##### Table of Contents



UNITED STATES
    SECURITIES AND EXCHANGE COMMISSION
  Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended:
    February 2, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period from
    
    to  Commission file
    number: 0-17017
  Dell
    Inc .
   Delaware

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

(I.R.S. Employer
    Identification No.)   One Dell Way, Round Rock, Texas 78682
   (512) 338-4400
  Securities registered pursuant to Section 12(b) of the
    Act:
   Securities registered pursuant to Section 12(g) of the
    Act:
  þ o
  o þ
  o þ
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 Large accelerated
    filer þ
    Accelerated
    filer o
    Non-accelerated
    filer o  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
    October 19, 2007


2,235,866,516




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##### 



Table of
    Contents
  PagePART IItem 1.


Business


1Item 1A.


Risk Factors


9Item 1B.


Unresolved Staff Comments


13Item 2.


Properties


13Item 3.


Legal Proceedings


14Item 4.


Submission of Matters to a Vote of Security
    Holders


16PART IIItem 5.


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


17Item 6.


Selected Financial Data


20Item 7.


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


36Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


56Item 8.


Financial Statements and Supplementary Data


57Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


111Item 9A.


Controls and Procedures


111Item 9B.


Other Information


116PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


116Item 11.


Executive Compensation


123Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


144Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


146Item 14.


Principal Accountant Fees and Services


148PART IVItem 15.


Exhibits, Financial Statement Schedules


150Exhibit Index





152Signatures





154Exhibits


(attached to the Report on
    Form 10-K)Amendment No. 3 to Amended and Restated 401(k) PlanSubsidiariesConsent of PricewaterhouseCoopers LLPCertification of Chairman and CEO Pursuant to Section 302Certification of Vice Chairman and CFO Pursuant to Section 906Certifications Pursuant to Section 906   i




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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, September 2007. 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.
    Special Note
  PART I
  ITEM 1  BUSINESS
  General
     1




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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.
    We offer customers choice. Customers can purchase
    systems and services from Dell via telephone, kiosks, and 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 have recently launched
    a retail initiative and plan to expand that 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 every five days on average, thereby reducing inventory
    levels, and rapidly bring the latest technology to our
    customers. The market and our competition has evolved, and we
    are now exploring the utilization of original design
    manufacturers 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. 2




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Product
    Development
    Products and
    Services
    
    Desktop PCs Our customers can select from
    five lines of desktop computer systems. The
    OptiPlextm
    line is designed to help business, government, and institutional
    customers manage their total cost of ownership by offering
    stability, security, and managed product transitions. The
    Dimensiontm
    line is designed for small businesses and home users requiring
    the latest features for their productivity and entertainment
    needs. The
    XPStm
    and Alienware lines are targeted at customers who require the
    highest performance gaming or entertainment experience
    available. In July 2007, we introduced the
    Vostrotm
    line, which is designed to provide technology and services to
    suit the specific needs of small businesses.  Dell
    Precisiontm
    and Alienware
    MJ-12®
    workstations are intended for professional users who demand
    exceptional performance from hardware platforms optimized and
    certified to run sophisticated applications, such as
    three-dimensional computer-aided design, digital content
    creation, geographic information systems, computer animation,
    software development, computer-aided engineering, game
    development, and financial analysis.  
    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.  Our
    PowerConnecttm
    switches connect computers and servers in small-to-medium-sized
    networks.
    PowerConnecttm
    products offer customers enterprise-class features and
    reliability at a low cost.  
    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 | EMC and Dell
    PowerVaulttm
    storage systems helps organizations optimize storage for diverse
    environments with varied requirements.
    Mobility The
    XPStm
    and Alienware lines of notebook computers are targeted at
    customers who require the highest performance gaming or
    entertainment experience available. In Fiscal 2007, we
    introduced the XPS M2010, an innovative mobile platform
    featuring a
    20-inch high
    definition display that received awards for its unique design.
    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
    Inspirontm
    line is targeted at 3




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consumers desiring the latest technology in a range of form
    factors to meet different usage needs. The new
    Vostrotm
    line, introduced in July 2007, is designed to customize
    technology, services, and expertise to suit the specific needs
    of small businesses.  
    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, notebook 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.-
    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. Our printer product line is focused on
    making printing easier to buy, own, and use. 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 2007, we continued our leadership position
    in the flat panel monitor category with the introductions of new
    Dell 22-, 24-, 27-, and
    30-inch wide
    screens. The Dell projector line was expanded with the
    introductions of the 1200MP, 1800MP, and 2400MP projectors. We
    are no longer developing Dell-branded TVs and will
    continue to sell our current models through the end of Fiscal
    2008. We have, however, introduced several third-party LCD TV
    offerings this year.  
    Enhanced Services  Leveraging our experience
    and expertise in lowering the cost of hardware, providing
    industry leading value, and simplifying the ability of customers
    to acquire and maintain systems, our global services business
    offers a full range of flexible, tailored solutions that help
    customers lower the cost of their services environment and
    maximize system performance, efficiency, and return on
    investment.  -
    Infrastructure Consulting Services. We provide a
    customer-focused approach to designing and implementing
    non-proprietary standards-based infrastructures to enhance
    performance, scalability, and efficiency while helping to
    minimize expenses and disruption to business operations.-
    Deployment Services. Our deployment services can
    simplify and accelerate the deployment and utilization of new
    systems in customers information technology environments.
    We offer scalable processes and technology to get our systems up
    and running quickly.-
    Asset Recovery and Recycling Services. We offer
    capabilities for secure and environmentally safe recovery and
    disposal of owned and leased information technology equipment.
    Various options, including resale, recycling, donation,
    redeployment, employee purchase, and lease return, help
    customers retain value while avoiding regulatory fines and
    storage costs.-
    Training Services. We help customers develop the
    skills that increase productivity with a comprehensive and
    flexible suite of training services. 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. The courses are designed for
    all skill levels and range from personal finance to business
    productivity to IT certification.-
    Enterprise Support Services. We help customers
    obtain maximum performance and availability from their server
    and storage systems. We operate Global Command Centers in the
    U.S., Ireland, China, Japan, and Malaysia to provide rapid,
    around-the-clock support for critical enterprise systems. Our
    enterprise support services include warranty services and
    provide proactive maintenance to help prevent problems as well
    as rapid response and resolution of problems when they do occur. 4




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-
    Client 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 help keep desktop and notebook PCs up and running
    so customers remain productive.-
    Managed Lifecycle Services. We offer a full suite of
    services for companies who need to outsource all or part of
    their IT management. From planning to deployment to ongoing
    technical support, we can deliver the services our customers
    need when they need them. Our Managed Lifecycle 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
           5




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tm tm
  Competition
        Manufacturing and
    Materials
         6




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Patents,
    Trademarks, and Licenses
          Employees
     7




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Government
    Regulation and Environment
    Sustainability
    Backlog
    Geographic Areas
    of Operations
   8




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non-U.S. revenue, non-U.S. production
    Trademarks and
    Service Marks
    Available
    Information
  Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330.
  ITEM 1A 
    RISK
    FACTORS    
    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 decrease our net revenue and
    profitability.
    Failure to maintain 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. Our 9




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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. We cannot guarantee that we will be able to
    maintain our cost advantage if our competitors improve their
    cost structure or business model, if we are not able to
    negotiate favorable pricing or rebate arrangements with our
    vendors, or if our competitors take other actions that affect
    our current competitive advantage. An inability to maintain 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 44% of our consolidated net revenue in Fiscal
    2007. Our future growth rates and success are dependent on
    continued growth in international markets. 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 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 cause us to lose customers and revenue and could require
    us to incur significant expense to eliminate these problems and
    address related 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 availability could unfavorably
    affect our performance. Our direct business model, as
    well as 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 inventory, a disruption in component
    availability could harm our financial performance and our
    ability to satisfy customer needs.
    Our reliance on suppliers 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). 10




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
    We could experience manufacturing interruptions, delays, or
    inefficiencies if we are unable to timely and reliably procure
    components 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 material or component is delayed or curtailed, we
    may not be able to ship the related product in desired
    quantities and in a timely manner. 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 will increasingly rely
    upon access to the capital markets to fund financing for our
    customers and to provide sources of liquidity in the
    U.S. for general corporate purposes, including funding DFS
    growth. If we are unable to access the capital markets, we may
    not be able to fully fund customer financing opportunities or
    planned share repurchases without repatriation of foreign cash
    balances. 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.
    Although we believe that we will be able to maintain sufficient
    access to the capital markets, adverse changes in the economy,
    deterioration in our business performance, or changes in our
    credit ratings could limit our access to these markets.
    We face risks relating to our ineffective internal
    controls. As a result of our review of issues
    identified during the recently completed independent Audit
    Committee investigation into certain accounting and financial
    reporting matters, as well as our internal review, management
    has identified several deficiencies in our control environment
    that constitute material weaknesses and, consequently, has
    concluded that our internal control over financial reporting was
    not effective at February 2, 2007. In addition, management
    has concluded, based primarily on the identification of the
    material weaknesses, that our disclosure controls and procedures
    were not effective at February 2, 2007. See
    Part II  Item 9A  Controls
    and Procedures. If we are unable to successfully remediate
    these material weaknesses in a timely manner, investors may lose
    confidence in our reported financial information, which 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.
    Litigation and governmental investigations or proceedings
    arising out of or related to our recent accounting and financial
    reporting investigation could result in substantial
    costs. We could incur substantial costs to defend and
    resolve litigation or governmental investigations or proceedings
    arising out of or related to the recently completed Audit
    Committee investigation into certain accounting and financial
    reporting matters. See Part II 
    Item 7  Managements Discussion and
    Analysis of Financial Condition and Results of
    Operations  Audit Committee Independent Investigation
    and Restatement. In addition, we could be exposed to
    enforcement or other actions with respect to these matters by
    the SECs Division of Enforcement or the
    U.S. Department of Justice. For a description of pending
    litigation and governmental proceedings and investigations see
    Part I  Item 3  Legal
    Proceedings  Investigations and Related
    Litigation.
    The acquisition of other companies may present new
    risks. We recently began to pursue a targeted
    acquisition strategy designed to augment areas of our business.
    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
    unidentified issues not 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 retail partners and third-party
    value-added resellers. Our inability to properly manage and
    balance these various distribution methods could harm our
    operating results. 11




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
    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. Further, revenue from our international
    operations may decrease if we do not effectively hedge our
    exposure to currency fluctuations.
    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. Also,
    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
    Part I  Item 3  Legal
    Proceedings  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, particularly in light of the reduction in the
    total number of equity shares granted to employees as part of
    their total compensation packages. New regulations and other
    factors could make it harder or more expensive for us to grant
    equity-based awards to employees in the future, putting us at a
    competitive disadvantage or forcing us to increase cash
    compensation.
    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 2019. Many of these holidays may be extended when
    certain conditions are met. If they are not extended, then our
    effective tax rate could increase in the future. See Note 4
    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 of our electronics products, including
    restrictions on lead, cadmium, and other substances. On
    July 1, 2006, the European Union adopted the Restriction of
    Hazardous Substances Directive. The labeling provisions of
    similar legislation in China became effective on March 1,
    2007. If we fail to comply with the rules and regulations
    regarding the use and sale of such regulated substances, we
    could be subject to liability. Beginning in August 2005, we
    became subject to the European Union Waste Electrical and
    Electronic Equipment Directive as enacted by individual member
    states of the European Union (WEEE Legislation). The
    WEEE Legislation makes producers of electrical goods, including
    computers and printers, responsible for collection, recycling,
    treatment, and disposal of recovered products. 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 12




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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 delay and inefficiencies in our
    supply chain.  ITEM 1B 
    UNRESOLVED
    STAFF COMMENTS    ITEM 2 
    PROPERTIES    Americas
    Properties
  Description


Principal
    Locations


Owned (square
    feet)


Leased (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


1.3 million


1.4 millionManufacturing and Distribution


 Brazil  El Dorado do Sul
     Florida  Miami (Alienware)
     North Carolina  Winston-Salem
     Ohio  West Chester
     Tennessee  Lebanon and Nashville
     Texas  Austin


2.5 million


1.0 millionDesign Centers


Texas  Austin and Round Rock


800,000


   EMEA
    Properties
  Description


Principal
    Locations


Owned (square
    feet)


Leased (square
    feet)Headquarters


Bracknell, England


100,000


50,000Business
    Centers(a)


 England  Bracknell
     France  Montpellier
     Ireland  Dublin and Limerick
     Morocco  Casablanca
     Slovakia  Bratislava


400,000


1.5 millionManufacturing and Distribution


 Ireland  Limerick and Athlone (Alienware)


400,000


  13




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APJ
    Properties
  Description


Principal
    Locations


Owned (square
    feet)


Leased (square
    feet)Headquarters


Singapore





100,000Business
    Centers(a)


 China  Dalian and Xiamen
 India  Bangalore, Gurgaon, Hyderabad and Mohali
 Japan  Kawasaki Malaysia  Penang Philippines  Pasay


200,000


3.1 millionManufacturing and Distribution


 China  Xiamen
     Malaysia  Penang


1.0 million


Design Centers


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





150,000     (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.      ITEM 3 
    LEGAL
    PROCEEDINGS  Accounting for
    Contingencies
  Investigations
    and Related Litigation
   14




---



##### Table of Contents



In re Dell Inc. Securities Litigation In re Dell
    Inc. ERISA Litigation In re Dell Inc. Derivative Litigation, Baltimore County Employees Retirement System v.
    Dell Inc.,
  Copyright
    Levies
     15




---



##### Table of Contents



Lucent v.
    Dell
  KSR v. Teleflex
  Sales Tax
    Claims
      ITEM 4 
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   16




---



##### Table of Contents



PART II
  ITEM 5 
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
    MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES  Market
    Information
    Form 10-Q Form 10-K Form 10-Qs
  Holders
    Dividends
    Issuance of
    Unregistered Securities
  Internal
    Restructuring
      Certain Employee
    Benefit Plan Securities
  Form 10-K
 17




---



##### Table of Contents




    Employee Stock Purchase Plan We maintain an
    Employee Stock Purchase Plan that is available to substantially
    all our employees worldwide. In 1994, stockholders approved
    additional shares for issuance under our Employee Stock Purchase
    Plan. We recently 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 are required to
    register certain transactions in the plans related to shares of
    Dell common stock. We recently 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 we should have filed a
    Form S-8
    to register share transactions in the Canada retirement plan in
    1999. Consequently, we may be deemed to have inadvertently
    failed to register transactions in the two plans relating to up
    to approximately 37 million shares.  Form S-8
    Purchases of
    Common Stock
  Cash Payments for
    Certain Employee Stock Options
  Form 10-K
   18




---



##### Table of Contents



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


Plan


Plan(b)(in
    millions)Repurchases from November 4, 2006 through December 1,
    2006






N/A






$
1,415Repurchases from December 2, 2006 through December 29,
    2006


870
(a)

$
25.72






$
1,415Repurchases from December 30, 2006 through February 2,
    2007






N/A






$
1,415Total


870


$
25.72



     (a)
    
    These shares were not purchased
    pursuant to our share repurchase program, but were withheld from
    employees upon the exercise of stock options or the vesting of
    restricted stock in order to pay the exercise price and required
    tax withholding.(b)
    
    Our share repurchase program was
    announced on February 20, 1996, and the program authorizes
    us to purchase shares at an aggregate cost not to exceed
    $30.0 billion. 19




---



##### Table of Contents



Stock Performance
    Graph
    
  End of Fiscal
    Year2002


2003


2004


2005


2006


2007Dell

$
100


$
89


$
125


$
153


$
109


$
88S&P 500 Index


100



76



101



104



113



129Dow Jones Computer Index


100



69



96



101



115



131   ITEM 6 
    SELECTED
    FINANCIAL DATA      
    The restated selected financial data for the annual periods
    described above;
    The annual financial data for the year ended February 2,
    2007;
    Restated quarterly selected financial data for those years being
    restated; and
    Schedules presenting details of the nature and impact of the
    restatement adjustments. Additional information regarding these
    adjustments can be found in Note 2 of Notes to Consolidated
    Financial Statements included in Part II 
    Item 8  Financial Statements and Supplementary
    Data. The adjustments that relate to fiscal years prior to
    Fiscal 2003 are reflected in beginning retained earnings 20




---



##### Table of Contents



for Fiscal 2003. The cumulative impact of these adjusting
    entries increased retained earnings by $59 million, net of
    tax, at the beginning of Fiscal 2003.  
    Selected
    Financial Data
    Fiscal Year
    EndedFebruary 2,

February 3,

January 28,

January 30,

January 31,2007

2006(c)

2005(d)

2004

2003(e)As

As

As

As

As

As

As

AsReported

Restated

Reported

Restated

Reported

Restated

Reported

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

$
57,420


$
55,908


$
55,788


$
49,205


$
49,121


$
41,444


$
41,327


$
35,404


$
35,262Gross margin

$
9,516


$
9,950


$
9,891


$
9,015


$
9,018


$
7,552


$
7,563


$
6,349


$
6,438Operating income

$
3,070


$
4,347


$
4,382


$
4,254


$
4,206


$
3,544


$
3,525


$
2,844


$
2,738Income before income taxes

$
3,345


$
4,574


$
4,608


$
4,445


$
4,403


$
3,724


$
3,711


$
3,027


$
2,907Net income

$
2,583


$
3,572


$
3,602


$
3,043


$
3,018


$
2,645


$
2,625


$
2,122


$
2,031Earnings per common share:Basic

$
1.15


$
1.49


$
1.50


$
1.21


$
1.20


$
1.03


$
1.02


$
0.82


$
0.79Diluted

$
1.14


$
1.46


$
1.47


$
1.18


$
1.18


$
1.01


$
1.00


$
0.80


$
0.77Number of weighted-average shares outstanding:Basic


2,255



2,403



2,403



2,509



2,509



2,565



2,565



2,584



2,584Diluted


2,271



2,449



2,449



2,568



2,568



2,619



2,619



2,644



2,644Cash Flow & Balance Sheet Data:Net cash provided by operating
    activities(f)

$
3,969


$
4,839


$
4,751


$
5,310


$
5,821


$
3,670


$
4,064


$
3,538


$
3,908Cash, cash equivalents and investments

$
12,445


$
11,749


$
11,756


$
14,101


$
14,101


$
11,922


$
11,921


$
9,905


$
9,910Total assets

$
25,635


$
23,109


$
23,252


$
23,215


$
23,318


$
19,311


$
19,340


$
15,470


$
15,540Short-term
    borrowings(a)

$
188


$



$
65


$



$
74


$



$
157


$



$
129Long-term
    debt(b)

$
569


$
504


$
625


$
505


$
662


$
505


$
645


$
506


$
581Total stockholders equity

$
4,328


$
4,129


$
4,047


$
6,485


$
6,412


$
6,280


$
6,238


$
4,873


$
4,846     (a)
    
    The restated amounts for short-term
    borrowings reflect (1) a correction in classification from
    accounts payable regarding a vendor financing arrangement during
    Fiscal 2002 until termination in the first quarter of Fiscal
    2006, and (2) a correction in classification from other
    current liabilities for the short-term portion of outstanding
    advances under the DFS Credit Facilities for the periods from
    the third quarter of Fiscal 2004 through Fiscal 2007. 21




---



##### Table of Contents



(b)
    
    The restated amounts for long-term
    debt reflect (1) adjustments to record changes in the fair
    value of the debt where the interest rate is hedged with
    interest rate swap agreements for all periods restated and
    (2) a correction in classification from both other current
    liabilities and other non-current liabilities related to the
    long-term portion of outstanding advances under the DFS Credit
    Facilities for the periods from the third quarter of Fiscal 2004
    through Fiscal 2007.(c)
    
    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.(d)
    
    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.(e)
    
    The adjustments relating to fiscal
    years prior to Fiscal 2003 are reflected in beginning retained
    earnings. The cumulative impact of these adjusting entries
    increased beginning retained earnings by $59 million, net
    of tax.(f)
    
    The cash flows have been revised to
    reflect a closer approximation of the weighted-average exchange
    rates during the reporting periods. For most periods, this
    revision reduced the previously reported effect of exchange rate
    changes on cash and cash equivalents with an offsetting change
    in effects of exchange rate changes on monetary assets and
    liabilities denominated in foreign currencies and changes in
    operating working capital included in cash flows from operating
    activities.  Cumulative
    Restatement Adjustments to Previously Reported Retained
    Earnings
    February 3,


January 28,


January 30,


January 31,2006


2005


2004


2003(in
    millions)Retained earnings as reported

$
12,746


$
9,174


$
6,131


$
3,486Cumulative restatement adjustments


(47
)


(77
)


(52
)


(32
)(a)Retained earnings as restated

$
12,699


$
9,097


$
6,079


$
3,454     (a)
    
    Includes a $59 million
    increase in beginning retained earnings at January 31, 2003
    for the pre- Fiscal 2003 cumulative impact of the adjustments.  Cumulative
    Restatement Adjustments to Previously Reported Beginning
    Retained Earnings and Net Income
  February 3,


January 28,


January 30,


January 31,2006


2005


2004


2003(in
    millions)Retained earnings as restated:Beginning retained earnings as reported

$
9,174


$
6,131


$
3,486


$
1,364Cumulative adjustments to beginning retained earnings


(77
)


(52
)


(32
)


59Beginning retained earnings as restated


9,097



6,079



3,454



1,423Net income as reported


3,572



3,043



2,645



2,122Net income restatement adjustments


30



(25
)


(20
)


(91
)Net income as restated


3,602



3,018



2,625



2,031Retained earnings as restated

$
12,699


$
9,097


$
6,079


$
3,454  22




---



##### Table of Contents



Cumulative
    Restatement Adjustments to Previously Reported Beginning
    Retained Earnings by Category
    February 3,


January 28,


January 30,


January 31,2006


2005


2004


2003(in
    millions)Beginning retained earnings as reported

$
9,174


$
6,131


$
3,486


$
1,364Revenue Recognition:Software


(21
)


(9
)


(7
)


(2
)Other


(216
)


(217
)


(102
)


(64
)Revenue Recognition


(237
)


(226
)


(109
)


(66
)Warranty Liabilities


202



223



129



31Restructuring Reserves


(18
)


(18
)


(14
)


80Other


(45
)


(35
)


(49
)


32(Provision) benefit for income taxes


21



4



11



(18
)Cumulative adjustments to beginning retained earnings


(77
)


(52
)


(32
)


59Beginning retained earnings as restated

$
9,097


$
6,079


$
3,454


$
1,423  23




---



##### Table of Contents



Impact of
    Restatement Adjustments on Fiscal 2006 Net Income
    Fiscal
    2006AdjustmentsRevenue








Other


Provisionrecognition








reserves


forAs


Software





Warranty


Restruc-


and


income


AsReported


sales


Other


liabilities


turing


accruals


tax(a)


Restated(in millions,
    except per share data)Net revenue

$
55,908


$
(248
)

$
130


$



$



$
(2
)

$



$
55,788Cost of net revenue


45,958



(244
)


124



52







7







45,897Gross margin


9,950



(4
)


6



(52
)






(9
)






9,891Operating expenses:Selling, general, and administrative


5,140







1











(90
)






5,051Research, development, and engineering


463











(1
)






(4
)






458Total operating expenses


5,603







1



(1
)






(94
)






5,509Operating income


4,347



(4
)


5



(51
)






85







4,382Investment and other income, net


227







11



(4
)






(8
)






226Income before income taxes


4,574



(4
)


16



(55
)






77







4,608Income tax provision


1,002























4



1,006Net income

$
3,572


























$
3,602Earnings per common share:Basic

$
1.49


























$
1.50Diluted

$
1.46


























$
1.47Weighted-average shares outstanding:Basic


2,403



























2,403Diluted


2,449



























2,449     (a)
    
    Primarily represents the aggregate
    tax impact of the adjustments. 24




---



##### Table of Contents



Impact of
    Restatement Adjustments on Fiscal 2006 Quarterly Financial
    Data
    First
    Quarter

Second
    Quarter(c)April 29,
    2005

July 29,
    2005As



As

As



AsFiscal
    2006

Reported

Adjustments

Restated

Reported

Adjustments

Restated(in millions,
    expect per share data)Results of Operations:Net revenue

