(Mark One) | ||
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended August 3, 2018 | ||
or | ||
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Delaware | 80-0890963 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer þ | Accelerated filer ¨ | |
Non-accelerated filer ¨ | Smaller reporting company ¨ | |
Emerging growth company ¨ |
Page | ||
Page | |
August 3, 2018 | February 2, 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 15,312 | $ | 13,942 | |||
Short-term investments | 2,504 | 2,187 | |||||
Accounts receivable, net | 11,201 | 11,721 | |||||
Short-term financing receivables, net | 4,140 | 3,919 | |||||
Inventories, net | 3,642 | 2,678 | |||||
Other current assets | 6,326 | 5,881 | |||||
Total current assets | 43,125 | 40,328 | |||||
Property, plant, and equipment, net | 5,240 | 5,390 | |||||
Long-term investments | 3,649 | 4,163 | |||||
Long-term financing receivables, net | 4,030 | 3,724 | |||||
Goodwill | 39,504 | 39,920 | |||||
Intangible assets, net | 25,208 | 28,265 | |||||
Other non-current assets | 2,625 | 2,403 | |||||
Total assets | $ | 123,381 | $ | 124,193 | |||
LIABILITIES, REDEEMABLE SHARES, AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Short-term debt | $ | 9,144 | $ | 7,873 | |||
Accounts payable | 20,853 | 18,334 | |||||
Accrued and other | 7,216 | 8,026 | |||||
Short-term deferred revenue | 11,965 | 11,606 | |||||
Total current liabilities | 49,178 | 45,839 | |||||
Long-term debt | 40,414 | 43,998 | |||||
Long-term deferred revenue | 9,735 | 9,210 | |||||
Other non-current liabilities | 6,787 | 7,277 | |||||
Total liabilities | 106,114 | 106,324 | |||||
Commitments and contingencies (Note 11) | |||||||
Redeemable shares | 2,056 | 384 | |||||
Stockholders' equity: | |||||||
Common stock and capital in excess of $.01 par value (Note 16) | 18,321 | 19,889 | |||||
Treasury stock at cost | (1,487 | ) | (1,440 | ) | |||
Accumulated deficit | (7,937 | ) | (6,860 | ) | |||
Accumulated other comprehensive income (loss) | (334 | ) | 130 | ||||
Total Dell Technologies Inc. stockholders’ equity | 8,563 | 11,719 | |||||
Non-controlling interests | 6,648 | 5,766 | |||||
Total stockholders' equity | 15,211 | 17,485 | |||||
Total liabilities, redeemable shares, and stockholders' equity | $ | 123,381 | $ | 124,193 |
Three Months Ended | Six Months Ended | ||||||||||||||
August 3, 2018 | August 4, 2017 | August 3, 2018 | August 4, 2017 | ||||||||||||
Net revenue: | |||||||||||||||
Products | $ | 18,149 | $ | 15,102 | $ | 34,820 | $ | 28,736 | |||||||
Services | 4,793 | 4,419 | 9,478 | 8,785 | |||||||||||
Total net revenue | 22,942 | 19,521 | 44,298 | 37,521 | |||||||||||
Cost of net revenue: | |||||||||||||||
Products | 14,943 | 12,775 | 28,549 | 24,598 | |||||||||||
Services | 1,876 | 1,778 | 3,748 | 3,498 | |||||||||||
Total cost of net revenue | 16,819 | 14,553 | 32,297 | 28,096 | |||||||||||
Gross margin | 6,123 | 4,968 | 12,001 | 9,425 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general, and administrative | 4,961 | 4,540 | 9,905 | 9,136 | |||||||||||
Research and development | 1,175 | 1,093 | 2,262 | 2,226 | |||||||||||
Total operating expenses | 6,136 | 5,633 | 12,167 | 11,362 | |||||||||||
Operating loss | (13 | ) | (665 | ) | (166 | ) | (1,937 | ) | |||||||
Interest and other, net | (455 | ) | (545 | ) | (925 | ) | (1,117 | ) | |||||||
Loss before income taxes | (468 | ) | (1,210 | ) | (1,091 | ) | (3,054 | ) | |||||||
Income tax benefit | (7 | ) | (471 | ) | (92 | ) | (1,112 | ) | |||||||
Net loss | (461 | ) | (739 | ) | (999 | ) | (1,942 | ) | |||||||
Less: Net income (loss) attributable to non-controlling interests | 38 | (7 | ) | 136 | (39 | ) | |||||||||
Net loss attributable to Dell Technologies Inc. | $ | (499 | ) | $ | (732 | ) | $ | (1,135 | ) | $ | (1,903 | ) | |||
Earnings (loss) per share attributable to Dell Technologies Inc. - basic: | |||||||||||||||
Class V Common Stock - basic | $ | 1.61 | $ | 1.00 | $ | 3.97 | $ | 1.60 | |||||||
DHI Group - basic | $ | (1.44 | ) | $ | (1.65 | ) | $ | (3.39 | ) | $ | (3.94 | ) | |||
Earnings (loss) per share attributable to Dell Technologies Inc. - diluted: | |||||||||||||||
Class V Common Stock - diluted | $ | 1.58 | $ | 1.00 | $ | 3.91 | $ | 1.59 | |||||||
DHI Group - diluted | $ | (1.45 | ) | $ | (1.66 | ) | $ | (3.40 | ) | $ | (3.95 | ) |
Three Months Ended | Six Months Ended | ||||||||||||||
August 3, 2018 | August 4, 2017 | August 3, 2018 | August 4, 2017 | ||||||||||||
Net loss | $ | (461 | ) | $ | (739 | ) | $ | (999 | ) | $ | (1,942 | ) | |||
Other comprehensive income (loss), net of tax | |||||||||||||||
Foreign currency translation adjustments | (261 | ) | 397 | (603 | ) | 450 | |||||||||
Available-for-sale investments: | |||||||||||||||
Change in unrealized gains (losses) | 6 | 19 | (1 | ) | 47 | ||||||||||
Reclassification adjustment for net (gains) losses realized in net loss | — | 2 | (1 | ) | 3 | ||||||||||
Net change in market value of investments | 6 | 21 | (2 | ) | 50 | ||||||||||
Cash flow hedges: | |||||||||||||||
Change in unrealized gains (losses) | 120 | (141 | ) | 241 | (157 | ) | |||||||||
Reclassification adjustment for net (gains) losses included in net loss | (77 | ) | 70 | (46 | ) | 49 | |||||||||
Net change in cash flow hedges | 43 | (71 | ) | 195 | (108 | ) | |||||||||
Total other comprehensive income (loss), net of tax expense of $5 and $0, respectively, and $7 and $15, respectively | (212 | ) | 347 | (410 | ) | 392 | |||||||||
Comprehensive loss, net of tax | (673 | ) | (392 | ) | (1,409 | ) | (1,550 | ) | |||||||
Less: Net income (loss) attributable to non-controlling interests | 38 | (7 | ) | 136 | (39 | ) | |||||||||
Less: Other comprehensive income (loss) attributable to non-controlling interests | 1 | 1 | (4 | ) | 4 | ||||||||||
Comprehensive loss attributable to Dell Technologies Inc. | $ | (712 | ) | $ | (386 | ) | $ | (1,541 | ) | $ | (1,515 | ) |
