1. Jim Vanderslice Vice Chairman
Thank you Dean Taggart (Bob).
Great to be here today in Boston As Bob mentioned, I’m a Boston native from the Newton Corner/Oak Square/Brighton area. This is really home to me and I’ll never forget my day-hop to BC from ’58-’62.
My Boston roots are deep. In fact, my parents used to say that I knew the names and numbers of the BC football team before I learned my Catechism.
I’d like to talk today about Growth and the business fundamentals that make Dell different. Growth is important topic for me personally because it’s central to the advice I gave my children as they began to enter the workforce.
Would also like to talk about some of the lessons we’ve learned that have become fundamental to how we do business.
These fundamentals have and will continue to guide our progress at at Dell and have proven to be even increasingly important as we more important in a global setting.
Our model and our vision for the future of computing is what makes us different. First, I’d like to provide a little background about Dell.
Boston College
November 6, 2002

2. Dell: The Facts Pioneer and leader in direct business
Leader in e-business
Fortune 50 Company -- $32+ Billion in Global Revenue
Global Company > Operating in 190 Countries
World’s #2 Computer Systems Company (temporarily)
#1 in Customer Satisfaction
Approximately 38,000 Employees Worldwide
Market Capitalization of $70 Billion
$32 billion over past 4 quarters
Dell is probably a Fortune 50 now again, with expected growth this year and with several members of the current Fortune 50 probably not being able to maintain that position (e.g. Dynegy, Reliant Energy (round-trip trading), Worldcom (Ch.11), Compaq (merged) etc.)
WW No.2 with only by 0.6 percent market share differential to the market leader (HPQ)

3. Foundation in Direct Model: Fundamentally Advantaged
Ownership of value chain/information
Structural costs
OPEX
Manufacturing
Warranty
Customer
Experience
Suppliers
DELL
Customers
Direct Model
Competitor Model
OEM
Outsourcing
Channel
For years, competitors have tried to imitate us… but no one close to implementing fundamental tenets of true Direct Model
This is because of proprietary aspects of model that come from owning entire value chain offers unique advantages to Dell
On manufacturing/supply side:
We Link supply to demand, which provices: better forecasting and replaces costly inventory with information (e.g., Days Sales Inventory DSI is just 4 days, many times better than our competitors).
Faster response to component pricing: Quickly pass on component savings to customers via our model - competitors complicated supply chains cannot react as quickly as Dell. In Q2 component pricing was down almost 1% per week.
Dell mfg. more efficient than outsourcing: we will use some outsourcing for commodity components, but not finished products, which allows us to retain control of information flow & cost structure
On customer side:
Build to order: deliver exactly what customer wants with Cash Conversion Cycle of negative 37
Unmatched price/performance
No channel conflict or middlemen
Dell is able to extend Direct Model into new markets with large profit pools & standardizing technology.
Model advantages unique to Dell & take significant time/cost to replicate

4. Executing the Direct Model: Q2FY03 Performance
Delivered $0.19 EPS and $8.5 billion in revenues
Repurchased 14 million shares of stock
Shipped record number of units during quarter
LIQUIDITY
$869 million in cash flow from operations
4 days of inventory*
$8.6 billion in cash & investments*
CCC -37 days*
PROFITABILITY
Gross margins = 17.9%
Operating Margin = 8.0%
OPEX percent of revenue = 9.9%*
GROWTH
Dell units +18%, market down -5%
Units #2 WW, #1 US
Favorable mix shift to enterprise
The advantages of the direct model are shown clearly in our most recent quarterly (Q2 FY03) results. We’ve recently completed our Q3, but don’t report our results until a little later this month (Nov. 14). We have announced that we expect revenue will reach a company-record $9.1 billion, up 22 percent from one year ago.
During Q2:
EPS and Revenue up sequentially and Y/Y. Continued to profitably gain share (+2.3 pts. Y/Y to 15.0 percent WW)
While industry revenues were down more than 10 percent, Dell revenues grew by 11percent
Liquidity
Generated ~ $869M cash flow in excess of net income of $501 million
Industry low inventory of 4 days and Record $8.6B in Cash and investments
Profitability
Operating margins +70 basis points to 8 percent - stable operating margins for the past 6 quarters
OpEx remained flat at 9.9 percent
Growth
Units up 18% while market down –5 percent – 23 percent growth premium
* Value ties or sets company record

