10-KPeriod: FY2017

Dell Technologies Inc. Annual Report, Year Ended Feb 3, 2017

Filed March 31, 2017For Securities:DELL

Summary

Dell Technologies Inc.'s 2017 10-K report details a transformative fiscal year marked by the significant acquisition of EMC Corporation, which substantially expanded the company's scale and offerings. The integration of EMC brought together complementary businesses, creating a comprehensive IT infrastructure portfolio. Dell Technologies also strategically divested several non-core businesses, including Dell Services and Dell Software Group, generating approximately $7.0 billion in cash and realizing a gain of $1.9 billion. These divestitures, coupled with cash on hand, allowed for the repayment of $7.0 billion in debt incurred for the EMC merger. The company operates across three primary segments: Client Solutions Group (CSG), Infrastructure Solutions Group (ISG), and VMware. Fiscal 2017 saw a 21% increase in net revenue, largely driven by the inclusion of EMC's businesses. Despite significant investments and transaction-related costs, the company highlighted strong non-GAAP operating income growth. Key risks identified include intense competition, reliance on single-source suppliers, and the substantial debt incurred from the EMC acquisition.

Financial Highlights

54 data points
Beta

Revenue

$61.64B

22.1% Gross Margin

Net Income

-$1.17B

-1.9% Net Margin

Total Assets

$118.21B

Cash & Equivalents

$9.47B

Free Cash Flow

$1.67B

Financial Statements
Beta
Revenue$61.64B
Cost of Revenue$48.52B
Gross Profit$13.65B
R&D Expenses$2.64B
SG&A Expenses$13.40B
Operating Expenses$16.04B
Operating Income-$2.39B
Interest Expense$1.75B
Net Income-$1.17B

Key Highlights

  • 1Completed the transformative acquisition of EMC Corporation, significantly expanding the company's scale and product/service portfolio.
  • 2Divested Dell Services, Dell Software Group, and Dell EMC Enterprise Content Division, generating approximately $7.0 billion in cash and a $1.9 billion gain.
  • 3Used divestiture proceeds and cash on hand to repay approximately $7.0 billion of debt incurred in connection with the EMC merger.
  • 4Reported a 21% increase in net revenue to $61.6 billion, largely driven by the inclusion of EMC's businesses.
  • 5The company's reportable segments are Client Solutions Group (CSG), Infrastructure Solutions Group (ISG), and VMware, with VMware contributing $3.2 billion in net revenue and $1.1 billion in operating income in its partial fiscal year.
  • 6Total debt increased significantly to $49.4 billion (carrying value) as of February 3, 2017, primarily due to financing the EMC acquisition.
  • 7Research and development expenses increased significantly to $2.6 billion, reflecting investment in innovation across the expanded business.

Frequently Asked Questions

The most significant strategic move was the completion of the acquisition of EMC Corporation, which dramatically expanded the company's market presence and product portfolio. Additionally, Dell Technologies divested several non-core businesses, including Dell Services and Dell Software Group, to streamline operations and strengthen its financial position.

The EMC acquisition significantly increased Dell Technologies' net revenue by 21% in Fiscal Year 2017, primarily due to the inclusion of EMC's revenue. It also led to a substantial increase in debt to finance the transaction and significant integration costs, which impacted reported operating loss and net loss. However, non-GAAP financial measures showed strong growth, indicating operational improvements excluding these transaction-related items.

Key risks identified include intense competitive pressures in the IT industry, reliance on single-source or limited-source suppliers for critical components, adverse global economic conditions that could impact customer demand, and the substantial level of indebtedness incurred to finance the EMC merger, which could affect financial flexibility and operations.

Dell Technologies is structured into three primary reportable segments: Client Solutions Group (CSG), which includes PCs and peripherals; Infrastructure Solutions Group (ISG), comprising servers, storage, and networking; and VMware, which offers virtualization and cloud infrastructure solutions.