Six Months Ended | |||||||
August 3, 2018 | August 4, 2017 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (999 | ) | $ | (1,942 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 3,845 | 4,354 | |||||
Amortization of debt issuance costs | 72 | 90 | |||||
Stock-based compensation expense | 415 | 409 | |||||
Deferred income taxes | (679 | ) | (1,432 | ) | |||
Net gain on sale of businesses | (27 | ) | (26 | ) | |||
Provision for doubtful accounts — including financing receivables | 81 | 77 | |||||
Other | 53 | 247 | |||||
Changes in assets and liabilities, net of effects from acquisitions and dispositions: | |||||||
Accounts receivable | 76 | (313 | ) | ||||
Financing receivables | (748 | ) | (657 | ) | |||
Inventories | (1,136 | ) | (171 | ) | |||
Other assets | (520 | ) | (1,385 | ) | |||
Accounts payable | 2,630 | 2,444 | |||||
Deferred revenue | 1,117 | 662 | |||||
Accrued and other liabilities | (388 | ) | (252 | ) | |||
Change in cash from operating activities | 3,792 | 2,105 | |||||
Cash flows from investing activities: | |||||||
Investments: | |||||||
Purchases | (888 | ) | (2,260 | ) | |||
Maturities and sales | 1,322 | 2,058 | |||||
Capital expenditures | (561 | ) | (561 | ) | |||
Proceeds from sale of facilities, land, and other assets | 10 | — | |||||
Capitalized software development costs | (160 | ) | (187 | ) | |||
Collections on purchased financing receivables | 17 | 10 | |||||
Acquisition of businesses, net | — | (223 | ) | ||||
Divestitures of businesses, net | 142 | — | |||||
Asset acquisitions, net | (38 | ) | (86 | ) | |||
Asset dispositions, net | (6 | ) | (41 | ) | |||
Change in cash from investing activities | (162 | ) | (1,290 | ) |
Six Months Ended | |||||||
August 3, 2018 | August 4, 2017 | ||||||
Cash flows from financing activities: | |||||||
Payment of dissenting shares obligation | (76 | ) | — | ||||
Share repurchases for tax withholdings of equity awards | (199 | ) | (194 | ) | |||
Proceeds from the issuance of common stock of subsidiaries | 653 | 80 | |||||
Repurchases of DHI Group Common Stock | (47 | ) | (2 | ) | |||
Repurchases of Class V Common Stock | — | (422 | ) | ||||
Payments for debt issuance costs | (8 | ) | (5 | ) | |||
Proceeds from debt | 4,637 | 4,756 | |||||
Repayments of debt | (6,948 | ) | (5,291 | ) | |||
Other | 1 | 1 | |||||
Change in cash from financing activities | (1,987 | ) | (1,077 | ) | |||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (216 | ) | 48 | ||||
Change in cash, cash equivalents, and restricted cash | 1,427 | (214 | ) | ||||
Cash, cash equivalents, and restricted cash at beginning of the period | 14,378 | 9,832 | |||||
Cash, cash equivalents, and restricted cash at end of the period | $ | 15,805 | $ | 9,618 |
Common Stock and Capital in Excess of Par Value | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||||||||
DHI Group | Class V Common Stock | DHI Group | Class V Common Stock | ||||||||||||||||||||||||||||||||||||||||||||
Issued Shares | Amount | Issued Shares | Amount | Shares | Amount | Shares | Amount | Accumulated Deficit | Accumulated Other Comprehensive Income/(Loss) | Dell Technologies Stockholders' Equity | Non-Controlling Interests | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||
Balances as of February 2, 2018 | 571 | $ | 9,848 | 223 | $ | 10,041 | 1 | $ | (16 | ) | 24 | $ | (1,424 | ) | $ | (6,860 | ) | $ | 130 | $ | 11,719 | $ | 5,766 | $ | 17,485 | ||||||||||||||||||||||
Adjustment for adoption of accounting standards (Note 1) | — | — | — | — | — | — | — | — | 58 | (58 | ) | — | (5 | ) | (5 | ) | |||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | — | — | — | — | (1,135 | ) | — | (1,135 | ) | 136 | (999 | ) | |||||||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | — | — | — | — | (603 | ) | (603 | ) | — | (603 | ) | |||||||||||||||||||||||||||||||
Investments, net change | — | — | — | — | — | — | — | — | — | — | — | (2 | ) | (2 | ) | ||||||||||||||||||||||||||||||||
Cash flow hedges, net change | — | — | — | — | — | — | — | — | — | 197 | 197 | (2 | ) | 195 | |||||||||||||||||||||||||||||||||
Issuance of common stock | — | (4 | ) | — | — | — | — | — | — | — | — | (4 | ) | — | (4 | ) | |||||||||||||||||||||||||||||||
Stock-based compensation expense | — | 37 | — | — | — | — | — | — | — | — | 37 | 378 | 415 | ||||||||||||||||||||||||||||||||||
Treasury stock repurchases | — | — | — | — | 1 | (47 | ) | — | — | — | — | (47 | ) | — | (47 | ) | |||||||||||||||||||||||||||||||
Revaluation of redeemable shares | — | (1,672 | ) | — | — | — | — | — | — | — | — | (1,672 | ) | — | (1,672 | ) | |||||||||||||||||||||||||||||||
Impact from equity transactions of non-controlling interests | — | 71 | — | — | — | — | — | — | — | — | 71 | 377 | 448 | ||||||||||||||||||||||||||||||||||
Balances as of August 3, 2018 | 571 | $ | 8,280 | 223 | $ | 10,041 | 2 | $ | (63 | ) | 24 | $ | (1,424 | ) | $ | (7,937 | ) | $ | (334 | ) | $ | 8,563 | $ | 6,648 | $ | 15,211 |
Common Stock and Capital in Excess of Par Value | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||||||||
DHI Group | Class V Common Stock | DHI Group | Class V Common Stock | ||||||||||||||||||||||||||||||||||||||||||||
Issued Shares | Amount | Issued Shares | Amount | Shares | Amount | Shares | Amount | Accumulated Deficit | Accumulated Other Comprehensive Income/(Loss) | Dell Technologies Stockholders' Equity | Non-Controlling Interests | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||
Balances as of February 3, 2017 | 569 | $ | 10,158 | 223 | $ | 10,041 | — | $ | (10 | ) | 14 | $ | (742 | ) | $ | (4,095 | ) | $ | (595 | ) | $ | 14,757 | $ | 5,821 | $ | 20,578 | |||||||||||||||||||||
Adjustment for adoption of accounting standard (Note 1) | — | — | — | — | — | — | — | — | 84 | — | 84 | — | 84 | ||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | (1,903 | ) | — | (1,903 | ) | (39 | ) | (1,942 | ) | ||||||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | — | — | — | — | 450 | 450 | — | 450 | ||||||||||||||||||||||||||||||||||