$
13,386


$
(86
)

$
13,300


$
13,428


$
(46
)

$
13,382Gross margin

$
2,491


$
(39
)

$
2,452


$
2,499


$
(68
)

$
2,431Operating income

$
1,174


$
(37
)

$
1,137


$
1,173


$
(60
)

$
1,113Income before income taxes

$
1,233


$
(45
)

$
1,188


$
1,234


$
(47
)

$
1,187Net income

$
934


$
(26
)

$
908


$
1,020


$
(38
)

$
982Earnings per common share:Basic

$
0.38


$
(0.01
)

$
0.37


$
0.42


$
(0.01
)

$
0.41Diluted

$
0.37


$
(0.01
)

$
0.36


$
0.41


$
(0.01
)

$
0.40Number of weighted-average shares outstanding:Basic


2,456







2,456



2,418







2,418Diluted


2,515







2,515



2,478







2,478Cash Flow and Balance Sheet Data:Net cash provided by operating
    activities(d)

$
1,190


$
84


$
1,274


$
919


$
(58
)

$
861Cash, cash equivalents and investments

$
13,374


$
4


$
13,378


$
12,624


$
6


$
12,630Total assets

$
22,687


$
82


$
22,769


$
22,611


$
107


$
22,718Short-term
    borrowings(a)

$



$
81


$
81


$



$
77


$
77Long-term
    debt(b)

$
504


$
140


$
644


$
504


$
135


$
639Total stockholders equity

$
5,624


$
(100
)

$
5,524


$
5,509


$
(144
)

$
5,365   Third
    Quarter(c)

Fourth
    QuarterOctober 28,
    2005

February 3,
    2006As



As

As



AsFiscal
    2006

Reported

Adjustments

Restated

Reported

Adjustments

Restated(in millions,
    expect per share data)Results of Operations:Net revenue

$
13,911


$
(31
)

$
13,880


$
15,183


$
43


$
15,226Gross margin

$
2,251


$
14


$
2,265


$
2,709


$
34


$
2,743Operating income

$
754


$
38


$
792


$
1,246


$
94


$
1,340Income before income taxes

$
804


$
39


$
843


$
1,303


$
87


$
1,390Net income

$
606


$
29


$
635


$
1,012


$
65


$
1,077Earnings per common share:Basic

$
0.25


$
0.02


$
0.27


$
0.43


$
0.03


$
0.46Diluted

$
0.25


$
0.01


$
0.26


$
0.43


$
0.02


$
0.45Number of weighted-average shares outstanding:Basic


2,395







2,395



2,350







2,350Diluted


2,435







2,435



2,375







2,375Cash Flow and Balance Sheet Data:Net cash provided by operating
    activities(d)

$
1,148


$
(42
)

$
1,106


$
1,582


$
(72
)

$
1,510Cash, cash equivalents and investments

$
12,233


$
4


$
12,237


$
11,749


$
7


$
11,756Total assets

$
22,874


$
163


$
23,037


$
23,109


$
143


$
23,252Short-term
    borrowings(a)

$



$
74


$
74


$



$
65


$
65Long-term
    debt(b)

$
504


$
113


$
617


$
504


$
121


$
625Total stockholders equity

$
4,821


$
(113
)

$
4,708


$
4,129


$
(82
)

$
4,047  25




---



##### Table of Contents



(a)
    
    The restated amounts for short-term
    borrowings reflect (1) a correction in classification from
    accounts payable for vendor financing for the periods from the
    end of Fiscal 2002 until termination in the first quarter of
    Fiscal 2006, and (2) a correction in classification from
    other current liabilities for the short-term portion of
    outstanding advances under the DFS Credit Facilities for the
    periods from the third quarter of Fiscal 2004 through Fiscal
    2007.(b)
    
    The restated amounts for long-term
    debt reflect (1) adjustments to record changes in the fair
    value of the debt where the interest rate is hedged with
    interest rate swap agreements for all periods restated and
    (2) a correction in classification from both other current
    liabilities and other non-current liabilities related to the
    long-term portion of outstanding advances under the DFS Credit
    Facilities for the periods from the third quarter of Fiscal 2004
    through Fiscal 2007.(c)
    
    Results for the third quarter of
    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
    OptiPlexTM
    systems that include a vendor part that failed to perform to our
    specifications, workforce realignment, product rationalizations,
    excess facilities, and a write-off of goodwill recognized in the
    third quarter. The related tax effect of these items was
    $96 million. The second quarter of Fiscal 2006 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.(d)
    
    The cash flows have been revised to
    reflect a closer approximation of the weighted-average exchange
    rates during the reporting periods. For most periods, this
    revision reduced the previously reported effect of exchange rate
    changes on cash and cash equivalents with an offsetting change
    in effects of exchange rate changes on monetary assets and
    liabilities denominated in foreign currencies and changes in
    operating working capital included in cash flows from operating
    activities.  Fiscal 2006
    Restatement Adjustments to Previously Reported Net
    Income
    First


Second


Third


Fourth


FiscalQuarter


Quarter


Quarter


Quarter


YearApril 29,


July 29,


October 28,


February 3,


February 3,Fiscal 2006 (As
    Restated)

2005


2005


2005


2006


2006(in
    millions)Net income as reported

$
934


$
1,020


$
606


$
1,012


$
3,572Revenue recognition:Software sales


(3
)


(3
)


3



(1
)


(4
)Other revenue recognition


(20
)


(3
)


9



30



16Revenue recognition


(23
)


(6
)


12



29



12Warranty liabilities


(14
)


(52
)


(14
)


25



(55
)Restructuring reserves


















Other reserves and accruals


(8
)


11



41



33



77(Provision) benefit for income taxes


19



9



(10
)


(22
)


(4
)Net impact of adjustments


(26
)


(38
)


29



65



30Net income as restated

$
908


$
982


$
635


$
1,077


$
3,602  26




---



##### Table of Contents



Impact of
    Restatement Adjustments on Fiscal 2005 Net Income
    Fiscal
    2005AdjustmentsRevenue








Other


Provisionrecognition








reserves


forAs


Software





Warranty


Restruc-


and


income


AsReported


sales


Other


liabilities


turing


accruals


tax(a)


Restated(in millions,
    except per share data)Net revenue

$
49,205


$
(105
)

$
21


$



$



$



$



$
49,121Cost of net revenue


40,190



(93
)


21



21







(36
)






40,103Gross margin


9,015



(12
)






(21
)






36







9,018Operating expenses:Selling, general, and administrative


4,298



















54







4,352Research, development, and engineering


463



















(3
)






460Total operating expenses


4,761



















51







4,812Operating income


4,254



(12
)






(21
)






(15
)






4,206Investment and other income, net


191







1











5







197Income before income taxes


4,445



(12
)


1



(21
)






(10
)






4,403Income tax provision


1,402























(17
)


1,385Net income

$
3,043


























$
3,018Earnings per common share:Basic

$
1.21


























$
1.20Diluted

$
1.18


























$
1.18Weighted-average shares outstanding:Basic


2,509



























2,509Diluted


2,568



























2,568     (a)
    
    Primarily represents the aggregate
    tax impact of the adjustments. 27




---



##### Table of Contents



Impact of
    Restatement Adjustments on Fiscal 2005 Quarterly Financial
    Data
    First
    Quarter

Second
    QuarterApril 30,
    2004

July 30,
    2004As



As

As



AsFiscal
    2005

Reported

Adjustments

Restated

Reported

Adjustments

Restated(in millions,
    expect per share data)Results of Operations:Net revenue

$
11,540


$
44


$
11,584


$
11,706


$
(56
)

$
11,650Gross margin

$
2,073


$
(14
)

$
2,059


$
2,134


$
59


$
2,193Operating income

$
966


$
(34
)

$
932


$
1,006


$
59


$
1,065Income before income taxes

$
1,015


$
(15
)

$
1,000


$
1,052


$
54


$
1,106Net income

$
731


$
(10
)

$
721


$
799


$
41


$
840Earnings per common share:Basic

$
0.29


$
(0.01
)

$
0.28


$
0.32


$
0.01


$
0.33Diluted

$
0.28


$



$
0.28


$
0.31


$
0.02


$
0.33Number of weighted-average shares outstanding:Basic


2,539







2,539



2,518







2,518Diluted


2,593







2,593



2,574







2,574Cash Flow and Balance Sheet Data:Net cash provided by operating
    activities(d)

$
1,002


$
135


$
1,137


$
703


$
62


$
765Cash, cash equivalents and investments

$
11,886


$



$
11,886


$
11,810


$



$
11,810Total assets

$
19,709


$
10


$
19,719


$
19,932


$
17


$
19,949Short-term
    borrowings(a)

$



$
101


$
101


$



$
80


$
80Long-term
    debt(b)

$
505


$
126


$
631


$
505


$
133


$
638Total stockholders equity

$
6,105


$
(61
)

$
6,044


$
6,207


$
(20
)

$
6,187   Third
    Quarter

Fourth
    Quarter(c)October 29,
    2004

January 28,
    2005As



As

As



AsFiscal
    2005

Reported

Adjustments

Restated

Reported

Adjustments

Restated(in millions,
    expect per share data)Results of Operations:Net revenue

$
12,502


$
11


$
12,513


$
13,457


$
(83
)

$
13,374Gross margin

$
2,313


$
(11
)

$
2,302


$
2,495


$
(31
)

$
2,464Operating income

$
1,095


$
(20
)

$
1,075


$
1,187


$
(53
)

$
1,134Income before income taxes

$
1,143


$
(21
)

$
1,122


$
1,235


$
(60
)

$
1,175Net income

$
846


$
(14
)

$
832


$
667


$
(42
)

$
625Earnings per common share:Basic

$
0.34


$
(0.01
)

$
0.33


$
0.27


$
(0.02
)

$
0.25Diluted

$
0.33


$



$
0.33


$
0.26


$
(0.02
)

$
0.24Number of weighted-average shares outstanding:Basic


2,493







2,493



2,485







2,485Diluted


2,546







2,546



2,553







2,553Cash Flow and Balance Sheet Data:Net cash provided by operating
    activities(d)

$
1,787


$
83


$
1,870


$
1,818


$
231


$
2,049Cash, cash equivalents and investments

$
12,436


$



$
12,436


$
14,101


$



$
14,101Total assets

$
21,054


$
73


$
21,127


$
23,215


$
103


$
23,318Short-term
    borrowings(a)

$



$
79


$
79


$



$
74


$
74Long-term
    debt(b)

$
505


$
154


$
659


$
505


$
157


$
662Total stockholders equity

$
5,880


$
(35
)

$
5,845


$
6,485


$
(73
)

$
6,412  28




---



##### Table of Contents



(a)
    
    The restated amounts for short-term
    borrowings reflect (1) a correction in classification from
    accounts payable for vendor financing for the periods from the
    end of Fiscal 2002 until termination in the first quarter of
    Fiscal 2006, and (2) a correction in classification from
    other current liabilities for the short-term portion of
    outstanding advances under the DFS Credit Facilities for the
    periods from the third quarter of Fiscal 2004 through Fiscal
    2007.(b)
    
    The restated amounts for long-term
    debt reflect (1) adjustments to record changes in the fair
    value of the debt where the interest rate is hedged with
    interest rate swap agreements for all periods restated and
    (2) a correction in classification from both other current
    liabilities and other non-current liabilities related to the
    long-term portion of outstanding advances under the DFS Credit
    Facilities for the periods from the third quarter of Fiscal 2004
    through Fiscal 2007.(c)
    
    Results 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.(d)
    
    The cash flows have been revised to
    reflect a closer approximation of the weighted-average exchange
    rates during the reporting periods. For most periods, this
    revision reduced the previously reported effect of exchange rate
    changes on cash and cash equivalents with an offsetting change
    in effects of exchange rate changes on monetary assets and
    liabilities denominated in foreign currencies and changes in
    operating working capital included in cash flows from operating
    activities.  Fiscal 2005
    Restatement Adjustments to Previously Reported Net
    Income
    First


Second


Third


Fourth


FiscalQuarter


Quarter


Quarter


Quarter


YearApril 30,


July 30,


October 29,


January 28,


January 28,Fiscal 2005 (As
    Restated)

2004


2004


2004


2005


2005(in
    millions)Net income as reported

$
731


$
799


$
846


$
667


$
3,043Revenue recognition:Software sales


(2
)


(2
)


(3
)


(5
)


(12
)Other revenue recognition


11



(2
)


6



(14
)


1Revenue recognition


9



(4
)


3



(19
)


(11
)Warranty liabilities


1



24



(21
)


(25
)


(21
)Restructuring reserves


















Other reserves and
    accruals(a)


(25
)


34



(3
)


(16
)


(10
)(Provision) benefit for income taxes


5



(13
)


7



18



17Net impact of adjustments


(10
)


41



(14
)


(42
)


(25
)Net income as restated

$
721


$
840


$
832


$
625


$
3,018     (a)
    
    Reflects an adjustment of an amount
    of vendor funding recognized in the first quarter of Fiscal 2005
    but earned in the second quarter of Fiscal 2005. 29




---



##### Table of Contents



Impact of
    Restatement Adjustments on Fiscal 2004 Net Income
    Fiscal
    2004AdjustmentsRevenue








Other


Provisionrecognition








reserves


forAs


Software





Warranty


Restruc-


and


income


AsReported


sales


Other(a)


liabilities


turing


accruals


tax(b)


Restated(in millions,
    except per share data)Net revenue

$
41,444


$
4


$
(121
)

$



$



$



$



$
41,327Cost of net revenue


33,892



6



(6
)


(94
)






(34
)






33,764Gross margin


7,552



(2
)


(115
)


94







34







7,563Operating expenses:Selling, general, and administrative


3,544







(1
)






4



57







3,604Research, development, and engineering


464



















(30
)






434Total operating expenses


4,008







(1
)






4



27







4,038Operating income


3,544



(2
)


(114
)


94



(4
)


7







3,525Investment and other income, net


180







(1
)










7







186Income before income taxes


3,724



(2
)


(115
)


94



(4
)


14







3,711Income tax provision


1,079























7



1,086Net income

$
2,645


























$
2,625Earnings per common share:Basic

$
1.03


























$
1.02Diluted

$
1.01


























$
1.00Weighted-average shares outstanding:Basic


2,565



























2,565Diluted


2,619



























2,619     (a)
    
    Primarily includes adjustments to
    the deferral and amortization of revenue from extended warranty
    and enhanced service level agreements, and adjustments to the
    period end in-transit revenue deferrals. See Note 2 of
    Notes to Consolidated Financial Statements included in
    Part II  Item 8  Financial
    Statements and Supplementary Data for additional detail.(b)
    
    Primarily represents the aggregate
    tax impact of the adjustments. 30




---



##### Table of Contents



Impact of
    Restatement Adjustments on Fiscal 2004 Quarterly Financial
    Data
    First
    Quarter

Second
    QuarterMay 2,
    2003

August 1,
    2003As



As

As



AsFiscal
    2004

Reported

Adjustments

Restated

Reported

Adjustments

Restated(in millions,
    expect per share data)Results of Operations:Net revenue

$
9,532


$
(11
)

$
9,521


$
9,778


$
(98
)

$
9,680Gross margin

$
1,748


$
9


$
1,757


$
1,778


$
(69
)

$
1,709Operating income

$
811


$
18


$
829


$
840


$
(92
)

$
748Income before income taxes

$
854


$
20


$
874


$
887


$
(87
)

$
800Net income

$
598


$
11


$
609


$
621


$
(63
)

$
558Earnings per common share:Basic

$
0.23


$
0.01


$
0.24


$
0.24


$
(0.02
)

$
0.22Diluted

$
0.23


$



$
0.23


$
0.24


$
(0.03
)

$
0.21Number of weighted-average shares outstanding:Basic


2,572







2,572



2,567







2,567Diluted


2,614







2,614



2,624







2,624Cash Flow and Balance Sheet Data:Net cash provided by operating
    activities(c)

$
812


$
117


$
929


$
740


$
134


$
874Cash, cash equivalents and investments

$
10,332


$
(2
)

$
10,330


$
10,618


$
(1
)

$
10,617Total assets

$
15,712


$
70


$
15,782


$
16,540


$
53


$
16,593Short-term
    borrowings(a)

$



$
134


$
134


$



$
81


$
81Long-term
    debt(b)

$
506


$
81


$
587


$
506


$
42


$
548Total stockholders equity

$
5,076


$
(19
)

$
5,057


$
5,506


$
(85
)

$
5,421   Third
    Quarter

Fourth
    QuarterOctober 31,
    2003

January 30,
    2004As



As

As



AsFiscal
    2004

Reported

Adjustments

Restated

Reported

Adjustments

Restated(in millions,
    expect per share data)Results of Operations:Net revenue

$
10,622


$
7


$
10,629


$
11,512


$
(15
)

$
11,497Gross margin

$
1,935


$
23


$
1,958


$
2,091


$
48


$
2,139Operating income

$
912


$
5


$
917


$
981


$
50


$
1,031Income before income taxes

$
953


$
7


$
960


$
1,030


$
47


$
1,077Net income

$
677


$
2


$
679


$
749


$
30


$
779Earnings per common share:Basic

$
0.26


$



$
0.26


$
0.29


$
0.01


$
0.30Diluted

$
0.26


$



$
0.26


$
0.29


$
0.01


$
0.30Number of weighted-average shares outstanding:Basic


2,563







2,563



2,557







2,557Diluted


2,623







2,623



2,616







2,616Cash Flow and Balance Sheet Data:Net cash provided by operating
    activities(c)

$
1,060


$
(119
)

$
941


$
1,058


$
262


$
1,320Cash, cash equivalents and investments

$
11,032


$
(2
)

$
11,030


$
11,922


$
(1
)

$
11,921Total assets

$
18,125


$
14


$
18,139


$
19,311


$
29


$
19,340Short-term
    borrowings(a)

$



$
176


$
176


$



$
157


$
157Long-term
    debt(b)

$
506


$
132


$
638


$
505


$
140


$
645Total stockholders equity

$
5,878


$
(78
)

$
5,800


$
6,280


$
(42
)

$
6,238  31




---



##### Table of Contents



(a)
    
    The restated amounts for short-term
    borrowings reflect (1) a correction in classification from
    accounts payable for vendor financing for the periods from the
    end of Fiscal 2002 until termination in the first quarter of
    Fiscal 2006, and (2) a correction in classification from
    other current liabilities for the short-term portion for
    outstanding advances under the DFS Credit Facilities for the
    periods from the third quarter of Fiscal 2004 through Fiscal
    2007.(b)
    
    The restated amounts for long-term
    debt reflect (1) adjustments to record changes in the fair
    value of the debt where the interest rate is hedged with
    interest rate swap agreements for all periods restated and
    (2) a correction in classification from both other current
    liabilities and other non-current liabilities related to the
    long-term portion of outstanding advances under the DFS Credit
    Facilities for the periods from the third quarter of Fiscal 2004
    through Fiscal 2007.(c)
    
    The cash flows have been revised to
    reflect a closer approximation of the weighted-average exchange
    rates during the reporting periods. For most periods, this
    revision reduced the previously reported effect of exchange rate
    changes on cash and cash equivalents with an offsetting change
    in effects of exchange rate changes on monetary assets and
    liabilities denominated in foreign currencies and changes in
    operating working capital included in cash flows from operating
    activities.  Fiscal 2004
    Restatement Adjustments to Previously Reported Net
    Income
    First


Second


Third


Fourth


FiscalQuarter


Quarter


Quarter


Quarter


YearMay 2,


August 1,


October 31,


January 30,


January 30,Fiscal 2004 (As
    Restated)

2003


2003


2003


2004


2004(in
    millions)Net income as reported

$
598


$
621


$
677


$
749


$
2,645Revenue recognition:Software sales






(1
)


2



(3
)


(2
)Other revenue
    recognition(a)


(31
)


(58
)


(6
)


(20
)


(115
)Revenue recognition


(31
)


(59
)


(4
)


(23
)


(117
)Warranty liabilities


11



5



35



43



94Restructuring reserves


(3
)


(2
)


1







(4
)Other reserves and accruals


43



(31
)


(24
)


26



14(Provision) benefit for income taxes


(9
)


24



(6
)


(16
)


(7
)Net impact of adjustments


11



(63
)


2



30



(20
)Net income as restated

$
609


$
558


$
679


$
779


$
2,625     (a)
    
    Primarily includes adjustments to
    the deferral and amortization of revenue from extended warranty
    and enhanced service level agreements, and adjustments to the
    period end in-transit revenue deferrals. See Note 2 of
    Notes to Consolidated Financial Statements included in
    Part II  Item 8  Financial
    Statements and Supplementary Data for additional detail. 32




---



##### Table of Contents



Impact of
    Restatement Adjustments on Fiscal 2003 Net Income
    Fiscal
    2003AdjustmentsRevenue








Other


Provisionrecognition








reserves


forAs


Software





Warranty


Restruc-


and


income


AsReported


sales


Other(b)


liabilities


turing


accruals(a)


tax(c)


Restated(in millions,
    except per share data)Net revenue

$
35,404


$
(78
)

$
(64
)

$



$



$



$



$
35,262Cost of net revenue


29,055



(73
)


(26
)


(98
)


22



(56
)






28,824Gross margin


6,349



(5
)


(38
)


98



(22
)


56







6,438Operating expenses:Selling, general, and administrative


3,050







(5
)






72



128







3,245Research, development, and engineering


455



























455Total operating expenses


3,505







(5
)






72



128







3,700Operating income


2,844



(5
)


(33
)


98



(94
)


(72
)






2,738Investment and other income, net


183







(5
)










(9
)






169Income before income taxes


3,027



(5
)


(38
)


98



(94
)


(81
)






2,907Income tax provision


905























(29
)


876Net income

$
2,122


























$
2,031Earnings per common share:Basic

$
0.82


























$
0.79Diluted

$
0.80


























$
0.77Weighted-average shares outstanding:Basic


2,584



























2,584Diluted


2,644



























2,644     (a)
    
    Primarily includes adjustments in
    the recognition of the benefit of certain vendor funding
    arrangements, and adjustments to the lease accruals for certain
    Dell facilities. See Note 2 of Notes to Consolidated
    Financial Statements included in Part II 
    Item 8  Financial Statements and Supplementary
    Data for additional details.(b)
    
    Other revenue recognition primarily
    includes adjustments to the recognition of deferred warranty
    revenue associated with the sale of extended warranties and
    enhanced service level agreements. See Note 2 of Notes to
    Consolidated Financial Statements included in
    Part II  Item 8  Financial
    Statements and Supplementary Data for additional details.(c)
    
    Primarily represents the aggregate
    tax impact of the adjustments. 33




---



##### Table of Contents



Impact of
    Restatement Adjustments on Fiscal 2003 Quarterly Financial
    Data
    First
    Quarter

Second
    QuarterMay 3,
    2002

August 2,
    2002As



As

As



AsFiscal
    2003

Reported

Adjustments

Restated

Reported

Adjustments

Restated(in millions,
    expect per share data)Results of Operations:Net revenue

$
8,066


$
17


$
8,083


$
8,459


$
(49
)

$
8,410Gross margin

$
1,391


$
(1
)

$
1,390


$
1,515


$
41


$
1,556Operating income

$
590


$
(73
)

$
517


$
677


$
9


$
686Income before income taxes

$
638


$
(77
)

$
561


$
726


$



$
726Net income

$
457


$
(56
)

$
401


$
501


$



$
501Earnings per common share:Basic

$
0.18


$
(0.03
)

$
0.15


$
0.19


$



$
0.19Diluted

$
0.17


$
(0.02
)

$
0.15


$
0.19


$



$
0.19Number of weighted-average shares outstanding:Basic


2,595







2,595



2,586







2,586Diluted


2,672







2,672



2,649







2,649Cash Flow and Balance Sheet Data:Net cash provided by operating
    activities(d)

$
579


$
(1
)

$
578


$
868


$
130


$
998Cash, cash equivalents and investments

$
8,194


$
1


$
8,195


$
8,633


$
1


$
8,634Total assets

$
13,316


$
46


$
13,362


$
14,062


$
55


$
14,117Short-term
    borrowings(a)

