##### Table of Contents





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

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    July 31,
    2009oro

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 (Address
    of principal executive offices) (Zip Code)
  1-800-289-3355
    þ o
  Regulation S-T o o
  12b-2
 Large accelerated
    filer þ

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

Smaller reporting company o   Rule 12b-2 o þ




---



##### 





INDEX
   
 PagePART I  FINANCIAL
    INFORMATIONItem 1.
    Financial StatementsCondensed Consolidated Statements of Financial
    Position at July 31, 2009 (unaudited), and January 30,
    2009


1Condensed Consolidated Statements of Income for
    the three and six months ended July 31, 2009 (unaudited),
    and August 1, 2008 (unaudited)


2Condensed Consolidated Statement of Cash Flows
    for the six months ended July 31, 2009 (unaudited), and
    August 1, 2008 (unaudited)


3Notes to Condensed Consolidated Financial
    Statements (unaudited)


4Item 2.
    Managements Discussion and Analysis of Financial Condition
    and Results of Operations


26Item 3.
    Quantitative and Qualitative Disclosures About Market
    Risk


42Item 4.
    Controls and Procedures


42PART II  OTHER
    INFORMATIONItem 1.
    Legal Proceedings


44Item 1A.
    Risk Factors


44Item 4.
    Submission of Matters to a Vote of Security
    Holders


45Item 6.
    Exhibits


45EX-10.1EX-10.2EX-31.1EX-31.2EX-32.1




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##### Table of Contents



PART I 
    FINANCIAL INFORMATION  ITEM 1.
    FINANCIAL
    STATEMENTS  DELL
    INC.CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
    POSITION
 
  July 31,


January 30,2009


2009(unaudited)ASSETSCurrent assets:Cash and cash equivalents

$
11,699


$
8,352Short-term investments


299



740Accounts receivable, net


5,403



4,731Financing receivables, net


2,252



1,712Inventories, net


839



867Other current assets


3,348



3,749Total current assets


23,840



20,151Property, plant, and equipment, net


2,117



2,277Investments


746



454Long-term financing receivables, net


263



500Goodwill


1,748



1,737Purchased intangible assets, net


646



724Other non-current assets


698



657Total assets

$
30,058


$
26,500LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Short-term debt

$
49


$
113Accounts payable


9,698



8,309Accrued and other


3,765



3,788Short-term deferred enhanced services revenue


2,775



2,649Total current liabilities


16,287



14,859Long-term debt


3,394



1,898Long-term deferred enhanced services revenue


3,051



3,000Other non-current liabilities


2,701



2,472Total liabilities


25,433



22,229Commitments and contingencies (Note 8)Stockholders equity:Preferred stock and capital in excess of $.01 par value;
    shares authorized: 5,000; issued and outstanding: none


-



-Common stock and capital in excess of $.01 par value;
    shares authorized: 7,000; shares issued: 3,349 and 3,338,
    respectively; shares outstanding: 1,955
    and 1,944, respectively


11,289



11,189Treasury stock at cost: 919 shares


(27,904
)


(27,904
)Retained earnings


21,439



20,677Accumulated other comprehensive (loss) income


(199
)


309Total stockholders equity


4,625



4,271Total liabilities and stockholders equity

$
30,058


$
26,500    1




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##### Table of Contents



DELL
    INC.CONDENSED CONSOLIDATED STATEMENTS OF
    INCOME
 
  Three Months Ended


Six Months EndedJuly 31,


August 1,


July 31,


August 1,2009


2008


2009


2008Net revenueProducts

$
10,623


$
14,147


$
20,855


$
28,103Services, including software related


2,141



2,287



4,251



4,408Total net revenue


12,764



16,434



25,106



32,511Cost of net revenueProducts


8,978



12,161



17,764



24,008Services, including software related


1,395



1,446



2,783



2,711Total cost of net revenue


10,373



13,607



20,547



26,719Gross margin


2,391



2,827



4,559



5,792Operating expensesSelling, general, and administrative


1,571



1,840



3,184



3,752In-process research and development


-



-



-



2Research, development, and engineering


149



168



290



320Total operating expenses


1,720



2,008



3,474



4,074Operating income


671



819



1,085



1,718Investment and other income (expense), net


(42
)


18



(44
)


143Income before income taxes


629



837



1,041



1,861Income tax provision


157



221



279



461Net income

$
472


$
616


$
762


$
1,400Earnings per common share:Basic

$
0.24


$
0.31


$
0.39


$
0.70Diluted

$
0.24


$
0.31


$
0.39


$
0.69Weighted-average shares outstanding:Basic


1,955



1,991



1,952



2,013Diluted


1,960



1,999



1,956



2,019    2




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##### Table of Contents



DELL
    INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
    FLOWS
 
  Six Months EndedJuly 31,


August 1,2009


2008Cash flows from operating activities:Net income

$
762


$
1,400Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


402



379Stock-based compensation


146



128In-process research and development charges


-



2Effects of exchange rate changes on monetary assets and
    liabilities denominated in foreign currencies


26



(110
)Deferred income taxes


(91
)


(19
)Other


173



85Changes in operating assets and liabilities, net of effects from
    acquisitions:Accounts receivable


(537
)


(392
)Financing receivables


(379
)


19Inventories


29



77Other assets


(24
)


(473
)Accounts payable


1,318



(328
)Deferred enhanced services revenue


40



405Accrued and other liabilities


(28
)


78Change in cash from operating activities


1,837



1,251Cash flows from investing activities:Investments:Purchases


(776
)


(788
)Maturities and sales


982



1,752Capital expenditures


(179
)


(264
)Proceeds from sale of facility and land


16



44Acquisition of business, net of cash received


(3
)


(165
)Change in cash from investing activities


40



579Cash flows from financing activities:Repurchase of common stock


-



(2,451
)Issuance of common stock under employee plans


-



68Issuance (payments) of commercial paper, net


(100
)


100Net proceeds from debt


1,491



1,519Repayments of debt


(12
)


(223
)Change in cash from financing activities


1,379



(987
)Effect of exchange rate changes on cash and cash equivalents


91



16Change in cash and cash equivalents


3,347



859Cash and cash equivalents at beginning of period


8,352



7,764Cash and cash equivalents at end of period

$
11,699


$
8,623    3




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   NOTE 1 
    BASIS OF
    PRESENTATION  Basis of Presentation Form 10-K Form 10-Q
    Recently Issued and Adopted Accounting
    Pronouncements Business Combinations
  157-2, Effective Date of FASB Statement No. 157 (FSP 157-2), FSP 157-2
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
  Disclosures about Derivative Instruments and Hedging
    Activities, an amendment of FASB Statement No. 133 ,
 4




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
   FSP 157-4 Determining Fair Value When Volume and Level of Activity for
    the Asset or Liability Have Significantly Decreased and
    Identifying Transactions That Are Not Orderly (FSP 157-4), FSP 157-4 FSP 157-4
  FAS No. 107-1 No. 28-1, Interim Disclosures about Fair Value of Financial Instruments FAS 107-1 28-1). FAS 107-1 28-1 FAS 107-1 28-1
  FAS No. 115-2 FAS No. 124-2, Recognition and Presentation of Other-Than-Temporary
    Investments FAS 115-2 124-2). FAS 115-2 124-2 other-than-temporary FAS 115-2 124-2, other-than-temporary other-than-temporary other-than-temporary FAS 115-2 124-2 FAS 115-2 124-2
  Subsequent Events
  Recently Issued Accounting
    Pronouncements Accounting for Transfers of
    Financial Assets, Accounting for Transfers and
    Servicing of Financial Assets and Extinguishments of
    Liabilities Consolidation of Variable Interest
    Entities
  Amendments to FASB Interpretation No. 46(R)
 5