Investments, net change | — | — | — | — | — | — | — | — | — | 46 | 46 | 4 | 50 | ||||||||||||||||||||||||||||||||||
Cash flow hedges, net change | — | — | — | — | — | — | — | — | — | (108 | ) | (108 | ) | — | (108 | ) | |||||||||||||||||||||||||||||||
Issuance of common stock | 1 | (14 | ) | — | — | — | — | — | — | — | — | (14 | ) | — | (14 | ) | |||||||||||||||||||||||||||||||
Stock-based compensation expense | — | 58 | — | — | — | — | — | — | — | — | 58 | 353 | 411 | ||||||||||||||||||||||||||||||||||
Treasury stock repurchases | — | — | — | — | — | (2 | ) | 6 | (382 | ) | — | — | (384 | ) | — | (384 | ) | ||||||||||||||||||||||||||||||
Revaluation of redeemable shares | — | (102 | ) | — | — | — | — | — | — | — | — | (102 | ) | — | (102 | ) | |||||||||||||||||||||||||||||||
Impact from equity transactions of non-controlling interests | — | (46 | ) | — | — | — | — | — | — | — | — | (46 | ) | (53 | ) | (99 | ) | ||||||||||||||||||||||||||||||
Balances as of August 4, 2017 | 570 | $ | 10,054 | 223 | $ | 10,041 | — | $ | (12 | ) | 20 | $ | (1,124 | ) | $ | (5,914 | ) | $ | (207 | ) | $ | 12,838 | $ | 6,086 | $ | 18,924 |
February 2, 2018 | |||||||||||
As Reported (a) | Revenue from Contracts with Customers | As Recast | |||||||||
(in millions) | |||||||||||
Assets | |||||||||||
Accounts receivable, net | $ | 11,177 | $ | 544 | $ | 11,721 | |||||
Other current assets | $ | 5,054 | $ | 827 | $ | 5,881 | |||||
Other non-current assets | $ | 1,862 | $ | 541 | $ | 2,403 | |||||
Liabilities and Stockholders' Equity | |||||||||||
Accrued and other | $ | 7,661 | $ | 365 | $ | 8,026 | |||||
Short-term deferred revenue | $ | 12,024 | $ | (418 | ) | $ | 11,606 | ||||
Long-term deferred revenue | $ | 10,223 | $ | (1,013 | ) | $ | 9,210 | ||||
Other non-current liabilities | $ | 6,797 | $ | 480 | $ | 7,277 | |||||
Accumulated deficit | $ | (9,253 | ) | $ | 2,393 | $ | (6,860 | ) | |||
Non-controlling interests | $ | 5,661 | $ | 105 | $ | 5,766 |
(a) | Amounts as reported in the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2018. |
• | First, the return rights provision, which represents an estimate of expected customer returns, which was previously presented as a reduction of accounts receivable, net, is now being presented outside of accounts receivable, net in two separate balance sheet line items. A liability is recorded in accrued and other for the estimated value of the sales amounts to be returned to the customer, and an asset is recorded in other current assets representing the recoverable cost of the inventory estimated to be returned. |
• | Second, the standard provides new guidance regarding transfer of control of goods to the customer. Under these new guidelines, the Company has determined that for certain hardware contracts in the United States, transfer of control and recognition of revenue can occur earlier. This resulted in an increase in accounts receivable, net and a decrease in the in-transit deferral recorded in other current assets. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
August 4, 2017 | August 4, 2017 | ||||||||||||||||||||||
As Reported (a) | Revenue from Contracts with Customers | As Recast | As Reported (a) | Revenue from Contracts with Customers | As Recast | ||||||||||||||||||
(in millions, except per share amounts) | |||||||||||||||||||||||
Net revenue: | |||||||||||||||||||||||
Products | $ | 14,355 | $ | 747 | $ | 15,102 | $ | 27,323 | $ | 1,413 | $ | 28,736 | |||||||||||
Services | 4,944 | (525 | ) | 4,419 | 9,792 | (1,007 | ) | 8,785 | |||||||||||||||
Total net revenue | 19,299 | 222 | 19,521 | 37,115 | 406 | 37,521 | |||||||||||||||||
Cost of net revenue: | |||||||||||||||||||||||
Products | 12,378 | 397 | 12,775 | 23,837 | 761 | 24,598 | |||||||||||||||||
Services | 2,112 | (334 | ) | 1,778 | 4,167 | (669 | ) | 3,498 | |||||||||||||||
Total cost of net revenue | 14,490 | 63 | 14,553 | 28,004 | 92 | 28,096 | |||||||||||||||||
Gross margin | 4,809 | 159 | 4,968 | 9,111 | 314 | 9,425 | |||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Selling, general, and administrative | 4,695 | (155 | ) | 4,540 | 9,364 | (228 | ) | 9,136 | |||||||||||||||
Research and development | 1,093 | — | 1,093 | 2,226 | — | 2,226 | |||||||||||||||||
Total operating expenses | 5,788 | (155 | ) | 5,633 | 11,590 | (228 | ) | 11,362 | |||||||||||||||
Operating loss | (979 | ) | 314 | (665 | ) | (2,479 | ) | 542 | (1,937 | ) | |||||||||||||
Interest and other, net | (545 | ) | — | (545 | ) | (1,118 | ) | 1 | (1,117 | ) | |||||||||||||
Income (loss) before income taxes | (1,524 | ) | 314 | (1,210 | ) | (3,597 | ) | 543 | (3,054 | ) | |||||||||||||
Income tax provision (benefit) | (546 | ) | 75 | (471 | ) | (1,236 | ) | 124 | (1,112 | ) | |||||||||||||
Net income (loss) | (978 | ) | 239 | (739 | ) | (2,361 | ) | 419 | (1,942 | ) | |||||||||||||
Less: Net income (loss) attributable to non-controlling interests | (32 | ) | 25 | (7 | ) | (81 | ) | 42 | (39 | ) | |||||||||||||
Net income (loss) attributable to Dell Technologies Inc. | $ | (946 | ) | $ | 214 | $ | (732 | ) | $ | (2,280 | ) | $ | 377 | $ | (1,903 | ) | |||||||
Earnings (loss) per share attributable to Dell Technologies Inc. - basic: | |||||||||||||||||||||||
Class V Common Stock - basic | $ | 0.83 | $ | 0.17 | $ | 1.00 | $ | 1.40 | $ | 0.20 | $ | 1.60 | |||||||||||
DHI Group - basic | $ | (1.97 | ) | $ | 0.32 | $ | (1.65 | ) | $ | (4.53 | ) | $ | 0.59 | $ | (3.94 | ) | |||||||
Earnings (loss) per share attributable to Dell Technologies Inc. - diluted: | |||||||||||||||||||||||
Class V Common Stock - diluted | $ | 0.82 | $ | 0.18 | $ | 1.00 | $ | 1.38 | $ | 0.21 | $ | 1.59 | |||||||||||
DHI Group - diluted | $ | (1.97 | ) | $ | 0.31 | $ | (1.66 | ) | $ | (4.54 | ) | $ | 0.59 | $ | (3.95 | ) |