$



$
162


$
162


$



$
161


$
161Long-term
    debt(b)

$
520


$
21


$
541


$
516


$
48


$
564Total stockholders
    equity(c)

$
4,521


$
5


$
4,526


$
4,566


$
10


$
4,576   Third
    Quarter

Fourth
    QuarterNovember 1,
    2002

January 31,
    2003As



As

As



AsFiscal
    2003

Reported

Adjustments

Restated

Reported

Adjustments

Restated(in millions,
    expect per share data)Results of Operations:Net revenue

$
9,144


$
40


$
9,184


$
9,735


$
(150
)

$
9,585Gross margin

$
1,662


$
60


$
1,722


$
1,781


$
(11
)

$
1,770Operating income

$
758


$
(4
)

$
754


$
819


$
(38
)

$
781Income before income taxes

$
802


$
(12
)

$
790


$
861


$
(31
)

$
830Net income

$
561


$
(11
)

$
550


$
603


$
(24
)

$
579Earnings per common share:Basic

$
0.22


$
(0.01
)

$
0.21


$
0.23


$
(0.01
)

$
0.22Diluted

$
0.21


$



$
0.21


$
0.23


$
(0.01
)

$
0.22Number of weighted-average shares outstanding:Basic


2,582







2,582



2,576







2,576Diluted


2,634







2,634



2,621







2,621Cash Flow and Balance Sheet Data:Net cash provided by operating
    activities(d)

$
954


$
126


$
1,080


$
1,137


$
115


$
1,252Cash, cash equivalents and investments

$
9,059


$
1


$
9,060


$
9,905


$
5


$
9,910Total assets

$
14,712


$
22


$
14,734


$
15,470


$
70


$
15,540Short-term
    borrowings(a)

$



$
101


$
101


$



$
129


$
129Long-term
    debt(b)

$
514


$
64


$
578


$
506


$
75


$
581Total stockholders
    equity(c)

$
4,648


$
3


$
4,651


$
4,873


$
(27
)

$
4,846     (a)
    
    The restated amounts for short-term
    borrowings reflect (1) a correction in classification from
    accounts payable for vendor financing for the periods from the
    end of Fiscal 2002 until termination in the first quarter of
    Fiscal 2006, and (2) a correction in 34




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##### Table of Contents



classification from other current
    liabilities for the short-term portion of outstanding advances
    under the DFS Credit Facilities for the periods from the third
    quarter of Fiscal 2004 through Fiscal 2007.(b)
    
    The restated amounts for long-term
    debt reflect (1) adjustments to record changes in the fair
    value of the debt where the interest rate is hedged with
    interest rate swap agreements for all periods restated and
    (2) a correction in classification from other current
    liabilities of the long-term portion of outstanding advances
    under the DFS Credit Facilities for the periods from the third
    quarter of Fiscal 2004 through Fiscal 2007.(c)
    
    The adjustments relating to fiscal
    years prior to Fiscal 2003 are reflected in beginning retained
    earnings. The cumulative impact of these adjusting entries
    increased beginning retained earnings by $59 million, net
    of tax.(d)
    
    The cash flows have been revised to
    reflect a closer approximation of the weighted-average exchange
    rates during the reporting periods. For most periods, this
    revision reduced the previously reported effect of exchange rate
    changes on cash and cash equivalents with an offsetting change
    in effects of exchange rate changes on monetary assets and
    liabilities denominated in foreign currencies and changes in
    operating working capital included in cash flows from operating
    activities.  Fiscal 2003
    Restatement Adjustments to Previously Reported Net
    Income
    First


Second


Third


Fourth


FiscalQuarter


Quarter


Quarter


Quarter


YearMay 3,


August 2,


November 1,


January 30,


January 30,Fiscal 2003 (As
    Restated)

2002


2002


2002


2003


2003(in
    millions)Net income as reported

$
457


$
501


$
561


$
603


$
2,122Revenue recognition:Software sales


1



(1
)


(1
)


(4
)


(5
)Other revenue
    recognition(a)


12



20



15



(85
)


(38
)Revenue recognition


13



19



14



(89
)


(43
)Warranty liabilities


10



13



21



54



98Restructuring reserves


(37
)


(12
)


(17
)


(28
)


(94
)Other reserves and
    accruals(b)


(63
)


(19
)


(30
)


31



(81
)(Provision) benefit for income taxes


21



(1
)


1



8



29Net impact of adjustments


(56
)






(11
)


(24
)


(91
)Net income as restated

$
401


$
501


$
550


$
579


$
2,031     (a)
    
    Other revenue recognition primarily
    includes adjustments to the recognition of deferred warranty
    revenue associated with the sale of extended warranties and
    enhanced service level agreements. See Note 2 of Notes to
    Consolidated Financial Statements included in
    Part II  Item 8  Financial
    Statements and Supplementary Data for additional details.(b)
    
    Other reserves and accruals
    primarily include adjustments in the recognition of the benefit
    of certain vendor funding arrangements, and adjustments to the
    lease accruals for certain Dell facilities. See Note 2 of
    Notes to Consolidated Financial Statements included in
    Part II  Item 8  Financial
    Statements and Supplementary Data for additional details. 35




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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.
   AUDIT COMMITTEE
    INDEPENDENT INVESTIGATION AND RESTATEMENT
  Background
        Scope of the
    Investigation
 36




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##### Table of Contents



Summary of
    Investigation Findings
      Other Company
    Identified Adjustments
    Restatement
  37




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##### Table of Contents



Overview
  Our
    Company
      tm tm
    Current Business
    Environment
   38




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##### Table of Contents



Fiscal 2007
    Performance
  Share position



According to IDC, we shipped an industry record of
    39.1 million units for calendar year 2006, resulting in a
    worldwide PC share position of 17.1%.  However, we lost share in
    the U.S. Consumer segment, 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.Net revenue



Fiscal 2007 revenue increased 3% year-over-year to
    $57.4 billion, with unit shipments up 2% year-over-year, as
    compared to Fiscal 2006 revenue which increased 14%
    year-over-year to $55.8 billion on unit growth of 19% over
    Fiscal 2005 revenue of $49.1 billion.Operating income



Operating income was $3.1 billion for Fiscal 2007, or 5.4%
    of revenue, compared to $4.4 billion or 7.9% of revenue in
    Fiscal 2006 and $4.2 billion or 8.6% of revenue in Fiscal
    2005.Net income



Net income was $2.6 billion for Fiscal 2007, or 4.5% of
    revenue, compared to $3.6 billion or 6.5% of revenue in
    Fiscal 2006 and $3.0 billion or 6.1% of revenue in Fiscal
    2005.Earnings per share



Earnings per share decreased 23% to $1.14 for Fiscal 2007,
    compared to $1.47 for Fiscal 2006 and $1.18 for Fiscal 2005.   Results of
    Operations
    Fiscal Year
    EndedFebruary 2,
    2007(a)


February 3,
    2006(b)


January 28,
    2005(c)% of





% of





% ofDollars


Revenue


Dollars


Revenue


Dollars


RevenueAs


As


As


AsRestated


Restated


Restated


Restated(in millions,
    except per share amounts and percentages)Net revenue

$
57,420



100.0
%

$
55,788



100.0
%

$
49,121



100.0
%Gross margin

$
9,516



16.6
%

$
9,891



17.7
%

$
9,018



18.4
%Operating expenses

$
6,446



11.2
%

$
5,509



9.8
%

$
4,812



9.8
%Operating income

$
3,070



5.4
%

$
4,382



7.9
%

$
4,206



8.6
%Income tax provision

$
762



1.3
%

$
1,006



1.8
%

$
1,385



2.8
%Net income

$
2,583



4.5
%

$
3,602



6.5
%

$
3,018



6.1
%Earnings per share  diluted

$
1.14



N/A


$
1.47



N/A


$
1.18



N/A     (a)
    
    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 6 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.(c)
    
    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. 39




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##### Table of Contents



Consolidated
    Operations
        Revenues by
    Segment
   40




---



##### Table of Contents



Fiscal Year
    EndedFebruary 2,
    2007


February 3,
    2006


January 28,
    2005% of





% of





% ofDollars


Revenue


Dollars


Revenue


Dollars


RevenueAs


As


As


AsRestated


Restated


Restated


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

$
29,311



51.1
%

$
28,365



50.8
%

$
25,289



51.5
%U.S. Consumer


7,069



12.3
%


7,960



14.3
%


7,614



15.5
%Americas


36,380



63.4
%


36,325



65.1
%


32,903



67.0
%EMEA


13,682



23.8
%


12,887



23.1
%


10,753



21.9
%APJ


7,358



12.8
%


6,576



11.8
%


5,465



11.1
%Net revenue

$
57,420



100.0
%

$
55,788



100.0
%

$
49,121



100.0
%   
    Americas Americas revenues remained
    flat year-over-year as units decreased 4% in Fiscal 2007,
    compared to revenue and unit growth of 10% and 13%,
    respectively, in Fiscal 2006. Americas Business represented the
    majority of our absolute dollar revenue growth in both Fiscal
    2007 and Fiscal 2006. This was offset by a decline in the
    U.S. Consumer business during Fiscal 2007 and slowed growth
    during Fiscal 2006. Revenue from the sale of mobility products
    led the segments growth in both Fiscal 2007 and Fiscal
    2006, and grew by single digits in both Americas Business and
    U.S. Consumer in Fiscal 2007. However, this growth was
    offset by the continuing trend of declines in desktop PC sales
    as wireless capabilities, falling prices, and a growing need for
    mobility have increased demand for notebooks.  -
    Business Americas Business grew
    revenue by 3% on flat unit growth in Fiscal 2007, compared to
    12% revenue growth on 15% unit growth in Fiscal 2006. The slow
    down of revenue growth was due to desktop weakness. 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; however, this growth was
    offset by overall weakness in demand for U.S. Business,
    with our Public business contributing to declines
    year-over-year. Americas International produced revenue growth
    of 19% year-over-year for Fiscal 2007 as compared to 30% revenue
    growth year-over-year in Fiscal 2006.-
    U.S. Consumer U.S. Consumer
    revenue and unit volume decreased 11% and 14% in Fiscal 2007,
    respectively, 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. This segments average
    selling price in Fiscal 2007 increased 3% year-over-year, which
    principally resulted from our pricing strategy, compared to a 4%
    year-over-year decline from a year ago. We continue to see a
    shift to mobility products in U.S. Consumer and our other
    segments as notebooks become more affordable. Our
    U.S. Consumer business continues to face a competitive
    pricing environment. Consequently, we experienced growth
    significantly slower than the U.S. sales growth. Revenue
    from the sale of mobility products increased 1% in Fiscal 2007
    on unit growth of 3%, as compared to 27% revenue growth on 55%
    unit growth in Fiscal 2006. This environment has led the
    U.S. Consumer business to update its business model and
    enter into a limited number of retail distribution arrangements
    to complement and extend the existing direct business.  
    EMEA EMEA produced positive results
    with 6% revenue growth on 7% unit growth in Fiscal 2007,
    compared to 20% revenue growth on 28% unit growth in Fiscal
    2006. In Fiscal 2007, the segments performance was largely
    attributed to mobility products, where year-over-year unit
    volumes and revenue grew 29% and 15%, respectively, compared to
    49% and 23% in Fiscal 2006, respectively. This sustained growth
    occurred primarily in France and Germany in Fiscal 2007, with
    Germany leading the regions progress. United Kingdom
    experienced weak demand in the consumer business, resulting in a
    2% year-over-year decline in revenue for Fiscal 2007, as
    compared to year-over-year growth of 12% in Fiscal 41




---



##### Table of Contents



2006. With the exception of desktop PCs, all product categories
    in this region experienced growth for Fiscal 2007 with mobility,
    storage, and enhanced services revenues posting strong gains.
    This continues the general trend from Fiscal 2006 where
    EMEAs revenue growth was strongest in mobility, enhanced
    services, and software and peripherals.  
    Asia Pacific-Japan APJ continued
    to build a substantial presence, with 12% revenue growth on 20%
    unit growth in Fiscal 2007 and 20% revenue growth on 30% unit
    growth in Fiscal 2006. The region was led by 26% year-over-year
    revenue growth in China during Fiscal 2007 and a 13% revenue
    growth in Japan during Fiscal 2006. Fiscal 2007s improved
    performance was partially offset by Japans results, which
    saw revenue decline 5% year-over-year. In Fiscal 2007, India,
    South Korea, Singapore, and Malaysia produced significant
    year-over-year revenue growth at a higher rate than the overall
    region. All product categories in this region experienced
    revenue growth during Fiscal 2007 and Fiscal 2006. Mobility
    revenue grew 12% on unit growth of 31% during Fiscal 2007
    compared to 24% revenue growth on 48% unit growth during Fiscal
    2006. Also driving this growth were increases in enhanced
    services, software and peripherals, and storage, which
    approximates the growth trends from Fiscal 2006.    Revenue by
    Product and Service Categories
        Fiscal Year
    EndedFebruary 2,
    2007


February 3,
    2006


January 28,
    2005% of





% of





% ofDollars


Revenue


Dollars


Revenue


Dollars


RevenueAs


As


As


AsRestated


Restated


Restated


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

$
19,815



34
%

$
21,568



39
%

$
21,141



43
%Mobility


15,480



27
%


14,372



25
%


12,001



25
%Software and peripherals


9,001



16
%


8,329



15
%


6,626



13
%Servers and networking


5,805



10
%


5,449



10
%


4,880



10
%Enhanced services


5,063



9
%


4,207



8
%


3,121



6
%Storage


2,256



4
%


1,863



3
%


1,352



3
%Net revenue

$
57,420



100
%

$
55,788



100
%

$
49,121



100
%   
    Desktop PCs In Fiscal 2007, revenue
    from desktop PCs (which includes desktop computer systems and
    workstations) decreased 8% year-over-year on unit decline of 5%,
    compared to a 2% revenue increase on unit growth of 10%
    year-over-year in Fiscal 2006. Desktop PCs in the Americas
    declined 42




---



##### Table of Contents



year-over-year during both Fiscal 2007 and Fiscal 2006 which was
    offset by single-digit growth in the APJ region during the same
    period. Desktop PCs, as compared to mobility products, led
    Fiscal 2007 in volume; however, business and consumer demand
    continues to shift toward mobility products. Desktop PC average
    selling price decreased 3% from Fiscal 2006 to Fiscal 2007 and
    decreased 7% from Fiscal 2005 to Fiscal 2006. In Fiscal 2007, we
    launched Quad-core processors on our XPS 710 Extreme desktop as
    well as on Dell
    Precisiontm
    workstations. In addition, we introduced our 64-bit dual core
    Dimensiontm
    and
    Optiplextm
    systems featuring AMD processors. In Fiscal 2008, we introduced
    Vostrotm
    desktops specifically designed to meet the needs of small
    business customers. We will likely see rising user demand for
    mobility products in the foreseeable future that will contribute
    to a slowing demand for desktop PCs.  
    Mobility In Fiscal 2007, revenue from
    mobility products (which includes notebook computers, mobile
    workstations, and Dell-branded MP3 players) grew by 8%
    year-over-year, on unit growth of 18%, compared to a 20% revenue
    increase on unit growth of 43% year-over-year in Fiscal 2006.
    The impact of this declining growth was particularly acute in
    the U.S. and led to a loss of share as compared to the same
    period last year. The slow growth resulted from both our product
    feature set and related value offering, particularly in the
    consumer business, as well as our inability to reach certain
    customer sets. Our EMEA region led the growth in our mobility
    product category with 15% and 23% increases in Fiscal 2007 and
    Fiscal 2006, respectively. During the year, we introduced Dell
    Latitudetm
    and Dell
    Inspirontm
    notebooks featuring AMD processors and in Fiscal 2008, we
    introduced
    Vostrotm
    notebooks, specifically designed to meet the needs of small
    business customers. As notebooks become more affordable and
    wireless 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
    2007 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 8% year-over-year, compared to a 26%
    increase in Fiscal 2006. The overall improvement in Fiscal 2007
    S&P revenue was led by the APJ region with growth of 38%
    while U.S. consumer sales declined 8%. This increase was
    primarily attributable to a 12% year-over-year increase in
    software revenue that was offset by declines in our imaging
    product revenue. We experienced strong performance in Fiscal
    2006 where software, imaging, and other hardware accessories
    produced double-digit growth.
    Servers and Networking In Fiscal 2007,
    servers and networking revenue grew 7% on unit growth of 6%
    year-over-year, compared to a 12% revenue increase in Fiscal
    2006 on 20% unit growth year-over-year. Servers and networking
    remains a strategic focus area. We competitively price our
    server products to facilitate additional sales of storage
    products and higher margin enhanced services. During the year we
    introduced our new ninth generation (9G) PowerEdge servers with
    Intels latest Xeon 5100 series processors, and we began
    shipping two new PowerEdge servers featuring AMD
    Opterontm
    processors, providing our customers with an additional choice
    for high-performance two-socket and four-socket systems. We also
    launched the industrys first standards-based Quad-Core
    processors for two-socket blade, rack, and tower servers. These
    additions contributed to the 6% year-over-year revenue increase
    in Fiscal 2007 in the Americas Business segment and in Fiscal
    2006 we experienced close to 30% unit growth in our APJ region.
    We now provide the broadest selection of industry-standard
    servers in our history.
    Enhanced Services In Fiscal 2007,
    revenue from enhanced services (which includes the sale and
    servicing of our extended product warranties) increased 20%
    year-over-year compared to a 35% increase in Fiscal 2006. As a
    result of expanding our services offerings and capabilities
    globally, we experienced a 26% and 58% year-over-year growth in
    revenues outside the Americas during Fiscal 2007 and Fiscal
    2006, respectively. This growth increased our deferred revenue
    by $514 million in Fiscal 2007, a 14% increase, and
    $803 million in Fiscal 2006, a 27% increase, to
    approximately $4.2 billion and 43




---



##### Table of Contents



$3.7 billion, respectively. We introduced our new Platinum
    Plus offering during Fiscal 2007, which contributed to an
    increase in our premium service contracts.  
    Storage In Fiscal 2007, storage
    revenue sustained double-digit growth with a 21% year-over-year
    increase as compared to a 38% year-over-year increase in Fiscal
    2006. The Americas led the revenue growth in Fiscal 2007 and
    Fiscal 2006 with year-over-year increases of 21% and 40%,
    respectively. In Fiscal 2008, we expect to continue to expand
    both our PowerVault and Dell | EMC solutions that
    will utilize new technologies intended to drive both additional
    increases in performance and customer value. In Fiscal 2007, we
    also announced a five-year extension to our partnership with
    EMC. These portfolio enhancements continue to deliver lower cost
    solutions for our customers.  Gross
    Margin
    Fiscal Year
    EndedFebruary 2,
    2007


February 3,
    2006


January 28,
    2005% of





% of





% ofDollars


Revenue


Dollars


Revenue


Dollars


RevenueAs


As


As


AsRestated


Restated


Restated


Restated(in millions,
    except percentages)Net revenue

$
57,420



100.0
%

$
55,788



100.0
%

$
49,121



100.0
%Gross margin

$
9,516



16.6
%

$
9,891



17.7
%

$
9,018



18.4
%   tm
 44




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##### Table of Contents



Operating
    Expenses
    Fiscal Year
    EndedFebruary 2,
    2007


February 3,
    2006


January 28,
    2005% of





% of





% ofDollars


Revenue


Dollars


Revenue


Dollars


RevenueAs


As


As


AsRestated


Restated


Restated


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

$
5,948



10.3
%

$
5,051



9.0
%

$
4,352



8.9
%Research, development, and engineering


498



0.9
%


458



0.8
%


460



0.9
%Operating expenses

$
6,446



11.2
%

$
5,509



9.8
%

$
4,812



9.8
%   
    Selling, General, and
    Administrative During Fiscal 2007,
    selling, general, and administrative expenses increased 18% to
    $5.9 billion, compared to $5.1 billion for Fiscal
    2006. The increase in Fiscal 2007 as compared to Fiscal 2006 was
    primarily attributed to increased compensation costs and outside
    consulting services. This increase was largely due to increased
    stock-based compensation expense due to the adoption of
    SFAS 123(R) ($272 million), and costs related to the
    Audit Committee investigation and related restatement
    ($100 million). In addition, during Fiscal 2007, we made
    incremental customer experience investments of $150 million
    to improve customer satisfaction, repurchase preferences, as
    well as technical support. As a result, we increased our
    headcount through direct hiring and replacing of temporary staff
    with regular employees. During Fiscal 2006, selling, general,
    and administrative expenses as a percentage of revenue increased
    compared to Fiscal 2005. The increase over Fiscal 2005 primarily
    related to increased advertising costs, headcount growth, as
    well as charges of $83 million related to workforce
    realignment costs ($50 million), costs of operating leases
    on office space no longer utilized ($4 million) and a
    write-off of goodwill ($29 million).
    Research, Development, and
    Engineering During Fiscal 2007,
    research, development, and engineering expenses increased
    slightly in absolute dollars, but remained consistent with
    Fiscal 2006 and 2005 as percentage of net revenue. We continue
    to fund research, development, and engineering activities to
    meet the demand for swift product cycles. As a result, Fiscal
    2007 research, development, and engineering expenses increased
    in absolute dollars due to increased staffing levels, product
    development costs, and stock-based compensation expense
    resulting from the adoption of SFAS 123(R). Fiscal 2006 as
    compared to Fiscal 2005 experienced a slight decrease in the
    percentage of net revenue primarily attributed to our revenue
    growth. We manage our research, development, and engineering
    spending by targeting those innovations and products most
    valuable to our customers, and by relying upon the capabilities
    of our strategic partners. We will continue to invest in
    research, development, and engineering activities to support our
    growth and to provide for new, competitive products. We obtained
    1,759 worldwide patents and have applied for 1,824 additional
    worldwide patents at February 2, 2007.   45




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##### Table of Contents



Stock-Based
    Compensation
    Accounting for Stock Issued to Employees,
    Form 10-K
   46




---



##### Table of Contents



Investment and
    Other Income, net
    Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


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

$
368


$
308


$
226Gains (losses) on investments, net


(5
)


(2
)


6Interest expense


(45
)


(29
)


(15
)CIT minority interest


(23
)


(27
)


(17
)Foreign exchange


(37
)


3



16Gain on sale of building


36







Other


(19
)


(27
)


(19
)Investment and other income, net

$
275


$
226


$
197     Income
    Taxes
  Accounting for Uncertainty in
    Income Taxes  an Interpretation of FASB
    Statement No. 109
       47




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##### Table of Contents



Off-Balance Sheet
    Arrangements
  Asset Securitization Accounting for Transfers and
    Servicing of Financial Assets and Extinguishment of Liabilities.
        Liquidity,
    Capital Commitments, and Contractual Cash Obligations
  Liquidity
   48




---



##### Table of Contents



February 2,


February 3,2007


2006AsRestated(in
    millions)Cash, cash equivalents, and investments:Cash and cash equivalents

$
9,546


$
7,054Debt securities


2,784



4,606Equity and other securities


115



96Cash, cash equivalents and investments

$
12,445


$
11,756   Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


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

$
3,969


$
4,751


$
5,821Investing activities


1,003



4,149



(1,678
)Financing activities


(2,551
)


(6,252
)


(3,129
)Effect of exchange rate changes on cash and cash equivalents


71



(73
)


46Net increase in cash and cash equivalents

$
2,492


$
2,575


$
1,060   
    Operating Activities Cash flows from
    operating activities during Fiscal 2007, 2006, and 2005 resulted
    primarily from net income, which represents our principal source
    of cash. 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. In Fiscal 2006, the decrease in cash
    provided by operating activities versus Fiscal 2005 is primarily
    due to changes in operating working capital accounts and
    slightly offset by an increase in net income.    Key Performance Metrics
 49




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##### Table of Contents



February 2,


February 3,


January 28,2007


2006


2005As


AsRestated


RestatedDays of sales
    outstanding(a)(d)


31



29



27Days of supply in
    inventory(b)


5



5



4Days in accounts
    payable(c)


(78
)


(77
)