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
     Reclassifications Regulation S-X 5-03
  NOTE 2 
    INVENTORIES  July 31,


January 30,2009


2009(in millions)Inventories, netProduction materials

$
432


$
454Work-in-process


115



150Finished goods


292



263Inventories, net

$
839


$
867   NOTE 3 
    FINANCIAL
    INSTRUMENTS  Investments
    July 31, 2009


January 30, 2009Fair





Unrealized


Unrealized


Fair





Unrealized


UnrealizedValue


Cost


Gain


(Loss)


Value


Cost


Gain


(Loss)(in millions)Debt securitiesU.S. government and agencies

$
160


$
161


$
-


$
(1
)

$
539


$
537


$
3


$
(1
)U.S. corporate


556



556



3



(3
)


457



464



2



(9
)International corporate


190



190



-



-



78



77



1



-State and municipal governments


3



3



-



-



5



5



-



-Subtotal


909



910



3



(4
)


1,079



1,083



6



(10
)Equity and other securities


136



136



-



-



115



115



-



-Investments

$
1,045


$
1,046


$
3


$
(4
)

$
1,194


$
1,198


$
6


$
(10
)Short-term

$
299


$
299


$
-


$
-


$
740


$
737


$
4


$
(1
)Long-term


746



747



3



(4
)


454



461



2



(9
)Investments

$
1,045


$
1,046


$
3


$
(4
)

$
1,194


$
1,198


$
6


$
(10
)  6




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
   available-for-sale A-1
      Less Than 12 Months


12 Months or Greater


TotalFair


Unrealized


Fair


Unrealized


Fair


UnrealizedValue


(Loss)


Value


(Loss)


Value


(Loss)(in millions)Debt securitiesU.S. government and agencies

$
172


$
-


$
1


$
(1
)

$
173


$
(1
)U.S. corporate


102



-



34



(3
)


136



(3
)International corporate


82



-



-



-



82



-Total debt securities

$
356


$
-


$
35


$
(4
)

$
391


$
(4
)     FAS 115-2 FAS 124-2 other-than-temporary FAS 115-2 FAS 124-2 other-than-temporarily
 7




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
     Three Months Ended


Six Months EndedJuly 31,


August 1,


July 31,


August 1,2009


2008


2009


2008(in millions)Gains

$
-


$
6


$
4


$
12Losses


-



(20
)


(3
)


(23
)Net recognized gains (losses)

$
-


$
(14
)

$
1


$
(11
)   Derivative
    Instruments and Hedging Activities
  Foreign
    Currency Instruments
  Accounting for Derivative Instruments
    and Hedging Activities,
  Cash
    Flow Hedges
     8




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
       Gain (Loss)Derivatives in

Gain (Loss) Recognized


Location of Gain (Loss)

Reclassified


Location of Gain (Loss)

Gain (Loss)SFAS 133 Cash Flow

in Accumulated OCI, Net


Reclassified from

from Accumulated


Recognized in Income

Recognized inHedging

of Tax, on Derivatives


Accumulated OCI into

OCI into Income


on Derivative

Income on DerivativeRelationships

(Effective Portion)


Income (Effective Portion)

(Effective Portion)


(Ineffective Portion)

(Ineffective Portion)(in millions)For the Three Months Ended July 31, 2009Foreign exchange





Total net revenue

$
(147
)

Investment and othercontracts

$
(289
)

Total cost of net revenue


(23
)

income (expense), net

$
-Total

$
(289
)



$
(170
)



$
-For the Six Months Ended July 31, 2009Foreign exchange





Total net revenue

$
74


Investment and othercontracts

$
(413
)

Total cost of net revenue


(10
)

income (expense), net

$
-Total

$
(413
)



$
64




$
-   Other
    Foreign Currency Derivative Instruments
    Derivative
    Instruments Additional Information
      Offsetting of Amounts Related to Certain
    Contracts,
 9




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
     July 31, 2009Other Current


Other Current


TotalAssets


Liabilities


Fair Value(in millions)Derivatives Designated as Hedging Instruments Under SFAS
    133Foreign exchange contracts in an asset position

$
38


$
78


$
116Foreign exchange contracts in a liability position


(29
)


(333
)


(362
)Net asset (liability)


9



(255
)


(246
)Derivatives not Designated as Hedging Instruments Under
    SFAS 133Foreign exchange contracts in an asset position


46



62



108Foreign exchange contracts in a liability position


(23
)


(80
)


(103
)Net asset (liability)


23



(18
)


5Total derivatives at fair value

$
32


$
(273
)

$
(241
)     Debt
  Commercial
    Paper
     10




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
   Long-Term
    Debt
    July 31,


January 30,2009


2009(in millions)Notes$400 million issued on June 10, 2009, at 3.375% due
    June 2012 (2012 Notes) with interest payable June 15
    and December 15

$
400


$
-$600 million issued on April 17, 2008, at 4.70% due
    April 2013 (2013 Notes) with interest payable April
    15 and October 15


599



599$500 million issued on April 1, 2009, at 5.625% due
    April 2014 (2014 Notes) with interest payable April
    15 and October 15


500



-$500 million issued on April 17, 2008, at 5.65% due
    April 2018 (2018 Notes) with interest payable April
    15 and October 15


499



499$600 million issued on June 10, 2009, at 5.875% due
    June 2019 (2019 Notes) with interest payable June 15
    and December 15


600



-$400 million issued on April 17, 2008, at 6.50% due
    April 2038 (2038 Notes) with interest payable April
    15 and October 15


400



400Senior Debentures$300 million issued on April 1998 at 7.10% due April 2028
    with interest payable April 15 and October 15 (includes the
    unamortized amount related to interest rate swap terminations)


396



400Total long-term debt

$
3,394


$
1,898       sale-and-lease
   11




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
    NOTE 4 
    FAIR
    VALUE MEASUREMENTS  Fair
    Value Measurements
  FSP 157-2 FSP 157-2
    
    Level 1: Inputs based on quoted market prices for
    identical assets or liabilities in active markets at the
    measurement date.
    Level 2: Observable inputs other than quoted prices
    included in Level 1, such as quoted prices for similar
    assets and liabilities in active markets; quoted prices for
    identical or similar assets and liabilities in markets that are
    not active; or other inputs that are observable or can be
    corroborated by observable market data.
    Level 3: Inputs reflect managements best
    estimate of what market participants would use in pricing the
    asset or liability at the measurement date. The inputs are
    unobservable in the market and significant to the
    instruments valuation.    July 31, 2009Level 1


Level 2


Level 3


TotalQuoted Pricesin Active


SignificantMarkets for


Other


SignificantIdentical


Observable


UnobservableAssets


Inputs


Inputs(in millions)Cash equivalents

$
-


$
119


$
-


$
119Investments - available for sale securities


-



924



29



953Investments - trading securities


-



92



-



92Retained interest


-



-



119



119Derivative instruments


-



32



-



32Total assets measured at fair value on recurring basis

$
-


$
1,167


$
148


$
1,315Derivative instruments

$
-


$
273


$
-


$
273Total liabilities measured at fair value on recurring basis

$
-


$
273


$
-


$
273  12




---



##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
   January 30, 2009Level 1


