report of Independent Registered Public
    Accounting Firm


46Consolidated Statements of Financial Position at
    February 1, 2008 and February 2, 2007


47Consolidated Statements of Income for the fiscal
    years ended February 1, 2008,
    February 2, 2007, and February 3, 2006


48Consolidated Statements of Cash Flows for the
    fiscal years ended February 1, 2008, February 2, 2007,
    and February 3, 2006


49Consolidated Statements of Stockholders
    Equity for the fiscal years ended February 1, 2008,
    February 2, 2007, and February 3, 2006


50Notes to Consolidated Financial Statements


51Financial Statement Schedule:Schedule II  Valuation and
    Qualifying Accounts for the fiscal years ended February 1,
    2008, February 2, 2007, and February 3, 2006


100All other schedules are omitted because they are not applicable.   45




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm     Internal Control  Integrated Framework
              46




---



##### Table of Contents



DELL
    INC.



CONSOLIDATED
    STATEMENTS OF FINANCIAL POSITION

(in
    millions)  February 1,

February 2,2008

2007ASSETSCurrent assets:Cash and cash equivalents

$
7,764


$
9,546Short-term investments


208



752Accounts receivable, net of allowance


5,961



4,622Financing receivables, net of allowance


1,732



1,530Inventories, net of allowance


1,180



660Other


3,035



2,829Total current assets


19,880



19,939Property, plant, and equipment, net of depreciation


2,668



2,409Investments


1,560



2,147Long-term financing receivables, net of allowance


407



323Goodwill


1,648



110Intangible assets, net of amortization


780



45Other non-current assets


618



662Total assets

$
27,561


$
25,635LIABILITIES AND EQUITYCurrent liabilities:Short-term borrowings

$
225


$
188Accounts payable


11,492



10,430Accrued and other


4,323



5,141Short-term deferred service revenue


2,486



2,032Total current liabilities


18,526



17,791Long-term debt


362



569Long-term deferred service revenue


2,774



2,189Other non-current liabilities


2,070



647Total liabilities


23,732



21,196Commitments and contingencies (Note 10)Redeemable common stock and capital in excess of $.01 par
    value; shares issued and outstanding: 4 and 5, respectively
    (Note 4)


94



111Stockholders equity:Preferred stock and capital in excess of $.01 par value;
    shares issued and outstanding: none


-



-Common stock and capital in excess of $.01 par value;
    shares authorized: 7,000; shares issued: 3,320 and 3,307,
    respectively; shares outstanding: 2,060 and 2,226, respectively


10,589



10,107Treasury stock at cost: 785 and 606 shares, respectively


(25,037
)


(21,033
)Retained earnings


18,199



15,282Accumulated other comprehensive loss


(16
)


(28
)Total stockholders equity


3,735



4,328Total liabilities and stockholders equity

$
27,561


$
25,635    47




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##### Table of Contents



DELL
    INC.



CONSOLIDATED
    STATEMENTS OF INCOME

(in
    millions, except per share amounts) Fiscal Year EndedFebruary 1,

February 2,

February 32008

2007

2006Net revenue

$
61,133

$
57,420

$
55,788Cost of net
    revenue(1)


49,462


47,904


45,897Gross margin


11,671


9,516


9,891Operating expenses:Selling, general, and
    administrative(1)


7,538


5,948


5,051In-process research and development


83


-


-Research, development, and
    engineering(1)


610


498


458Total operating expenses


8,231


6,446


5,509Operating income


3,440


3,070


4,382Investment and other income, net


387


275


226Income before income taxes


3,827


3,345


4,608Income tax provision


880


762


1,006Net income

$
2,947

$
2,583

$
3,602Earnings per common share:Basic

$
1.33

$
1.15

$
1.50Diluted

$
1.31

$
1.14

$
1.47Weighted-average shares outstanding:Basic


2,223


2,255


2,403Diluted


2,247


2,271


2,449     (1)
    
    Cost of net revenue and operating
    expenses for the fiscal years ended February 1, 2008 and
    February 2, 2007, include stock-based compensation expense
    pursuant to Statement of Financial Accounting Standards
    No. 123 (revised 2004), Share-Based Payment,(SFAS 123(R)). See Note 5 of Notes to
    Consolidated Financial Statements for additional information.   48




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##### Table of Contents



DELL
    INC.



CONSOLIDATED
    STATEMENTS OF CASH FLOWS

(in
    millions) Fiscal Year EndedFebruary 1,

February 2,

February 3,2008

2007

2006Cash flows from operating activities:Net income

$
2,947


$
2,583


$
3,602Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


607



471



394Stock-based compensation


329



368



17In-process research and development charges


83



-



-Excess tax benefits from stock-based compensation


(12
)


(80
)


-Tax benefits from employee stock plans


-



-



224Effects of exchange rate changes on monetary assets and
    liabilities denominated in foreign currencies


30



37



(3
)Other


133



61



157Changes in:Operating working capital


(519
)


397



(53
)Non-current assets and liabilities


351



132



413Net cash provided by operating activities


3,949



3,969



4,751Cash flows from investing activities:Investments:Purchases


(2,394
)


(8,343
)


(6,796
)Maturities and sales


3,679



10,320



11,692Capital expenditures


(831
)


(896
)


(747
)Acquisition of business, net of cash received


(2,217
)


(118
)


-Proceeds from sale of building


-



40



-Net cash (used in) provided by investing activities


(1,763
)


1,003



4,149Cash flows from financing activities:Repurchase of common stock


(4,004
)


(3,026
)


(7,249
)Issuance of common stock under employee plans


136



314



1,051Excess tax benefits from stock-based compensation


12



80



-(Repayment) issuance of commercial paper, net


(100
)


100



-Repayments of borrowings


(165
)


(63
)


(81
)Proceeds from borrowings


66



52



55Other


(65
)


(8
)


(28
)Net cash used in financing activities


(4,120
)


(2,551
)


(6,252
)Effect of exchange rate changes on cash and cash equivalents


152



71



(73
)Net (decrease) increase in cash and cash equivalents


(1,782
)


2,492



2,575Cash and cash equivalents at beginning of year


9,546



7,054



4,479Cash and cash equivalents at end of year

$
7,764


$
9,546


$
7,054    49




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##### Table of Contents



DELL
    INC.



CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY

(in
    millions) Common Stock and







AccumulatedCapital in Excess of







OtherPar Value

Treasury Sock



ComprehensiveIssued Shares

Amount

Shares

Amount

Retained Earnings

Loss

Other

TotalBalances at January 28, 2005


2,769

$
8,195



284

$
(10,758
)

$
9,097


$
(78
)

$
(44
)

$
6,412Net income


-


-



-


-



3,602



-



-



3,602Change in net unrealized loss on investments, net of taxes


-


-



-


-



-



(24
)


-



(24
)Foreign currency translation adjustments


-


-



-


-



-



(8
)


-



(8
)Change in net unrealized loss on derivative instruments, net of
    taxes


-


-



-


-



-



9



-



9Total comprehensive income


-


-



-


-



-



-



-



3,579Stock issuances under employee plans, including tax benefits


49


1,308



-


-



-



-



-



1,308Repurchases


-


-



204


(7,249
)


-



-



-



(7,249
)Other


-


-



-


-



-



-



(3
)


(3
)Balances at February 3, 2006


2,818

$
9,503



488

$
(18,007
)

$
12,699


$
(101
)

$
(47
)

$
4,047Net income


-


-



-


-



2,583



-



-



2,583Change in net unrealized loss on investments, net of taxes


-


-



-


-



-



31



-



31Foreign currency translation adjustments


-


-



-


-



-



(11
)


-



(11
)Change in net unrealized gain on derivative instruments, net of
    taxes


-


-



-


-



-



30



-



30Valuation of retained interests in securitized assets, net of
    taxes


-


-



-


-



-



23



-



23Total comprehensive income


-


-



-


-



-



-



-



2,656Stock issuances under employee
    plans(b)


14


196



-


-



-



-



-



196Repurchases


-


-



118


(3,026
)


-



-



-



(3,026
)Stock-based compensation expense under SFAS 123(R)