(a) | Amounts as reported in the Company's Quarterly Report on Form 10-Q for the quarterly period ended August 4, 2017. |
• | Under the new revenue standard, amounts within a contract are now allocated to the product and services performance obligations based on their respective standalone selling prices, which generally increases product revenue and decreases services revenue relative to previously reported results. |
• | Further, third-party software licenses were previously recognized in services revenue as the Company could not separate the value of the software license from the associated maintenance agreement. Under the new revenue standard, the license value requires separation and will be recognized in product revenue and the value of the software maintenance will continue to be recognized in services revenue. |
Six Months Ended | |||||||||||||||
August 4, 2017 | |||||||||||||||
As Reported (a) | Classification of Certain Cash Receipts and Cash Payments | Statement of Cash Flows, Restricted Cash | As Recast | ||||||||||||
(in millions) | |||||||||||||||
Change in cash from operating activities | $ | 2,056 | $ | 32 | $ | 17 | $ | 2,105 | |||||||
Change in cash from investing activities | $ | (1,290 | ) | $ | — | $ | — | $ | (1,290 | ) | |||||
Change in cash from financing activities | $ | (1,075 | ) | $ | (32 | ) | $ | 30 | $ | (1,077 | ) | ||||
Change in cash, cash equivalents, and restricted cash | $ | (261 | ) | $ | — | $ | 47 | $ | (214 | ) | |||||
Cash, cash equivalents, and restricted cash at beginning of the period | 9,474 | — | 358 | 9,832 | |||||||||||
Cash, cash equivalents, and restricted cash at end of the period | $ | 9,213 | $ | — | $ | 405 | $ | 9,618 |
(a) | Amounts as reported in the Company's Quarterly Report on Form 10-Q for the quarterly period ended August 4, 2017. |
(1) | Identify the contract with a customer. The term "contract" refers to the enforceable rights and obligations provided in an agreement between the Company and one or more other parties in exchange for payment. The Company evaluates facts and circumstances regarding sales transactions in order to identify contracts with its customers. An agreement must meet all of the following criteria to qualify as a contract eligible for revenue recognition under the model: (i) the contract must be approved by all parties; (ii) each party's rights regarding the goods and services to be transferred to the customer can be identified; (iii) the payment terms for the goods and services can be identified; (iv) the customer has the ability and intent to pay and it is probable that the Company will collect substantially all of the consideration to which it will be entitled; and (v) the contract must have commercial substance. Judgment is used in determining the customer's ability and intent to pay, which is based upon various factors including the customer's historical payment experience or customer credit and financial information. |
(2) | Identify the performance obligations in the contract. Distinct promises within a contract are referred to as "performance obligations" and are accounted for as separate units of account. The Company assesses whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract. This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such goods or services are separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct); and (ii) the Company's promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract). The Company's performance obligations consist of a variety of products and services offerings which include: hardware, such as servers, storage, networking, personal computers, workstations, and peripherals; third-party software; proprietary software licenses; support and deployment services, which include hardware support that extends beyond the Company's standard warranties, software maintenance, and installation; professional services; training; software as a service ("SaaS"); and infrastructure as a service ("IaaS"). |
(3) | Determine the transaction price. Transaction price reflects the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to the customer. If the consideration promised in a contract includes a variable amount, the Company estimates the amount to which it expects to be entitled using either the expected value or most likely amount method. The Company’s contracts may include terms that could cause variability in the transaction price, including, for example, rebates, sales returns, and volume discounts. In determining the transaction price, any variable consideration would be considered, to the extent applicable, if it is probable that a significant future reversal of cumulative revenue under the contract will not occur when the uncertainty associated with the variable consideration is resolved. |
(4) | Allocate the transaction price to performance obligations in the contract. Many of the Company’s contracts include promises to transfer multiple products and services to a customer, and the transaction price must be allocated to each performance obligation in an amount that depicts the consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services. For these contracts with multiple performance obligations, the transaction price is allocated in proportion to the standalone selling price ("SSP") of each performance obligation. |
(5) | Recognize revenue when (or as) the performance obligation is satisfied. Revenue is recognized when obligations under the terms of the contract with the Company's customer are satisfied. Revenue is recognized either over time or at a point in time, depending on when the underlying products or services are transferred to the customer. Revenue is recognized at a point in time for products upon transfer of control. Revenue is recognized over time for support and deployment services, professional services, training, software support, SaaS, and IaaS. |