Level 2


Level 3


TotalQuoted Pricesin Active


SignificantMarkets for


Other


SignificantIdentical


Observable


UnobservableAssets


Inputs


Inputs(in millions)Cash equivalents

$
-


$
56


$
-


$
56Investments - available for sale securities


-



1,093



27



1,120Investments - trading securities


1



73



-



74Retained interest


-



-



396



396Derivative instruments


-



627



-



627Total assets measured at fair value on recurring basis

$
1


$
1,849


$
423


$
2,273Derivative instruments

$
-


$
131


$
-


$
131Total liabilities measured at fair value on recurring basis

$
-


$
131


$
-


$
131     Cash Equivalents
  Investments Available for Sale
  Investments Trading Securities
  Retained Interest in Securitized
    Receivables
 13




---



##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
   Derivative Instruments
    Three Months EndedJuly 31, 2009


August 1, 2008Investments








InvestmentsRetained


Available





Retained


AvailableInterest


for Sale


Total


Interest


for Sale


Total(in millions)Balance at beginning of the period

$
504


$
28


$
532


$
317


$
25


$
342Net unrealized gains included in
    earnings (a)


17



1



18



4



1



5Issuances and settlements


100



-



100



(9
)


-



(9
)Impact of special purpose entity consolidation
    (b)


(502
)


-



(502
)


-



-



-Balance at end of period

$
119


$
29


$
148


$
312


$
26


$
338   Six Months EndedJuly 31, 2009


August 1, 2008Investments








InvestmentsRetained


Available





Retained


AvailableInterest


for Sale


Total


Interest


for Sale


Total(in millions)Balance at beginning of period

$
396


$
27


$
423


$
223


$
-


$
223Net unrealized gains (losses) included in earnings
    (a)


8



2



10



(3
)


1



(2
)Issuances and settlements


217



-



217



92



-



92Purchases














-



25



25Impact of special purpose entity consolidation
    (b)


(502
)


-



(502
)


-



-



-Balance at end of period

$
119


$
29


$
148


$
312


$
26


$
338     (a)
    
    The unrealized gains on investments
    available for sale represent accrued interest.(b)
    
    See Note 5 of Notes to
    Condensed Consolidated Financial Statements for additional
    information about the impact of the special purpose entity
    consolidation.    Other Financial Items Measured at Fair Value on a
    Nonrecurring Basis
 14




---



##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
     Nonfinancial Items Measured at Fair Value on a
    Nonrecurring Basis
  NOTE 5 
    FINANCIAL
    SERVICES  Dell Financial Services L.L.C.
    Financing
    Receivables
    July 31,


January 30,2009


2009(in millions)Financing receivables, netCustomer receivablesRevolving loans

$
1,034


$
963Fixed-term leases and loans


715



723Subtotal


1,749



1,686Customer receivables previously unconsolidated


561



-Allowance for losses


(173
)


(149
)Customer receivables, net


2,137



1,537Residual interest


259



279Retained interest


119



396Financing receivables, net

$
2,515


$
2,212Short-term

$
2,252


$
1,712Long-term


263



500Financing receivables, net

$
2,515


$
2,212  15




---



##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
   Customer
    Receivables
    
    Revolving loans offered under private label credit financing
    programs provide qualified customers with a revolving credit
    line for the purchase of products and services offered by Dell.
    Revolving loans bear interest at a variable annual percentage
    rate that is tied to the prime rate. Based on historical payment
    patterns, revolving loan transactions are typically repaid on
    average within 12 months. Revolving loans are included in
    short-term financing receivables in the table above. 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 by a specific date, no
    interest is charged. These special programs generally range from
    3 to 12 months. At July 31, 2009, and January 30,
    2009, $331 million and $352 million, respectively,
    were receivable under these special programs.
    Dell enters into sales-type lease arrangements with customers
    who desire lease financing. Leases with business customers have
    fixed terms of two to five years. Future maturities of minimum
    lease payments at July 31, 2009, for future fiscal years
    are as follows: 2010  $151 million;
    2011  $205 million; 2012 
    $118 million; 2013  $28 million; and
    2014  $2 million. Fixed-term loans are offered
    to qualified small businesses, large commercial accounts,
    governmental organizations, and educational entities.    
    As of July 31, 2009, and January 30, 2009, customer
    financing receivables 60 days or more delinquent were
    $54 million and $58 million, respectively. These
    amounts represent 3.1% and 3.4% of the ending gross customer
    financing receivables balances for the respective periods.
    Net principal charge-offs for the three months ended
    July 31, 2009, and August 1, 2008, were
    $30 million and $20 million, respectively. These
    amounts, when annualized, represent 7.2% and 5.4% of the average
    gross outstanding customer financing receivable balance
    (including accrued interest) for the respective three month
    periods.
    Net principal charge-offs for the six months ended July 31,
    2009, and August 1, 2008, were $60 million and
    $38 million, respectively. These amounts, when annualized,
    represent 6.9% and 4.7% of the average gross outstanding
    customer financing receivable balance (including accrued
    interest) for the respective six month periods.  Customer
    Receivables Previously Unconsolidated
   16




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
   Residual
    Interest
  fixed-term value-at-risk other-than-temporary
  Retained
    Interest
      Three Months Ended


Six Months EndedJuly 31,


August 1,


July 31,


August 1,2009


2008


2009


2008(in millions)Retained interest at beginning of period

$
504


$
317


$
396


$
223Issuances


125



76



252



232Distributions from conduits


(25
)


(85
)


(35
)


(140
)Net accretion


14



10



24



20Change in fair value for the period


3



(6
)


(16
)


(23
)Impact of special purpose entity consolidation


(502
)


-



(502
)


-Retained interest at end of period

$
119


$
312


$
119


$
312     Weighted Average Key AssumptionsMonthly


Credit


DiscountPayment Rates


Losses


Rates


Life(lifetime)


(annualized)


(months)Time of transfer valuation of retained interest


5
%


1
%


12
%


19Valuation of retained interest


8
%


3
%


12
%


14  17




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
     July 31, 2009(in millions)Adverse Change ofExpected prepayment speed: 10%

$
(0.1
)Expected prepayment speed: 20%

$
(0.3
)Expected credit losses: 10%

$
(1.2
)Expected credit losses: 20%

$
(2.5
)Discount rate: 10%

$
(1.4
)Discount rate: 20%

$
(2.8
)     Asset
    Securitization
      fixed-term
  
    As of July 31, 2009, and January 30, 2009, the unpaid
    principal balance of securitized receivables were
    $726 million and $680 million, respectively. As of
    July 31, 2009, and January 30, 2009, securitized
    financing receivables 60 days or more delinquent were
    $11 million and $14 million, respectively. These
    amounts represent 1.5% and 2.1% of the ending securitized
    financing receivables balances for the respective periods. 18




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
    
    Net principal charge-offs for the three months ended
    July 31, 2009, and August 1, 2008, were
    $3 million and $6 million, respectively. These amounts
    when annualized represent 1.9% and 3.1% of the average
    outstanding securitized financing receivable balance for the
    respective three month periods.
    Net principal charge-offs for the six months ended July 31,
    2009, and August 1, 2008, were $8 million and
    $11 million, respectively. These amounts when annualized
    represent 2.3% and 3.2% of the average outstanding securitized
    financing receivable balance for the respective six month
    periods.  NOTE 6 
    GOODWILL
    AND INTANGIBLE ASSETS  Goodwill
    Large