-


368



-


-



-



-



-



368Tax benefit from employee stock plans


-


56



-


-



-



-



-



56Other and shares issued to subsidiaries


475


(16
)


-


-



-



-



47



31Balances at February 2, 2007


3,307

$
10,107



606

$
(21,033
)

$
15,282


$
(28
)

$
-


$
4,328Net income


-


-



-


-



2,947



-



-



2,947Impact of adoption of SFAS 155


-


-



-


-



29



(23
)






6Change in net unrealized gain on investments, net of taxes


-


-



-


-



-



56



-



56Foreign currency translation adjustments


-


-



-


-



-



17



-



17Change in net unrealized loss on derivative instruments, net of
    taxes


-


-



-


-



-



(38
)


-



(38
)Total comprehensive income


-


-



-


-



-



-



-



2,988Impact of adoption of FIN 48


-


(3
)


-


-



(59
)


-







(62
)Stock issuances under employee
    plans(a)


13


153



-


-



-



-



-



153Repurchases


-


-



179


(4,004
)


-



-



-



(4,004
)Stock-based compensation expense under SFAS 123(R)


-


329



-


-



-



-



-



329Tax benefit from employee stock plans


-


3



-


-



-



-



-



3Balance at February 1, 2008


3,320

$
10,589



785

$
(25,037
)

$
18,199


$
(16
)

$
-


$
3,735     (a)
    
    Includes 1 million shares and
    $17 million related to redeemable common stock. See
    Note 4 of Notes to Consolidated Financial Statements.(b)
    
    Excludes 5 million shares and
    $111 million related to redeemable common stock. See
    Note 4 of Notes to Consolidated Financial Statements.   50




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##### Table of Contents



DELL
    INC.
 NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  NOTE 1 
    DESCRIPTION
    OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES  Description of Business
  Fiscal Year
  Principles of Consolidation
    Use of Estimates
  Cash and Cash Equivalents
  Investments
  Financing Receivables
  Asset Securitization Accounting for Transfers and Servicing of
    Financial Assets and Extinguishment of Liabilities  a
    Replacement of SFAS No. 125
 51




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Allowance for Financing Receivables Losses
  Inventories first-in,
  Property, Plant, and Equipment
  Impairment of Long-Lived Assets Accounting for the Impairment or Disposal of Long-Lived
    Assets,
  Business Combinations and Intangible Assets Including
    Goodwill
   52




---



##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Foreign Currency Translation
    Hedging Instruments
  Accounting for
    Derivative Instruments and Hedging Activities
  Treasury Stock
  Revenue Recognition Revenue Recognition, (EITF) 00-21, Accounting for Revenue Arrangements with Multiple
    Deliverables No. 97-2, Software Revenue Recognition, EITF 01-09, Accounting for Consideration Given by a Vendor to a Customer
    (Including a Reseller of the Vendors Products) (EITF 01-09)
  
    persuasive evidence of an arrangement exists;
    delivery has occurred or services have been rendered;
    Dells fee to its customer is fixed or determinable; and
    collection of the resulting receivable is reasonably assured.   53




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  EITF 01-09.
  EITF 99-19, Reporting Revenue Gross as a Principal versus Net as an
    Agent
        Warranty
 54




---



##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Vendor Rebates EITF 02-16, Accounting by a Customer (Including a Reseller) for Certain
    Consideration Received from a Vendor
  Loss Contingencies
  Shipping Costs
  Selling, General, and Administrative
  Research, Development, and Engineering Costs Accounting for
    Research and Development Costs
  In Process Research and Development
  Website Development Costs
  Income Taxes
 55




---



##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Comprehensive Income Accounting for Certain Hybrid
    Financial Instruments  an amendment of FASB
    Statements No. 133 and 140
  Earnings Per Common Share
  Consolidated Financial Statements
    (as amended)
    Fiscal Year EndedFebruary 1,

February 2,

February 3,2008

2007

2006(in millions, except per share amounts)Numerator:Net income

$
2,947

$
2,583

$
3,602Denominator:Weighted-average shares outstanding:Basic


2,223


2,255


2,403Effect of dilutive options, restricted stock units, restricted
    stock, and other


24


16


46Diluted


2,247


2,271


2,449Earnings per common share:Basic

$
1.33

$
1.15

$
1.50Diluted

$
1.31

$
1.14

$
1.47  56




---



##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Stock-Based Compensation
  Accounting for Stock-Based
    Compensation
  Accounting for Stock
    Issued to Employees
  Recently Issued Accounting Pronouncements Fair
    Value Measurements
  The
    Fair Value Option for Financial Assets and Financial Liabilities
  Business Combinations
 57




---



##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
  NOTE 2 
    FINANCIAL
    INSTRUMENTS  Disclosures
    About Fair Values of Financial Instruments
       58




---



##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Investments
    February 1, 2008

February 2, 2007Fair



Unrealized

Unrealized

Fair



Unrealized

UnrealizedValue

Cost

Gain

(Loss)

Value

Cost

Gain

(Loss)(in millions)Debt securities:U.S. government and agencies

$
1,013

$
991

$
23

$
(1
)

$
1,424

$
1,449

$
-

$
(25
)U.S. corporate


571


569


10


(8
)


1,163


1,170


-


(7
)International corporate


68


67


1


-



156


159


-


(3
)State and municipal governments


5


5


-


-



41


41


-


-Debt securities


1,657


1,632


34


(9
)


2,784


2,819


-


(35
)Equity and other securities


111


111


-


-



115


109


6


-Investments

$
1,768

$
1,743

$
34

$
(9
)

$
2,899

$
2,928

$
6

$
(35
)Short-term

$
208

$
206

$
2

$
-


$
752

$
756

$
-

$
(4
)Long-term


1,560


1,537


32


(9
)


2,147


2,172


6


(31
)Investments

$
1,768

$
1,743

$
34

$
(9
)

$
2,899

$
2,928

$
6

$
(35
)   A-1
   59




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Less Than 12 MonthsUnrealized

12 Months or Greater

TotalFair Value

Loss

Fair Value

Unrealized Loss

Fair Value

Unrealized Loss(in millions)Debt securities:U.S. government and agencies

$
29

$
(1
)

$
59

$
(0
)

$
88

$
(1
)U.S. corporate


38


(8
)


27


(0
)


65


(8
)International corporate


-


-



2


-



2


-State and municipal governments


-


-



-


-



-


-Total debt securities

$
67

$
(9
)

$
88

$
(0
)

$
155

$
(9
)           Fiscal Year EndedFebruary 1,

February 2,

February 3,2008

2007

2006(in millions)Gains

$
17


$
9


$
13Losses


(3
)


(14
)


(15
)Net realized gain (loss)

$
14


$
(5
)

$
(2
)    60




---



##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Foreign
    Currency Instruments
    Cash Flow
    Hedges
     61




---



##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Fiscal Year EndedFebruary 1,

February 2,

February 3,2008

2007

2006(in millions)Aggregate unrealized net gain (loss) at beginning of year

$
13


$
(17
)

$
(26
)Net (losses) gains reclassified to earnings


(392
)


(260
)


225Change in fair value of cash flow hedges


354



290



(216
)Aggregate unrealized net (loss) gain at end of year

$
(25
)

$
13


$
(17
)   Other
    Foreign Currency Derivative Instruments
      February 1, 2008

February 2, 2007Gross



GrossNotional

Net Asset (Liability)

Notional

Net Asset (Liability)(in millions)Cash flow hedges

$
7,772


$
(9
)

$
7,443


$
80Other derivatives


(1,338
)


8



(1,125
)


(5
)$
6,434


$
(1
)

$
6,318


$
75   Commercial
    Paper
     62




---



##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  DFS
    Credit Facilities
    India
    Credit Facilities
    Long-Term
    Debt and Interest Rate Risk Management
       63




---



##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    NOTE 3 
    INCOME
    TAXES    Fiscal Year EndedFebruary 1,

February 2,

February 3,2008

2007

2006(in millions)Current:Domestic

$
901


$
846


$
1,141Foreign


287



178



263Tax repatriation benefit


-



-



(85
)Deferred


(308
)


(262
)


(313
)Provision for income taxes

$
880


$
762


$
1,006      64




---



##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Fiscal Year EndedFebruary 1,