5. Take Risks Fundamental #1
The first of the fundamentals I want to talk about is to TAKE RISKS: By now, you all probably have heard this. But more than ever it’s a requirement for success in global business.
I’m not just talking about taking the safe bets … I’m talking about taking the risks that others may tell you not to take.
Along the way, you WILL make mistakes. The key is not to make the same mistakes twice.
When Michael began our company, he saw an opportunity to cut out the middleman and sell direct. People said it would not work. Over time, the company has tried a number of different approaches, including some forays into retail and entries into product markets before we were ready. They all were learning experiences.
We believe that taking risks, and learning from mistakes, has formed the foundation of Dell.
Take Risks

6. Dell’s Enterprise Success
#1 in Servers (U.S.)
#2 in Servers (Worldwide)
#1 in Workstations (Worldwide)
Storage revenues grew 72 percent year-over-year in Q2
Dell EMC and PowerConnect Ahead of Expectations
Today, we still look for opportunities, take risks … and make mistakes. But that entrepreneurial spirit has been maintained.
One collection of opportunities that we’ve pursued has been enterprise products and services.
When we started these businesses, the conventional wisdom was that a PC company could never compete in the world of high-end computing. We’ve proved them wrong.
[Discuss slide]
Our progress to date in industry & open standard servers is one of the factors that gives us confidence we can continue our momentum.
Moved from #10 U.S. market share position in 1995 to #1 today
1 in 4 servers sold in the U.S. today is a Dell
#2 worldwide … rapidly closing in on #1
In Q2 this year …
Our year-over-year worldwide server unit growth was the fastest among the top 10 vendors and six times the industry growth rate.
And our external storage revenues grew 72 percent year-over-year last quarter as we shipped approximately 250 terabytes of storage capacity a day.
The market is coming to us and we’ve proven no company is better at winning in open standards environment than Dell.

7. Market Share -- WW Corporate
Leveraging our Core Business
Market Share -- WW Corporate
20%
Continue to gain share in all products & segments:
#1 in WW Corporate
#1 in WW SMB
#1 in WW Public
#3 in WW Consumer
#1 in WW Desktops
#1 in WW Notebooks
#2 in WW Servers
Continue to grow profitable $3.5 billion software & peripherals business
16%
Our calculated “risk” of entering the enterprise and services businesses was based on a solid foundation of success in the corporate market.
Historically, our strength has been corporate market [slide]
Now have approx. 19 percent in WW corporate market -- 5 share points higher than closest competitor
From 1995 – 2001, Dell gained 13.4 share points in the WW corporate market and our unit growth CAGR was 40%
Our WW corp business on same trajectory as our US corp business which now has 40% market share
During same time period, not one competitor gained more than 2.5 share points & competitors in aggregate lost –5.4 pts
Recently placed a greater emphasis on selling to the consumer market and we have been able to earn considerable profits there while our competitors cannot
Each movement into new areas is a risk – but a great opportunity.
12% 8% 4% 0%
1995
1997
1999
2001
Source: IDC

8. Efficiency Wins Fundamental #2
At Dell, we know the importance of eliminating unnecessary steps.
That philosophy began when Michael started the company. It holds true 18 years later, as we’ve eliminated the middlemen, who add no value to customers.
Today, if there’s anything we’re known for at Dell, it’s running an efficient operation.
Our direct model is the foundation of our efficiency.
By dealing directly with our customers, Dell enjoys a more than 10 percent cost advantage over our indirect competitors.
That advantage, combined with the significant cost-savings that we’ve built into our manufacturing process, helps Dell offer customers the best price-for-performance in the industry.
Efficiency Wins