• | The Company does not account for significant financing components if the period between revenue recognition and when the customer pays for the product or service will be one year or less. |
• | The Company recognizes revenue equal to the amount it has a right to invoice when the amount corresponds directly with the value to the customer of the Company's performance to date. |
• | The Company does not account for shipping and handling activities as a separate performance obligation, but rather as an activity performed to transfer the promised good. |
August 3, 2018 (a) | February 2, 2018 | ||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||
Cash and cash equivalents: | |||||||||||||||||||||||||||||||
Money market funds | $ | 11,662 | $ | — | $ | — | $ | 11,662 | $ | 8,641 | $ | — | $ | — | $ | 8,641 | |||||||||||||||
U.S. corporate debt securities | — | — | — | — | — | 23 | — | 23 | |||||||||||||||||||||||
U.S. government and agencies | — | 8 | — | 8 | — | — | — | — | |||||||||||||||||||||||
Foreign corporate debt securities | — | — | — | — | — | 65 | — | 65 | |||||||||||||||||||||||
Debt securities: | |||||||||||||||||||||||||||||||
U.S. government and agencies | 623 | 318 | — | 941 | 682 | 392 | — | 1,074 | |||||||||||||||||||||||
U.S. corporate | — | 1,863 | — | 1,863 | — | 2,003 | — | 2,003 | |||||||||||||||||||||||
Foreign | — | 2,323 | — | 2,323 | — | 2,547 | — | 2,547 | |||||||||||||||||||||||
Equity and other securities | 430 | 14 | — | 444 | 236 | 5 | — | 241 | |||||||||||||||||||||||
Derivative instruments | — | 311 | — | 311 | — | 83 | — | 83 | |||||||||||||||||||||||
Total assets | $ | 12,715 | $ | 4,837 | $ | — | $ | 17,552 | $ | 9,559 | $ | 5,118 | $ | — | $ | 14,677 | |||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||
Derivative instruments | $ | — | $ | 42 | $ | — | $ | 42 | $ | — | $ | 184 | $ | — | $ | 184 | |||||||||||||||
Total liabilities | $ | — | $ | 42 | $ | — | $ | 42 | $ | — | $ | 184 | $ | — | $ | 184 |
August 3, 2018 | February 2, 2018 | ||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||
(in billions) | |||||||||||||||
Senior Secured Credit Facilities | $ | 10.3 | $ | 10.5 | $ | 10.4 | $ | 10.6 | |||||||
First Lien Notes | $ | 19.7 | $ | 21.3 | $ | 19.7 | $ | 21.9 | |||||||
Unsecured Notes and Debentures | $ | 1.8 | $ | 2.0 | $ | 2.3 | $ | 2.5 | |||||||
Senior Notes | $ | 3.1 | $ | 3.4 | $ | 3.1 | $ | 3.4 | |||||||
EMC Notes | $ | 3.0 | $ | 2.9 | $ | 5.5 | $ | 5.4 | |||||||
VMware Notes | $ | 4.0 | $ | 3.9 | $ | 4.0 | $ | 3.9 | |||||||
Margin Loan Facility | $ | 2.0 | $ | 2.0 | $ | 2.0 | $ | 2.0 |
August 3, 2018 | February 2, 2018 | ||||||||||||||||||||||||||||||
Cost | Unrealized Gain | Unrealized (Loss) | Carrying Value | Cost | Unrealized Gain | Unrealized (Loss) | Carrying Value | ||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||
Investments: | |||||||||||||||||||||||||||||||
U.S. government and agencies | $ | 501 | $ | — | $ | (2 | ) | $ | 499 | $ | 485 | $ | — | $ | (2 | ) | $ | 483 | |||||||||||||
U.S. corporate debt securities | 819 | — | (3 | ) | 816 | 660 | — | (2 | ) | 658 | |||||||||||||||||||||
Foreign debt securities | 1,192 | — | (3 | ) | 1,189 | 1,048 | — | (2 | ) | 1,046 | |||||||||||||||||||||
Total short-term investments | 2,512 | — | (8 | ) | 2,504 | 2,193 | — | (6 | ) | 2,187 | |||||||||||||||||||||
U.S. government and agencies | 450 | — | (8 | ) | 442 | 600 | — | (9 | ) | 591 | |||||||||||||||||||||
U.S. corporate debt securities | 1,067 | — | (20 | ) | 1,047 | 1,361 | — | (16 | ) | 1,345 | |||||||||||||||||||||
Foreign debt securities | 1,155 | — | (21 | ) | 1,134 | 1,518 | — | (17 | ) | 1,501 | |||||||||||||||||||||
Equity and other securities (a) | 717 | 309 | — | 1,026 | 640 | 86 | — | 726 | |||||||||||||||||||||||
Total long-term investments | 3,389 | 309 | (49 | ) | 3,649 | 4,119 | 86 | (42 | ) | 4,163 | |||||||||||||||||||||
Total investments | $ | 5,901 | $ | 309 | $ | (57 | ) | $ | 6,153 | $ | 6,312 | $ | 86 | $ | (48 | ) | $ | 6,350 |
(a) | $582 million and $485 million of equity and other securities as of August 3, 2018 and February 2, 2018, respectively, are strategic investments without readily determinable fair values, which are recorded at cost, less impairment, and adjusted for observable price changes. The remainder are publicly-traded investments that are measured at fair value on a recurring basis. See Note 3 of the Notes to the Condensed Consolidated Financial Statements for additional information on investments measured at fair value. |
Carrying Value | Amortized Cost | ||||||
(in millions) | |||||||
Due within one year | $ | 2,504 | $ | 2,512 | |||
Due after 1 year through 5 years | 2,576 | 2,624 | |||||
Due after 5 years through 10 years | 46 | 48 | |||||
Total | $ | 5,126 | $ | 5,184 |
• | Revolving loans — 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 Technologies. These private label credit financing programs are referred to as Dell Preferred Account ("DPA") and Dell Business Credit ("DBC"). The DPA product is primarily offered to individual consumer customers, and the DBC product is primarily offered to small and medium-sized commercial customers. Revolving loans in the United States 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 within twelve months on average. |
• | Fixed-term sales-type leases and loans — The Company enters into sales-type lease arrangements with customers who seek lease financing. Leases with business customers have fixed terms of generally two to four years. Future maturities of minimum lease and associated financing payments as of August 3, 2018 were as follows: Fiscal 2019 - $1,335 million; Fiscal 2020 - $1,932 million; Fiscal 2021 - $1,203 million; Fiscal 2022 - $462 million; Fiscal 2023 and beyond - $153 million. Future maturities and associated financing payments referenced herein represent the aggregate payments under the customer lease contract. The Company also offers fixed-term loans to qualified small businesses, large commercial accounts, governmental organizations, educational entities, and certain individual consumer customers. These loans are repaid in equal payments including interest and have defined terms of generally three to five years. |