Small andEnterprise


Public


Medium Business


Consumer


Total(in millions)Balance at January 30, 2009

$
677


$
411


$
354


$
295


$
1,737Adjustments


6



2



-



3



11Balance at July 31, 2009

$
683


$
413


$
354


$
298


$
1,748    19




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
    NOTE 7 
    WARRANTY
    LIABILITY AND RELATED DEFERRED ENHANCED SERVICES
    REVENUE    Three Months Ended


Six Months EndedJuly 31,


August 1,


July 31,


August 1,2009


2008 (b)


2009


2008 (b)(in millions)Deferred enhanced services revenueDeferred enhanced services revenue at beginning of period

$
5,637


$
5,424


$
5,649


$
5,260Revenue deferred for new extended warranty and services
    contracts sold


957



1,058



1,717



2,002Revenue recognized


(768
)


(793
)


(1,540
)


(1,573
)Deferred enhanced services revenue at end of period

$
5,826


$
5,689


$
5,826


$
5,689Current portion

$
2,775


$
2,572


$
2,775


$
2,572Non-current portion


3,051



3,117



3,051



3,117Deferred enhanced services revenue at end of period

$
5,826


$
5,689


$
5,826


$
5,689   Three Months Ended


Six Months EndedJuly 31,


August 1,


July 31,


August 1,2009


2008(b)


2009


2008(b)(in millions)Warranty liabilityWarranty liability at beginning of period

$
1,032


$
1,014


$
1,035


$
929Costs accrued for new warranty contracts and changes in
    estimates for pre-existing
    warranties (a)


193



314



487



683Services obligations honored


(253
)


(250
)


(550
)


(534
)Warranty liability at end of period

$
972


$
1,078


$
972


$
1,078Current portion

$
501


$
725


$
501


$
725Non-current portion


471



353



471



353Warranty liability at end of period

$
972


$
1,078


$
972


$
1,078     (a)
    
    Changes in cost estimates related
    to pre-existing warranties are aggregated with accruals for new
    warranty contracts. Dells warranty liability process does
    not differentiate between estimates made for pre-existing
    warranties and new warranty obligations.(b)
    
    Fiscal 2009 amounts have been
    revised to include foreign currency exchange rate fluctuations
    in revenue deferred for new extended warranty and service
    contracts sold and costs accrued for new warranty contracts and
    changes in estimates for pre-existing warranties to conform to
    the current period presentation. 20




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
    NOTE 8 
    COMMITMENTS
    AND CONTINGENCIES  Severance Costs and Facility Actions
  Restricted Cash
  Legal Matters time-to-time Accounting for Contingencies,
    Investigations and Related Litigation
    
    Four putative securities class actions filed between
    September 13, 2006, and January 31, 2007, in the
    Western District of Texas, Austin Division, against Dell and
    certain of its current and former officers were consolidated as
    In re Dell Securities Litigation, and a lead plaintiff
    was appointed by the court. The lead plaintiff asserted claims
    under sections 10(b), 20(a), and 20A of the Securities
    Exchange Act of 1934 based on alleged false and 21




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
   misleading disclosures or omissions regarding Dells
    financial statements, governmental investigations, internal
    controls, known battery problems and business model, and based
    on insiders sales of Dell securities. This action also
    included Dells independent registered public accounting
    firm, PricewaterhouseCoopers LLP, as a defendant. On
    October 6, 2008, the court dismissed all of the
    plaintiffs claims with prejudice and without leave to
    amend. On November 3, 2008, the plaintiff appealed the
    dismissal of Dell and the officer defendants to the Fifth
    Circuit Court of Appeals. The hearing is scheduled for September
    2009.  
    In addition, seven shareholder derivative lawsuits filed between
    September 29, 2006, and January 22, 2007, in three
    separate jurisdictions were consolidated as In re Dell
    Derivative Litigationinto three actions. One of those
    consolidated actions was pending in the Western District of
    Texas, Austin Division, but was dismissed without prejudice by
    an order filed October 9, 2007. The second consolidated
    shareholder derivative action was pending in Delaware Chancery
    Court. On October 16, 2008, the Delaware court granted the
    parties stipulation to dismiss all of the plaintiffs
    claims in the Delaware lawsuit without prejudice. The third
    consolidated shareholder derivative action is pending in state
    district court in Williamson County, Texas. These shareholder
    derivative lawsuits named various current and former officers
    and directors as defendants and Dell as a nominal defendant, and
    asserted various claims derivatively on behalf of Dell under
    state law, including breaches of fiduciary duties.
    The Board of Directors received a shareholder demand letter,
    dated November 12, 2008, asserting allegations similar to
    those made in the securities and shareholder derivative lawsuits
    against various current and former officers and directors and
    PricewaterhouseCoopers LLP, and requesting that the Board of
    Directors investigate and assert claims relating to those
    allegations on behalf of Dell. The Board of Directors is
    considering and will address the demand.    Copyright Levies
    Tax Matters
 22




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
       Other Litigation
  
    Abstrax, Inc. v. Dell  On June 1,
    2007, Abstrax, Inc. filed a lawsuit against Dell and Gateway,
    Inc. in the Eastern District of Texas, Marshall Division,
    alleging that Dell infringed claims under its U.S. Patent
    No. 6,240,328 entitled Manufacturing Method for
    Assembling Products by Generating and Scheduling Dynamically
    Assembly Instructions. Abstrax seeks monetary damages and
    injunctive relief. On July 2, 2007, Dell filed its defense
    and counterclaim, asserting non-infringement, invalidity,
    laches, intervening rights, inequitable conduct and patent
    expiration. Dell subsequently filed an amended answer and
    counterclaims on April 4, 2008. A jury trial is scheduled
    for October, 2009 in Marshall, Texas.
    Active Solutions, L.L.C. and Southern Electronics Supply,
    Inc. v. Dell Inc. et. al. On April 20,
    2007, plaintiffs Active Solutions, L.L.C. and Southern
    Electronics Supply, Inc. filed a lawsuit in Orleans Parish, New
    Orleans, Louisiana. The defendants are Dell Inc., the City of
    New Orleans, certain representatives of and former
    subcontractors for the City of New Orleans, and the
    subcontractors principals. The plaintiffs seek monetary
    damages for promissory estoppel, breach of a Dell nondisclosure
    agreement, breach of the Louisiana Unfair Trade Practices Act,
    conspiracy to violate the Uniform Trade Secrets Act, and unjust
    enrichment. A jury trial is scheduled for September 14,
    2009, in New Orleans.Dell believes that it has meritorious defenses with respect to
    the claims made in the Abstraxand Active Solutionslawsuits. However, the outcome of litigation is inherently
    unpredictable, and an unfavorable outcome in either matter could
    have a material adverse effect on Dells financial
    position, results of operations or cash flows for the periods in
    which the effects become reasonably estimable.  Form 10-K Form 10-Q
 23




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
    NOTE 9 
    COMPREHENSIVE
    INCOME    Three Months Ended


Six Months EndedJuly 31,


August 1,


July 31,


August 1,2009


2008


2009


2008(in millions)Comprehensive incomeNet income

$
472


$
616


$
762


$
1,400Change related to foreign currency hedging
    instruments, net


(119
)


14



(477
)


(17
)Change related to marketable securities, net


3



2



3



(23
)Foreign currency translation adjustments


(26
)


28



(34
)


