INCOME STATEMENT 2007 2008 2009 2010 2011

Desktops 4,023 5,622 4,324 4,929 5,619

Portables 6,313 8,732 9,535 10,870 12,392
Total Mac net sales 10,336 14,354 13,859 15,799 18,011
iPod 8,305 9,153 8,091 9,224 10,515
Other music related products and services 2,496 3,340 4,036 4,601 5,245
iPhone and related products and services 630 6,742 13,033 14,858 16,938
Peripherals and other hardware 1,303 1,694 1,475 1,682 1,917
Software, service and other net sales 1,508 2,208 2,411 2,749 3,133
Net Sales $24,578 $37,491 $42,905 $48,912 $54,781
Cost of sales 16,426 24,294 25,683 39,129 43,507
Gross margin 8,152 13,197 17,222 9,782 11,274
Operating expenses:
Research and development 782 1,109 1,333 1,508 1,688
Selling, general and administrative 2,963 3,761 4,149 5,178 5,799
Total operating expenses 3,745 4,870 5,482 6,685 7,487
Operating income 4,407 8,327 11,740 3,097 3,786
Other income and expense 599 620 326 827 927
Income before provision for income taxes 5,006 8,947 12,066 3,925 4,713
Provision for income taxes 1,511 2,828 3,831 1,224 1,470
Net income 3,495 $6,119 $8,235 $2,701 $3,244

Cash, cash equivalents and marketable securities 15,386 24,490 33,992 33,773 37,826

Operating Margin 33.17% 35.20% 40.14% 20.00% 21%

Net Sales Growth N/A 34% 13% 14% 12%
R&D/Sales 3.18% 2.96% 3.11% 3.08% 3.08%
SG&A/Sales 12.06% 10.03% 9.67% 10.59% 10.59%
Cash/Sales 62.60% 65.32% 79.23% 69.05% 69.05%
Implied Interest Rate 3.89% 2.53% 0.96% 2.45% 2.45%
Implicit Tax Rate 30.18% 31.61% 31.75% 31.18% 31.18%
 2012 2013 2014 2015
6,406 7,303 8,325 9,491
14,127 16,104 18,359 20,929
20,533 23,407 26,684 30,420
11,987 13,665 15,579 17,760
5,980 6,817 7,771 8,859
19,309 22,012 25,094 28,607
2,185 2,491 2,840 3,238
3,572 4,072 4,642 5,292
$60,259 $65,080 $68,985 $71,744
47,508 50,932 53,587 55,315
12,751 14,148 15,397 16,429

1,857 2,006 2,126 2,211

6,379 6,889 7,303 7,595
8,236 8,895 9,429 9,806
4,515 5,253 5,969 6,623
1019 1101 1167 1214
5,534 6,354 7,136 7,837
1,726 1,981 2,225 2,444
$3,808 $4,373 $4,911 $5,393

41,609 44,938 47,634 49,539

21% 22% 22% 22.90%

10% 8% 6% 4% Because of an accounting change, 2006 net sales cannot be used for growth
3.08% 3.08% 3.08% 3.08%
10.59% 10.59% 10.59% 10.59%
69.05% 69.05% 69.05% 69.05%
2.45% 2.45% 2.45% 2.45% Current 5 Year T-Bond Yield
31.18% 31.18% 31.18% 31.18%
 Statement Of Financial Position Classified (USD $)
2008 2009
In Millions