(73
)Cash conversion cycle


(42
)


(43
)


(42
)     (a)
    Days of sales outstanding (DSO) is based on the
    ending net trade receivables and most recent quarterly revenue
    for each period. DSO includes the effect of product costs
    related to customer shipments not yet recognized as revenue that
    are classified in other current assets. At February 2,
    2007, February 3, 2006, and January 28, 2005, DSO and
    days of customer shipments not yet recognized were 28 and
    3 days, 26 and 3 days, and 24 and 3 days,
    respectively.(b)
    Days of supply in inventory is based on ending inventory and
    most recent quarterly cost of sales for each period.  (c)
    Days in accounts payable is based on ending accounts payable and
    most recent quarterly cost of sales for each period.  (d)
    Financing receivables have been separately classified on the
    balance sheet beginning February 3, 2006. As a result, days
    of sales outstanding has been recalculated for January 28,
    2005 to reflect the change in classification of certain items
    previously included in accounts receivable to financing
    receivables.  Our cash conversion cycle decreased one day at February 2,
    2007 from February 3, 2006. This decline was driven by a
    two-day
    increase in days of sales outstanding largely attributed to
    higher percentage of our revenue coming from outside the U.S.,
    where payment terms are customarily longer and a higher
    percentage of revenue occurring at the end of the period. This
    decline was offset by a
    one-day
    increase in days in accounts payable largely attributed to an
    increase in the number of suppliers with extended payment terms
    as compared to Fiscal 2006.    
    Investing Activities Cash provided by
    investing activities during Fiscal 2007 was $1.0 billion,
    as compared to $4.1 billion provided in Fiscal 2006 and
    $1.7 billion used in Fiscal 2005. Cash generated or used in
    investing activities principally consists of net maturities and
    sales or purchases of investments, net of capital expenditures
    for property, plant, and equipment. In Fiscal 2007 compared to
    Fiscal 2006, we had a lower amount of proceeds from maturities
    and sales of investments, and this was partially offset by an
    increase in capital expenditures as we continued to focus on
    investing in our global infrastructure in order to support our
    rapid global growth.
    Financing Activities  Cash used in
    financing activities during Fiscal 2007 was $2.6 billion,
    as compared to $6.3 billion in Fiscal 2006 and
    $3.1 billion in Fiscal 2005. 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 2007, the year-over-year
    decrease in cash used in financing activities is 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 and
    119 million shares at an aggregate cost of
    $4.2 billion in Fiscal 2005. In Fiscal 2006, the increase
    in share repurchases compared to Fiscal 2005 drove the
    year-over-year increase in cash used in financing activities.   50




---



##### Table of Contents



Capital
    Commitments
  Redeemable Common Stock
  Share Repurchase Program
    Capital Expenditures
  Restricted Cash
 51




---



##### Table of Contents



Contractual Cash
    Obligations
    Payments Due by
    PeriodFiscal


Fiscal 2009-


Fiscal 2011-Total


2008


2010


2012


Beyond(in
    millions)Contractual cash obligations:Long-term debt, including current
    portion(b)

$
502


$
1


$
204


$



$
297Operating leases


450



79



128



82



161Advances under credit facilities


222



187



35







Purchase obligations


570



532



38







DFS purchase commitment


345







345







Interest


590



73



129



43



345Current portion of uncertain tax
    positions(a)


22



22











Contractual cash obligations

$
2,701


$
894


$
879


$
125


$
803     (a)
    
    The current portion of uncertain
    tax positions does not include approximately $1.1 billion
    in additional liabilities associated with uncertain tax
    positions. We are unable to reliably estimate the expected
    payment dates for these additional liabilities.(b)
    
    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.  Long-Term Debt
    Operating Leases
  Advances Under Credit Facilities
   52




---



##### Table of Contents



Purchase Obligations
    DFS Purchase Commitment
  Interest
  Market
    Risk
    Foreign Currency
    Hedging Activities
    one-day Value-at-Risk
 53




---



##### Table of Contents



Cash and
    Investments
    Debt
  Accounting for Derivative Instruments
    and Hedging Activities
    Risk Factors
    Affecting Our Business and Prospects
    
    general economic, business, and industry conditions;
    our ability to maintain 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 successfully remediate identified internal
    control deficiencies;
    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;
    litigation and governmental investigations or proceedings
    arising out of or related to accounting and financial reporting
    matters; 54




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##### Table of Contents




    our acquisition of other companies may present new risks;
    our ability to properly manage the distribution of our products
    and services;
    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.    Critical
    Accounting Policies
    Revenue Recognition and Related Allowances and/or 99-19, Reporting Revenue Gross as a Principal versus Net as an
    Agent.
   55




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##### Table of Contents



Warranty
  Income Taxes
  Recently Issued
    Accounting Pronouncements
    ITEM 7A 
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   56




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##### Table of Contents



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


58Consolidated Statements of Financial Position at
    February 2, 2007 and February 3, 2006 (Restated)


61Consolidated Statements of Income for the fiscal years ended
    February 2, 2007, February 3, 2006 (Restated), and
    January 28, 2005 (Restated)


62Consolidated Statements of Cash Flows for the fiscal years ended
    February 2, 2007, February 3, 2006 (Restated), and
    January 28, 2005 (Restated)


63Consolidated Statements of Stockholders Equity for the
    fiscal years ended February 2, 2007, February 3, 2006
    (Restated), and January 28, 2005 (Restated)


64Notes to Consolidated Financial Statements


65Financial Statement Schedule:Schedule II  Valuation and Qualifying Accounts
    for the fiscal years ended February 2, 2007,
    February 3, 2006, (Restated) and January 28, 2005
    (Restated)


151    57




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
       Consolidated
    financial statements and financial statement
    schedule
        Internal
    control over financial reporting
  Internal Control  Integrated Framework
   58




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##### Table of Contents



Control environment
  -
    The Company did not maintain a tone and control consciousness
    that consistently emphasized strict adherence to accounting
    principles generally accepted in the United States of America.
    This control deficiency, in some instances, included
    inappropriate accounting decisions and entries that appear to
    have been largely motivated to achieve desired accounting
    results and management override of controls. In a number of
    instances, information critical to an effective review of
    transactions and accounting entries was not disclosed to
    internal and external auditors.-
    The Company did not maintain a sufficient complement of
    personnel with an appropriate level of accounting knowledge,
    experience, and training in the application of accounting
    principles generally accepted in the United States of America
    commensurate with the Companys financial reporting
    requirements and business environment.    Period-end financial reporting process
  -
    Journal entries, both recurring and nonrecurring, were not
    always accompanied by sufficient supporting documentation and
    were not adequately reviewed and approved for validity,
    completeness and accuracy;-
    Account reconciliations over balance sheet accounts were not
    always properly and timely performed, and the reconciliations
    and their supporting documentation were not consistently
    reviewed for completeness, accuracy and timely resolution of
    reconciling items; and 59




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##### Table of Contents



-
    The Company did not design and maintain effective controls to
    ensure the completeness, accuracy and timeliness of the
    recording of accrued liabilities, reserves and operating
    expenses.      Internal
    Control  Integrated Framework Internal Control  Integrated Framework
        60




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##### Table of Contents



DELL INC.
  CONSOLIDATED
    STATEMENTS OF FINANCIAL POSITION
 (in
    millions)
  February 2,


February 3,2007


2006AsRestatedASSETSCurrent assets:Cash and cash equivalents

$
9,546


$
7,054Short-term investments


752



2,016Accounts receivable, net


4,622



4,082Financing receivables, net


1,530



1,366Inventories


660



588Other


2,829



2,688Total current assets


19,939



17,794Property, plant, and equipment, net


2,409



1,993Investments


2,147



2,686Long-term financing receivables, net


323



325Other non-current assets


817



454Total assets

$
25,635


$
23,252LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Short-term borrowings

$
188


$
65Accounts payable


10,430



9,868Accrued and other


7,173



6,240Total current liabilities


17,791



16,173Long-term debt


569



625Other non-current liabilities


2,836



2,407Total liabilities


21,196



19,205Commitments and contingencies (Note 9)Redeemable common stock and capital in excess of $.01 par
    value; 5 shares issued and outstanding (Note 5)


111



Stockholders 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: 3,307 and 2,818,
    respectively; shares outstanding: 2,226 and 2,330, respectively


10,107



9,503Treasury stock at cost: 606 and 488 shares, respectively


(21,033
)


(18,007
)Retained earnings


15,282



12,699Accumulated other comprehensive loss


(28
)


(101
)Other






(47
)Total stockholders equity


4,328



4,047Total liabilities and equity

$
25,635


$
23,252    61




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##### Table of Contents



DELL INC.
  CONSOLIDATED
    STATEMENTS OF INCOME
 (in millions,
    except per share amounts)
  Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


RestatedNet revenue

$
57,420


$
55,788


$
49,121Cost of net
    revenue(1)


47,904



45,897



40,103Gross margin


9,516



9,891



9,018Operating expenses:Selling, general, and
    administrative(1)


5,948



5,051



4,352Research, development, and
    engineering(1)


498



458



460Total operating expenses


6,446



5,509



4,812Operating income


3,070



4,382



4,206Investment and other income, net


275



226



197Income before income taxes


3,345



4,608



4,403Income tax provision


762



1,006



1,385Net income

$
2,583


$
3,602


$
3,018Earnings per common share:Basic

$
1.15


$
1.50


$
1.20Diluted

$
1.14


$
1.47


$
1.18Weighted-average shares outstanding:Basic


2,255



2,403



2,509Diluted


2,271



2,449



2,568     (1)
    
    Cost of revenue and operating
    expenses for the fiscal year ended February 2, 2007 include
    stock-based compensation expense pursuant to Statement of
    Financial Accounting Standards No. 123 (revised 2004),
    Share-Based Payment.See Note 6 of Notes to
    Consolidated Financial Statements for additional information.   62




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##### Table of Contents



DELL INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 (in
    millions)
  Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


RestatedCash flows from operating activities:Net income

$
2,583


$
3,602


$
3,018Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


471



394



331Stock-based compensation


368



17



18Excess tax benefits from stock-based compensation


(80
)






Tax benefits from employee stock plans






224



249Effects of exchange rate changes on monetary assets and
    liabilities denominated in foreign currencies


37



(3
)


(16
)Other


61



157



61Changes in:Operating working capital


397



(53
)


1,772Non-current assets and liabilities


132



413



388Net cash provided by operating activities


3,969



4,751



5,821Cash flows from investing activities:Investments:Purchases


(8,343
)


(6,796
)


(13,006
)Maturities and sales


10,320



11,692



11,843Capital expenditures


(896
)


(747
)


(515
)Acquisition of business, net of cash received


(118
)






Proceeds from sale of building


40







Net cash provided by (used in) investing activities


1,003



4,149



(1,678
)Cash flows from financing activities:Repurchase of common stock


(3,026
)


(7,249
)


(4,219
)Issuance of common stock under benefit plans


314



1,051



1,112Excess tax benefits from stock-based compensation


80







Issuance of commercial paper, net


100







Other


(19
)


(54
)


(22
)Net cash used in financing activities


(2,551
)


(6,252
)


(3,129
)Effect of exchange rate changes on cash and cash equivalents


71



(73
)


46Net increase in cash and cash equivalents


2,492



2,575



1,060Cash and cash equivalents at beginning of year


7,054



4,479



3,419Cash and cash equivalents at end of year

$
9,546


$
7,054


$
4,479    63




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##### Table of Contents



DELL, INC.
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
 (in
    millions)
  Common Stock
    andCapital in Excess
    of











AccumulatedPar
    Value











OtherIssued





Treasury
    Stock


Retained


ComprehensiveShares


Amount


Shares


Amount


Earnings


Loss


Other


TotalBalances at January 30, 2004 (Reported)


2,721


$
6,823



165


$
(6,539
)

$
6,131


$
(83
)

$
(52
)

$
6,280Cumulative impact of restatement


















(52
)


10







(42
)Balances at January 30, 2004 (Restated)


2,721



6,823



165



(6,539
)


6,079



(73
)


(52
)


6,238Net income


















3,018











3,018Change in net unrealized loss on investments, net of taxes of $16






















(52
)






(52
)Foreign currency translation adjustments






















1







1Change in net unrealized loss on derivative instruments, net of
    taxes of $21






















46







46Total comprehensive income






























3,013Stock issuances under employee plans, including tax benefits


48



1,372























1,372Repurchases










119



(4,219
)














(4,219
)Other


























8



8Balances at January 28, 2005 (Restated)


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 of $1






















(24
)






(24
)Foreign currency translation adjustments






















(8
)






(8
)Change in net unrealized loss on derivative instruments, net of
    taxes of $4






















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 (Restated)


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 of $12






















31







31Foreign currency translation adjustments






















(11
)






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






















30







30Valuation of retained interests in securitized assets, net of
    taxes of $7






















23







23Total comprehensive income






























2,656Stock issuances under employee plans


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
)

$



$
4,328    64




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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
 65




---



##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Inventories first-in,
  Property, Plant, and Equipment
  Foreign Currency Translation
    Hedging Instruments Accounting for Derivative
    Instruments and Hedging Activities
   66




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
    Treasury Stock
  Revenue Recognition EITF 99-19
    Warranty
  Vendor Rebates EITF 02-16, Accounting by a Customer (Including a Reseller) for Certain
    Consideration Received
 67




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
  from a Vendor
  Shipping Costs
  Selling, General, and Administrative
  Research, Development, and Engineering Costs Accounting for
    Research and Development Costs
  Website Development Costs
  Income Taxes
  Comprehensive Income
  Earnings Per Common Share
   68




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Consolidated Financial Statements (as
    amended)
    Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


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

$
2,583


$
3,602


$
3,018Denominator:Weighted-average shares outstanding:Basic


2,255



2,403



2,509Effect of dilutive options, restricted stock units, restricted
    stock, and other


16



46



59Diluted


2,271



2,449



2,568Earnings per common share:Basic

$
1.15


$
1.50


$
1.20Diluted

$
1.14


$
1.47


$
1.18   Stock-Based Compensation 
  Share-Based Payment Accounting for Stock-Based
    Compensation
  Accounting for Stock
    Issued to Employees
  Recently Issued Accounting
    Pronouncements  Accounting for Certain Hybrid
    Instruments Accounting for Transfers and Servicing of Financial Assets
    and Extinguishments of
 69




---



##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Liabilities a replacement of FASB
    Statement No. 125
  Accounting for Servicing of Financial Assets  an
    amendment of FASB Statement No. 140
  No. 06-3, Disclosure Requirements for Taxes Assessed by a Governmental
    Authority on Revenue-Producing Transactions (EITF 06-3). Disclosure of Accounting Policies
  Accounting for Uncertainty in Income Taxes  an
    interpretation of FASB Statement No. 109 Considering the Effects of Prior
    Year Misstatements when Quantifying Misstatements in Current
    Year Financial Statements
 70




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Fair Value Measurements
  The
    Fair Value Option for Financial Assets and Financial Liabilities
  Reclassifications 
  NOTE 2 
    Audit Committee
    Independent Investigation and Restatement  Background and
    Scope of the Investigation
         71




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Summary of
    Investigation Findings
      Other Company
    Identified Adjustments
    Restatement
    Adjustments
     72




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
    Fiscal
    2006AdjustmentsRevenue





Other


Provisionrecognition





reserves


forAs


Software





Warranty


and


income


AsReported


sales


Other


liabilities


accruals


tax(a)


Restated(in millions,
    except per share data)Net revenue

$
55,908


$
(248
)

$
130


$



$
(2
)

$



$
55,788Cost of net revenue


45,958



(244
)


124



52



7







45,897Gross margin


9,950



(4
)


6



(52
)


(9
)






9,891Operating expenses:Selling, general, and administrative


5,140







1







(90
)






5,051Research, development, and engineering


463











(1
)


(4
)






458Total operating expenses


5,603







1



(1
)


(94
)






5,509Operating income


4,347



(4
)


5



(51
)


85







4,382Investment and other income, net


227







11



(4
)


(8
)






226Income before income taxes


4,574



(4
)


16



(55
)


77







4,608Income tax provision


1,002



















4



1,006Net income

$
3,572






















$
3,602Earnings per common share:Basic

$
1.49






















$
1.50Diluted

$
1.46






















$
1.47Weighted-average shares outstanding:Basic


2,403























2,403Diluted


2,449























2,449     (a)
    
    Primarily represents the aggregate
    tax impact of the adjustments. 73




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
     Fiscal
    2005AdjustmentsRevenue





Other


Provisionrecognition





reserves


forAs


Software





Warranty


and


income


AsReported


sales


Other


liabilities


accruals


tax(a)


Restated(in millions,
    except per share data)Net revenue

$
49,205


$
(105
)

$
21


$



$



$



$
49,121Cost of net revenue


40,190



(93
)


21



21



(36
)






40,103Gross margin


9,015



(12
)






(21
)


36







9,018Operating expenses:Selling, general, and administrative


4,298















54







4,352Research, development, and engineering


463















(3
)






460Total operating expenses


4,761















51







4,812Operating income


4,254



(12
)






(21
)


(15
)






4,206Investment and other income, net


191







1







5







197Income before income taxes


4,445



(12
)


1



(21
)


(10
)






4,403Income tax provision


1,402



















(17
)


1,385Net income

$
3,043






















$
3,018Earnings per common share:Basic

$
1.21






















$
1.20Diluted

$
1.18






















$
1.18Weighted-average shares outstanding:Basic


2,509























2,509Diluted


2,568























2,568     (a)
    
    Primarily represents the aggregate
    tax impact of the adjustments  Revenue
    Recognition Adjustments
  Software Sales No. 97-2, Software Revenue Recognition (SOP 97-2).
 74




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
  SOP 97-2 SOP 97-2 No. 99-19, Reporting Revenue Gross as a Principal vs. Net as an
    Agent.
  Other 
  
    SAB 104 DeferralsInstances were
    identified where Dell prematurely recognized revenue prior to
    finalization of the terms of sale with the customer, or prior to
    title and/or
    risk of loss having been passed to the customer. Sometimes these
    situations involved warehousing arrangements. Additionally,
    there were situations where revenue was incorrectly deferred to
    later periods despite title
    and/or risk
    of loss having passed to the end customer. Under SAB 104,
    there were also cases where the in-transit deferral calculation
    for the period end was not appropriately calculated or was based
    on incorrect assumptions.
    Deferred Warranty RevenuePursuant to
    FASB Technical Bulletin No.
    90-1,
    Accounting for Separately Priced Extended Warranty and
    Product Maintenance Contracts,Dell defers and amortizes the
    revenue from the sale of extended warranties and enhanced
    service level agreements over the service period of the
    associated agreement. In some instances Dells accounting
    estimates of the agreement durations were not correct, resulting
    in revenue being recognized over a shorter time period than the
    actual contract durations. Additionally, an error was identified
    in the amount of deferred revenue recognized and amortized
    during the restatement period.
    Customer Rebate AccrualsDells
    U.S. Consumer segment and small business group historically
    offered various forms of rebates to stimulate sales, including
    mail-in rebates. The rebate redemption liability is estimated at
    the time of sale based on historical redemption rates for the
    various types of promotions. Dell has determined that this
    liability was overstated due to a number of factors, including
    failure to update redemption rates when appropriate, additional
    amounts accrued for expected customer satisfaction costs, and
    unsupported incremental accruals recorded in addition to the
    calculated redemption liability estimate.
    Japan Services TransactionsIn late
    January 2007, a Japanese systems integrator with whom
    Dells Japanese services division did business, filed for
    bankruptcy. The bankruptcy trustee publicly indicated that the
    systems integrator had engaged in fictitious transactions. Dell
    promptly commenced an internal investigation led by Dells
    Ethics Office to determine whether its Japanese business unit
    had engaged in any fictitious transactions with the systems
    integrator. Dell hired independent outside counsel who retained
    independent accountants to lead the investigation. The
    investigation determined that almost all of the transactions of
    the Japan services business involving the systems integrator
    likely were fabricated, as were certain additional smaller
    transactions involving two other Japanese systems integrators.
    The impact of the adjustments reduced net revenue and cost of
    revenue to eliminate the effect of the fictitious transactions.
    Sales Reflected in Cost of SalesThere
    were transactions identified involving the sale of certain
    computer component commodities and parts where the net proceeds
    were presented as a reduction of cost of sales rather than as
    revenue. 75




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
   Warranty
    Liabilities
    Other Reserves
    and Accruals
    
    Employee Bonuses Certain employee bonuses
    were not accrued correctly, including the timing of the
    recording of the accrual for the employee bonuses. Additionally,
    in certain cases when excess accruals resulted from differences
    in the actual bonus payments, the excess accruals were not
    adjusted as appropriate.
    Vendor Funding ArrangementsIn some
    instances vendor funding arrangements were not accounted for
    appropriately under EITF Issue No.
    02-16,
    Accounting by a Customer (Including a Reseller) for Certain
    Consideration Received from a Vendor.Certain amounts
    received from vendors were recorded as a reduction in operating
    expenses instead of being correctly recorded as a reduction of
    cost of goods sold. Additionally, certain amounts received were
    retained on the balance sheet and released in future periods
    despite the earnings process having been complete in the earlier
    period. Finally, there were instances where the benefit of
    certain vendor funding was recorded prior to the completion of
    the earnings process.
    Unsubstantiated Accruals and Inadequately Reconciled
    Accounts In some instances accrual and reserve
    accounts lacked justification or supporting documentation. In
    certain cases these accounts were used to accumulate excess
    amounts from other reserve and accrual accounts. However, these
    excess reserves were not released to the income statement in the
    appropriate reporting period or were released for other
    purposes. In some instances accounts had incorrect balances
    because they had not been properly reconciled or because
    reconciling items had not been adjusted timely. 76




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
     February 3,2006As





AsReported


Adjustments


Restated(in
    millions)ASSETSCurrent assets:Cash and cash equivalents

$
7,042


$
12


$
7,054Short-term investments


2,016







2,016Accounts receivable, net


4,089



(7
)


4,082Financing receivables, net


1,363



3



1,366Inventories


576



12



588Other


2,620



68



2,688Total current assets


17,706



88



17,794Property, plant, and equipment, net


2,005



(12
)


1,993Investments


2,691



(5
)


2,686Long-term financing receivables, net


325







325Other non-current assets


382



72



454Total assets

$
23,109


$
143


$
23,252LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Short-term borrowings

$



$
65


$
65Accounts payable


9,840



28



9,868Accrued and other


6,087



153



6,240Total current liabilities


15,927



246



16,173Long-term debt


504



121



625Other non-current liabilities


2,549



(142
)


2,407Total liabilities


18,980



225



19,205Redeemable common stock and capital in excess of par value










Stockholders equity:Common stock and capital in excess of par


9,540



(37
)


9,503Treasury stock


(18,007
)






(18,007
)Retained earnings


12,746



(47
)


12,699Accumulated other comprehensive loss


(103
)


2



(101
)Other


(47
)






(47
)Total stockholders equity


4,129



(82
)


4,047Total liabilities and equity

$
23,109


$
143


$
23,252   Statement of
    Financial Position Adjustments
   77




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
    Statement of Cash
    Flows
    Fiscal Year
    EndedFebruary 3,
    2006


January 28,
    2005As


As


As


AsReported


Restated


Reported


Restated(in
    millions)Net cash provided by (used in):Net income

$
3,572


$
3,602


$
3,043


$
3,018Non-cash adjustments


912



789



59



643Changes in working capital


(67
)


(53
)


1,755



1,772Changes in noncurrent assets and liabilities


422



413



453



388Operating activities


4,839



4,751



5,310



5,821Investing activities


3,878



4,149



(2,317
)


(1,678
)Financing activities


(6,226
)


(6,252
)


(3,128
)


(3,129
)Effect of exchange rate changes on cash and cash
    equivalents(a)


(196
)


(73
)


565



46Net increase in cash and cash equivalents


2,295



2,575



430



1,060Cash and cash equivalents at beginning of year


4,747



4,479



4,317



3,419Cash and cash equivalents at end of year

$
7,042


$
7,054


$
4,747


$
4,479     (a)
    