(13
)Comprehensive income

$
330


$
660


$
254


$
1,347   NOTE 10 
    EARNINGS
    PER COMMON SHARE      Three Months Ended


Six Months EndedJuly 31,


August 1,


July 31,


August 1,2009


2008


2009


2008(in millions, except per share amounts)NumeratorNet income

$
472


$
616


$
762


$
1,400DenominatorWeighted-average shares outstanding:Basic


1,955



1,991



1,952



2,013Effect of dilutive options, restricted stock units, restricted
    stock, and other


5



8



4



6Diluted


1,960



1,999



1,956



2,019Earnings per common share:Basic

$
0.24


$
0.31


$
0.39


$
0.70Diluted

$
0.24


$
0.31


$
0.39


$
0.69  24




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##### Table of Contents



DELL
    INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Continued)
    NOTE 11 
    SEGMENT
    INFORMATION        Three Months Ended


Six Months EndedJuly 31,


August 1,


July 31,


August 1,2009


2008


2009


2008(in millions)Net revenueLarge Enterprise

$
3,285


$
4,806


$
6,685


$
9,727Public


3,798



4,510



6,969



8,091Small and Medium Business


2,820



3,958



5,787



8,202Consumer


2,861



3,160



5,665



6,491Net revenue

$
12,764


$
16,434


$
25,106


$
32,511Consolidated operating income:Large Enterprise

$
172


$
259


$
364


$
645Public


383



331



676



608Small and Medium Business


246



330



476



660Consumer


89



29



88



117Consolidated segment operating income


890



949



1,604



2,030Severance and facility action expenses


(87
)


(25
)


(272
)


(131
)Broad based long-term
    incentives (a)


(92
)


(78
)


(168
)


(128
)In-process research and development


-



-



-



(2
)Amortization of intangible assets


(40
)


(27
)


(79
)


(51
)Consolidated operating income

$
671


$
819


$
1,085


$
1,718     (a)
    
    Broad based long-term incentives
    includes stock based compensation of $79 million and
    $78 million for the three months ended July 31, 2009,
    and August 1, 2008, respectively; and $146 million and
    $128 million for the six months ended July 31, 2009,
    and August 1, 2008, respectively. 25




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##### Table of Contents



ITEM 2.
    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 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 in our Annual Report
    on
    Form 10-K
    for the fiscal year ended January 30, 2009.
  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 preliminary information provided by
    IDC Worldwide Quarterly PC Tracker, August 17, 2009. Share
    data is for the calendar quarter 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.
  OVERVIEW
  Our
    Company
             26




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##### Table of Contents




    Large Enterprise  Our customers include
    large global and national corporate businesses. We believe that
    a single large-enterprise unit will give us an even greater
    knowledge of our customers and thus further our advantage in
    delivering globally consistent and cost-effective solutions and
    services to the worlds largest IT users. We intend to
    improve our global leadership and relationships with these
    customers. Our execution in this space will be increasingly
    focused on data center solutions, disruptive innovation,
    customer segment specialization, and the value chain of design
    to value, price to value, market to value, and sell to value.
    Public Our customers, which include
    educational institutions, government, health care, and law
    enforcement agencies, operate in communities and their missions
    are aligned with their constituents needs. We intend to
    further our understanding of our Public customers goals
    and missions and extend our leadership in answering their urgent
    IT challenges. To better meet our customers goals, we are
    focusing on simplifying IT, providing faster deployment of IT
    applications, expanding our enterprise and services offerings,
    helping customers understand economic stimulus packages through
    our Economic Stimulus Learning Center, and strengthening our
    partner relations to build best of breed integrated solutions.
    Small and Medium Business Our
    customers include those in the small and medium business sector.
    We are focused on providing small and medium businesses with the
    simplest and most complete standards-based IT solutions and
    services, customized for their needs. Our SMB organization will
    accelerate the creation and delivery of specific solutions and
    technology to small and medium-sized businesses worldwide in an
    effort to help our customers improve and grow their businesses.
    We are doing this through solutions such as our
    ProManage-Managed Services and through extending our channel
    program (PartnerDirect) to provide additional certification
    paths and purchase options to our customers.
    Consumer Our customers include
    individual consumers who buy through our on-line store at
    www.dell.com, over the phone, and through retail channels. The
    globalization of our business has improved our global sales
    execution and coverage through better customer alignment,
    targeted sales force investments in rapidly growing countries,
    and improved marketing tools. We are designing new, innovative
    products with faster development cycles and competitive
    features. In order to reach more consumers, we will continue to
    expand and transform both our direct and retail business.   27




---



##### Table of Contents



CONSOLIDATED
    RESULTS OF OPERATIONS
    Three Months Ended

Six Months EndedJuly 31, 2009




August 1, 2008

July 31, 2009




August 1, 2008% of

%





% of




% of

%





% ofDollars


Revenue

Change


Dollars


Revenue

Dollars


Revenue

Change


Dollars


Revenue(in millions, except per share amounts and percentages)Net revenueProducts

$
10,623



83.2%


(25)%


$
14,147



86.1%

$
20,855



83.1%


(26)%


$
28,103



86.4%Services, including software related


2,141



16.8%


(6)%



2,287



13.9%


4,251



16.9%


(4)%



4,408



13.6%Total net revenue

$
12,764



100.0%


(22)%


$
16,434



100.0%

$
25,106



100.0%


(23)%


$
32,511



100.0%Gross marginProducts

$
1,645



15.5%


(17)%


$
1,986



14.0%

$
3,091



14.8%


(25)%


$
4,095



14.6%Services, including software related


746



34.8%


(11)%



841



36.8%


1,468



34.5%


(13)%



1,697



38.5%Total Gross margin

$
2,391



18.7%


(15)%


$
2,827



17.2%

$
4,559



18.2%


(21)%


$
5,792



17.8%Operating expenses

$
1,720



13.5%


(14)%


$
2,008



12.2%

$
3,474



13.8%


(15)%


$
4,074



12.5%Operating income

$
671



5.2%


(18)%


$
819



5.0%

$
1,085



4.3%


(37)%


$
1,718



5.3%Net income

$
472



3.7%


(23)%


$
616



3.7%

$
762



3.0%


(46)%


$
1,400



4.3%Earnings per share diluted

$
0.24



N/A


(23)%


$
0.31



N/A

$
0.39



N/A


(43)%


$
0.69



N/A   year-over-year
  Revenue
  Product Revenue year-over-year year-over-year
  Services Revenue, including software
    related year-over-year year-over-year
  year-over-year,
 28




---



##### Table of Contents



year-over-year year-over-year year-over-year
    year-over-year
    Share
    Position
    Gross
    Margin
  Products
  Services, including software related
 29




---



##### Table of Contents



Operating
    Expenses
    Three Months Ended

Six Months EndedJuly 31, 2009



August 1, 2008

July 31, 2009



August 1, 2008% of

%




% of




% of

%




% ofDollars


Revenue

Change

Dollars


Revenue

Dollars


Revenue

Change

Dollars


Revenue(in millions, except percentages)Operating expensesSelling, general, and administrative

$
1,571



12.3%



(15)%


$
1,840



11.2%


$
3,184



12.7%



(15)%


$
3,752



11.5%In-process research and development


-



0.0%



N/A



-



0.0%



-



0.0%



(100)%



2



0.0%Research, development, and engineering


149



1.2%



(12)%



168



1.0%



290



1.1%



(9)%



320



1.0%Operating expenses

$
1,720



13.5%



(14)%


$
2,008



12.2%


$
3,474



13.8%



(15)%


$
4,074



12.5%  30




---



##### Table of Contents



Selling, general, and administrative
    Research, Development, and Engineering year-over-year, year-over-year.
  Operating
    Income
  year-over-year year-over-year year-over-year year-over-year
  Net
    Income
  year-over-year
  SEGMENT
    DISCUSSION
   31