August 3, 2018 | February 2, 2018 | ||||||||||||||||||||||
Revolving | Fixed-term | Total | Revolving | Fixed-term | Total | ||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Financing receivables, net: | |||||||||||||||||||||||
Customer receivables, gross (a) | $ | 825 | $ | 6,825 | $ | 7,650 | $ | 900 | $ | 6,282 | $ | 7,182 | |||||||||||
Allowances for losses | (75 | ) | (51 | ) | (126 | ) | (81 | ) | (64 | ) | (145 | ) | |||||||||||
Customer receivables, net | 750 | 6,774 | 7,524 | 819 | 6,218 | 7,037 | |||||||||||||||||
Residual interest | — | 646 | 646 | — | 606 | 606 | |||||||||||||||||
Financing receivables, net | $ | 750 | $ | 7,420 | $ | 8,170 | $ | 819 | $ | 6,824 | $ | 7,643 | |||||||||||
Short-term | $ | 750 | $ | 3,390 | $ | 4,140 | $ | 819 | $ | 3,100 | $ | 3,919 | |||||||||||
Long-term | $ | — | $ | 4,030 | $ | 4,030 | $ | — | $ | 3,724 | $ | 3,724 |
Three Months Ended | |||||||||||||||||||||||
August 3, 2018 | August 4, 2017 | ||||||||||||||||||||||
Revolving | Fixed-term | Total | Revolving | Fixed-term | Total | ||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Allowance for financing receivable losses: | |||||||||||||||||||||||
Balances at beginning of period | $ | 77 | $ | 62 | $ | 139 | $ | 85 | $ | 51 | $ | 136 | |||||||||||
Charge-offs, net of recoveries | (19 | ) | (12 | ) | (31 | ) | (20 | ) | (5 | ) | (25 | ) | |||||||||||
Provision charged to income statement | 17 | 1 | 18 | 16 | 8 | 24 | |||||||||||||||||
Balances at end of period | $ | 75 | $ | 51 | $ | 126 | $ | 81 | $ | 54 | $ | 135 |
Six Months Ended | |||||||||||||||||||||||
August 3, 2018 | August 4, 2017 | ||||||||||||||||||||||
Revolving | Fixed-term | Total | Revolving | Fixed-term | Total | ||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Allowance for financing receivable losses: | |||||||||||||||||||||||
Balances at beginning of period | $ | 81 | $ | 64 | $ | 145 | $ | 91 | $ | 52 | $ | 143 | |||||||||||
Charge-offs, net of recoveries | (39 | ) | (17 | ) | (56 | ) | (42 | ) | (8 | ) | (50 | ) | |||||||||||
Provision charged to income statement | 33 | 4 | 37 | 32 | 10 | 42 | |||||||||||||||||
Balances at end of period | $ | 75 | $ | 51 | $ | 126 | $ | 81 | $ | 54 | $ | 135 |
August 3, 2018 | February 2, 2018 | ||||||||||||||||||||||||||||||
Current | Past Due 1 — 90 Days | Past Due >90 Days | Total | Current | Past Due 1 — 90 Days | Past Due >90 Days | Total | ||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||
Revolving — DPA | $ | 572 | $ | 60 | $ | 20 | $ | 652 | $ | 633 | $ | 59 | $ | 23 | $ | 715 | |||||||||||||||
Revolving — DBC | 151 | 18 | 4 | 173 | 162 | 19 | 4 | 185 | |||||||||||||||||||||||
Fixed-term — Consumer and Commercial | 6,065 | 677 | 83 | 6,825 | 5,414 | 775 | 93 | 6,282 | |||||||||||||||||||||||
Total customer receivables, gross | $ | 6,788 | $ | 755 | $ | 107 | $ | 7,650 | $ | 6,209 | $ | 853 | $ | 120 | $ | 7,182 |
August 3, 2018 | February 2, 2018 | ||||||||||||||||||||||||||||||
Higher | Mid | Lower | Total | Higher | Mid | Lower | Total | ||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||
Revolving — DPA | $ | 133 | $ | 195 | $ | 324 | $ | 652 | $ | 131 | $ | 223 | $ | 361 | $ | 715 | |||||||||||||||
Revolving — DBC | $ | 44 | $ | 54 | $ | 75 | $ | 173 | $ | 48 | $ | 58 | $ | 79 | $ | 185 | |||||||||||||||
Fixed-term — Consumer and Commercial | $ | 3,665 | $ | 1,957 | $ | 1,203 | $ | 6,825 | $ | 3,334 | $ | 1,828 | $ | 1,120 | $ | 6,282 |
August 3, 2018 | February 2, 2018 | ||||||
(in millions) | |||||||
DFS U.S. debt | |||||||
Securitization facilities | $ | 1,782 | $ | 1,498 | |||
Fixed-term securitization offerings | 2,305 | 2,034 | |||||
Other | 132 | 32 | |||||
Total DFS U.S. debt | 4,219 | 3,564 | |||||
DFS international debt | |||||||
Securitization facility | 497 | 404 | |||||
Other structured facilities | 670 | 628 | |||||
Note payable | 200 | 200 | |||||
Total DFS international debt | 1,367 | 1,232 | |||||
Total DFS debt | $ | 5,586 | $ | 4,796 | |||
Total short-term DFS debt | $ | 3,130 | $ | 3,327 | |||
Total long-term DFS debt | $ | 2,456 | $ | 1,469 |
August 3, 2018 | February 2, 2018 | ||||||
(in millions) | |||||||
Financing receivables held by consolidated VIEs, net: | |||||||
Short-term, net | $ | 2,794 | $ | 2,572 | |||
Long-term, net | 2,379 | 1,981 | |||||
Financing receivables held by consolidated VIEs, net | $ | 5,173 | $ | 4,553 |
August 3, 2018 | February 2, 2018 | ||||||
(in millions) | |||||||
Secured Debt | |||||||
Senior Secured Credit Facilities: | |||||||
4.08% Term Loan B Facility due September 2023 | $ | 4,963 | $ | 4,988 | |||
3.83% Term Loan A-2 Facility due September 2021 | 4,283 | 4,394 | |||||
3.58% Term Loan A-3 Facility due December 2018 | 1,213 | 1,213 | |||||
First Lien Notes: | |||||||
3.48% due June 2019 | 3,750 | 3,750 | |||||
4.42% due June 2021 | 4,500 | 4,500 | |||||
5.45% due June 2023 | 3,750 | 3,750 | |||||
6.02% due June 2026 | 4,500 | 4,500 | |||||
8.10% due July 2036 | 1,500 | 1,500 | |||||
8.35% due July 2046 | 2,000 | 2,000 | |||||
Unsecured Debt | |||||||
Unsecured Notes and Debentures: | |||||||
5.65% due April 2018 | — | 500 | |||||
5.875% due June 2019 | 600 | 600 | |||||
4.625% due April 2021 | 400 | 400 | |||||
7.10% due April 2028 | 300 | 300 | |||||
6.50% due April 2038 | 388 | 388 | |||||
5.40% due September 2040 | 264 | 264 | |||||
Senior Notes: | |||||||
5.875% due June 2021 | 1,625 | 1,625 | |||||
7.125% due June 2024 | 1,625 | 1,625 | |||||
EMC Notes: | |||||||
1.875% due June 2018 | — | 2,500 | |||||
2.650% due June 2020 | 2,000 | 2,000 | |||||
3.375% due June 2023 | 1,000 | 1,000 | |||||
VMware Notes: | |||||||