    The cash flows have been revised to
    reflect a closer approximation of the weighted-average exchange
    rates during the reporting periods. For most periods, this
    revision reduced the previously reported effect of exchange rate
    changes on cash and cash equivalents with an offsetting change
    in effects of exchange rate changes on monetary assets and
    liabilities denominated in foreign currencies and changes in
    operating working capital included in cash flows from operating
    activities. 78




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
   Comprehensive
    Income
    Fiscal Year
    EndedFebruary 3,
    2006


January 28,
    2005As


As


As


AsReported


Restated


Reported


Restated(in
    millions)Comprehensive income:Net income

$
3,572


$
3,602


$
3,043


$
3,018Unrealized gains on foreign currency hedging instruments


11



9



52



46Unrealized losses on marketable securities


(24
)


(24
)


(52
)


(52
)Foreign currency translations adjustments


(8
)


(8
)


1



1Comprehensive income

$
3,551


$
3,579


$
3,044


$
3,013   Cumulative Restatement Adjustments to Previously Reported
    Beginning Retained Earnings by Category
    February 3,


January 28,


January 30,


January 31,2006


2005


2004


2003(in
    millions)Beginning retained earnings as reported

$
9,174


$
6,131


$
3,486


$
1,364Revenue Recognition:Software


(21
)


(9
)


(7
)


(2
)Other


(216
)


(217
)


(102
)


(64
)Revenue Recognition


(237
)


(226
)


(109
)


(66
)Warranty Liabilities


202



223



129



31Restructuring Reserves


(18
)


(18
)


(14
)


80Other


(45
)


(35
)


(49
)


32(Provision) benefit for income taxes


21



4



11



(18
)Cumulative adjustments to beginning retained earnings


(77
)


(52
)


(32
)


59Beginning retained earnings as restated

$
9,097


$
6,079


$
3,454


$
1,423   NOTE 3 
    Financial
    Instruments  Disclosures About
    Fair Values of Financial Instruments
   79




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
    Investments
    February 2,
    2007


February 3,
    2006Fair





Unrealized


Fair





UnrealizedValue


Cost


Gain
    (Loss)


Value


Cost


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

$
1,424


$
1,449


$
(25
)

$
2,501


$
2,547


$
(46
)U.S. corporate


1,163



1,170



(7
)


1,638



1,657



(19
)International corporate


156



159



(3
)


352



359



(7
)State and municipal governments


41



41







115



115



Debt securities


2,784



2,819



(35
)


4,606



4,678



(72
)Equity and other securities


115



109



6



96



96



Investments

$
2,899


$
2,928


$
(29
)

$
4,702


$
4,774


$
(72
)Short-term

$
752


$
756


$
(4
)

$
2,016


$
2,028


$
(12
)Long-term


2,147



2,172



(25
)


2,686



2,746



(60
)Investments

$
2,899


$
2,928


$
(29
)

$
4,702


$
4,774


$
(72
)       Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


Restated(in
    millions)Gains

$
9


$
13


$
40Losses


(14
)


(15
)


(34
)Net realized (loss) gain

$
(5
)

$
(2
)

$
6    80




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Foreign Currency
    Instruments
          Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


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

$
(17
)

$
(26
)

$
(72
)Net (losses) gains reclassified to earnings


(260
)


225



(356
)Change in fair value of cash flow hedges


290



(216
)


402Aggregate unrealized net gain (loss) at end of year

$
13


$
(17
)

$
(26
)  81




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
    Commercial
    Paper
      DFS Credit
    Facilities
    Vendor
    Financing
   82




---



##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
    Long-Term Debt
    and Interest Rate Risk Management
         83




---



##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
  NOTE 4 
    Income
    Taxes    Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


Restated(in
    millions)Current:Domestic

$
846


$
1,141


$
881Foreign


178



263



215Tax repatriation (benefit) charge






(85
)


280Deferred


(262
)


(313
)


9Provision for income taxes

$
762


$
1,006


$
1,385      84




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
    Fiscal Year
    EndedFebruary 2,


February 3,2007


2006AsRestated(in
    millions)Deferred tax assets:Deferred revenue

$
440


$
408Inventory and warranty provisions


128



169Investment impairments and unrealized gains






21Provisions for product returns and doubtful accounts


51



46Capital loss


13



15Leasing and financing


222



120Credit carryforwards


22



Stock-based and deferred compensation


145



32Other


159



93Deferred tax assets


1,180



904Deferred tax liabilities:Property and equipment


(96
)


(108
)Acquired intangibles


(16
)


Other


(39
)


(33
)Deferred tax liabilities


(151
)


(141
)Valuation allowance


(28
)


(7
)Net deferred tax asset

$
1,001


$
756Current portion (included in other current assets)

$
445


$
442Non-current portion (included in other non-current assets)


556



314Net deferred tax asset

$
1,001


$
756      85




---



##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
    Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


RestatedEffective tax rate:U.S. federal statutory rate


35.0
%


35.0
%


35.0
%Foreign income taxed at different rates


(17.8
)


(13.9
)


(11.7
)Tax repatriation (benefit) charge






(1.9
)


6.4Foreign earnings subject to U.S. taxation


2.9



1.6



0.7Imputed intercompany charges


2.0



1.2



Other


0.7



(0.2
)


1.1Effective tax rate


22.8
%


21.8
%


31.5
%     NOTE 5 
    Capitalization  Preferred
    Stock
  Authorized Shares
  Series A Junior Participating Preferred
    Stock
  Redeemable Common
    Stock
    Common
    Stock
  Authorized Shares
 86




---



##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Share Repurchase Program
  Preferred Share
    Purchase Rights
    NOTE 6
    
    Benefit Plans  Description of
    the Plans
  Employee Stock Purchase Plan
  Employee Stock Plans
  
    The Dell Computer Corporation 1989 Stock Option Plan (the
    1989 Option Plan)
    The Dell Computer Corporation Incentive Plan (the 1994
    Incentive Plan)
    The Dell Computer Corporation 1998 Broad-Based Stock Option Plan
    (the 1998 Broad-Based Plan),
    The Dell Computer Corporation 2002 Long-Term Incentive Plan (the
    2002 Incentive Plan)   87




---



##### 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 ESPP Purchases Form 10-K
  Form 10-K
 88




---



##### 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 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 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 2, 2007. The intrinsic value changes based on
    changes in the fair market value of Dells common stock.    Fiscal Years
    EndedFebruary 2,

February 3,

January 28,2007

2006

2005(in millions,
    except per option data)Weighted-average grant date fair value of stock options granted
    per option

$
6.90


$
10.22


$
10.72Total fair value of options vested

$
415


$
2,029


$
1,028Total intrinsic value of options
    exercised(a)

$
171


$
688


$
697     (a)
    
    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 Fiscal 2007.   89




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Non-vested Restricted Stock Activity
  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   Fiscal Years
    EndedFebruary 2,

February 3,

January 28,2007

2006

2005(in millions,
    except per share data)Weighted-average grant date fair value of restricted stock
    awards granted

$
28.36


$
39.70


$
35.23Total estimated fair value of restricted stock awards vested

$
16


$



$
     Expense
    Information under SFAS 123(R)
    Fiscal Year
    EndedFebruary 2,2007(in
    millions)Stock-based compensation expense:Cost of net revenue

$
59Operating expenses


309Stock-based compensation expense before taxes


368Income tax benefit


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

$
258    90




---



##### 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
    EndedFebruary 3,


January 28,2006


2005As


AsRestated


Restated(in millions,
    except per share data)Net income

$
3,602


$
3,018Deduct: Total share-based employee compensation determined under
    fair value method for all awards, net of related tax effects


(1,094
)


(812
)Net income  pro forma

$
2,508


$
2,206Earnings per common share:Basic  as restated

$
1.50


$
1.20Basic  pro forma

$
1.04


$
0.88Diluted  as restated

$
1.47


$
1.18Diluted  pro forma

$
1.02


$
0.86     Valuation
    Information
   91




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
      Fiscal Years
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005Expected term:Stock options


3.6 years



3.8 years



3.8 yearsEmployee stock purchase plan


3 months



3 months



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


4.8
%


3.9
%


2.9
%Volatility


26
%


25
%


36
%Dividends


0
%


0
%


0
%   401(k) Plan Form 10-K
  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),
  NOTE 7 
    Financial
    Services  Joint Venture
    Agreement
   92




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
            Financing
    Receivables
    February 2,


February 3,2007


2006AsRestated(in
    millions)Financing receivables, net:Customer receivables:Revolving loans, net

$
771


$
1,025Leases and loans, net


627



302Customer receivables, net


1,398



1,327Residual interest


296



274Retained interest


159



90Financing receivables, net

$
1,853


$
1,691Short-term

$
1,530


$
1,366Long-term


323



325Financing receivables, net

$
1,853


$
1,691    93




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
    
    Customer receivables are presented net of allowance for
    uncollectible accounts. The allowance is based on factors
    including historical trends and the composition and credit
    quality of the customer receivables. The composition and credit
    quality varies from investment grade commercial customers to
    subprime consumers. Customer receivables are charged to the
    allowance at the earlier of when an account is deemed to be
    uncollectible or when the account is 180 days delinquent.
    Recoveries on customer receivables previously charged off as
    uncollectible are adjusted 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.
    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
    18 months and have an average original term of
    approximately 13 months. Revolving loans bear interest at a
    variable annual percentage rate that is tied to the prime rate.-
    Leases with business customers generally have fixed terms of two
    to three years. Future maturities of minimum lease payments at
    February 2, 2007 are as follows: 2008: $55 million;
    2009: $36 million; 2010: $13 million; and 2011:
    $1 million. Fixed-term loans are also offered to qualified
    small businesses for the purchase of products sold by Dell.  
    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 finance
    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. Any resulting losses representing the excess of carrying
    value over estimated fair value that are other-than-temporary
    are recorded in earnings. However, unrealized gains are
    reflected in stockholders equity as part of accumulated
    other comprehensive income. In the first quarter of Fiscal 2008
    Dell adopted SFAS 155 and, as a result, all gains and
    losses are recognized in income immediately and are no longer
    included in accumulated other comprehensive income. 94




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DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
     Fiscal Year
    EndedFebruary 2,


February 3,2007


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

$
90


$
24New sales


167



97Distributions from conduits


(142
)


(37
)Net accretion


17



4Change in fair value for the period


27



2Retained interest at end of year

$
159


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

$
607


$
446Other cash flows received on retained interests


142



36Servicing fees received


9



Repurchases of ineligible contracts


(7
)


(4
)Cash flows during the period

$
751


$
478     Average Key
    AssumptionsWeighted-Average

Weighted-

Weighted-

Weighted-Monthly

Average

Average

AveragePayment
    Rates

Credit
    Losses

Discount
    Rates

Life(lifetime)

(annualized)

(months)Time of Sale Valuation of Retained Interest


8
%


9
%


15
%


12Valuation of Retained Interests


7
%


9
%


14
%


12     February 2,2007(in
    millions)Adverse Change of:Expected Prepayment Speed: 10%

$
(2
)Expected Prepayment Speed: 20%

$
(4
)Expected Credit Losses: 10%

$
(7
)Expected Credit Losses: 20%

$
(14
)Discount Rate: 10%

$
(4
)Discount Rate: 20%

$
(8
)    95




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
    DFS Servicing
    Liability
    Asset
    Securitization
       96




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
    February 2,
    2007

February 3,
    2006Dollars

%(a)

Dollars

%(a)As

AsRestated

Restated(in millions,
    except percentages)Net credit losses of securitized finance receivables

$
30.9



4
%

$
6.2



2
%Securitized finance receivables 60 days or more delinquent

$
33.2



3
%

$
5.5



1
%     (a)
    
    Net credit losses as a percent of
    the outstanding financing receivable balance.  NOTE 8 
    Warranty
    Liability and Related Deferred Revenue    Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


Restated(in
    millions)Deferred revenue:Deferred revenue at beginning of year

$
3,707


$
2,904


$
2,053Revenue deferred for new extended warranty and service contracts
    sold(a)


3,135



2,830



2,135Revenue
    recognized(a)


(2,621
)


(2,027
)


(1,284
)Deferred revenue at end of year

$
4,221


$
3,707


$
2,904Current portion

$
2,032


$
1,842


$
1,473Non-current portion


2,189



1,865



1,431Deferred revenue at end of year

$
4,221


$
3,707


$
2,904   97




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
  Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


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

$
951


$
722


$
633Costs accrued for new warranty contracts and changes in
    estimates for pre-existing
    warranties(b)


1,242



1,391



852Service obligations
    honored(a)


(1,235
)


(1,162
)


(763
)Warranty liability at end of year

$
958


$
951


$
722Current portion

$
768


$
714


$
463Non-current portion


190



237



259Warranty liability at end of year

$
958


$
951


$
722     (a)
    
    Prior period amounts have been
    changed to reflect the current year presentation of service
    obligations honored. There is no impact to the Consolidated
    Statements of Financial Position or Consolidated Statements of
    Income as a result of this change.(b)
    
    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 9 
    Commitments and
    Contingencies  Lease Commitments
    DFS Purchase Commitment
  Restricted Cash
 98




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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 recently completed. For
    information regarding the Audit Committees investigation,
    the accounting errors and irregularities identified, and the
    restatement adjustments see Note 2 of Notes to Consolidated
    Financial Statements. 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 Inc. Securities Litigation In re Dell Inc. ERISA Litigation In
    re Dell Inc. Derivative Litigation, Baltimore County Employees Retirement
    System v. Dell Inc.,
  
    Copyright Levies Proceedings against the IT
    industry in Germany seek to impose levies on equipment, such as
    personal computers, multifunction devices, and printers that
    facilitate making private copies of copyrighted materials. The
    total levies due, if imposed, would be based on the number of 99




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
  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.    
    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 addition, in
    decisions made through May 2007, the court granted summary
    judgment of non-infringement with respect to five more of the
    Lucent patents asserted against Dell. The court has ordered
    invalidity briefing with regard to other patents at issue in
    view of the April 30, 2007, U.S. Supreme Court
    decision in KSR v. Teleflex. Fact and expert
    discovery has closed, and the three actions have been
    consolidated. Trial is scheduled to begin in February 2008. Dell
    is defending these claims vigorously. Separately, Dell has 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 litigation is pending and discovery is
    proceeding.
    Sales Tax Claims Several state and local
    taxing jurisdictions have asserted claims against Dell Catalog
    Sales L.P. (DCSLP), an indirect wholly-owned
    subsidiary of Dell, alleging that DCSLP had an obligation to
    collect tax on sales made into those jurisdictions because of
    its alleged nexus, or physical presence, in those jurisdictions.
    During the first and second quarter of Fiscal 2008, Dell settled
    suits filed by the State of Louisiana and the Secretary of the
    Louisiana Department of Revenue and Taxation in the
    19th Judicial District Court of the State of Louisiana, and
    by two Louisiana parishes, Orleans Parish and Jefferson Parish,
    in the State of Louisiana 24th Judicial District Court.
    Dell also settled similar claims made by a number of other
    Louisiana parishes and by the State of Massachusetts. These
    settlement amounts did not have a material adverse effect on
    Dells financial condition, results of operations, or cash
    flows. While there are ongoing claims by certain other state and
    local taxing authorities, DCSLP disputes the allegation that it
    had nexus in any of these other jurisdictions during the periods
    in issue, and is defending the claims vigorously. Dell does not
    expect that the outcome of these other claims, individually or
    collectively, will have a material adverse effect on its
    financial condition, results of operations, or cash flows. 100




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
   
    Income Tax Dell is currently under audit in
    various jurisdictions, including the United States. The tax
    periods open to examination by the major taxing jurisdictions to
    which Dell is subject include Fiscal 1999 through Fiscal 2007.
    Dell does not anticipate a significant change to the total
    amount of unrecognized benefits within the next 12 months.    Certain Concentrations
        NOTE 10 
    Segment
    Information     101




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
      Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


Restated(in
    millions)Net revenueAmericas:Business

$
29,311


$
28,365


$
25,289U.S. Consumer


7,069



7,960



7,614Americas


36,380



36,325



32,903EMEA


13,682



12,887



10,753APJ


7,358



6,576



5,465Net revenue

$
57,420


$
55,788


$
49,121   Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


Restated(in
    millions)Consolidated operating incomeAmericas:Business

$
2,388


$
2,956


$
2,534U.S. Consumer


135



452



414Americas


2,523



3,408



2,948EMEA


583



871



815APJ


332



524



443Consolidated segment operating income


3,438



4,803



4,206Stock-based compensation
    expense(a)


(368
)






Other product
    charges(b)






(338
)


Selling, general, and administrative
    charges(c)






(83
)


Consolidated operating income

$
3,070


$
4,382


$
4,206     (a)
    
    Stock compensation of
    $17 million and $18 million for Fiscal 2006 and Fiscal
    2005, respectively, is included in the total consolidated
    segment operating income.(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. 102




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
     Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


Restated(in
    millions)Depreciation:Americas:Business

$
211


$
156


$
125U.S. Consumer


62



53



50Americas


273



209



175EMEA


114



106



88APJ


84



79



68Depreciation and amortization expense

$
471


$
394


$
331   Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


Restated(in
    millions)Capital expenditures:Americas:Business

$
489


$
408


$
268U.S. Consumer


141



140



113Americas


630



548



381EMEA


144



91



74APJ


122



108



60Capital expenditures

$
896


$
747


$
515   Fiscal Year
    EndedFebruary 2,


February 3,2007


2006AsRestated(in
    millions)Assets:Corporate

$
16,694


$
15,433Americas


4,981



4,410EMEA


2,401



1,971APJ


1,559



1,438Assets

$
25,635


$
23,252  103




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
    Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


Restated(in
    millions)Net revenue:United States

$
32,361


$
32,949


$
30,311Foreign countries


25,059



22,839



18,810Net revenue

$
57,420


$
55,788


$
49,121   Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


Restated(in
    millions)Long-lived assets:United States

$
1,538


$
1,440


$
1,248Foreign countries


871



553



420Long-lived assets

$
2,409


$
1,993


$
1,668      104




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
    Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


Restated(in
    millions)Net revenue:Desktop PCs

$
19,815


$
21,568


$
21,141Mobility


15,480



14,372



12,001Software and peripherals


9,001



8,329



6,626Servers and networking


5,805



5,449



4,880Enhanced services


5,063



4,207



3,121Storage


2,256



1,863



1,352Net revenue

$
57,420


$
55,788


$
49,121  105




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
  NOTE 11 
    Supplemental
    Consolidated Financial Information  Fiscal Year
    EndedFebruary 2,


February 3,2007


2006AsRestated(in
    millions)Supplemental Consolidated Statements of Financial Position
    Information:Accounts receivable:Gross accounts receivable

$
4,748


$
4,179Allowance for doubtful accounts


(126
)


(97
)Accounts receivable

$
4,622


$
4,082Inventories:Production materials

$
361


$
325Work-in-process


61



43Finished goods


238



220Inventories

$
660


$
588Property, plant, and equipment:Computer equipment

$
1,596


$
1,275Land and buildings


1,480



1,372Machinery and other equipment


973



910Total property, plant, and equipment


4,049



3,557Accumulated depreciation and amortization


(1,640
)


(1,564
)Property, plant, and equipment

$
2,409


$
1,993Accrued and other current liabilities:Deferred revenue

$
2,032


$
1,842Warranty liability


768



714Income taxes


1,141



877Compensation


861



838Other


2,371



1,969Accrued and other current liabilities

$
7,173


$
6,240Other non-current liabilities:Deferred revenue

$
2,189


$
1,865Warranty liability


190



237Other


457



305Other non-current liabilities

$
2,836


$
2,407  106




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
    Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


Restated(in
    millions)Supplemental Consolidated Statements of Income
    Information:Investment and other income, net:Investment income, primarily interest

$
368


$
308


$
226Gains (losses) on investments, net


(5
)


(2
)


6Interest expense


(45
)


(29
)


(15
)CIT minority interest


(23
)


(27
)


(17
)Foreign exchange


(37
)


3



16Gain on sale of building


36







Other


(19
)


(27
)


(19
)Investment and other income, net

$
275


$
226


$
197   Fiscal Year
    EndedFebruary 2,


February 3,


January 28,2007


2006


2005As


AsRestated


Restated(in
    millions)Supplemental Consolidated Statements of Cash Flows
    Information:Changes in operating working capital accounts:Accounts receivable, net

$
(542
)

$
(602
)

$
(566
)Financing receivables, net


(165
)


(378
)


(275
)Inventories


(72
)


(72
)


(183
)Accounts payable


505



1,018



1,661Accrued and other liabilities


955



853



1,611Other, net


(284
)


(872
)


(476
)Changes in operating working capital accounts

$
397


$
(53
)

$
1,772Income taxes paid

$
652


$
996


$
575Interest paid

$
57


$
39


$
31  107




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
  NOTE 12 
    Unaudited
    Quarterly Results and Stock Prices  Unaudited Quarterly Results
  Fiscal Year
    2007(a)First

Second

Third

FourthQuarter

Quarter

Quarter

QuarterAs

AsReported

Restated(in millions,
    except per share data)Net revenue

$
14,216


$
14,320


$
14,211


$
14,419


$
14,470Gross margin

$
2,472


$
2,508


$
2,138


$
2,391


$
2,479Net income

$
762


$
776


$
480


$
601


$
726Earnings per common share:Basic

$
0.33


$
0.34


$
0.21


$
0.27


$
0.33Diluted

$
0.33


$
0.33


$
0.21


$
0.27


$
0.32Weighted-average shares outstanding:Basic


2,297



2,297



2,264



2,229



2,230Diluted


2,318



2,318



2,278



2,238



2,251     (a)
    
    Results for Fiscal 2007 include
    stock-based compensation expense due to the implementation of
    SFAS 123(R). Dell implemented SFAS 123(R) using the
    modified prospective method effective February 4, 2006. See
    Note 6 of Notes to Consolidated Financial Statements for
    further discussion.    Fiscal Year
    2006First

Second

Third

FourthQuarter

Quarter(a)

Quarter(b)

QuarterAs

As

As

As

As

As

As

AsReported

Restated

Reported

Restated

Reported

Restated

Reported

Restated(in millions,
    except per share data)Net revenue

$
13,386


$
13,300


$
13,428


$
13,382


$
13,911


$
13,880


$
15,183


$
15,226Gross margin

$
2,491


$
2,452


$
2,499


$
2,431


$
2,251


$
2,265


$
2,709


$
2,743Net income

$
934


$
908


$
1,020


$
982


$
606


$
635


$
1,012


$
1,077Earnings per common share:Basic

$
0.38


$
0.37


$
0.42


$
0.41


$
0.25


$
0.27


$
0.43


$
0.46Diluted

$
0.37


$
0.36


$
0.41


$
0.40


$
0.25


$
0.26


$
0.43


$
0.45Weighted-average shares outstanding:Basic


2,456



2,456



2,418



2,418



2,395



2,395



2,350



2,350Diluted


2,515



2,515



2,478



2,478



2,435



2,435



2,375



2,375     (a)
    
    Results for the second quarter
    include the impact of 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.(b)
    
    Results for the third quarter
    include charges of $421 million related to the cost of
    servicing certain
    OptiPlextmsystems that include a vendor part that failed to perform to
    Dells specifications, workforce realignment, product
    rationalizations, excess facilities, and the write-off of
    goodwill. 108




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
     FirstFirst Quarter of
    Fiscal 2007 (As Restated)

Quarter(In millions,except pershare
    data)Net income as reported

$
762Revenue recognition:Software sales


(2
)Other revenue recognition


(8
)Revenue recognition


(10
)Warranty liabilities


33Other reserves and accruals


(3
)(Provision) benefit for income taxes


(6
)Net impact of adjustments


14Net income as restated

$
776   First


Second


Third


FourthFiscal 2006 (As
    Restated)

Quarter


Quarter


Quarter


Quarter(In millions,
    except per share data)Net income as reported

$
934


$
1,020


$
606


$
1,012Revenue recognition:Software sales


(3
)


(3
)


3



(1
)Other revenue recognition


(20
)


(3
)


9



30Revenue recognition


(23
)


(6
)


12



29Warranty liabilities


(14
)


(52
)


(14
)