---



##### Table of Contents



Three Months Ended

Six Months EndedJuly 31, 2009



August 1, 2008

July 31, 2009



August 1, 2008% of

%




% of




% of

%




% ofDollars


Revenue

Change

Dollars


Revenue

Dollars


Revenue

Change

Dollars


Revenue(in millions, except percentages)Large EnterpriseNet revenue

$
3,285



26%



(32)%


$
4,806



29%


$
6,685



27%



(31)%


$
9,727



30%Operating income


172



5%



(34)%



259



5%



364



5%



(44)%



645



7%PublicNet revenue


3,798



30%



(16)%



4,510



28%



6,969



28%



(14)%



8,091



25%Operating income


383



10%



16%



331



7%



676



10%



11%



608



8%Small and Medium BusinessNet revenue


2,820



22%



(29)%



3,958



24%



5,787



23%



(29)%



8,202



25%Operating income


246



9%



(26)%



330



8%



476



8%



(28)%



660



8%ConsumerNet revenue


2,861



22%



(9)%



3,160



19%



5,665



22%



(13)%



6,491



20%Operating income


89



3%



207%



29



1%



88



2%



(25)%



117



2%ConsolidatedTotal net revenue

$
12,764



100%



(22)%


$
16,434



100%


$
25,106



100%



(23)%


$
32,511



100%Segment operating income

$
890



7%



(6)%


$
949



6%


$
1,604



6%



(21)%


$
2,030



6%     
    Large Enterprise During the second
    quarter of Fiscal 2010, Large Enterprises revenue
    decreased 32%
    year-over-year
    mainly due to a unit shipment decline of 32% as prices remained
    relatively stable
    year-over-year.
    During the first half of Fiscal 2010, Large Enterprises
    revenue decreased 31%
    year-over-year
    due to a unit shipment decline of 34%, partially offset by a 4%
    increase in average selling prices. Large Enterprises weak
    performance can generally be attributed to the current global
    economy coupled with our focus on balancing growth and
    profitability. As a result of the current economic slowdown,
    many of our customers have either delayed or canceled IT
    projects. The increase in average selling prices for the first
    half of Fiscal 2010 was driven by higher mix of services and
    software related revenues, which improved overall product mix.
    Large Enterprise experienced significant
    year-over-year
    declines in revenue across all product lines during the second
    quarter and first half of Fiscal 2010. For the second quarter of
    Fiscal 2010, revenue from desktop PCs and mobility products
    declined
    year-over-year
    40% and 43%, respectively, servers and networking, storage, and
    software and peripherals revenue decreased
    year-over-year
    23%, 30%, and 25%, respectively; and enhanced services revenue
    declined 13%. For the first half of Fiscal 2010, revenue
    declines across all product lines were consistent with the
    declines for the second quarter. Revenue decreased significantly
    year-over-year
    across all countries due to current global economic conditions
    and competitive pressures.  year-over-year year-over-year year-over-year
 32




---



##### Table of Contents



year-over-year
  
    Public During the second quarter and
    first half of Fiscal 2010, Public experienced a 16% and 14%
    year-over-year
    decline, respectively, in revenue primarily due to a unit
    shipment decline of 15% for both time periods. The decline in
    unit shipments can be attributed to continued soft demand in the
    current global economy. Additionally, during the second quarter,
    Publics selling prices began to decline due to aggressive
    pricing competition in certain areas and as a result of seasonal
    growth in education sector sales, which typically have lower
    selling prices than other areas of Publics business.
    Publics revenue declined across all product categories for
    the second quarter and first half of Fiscal 2010; however,
    services and software related revenue improved
    year-over-year.
    Product revenue decline was led by desktop PCs, which decreased
    year-over-year
    27% and 26% for the second quarter and first half of Fiscal
    2010, respectively. From a country perspective, revenue declined
    across most countries during the second quarter and first half
    of Fiscal 2010. For the third quarter of Fiscal 2010, we
    anticipate seasonally strong demand from the U.S. Federal
    government due to its fiscal year end.  year-over-year, year-over-year year-over-year
  
    Small and Medium Business During the
    second quarter of Fiscal 2010, SMB experienced a 29% and 25%
    year-over-year
    decline in revenue and unit shipments, respectively. During the
    first half of Fiscal 2010, SMB experienced a 29% and 27%
    year-over-year
    decline in revenue and unit shipments, respectively. Average
    selling prices declined 5% and 3% for the second quarter and
    first half of Fiscal 2010, respectively. SMB experienced a
    double digit revenue decline across all product lines, led by a
    38% and 31% decline in desktop PC and mobility revenue,
    respectively, for both the second quarter and first half of
    Fiscal 2010. Consistent with our other segments
    performance, the contraction of the global economy in the first
    half of Fiscal 2010 and competitive pressures are significant
    contributors to SMBs
    year-over-year
    revenue, unit shipment, and average selling price declines.
    Additionally, we limited our participation in certain lower
    priced-but higher demand bands in an effort to protect
    profitability. From a country perspective, revenue declined
    across most countries for the second quarter and first half of
    Fiscal 2010.  year-over-year year-over-year
  
    Consumer During the second quarter and
    first half of Fiscal 2010, Consumers revenue declined 9%
    and 13%
    year-over-year,
    respectively, on unit growth of 17% and 14%, respectively. Even
    though unit shipments grew, our Consumer revenue decreased
    mainly due to our growth in retail, which tends to have lower
    average selling prices, combined with a shift in product mix and
    competitive pricing pressures. As a result, our average selling
    prices declined 22% and 24%
    year-over-year
    in the second quarter and first half of Fiscal 2010,
    respectively. In addition, Consumers desktop PC revenue
    declined 27% for the second quarter of Fiscal 2010 as compared
    to the second quarter of Fiscal 2009 on a unit shipment decline
    of 11%, and desktop PC revenue declined 31% for the first half
    of Fiscal 2010 as compared to the first half of Fiscal 2009 on a
    unit shipment decline of 16%. Mobility shipments increased
    year-over-year
    by 30% and 31% for the second quarter and first half of Fiscal
    2010, respectively, while 33




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##### Table of Contents



average selling prices for mobility products declined 24% and
    26% during the same time periods. The continued shift in
    consumer preference from desktops to notebooks has contributed
    to our mobility unit growth. The reduction in mobility average
    selling prices is mainly attributable to our expansion into
    retail coupled with a demand shift to lower priced notebooks
    from higher priced notebooks. Software and peripheral revenue
    also declined 6% and 14%
    year-over-year
    during the second quarter and first half of Fiscal 2010,
    respectively. At a country level, our targeted BRIC revenue grew
    17%
    year-over-year
    for both the second quarter and first half of Fiscal 2010.  year-over-year.
  year-over-year year-over-year, year-over-year year-over-year year-over-year
    REVENUE
    BY PRODUCT AND SERVICES CATEGORIES
     34