9. Executing the Direct Model: Significant Cost Advantage
Operating Expense Over Time (% sales)
Competitor OPEX greater than 2x Dell
Dell focused on maintaining advantage
Translated cost adv. into profitable share gains
WW share incr. from 9.7% in Q1’00 to 15% in Q2’02
55% increase in 10 quarters
HPQ
Of particular interest to me since I joined Dell is our ongoing focus on operating expense reductions. What we have done over the past few years has contributed to a dramatic increase in cost advantage versus our competition.
This has allowed us to profitably gain share while competition lost share, lost operating income, or both.
Among the things I’m most proud is the fact that we’re ahead of plan on all areas of our current fiscal year $1 billion cost reduction goal. We’re taking costs out of
Warranty, Manufacturing, Structural design, Overhead and we . . .
Now expect to deliver well over $1 billion this year (in FY03).
Keep in mind that these cost savings are proprietary. While our competitors are outsourcing and relinquishing control of their production costs, we are focused on increasing efficiencies in our 7 factories around the world. For example, we now expect to reduce the cost per box by approximately 18% more than originally targeted in the Americas alone.
Some of these savings are reinvested back into our business to drive profitable market share.
As you can see, Dell’s operating expenses are considerably lower than our competition’s
OPEX margin now roughly half that of our competitors
We also have continued to reduce our days of sales in inventory versus the competition, thereby increasing our cost advantage further – the industry-average DSI is approximately 8 times our current level
Our focus on operating expense control, as well as other actions we’ve undertaken, have contributed to an increase in our cost advantage which has allowed us to profitably gain share
With a win rate of 80 to 90 percent, we continue to win share at the fastest rate in our history, adding another 2.3 share points worldwide in Q2.
Source: Company Financial Statements

10. FY03 Initiatives – Warranty Cost Reduction
A key focus area for the company is to reduce cost by $1B in FY03. Warranty cost reduction is a major component of this initiative. At the end of Q2 FY03, Dell’s warranty cost reduction projection for FY03 consisted of the following:
Service Labor rates
Product Quality
Improvements
Global Site Optimization
Inventory management
Speak to slide.

11. Speed is Life Fundamental #3
In addition to running an efficient operation, over the years we’ve learned the value of running a FAST organization.
The technology industry moves very quickly. Slow companies don’t stay around too long.
Successful companies must be able to react to changes and serve customers faster than competitors … or the market will punish them.
At Dell, our speed and agility are the result of two things: Our direct relationship with our customers and a culture at Dell that thrives on a fast pace. For us, speed is life.
Dell’s ability and dedication to speed was never more evident than in the tragedies in New York and Washington D.C. Within hours after those attacks, dozens of customers were calling us, asking us to help them get back to business. In many cases, our customers had to ask us what equipment they used to have … and because of our direct connection, we knew. We were able to move quickly and do our best to let them focus on other things.
Speed is Life

12. Historical Cash Conversion Cycle (Q1 FY99 – Q4 FY02)
Hewlett Packard
One of the best illustrations of Dell’s dedication to speed and agility is our cash conversion cycle.
I had my first real business look at cash conversion and its benefits many years ago from my father-in-law, Jim Hardemann, who ran a liquor store. (Tell story of re cases of beer).
At Dell, the cash conversion cycle is a measure of how we maximize inventory efficiency.
You can see by this chart that Dell is the only competitor in our industry that has a negative cash conversion cycle.
At Dell, we ship more than 95% of the orders we receive within eight hours and we hold no finished-goods inventory.
Through this speed and agility we’re not only able to generate cash that we can put back into the business, but we’re able to serve our customers more quickly.
Sun
Compaq
IBM
Dell

13. Grow or Die Fundamental #4
Growth is the primary goal for public companies. Shareholders and employees demand it. If you don’t grow, you die.
Earlier I mentioned that I always spoke to my own children about growth. What I told them as they began their careers was always go with a growth company. Well, after 33 years at IBM, I had to ask myself if I had the courage to live by my own words.
At the end of the day, I decided I did. The Dell growth story and model was what attracted me to accept Michael’s offer.
Dell was only three years old in In 1987 when rapid consolidation in the PC industry meant it had to expand beyond the U.S. We opened our first overseas office in the UK that year, at a time when the entire company had only 150 employees.
At a young age, Dell had to address all the challenges of globalization: local customs, currencies, taxes, and so on.
We now have six manufacturing locations worldwide, Dell offices in 34 countries, and distribution in over 190 countries.
… But the imperative for growth hasn’t changed.
Grow or Die