Current assets:
Cash and cash equivalents $ 11,875 $ 5,263
Short-term marketable securities $ 10,236 $ 18,201
Accounts receivable, less allowances of $52 and $47, respectively $ 2,422 $ 3,361
Inventories $ 509 $ 455
Deferred tax assets $ 1,044 $ 1,135
Other current assets $ 3,920 $ 3,140
Total current assets $ 30,006 $ 31,555
Long-term marketable securities $ 2,379 $ 10,528
Property, plant and equipment, net $ 2,455 $ 2,954
Goodwill $ 207 $ 206
Acquired intangible assets, net $ 285 $ 247
Other assets $ 839 $ 2,011
Total assets $ 36,171 $ 47,501
Current liabilities:
Accounts payable $ 5,520 $ 5,601
Accrued expenses $ 4,224 $ 3,852
Deferred revenue $ 1,617 $ 2,053
Total current liabilities $ 11,361 $ 11,506
Deferred revenue - non-current $ 768 $ 853
Other non-current liabilities $ 1,745 $ 3,502
Total liabilities $ 13,874 $ 15,861
Shareholders' equity:
Common stock, no par value; 1,800,000,000 shares authorized; 899,805,500 and
888,325,973 shares issued and outstanding, respectively $ 7,177 $ 8,210
Retained earnings $ 15,129 $ 23,353
Accumulated other comprehensive income/(loss) $ (9) $ 77
APIC $ - $ -
Total shareholders' equity $ 22,297 $ 31,640
Total liabilities and shareholders' equity $ 36,171 $ 47,501

Depreciation 734
Depreciation/(PPE + Acquired Intangibles) 26.79%

Inventory/COGS 2% 2%
Accounts Payable/COGS 23% 22%
Accrued Expenses/COGS 17% 15%

PPE/Net Sales 6.5% 6.9%

Marketable Securities/Sales 27.3% 42.4%
Accounts Receivable/Sales 6.5% 7.8%
Other Current Assets/Sales 10.5% 7.3%
Long-Term Marketable Securities 6.3% 24.5%
Other Assets/Sales 2.2% 4.7%
Deferred Revenue/Sales 4.3% 4.8%
Non-current deferred revenue/Sales 2.0% 2.0%
Other non-current liabilities/Sales 4.7% 8.2%
 2010 2011 2012 2013 2014

$ 16,722 $ 18,728 $ 20,601 $ 22,249 $ 23,584

$ 17,052 $ 19,098 $ 21,008 $ 22,688 $ 24,050
$ 3,496 $ 3,915 $ 4,307 $ 4,651 $ 4,930
$ 757 $ 841 $ 919 $ 985 $ 1,036
$ - $ - $ - $ - $ -
$ 4,347 $ 4,868 $ 5,355 $ 5,784 $ 6,131
$ 42,372 $ 47,451 $ 52,189 $ 56,357 $ 59,731
$ 7,553 $ 8,459 $ 9,305 $ 10,049 $ 10,652
$ 3,285 $ 3,679 $ 4,047 $ 4,371 $ 4,633
$ 206 $ 206 $ 206 $ 206 $ 206
$ 195 $ 97 $ 65 $ 49 $ 39
$ 1,694 $ 1,897 $ 2,086 $ 2,253 $ 2,389
$ 55,305 $ 61,790 $ 67,899 $ 73,286 $ 77,650

$ 8,712 $ 9,687 $ 10,578 $ 11,340 $ 11,931

$ 6,336 $ 7,045 $ 7,693 $ 8,247 $ 8,677
$ 2,225 $ 2,492 $ 2,741 $ 2,960 $ 3,138
$ 17,273 $ 19,224 $ 21,012 $ 22,548 $ 23,747
$ 987 $ 1,106 $ 1,216 $ 1,314 $ 1,392
$ 3,134 $ 3,511 $ 3,862 $ 4,171 $ 4,421
$ 21,395 $ 23,840 $ 26,090 $ 28,032 $ 29,560

$ 8,210 $ 8,210 $ 8,210 $ 8,210 $ 8,210

$ 26,054 $ 29,297 $ 33,106 $ 37,479 $ 42,389
$ 77 $ 77 $ 77 $ 77 $ 77
$ (431) $ 365 $ 417 $ (511) $ (2,586)
$ 33,910 $ 37,950 $ 41,810 $ 45,254 $ 48,091
$ 55,305 $ 61,790 $ 67,899 $ 73,286 $ 77,650