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##### Table of Contents



Three Months Ended

Six Months EndedJuly 31, 2009



August 1, 2008

July 31, 2009



August 1, 2008% of

%




% of




% of

%




% ofDollars


Revenue

Change

Dollars


Revenue

Dollars


Revenue

Change

Dollars


Revenue(in millions, except percentages)Net revenueMobility

$
3,891



30%



(21)%


$
4,895



30%


$
7,766



31%



(20)%


$
9,744



30%Desktop PCs


3,319



26%



(33)%



4,954



30%



6,482



26%



(33)%



9,735



30%Software and peripherals


2,382



19%



(15)%



2,790



17%



4,628



18%



(16)%



5,531



17%Servers and networking


1,403



11%



(19)%



1,733



11%



2,689



11%



(22)%



3,451



11%Enhanced services


1,218



10%



(11)%



1,372



8%



2,456



10%



(10)%



2,716



8%Storage


551



4%



(20)%



690



4%



1,085



4%



(19)%



1,334



4%Net revenue

$
12,764



100%



(22)%


$
16,434



100%


$
25,106



100%



(23)%


$
32,511



100%   
    Mobility  During the second quarter and
    first half of Fiscal 2010, revenue from mobility products (which
    includes notebook computers and mobile workstations) declined
    21% and 20%, respectively, on a unit decline of 1% and 3%,
    respectively, compared to the second quarter and first half of
    Fiscal 2009.
    Year-over-year,
    Commercial revenue and units declined 31% and 22%, respectively,
    for the second quarter of Fiscal 2010 while revenue and units
    decreased 30% and 25%, respectively, for first half of Fiscal
    2010. The declines are generally driven by the softer demand
    environment. Additionally, we generally were selective in
    participating in lower price bands. Average selling prices in
    Commercial declined 12% and 7% for the second quarter and first
    half of Fiscal 2010, respectively, due to an overall industry
    decline in mobility selling prices.  year-over-year year-over-year,
  tm
  
    Desktop PCs  During both the second
    quarter and first half of Fiscal 2010, revenue from desktop PCs
    (which includes desktop computer systems and workstations)
    decreased 33%
    year-over-year
    on a unit decline of 23% and 24%, respectively. In the
    marketplace, we are continuing to see rising end-user demand for
    mobility products, which contributes to further slowing demand
    for desktop PCs as mobility growth is expected to continue to
    outpace desktop growth. The decline in desktop PC revenue was
    also due to the on-going competitive pricing pressure for lower
    priced desktops and a softening in global IT end-user demand.
    Consequently, our average selling price for desktops decreased
    13% and 12%
    year-over-year
    during the second quarter and first half of Fiscal 2010 as we
    continued to align our prices and product offerings with the
    marketplace. For the second quarter and first half of Fiscal
    2010, desktop revenue decreased across all segments. During the
    second quarter of Fiscal 2010, we introduced our
    Vostrotm

    All In One desktop, which is designed to save desk space for our
    business customers.
    Software and Peripherals  Revenue from
    sales of software and peripherals (S&P)
    consists of Dell-branded printers, monitors (not sold with
    systems), projectors, and a multitude of competitively priced
    third-party peripherals including plasma and LCD televisions,
    standalone software sales and related support services, and
    other products. S&P revenue declined 15% and 16%
    year-over-year
    for the second quarter and first six months of Fiscal 2010,
    respectively. S&Ps revenue decline was driven by
    overall customer unit shipment declines and 35




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##### Table of Contents



demand softness in displays, imaging products, and electronics,
    which experienced year-over-year revenue decreases of 34%, 19%,
    and 11%, respectively, during the second quarter and
    year-over-year revenue declines of 35%, 25%, and 19%,
    respectively, for the first half of Fiscal 2010. We continued to
    see growth in software licensing with 1% and 6% revenue
    improvement for the second quarter and first half of Fiscal
    2010, respectively. Contributing to this growth was our
    acquisition of ASAP Software (ASAP) in the fourth
    quarter of Fiscal 2008. With ASAP, we now offer products from
    over 2,400 software publishers. We continue to believe that
    software licensing is a revenue growth opportunity as customers
    continue to seek out consolidated software sources. All segments
    experienced
    year-over-year
    revenue declines for the second quarter and first half of Fiscal
    2010.    
    Servers and Networking  During the
    second quarter and first half of Fiscal 2010, revenue from sales
    of servers and networking products (which includes rack, blade,
    and tower servers) decreased 19% and 22%
    year-over-year,
    respectively, on a unit shipment decrease of 23% and 25%,
    respectively. The decline in our server and networking revenue
    is due to demand challenges across all Commercial segments and
    regions. Our average selling price for servers and networking
    products increased 5% and 4%
    year-over-year
    during the second quarter and first half of Fiscal 2010,
    respectively. During the second quarter, we continued the
    rollout of our new 11th generation PowerEdge servers as a
    part of our mission to help companies of all sizes simplify
    their IT environments. These servers provide optimal
    virtualization, system management, and usability.
    Enhanced Services  Enhanced services
    offerings include infrastructure consulting, deployment of
    enterprise products and computer systems in customers
    environments, asset recovery and recycling, computer-related
    training, IT support, client and enterprise support, and managed
    service solutions. Enhanced services revenue decreased 11% and
    10%
    year-over-year
    for the second quarter and first half of Fiscal 2010 to
    $1.2 billion and $2.5 billion, respectively. Although
    we continue to move towards more standalone services, a
    significant portion of our portfolio is made up of support
    services, which tend to correlate with hardware unit growth, and
    thus causing the
    year-over-year
    decline. For the second quarter and first half of Fiscal 2010,
    enhanced services revenue declined for each of our segments as
    compared to the same time periods in Fiscal 2009 with Large
    Enterprise experiencing the largest reduction from an absolute
    dollar perspective. Our deferred enhanced service revenue
    balance increased 2%
    year-over-year
    to $5.8 billion at July 31, 2009, primarily due to an
    increase in up-sell service offerings. We continue to view
    enhanced services as a strategic growth opportunity and will
    continue to invest in our offerings and resources focused on
    increasing our solution sales.
    Storage  Revenue from sales of storage
    products decreased 20% and 19%
    year-over-year
    for the second quarter and first half of Fiscal 2010,
    respectively. All Commercial segments contributed to the
    year-over-year
    decrease in storage revenue for the second quarter and first
    half of Fiscal 2010. EqualLogic performed strongly with
    year-over-year
    revenue growth of 42% and 52% for the second quarter and first
    half of Fiscal 2010, respectively. During the second quarter of
    Fiscal 2010, we introduced the EqualLogic PS4000 storage array
    and the PowerVault NX3000 network attached storage device to
    help small businesses and remote office customers meet their
    growing storage needs. 36




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##### Table of Contents



Investment
    and Other Income (Expense), net
    Three Months Ended


Six Months EndedJuly 31,


August 1,


July 31,


August 1,2009


2008


2009


2008(in millions)Investment and other income (expense), netInvestment income, primarily interest

$
15


$
49


$
36


$
104Gains (losses) on investments, net


-



(14
)


1



(11
)Interest expense


(39
)


(26
)


(68
)


(38
)Foreign exchange


(26
)


20



(26
)


110Other


8



(11
)


13



(22
)Investment and other income (expense), net

$
(42
)

$
18


$
(44
)

$
143   year-over-year year-over-year
  year-over-year
  Income
    Taxes
    ACCOUNTS
    RECEIVABLE
   37




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##### Table of Contents



FINANCING
    RECEIVABLES
   
        OFF-BALANCE
    SHEET ARRANGEMENTS
  Asset
    Securitization
   38




---



##### Table of Contents



 
  Accounting for Transfers and
    Servicing of Financial Assets and Extinguishment of
    Liabilities
     