14. Dell Gaining Share in All Regions
Dell CY ‘02 Q2 Share
Dell CY ‘01 Q2 Share
Cost efficiencies help us profitably gain share. Let’s take a look at global results. We continue to outperform the market and demonstrate the power of our portfolio of businesses
Today, Dell is the world’s #1 computer-systems company.
We now sell as much in two days as it took us to sell in our first three years.
But we only have about 15% of the global computer-systems market.
We have a lot more room to grow.
Regions outside the United States performed well.
Germany
17 pctg pt growth premium to market, total share up 16% to 8%
46% increase in server share to 13%, ranked #3
52% increase in large corp share to 25%, ranked #1
France
28 pctg pt growth premium to market, total share up 30% to 12%
8% increase in server share to 18%, ranked #3
41% increase in large corp share to 35%, ranked #1
Japan
23 pctg pt growth premium to market, total share up 26% to 7%
30% increase in server share to 19%, ranked #2
73% increase in consumer share
China
33 pctg pt growth premium to market, total share up 29% to 5%
8% increase in server share to 12%
50% increase in large corp share to 15%, ranked #2
Dell Premium
25% 9%
11%
23%
20%
Dell Y/Y
Growth
23% 5%
13%
10%
18%
Mkt. Position 1 2 4

15. Extending the Direct Model: Method for Extension
Direct Model extends into new markets, we:
Selectively identify markets
Fit our economics – large, profitable, standardizing
Leverage our capabilities
As we look toward the future, the Direct Model allows us to outperform alternatives – and we have proven that it extends well into new markets
Now focused on extending into enterprise to generate growth and improve margins – gaining traction in enterprise as standardization continues.
Methodology for extending into new markets on slide
Key that market fit our economics – large, profitable & standardizing – we will walk away from opportunities that do not meet this criteria
Profit Pool approach – do not subsidize businesses.
Consumer is perfect example. Dell very profitable while others lose money
We enter new markets with low investment – profitable from Day 1
Layer in capabilities and drive costs out
Lowest OpEx by large margin
Then improve operating margins
Competitors often slow to react and we end up gaining share (e.g., servers, workstations, etc.)
In the end, Dell driving value for customers all the way back to the silicon
I’d like to focus on a specific opportunity we are focused on going forward…
Enter with low investment
Partnership with existing player
Brand 3rd party products
Layer in new capabilities/offerings over time
Take ownership of the value chain
Improve margins

16. Opportunities for Growth: External Storage
DELL PowerVault
DELL EMC 2
and
DAS
NAS
SAN
Storage HW Addressable Market
Addressable
market
doubles with
EMC Alliance
Standardizing, adjacent to core, leverage existing channel
Addressable market now ~$30 billion
EMC Partnership
Continues to progress; revenues up 65% Q/Q
Introduction of the co-branded CX600
A great opportunity exists in our expansion into the enterprise – You know about our success in the server business, so I would like to focus on storage.
Opportunity for growth in external storage is a perfect example of a large, profitable & standardizing market .
Standard platforms benefit end-user in terms of choice, market expansion, technology innovation and lower TCO
Developing products w/ partners MSFT & EMC
Addressable market now ~$30B, SAN and NAS grow from 33% of mrkt to 67% of storage mrkt by 2005 – this is Dell’s focus going forward
In Q2 SAN and NAS business grew significantly faster than DAS as their percentage of our storage revs doubled to 70%.
In fact, our revenues being generated for the EMC relationship grew 65% sequentially with our pipeline of new business opportunities continuing to grow quarter on quarter.
Dell has also moved up higher into the SAN market – In Q4 the typical Dell SAN had 4 hosts attached and 800GB of storage. Now with Dell/EMC storage, SAN configurations average 8-12 hosts attached to TB of storage.
And we continue to strengthen our portfolio…
During Q2, we added the new Dell/EMC CX 600 which addresses the higher end of the midrange SAN market.
Look for additional products from the Dell/EMC relationship in this space in Q3 and early next year.
Goal is to have products that address the entry through high-end needs of our customers in the fiber-attached SAN market.