February 2,2008

2007(in millions)Deferred tax assets:Deferred revenue

$
597


$
440Inventory and warranty provisions


46



128Investment impairments and unrealized gains


10



-Provisions for product returns and doubtful accounts


61



51Capital loss


7



13Leasing and financing


302



222Credit carryforwards


3



22Stock-based and deferred compensation


188



145Operating accruals


58



34Other


134



125Deferred tax assets


1,406



1,180Deferred tax liabilities:Property and equipment


(105
)


(96
)Acquired intangibles


(199
)


(16
)Other


(21
)


(39
)Deferred tax liabilities


(325
)


(151
)Valuation allowance


-



(28
)Net deferred tax asset

$
1,081


$
1,001Current portion (included in other current assets)

$
596


$
445Non-current portion (included in other non-current assets)


485



556Net deferred tax asset

$
1,081


$
1,001      65




---



##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Fiscal Year EndedFebruary 1,

February 2,

February 3,2008

2007

2006Effective tax rate:U.S. federal statutory rate


35.0
%


35.0
%


35.0
%Foreign income taxed at different rates


(18.2
)


(17.8
)


(13.9
)Tax repatriation benefit


-



-



(1.9
)Foreign earnings subject to U.S. taxation


4.6



2.9



1.6Imputed intercompany charges


-



2.0



1.2In-process research and development


0.8



-



-Other


0.8



0.7



(0.2
)Effective tax rate


23.0
%


22.8
%


21.8
%     Accounting for
    Uncertainty in Income Taxes  an interpretation of
    FASB Statement No. 109
  Total(in millions)Balance at February 3, 2007

$
1,096Increases related to tax positions of the current year


390Increases related to tax positions of prior years


34Reductions for tax positions of prior years


(13
)Lapse of statue of limitations


(6
)Settlements


(18
)Balance at February 1, 2008

$
1,483      66




---



##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
      NOTE 4 
    CAPITALIZATION  Preferred
    Stock
  Authorized Shares
  Redeemable
    Common Stock
    Common
    Stock
  Authorized Shares
  Share Repurchase Program
  NOTE 5 
    BENEFIT PLANS
  Description
    of the Plans
  Employee Stock Plans
   67




---



##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Stock Option Agreements
  Restricted Stock Awards
  Temporary Suspension of Option Exercises, Vesting of
    Restricted Stock Units, and Employee Stock Purchase Plan
    (ESPP) Purchases Form 10-K
  Form 10-K
 68




---



##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  General
    Information
  Stock Option Activity
  Weighted-Weighted-

AverageNumber

Average

Remaining

Aggregateof

Exercise

Contractual

IntrinsicOptions

Price

Term

Value(in millions)

(per share)

(in years)

(in millions)Options outstanding  February 2, 2007


314


$
32.16Granted


12



24.45Exercised


(7
)


18.99Forfeited


(5
)


26.80Cancelled/expired


(50
)


32.01Options outstanding  February 1, 2008


264


$
32.30Vested and expected to vest (net of estimated
    forfeitures)  February 1,
    2008(a)


259


$
32.43


4.5

$
13Exercisable  February 1, 2008


242


$
32.89


4.2

$
12     Weighted-Weighted-

AverageNumber

Average

Remaining

Aggregateof

Exercise

Contractual

IntrinsicOptions

Price

Term

Value(in millions)

(per share)

(in years)

(in millions)Options outstanding  February 3, 2006


343


$
31.86Granted


10



25.97Exercised


(13
)


14.09Forfeited


(4
)


25.84Cancelled/expired


(22
)


36.43Options outstanding  February 2, 2007


314


$
32.16Vested and expected to vest (net of estimated
    forfeitures)  February 2,
    2007(a)


309


$
32.26


5.2

$
148Exercisable  February 2,
    2007(a)


284


$
32.74


5.1

$
145     (a)
    
    For options vested and expected to
    vest and options exercisable, the aggregate intrinsic value in
    the table above represents the total pre-tax intrinsic value
    (the difference between Dells closing stock price on
    February 1, 2008 and February 2, 2007, and the
    exercise price multiplied by the number of in-the-money options)
    that would have been received by the option holders had the
    holders exercised their options on February 1, 2008 and
    February 2, 2007. The intrinsic value changes based on
    changes in the fair market value of Dells common stock. 69




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DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
     Fiscal Years EndedFebruary 1,

February 2,

February 3,2008

2007

2006(in millions, except per option data)Weighted-average grant date fair value of stock options granted
    per option

$
6.29

$
6.90

$
10.22Total fair value of options
    vested(a)

$
208

$
415

$
2,029Total intrinsic value of options
    exercised(b)

$
64

$
171

$
688     (a)
    
    Includes the Fiscal 2006
    acceleration of vesting of certain unvested and
    out-of-the-money stock options with exercise prices
    equal to or greater than the $30.75 per share previously awarded
    under equity compensation plans.(b)
    
    The total intrinsic value of
    options exercised represents the total pre-tax intrinsic value
    (the difference between the stock price at exercise and the
    exercise price multiplied by the number of options exercised)
    that was received by the option holders who exercised their
    options during the fiscal year.    Non-vested Restricted Stock Activity
  Weighted-Number

Averageof

Grant DateShares

Fair Value(in millions)

(per share)Non-vested restricted stock  February 2, 2007


17


$
28.76Granted


26



22.85Vested


(3
)


28.79Forfeited


(4
)


24.71Non-vested restricted stock  February 1, 2008


36


$
24.90   Weighted-Number

Averageof

Grant DateShares

Fair Value(in millions)

(per share)Non-vested restricted stock  February 3, 2006


2


$
34.66Granted


21



28.36Vested


(1
)


28.84Forfeited


(5
)


29.29Non-vested restricted stock  February 2, 2007


17


$
28.76   70




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Fiscal Years EndedFebruary 1,

February 2,

February 3,2008

2007

2006(in millions, except per share data)Weighted-average grant date fair value of restricted stock
    awards granted

$
22.85

$
28.36

$
39.70Total estimated fair value of restricted stock awards vested

$
103

$
16

$
-     Expense
    Information under SFAS 123(R)
    Fiscal Year EndedFebruary 1,

February 2,2008

2007(in millions)Stock-based compensation expense:Cost of net revenue

$
62


$
59Operating expenses


374



309Stock-based compensation expense before taxes


436



368Income tax benefit


(127
)


(110
)Stock-based compensation expense, net of income taxes

$
309


$
258        71




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Pro Forma
    Information under SFAS 123 for Periods Prior to Fiscal
    2007
      Fiscal Year Ended(in millions, except per share data)

February 3, 2006Net income

$
3,602Deduct: Total stock options and stock purchase plans employee
    compensation determined under fair value method for these
    awards, net of related tax effects


(1,094
)Net income  pro forma

$
2,508Earnings per common share:Basic

$
1.50Basic  pro forma

$
1.04Diluted

$
1.47Diluted  pro forma

$
1.02     Valuation
    Information
   72




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Fiscal Years EndedFebruary 1,

February 2,

February 3,2008

2007

2006Expected term:Stock options

3.5 years

3.6 years

3.8 yearsEmployee stock purchase plan

N/A(a)

3 months

3 monthsRisk-free interest rate (U.S. Government Treasury Note)

4.4%

4.8%

3.9%Volatility

27%

26%

25%Dividends

0%

0%

0%     (a)
    
    No purchase rights were granted
    under the ESPP in Fiscal 2008 due to Dell suspending the ESPP on
    April 4, 2007, and subsequently discontinuing the plan
    effective the first quarter of Fiscal 2009 as a part of an
    overall assessment of its benefits strategy.  401(k) Plan Form 10-K Form S-8,
  Deferred Compensation Plan No. 97-14, Accounting for Deferred Compensation Arrangements Where
    Amounts Earned are Held in a Rabbi Trust and Invested (EITF 97-14),
  Employee Stock Purchase Plan
 73




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    NOTE 6 
    FINANCIAL
    SERVICES  Dell Financial Services L.P.
         74




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Financing
    Receivables
    Fiscal Year EndedFebruary 1,