25Other reserves and accruals


(8
)


11



41



33(Provision) benefit for income taxes


19



9



(10
)


(22
)Net impact of adjustments


(26
)


(38
)


29



65Net income as restated

$
908


$
982


$
635


$
1,077   Stock Prices
  First

Second

Third

FourthQuarter

Quarter

Quarter

QuarterPrice Per
    Share

Price Per
    Share

Price Per
    Share

Price Per
    ShareHigh

Low

High

Low

High

Low

High

LowFiscal 2007

$
32.00


$
25.32


$
26.43


$
19.91


$
24.62


$
20.99


$
27.62


$
23.52Fiscal 2006

$
41.76


$
34.83


$
41.54


$
34.96


$
40.84


$
31.06


$
32.89


$
29.00  109




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##### Table of Contents



DELL INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS (continued)
  NOTE 13 
    Subsequent
    Events     110




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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
      Evaluation of
    Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
   111




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Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f)
  Internal
    Control  Integrated Framework
  
    Control environment We did not maintain an
    effective control environment. Specifically:  -
    We did not maintain a tone and control consciousness that
    consistently emphasized strict adherence to GAAP. This control
    deficiency resulted in an environment in which accounting
    adjustments were viewed at times as an acceptable device to
    compensate for operational shortfalls, which in certain
    instances led to inappropriate accounting decisions and entries
    that appear to have been largely motivated to achieve desired
    accounting results and, in some instances, involved management
    override of controls. In a number of instances, information
    critical to an effective review of transactions and accounting
    entries was not disclosed to internal and external auditors.-
    We did not maintain a sufficient complement of personnel with an
    appropriate level of accounting knowledge, experience, and
    training in the application of GAAP commensurate with our
    financial reporting requirements and business environment.  The control environment, which is the responsibility of senior
    management, sets the tone of the organization, influences the
    control consciousness of its people, and is the foundation for
    all other components of internal control over financial
    reporting. The control environment material weaknesses described
    above contributed to the material weaknesses related to our
    period-end financial reporting process described below.  
    Period-end financial reporting process We did
    not maintain effective controls over the period-end reporting
    process, including controls with respect to the review,
    supervision, and monitoring of accounting operations.
    Specifically:  -
    Journal entries, both recurring and nonrecurring, were not
    always accompanied by sufficient supporting documentation and
    were not always adequately reviewed and approved for validity,
    completeness, and accuracy; 112




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##### Table of Contents



-
    Account reconciliations over balance sheet accounts were not
    always properly and timely performed, and the reconciliations
    and their supporting documentation were not consistently
    reviewed for completeness, accuracy, and timely resolution of
    reconciling items; and-
    We did not design and maintain effective controls to ensure the
    completeness, accuracy, and timeliness of the recording of
    accrued liabilities, reserves, and operating expenses, primarily
    related to our accrued warranty obligations, goods and services
    received but not invoiced, customer rebates, and nonproduction
    operating expenses.      Remediation
    Plan
    
    Our new leadership team, together with other senior executives,
    is committed to achieving and maintaining a strong control
    environment, high ethical standards, and financial reporting
    integrity. This commitment will be communicated to and
    reinforced with every Dell employee and to external
    stakeholders. This commitment is accompanied by a renewed
    management focus on decision-making and processes that are
    intended to achieve maximum shareholder value over the long-term
    and a decreased focus on short-term,
    quarter-by-quarter
    operating results.
    As a result of the initiatives already underway to address the
    control deficiencies described above, we have effected personnel
    changes in our accounting and financial reporting functions.
    Consequently, many of the employees involved in the accounting
    processes in which errors and irregularities were made are no
    longer involved in the accounting or financial reporting
    functions. In addition, we have taken, or will take, appropriate
    remedial actions with respect to certain employees, including
    terminations, reassignments, reprimands, increased supervision,
    training, and imposition of financial penalties in the form of
    compensation adjustments.
    We are in the process of reorganizing the Finance Department,
    segregating accounting and financial reporting responsibility
    from planning and forecasting responsibility, with a renewed
    commitment to accounting and financial reporting integrity. We
    have appointed a new Chief Accounting Officer and have
    strengthened that position, making it directly responsible for
    all accounting and financial reporting functions worldwide. In
    addition, we are implementing personnel resource plans, and
    training and retention programs, that are designed to ensure
    that we have sufficient personnel with knowledge, experience,
    and training in the application of GAAP commensurate with our
    financial reporting requirements. 113




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##### Table of Contents




    We will continue our efforts to establish or modify specific
    processes and controls to provide reasonable assurance with
    respect to the accuracy and integrity of accounting entries and
    the appropriate documentation, review, and approval of those
    entries. These efforts include:  -
    Centralization of the development, oversight, and monitoring of
    accounting policies and standardized processes in all critical
    accounting areas, including areas involving management judgment
    and discretion;-
    Implementation and clarification of specific accounting and
    finance policies, applicable worldwide, regarding the
    establishment, increase, and release of accrued liability and
    other balance sheet reserve accounts;-
    Creation of a revenue recognition accounting resource function
    to coordinate complex revenue recognition matters and to provide
    oversight and guidance on the design of controls and processes
    to enhance and standardize revenue recognition accounting
    procedures;-
    Improving 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;-
    Extending 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;-
    Enhancing the development, communication, and monitoring of
    processes and controls to ensure that appropriate account
    reconciliations are performed, documented, and reviewed as part
    of standardized procedures; and-
    Increasing the focus by the internal audit function and the
    Chief Accounting Officer on the 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.  
    We will implement company-wide training (led by the Chief
    Accounting Officer and other finance executives with appropriate
    accounting expertise) to enhance awareness and understanding of
    standards and principles for accounting and financial reporting.
    This training will include:  -
    Development and communication of an accounting code of conduct
    that will 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;-
    Comprehensive programs for all finance personnel globally (with
    initial focus on personnel directly responsible for accounting
    and financial reporting) covering all 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; and-
    Appropriate programs for other company personnel, including
    senior management, to emphasize the importance of accounting and
    financial reporting integrity.  
    We will invest in the design and implementation of additional
    and enhanced information technology systems and user
    applications commensurate with the complexity of our business
    and our financial reporting requirements. It is expected that
    these investments will improve the reliability of our financial
    reporting by reducing the need for manual processes, subjective
    assumptions, and management discretion; by reducing the
    opportunities for errors and omissions; and by decreasing our
    reliance on manual controls to detect and correct accounting and
    financial reporting inaccuracies. 114




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
    We will reemphasize and invigorate our communications to all
    Dell employees regarding the availability of our Ethics Hotline,
    through which employees at all levels can anonymously submit
    information or express concerns regarding accounting, financial
    reporting, or other irregularities they have become aware of or
    have observed. In addition, these communications will emphasize
    the existence and availability of other reporting avenues or
    forums for all employees, such as their management chain, their
    Human Resources representatives, the Ethics Office, the
    Ombudsmans Office, the Legal Department, and direct
    contact with the Chief Financial Officer or the Audit Committee.      Inherent
    Limitations over Internal Controls
    
    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.    Changes in
    Internal Control Over Financial Reporting
   115




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##### Table of Contents



ITEM 9B 
    OTHER INFORMATION
    PART III
  ITEM 10 
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Board of
    Directors
    Name

Age


CommitteesDonald J. Carty


61


Michael S. Dell


42


William H. Gray, III


66


Audit, Governance and NominatingSallie L. Krawcheck


42


FinanceAlan (A.G.) Lafley


60


Finance, Leadership Development and CompensationJudy C. Lewent


58


Finance (Chair), Leadership Development and CompensationThomas W. Luce, III


67


Audit (Chair)Klaus S. Luft


65


Leadership Development and CompensationAlex J. Mandl


63


AuditMichael A. Miles


68


Governance and Nominating, Leadership Development and
    Compensation (Chair)Sam Nunn


69


Audit, Governance and Nominating (Chair),
    Presiding Director     
    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, real
    estate, 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 116




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##### Table of Contents




    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.
    William H. Gray, III Mr. Gray has
    been a director since November 2000. He is Chairman of the Amani
    Group (a consulting and advisory firm), a position he has held
    since August 2004. Mr. Gray was President and Chief
    Executive Officer of The College Fund/UNCF (educational
    assistance) from 1991 until he retired in June 2004. He was a
    member of the United States House of Representatives from 1979
    to 1991. During his tenure, he was Chairman of the House Budget
    Committee, a member of the Appropriations Committee, Chairman of
    the House Democratic Caucus, and Majority Whip. He is an
    ordained Baptist Minister and last pastored at Bright Hope
    Baptist Church of Philadelphia from 1972 until 2007.
    Mr. Gray is also a director of J.P. Morgan
    Chase & Co., Prudential Financial Inc., Visteon
    Corporation, and Pfizer Inc.
    Sallie L. Krawcheck Ms. Krawcheck has
    been a director since July 2006. She is the Chairman and Chief
    Executive Officer, Citi Global Wealth Management. Until March
    2007, Ms. Krawcheck served as Chief Financial Officer and
    Head of Strategy for Citigroup Inc. She is also a member of the
    Citi Management, Operating and Business Heads Committees, as
    well as the Citi Foundation Board and the Citi Business
    Practices Committee. Ms. Krawcheck joined Citi in October
    2002 as Chairman and Chief Executive Officer of Smith Barney.
    Prior to joining Citi, Ms. Krawcheck was Chairman and Chief
    Executive Officer of Sanford C. Bernstein & Company.
    She also served as an Executive Vice President of
    Bernsteins parent company, Alliance Capital Management,
    from 1999 to 2001. Ms. Krawcheck is a member of the Board
    of Directors of the University of North Carolina at Chapel Hill
    Foundations, Inc., the Board of Directors of Carnegie Hall, the
    Board of Overseers of Columbia Business School, and the Board of
    Trustees for the Economic Club of New York.
    Alan (A.G.) Lafley Mr. Lafley has been a
    director since July 2006. He is the Chairman of the Board and
    Chief Executive Officer of The Procter & Gamble
    Company. Mr. Lafley joined Procter & Gamble in
    1977, and has served in a variety of executive level positions
    since 1992. He was named President and Chief Executive in 2000
    and Chairman of the Board in 2002. Mr. Lafley also serves
    on the Board of General Electric Company, and on the Board of
    the Cincinnati Center City Development Corporation. He is a
    Trustee of Hamilton College and is a member of the Business
    Roundtable and the Business Council.
    Judy C. Lewent Ms. Lewent has been a
    director since May 2001. Until her retirement in September 2007,
    she served as the Executive Vice President, Chief Financial
    Officer of Merck & Co., Inc. She served as Chief
    Financial Officer of Merck starting in 1990 and also held
    various other financial and management positions since joining
    Merck in 1980. Ms. Lewent is also a director of Motorola,
    Inc. Ms. Lewent is a trustee of the Rockefeller Family
    Trust, a life member of the Massachusetts Institute of
    Technology Corporation, and a member of the American Academy of
    Arts and Sciences.
    Thomas W. Luce, III Mr. Luce served
    as a director from November 1991 to September 2005 and rejoined
    the Board in September 2006. He currently serves as President,
    Chief Executive Officer, and Director of the National Math and
    Science Initiative Inc., a not-for-profit organization dedicated
    to expanding programs that have a proven impact on math and
    science. He served as United States Assistant Secretary of
    Education for Planning, Evaluation and Policy Development from
    July 1, 2005 until his resignation September 1, 2006.
    From 1997 until 2005, Mr. Luce was a partner of the
    business advisory firm Luce & Williams, Ltd. Before
    then, Mr. Luce was a founding partner and managing partner 117




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##### Table of Contents



of the law firm of Hughes & Luce, LLP from 1973 until
    his retirement from the firm in 1997, and was Of Counsel with
    that law firm until December 2003.  
    Klaus S. Luft Mr. Luft has been a
    director since March 1995. He is the founder and Chairman of the
    Supervisory Board of Artedona AG, a privately held mail order
    e-commerce
    company established in 1999 and headquartered in Munich,
    Germany. He is also owner and President of Munich-based
    MATCH  Market Access Services GmbH & Co.,
    KG. Since August 1990, Mr. Luft has served and continues to
    serve as Vice Chairman and International Advisor to Goldman
    Sachs Europe Limited. From March 1986 to November 1989, he was
    Chief Executive Officer of Nixdorf Computer AG, where he served
    for more than 17 years in a variety of executive positions
    in marketing, manufacturing, and finance. Mr. Luft is the
    Honorary Consul of the Republic of Estonia in the State of
    Bavaria.
    Alex J. Mandl Mr. Mandl has been a
    director since November 1997. In June 2006, he became Executive
    Chairman of Gemalto, a company resulting from the merger of
    Axalto Holding N.V. and Gemplus International S.A. Before June
    2006, Mr. Mandl was President and Chief Executive Officer
    and a member of the Board of Directors of Gemplus, positions he
    held since August 2002. He has served as Principal of ASM
    Investments, a company focusing on early stage funding in the
    technology sector since April 2001. From 1996 to March 2001,
    Mr. Mandl was Chairman and CEO of Teligent, Inc., which
    offered business customers an alternative to the Bell Companies
    for local, long distance and data communication services.
    Mr. Mandl was AT&Ts President and Chief
    Operating Officer from 1994 to 1996, and its Executive Vice
    President and Chief Financial Officer from 1991 to 1993. From
    1988 to 1991, Mr. Mandl was Chairman of the Board and Chief
    Executive Officer of
    Sea-Land
    Services Inc. Mr. Mandl is also a board member of Hewitt
    Associates, Inc., Horizon Lines, Inc., and Willamette University.
    Michael A. Miles Mr. Miles has been a
    director since February 1995. He is a special limited partner
    and a member of the Advisory Board of the investment firm
    Forstmann Little and Co. He is the former Chairman of the Board
    and Chief Executive Officer of Philip Morris Companies Inc.,
    having served in those positions from September 1991 to July
    1994. Prior to September 1991, Mr. Miles was Vice Chairman
    and a member of the board of directors of Philip Morris
    Companies Inc. Mr. Miles is also a director of Time Warner
    Inc., AMR Corporation, and Citadel Broadcasting Corp. and a
    trustee of Northwestern University.
    Sam Nunn Mr. Nunn has been a director
    since December 1999. He is Co-Chairman and Chief Executive
    Officer of the Nuclear Threat Initiative (NTI), a charitable
    organization working to reduce the global threats from nuclear,
    biological, and chemical weapons. He was a Senior Partner at the
    law firm of King & Spalding, Atlanta, Georgia, from
    1997 until 2003. From 1972 through 1996, he served as a United
    States Senator from Georgia. During his tenure as Senator, he
    served as Chairman of the Senate Armed Services Committee and
    the Permanent Subcommittee on Investigations. He also served on
    the Intelligence and Small Business Committees. Mr. Nunn
    also serves as a director of Chevron Corporation, The
    Coca-Cola
    Company, and General Electric Company. 118




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##### Table of Contents



Executive
    Officers
    Name

Age


TitleMichael S. Dell


42


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


54


President, Global OperationsJeffrey W. Clarke


44


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


43


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     
    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 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, and supply
    chain 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 119




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##### Table of Contents



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 on
    a worldwide basis. He currently sits on the board of directors
    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. Before
    joining Dell, Mr. Garriques served in various leadership
    roles at Motorola from February 2001 to February 2007, where he
    was most recently Executive Vice President and President,
    responsible for the Mobile Devices division. He also was Senior
    Vice President and General Manager of the Europe, Middle East,
    and Africa region for the Personal Communications Services
    division, as well as Senior Vice President and General Manager
    of Worldwide Products Line Management for the Personal
    Communications Services division. Prior to joining Motorola,
    Mr. Garriques held management positions at AT&T
    Network Systems, Lucent Technologies, and Philips Consumer
    Communications. Mr. Garriques holds a masters degree
    in business administration from The Wharton School at the
    University of Pennsylvania, a masters degree in mechanical
    engineering from Stanford University, and a bachelors
    degree in mechanical engineering from Boston University.
    Mark Jarvis Mr. Jarvis joined us in
    October 2007 as Senior Vice President, Chief Marketing Officer.
    In this role he is responsible for the companys global
    marketing effort, spanning consumer and commercial businesses,
    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. From 2003 until
    2007, Mr. Jarvis served as a marketing consultant to
    numerous Bay Area startups. From 1989 until 2003,
    Mr. Jarvis held various roles at Oracle, last serving as
    Chief Marketing Officer. 120




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##### Table of Contents




    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 Manger 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
    Manger 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. 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.  Section 16(a)
    Beneficial Ownership Reporting Compliance
    Code of
    Conduct
  Winning with
    Integrity
   121




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##### Table of Contents



Corporate
    Governance
  Corporate Governance Principles 
  Board Committees 
  
    Audit Committee The Audit Committee assists
    the Board in fulfilling its responsibility to provide oversight
    with respect to our financial statements and reports and other
    disclosures provided to stockholders, the system of internal
    controls, the audit process, and legal and ethical compliance.
    Its primary duties include reviewing the scope and adequacy of
    our internal and financial controls; reviewing the scope and
    results of the audit plans of our independent and internal
    auditors; reviewing the objectivity, effectiveness, and
    resources of the internal audit function; appraising our
    financial reporting activities and the accounting standards and
    principles followed; and reviewing and approving ethics and
    compliance policies. The Audit Committee also selects, engages,
    compensates, and oversees our independent auditor and
    pre-approves all services to be performed by that firm.    
    Leadership Development and Compensation Committee The Leadership Development and Compensation Committee
    reviews and approves, on behalf of the Board, the amounts and
    types of compensation to be paid to our executive officers and
    the non-employee directors; reviews and approves, on behalf of
    the Board, all bonus and equity compensation to be paid to our
    other employees; and administers our stock-based compensation
    plans. The Leadership Development and Compensation Committee is
    comprised entirely of directors who satisfy the standards of
    independence established in our Corporate Governance Principles,
    as well as additional or supplemental independence standards
    applicable to compensation committee members established under
    applicable law and NASDAQ listing requirements.
    Governance and Nominating Committee The
    Governance and Nominating Committee oversees all matters of
    corporate governance, including formulating and recommending to
    the full Board governance policies and processes and monitoring
    and safeguarding the independence of the Board, and selects,
    evaluates, and recommends to the full Board qualified candidates
    for election or appointment to the Board. This committee also
    recommends the structure and membership of the Board committees
    and administers an annual self-evaluation of Board performance.
    This committee is also responsible for monitoring, on behalf of
    the Board, our sustainability and corporate responsibility
    activities and initiatives. The Governance and Nominating
    Committee is comprised entirely of directors who satisfy the
    standards of independence established in our Corporate
    Governance Principles, as well as additional or supplemental
    independence standards applicable to nominating committee
    members established under applicable law and NASDAQ listing
    requirements.   122




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##### Table of Contents




    Finance Committee The Finance Committee
    oversees all areas of corporate finance, including capital
    structure, equity and debt financings, capital expenditures,
    merger and acquisition activity, cash management, banking
    activities and relationships, investments, foreign exchange
    activities, and share repurchase activities. A majority of the
    members of the Finance Committee is comprised of directors who
    satisfy the standards of independence established in our
    Corporate Governance Principles.    ITEM 11 
    EXECUTIVE
    COMPENSATION  Director
    Compensation
    Annual Retainer Fee 
  Option and Stock Awards 
   123




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##### Table of Contents



Other Benefits 
    Director Compensation During Fiscal 2007 
  Fees Earned or

Equity
    Awards(a)Name

Paid in
    Cash

Stock

Option

TotalMr.
    Carty(b)

$
20,000


$
112,597


$
122,728


$
255,325Mr. Gray


37,500



75,100



122,728



235,328Ms. Krawcheck


75,000



26,336



27,161



128,497Mr. Lafley


75,000



26,336



27,161



128,497Ms. Lewent


15,000



112,597



210,298



337,895Mr. Luce


95,000



4,887



23,003



122,890Mr. Luft






112,597
(c)


138,343



250,940Mr. Mandl


75,000



37,603



128,798



241,401Mr. Miles


90,000



37,603



135,450



263,053Mr. Nunn


15,000



112,597



141,519



269,116     (a)
    
    Represents the dollar amount of
    equity compensation cost recognized for financial statement
    reporting purposes with respect to Fiscal 2007, computed in
    accordance with SFAS 123(R), excluding the impact of
    estimated forfeitures for service-based vesting conditions. See
    Note 6 of Notes to Consolidated Financial Statements
    included in Part II 
    Item 8  Financial Statements and Supplementary
    Data for a description of the assumptions used in that
    computation. The actual value realized by the director with
    respect to stock awards will depend on the market value of Dell
    common stock on the date the stock is sold, and the actual value
    realized by the director with respect to option awards will
    depend on the difference between the market value of Dell common
    stock on the date the option is exercised and the exercise price.The following table sets forth the
    number of shares covered by awards made in Fiscal 2007. All of
    these awards, other than those made to Mr. Luce, were made
    on July 21, 2006, the date of the first Board meeting
    following last years annual meeting of stockholders. The
    awards to Mr. Luce were made on December 7, 2006, the
    date of the first Board meeting Mr. Luce attended after his
    reappointment to the Board in September 2006.  Annual

Annual

Restricted

New Director

New DirectorRestricted
    Stock

Stock Option

Stock in Lieu

Restricted

Stock OptionName

Award

Award

of
    Retainer

Stock
    Award

AwardMr. Carty


3,944



15,775



3,836







Mr. Gray


3,944



15,775



1,918







Ms. Krawcheck


3,944



15,775







7,888



31,550Mr. Lafley


3,944



15,775







7,888



31,550Ms. Lewent


3,944



15,775



3,836







Mr. Luce














5,850



23,399Mr. Luft


3,944



15,775



3,836







Mr. Mandl


3,944



15,775











Mr. Miles


3,944



15,775











Mr. Nunn


3,944



15,775



3,836







   The restricted stock included in
    the Annual Restricted Stock Award column and the New Director
    Restricted Stock Award column vests ratably over five years (20%
    per year), so long as the director remains a member of the
    Board. The portion that is unvested at the time the director
    ceases to be a member of the Board (other than by reason of
    death or permanent disability) is forfeited. All unvested
    restricted stock vests immediately upon death or permanent
    disability. The grant date fair value for these awards, computed
    in accordance with SFAS 123(R), was $77,105 for each of the
    Annual Restricted Stock Awards; $154,211 for each of the New
    Director Restricted Stock Awards granted to Ms. Krawcheck
    and Mr. Lafley; and $154,206 for the New Director
    Restricted Stock Award granted to Mr. Luce.The stock options included in the
    Annual Stock Option Award column and the New Director Stock
    Option Award column vest ratably over five years (20% per year),
    so long as the director remains a member of the Board. The
    portion that is unvested at the time the director ceases to be a
    member of the Board (other than by reason of death or permanent
    disability) terminates. All 124




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unvested options vest immediately
    upon death or permanent disability. The options terminate ten
    years from the date of grant unless terminated earlier as
    follows: all options (vested and unvested) terminate immediately
    if the director resigns at the request or demand of the Board or
    is otherwise removed from the Board; if the director ceases to
    be a member of the Board by reason of death, permanent
    disability, or retirement after attaining the age of 72, vested
    options remain exercisable for one year; if the director resigns
    for any other reason, vested options remain exercisable for
    90 days. The options are transferable to family members
    under specified conditions. The exercise price of the options is
    the fair market value of Dell common stock on the date of grant
    ($26.36 for the award to Mr. Luce on December 7, 2006,
    and $19.55 for the awards to the other non-employee directors on
    July 21, 2006). The grant date fair value for these awards,
    computed in accordance with SFAS 123(R), was $104,367 for
    each of the Annual Stock Option Awards; $208,735 for each of the
    New Director Stock Option Awards granted to Ms. Krawcheck
    and Mr. Lafley; and $174,884 for the New Director Stock
    Option Award granted to Mr. Luce.The restricted stock included in
    the Restricted Stock in Lieu of Retainer column was granted
    pursuant to the directors election to receive restricted
    stock in lieu of some or all of the $75,000 annual cash
    retainer. This stock was fully vested at grant, but may not be
    sold or transferred for six months following the grant. The
    number of shares was determined by dividing the foregone
    retainer amount by the fair market value of Dell common stock on
    the date of grant ($19.55). The grant date fair value for these
    awards, computed in accordance with SFAS 123(R), was equal
    to the amount of the foregone retainer ($37,500 in the case of
    Mr. Gray and $75,000 in the case of each other director who
    elected this option).The following table sets forth the
    number of shares of restricted stock and the number of shares
    underlying stock options held by each of the non-employee
    directors as of the end of Fiscal 2007:  Name