17. Exceed Expectations Fundamental #5
We learned early that growth is based on satisfied and loyal customers.
We also learned that in a highly competitive environment, shooting for “satisfied” often isn’t enough. You have to “under promise and over deliver.”
You have to exceed customer expectations in service, performance, and quality.
Today, we continue our tradition of industry-leading service, innovation, and consistently being first to market with latest technology.
To ensure the highest quality we set our internal standards very high, and we set very high standards for our suppliers and partners – and we hold them to those standards.
Exceed Expectations

18. The Customer Experience
On-Time, Reliable Delivery
Product Availability
Time to Repair
Price/Performance
Total Cost of Ownership
Volume Discounts
Significant Lead In:
Overall HW Performance
Overall Satisfaction
Out-of-Box Quality
Replacement Parts Availability
Dell
Compaq
Hewlett Packard
IBM
Gateway
Toshiba
Category Leader In:
Desktops
Notebooks
Servers 80 82 79 83 86 78 81 84 70 75 85 90
TBR Category Ranking
10 of 13 Categories
10 of 15 Categories
12 of 16 Categories
Source: TBR Customer Satisfaction Study, Q4 01
Our customers have noticed that we work very hard to deliver the best service, performance, and quality in our industry.
In fact, Dell is consistently selected by corporate IT buyers as #1 in overall customer satisfaction, according to a quarterly study by Technology Business Research.
Dell earned the top spot in all product categories, including notebooks, desktops, and Intel-based servers.

19. Be Relevant to Customers
Fundamental #6
Regardless what industry you’re in, you have to provide the products and services that your customers want.
In the technology industry, changes occur very quickly and it’s a challenge to stay relevant to customers.
At Dell, we work to stay relevant in many ways:
One way that we stay relevant is through our dedication to industry standards. We let the market dictate relevancy rather than try to convince customers of the relevancy of a proprietary architecture.
However, different aspects of the state of technology are relevant to different customers.
That’s why we build every system to order … because every customer has different needs and requirements.
We also organize our whole business around the customer…
Be Relevant to Customers

20. (Business and Consumer)
1994
$4B
Large Customers
Small Customers
(Business and Consumer)
Over time, we’ve been able to identify similarities among different customer groups.
Many companies organize themselves functionally – the sales, marketing, and finance functions each in their own “silo.”
At Dell, we organize our company around customers – groups of customers with similar technology needs.
[slide]
A small business has different needs from a global customer, who has different needs from a local government.
Being relevant is different for each customer. And the only people that can tell you that are customers.
1996
$8B
Large
Companies
Midsize
Companies
Government
Education &
Healthcare
Small
Customers
1998
$18B
Global
Enterprise
Accounts
Large
Companies
Midsize
Companies
K-12
Higher
Ed.
Healthcare
Small
Companies
Consumers
Civilian
Dept. of Defense
&
Intelligence
State & Local
2001
$32B

21. Companies that Work in Isolation Continue to Overspend
Server R&D as Percent of Revenues
19%
Sun R&D
Inefficiency: 8%
3rd Party R&D
Also important to point out that leveraged R&D is not only more efficient, but more absolute dollars are spent on standardized technology versus proprietary – so firms that choose collaborative R&D have huge pool of resources to leverage:
65 percent of total industry R&D investments spent on standard technology
Our research shows that approx. $34 billion dollars invested on R&D for standard technology for client, server, software, networking and storage products alone last year – almost 2x the amount of investments made into proprietary tech.
And Dell in particular has done an excellent job at leveraging these investments & adding our own value-added R&D to provide better value for our customers:
This graph clearly shows inefficiency of R&D spent by proprietary vendors versus collaborative R&D done by Dell, which is focused on standards-based technology and customer value.
This example looks at R&D investments made for a typical high-end server:
Whereas proprietary provider conducts R&D primarily in-house on a proprietary solution – developing processors, operating system and hardware – while leveraging some standardized components, Dell leverages best-in-breed components from across the industry…
We believe that the standards-based model delivers better performance. We can see that it saves money as well, as proprietary provider is spending additional 8% or so of their revenues to develop a similar product.
11%
3rd Party R&D
In-house R&D
In-house R&D
Source: Dell, Company Financials

22. Fundamental #7
This next fundamental is at the very essence of staying relevant: listening.
At Dell we have a direct business model. The greatest benefit of that model is our ability to listen to our customers.
We value our direct relationships with customers above all else … and we listen to what they tell us.
Listen

23. Customers Told Us …
In fact, every product area that we’ve entered has been a result of having listened to what our customers want.
From scale-to-size products for the data center,
to Linux open-source software,
to the wireless standard,
to our low-cost Smart PCs in China,
to the dark color of our entire product line
… all have been a result of listening to customers.
Linux