February 2,2008

2007(in millions)Financing receivables, net:Customer receivables:Revolving loans, gross

$
1,063


$
805Fixed-term leases and loans, gross


654



632Customer receivables, gross


1,717



1,437Customer receivables allowance


(96
)


(39
)Customer receivables, net


1,621



1,398Residual interest


295



296Retained interest


223



159Financing receivables, net

$
2,139


$
1,853Short-term

$
1,732


$
1,530Long-term


407



323Financing receivables, net

$
2,139


$
1,853     
    Customer receivables are presented net of allowance for
    uncollectible accounts. The allowance is based on factors
    including historical experience, past due receivables,
    receivable type, and the risk composition of the receivables.
    The composition and credit quality varies from investment grade
    commercial customers to subprime consumers. Subprime receivables
    comprise less than 20% of the net customer receivable balance at
    February 1, 2008. Financing receivables are charged to the
    allowance at the earlier of when an account is deemed to be
    uncollectible or when an account is 180 days delinquent.
    Recoveries on customer receivables previously charged off as
    uncollectible are recorded to the allowance for uncollectible
    accounts. The following is a description of the components of
    financing receivables.  
    Revolving loans offered under private label credit financing
    programs provide qualified customers with a revolving credit
    line for the purchase of products and services offered by Dell.
    Revolving loans bear interest at a variable annual percentage
    rate that is tied to the prime rate. From time to time, account
    holders may have the opportunity to finance their Dell purchases
    with special programs during which, if the outstanding balance
    is paid in full, no interest is charged. These special programs
    generally range from 3 to 12 months and have an average
    original term of approximately 11 months. At
    February 1, 2008 and February 2, 2007,
    $668 million and $694 million, respectively, were
    receivables under these special programs.
    Leases with business customers generally have fixed terms of two
    to three years. Future maturities of minimum lease payments at
    February 1, 2008, are as follows: 2009: $137 million;
    2010: $74 million; 2011: 75




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  $30 million; and 2012: $4 million. Fixed-term loans
    are also offered to qualified small businesses and primarily
    consist of loans with short-term maturities.    Fiscal Year EndedFebruary 1, 2008


February 2, 2007Dollars

%


Dollars

%(in millions, except percentages)Net credit losses of customer financing receivables

$
40


2.7
%(a)

$
20


1.5
%(a)Customer financing receivables 60 days or more delinquent

$
34


2.1
%(b)

$
10


0.7
%(b)     (a)
    
    Net credit losses as a percentage
    of the outstanding average customer receivables balance over the
    year.(b)
    
    Customer financing receivables
    60 days or more delinquent divided by the ending customer
    financing receivables balance.  
    Dell retains a residual interest in the leased equipment. The
    amount of the residual interest is established at the inception
    of the lease based upon estimates of the value of the equipment
    at the end of the lease term using historical studies, industry
    data, and future
    value-at-risk
    demand valuation methods. On a periodic basis, Dell assesses the
    carrying amount of its recorded residual values for impairment.
    Anticipated declines in specific future residual values that are
    considered to be other-than-temporary are recorded in current
    earnings.
    Retained interests represent the residual beneficial interest
    Dell retains in certain pools of securitized financing
    receivables. Retained interests are stated at the present value
    of the estimated net beneficial cash flows after payment of all
    senior interests. In estimating the value of retained interests,
    Dell makes a variety of financial assumptions, including pool
    credit losses, payment rates, and discount rates. These
    assumptions are supported by both Dells historical
    experience and anticipated trends relative to the particular
    receivable pool. Dell reviews its investments in retained
    interests periodically for impairment, based on estimated fair
    value. In the first quarter of Fiscal 2008, Dell adopted
    SFAS 155, and as a result, all gains and losses are
    recognized in income immediately. 76




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
     Fiscal Year EndedFebruary 1,


February 2,


February 3,2008


2007


2006(in millions)Retained interest:Retained interest at beginning of year

$
159


$
90


$
24New sales


173



167



97Distributions from conduits


(132
)


(142
)


(37
)Net accretion


31



17



4Change in fair value for the period


(8
)


27



2Retained interest at end of year

$
223


$
159


$
90Cash flows during the periods:Proceeds from new securitizations

$
538


$
607


$
446Other cash flows received on retained interests


132



142



36Servicing and administration fees received


15



9



-Repurchases of ineligible contracts


(11
)


(7
)


(4
)Cash flows during the period

$
674


$
751


$
478     Weighted Average Key AssumptionsMonthly Payment


Credit


DiscountRates


Losses


Rates


Life(lifetime)


(annualized)


(months)Time of sale valuation of retained interest


9%



8%



14%



14Valuation of retained interests


8%



10%



16%



12     Fiscal Year EndedFebruary 1,

February 2,2008

2007(in millions)Adverse change of:Expected prepayment speed: 10%

$
(17
)

$
(2
)Expected prepayment speed: 20%

$
(27
)

$
(4
)Expected credit losses: 10%

$
(8
)

$
(7
)Expected credit losses: 20%

$
(15
)

$
(14
)Discount rate: 10%

$
(7
)

$
(4
)Discount rate: 20%

$
(13
)

$
(8
)  77




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Asset
    Securitization
          Fiscal Year EndedFebruary 1, 2008


February 2, 2007Dollars

%


Dollars

%(in millions, except percentages)Net credit losses of securitized financing receivables

$
81


7.0%
(a)

$
31


3.8%
(a)Securitized financing receivables 60 days or more delinquent

$
54


4.4%
(b)

$
33


3.4%
(b)     (a)
    
    Net credit losses as a percentage
    of the average outstanding securitized financing receivables
    over the year.(b)
    
    Securitized financing receivables
    60 days or more delinquent divided by ending securitized
    financing receivables balance. 78




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
   NOTE 7 
    ACQUISITIONS  Business Combinations
    EqualLogic
    Acquisition
      (in millions)Cash, cash equivalents and short-term investments

$
21Other tangible assets


57Liabilities


(243
)Total net liabilities assumed


(165
)Amortizable intangible assets


486Goodwill


969IPR&D


75Total purchase price

$
1,365    79




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Weighted-AverageUseful Life(in millions)

(years)Technology

$
424


6.0Customer relationships


46


7.6Covenants not-to-compete


16


4.2Total amortizable intangible assets

$
486


6.1   ASAP
    Software Acquisition
      (in millions)Cash, cash equivalents and short-term investments

$
2Other tangible assets


175Liabilities


(125
)Total net assets acquired


52Amortizable intangible assets


171Goodwill


130Total purchase price

$
353     Weighted-AverageUseful Life(in millions)

(years)Technology

$
18


4.9Customer relationships


144


10.8Tradenames


8


5.3Covenants not-to-compete


1


1.1Total amortizable intangible assets

$
171


9.9  80




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Other
    Acquisitions in Fiscal 2008
      (in millions)Cash and short-term investments

$
9Other tangible assets


7Liabilities


(14
)Total net assets acquired


2Amortizable intangible assets


78Indefinite lived intangible
    assets(a)


27Total purchased intangibles


105Goodwill


438IPR&D


8Total purchase price

$
553     (a)
    
    Indefinite-lived intangible assets
    represent tradename related to DFS, which is valued at
    approximately $27 million at February 1, 2008.    Weighted-AverageUseful Life(in millions)

(years)Technology

$
42


3.8Customer relationships


30


5.0Covenants not-to-compete


5


3.4Other


1


3.4Total amortizable intangible assets

$
78


4.2     Acquisitions
    in Fiscal 2007
   81




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
      NOTE 8 
    GOODWILL
    AND INTANGIBLE ASSETS  Goodwill
    Fiscal Year EndedFebruary 1,

February 2,2008

2007(in millions)Balance at beginning of the year

$
110

$
-Goodwill acquired during the period


1,538


110Balance at end of the year

$
1,648

$
110     Intangible
    Assets
    Fiscal
    2008:
  AccumulatedAs of February 1, 2008

Gross

Amortization


Net(in millions)Technology

$
491

$
(15
)

$
476Customer relationships


231


(9
)


222Tradenames


39


(6
)


33Covenants not-to-compete


23


(1
)


22Other


1


(1
)


-Amortizable intangible assets

$
785

$
(32
)