Restricted
    Stock

Stock
    OptionsMr. Carty


6,576



342,376Mr. Gray


6,576



83,375Ms. Krawcheck


11,832



47,325Mr. Lafley


11,832



47,325Ms. Lewent


6,576



157,669Mr. Luce


5,850



37,208Mr. Luft


6,576



165,091Mr. Mandl


6,576



167,704Mr. Miles


6,576



361,402Mr. Nunn


6,576



182,549   The information for Mr. Carty
    reflects awards he received in his capacity as a director, prior
    to becoming an executive officer. For information regarding
    awards he received as an executive officer, see
    Compensation of Executive Officers below.(b)
    
    These awards were made to
    Mr. Carty as a member of the Board prior to his becoming an
    executive officer. As an executive officer, he is no longer
    eligible for additional compensation for service on the Board.
    For a description of Mr. Cartys compensation as an
    executive officer, see Compensation of Executive
    Officers below.(c)
    
    To afford Mr. Luft, a resident
    of Germany, a comparable compensation benefit under local law,
    all awards designated as restricted stock awards were made in
    the form of restricted stock units with the same vesting and
    expiration provisions as the restricted stock.  Compensation of
    Executive Officers
  Compensation
    Discussion and Analysis
  Introduction
      
    Reviewing with management and approving the compensation
    philosophy and core objectives for executive officers;
    Evaluating the performance of the Chairman and Chief Executive
    Officer in light of the current business environment and our
    strategic objectives; 125




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##### Table of Contents




    Reviewing with management and approving all forms of
    compensation to be provided to the executive officers, including
    establishing target opportunity levels, setting performance
    goals, and determining results;
    Acting as administrator of our compensation plans, including
    granting awards to executive officers; and
    Evaluating the need for, and provisions of, employment contracts
    or severance arrangements for the executive officers.    Executive
    Compensation Philosophy and Core Objectives
    
    Globalization  Focus on accelerating profitable
    revenue growth in developing areas of the world;
    Product Leadership  Design and innovate around
    non-proprietary standards-based technologies to offer customers
    what they want, when they want it, and at a level of value they
    consider to be unparalleled;
    Customer Experience  Focus on product quality and
    customer service to instill customer satisfaction, trust, and
    loyalty; and
    Winning Culture  Recruit and develop a diverse
    workforce globally and provide a positive work environment,
    including recognition based on merit, a focus on customer
    commitment, the highest standards of integrity and ethical
    behavior, and community leadership.    
    Providing compensation commensurate with the level of success
    achieved, ranging from above-average overall rewards for
    performance that exceeds that of our peers to below-average
    compensation for below-average performance;
    Providing a total compensation opportunity that is competitive
    with similar high-tech and other large global general industry
    companies that we compete with for talent;
    Managing fixed costs by combining a conservative approach to
    base salaries and benefits, with more aggressive
    performance-dependent short- and long-term incentives;
    Recognizing and rewarding the achievement of corporate,
    regional/business unit, and individual performance
    goals; and
    Heavily weighting the compensation package towards long-term,
    performance-dependent incentives to better align the interests
    of executives with shareholders. 126




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##### Table of Contents



Evaluating
    Chairman and CEO Performance
  Process
    Results
    Executive Officer
    Compensation
  The Total
    Compensation Package
  Process 
  Elements of the Total Compensation Package 
 127




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##### Table of Contents



Pay Mix for Named
    Executive Officers
  
  Pay Mix 
  Competitive Market Assessment
   128




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##### Table of Contents



 Advanced Micro Devices, Inc.
     Apple Inc.
     Applied Materials Inc.
     Best Buy Co., Inc.
     CDW Corp.
     Cisco Systems Inc.
     Citigroup Inc.
     Computer Sciences Corp.
     Electronic Data Systems Corp.
     EMC Corp.
     General Electric Company
     Hewlett Packard Co.

 Home Depot Inc.
     Honeywell International Inc.
     Intel Corp.
     International Business Machines Corp.
     Johnson & Johnson
     Lexmark International Inc.
     Microsoft Corp.
     Oracle Corp.
     Procter & Gamble Co.
     Texas Instruments Inc.
     Wal Mart Stores Inc.      Anheuser-Busch Companies Inc.
     Best Buy Co., Inc.
     Citigroup Inc. Coca-Cola
    Company
     ConocoPhillips Company
     Costco Wholesale Corporation

 D R Horton, Inc.
     Kroger Co.
     Oracle Corp.
     Pulte Homes Inc.
     The Travelers Companies Inc.
     Texas Instruments Inc.   Market Positioning
  Individual
    Compensation Components
  Base
    Salary
  Design 
 129




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##### Table of Contents



Results 
  Annual Incentive
    Bonus
  Design 
      Target Incentive
    as aNamed Executive
    Officer

% of Base
    Salary(a)Mr. Dell


200
%Mr. Carty



%(b)Mr. Bell


100
%Mr. Felice


100
%Mr. Rollins


300
%Mr. Schneider


100
%Mr. Parra


100
%     (a)
    
    To qualify for tax deductibility
    under Section 162(m) of the Internal Revenue Code, the
    maximum payout was capped at 0.10% of consolidated net income
    for each executive, with the exception of Mr. Dell and
    Mr. Rollins, whose payouts were capped at 0.20% of
    consolidated net income.(b)
    
    Mr. Carty joined the company
    as an executive officer in January 2007 and was not eligible for
    an annual incentive bonus for Fiscal 2007.    Target Annual
    Incentive


X

Corporate Performance
    Modifier
    (0%-300%)


X

Regional/Business
    Unit Performance
    Modifier
    (50%-150%)


X

Individual
    Performance
    Modifier
    (0%-150%)   Corporate Performance Target 
 130




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##### Table of Contents



Threshold

Target

MaximumRevenue Growth


5.0
%


10.0
%


20.0
%Operating Income Margin


7.0
%


7.8
%


8.6
%   Results 
  Regional/Business Unit and Individual Performance 
  
    Performance of the executives regional/business
    unit; and
    A subjective evaluation of each executives individual
    performance and contribution during the year.    Strategic Priorities Targets 
  Fiscal 2007Strategic
    Initiatives(a)

Fiscal 2007
    Goal

Fiscal 2007
    ResultsCustomer Experience:Customer Satisfaction score

90% Positive

75% PositiveOnline Customer Satisfaction score

90% Positive

<90% PositiveWinning Culture:All Tell Dell Metrics

>75% Positive

76% PositiveLeadership Imperative Participation

100%

88%Global
    Growth(b)     (a)
    
    The committee believes that the
    performance objectives established for each of these strategic
    initiatives represent meaningful improvements for the
    organization and, therefore, are reasonably difficult to attain.(b)
    
    Management believes, and the
    committee concurs, that the specific strategic initiatives and
    performance goals established for the Global Growth
    strategic priority during Fiscal 2007 represent confidential
    business information, the disclosure of which would result in
    meaningful competitive harm.    Long-Term
    Incentives
  Design 
 131




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##### Table of Contents




    Stock options
    Restricted stock units (RSUs)
    Performance-based restricted stock units (PBUs)
    Long-term cash awards          Fiscal 2007 Equity Opportunities
  TargetFiscal 2007

Award
    MixNamed Executive
    Officer

Grant
    Value

Options

PBUsMr. Dell


(a)




Mr. Carty


(b)




Mr. Bell

$
4,500,000


40%

60%Mr. Felice


4,500,000


51%

49%Mr. Rollins


9,360,000


52%

48%Mr. Schneider


4,500,000


51%

49%Mr. Parra


4,500,000


51%

49%     (a)
    
    As Dells founder and largest
    individual stockholder, Mr. Dell does not receive any
    long-term incentive compensation.(b)
    
    Mr. Carty joined the company
    as an executive officer in January 2007 and was not eligible for
    long-term awards as part of the annual grant for Fiscal 2007. He
    did receive stock option and RSU awards as part of his new hire
    compensation package. See Summary Compensation Table
    below. 132




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##### Table of Contents




    Stock Options Stock options are designed to
    reward executive officers for the increase in Dells stock
    price over time. Options represent the high-risk and potential
    high-return component of our total long-term incentive program,
    as the realizable value of each option can fall to zero if the
    stock price is lower than the exercise price established on the
    date of grant.      Form 10-K Form 10-K
  
    RSUs Like stock options, RSUs are designed to
    reward executives for increases in our stock price over time.
    RSUs also provide a deferral of vesting and payout to help
    retain executive officers. RSUs are denominated in full shares
    of the companys common stock and, therefore, have a more
    stable value over time as the stock price goes up or down (as
    compared to options, which only have value if the stock price
    increases).
    PBUs PBUs are designed to reward participants
    for the achievement of near-term financial objectives, while
    also providing a deferral of vesting and payout to help retain
    executive officers. Like RSUs, PBUs are denominated in full
    shares of the companys common stock and, therefore, have a
    more stable value over time as the stock price goes up or down.     133




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##### Table of Contents



Threshold

Target

MaximumPerformance Goals:Revenue (in billions)

$57.6

$61.5

$64.3(Year-over-year revenue growth)

3%

10%

15%Minimum operating margin

6%

6%

6%Shares Earned
    (Percent of Initial Shares Granted)

0%

100%

120%     
    2003 and 2006 Long-Term Cash Incentive Bonus
    Awards The Named Executive Officers, other than
    Mr. Dell, Mr. Carty, and Mr. Rollins, are
    eligible for payments under these previously approved programs.
    Because we did not achieve the threshold targets for corporate
    performance specified in the programs, no amounts were earned
    under either program for Fiscal 2007. Amounts earned under these
    programs for prior years will be paid in Fiscal 2008 or Fiscal
    2009.
    2007 Long-Term Cash Incentive Awards In March
    2006, the Leadership Development and Compensation Committee
    implemented the 2007 Long-Term Cash Award Program. All executive
    officers employed at that time other than Mr. Dell and
    Mr. Rollins were eligible for cash engagement awards under
    this program. As Dell has become recognized for our high-quality
    leaders, our executives have increasingly become targets for
    recruitment to key positions in other organizations. This
    program is intended to better balance our existing long-term
    compensation programs between cash and equity awards, and to
    enhance the overall holding power of our compensation package.      Fiscal 2008

Fiscal 2009

Fiscal 2010

Fiscal 2011Named Executive
    Officer

Total
    Grant

Vesting

Vesting

Vesting

VestingMr. Bell

$
4,000,000


$



$
1,200,000


$
1,300,000


$
1,500,000Mr. Felice


5,000,000



800,000



1,000,000



1,400,000



1,800,000Mr.
    Schneider(a)


8,000,000







2,666,667



2,666,667



2,666,666Mr.
    Parra(a)


4,000,000







1,200,000



1,300,000



1,500,000     (a)
    
    Both Mr. Schneider and
    Mr. Parra resigned from the company before the first
    vesting date and, therefore, forfeited these amounts.  Benefits and
    Perquisites
   134




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##### Table of Contents



Deferred Compensation Plan
  Financial counseling and tax preparation
    services
  Annual physical
  Technical Support
  Other 
  Stock Ownership
    Guidelines
      Administration of
    Compensation Plans
    Employment
    Agreements, Severance, and
    Change-in-Control
    Arrangements
   135




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##### Table of Contents



change-in-control
  change-in-control change-in-control
  Other Factors
    Affecting Compensation
    Compensation
    Committee Report
  Form 10-K
  
  Michael A. Miles,  Alan (A.G.) Lafley
    Judy C. Lewent
    Klaus S. Luft
 136




---



##### Table of Contents



Summary
    Compensation Table
    FISCAL 2007
    SUMMARY COMPENSATION TABLE
  Non-EquityName and

Fiscal





Stock

Option

Incentive Plan

All OtherPrincipal
    Position

Year

Salary

Bonus

Awards(a)

Awards(a)

Compensation(b)

Compensation(c)

TotalMichael S. Dell


2007


$
950,000










$
2,485,008






$
1,060,881


$
4,495,889Chairman and Chief
    Executive OfficerDonald J.
    Carty(d)


2007



51,154






$
133,655



146,320







20,000



351,129Vice Chairman and
    Chief Financial OfficerPaul D. Bell


2007



594,231











2,815,494







5,414,916



8,824,641Senior Vice President and
    President, AmericasStephen J. Felice


2007



491,346







113,264



1,043,080







5,559,474



7,207,164Senior Vice President and
    President, Asia-Pacific/JapanKevin B. Rollins


2007



950,000











7,574,388







23,950



8,548,338Former President and
    Chief  Executive OfficerJames M. Schneider


2007



614,231











2,652,274







8,025,211
(e)


11,291,716Former Senior Vice President
    and Chief Financial  OfficerRosendo G. Parra


2007



594,231











1,651,650







4,018,205
(e)


6,264,086Former Senior Vice
    President, Americas     (a)
    
    Represents the dollar amount of
    equity compensation cost recognized for financial reporting
    purposes with respect to Fiscal 2007, computed in accordance
    with SFAS 123(R), excluding the impact of estimated
    forfeitures for service-based vesting conditions. See
    Note 6 of Notes to Consolidated Financial Statements
    included in Part II 
    Item 8  Financial Statements and Supplementary
    Data for a description of the assumptions used in that
    computation. The actual value realized by the Named Executive
    Officer with respect to stock awards will depend on the market
    value of Dell common stock on the date the stock is sold, and
    with respect to option awards, will depend on the difference
    between the market value of Dell common stock on the date the
    option is exercised and the exercise price. The terms of these
    awards are described in footnote (g) to the Grants of
    Plan Based Awards table below.(b)
    
    Represents amounts earned under the
    Executive Annual Incentive Bonus Plan, the 2006 Long-Term Cash
    Incentive Bonus Program and the 2003 Long-Term Cash Incentive
    Bonus Program. Because we did not achieve the threshold targets
    for corporate performance specified in the plans, no amounts
    were earned under these plans in Fiscal 2007.(c)
    
    Includes cash engagement awards.
    See Compensation Discussion and Analysis 
    Long-Term Incentives  2007 Long-Term Cash Incentive
    Awards. Payouts of these awards are contingent upon
    continued employment through the vesting and payout dates.   137




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##### Table of Contents



Mr.
    Dell


Mr.
    Carty


Mr.
    Bell


Mr.
    Felice


Mr.
    Rollins


Mr.
    Schneider


Mr.
    ParraEngagement awards

$



$



$
4,000,000


$
5,000,000


$



$
8,000,000


$
4,000,000401(k) matching contributions


8,800







8,800



8,800



8,800



8,800



8,800Term life insurance


1,081











828



2,650



1,663



980Financial counseling/tax prep










2,350



4,400



12,500



12,500



Annual physical exam






















2,248



1,794Security


1,051,000























Sales award trip


























6,631Director retainer






20,000



















Expat expenses:Automobile expenses










77,370



44,037











Housing and furnishings










300,075



195,308











Other expenses










40,216



50,633











Taxes










104,893



115,000











Tax gross up










150,340



140,468











UK National Insurance










730,872















     The amount shown for
    Mr. Dells security costs represents the amount of
    company-paid expenses relating to personal and residential
    security. This security is provided to Mr. Dell pursuant to
    a Board-authorized security program. The Board believes that
    Mr. Dells personal safety and security are of vital
    importance to the companys business and prospects and,
    therefore, that these costs are appropriate corporate business
    expenses. Nevertheless, because these costs can be viewed as
    conveying personal benefits to Mr. Dell, they are reported
    as perquisites in this column. In conjunction with our security
    operations, we also provide certain security services to members
    of Mr. Dells immediate family and at locations other
    than Mr. Dells principal residence. Mr. Dell
    fully reimburses the company for the incremental costs
    attributable to such services.(d)
    
    Mr. Carty joined the company
    as Vice Chairman and Chief Financial Officer in January 2007,
    and is no longer eligible for any additional compensation for
    his Board service. Amounts in this table reflect his director
    compensation earned for Fiscal 2007. The amount shown in the
    Stock Awards column represents $112,597 for his director grants
    and $21,058 for his employee grants, and the amount under Option
    Awards represents $122,728 for his director grants and $23,592
    for his employee grants. Mr. Cartys
    $20,000 director retainer fee for Fiscal 2007 is reflected
    under All Other Compensation.(e)
    
    Mr. Schneider and
    Mr. Parra both resigned from the company before the first
    vesting date and, therefore, forfeited their cash engagement
    awards. Mr. Schneider actually only received $25,211 and
    Mr. Parra actually received only $18,205 of All Other
    Compensation.  Incentive Plan
    Based Awards
    GRANTS OF
    PLAN-BASED AWARDS IN FISCAL 2007
  All otherAll Other

OptionsStock

Awards:Awards:

Number of

Exercise orEstimated Future
    Payouts Under Non-

Estimated Future
    Payouts Under

Number of

Securities

Base PriceGrant

equity Incentive
    Plan
    Awards(a)

Equity Incentive
    Plan Awards

Shares of

Underlying

of Option

Grant DateName

Date

Threshold

Target

Maximum

Threshold

Target

Maximum

Stock
    Units

Options

Awards(b)

Fair
    ValueMr. Dell


3/9/06


$
0


$
1,900,000


$
12,825,000Mr. Carty


7/21/06































15,775
(c)

$
19.55


$
104,3677/21/06



























7,780
(c)










152,0991/2/07































190,000
(d)


25.27



1,414,9841/2/07



























50,000
(e)










1,263,500Mr. Bell


3/9/06



0



550,000



3,712,5003/9/06















0



90,000
(f)


108,000















2,605,5003/9/06































220,000
(g)


28.95



1,543,080Mr. Felice


3/9/06



0



425,000



2,868,7053/9/06















0



75,000
(f)


90,000















2,171,2503/9/06































280,000
(g)


28.95



1,963,920Mr. Rollins


3/9/06



0



2,850,000



19,237,5003/9/06















0



150,000
(f)


180,000















4,342,5003/9/06































600,000
(g)


28.95



4,208,400Mr. Schneider


3/9/06



0



570,000



3,847,5003/9/06















0



75,000
(f)


90,000















2,171,2503/9/06































280,000
(g)


28.95



1,963,920Mr. Parra


3/9/06



0



550,000



3,712,5003/9/06















0



75,000
(f)


90,000















2,171,2503/9/06































280,000
(g)


28.95



1,963,920  138




---



##### Table of Contents



(a)
    
    Because we did not achieve either
    revenue growth or operating income margin threshold goals, no
    annual incentive payouts were made for Fiscal 2007. See
    Compensation Discussion and Analysis 
    Individual Compensation Components  Annual Incentive
    Bonus.(b)
    
    The exercise price is calculated
    using the average of the high and low sales prices for Dell
    common stock on the date of grant. The closing sales price of
    Dell common stock on March 9, 2006 was $28.90, the closing
    price on July 21, 2006 was $19.91, and the closing price on
    December 29, 2006 (the last trading day prior to the
    January 2, 2007 grant date) was $25.09.(c)
    
    These awards were made to
    Mr. Carty in his capacity as a member of the Board of
    Directors prior to his becoming an executive officer. These
    awards are subject to the same vesting and expiration terms as
    the director awards described under Director Compensation
    During Fiscal 2007. The stock award includes
    3,944 shares of restricted stock granted as an annual
    restricted stock award and 3,836 shares of restricted stock
    granted in lieu of Mr. Cartys $75,000 annual
    retainer. As an executive officer, he will no longer receive
    additional compensation for serving on the Board of Directors.(d)
    
    Mr. Cartys equity awards
    have the same expiration provisions as described in note (g),
    except that all unvested awards will continue to vest upon
    Mr. Cartys termination of employment so long as he
    remains a member of the Board of Directors.(e)
    
    Represents restricted stock that
    vests ratably over five years (20% per year) beginning on the
    first anniversary of the date of grant. All unvested restricted
    stock will be forfeited upon Mr. Cartys resignation
    or termination as a Dell employee and member of the Board of
    Directors.(f)
    
    Represents PBUs granted, assuming
    shares were earned at the target level. The actual number of
    shares earned was zero because the company failed to achieve the
    applicable performance targets. See Compensation
    Discussion and Analysis  Long-Term
    Incentives  PBUs.(g)
    
    Represents stock options with an
    exercise price equal to the fair market value of Dell common
    stock on the date of grant. These options vest and become
    exercisable ratably over five years (20% per year) beginning on
    the first anniversary of the date of grant. All unvested options
    expire upon the termination of employment for any reason other
    than death or permanent disability. All unvested options vest
    immediately upon death or permanent disability, and all options
    expire one year later. If employment is terminated for conduct
    detrimental to the company, all options (whether or not vested)
    expire immediately. If employment is terminated as a result of
    normal retirement, vested options expire the third year after
    such retirement. If employment is terminated for any other
    reason, all vested options expire 90 days after such
    termination. In any event, the options expire ten years from the
    date of grant unless otherwise expired as described above. All
    options are transferable to family members under specified
    circumstances.    OUTSTANDING
    EQUITY AWARDS AT FISCAL 2007 YEAR-END
  Option
    Awards


Stock
    AwardsEquity Incentive
    PlanAwardsMarketPayoutNumber of


Value ofUnearned


UnearnedNumber
    of





Shares,


Shares,Shares
    or


Market Value


Units or


Units orNumber of
    Securities Underlying Unexercised Options





Units
    of


of Shares or


Other


OtherOption


Option


Stock
    that


Units of Stock


Rights That


Rights ThatExercise


Expiration


Have
    Not


that Have Not


Have Not


Have NotName

Exercisable


Unexercisable


Price


Date


Vested


Vested(a)


Vested


Vested(a)Mr. Dell


4,800,000






$
28.90



7/17/08805,595







44.69



9/23/09900,000







43.44



3/2/10145,555







45.90



3/24/10350,000







37.59



8/22/10500,000







22.94



2/12/11307,285







21.72



3/23/11500,000







24.09



6/18/11400,000



100,000
(b)


27.64



3/7/1264,940







21.39



3/22/12240,000



160,000
(c)


26.19



3/6/13400,000







34.24



9/4/13400,000







32.99



3/4/14 139




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##### Table of Contents



Option
    Awards


Stock
    AwardsEquity Incentive
    PlanAwardsMarketPayoutNumber of


Value ofUnearned


UnearnedNumber
    of





Shares,


Shares,Shares
    or


Market Value


Units or


Units orNumber of
    Securities Underlying Unexercised Options





Units
    of


of Shares or


Other


OtherOption


Option


Stock
    that


Units of Stock


Rights That


Rights ThatExercise


Expiration


Have
    Not


that Have Not


Have Not


Have NotName

Exercisable


Unexercisable


Price


Date


Vested


Vested(a)


Vested


Vested(a)Mr. Carty


192,000
(d)






9.26



7/18/0722,492
(d)






28.90



7/17/0816,284
(d)






43.91



7/16/0916,298
(d)






52.16



7/20/1024,080
(d)






28.24



7/19/1128,420
(d)






26.32



7/18/1211,996
(d)






33.35



7/18/137,492
(d)






35.60



7/16/147,539
(d)






40.91



7/15/1515,775
(d)






19.55



7/21/16



190,000
(e)


25.27



1/2/1756,576
(f)

$
1,330,668Mr. Bell


36,800







9.26



7/18/0723,996







16.67



3/5/08346,060







28.90



7/17/0858,461







30.43



3/26/09100,700







44.69



9/23/09400,000







43.44



3/2/1032,679







45.90



3/24/10200,000







37.59



8/22/10200,000







22.94



2/12/1182,656







21.72



3/23/111,000,000







24.09



6/18/11200,000







22.10



9/6/11160,000



40,000
(b)


27.64



3/7/12160,000



40,000
(g)


25.45



9/5/1290,000



60,000
(c)