24. Differentiated Performance
Dell performance among upper echelon of enterprise companies
-10 10 20
30%
-40
-30
-20
20%
$5B
Rev
Operating Income %
Earlier I spoke about our opportunity in the enterprise market. It is important to note that we are already performing at upper echelon of enterprise players
Chart shows Q2 Y/Y revenue growth vs. operating margins – includes all segments for Dell and competition
Note that Cisco had a good Q2 and has always had higher margins that we do, which is why they show up on the chart right with us.
We believe that standards based systems will be pervasive as next generation computers… Because of their price performance, industry standard HPCC installations are enabling more researchers access to computing power than previously…
We believe that standards-based cluster computing will become pervasive in arenas that were traditionally dominated by proprietary supercomputers.
 The supercomputing arena is a huge opportunity for customers to realize the cost-effectiveness, performance and flexibility of standards-based technology
Revenue Growth Y/Y - Q2'02

25. Build Strong Relationships
Fundamental #8
All of the lessons that I’ve shared thus far ultimately serve one purpose: building strong relationships.
There is nothing more important at Dell than the relationships we share – with our customers, partners, suppliers, and with each other.
Our Direct Business Model is the foundation of our strong relationships.
And through the Internet, our relationships have become “virtually integrated.”
A “virtually integrated” organization is one where information replaces inventory, redundancies are eliminated, responsibilities are shared, strengths are leveraged, and the traditional boundaries that separate organizations are erased.
Build Strong Relationships

26. Our dedication at Dell to building strong relationships is the #1 reason that we’ve become the world’s leading computer-systems company.
Customers from around the world have asked Dell to help them achieve the results their looking for – from the desktop to the datacenter.
Customer Examples
For GE, Dell simplified the process for worldwide acquisition of computer systems loaded with standard GE software. Dell provides GE with a global standard for fast and efficient ordering and delivery of high-quality "plug-and-play" computer platforms and worldwide availability of next-day, on-site warranty services. Now in the program's third year, Dell serves GE in 33 of its key countries with hundreds of thousands of Dell computers installed across all of its business units.
China Pacific Insurance Corporation (CPIC), one of the three largest insurance companies in China, uses Dell desktops and notebooks to support their explosive growth – about 40% a year. Reliable IT support provides their customers with better access to CPIC insurance services.
Canon, a company that continues to succeed – even in a depressed market -- uses Precision Workstations in its R&D functions nationwide in the development of a wide range of products, from digital cameras, printers to optical medical components.
Bumrungrad Hospital in Thailand uses Dell workstations, servers and storage products to support for its mission-critical operations and to help deliver enhanced levels of healthcare and customer service.
We’re proud of all of these relationships and we will continue to listen, understand, and simplify computing to help our customers succeed.
                                                                   

27. Believe in Yourself Fundamental #9
My final fundamental is to believe in yourself.
As an individual or as a company, you must believe in yourself to apply all of the lessons I’ve shared with you today.
Throughout the history of Dell, we’ve had doubters. People who said that our business model wouldn’t work globally. People who said a PC company could never sell enterprise products.
But for 18 years we’ve believed in who we are and what we have to offer. And that has made all the difference.
Believe in Yourself

28. Performing in a Weak Market
25%
15%
Dell
Market Share
Even in difficult times we’ve been able to excel.
[slide]
Unit Growth 0%
12%
Market Share
WW Market Unit Growth
-25% 9%
Q4 FY00
Q4 FY01
Q4 FY02
Dell
Growth
Premium
16%
11% 7% 2%
35%
23%
23%
21%
18%

29. Customers Prefer Dell: Market Share Up +158%
Worldwide Unit Market Share
All Products – Last 5 Years
HPQ
down -23%
WW Market Share
We’ve been able to excel relative to some very formidable competitors.
Speak to slide.
DELL
up +158%
IBM
down -19%
Source: IDC

30. Questions & Answers
We believe we have a great track record for consistent execution & judiciously choosing new growth options
Customers are increasingly choosing standardized versus proprietary solutions because of the inherent cost advantages and increased flexibility.
Those companies like Dell with strong fundamentals, customer and financial models will come out of this current downturn stronger and will be the winners, while those companies with broken models – either because they can’t execute or they have the wrong cost structure – will lose.
Thank you
Now open it up for Q&A