$
753Indefinite lived intangible assets


27


-



27Total intangible assets

$
812

$
(32
)

$
780  82




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  Fiscal
    2007:
  AccumulatedAs of February 2, 2007

Gross

Amortization


Net(in millions)Technology

$
7

$
(2
)

$
5Customer relationships


11


(1
)


10Tradenames


31


(2
)


29Covenants not-to-compete


1


-



1Total amortizable intangible assets

$
50

$
(5
)

$
45       Fiscal Years

(in millions)2009

$
1022010


1542011


1352012


1132013


92Thereafter


157Total

$
753   NOTE 9 
    WARRANTY
    LIABILITY AND RELATED DEFERRED SERVICE REVENUE   83




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Fiscal Year EndedFebruary 1,


February 2,


February 3,2008


2007


2006(in millions)Deferred service revenue:Deferred service revenue at beginning of year

$
4,221


$
3,707


$
2,904Revenue deferred for new extended warranty and service contracts
    sold


3,646



3,135



2,830Revenue recognized


(2,607
)


(2,621
)


(2,027
)Deferred service revenue at end of year

$
5,260


$
4,221


$
3,707Current portion

$
2,486


$
2,032


$
1,842Non-current portion


2,774



2,189



1,865Deferred service revenue at end of year

$
5,260


$
4,221


$
3,707   Fiscal Year EndedFebruary 1,


February 2,


February 3,2008


2007


2006(in millions)Warranty liability:Warranty liability at beginning of year

$
958


$
951


$
722Costs accrued for new warranty contracts and changes in
    estimates for pre-existing
    warranties(a)


1,141



1,242



1,391Service obligations honored


(1,170
)


(1,235
)


(1,162
)Warranty liability at end of year

$
929


$
958


$
951Current portion

$
690


$
768


$
714Non-current portion


239



190



237Warranty liability at end of year

$
929


$
958


$
951     (a)
    
    Changes in cost estimates related
    to pre-existing warranties are aggregated with accruals for new
    warranty contracts. Dells warranty liability process does
    not differentiate between estimates made for pre-existing
    warranties and new warranty obligations.  NOTE 10 
    COMMITMENTS
    AND CONTINGENCIES  Lease Commitments
    Restricted Cash
 84




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Legal Matters Accounting for
    Contingencies
  
    Investigations and Related Litigation  In
    August 2005, the SEC initiated an inquiry into certain of
    Dells accounting and financial reporting matters and
    requested that Dell provide certain documents. The SEC expanded
    that inquiry in June 2006 and entered a formal order of
    investigation in October 2006. The SECs requests for
    information were joined by a similar request from the United
    States Attorney for the Southern District of New York
    (SDNY), who subpoenaed documents related to
    Dells financial reporting from and after Fiscal 2002. In
    August 2006, because of potential issues identified in the
    course of responding to the SECs requests for information,
    Dells Audit Committee, on the recommendation of management
    and in consultation with PricewaterhouseCoopers LLP, Dells
    independent registered public accounting firm, initiated an
    independent investigation, which was completed in the third
    quarter of Fiscal 2008. Although the Audit Committee
    investigation has been completed, the investigations being
    conducted by the SEC and the SDNY are ongoing. Dell continues to
    cooperate with the SEC and the SDNY.  In re Dell Securities Litigation In re Dell ERISA Litigation In
    re Dell Derivative Litigation
  
    Copyright Levies Proceedings against the IT
    industry in Germany seek to impose levies on equipment, such as
    personal computers and multifunction devices that facilitate
    making private copies of copyrighted materials. The total levies
    due, if imposed, would be based on the number of products sold
    and the per-product amounts of the levies, which vary. Dell,
    along with other companies and various industry associations are
    opposing these levies and instead are advocating compensation to
    rights holders through digital rights management systems. 85




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    
    Lucent v. Dell In February 2003, Lucent
    Technologies, Inc. filed a lawsuit against Dell in the United
    States District Court for Delaware, and the lawsuit was
    subsequently transferred to the United States District Court for
    the Southern District of California. The lawsuit alleges that
    Dell infringed 12 patents owned by Lucent and seeks monetary
    damages and injunctive relief. In April 2003, Microsoft
    Corporation filed a declaratory judgment action against Lucent
    in the United States District Court for the Southern District of
    California, asserting that Microsoft products do not infringe
    patents held by Lucent, including 10 of the 12 patents at issue
    in the lawsuit involving Dell and Microsoft. These actions were
    consolidated for discovery purposes with a previous suit that
    Lucent filed against Gateway, Inc. In September 2005, the court
    granted a summary judgment of invalidity with respect to one of
    the Lucent patents asserted against Dell. In subsequent
    decisions, the court granted summary judgment of
    non-infringement with respect to five more of the Lucent patents
    asserted against Dell. Fact and expert discovery has closed, and
    the three actions have been consolidated. The asserted patents
    are owned by two parties: Alcatel-Lucent and Multimedia Patent
    Trust (MPT). Prior to trial, Gateway settled with both
    Alcatel-Lucent and MPT. Dell settled with MPT, licensing the
    patents asserted by MPT in the lawsuit, but not with
    Alcatel-Lucent. Dell has satisfactorily resolved its indemnity
    coverage related to Microsoft products it uses or distributes
    and has determined that, in conjunction with the MPT license,
    such indemnity substantially reduces Dells exposure to the
    Alcatel-Lucent lawsuit. Trial as to those Alcatel-Lucent owned
    patents began February 20, 2008, in San Diego federal
    court. Microsoft and Dell are defending these claims at trial,
    which is scheduled to end no later the April 4, 2008.
    Separately, Dell filed a lawsuit against Lucent in the United
    States District Court for the Eastern District of Texas,
    alleging that Lucent infringes two patents owned by Dell and
    seeking monetary damages and injunctive relief. That case went
    to trial ending in a jury verdict on February 1, 2008, that
    the patents were valid but not infringed. Dell is considering
    its options for challenging the verdict and appeal.    Certain Concentrations
   86




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
        NOTE 11 
    SEGMENT
    INFORMATION     87




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Fiscal Year EndedFebruary 1,

February 2,

February 3,Net revenue

2008

2007

2006(in millions)Americas:Business

$
31,144

$
29,311

$
28,365U.S. Consumer


6,224


7,069


7,960Americas


37,368


36,380


36,325EMEA


15,267


13,682


12,887APJ


8,498


7,358


6,576Net revenue

$
61,133

$
57,420

$
55,788   Fiscal Year EndedFebruary 1,


February 2,


February 3,Consolidated operating
    income

2008


2007


2006(in millions)Americas:Business

$
2,549


$
2,388


$
2,956U.S. Consumer


(59
)


135



452Americas


2,490



2,523



3,408EMEA


1,009



583



871APJ


471



332



524Consolidated segment operating income


3,970



3,438



4,803Stock-based compensation
    expense(a)


(436
)


(368
)


-Other product
    charges(b)


-



-



(338
)Selling, general, and administrative
    charges(c)


-



-



(83
)In-process research and
    development(d)


(83
)


-



-Amortization of intangible
    assets(d)


(11
)


-



-Consolidated operating income

$
3,440


$
3,070


$
4,382     (a)
    
    Stock compensation of
    $17 million for Fiscal 2006 is included in the total
    consolidated segment operating income. Stock-based compensation
    expense for Fiscal 2008 includes $107 million of cash
    expense for expired stock options. See Note 5 of Notes to
    Consolidated Financial Statements for additional information.(b)
    
    Other product charges include
    $307 million for estimated warranty costs of servicing or
    replacing certain
    OptiPlextmsystems that include a vendor part that failed to perform to
    Dells specifications, as well as additional charges for
    product rationalizations and workforce realignment.(c)
    
    Charges relate to workforce
    realignment expenses, primarily for severance and related costs
    of $50 million, cost of operating leases on office space no
    longer utilized of $4 million, and a write-off of goodwill
    of $29 million.(d)
    
    Prior to the fourth quarter of
    Fiscal 2008, amortization of intangibles and IPR&D expenses
    of $16 million and $5 million are included in total
    consolidated segment operating income in Fiscal 2008 and 2007,
    respectively. 88