2.30% due August 2020 | 1,250 | 1,250 | |||||
2.95% due August 2022 | 1,500 | 1,500 | |||||
3.90% due August 2027 | 1,250 | 1,250 | |||||
DFS Debt (Note 5) | 5,586 | 4,796 | |||||
Other | |||||||
4.59% Margin Loan Facility due April 2022 | 2,000 | 2,000 | |||||
Other | 56 | 101 | |||||
Total debt, principal amount | $ | 50,303 | $ | 52,694 |
August 3, 2018 | February 2, 2018 | ||||||
(in millions) | |||||||
Total debt, principal amount | $ | 50,303 | $ | 52,694 | |||
Unamortized discount, net of unamortized premium | (246 | ) | (266 | ) | |||
Debt issuance costs | (499 | ) | (557 | ) | |||
Total debt, carrying value | $ | 49,558 | $ | 51,871 | |||
Total short-term debt, carrying value | $ | 9,144 | $ | 7,873 | |||
Total long-term debt, carrying value | $ | 40,414 | $ | 43,998 |
Maturities by Fiscal Year | |||||||||||||||||||||||||||
2019 (remaining six months) | 2020 | 2021 | 2022 | 2023 | Thereafter | Total | |||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||
Senior Secured Credit Facilities and First Lien Notes | $ | 1,405 | $ | 4,245 | $ | 371 | $ | 7,888 | $ | 63 | $ | 16,488 | $ | 30,460 | |||||||||||||
Unsecured Notes and Debentures | — | 600 | — | 400 | — | 952 | 1,952 | ||||||||||||||||||||
Senior Notes and EMC Notes | — | — | 2,000 | 1,625 | — | 2,625 | 6,250 | ||||||||||||||||||||
VMware Notes | — | — | 1,250 | — | 1,500 | 1,250 | 4,000 | ||||||||||||||||||||
DFS Debt | 1,931 | 1,998 | 1,459 | 165 | 31 | 1 | 5,585 | ||||||||||||||||||||
Margin Loan Facility | — | — | — | — | 2,000 | — | 2,000 | ||||||||||||||||||||
Other | 16 | 24 | 14 | — | — | 2 | 56 | ||||||||||||||||||||
Total maturities, principal amount | 3,352 | 6,867 | 5,094 | 10,078 | 3,594 | 21,318 | 50,303 | ||||||||||||||||||||
Associated carrying value adjustments | (4 | ) | (21 | ) | (7 | ) | (164 | ) | (27 | ) | (522 | ) | (745 | ) | |||||||||||||
Total maturities, carrying value amount | $ | 3,348 | $ | 6,846 | $ | 5,087 | $ | 9,914 | $ | 3,567 | $ | 20,796 | $ | 49,558 |
August 3, 2018 | February 2, 2018 | ||||||
(in millions) | |||||||
Foreign exchange contracts: | |||||||
Designated as cash flow hedging instruments | $ | 5,989 | $ | 4,392 | |||
Non-designated as hedging instruments | 6,061 | 6,223 | |||||
Total | $ | 12,050 | $ | 10,615 | |||
Interest rate contracts: | |||||||
Non-designated as hedging instruments | $ | 2,356 | $ | 1,897 |
Derivatives in Cash Flow Hedging Relationships | Gain (Loss) Recognized in Accumulated OCI, Net of Tax, on Derivatives | Location of Gain (Loss) Reclassified from Accumulated OCI into Income | Gain (Loss) Reclassified from Accumulated OCI into Income | |||||||
(in millions) | (in millions) | |||||||||
For the three months ended August 3, 2018 | ||||||||||
Total net revenue | $ | 77 | ||||||||
Foreign exchange contracts | $ | 120 | Total cost of net revenue | — | ||||||
Interest rate contracts | — | Interest and other, net | — | |||||||
Total | $ | 120 | $ | 77 | ||||||
For the three months ended August 4, 2017 | ||||||||||
Total net revenue | $ | (49 | ) | |||||||
Foreign exchange contracts | $ | (141 | ) | Total cost of net revenue | (21 | ) | ||||
Interest rate contracts | — | Interest and other, net | — | |||||||
Total | $ | (141 | ) | $ | (70 | ) | ||||
For the six months ended August 3, 2018 | ||||||||||
Total net revenue | $ | 46 | ||||||||
Foreign exchange contracts | $ | 241 | Total cost of net revenue | — | ||||||
Interest rate contracts | — | Interest and other, net | — | |||||||
Total | $ | 241 | $ | 46 | ||||||
For the six months ended August 4, 2017 | ||||||||||
Total net revenue | $ | (32 | ) | |||||||
Foreign exchange contracts | $ | (157 | ) | Total cost of net revenue | (17 | ) | ||||
Interest rate contracts | — | Interest and other, net | — | |||||||
Total | $ | (157 | ) | $ | (49 | ) |
Three Months Ended | Six Months Ended | |||||||||||||||||
August 3, 2018 | August 4, 2017 | August 3, 2018 | August 4, 2017 | Location of Gain (Loss) Recognized | ||||||||||||||
(in millions) | ||||||||||||||||||
Gain (Loss) Recognized: | ||||||||||||||||||
Foreign exchange contracts | $ | 75 | $ | 51 | $ | 32 | $ | 4 | Interest and other, net | |||||||||
Interest rate contracts | (1 | ) | (1 | ) | 1 | (1 | ) | Interest and other, net | ||||||||||
Total | $ | 74 | $ | 50 | $ | 33 | $ | 3 |
August 3, 2018 | |||||||||||||||||||
Other Current Assets | Other Non- Current Assets | Other Current Liabilities | Other Non-Current Liabilities | Total Fair Value | |||||||||||||||
(in millions) | |||||||||||||||||||
Derivatives designated as hedging instruments: | |||||||||||||||||||
Foreign exchange contracts in an asset position | $ | 206 | $ | — | $ | 17 | $ | — | $ | 223 | |||||||||
Foreign exchange contracts in a liability position | (72 | ) | — | (19 | ) | — | (91 | ) | |||||||||||
Net asset (liability) | 134 | — | (2 | ) | — | 132 | |||||||||||||
Derivatives not designated as hedging instruments: | |||||||||||||||||||
Foreign exchange contracts in an asset position | 289 | — | 15 | — | 304 | ||||||||||||||
Foreign exchange contracts in a liability position | (121 | ) | — | (53 | ) | — | (174 | ) | |||||||||||
Interest rate contracts in an asset position | — | 9 | — | — | 9 | ||||||||||||||
Interest rate contracts in a liability position | — | — | — | (2 | ) | (2 | ) | ||||||||||||
Net asset (liability) | 168 | 9 | (38 | ) | (2 | ) | 137 | ||||||||||||
Total derivatives at fair value | $ | 302 | $ | 9 | $ | (40 | ) | $ | (2 | ) | $ | 269 | |||||||
February 2, 2018 | |||||||||||||||||||
Other Current Assets | Other Non- Current Assets | Other Current Liabilities | Other Non-Current Liabilities | Total Fair Value | |||||||||||||||
(in millions) | |||||||||||||||||||
Derivatives designated as hedging instruments: | |||||||||||||||||||
Foreign exchange contracts in an asset position | $ | 9 | $ | — | $ | 11 | $ | — | $ | 20 | |||||||||
Foreign exchange contracts in a liability position | (7 | ) | — | (52 | ) | — | (59 | ) | |||||||||||