2872 2121 2299 2509 2702

26.79% 26.79% 26.79% 26.79% 26.79%

2% 2% 2% 2% 2%
22% 22% 22% 22% 22%
16% 16% 16% 16% 16%

6.7% 6.7% 6.7% 6.7% 6.7%

34.9% 34.9% 34.9% 34.9% 34.9%
7.1% 7.1% 7.1% 7.1% 7.1%
8.9% 8.9% 8.9% 8.9% 8.9%
15.4% 15.4% 15.4% 15.4% 15.4%
3.5% 3.5% 3.5% 3.5% 3.5%
4.5% 4.5% 4.5% 4.5% 4.5%
2.0% 2.0% 2.0% 2.0% 2.0%
6.4% 6.4% 6.4% 6.4% 6.4%
 2015

$ 24,528
$ 25,012
$ 5,127
$ 1,069
$ -
$ 6,376
$ 62,112
$ 11,079
$ 4,819
$ 206
$ 32
$ 2,484
$ 80,732

$ 12,316
$ 8,957
$ 3,264
$ 24,536
$ 1,448
$ 4,598
$ 30,582

$ 8,210
$ 47,783
$ 77
$ (5,920)
$ 50,150
$ 80,732

2860
26.79%

2%
22%
16%

6.7%
34.9%
7.1%
8.9%
15.4%
3.5%
4.5%
2.0%
6.4%
 2008 2009 2010
Working Capital $ 18,645 $ 20,049 $ 25,099

FREE CASH FLOWS

Net income $ 8,235 $ 2,701
+ Depreciation $ 734 $ 2,872
 - Change in Working Capital  $ 1,404 $ 5,050
 - Capital Expenditure  $ 1,157 $ 1,123

Cash Flows $ 6,408 $ (600)

Rdiscount 10.00% 10.00%
Discount Period 0 1

Discounted FCF $ 6,408 $ (545)

Growth Rate 4%

Total Firm Value $ 66,622 million

$ 66,622,316,867
 2011 2012 2013 2014 2015
$ 28,227 $ 31,178 $ 33,810 $ 35,984 $ 37,576

$ 3,244 $ 3,808 $ 4,373 $ 4,911 $ 5,393

$ 2,121 $ 2,299 $ 2,509 $ 2,702 $ 2,860
$ 3,128 $ 2,950 $ 2,632 $ 2,175 $ 1,591
$ 1,274 $ 1,354 $ 1,408 $ 1,433 $ 1,427

$ 962 $ 1,803 $ 2,842 $ 4,005 $ 5,236

10.00% 10.00% 10.00% 10.00% 10.00%
2 3 4 5 6

$ 795 $ 1,355 $ 1,941 $ 2,486 $ 2,955

Terminal Value
$ 51,226
Current Valuation: $182.87B VALUATION
in millions
Operating Margin
Sales 40% 30% 20% 10%
Growth
(i.e. 30% $ 251,379 $ 157,553 $ 63,727 $ (30,099)
taperin 20% $ 204,447 $ 130,459 $ 56,472 $ (17,516)
g from 16% $ 187,986 $ 120,956 $ 53,927 $ (13,103)
x in
2010 15% $ 184,063 $ 118,692 $ 53,320 $ (12,051)
with 14% $ 180,215 $ 116,470 $ 52,726 $ (11,019)
termina 13% $ 176,442 $ 114,292 $ 52,142 $ (10,008)
l
growth 12% $ 172,741 $ 112,156 $ 51,570 $ (9,016)
rate of 11% $ 169,113 $ 110,061 $ 51,009 $ (8,043)
4% in
2015) 10% $ 165,555 $ 108,007 $ 50,459 $ (7,089)

Dell's Operating Margin: 17.90%

VALUATION
Operating Margin (starting at X in 2010 and
in millions then tapering off to 22.9% in 2015)
Sales Growth
(i.e. tapering 40% 30% 20%
from x in 2010 30% $ 123,214 $ 104,338 $ 85,463
with terminal 20% $ 104,518 $ 88,968 $ 73,419
growth rate of
4% in 2015) 16% $ 97,914 $ 83,558 $ 69,202
15% $ 96,336 $ 82,267 $ 68,198
14% $ 94,786 $ 81,000 $ 67,213