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
     Fiscal Year EndedFebruary 1,

February 2,

February 3,Depreciation and amortization
    expense:

2008

2007

2006(in millions)Americas:Business

$
254

$
211

$
156U.S. Consumer


108


62


53Americas


362


273


209EMEA


140


114


106APJ


97


84


79Depreciation and amortization expense

$
599

$
471

$
394   Fiscal Year EndedFebruary 1,

February 2,

February 3,Capital expenditures:

2008

2007

2006(in millions)Americas:Business

$
332

$
489

$
408U.S. Consumer


151


141


140Americas


483


630


548EMEA


200


144


91APJ


148


122


108Capital expenditures

$
831

$
896

$
747   Fiscal Year EndedFebruary 1,

February 2,Assets:

2008

2007(in millions)Corporate

$
15,336

$
16,694Americas


6,524


4,981EMEA


3,597


2,401APJ


2,104


1,559Total assets

$
27,561

$
25,635  89




---



##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Fiscal Year EndedFebruary 1,

February 2,

February 3,Net revenue:

2008

2007

2006(in millions)United States

$
32,687

$
32,361

$
32,949Foreign countries


28,446


25,059


22,839Net revenue

$
61,133

$
57,420

$
55,788   Fiscal Year EndedFebruary 1,

February 2,

February 3,Long-lived assets:

2008

2007

2006(in millions)United States

$
1,622

$
1,538

$
1,440Foreign countries


1,046


871


553Long-lived assets

$
2,668

$
2,409

$
1,993       Fiscal Year EndedFebruary 1,

February 2,

February 3,2008

2007

2006(in millions)Net revenue:Desktop PCs

$
19,573

$
19,815

$
21,568Mobility


17,423


15,480


14,372Software and peripherals


9,908


9,001


8,329Servers and networking


6,474


5,805


5,449Enhanced services


5,320


5,063


4,207Storage


2,435


2,256


1,863Net revenue

$
61,133

$
57,420

$
55,788  90




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  NOTE 12 
    SUPPLEMENTAL
    CONSOLIDATED FINANCIAL INFORMATION  Fiscal Year EndedSupplemental Consolidated
    Statements of

February 1,


February 2,Financial Position
    Information:

2008


2007(in millions)Accounts receivable:Gross accounts receivable

$
6,064


$
4,748Allowance for doubtful accounts


(103
)


(126
)Accounts receivable

$
5,961


$
4,622Inventories:Production materials

$
744


$
353Work-in-process


160



106Finished goods


276



201Inventories

$
1,180


$
660Property, plant, and equipment:Computer equipment

$
1,968


$
1,596Land and buildings


1,635



1,480Machinery and other equipment


1,011



973Total property, plant, and equipment


4,614



4,049Accumulated depreciation and amortization


(1,946
)


(1,640
)Property, plant, and equipment

$
2,668


$
2,409Accrued and other current liabilities:Warranty liability


690



768Income taxes


99



1,141Compensation


1,131



861Other


2,403



2,371Accrued and other current liabilities

$
4,323


$
5,141Other non-current liabilities:Warranty liability


239



190Tax liability


1,463



-Other


368



457Other non-current liabilities

$
2,070


$
647  91




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
    Fiscal Year EndedSupplemental Consolidated
    Statements of

February 1,


February 2,


February 3,Income Information:

2008


2007


2006(in millions)Investment and other income, net:Investment income, primarily interest

$
496


$
368


$
308Gains (losses) on investments, net


14



(5
)


(2
)Interest expense


(45
)


(45
)


(29
)CIT minority interest


(29
)


(23
)


(27
)Foreign exchange


(30
)


(37
)


3Gain on sale of building


-



36



-Other


(19
)


(19
)


(27
)Investment and other income, net

$
387


$
275


$
226   Fiscal Year EndedSupplemental Consolidated
    Statements of

February 1,


February 2,


February 3,Cash Flows
    Information:

2008


2007


2006(in millions)Changes in operating working capital accounts:Accounts receivable, net

$
(990
)

$
(542
)

$
(602
)Short-term financing receivables, net


(310
)


(165
)


(378
)Inventories


(498
)


(72
)


(72
)Accounts payable


837



505



1,018Accrued and other liabilities


787



955



853Other, net


(345
)


(284
)


(872
)Changes in operating working capital accounts

$
(519
)

$
397


$
(53
)Income taxes paid

$
767


$
652


$
996Interest paid

$
54


$
57


$
39  92




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  NOTE 13 
    UNAUDITED
    QUARTERLY RESULTS AND STOCK PRICES  Unaudited Quarterly Results
  Fiscal Year 2008First

Second

Third

FourthQuarter

Quarter

Quarter

Quarter(in millions except per share data)Net revenue

$
14,722

$
14,776

$
15,646

$
15,989Gross margin

$
2,838

$
2,951

$
2,888

$
2,994Net income

$
756

$
746

$
766

$
679Earnings per common share:Basic

$
0.34

$
0.33

$
0.34

$
0.31Diluted

$
0.34

$
0.33

$
0.34

$
0.31Weighted-average shares outstanding:Basic


2,234


2,237


2,236


2,184Diluted


2,254


2,264


2,266


2,201Stock sales price per share:High

$
25.95

$
29.61

$
30.77

$
30.37Low

$
21.61

$
24.64

$
24.96

$
18.87   Fiscal Year 2007First

Second

Third

FourthQuarter

Quarter

Quarter

Quarter(in millions except per share data)Net revenue

$
14,320

$
14,211

$
14,419

$
14,470Gross margin

$
2,508

$
2,138

$
2,391

$
2,479Net income

$
776

$
480

$
601

$
726Earnings per common share:Basic

$
0.34

$
0.21

$
0.27

$
0.33Diluted

$
0.33

$
0.21

$
0.27

$
0.32Weighted-average shares outstanding:Basic


2,297


2,264


2,229


2,230Diluted


2,318


2,278


2,238


2,251Stock sales price per share:High

$
32.00

$
26.43

$
24.62

$
27.62Low

$
25.32

$
19.91

$
20.99

$
23.52  93




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##### Table of Contents



DELL
    INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  NOTE 14 
    SUBSEQUENT
    EVENTS  e-mail
     94




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##### Table of Contents



ITEM 9 
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE   ITEM 9A 
    CONTROLS AND PROCEDURES  Rule 13a-14
  Background
  Form 10-K
    Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
    Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f)
 95




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##### Table of Contents



Internal
    Control  Integrated Framework
  Changes
    in Internal Control Over Financial Reporting
  Form 10-K
  
    Our senior management renewed its commitment to achieving and
    maintaining a strong control environment, high ethical
    standards, and financial reporting integrity. This commitment
    has been communicated to and reinforced with every Dell employee
    and to external stakeholders. In this regard:  
    We developed, adopted, and communicated an accounting code of
    conduct to serve as a set of guiding principles emphasizing our
    commitment to accounting and financial reporting integrity, as
    well as transparency and robust and complete communications
    with, and disclosures to, internal and external auditors.
    We reemphasized and invigorated our communications to all
    employees regarding the availability of our Ethics Hotline, as
    well as other reporting avenues or forums, through which
    employees at all levels can submit information or express
    concerns regarding accounting, financial reporting, or other
    irregularities they have become aware of or have observed.
    We effected various personnel actions in our accounting and
    financial reporting functions. These actions included
    terminations, reassignments, reprimands, increased supervision,
    training, and imposition of financial penalties in the form of
    compensation adjustments.
    We implemented personnel resource plans, as well as training and
    retention programs, designed to ensure that we have sufficient
    personnel with knowledge, experience, and training in the
    application of GAAP commensurate with our financial reporting
    requirements. We developed and implemented comprehensive
    training programs for finance personnel globally covering
    fundamental accounting and financial reporting matters,
    including accounting policies, financial reporting requirements,
    income statement classification, revenue recognition, vendor
    funding, accounting for reserves and accrued liabilities, and
    account reconciliation and documentation requirements. As of
    March 31, 2008, we have delivered that training to a
    majority of the accounting organization worldwide.  
    We reorganized the Finance Department, segregating accounting
    and financial reporting responsibility from other finance
    functions, with a renewed commitment to accounting and financial
    reporting integrity. We appointed a new Chief Accounting Officer
    in May 2007 and strengthened that position, making it directly
    responsible for all accounting and financial reporting functions
    worldwide. Under the supervision and oversight of the Chief
    Accounting Officer: 96