26.19



3/6/13150,000







34.24



9/4/13150,000







32.99



3/4/14150,000







35.35



9/2/14200,000







40.17



3/3/15



220,000
(h)


28.95



3/9/1690,000
(i)


2,116,800Mr. Felice


80,000







41.13



2/22/0930,000







41.00



8/12/0950,350







44.69



9/23/0976,191







45.94



3/3/1015,686







45.90



3/24/10158,600







37.59



8/22/1020,796







22.94



2/12/1150,000







24.09



6/18/1115,774







22.10



9/6/117,567



7,567
(b)


27.64



3/7/1243,144



21,572
(g)


25.45



9/5/128,120



16,240
(c)


26.19



3/6/1372,280







34.24



9/4/1332,515







32.99



3/4/1429,705







35.35



9/2/1456,635







40.17



3/3/1575,000







40.63



8/1/15



280,000
(h)


28.95



3/9/16











75,000
(i)


1,764,00011,893
(j)

$
279,723 140




---



##### Table of Contents



Option
    Awards


Stock
    AwardsEquity Incentive
    PlanAwardsMarketPayoutNumber of


Value ofUnearned


UnearnedNumber
    of





Shares,


Shares,Shares
    or


Market Value


Units or


Units orNumber of
    Securities Underlying Unexercised Options





Units
    of


of Shares or


Other


OtherOption


Option


Stock
    that


Units of Stock


Rights That


Rights ThatExercise


Expiration


Have
    Not


that Have Not


Have Not


Have NotName

Exercisable


Unexercisable


Price


Date


Vested


Vested(a)


Vested


Vested(a)Mr.
    Rollins(m)


400,000
(k)






9.26



7/18/071,200,000







10.16



12/22/07353,584







12.74



3/20/08259,540
(l)






28.90



7/17/08201,577







30.45



3/26/09116,365







44.69



9/23/09174,545
(l)






44.69



9/23/09750,000







43.44



3/2/1094,727







45.90



3/24/10500,000







37.59



8/22/10350,000







22.94



2/12/11213,442







21.72



3/23/113,800,000







24.09



6/18/111,200,000
(l)






24.09



6/18/11400,000



100,000
(b)


27.64



3/7/1245,586







21.39



3/22/12240,000



160,000
(c)


26.19



3/6/13400,000







34.24



9/4/13400,000







32.99



3/4/14800,000







35.60



7/16/14650,000







40.17



3/3/15



600,000
(h)


28.95



3/9/16150,000
(i)

$
3,528,000Mr. Schneider


121,600







3.33



3/21/07179,940
(l)






12.74



3/20/0855,376







28.90



5/3/0833,870







30.43



3/26/0978,320







44.69



5/3/07400,000







43.44



5/3/0716,339







45.90



3/24/10200,000







37.59



5/3/0720,000







22.94



5/3/07140,000







22.10



5/3/0740,000







27.64



5/3/0780,000







25.45



5/3/07100,000







26.19



5/3/07150,000







34.24



5/3/07150,000







32.99



5/3/07150,000







35.35



5/3/07200,000







40.17



5/3/07 141




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##### Table of Contents



Option
    Awards


Stock
    AwardsEquity Incentive
    PlanAwardsMarketPayoutNumber of


Value ofUnearned


UnearnedNumber
    of





Shares,


Shares,Shares
    or


Market Value


Units or


Units orNumber of
    Securities Underlying Unexercised Options





Units
    of


of Shares or


Other


OtherOption


Option


Stock
    that


Units of Stock


Rights That


Rights ThatExercise


Expiration


Have
    Not


that Have Not


Have Not


Have NotName

Exercisable


Unexercisable


Price


Date


Vested


Vested(a)


Vested


Vested(a)Mr.
    Parra(n)


17,304
(l)






28.90



7/17/0889,510
(l)






44.69



9/23/09350,000
(l)






43.44



3/2/1032,679
(l)






45.90



3/24/10200,000
(l)






37.59



8/22/1040,000
(l)






22.94



2/12/11200,000
(l)






24.09



6/18/1180,000
(l)






22.10



9/6/1180,000
(l)


40,000
(b)


27.64



3/7/12120,000
(l)


40,000
(g)


25.45



9/5/1230,000
(l)


60,000
(c)


26.19



3/6/13150,000
(l)






34.24



9/4/13150,000
(l)






32.99



3/4/14150,000
(l)






35.35



9/2/14200,000







40.17



3/3/15



280,000
(h)


28.95



3/9/1675,000
(i)


1,764,000     (a)
    
    Value is based on the closing price
    of Dell common stock on February 2, 2007 ($23.52).(b)
    
    These options became exercisable on
    March 7, 2007.(c)
    
    Of these options, 50% became
    exercisable on March 6, 2007 and 50% become exercisable on
    March 6, 2008.(d)
    
    These awards were granted to
    Mr. Carty in his capacity as a member of the Board of
    Directors prior to his becoming an executive officer.(e)
    
    These options become exercisable
    ratably on January 2 of 2008 through 2012.(f)
    
    Represents unvested restricted
    stock. Of these shares, 6,576 shares were granted to
    Mr. Carty in his capacity as a member of the Board of
    Directors prior to his becoming an executive officer, and vest
    as follows: 1,165 shares vested on July 1, 2007;
    374 shares vested on July 16, 2007; 375 shares
    will vest on July 16 of 2008 and 2009; 1,166 shares will
    vest on July 1 of 2008, 2009, and 2010; and 789 shares will
    vest on July 1, 2011. The remaining 50,000 shares were
    granted to Mr. Carty as an employee and will vest ratably
    on January 2 of 2008, 2009, 2010, 2011 and 2012.(g)
    
    Options became exercisable on
    September 5, 2007.(h)
    
    Of these options, 20% became
    exercisable on March 9, 2007 and the remainder become
    exercisable ratably on March 9 of 2008 through 2011.(i)
    
    Represents the target number of
    PBUs assuming shares are earned at the target level pursuant to
    established performance targets. The actual number of units
    earned was zero because the performance targets were not
    achieved.(j)
    
    Restricted stock vesting ratably on
    March 3 of 2009 through 2012.(k)
    
    These options were transferred
    without consideration to an irrevocable trust for the benefit of
    Mr. Rollins children.(l)
    
    These options were transferred
    without consideration to a limited partnership wholly owned by
    the executives family members, entities wholly owned by
    family members, or trusts for the benefit of family members.(m)
    
    Mr. Rollins employment
    terminated on May 4, 2007 and all unvested options expired
    on that date. The grants with expiration dates of 3/20/2008,
    3/26/2009, 3/24/2010, 3/23/2011, and 3/22/2012, were unaffected
    by his termination. All other grants expired unexercised
    pursuant to the terms of the option agreements. Mr. Rollins
    was not able to exercise the options prior to expiration because
    we suspended option exercises once we were unable to file our
    Annual Report on
    Form 10-K
    for Fiscal 2007 on a timely basis. We agreed to pay cash for
    those expired options, as described in Compensation
    Discussion and Analysis.(n)
    
    Mr. Parras employment
    terminated on April 20, 2007 and all unvested options
    expired on that date. The grant with an expiration date of
    3/24/2010 was unaffected by his termination. All other grants
    expired unexercised pursuant to the terms of the option
    agreements. Mr. Parra was not able to exercise the options
    prior to expiration because we suspended option exercises once
    we were unable to file our Annual Report on Form
    10-K for
    Fiscal 2007 on a timely basis. We agreed to pay cash for those
    expired options, as described in Compensation Discussion
    and Analysis. 142




---



##### Table of Contents



OPTION EXERCISES
    AND STOCK VESTED DURING FISCAL 2007
  Option
    Awards

Stock
    AwardsNumber of
    SharesAcquired on

Value Realized
    upon

Number of
    Shares

Value Realized
    onName

Exercise

Exercise(a)

Acquired on
    Vesting

Vesting(b)Mr. Dell














Mr.
    Carty(c)


384,000


$
7,634,995



2,585


$
70,723Mr. Bell














Mr. Felice










7,556



196,415Mr.
    Rollins(d)


1,120,000



25,826,752







Mr. Schneider














Mr. Parra














     (a)
    
    Computed using the fair market
    value of the stock on the date of exercise.(b)
    
    Computed using the fair market
    value of the stock on the date of vesting.(c)
    
    Represents the exercise of options
    granted to Mr. Carty in his capacity as a member of the
    Board of Directors prior to his becoming an executive officer.
    Mr. Carty paid cash to exercise these options and continues
    to hold the shares.(d)
    
    Mr. Rollins paid cash to
    exercise these options.  Other Benefit
    Plans
  401(k) Retirement Plan 
  Deferred Compensation Plan 
 143




---



##### Table of Contents



NONQUALIFIED
    DEFERRED COMPENSATION PLAN AT FISCAL YEAR-END 2007
  Aggregate

AggregateExecutive

Company

Earnings in

Withdrawals/Contributions
    in

Contributions
    in

Last Fiscal

Distributions
    in

Aggregate
    BalanceName

Last Fiscal
    Year

Last Fiscal
    Year

Year(a)

Last Fiscal
    Year

at Fiscal
    Year-EndMr. Dell









$
714,365






$
5,843,235Mr. Carty










134,564







985,723Mr. Rollins










5,858







339,151Mr. Parra










23,993







393,378     (a)
    
    Not reported as compensation to the
    Named Executive Officers for tax purposes.  Certain Termination Benefits 
  Acceleration
    Benefit onNamed Executive
    Officer

Death or
    Permanent
    Disability(a)Mr. Dell

$
Mr. Carty


1,393,294Mr. Bell


2,116,800Mr. Felice


2,043,723Mr. Rollins


3,528,000Mr. Schneider


Mr. Parra


1,764,000     (a)
    
    Represents the sum of (1) the
    in-the-money value of unvested stock options that were subject
    to vesting acceleration in the event of death or permanent
    disability and (2) the value of unvested restricted stock,
    restricted stock units, and performance-based units that were
    subject to vesting acceleration in the event of death or
    permanent disability. All values were computed as of the end of
    Fiscal 2007 based on the closing price of Dell common stock on
    the last day of Fiscal 2007 ($23.52).  ITEM 12 
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS  Equity
    Compensation Plans
  Equity
    Compensation Plans Approved by Stockholders
  Stock Option Plans 
  Employee Stock Purchase Plan 
 144




---



##### Table of Contents



Equity
    Compensation Plans Not Approved by Stockholders
  Broad Based Stock Option Plan 
  EQUITY
    COMPENSATION PLANS
  Number of
    SecuritiesRemaining
    Available forFuture Issuance
    UnderEquity
    CompensationNumber of
    Securities to

Weighted-Average
    Exercise

Plans
    (excludingbe Issued Upon
    Exercise

Price of
    Outstanding

securities
    reflected inPlan
    Category

of Outstanding
    Options

Options

first
    column)Plans approved by stockholders


328,698,214


$
32.03



281,961,451
(a)Plans not approved by stockholders


4,963,167
(b)

$
34.65



0
(c)     (a)
    
    This number includes
    10,611,746 shares that were available for issuance under
    the Employee Stock Purchase Plan and 271,349,705 shares
    that were available for issuance under the 2002 Long-Term
    Incentive Plan. Of the shares available under the 2002 plan,
    173,040,042 shares were available to be issued in the form
    of restricted stock. All information is as of the end of Fiscal
    2007.(b)
    
    This is the number of shares that
    were issuable pursuant to options granted under the Broad Based
    Stock Option Plan that were outstanding as of the end of Fiscal
    2007.(c)
    
    The Broad Based Stock Option Plan
    was terminated in November 2002, and consequently, no shares are
    available for future awards. 145




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##### Table of Contents



Stock
    Ownership
    Total as aOptions



Percentage ofNumber of

Exercisable

Total

SharesShares

Within 60

Beneficial

OutstandingBeneficial
    Owner

Owned

Days

Ownership

(if 1% or
    more)(a)Michael S. Dell


217,739,415
(b)


9,993,375



227,732,790



10.14
%One Dell Way
    Round Rock, Texas 78682Southeastern Asset Management, Inc.


126,067,420







126,067,420



5.5
%6410 Poplar Avenue, Suite 900
    Memphis, Tennessee 38119Donald J. Carty


602,907



137,756



740,663



William H. Gray, III


12,380



70,755



83,135



Sallie L. Krawcheck


11,832



9,465



21,297



Alan (A.G.) Lafley


11,832



9,465



21,297



Judy C. Lewent


15,057



145,049



160,106



Thomas W. Luce, III


47,688
(c)


13,809



61,497



Klaus S. Luft


8,481



152,435



160,916



Alex J. Mandl


11,088
(d)


155,084



166,172



Michael A. Miles


562,003



149,894



711,897



Sam Nunn


15,371



169,929



185,300



Paul D. Bell


7,761



3,855,352



3,863,113



Stephen J. Felice


16,106



894,050



910,156



Kevin B.
    Rollins(f)


1,259,658
(e)


908,916



2,168,574



James M.
    Schneider(f)


28,850



230,149



258,999



Rosendo G.
    Parra(f)


19,802







19,802



Directors and executive officers as a group (24 persons)


220,585,584



19,973,178



240,543,767



10.7
%     (a)
    
    Other than the percentage reported
    for Southeastern Asset Management, Inc., the percentage is based
    on the number of shares outstanding (2,235,801,991) at the close
    of business on October 1, 2007. The percentage reported for
    Southeastern Asset Management, Inc. is based on their
    Form 13G filed with the Securities and Exchange Commission
    on February 12, 2007.(b)
    
    Includes 1,482,435 shares held
    is a trust for the benefit of his children of which
    Mr. Dell is the trustee. Does not include
    26,449,112 shares held in a separate property trust for
    Mr. Dells spouse and 1,482,434 shares held in a
    trust for the benefit of his children of which his spouse is
    trustee.(c)
    
    Includes 39,778 shares held in
    a personal retirement plan.(d)
    
    Includes 400 shares held by
    Mr. Mandls spouse and 1,300 shares held in an
    IRA for Mr. Mandls spouse.(e)
    
    Includes 1,120,000 shares that
    have been pledged as collateral for a loan as of May 4,
    2007.(f)
    
    The Number of Shares Owned reported
    for Mr. Rollins, Mr. Schneider, and Mr. Parra are
    as of the date of their retirement (May 4, 2007 for
    Mr. Rollins, January 31, 2007 for Mr. Schneider,
    and April 20, 2007 for Mr. Parra.)  ITEM 13 
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE  Related Party
    Transactions
   146




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##### Table of Contents



Executive
    Officer

Reimbursement
    AmountMr. Dell

$
1,861,356Mr. Parra


206,423Mr. Rollins


2,489,321Mr. Schneider


199,294     Director
    Independence
      DIRECTOR
    INDEPENDENCE
  Director

Status(a)Mr. Carty

Not
    independent(b)Mr. Dell

Not
    independent(c)Mr. Gray

IndependentMs. Krawcheck

Independent(d)Mr. Lafley

Independent(e)Ms. Lewent

Independent(f)Mr. Luce

Independent(g)Mr. Luft

Independent(h)Mr. Mandl

Independent(i)Mr. Miles

IndependentMr. Nunn

Independent     (a)
    
    Unless otherwise noted, the
    Boards determination that a director is independent was
    made on the basis of the standards set forth in the Corporate
    Governance Principles, which is available on our website at
    www.dell.com/corporategovernance.(b)
    
    Mr. Carty is the Vice Chairman
    and Chief Financial Officer of Dell and, therefore, is not
    independent in accordance with the standards set forth in the
    Corporate Governance Principles. 147




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##### Table of Contents



(c)
    
    Mr. Dell is the Chairman of
    the Board and Chief Executive Officer of Dell and, therefore, is
    not independent in accordance with the standards set forth in
    the Corporate Governance Principles.(d)
    
    Ms. Krawcheck serves as Chairman
    and Chief Executive Officer of Citi Global Wealth Management,
    and during Fiscal 2007 served as Chief Financial Officer and
    Head of Strategy for Citigroup Inc. During Fiscal 2007, Dell was
    both a customer of and a supplier to Citigroup, and the Board
    considered those relationships in assessing
    Ms. Krawchecks independence.(e)
    
    Mr. Lafley serves as Chairman
    and Chief Executive Officer of The Procter & Gamble
    Co., and during Fiscal 2007, Dell was a supplier to
    Procter & Gamble. In addition, Mr. Lafley is a
    director of the United Negro College Fund, and Dell made
    contributions to the UNCF during Fiscal 2007. The Board
    considered those relationships in assessing
    Mr. Lafleys independence.(f)
    
    Until September 2007,
    Ms. Lewent served as Executive Vice President and Chief
    Financial Officer of Merck & Co., Inc. During Fiscal
    2007, Dell was a supplier to Merck. The Board considered this
    relationship in assessing Ms. Lewents independence.(g)
    
    Mr. Luce serves as the
    President and Chief Executive Officer and a director of the
    National Math and Science Initiative, Inc. (NMSI), a
    not-for-profit organization dedicated to expanding programs that
    have a proven impact on math and science. The Michael and Susan
    Dell Foundation has pledged a contribution to NMSI in the amount
    of $5,000,000 over three years. It is estimated that this
    contribution will constitute approximately 3.5% of NMSIs
    known funding commitments. After considering all the surrounding
    facts and circumstances, the Board concluded that this
    relationship is not material and does not otherwise impair, or
    appear to impair, Mr. Luces ability to make
    independent judgments and, therefore, does not prevent
    Mr. Luce from being considered an independent
    director. In addition to the small size of the contribution in
    relation to NMSIs total expected funding, the Board
    considered the following facts: (a) NMSIs charitable
    purposes are squarely within the historical philanthropic focus
    of The Michael and Susan Dell Foundation and
    (b) Mr. Luce is not compensated by NMSI and, thus,
    derives no financial benefit from the contribution.(h)
    
    Mr. Luft serves as Vice
    Chairman and International Advisor to Goldman Sachs Europe
    Limited. During Fiscal 2007, Dell was a supplier to Goldman
    Sachs. The Board considered this relationship in assessing
    Mr. Lufts independence.(i)
    
    Mr. Mandl is Executive
    Chairman of Gemalto. During Fiscal 2007, Dell was a supplier to
    Gemalto. The Board considered this relationship in assessing
    Mr. Mandls independence.    ITEM 14 
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES    Fee
    Type

Fiscal
    2007


Fiscal
    2006Audit
    Fees(a)

$
11.9


$
8.7Audit Related
    Fees(b)


0.6



0.8Tax
    Fees(c)


1.9



1.8Total

$
14.4


$
11.3     (a)
    
    This category includes fees
    incurred for professional services rendered in connection with
    the audit of the annual financial statements, for the audit of
    internal controls under Section 404 of the Sarbanes-Oxley
    Act, for the review of the quarterly financial statements, and
    for the statutory audits of international subsidiaries. Also
    includes fees incurred for professional services rendered in
    connection with the Audit Committee and SEC investigations.(b)
    
    This category includes fees
    incurred for professional services rendered in connection with
    assurance and other activities not explicitly related to the
    audit of our financial statements, including the audits of our
    employee benefit plans, contract compliance reviews, and
    accounting research.(c)
    
    This category includes fees
    incurred for domestic and international income tax compliance
    and tax audit assistance, corporate-wide tax planning, and
    executive tax consulting and return preparation. 148




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149




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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


58Consolidated Statements of Financial Position at
    February 2, 2007 and February 3, 2006 (Restated)


61Consolidated Statements of Income for the fiscal years ended
    February 2, 2007, February 3, 2006 (Restated) and
    January 28, 2005 (Restated)


62Consolidated Statements of Cash Flows for the fiscal years ended
    February 2, 2007, February 3, 2006 (Restated) and
    January 28, 2005 (Restated)


63Consolidated Statements of Stockholders Equity for the
    fiscal years ended February 2, 2007, February 3,
    2006(Restated) and January 28, 2005 (Restated)


64Notes to Consolidated Financial Statements


65  150




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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

BalanceBeginning

Bad Debt

Charged
    to

at
    End ofFiscal
    Year

Description

of
    Period

Expense

Allowance

PeriodTrade Receivables:2007


Allowance for doubtful accounts


$
96


$
107


$
77


$
1262006


Allowance for doubtful accounts (as restated
)

$
79


$
101


$
84


$
962005


Allowance for doubtful accounts (as restated
)

$
83


$
62


$
66


$
79Financing Receivables:2007


Allowance for doubtful accounts


$
22


$
40


$
23


$
392006


Allowance for doubtful accounts (as restated
)

$
1


$
22


$
1


$
222005


Allowance for doubtful accounts (as restated
)

$



$
1


$



$
1  151




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##### Table of Contents



Exhibits
  ExhibitNo.



Description of
    Exhibit3
.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*



Dell Computer Corporation 1989 Stock Option Plan, as amended and
    restated (incorporated by reference to Exhibit 10.4 of
    Dells Annual Report on Form 10-K for the fiscal year ended
    January 31, 1993, Commission File No. 0-17017)10
.2*



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
.3*



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
.4*



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
.5*



Amended and Restated Dell Inc. 401(k) Plan, adopted on December
    19, 2003 (incorporated by reference to Exhibit 10.5 to
    Dells Annual Report on Form 10-K for the fiscal year ended
    January 30, 2004, Commission File No. 0-17017)10
.6*



Amendment No. 1 to Amended and Restated Dell Inc. 401(k) Plan,
    dated March 3, 2005 (incorporated by reference to Exhibit 10.6
    of Dells Annual Report on Form 10-K for the fiscal year
    ended January 28, 2005, Commission File No. 0-17017)10
.7*



Amendment No. 2 to Amended and Restated Dell Inc. 401(k) Plan,
    dated November 29, 2005 (incorporated by reference to Exhibit
    10.7 of Dells Annual Report on Form 10-K for the fiscal
    year ended February 3, 2006, Commission File No. 0-17017)10
.8*



Amendment No. 3 to Amended and Restated Dell Inc. 401(k) Plan,
    dated December 12, 2006 152




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##### Table of Contents



ExhibitNo.



Description of
    Exhibit10
.9*



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
.10*



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
.11*



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
.12*



Form of Nonstatutory Stock Option Agreement for employees under
    the 2002 Long-Term Incentive Plan (incorporated by reference to
    Exhibit 99.1 of Dells Current Report on Form 8-K filed
    March 14, 2006, Commission File No. 0-17017)10
.13*



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
.14*



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)10
.15*



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
.16*



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
.17*



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
.18*



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)21




Subsidiaries of Dell23




Consent of PricewaterhouseCoopers LLP31
.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 2002     *
    
    Identifies Exhibit that consists of or includes a management
    contract or compensatory plan or arrangement.
    
    Filed herewith.
    
    Furnished herewith. 153




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##### Table of Contents



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

Title

Date/s/  MICHAEL
    S. DELLMichael
    S. Dell

Chairman and Chief Executive Officer (principal executive
    officer)

October 30, 2007/s/  DONALD
    J. CARTYDonald
    J. Carty

Vice Chairman and Chief Financial Officer

October 30, 2007/s/  WILLIAM
    H. GRAY, IIIWilliam
    H. Gray, III

Director

October 30, 2007/s/  SALLIE
    L. KRAWCHECKSallie
    L. Krawcheck

Director

October 30, 2007/s/  ALAN
    G. LAFLEYAlan
    G. Lafley

Director

October 30, 2007/s/  JUDY
    C. LEWENTJudy
    C. Lewent

Director

October 30, 2007/s/  THOMAS
    W. LUCE, IIIThomas
    W. Luce, III

Director

October 30, 2007/s/  KLAUS
    S. LUFTKlaus
    S. Luft

Director

October 30, 2007/s/  ALEX
    J. MANDLAlex
    J. Mandl

Director

October 26, 2007/s/  MICHAEL
    A. MILESMichael
    A. Miles

Director

October 30, 2007 154




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##### Table of Contents



Name

Title

Date/s/  SAMUEL
    A. NUNN, JR.Samuel
    A. Nunn, Jr.

Director

October 30, 2007/s/  THOMAS
    W. SWEETThomas
    W. Sweet

Vice President, Corporate Finance (principal accounting officer)

October 30, 2007  155