    LIQUIDITY
    AND CAPITAL COMMITMENTS
  Current
    Market Conditions
      Form 10-K
  Liquidity
   39




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##### Table of Contents



Six Months EndedJuly 31,


August 1,2009


2008(in millions)Net change in cash from:Operating activities

$
1,837


$
1,251Investing activities


40



579Financing activities


1,379



(987
)Effect of exchange rate changes on cash and cash equivalents


91



16Change in cash and cash equivalents

$
3,347


$
859   Key Performance
    Metrics
  Operating Activities
  Key Performance Metrics
 40




---



##### Table of Contents



July 31,


August 1,2009


2008Days of sales outstanding
    (a)


42



38Days of supply in inventory
    (b)


7



7Days in accounts payable
    (c)


84



74Cash conversion cycle


(35
)


(29
)     (a)
    
    Days of sales outstanding
    (DSO) calculates the average collection period of
    our accounts receivable. DSO is based on the ending net trade
    receivables and the most recent quarterly total net revenue for
    each period. DSO also includes the effect of product costs
    related to customer shipments not yet recognized as revenue that
    are classified in other current assets. DSO is calculated by
    adding accounts receivable, net of allowance for doubtful
    accounts, and customer shipments in transit and dividing that
    sum by average net revenue per day for the current quarter
    (90 days). At July 31, 2009, and August 1, 2008,
    DSO and days of customer shipments not yet recognized were 38
    and 4 days and 35 and 3 days, respectively.(b)
    
    Days of supply in inventory
    (DSI) measures the average number of days from
    procurement to sale of our product. DSI is based on ending
    inventory and most recent quarterly total cost of sales for each
    period. DSI is calculated by dividing inventory by average cost
    of goods sold per day for the current quarter (90 days).(c)
    
    Days in accounts payable
    (DPO) calculates the average number of days our
    payables remain outstanding before payment. DPO is based on
    ending accounts payable and most recent quarterly total cost of
    sales for each period. DPO is calculated by dividing accounts
    payable by average cost of goods sold per day for the current
    quarter (90 days).      Investing Activities
  Financing Activities year-over-year
 41




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##### Table of Contents



Capital
    Commitments
  Share Repurchase Program
    Capital Expenditures
  Restricted Cash
  RECENTLY
    ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS
   
  ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Form 10-K Form 10-K.
  ITEM 4.
    CONTROLS
    AND PROCEDURES  Rule 13a-14
  EVALUATION
    OF DISCLOSURE CONTROLS AND PROCEDURES
  Rules 13a-15(e) 15d-15(e)
 42




---



##### Table of Contents



CHANGES
    IN INTERNAL CONTROL OVER FINANCIAL REPORTING
   43




---



##### Table of Contents



PART II 
    OTHER INFORMATION  ITEM 1.
    LEGAL
    PROCEEDINGS    ITEM 1A.
    RISK
    FACTORS    Form 10-K
 44




---



##### Table of Contents



ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    (1)
    Proposal 1 (Election of Directors)  A proposal
    for the election of the persons who will serve as Dells
    directors until next years annual meeting.(2)
    Proposal 2 (Ratification of Independent
    Auditor)  A proposal for the ratification of the
    Audit Committees selection of PricewaterhouseCoopers LLP
    as Dells independent auditor for Fiscal 2010.(3)
    Stockholder Proposal 1 (Reimbursement of Proxy
    Expenses)  A proposal to amend our Bylaws to provide
    for the reimbursement of certain proxy expenses incurred in
    connection with a stockholder proposed director nomination.(4)
    Stockholder Proposal 2 (Adopt Simple Majority
    Vote)  A proposal to amend our Certificate of
    Incorporation and Bylaws to provide for a simple majority vote
    requirement for matters brought before stockholders.    Number
    of VotesProposal 1:

For


WithheldElection of Directors:James W. Breyer


1,636,653,739



32,156,742Donald J. Carty


1,631,633,628



37,176,854Michael S. Dell


1,627,397,709



41,412,773William H. Gray, III


1,396,321,550



272,488,932Sallie L. Krawcheck


1,643,632,411



25,178,040Judy C. Lewent


1,646,325,730



22,484,752Thomas W. Luce, III


1,482,484,852



186,325,630Klaus S. Luft


1,599,449,293



69,361,188Alex J. Mandl


1,627,064,605



41,745,877Samuel A. Nunn, Jr.


1,399,029,662



269,780,819   Proposal 2:

For

Against

Abstain

Broker Non-VotesRatification of Independent Auditor


1,643,819,083



21,507,204



3,484,193   Stockholder Proposal 1:Reimbursement of Proxy Expenses


490,597,816



901,757,293



19,857,894



256,597,477   Stockholder Proposal 2:Adopt Simple Majority Vote


973,083,305



437,260,886



1,863,616



256,602,673   ITEM 6.
    EXHIBITS  Exhibits
 45




---



##### Table of Contents



SIGNATURE
      THOMAS
    W. SWEET
   Vice President, Corporate Finance and
 Chief Accounting Officer
    46




---



##### Table of Contents



INDEX TO
    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
    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)4.3






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)4.4






Indenture, dated as of April 17, 2008, between Dell Inc.
    and The Bank of New York Trust Company, N.A., as trustee
    (including the form of notes) (incorporated by reference to
    Exhibit 4.1 of Dells Current Report on
    Form 8-K
    filed April 17, 2008, Commission file
    No. 0-17017)4.5






Indenture, dated April 6, 2009, between Dell Inc. and The
    Bank of New York Mellon Trust Company, N.A., as trustee
    (incorporated by reference to Exhibit 4.1 of Dells
    Current Report on
    Form 8-K
    filed April 6, 2009, Commission file
    No. 0-17017)4.6






First Supplemental Indenture, dated April 6, 2009, between
    Dell Inc. and The Bank of New York Mellon Trust Company,
    N.A., as trustee (incorporated by reference to Exhibit 4.2
    of Dells Current Report on
    Form 8-K
    filed April 6, 2009, Commission file
    No. 0-17017)4.7






Form of 5.625% Notes due 2014 (incorporated by reference to
    Exhibit 4.3 of Dells Current Report on
    Form 8-K
    filed April 6, 2009, Commission file
    No. 0-17017)4.8






Second Supplemental Indenture, dated as of June 15, 2009,
    between Dell Inc. and The Bank of New York Mellon
    Trust Company, N.A., as trustee (incorporated by reference
    to Exhibit 4.1 of Dells Current Report on
    Form 8-K
    filed June 15, 2009, Commission file
    No. 0-17017)4.9






Form of 3.375% Notes due 2012 (incorporated by reference to
    Exhibit 4.2 of Dells Current Report on
    Form 8-K
    filed June 15, 2009, Commission file
    No. 0-17017)4.10






Form of 5.875% Notes due 2019 (incorporated by reference to
    Exhibit 4.3 of Dells Current Report on
    Form 8-K
    filed June 15, 2009, Commission file
    No. 0-17017)10.1
*





Form of Indemnification Agreement between Dell and each Director
    and Officer of Dell10.2
*





Form of Senior Executive Officer New Hire Stock Unit Agreement
    under the Amended and Restated 2002 Long-Term Incentive Plan31.1






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 2002 47




---



##### Table of Contents



31.2






Certification of Brian T. Gladden, Senior Vice President 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 Brian T. Gladden, Senior Vice President 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. 48