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##### Table of Contents




    We centralized the development, oversight, and monitoring of
    accounting policies, and standardized processes in critical
    accounting areas.
    We implemented new, and refreshed and reemphasized existing,
    global accounting and finance policies regarding the proper
    maintenance of accrued liability and other balance sheet reserve
    accounts.
    We created a revenue recognition accounting resource function to
    coordinate complex revenue recognition matters and to provide
    global oversight and guidance on the design of controls and
    processes to enhance and standardize revenue recognition
    accounting procedures.
    We developed, implemented, and communicated processes and
    controls to ensure that appropriate account reconciliations are
    performed, documented, and reviewed as part of standardized
    procedures.
    We improved the processes and procedures around the completion
    and review of quarterly management representation letters, in
    which our various business and finance leaders make full and
    complete representations concerning, and assume accountability
    for, the accuracy and integrity of their submitted financial
    results.  
    We extended the time between the end of a financial reporting
    period and the public release of financial and operating data
    with respect to that period, giving our accounting organization
    more time to appropriately process the close of the accounting
    records and analyze the reported results prior to public
    announcement.
    The internal audit organization and the Chief Accounting Officer
    enhanced their review and monitoring of key accounting
    processes, including journal entries and supporting
    documentation, revenue recognition processes, account
    reconciliations, and management representation letter controls
    and processes.        Inherent
    Limitations over Internal Controls
   97




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##### Table of Contents




    Judgments in decision-making can be faulty, and control and
    process breakdowns can occur because of simple errors or
    mistakes.
    Controls can be circumvented by individuals, acting alone or in
    collusion with each other, or by management override.
    The design of any system of controls is based in part on certain
    assumptions about the likelihood of future events, and there can
    be no assurance that any design will succeed in achieving its
    stated goals under all potential future conditions.


    Over time, controls may become inadequate because of changes in
    conditions or deterioration in the degree of compliance with
    associated policies or procedures.
    The design of a control system must reflect the fact that
    resources are constrained, and the benefits of controls must be
    considered relative to their costs.    ITEM 9B 
    OTHER
    INFORMATION   PART III  Form 10-K
 98




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##### Table of Contents



PART IV  ITEM 15 
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES  Financial
    Statements
    PageFinancial Statements:Report of Independent Registered Public Accounting Firm


46Consolidated Statements of Financial Position at
    February 1, 2008 and February 2, 2007


47Consolidated Statements of Income for the fiscal years ended
    February 1, 2008, February 2, 2007, and
    February 3, 2006


48Consolidated Statements of Cash Flows for the fiscal years ended
    February 1, 2008, February 2, 2007, and
    February 3, 2006


49Consolidated Statements of Stockholders Equity for the
    fiscal years ended February 1, 2008, February 2, 2007
    and February 3, 2006


50Notes to Consolidated Financial Statements


51    99




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##### Table of Contents



Financial
    Statement Schedule  Form 10-K
 SCHEDULE II



DELL
    INC.



VALUATION
    AND QUALIFYING ACCOUNTS  Balance at


Charged to


Write-Offs


BalanceFiscal




Beginning


Income


Charged to


at End ofYear


Description

of Period


Statement


Allowance


PeriodTrade Receivables:2008


Allowance for doubtful accounts


$ 126



$ 82



$ 105



$ 1032007


Allowance for doubtful accounts


$ 96



$ 107



$ 77



$ 1262006


Allowance for doubtful accounts


$ 79



$ 101



$ 84



$ 96Customer Financing Receivables:2008


Allowance for doubtful accounts


$ 39



$ 105



$ 48



$ 962007


Allowance for doubtful accounts


$ 22



$ 40



$ 23



$ 392006


Allowance for doubtful accounts


$ 1



$ 22



$ 1



$ 22Trade Receivables:2008


Allowance for customer returns


$ 53



$ 475



$ 437



$ 912007


Allowance for customer returns


$ 57



$ 387



$ 391



$ 532006


Allowance for customer returns


$ 45



$ 384



$ 372



$ 57  100




---



##### Table of Contents



SIGNATURES      By:
    /s/  MICHAEL
    S. DELL   Chairman and Chief Executive Officer
   101




---



##### Table of Contents



Name

Title

Date/s/  MICHAEL
    S. DELLMichael
    S. Dell

Chairman and Chief Executive Officer (principal executive
    officer)

March 31, 2008/s/  DONALD
    J. CARTYDonald
    J. Carty

Vice Chairman and Chief Financial Officer

March 31, 2008/s/  WILLIAM
    H. GRAY, IIIWilliam
    H. Gray, III

Director

March 31, 2008/s/  SALLIE
    L. KRAWCHECKSallie
    L. Krawcheck

Director

March 31, 2008/s/  ALAN
    G. LAFLEYAlan
    G. Lafley

Director

March 31, 2008/s/  JUDY
    C. LEWENTJudy
    C. Lewent

Director

March 31, 2008/s/  THOMAS
    W. LUCE IIIThomas
    W. Luce III

Director

March 31, 2008/s/  KLAUS
    S. LUFTKlaus
    S. Luft

Director

March 31, 2008/s/  ALEX
    J. MANDLAlex
    J. Mandl

Director

March 31, 2008/s/  MICHAEL
    A. MILESMichael
    A. Miles

Director

March 31, 2008/s/  SAMUEL
    A. NUNN, Jr.Samuel
    A. Nunn, Jr.

Director

March 31, 2008/s/  THOMAS
    W. SWEETThomas
    W. Sweet

Vice President, Corporate Finance
    (principal accounting officer)

March 31, 2008  102




---



##### Table of Contents



Exhibits  ExhibitNo.



Description of Exhibit2
.1



Agreement and Plan of Merger, dated November 4, 2007, by
    and among Dell International Incorporated, DII 
    Elephant Inc. and EqualLogic, Inc. (incorporated by reference to
    Exhibit 2.1 of Dells Current Report on
    Form 8-K
    filed on November 8, 2007, Commission File
    No. 0-17017)3
.1



Restated Certificate of Incorporation, filed February 1,
    2006 (incorporated by reference to Exhibit 3.3 of
    Dells Current Report on
    Form 8-K
    filed on February 2, 2006, Commission File
    No. 0-17017)3
.2



Restated Bylaws, as amended and effective March 8, 2007
    (incorporated by reference to Exhibit 3.1 of Dells
    Current Report on
    Form 8-K
    filed on March 13, 2007, Commission File
    No. 0-17017)4
.1



Indenture, dated as of April 27, 1998, between Dell
    Computer Corporation and Chase Bank of Texas, National
    Association (incorporated by reference to Exhibit 99.2 of
    Dells Current Report on
    Form 8-K
    filed April 28, 1998, Commission File
    No. 0-17017)4
.2



Officers Certificate pursuant to Section 301 of the
    Indenture establishing the terms of Dells
    6.55% Senior Notes Due 2008 (incorporated by reference to
    Exhibit 99.3 of Dells Current Report on
    Form 8-K
    filed April 28, 1998, Commission File
    No. 0-17017)4
.3



Officers Certificate pursuant to Section 301 of the
    Indenture establishing the terms of Dells
    7.10% Senior Debentures Due 2028 (incorporated by reference
    to Exhibit 99.4 of Dells Current Report on
    Form 8-K
    filed April 28, 1998, Commission File
    No. 0-17017)4
.4



Form of Dells 6.55% Senior Notes Due 2008
    (incorporated by reference to Exhibit 99.5 of Dells
    Current Report on
    Form 8-K
    filed April 28, 1998, Commission File
    No. 0-17017)4
.5



Form of Dells 7.10% Senior Debentures Due 2028
    (incorporated by reference to Exhibit 99.6 of Dells
    Current Report on
    Form 8-K
    filed April 28, 1998, Commission File
    No. 0-17017)10
.1*



Amended and Restated Dell Computer Corporation 1994 Incentive
    Plan (incorporated by reference to Exhibit 99 of
    Dells Registration Statement on
    Form S-8,
    filed October 31, 2000, Registration
    No. 333-49014)10
.2*



Amended and Restated Dell Computer Corporation 1998 Broad Based
    Stock Option Plan (incorporated by reference to Exhibit 99
    of Dells Registration Statement on
    Form S-8,
    filed October 31, 2000, Registration
    No. 333-49016)10
.3*



Dell Computer Corporation 2002 Long-Term Incentive Plan
    (incorporated by reference to Exhibit 10.1 of Dells
    Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended August 2, 2002, Commission
    File
    No. 0-17017)10
.4*



Dell Inc. Amended and Restated 2002 Long-Term Incentive Plan
    (incorporated by reference to Appendix A of Dells
    2007 proxy statement filed on October 31, 2007, Commission
    File
    No. 0-17017)10
.5*



Amended and Restated Dell Inc. 401(k) Plan, adopted effective as
    of January 1, 200710
.6*



Amended and Restated Dell Computer Corporation Deferred
    Compensation Plan (incorporated by reference to
    Exhibit 10.6 to Dells Annual Report on
    Form 10-K
    for the fiscal year ended January 30, 2004, Commission File
    No. 0-17017)10
.7*



Executive Incentive Bonus Plan, adopted July 18, 2003
    (incorporated by reference to Exhibit 10.1 of Dells
    Quarterly Report on
    Form 10-Q
    for the fiscal quarter ended August 1, 2003, Commission
    File
    No. 0-17017)10
.8*



Form of Indemnification Agreement between Dell and each
    Non-Employee Director of Dell (incorporated by reference to
    Exhibit 10.11 to Dells Annual Report on
    Form 10-K
    for the fiscal year ended January 31, 2003, Commission File
    No. 0-17017)10
.9*



Form of Performance Based Stock Unit Agreement for employees
    under the 2002 Long-Term Incentive Plan (incorporated by
    reference to Exhibit 99.2 of Dells Current Report on
    Form 8-K
    filed March 14, 2006, Commission File
    No. 0-17017)10
.10*



Form of Restricted Stock Agreement for Non-Employee Directors
    under the 2002 Long-Term Incentive Plan (incorporated by
    reference to Exhibit 99.1 of Dells Current Report on
    Form 8-K
    filed July 27, 2006, Commission File
    No. 0-17017) 103




---



##### Table of Contents



ExhibitNo.



Description of Exhibit10
.11*



Form of Restricted Stock Unit Agreement for Non-Employee
    Directors under the 2002 Long-Term Incentive Plan (incorporated
    by reference to Exhibit 99.2 of Dells Current Report
    on
    Form 8-K
    filed July 27, 2006, Commission File
    No. 0-17017)10
.12



Form of Nonstatutory Stock Option Agreement for Non-Employee
    Directors under the 2002 Long-Term Incentive Plan (incorporated
    by reference to Exhibit 99.3 of Dells Current Report
    on
    Form 8-K
    filed July 27, 2006, Commission File
    No. 0-17017)10
.13*



Form of Nonstatutory Stock Option Agreement for grant to Donald
    J. Carty under the 2002 Long-Term Incentive Plan (incorporated
    by reference to Exhibit 99.1 of Dells Current Report
    on
    Form 8-K
    filed December 20, 2006, Commission File
    No. 0-17017)10
.14*



Form of Stock Unit Agreement for grant to Donald J. Carty under
    the 2002 Long-Term Incentive Plan (incorporated by reference to
    Exhibit 99.2 of Dells Current Report on
    Form 8-K
    filed December 20, 2006, Commission File
    No. 0-17017)10
.15*



Form of Restricted Stock Unit Agreement for Non-Employee
    Directors under the Amended and Restated 2002 Long-Term
    Incentive Plan (incorporated by reference to Exhibit 10.10
    of Dells Quarterly Report on
    Form 10-Q
    filed October 30, 2007, Commission File
    No. 0-17017)10
.16*



Form of Nonstatutory Stock Option Agreement for Non-Employee
    Directors under the Amended and Restated 2002 Long-Term
    Incentive Plan (incorporated by reference to Exhibit 10.11
    of Dells Quarterly Report on
    Form 10-Q
    filed October 30, 2007, Commission File
    No. 0-17017)10
.17*



Form of Performance Based Stock Unit Agreement for Executive
    Officers under the Amended and Restated 2002 Long-Term Incentive
    Plan10
.18*



Form of Nonstatutory Stock Option Agreement for Executive
    Officers under the Amended and Restated 2002 Long-Term Incentive
    Plan10
.19*



Form of Restricted Stock Unit Agreement for Executive Officers
    under the Amended and Restated 2002 Long-Term Incentive Plan10
.20*



Form of Protection of Sensitive Information, Noncompetition and
    Nonsolicitation Agreement for Executive Officers (incorporated
    by reference to Exhibit 10.1 of Dells Current Report
    on
    Form 8-K
    filed on July 16, 2007, Commission file
    No. 0-17017)10
.21*



Form of Release Agreement between Dell and Current and Former
    Executive Officers with respect to Expired Stock Options
    (incorporated by reference to Exhibit 10.1 of Dells
    Current Report on
    Form 8-K
    filed July 16, 2007, Commission file
    No. 0-17017)10
.22*



Protection of Sensitive Information, Noncompetition and
    Nonsolicitation Agreement between Kevin B. Rollins and Dell Inc.
    (incorporated by reference to Exhibit 99.2 of Dells
    Current Report on
    Form 8-K
    filed February 20, 2007, Commission File
    No. 0-17017)10
.23*



Letter Agreement regarding Severance Benefits between Michael R.
    Cannon and Dell Inc. (incorporated by reference to
    Exhibit 99.1 of Dells Current Report on
    Form 8-K
    filed February 21, 2007, Commission File
    No. 0-17017)10
.24*



Letter Agreement regarding Severance Benefits between Ronald G.
    Garriques and Dell Inc. (incorporated by reference to
    Exhibit 99.2 of Dells Current Report on
    Form 8-K
    filed February 21, 2007, Commission File
    No. 0-17017)10
.25*



Form of Protection of Sensitive Information, Noncompetition and
    Nonsolicitation Agreement (incorporated by reference to
    Exhibit 99.3 of Dells Current Report on
    Form 8-K
    filed February 21, 2007, Commission File
    No. 0-17017)10
.26*



Form of Protection of Sensitive Information, Noncompetition and
    Nonsolicitation Agreement for Executive Officers (incorporated
    by reference to Exhibit 10.1 of Dells Current Report
    on
    Form 8-K
    filed on September 12, 2007, Commission file
    No. 0-17017)10
.27*



Separation Agreement and Release between Kevin B. Rollins and
    Dell Inc. (incorporated by reference to Exhibit 99.1 of
    Dells Current Report on
    Form 8-K
    filed February 20, 2007, Commission File
    No. 0-17017)21




Subsidiaries of Dell23




Consent of PricewaterhouseCoopers LLP 104




---



##### Table of Contents



ExhibitNo.



Description of Exhibit31
.1



Certification of Michael S. Dell, Chairman and Chief Executive
    Officer, pursuant to
    Rule 13a-14(a)
    under the Securities Exchange Act of 1934, as adopted pursuant
    to Section 302 of the Sarbanes-Oxley Act of 200231
.2



Certification of Donald J. Carty, Vice Chairman and Chief
    Financial Officer, pursuant to
    Rule 13a-14(a)
    under the Securities Exchange Act of 1934, as adopted pursuant
    to Section 302 of the Sarbanes-Oxley Act of 200232
.1



Certifications of Michael S. Dell, Chairman and Chief Executive
    Officer, and Donald J. Carty, Vice Chairman and Chief Financial
    Officer, pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 200299
.1



Item 4  Submission of Matters to a Vote of
    Security Holders from page 34 of Dells Quarterly
    Report on
    Form 10-Q
    filed December 10, 2007, Commission File
    No. 0-17017     *
    
    Identifies Exhibit that consists of or includes a management
    contract or compensatory plan or arrangement.
    
    Filed herewith.
    
    Furnished herewith. 105