Net asset (liability) | 2 | — | (41 | ) | — | (39 | ) | ||||||||||||
Derivatives not designated as hedging instruments: | |||||||||||||||||||
Foreign exchange contracts in an asset position | 194 | 3 | 141 | — | 338 | ||||||||||||||
Foreign exchange contracts in a liability position | (127 | ) | — | (283 | ) | — | (410 | ) | |||||||||||
Interest rate contracts in an asset position | — | 11 | — | — | 11 | ||||||||||||||
Interest rate contracts in a liability position | — | — | — | (1 | ) | (1 | ) | ||||||||||||
Net asset (liability) | 67 | 14 | (142 | ) | (1 | ) | (62 | ) | |||||||||||
Total derivatives at fair value | $ | 69 | $ | 14 | $ | (183 | ) | $ | (1 | ) | $ | (101 | ) |
August 3, 2018 | |||||||||||||||||||||||
Gross Amounts of Recognized Assets/ (Liabilities) | Gross Amounts Offset in the Statement of Financial Position | Net Amounts of Assets/ (Liabilities) Presented in the Statement of Financial Position | Gross Amounts not Offset in the Statement of Financial Position | Net Amount | |||||||||||||||||||
Financial Instruments | Cash Collateral Received or Pledged | ||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Derivative instruments: | |||||||||||||||||||||||
Financial assets | $ | 536 | $ | (225 | ) | $ | 311 | $ | — | $ | — | $ | 311 | ||||||||||
Financial liabilities | (267 | ) | 225 | (42 | ) | — | 1 | (41 | ) | ||||||||||||||
Total derivative instruments | $ | 269 | $ | — | $ | 269 | $ | — | $ | 1 | $ | 270 | |||||||||||
February 2, 2018 | |||||||||||||||||||||||
Gross Amounts of Recognized Assets/ (Liabilities) | Gross Amounts Offset in the Statement of Financial Position | Net Amounts of Assets/ (Liabilities) Presented in the Statement of Financial Position | Gross Amounts not Offset in the Statement of Financial Position | Net Amount | |||||||||||||||||||
Financial Instruments | Cash Collateral Received or Pledged | ||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Derivative instruments: | |||||||||||||||||||||||
Financial assets | $ | 369 | $ | (286 | ) | $ | 83 | $ | — | $ | — | $ | 83 | ||||||||||
Financial liabilities | (470 | ) | 286 | (184 | ) | — | — | (184 | ) | ||||||||||||||
Total derivative instruments | $ | (101 | ) | $ | — | $ | (101 | ) | $ | — | $ | — | $ | (101 | ) |
Infrastructure Solutions Group (a) | Client Solutions Group | VMware | Other Businesses (b) | Total | |||||||||||||||
(in millions) | |||||||||||||||||||
Balances as of February 2, 2018 | $ | 15,953 | $ | 4,237 | $ | 15,635 | $ | 4,095 | $ | 39,920 | |||||||||
Impact of foreign currency translation | (278 | ) | — | — | (68 | ) | (346 | ) | |||||||||||
Goodwill divested | (69 | ) | — | — | — | (69 | ) | ||||||||||||
Other adjustments (c) | (396 | ) | — | (1 | ) | 396 | (1 | ) | |||||||||||
Balances as of August 3, 2018 | $ | 15,210 | $ | 4,237 | $ | 15,634 | $ | 4,423 | $ | 39,504 |
(a) | Infrastructure Solutions Group is composed of the Core Storage, Servers, and Networking goodwill reporting unit. |
(b) | Other Businesses consists of offerings by Pivotal, SecureWorks, RSA Security LLC ("RSA Security"), Virtustream Group Holdings, Inc. ("Virtustream"), and Boomi, Inc. ("Boomi"). |
(c) | During the three months ended May 4, 2018, the Company made certain segment reporting changes, which included the movement of the results of Virtustream from the Infrastructure Solutions Group segment to Other businesses. The amount of goodwill attributable to Virtustream was reclassified to Other businesses to align with these reporting changes. |
August 3, 2018 | February 2, 2018 | ||||||||||||||||||||||
Gross | Accumulated Amortization | Net | Gross | Accumulated Amortization | Net | ||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Customer relationships | $ | 22,724 | $ | (10,164 | ) | $ | 12,560 | $ | 22,764 | $ | (8,637 | ) | $ | 14,127 | |||||||||
Developed technology | 15,589 | (7,596 | ) | 7,993 | 15,586 | (6,196 | ) | 9,390 | |||||||||||||||
Trade names | 1,277 | (497 | ) | 780 | 1,277 | (407 | ) | 870 | |||||||||||||||
Leasehold assets (liabilities) | 128 | (8 | ) | 120 | 128 | (6 | ) | 122 | |||||||||||||||
Definite-lived intangible assets | 39,718 | (18,265 | ) | 21,453 | 39,755 | (15,246 | ) | 24,509 | |||||||||||||||
Indefinite-lived trade names | 3,755 | — | 3,755 | 3,756 | — | 3,756 | |||||||||||||||||
Total intangible assets | $ | 43,473 | $ | (18,265 | ) | $ | 25,208 | $ | 43,511 | $ | (15,246 | ) | $ | 28,265 |
Fiscal Years | (in millions) | ||
2019 (remaining six months) | $ | 3,050 | |
2020 | 4,308 | ||
2021 | 3,346 | ||
2022 | 2,636 | ||
2023 | 1,756 | ||
Thereafter | 6,357 | ||
Total | $ | 21,453 |
Three Months Ended | Six Months Ended | ||||||
August 3, 2018 | August 3, 2018 | ||||||
(in millions) | |||||||
Deferred revenue: | |||||||
Deferred revenue at beginning of period | $ | 20,959 | $ | 20,816 | |||
Revenue deferrals for new contracts and changes in estimates for pre-existing contracts (a) | 6,123 | 11,460 | |||||
Revenue recognized | (5,382 | ) | (10,576 | ) | |||
Deferred revenue at end of period | $ | 21,700 | $ | 21,700 | |||
Short-term deferred revenue | $ | 11,965 | $ | 11,965 | |||
Long-term deferred revenue | $ | 9,735 | $ | 9,735 |
(a) | Includes the impact of foreign currency exchange rate fluctuations. |
Three Months Ended | Six Months Ended | ||||||||||||||
August 3, 2018 | August 4, 2017 | August 3, 2018 | August 4, 2017 | ||||||||||||
(in millions) | |||||||||||||||
Warranty liability: | |||||||||||||||
Warranty liability at beginning of period | $ | 527 | $ | 607 | $ | 539 | $ | 604 | |||||||
Costs accrued for new warranty contracts and changes in estimates for pre-existing warranties (a) (b) | 236 | 223 | 430 | 463 | |||||||||||
Service obligations honored | (221 | ) | (242 | ) | (427 | ) | (479 | ) | |||||||
Warranty liability at end of period | $ | 542 | $ | 588 | $ | 542 | $ | 588 | |||||||
Current portion | $ | 366 | $ | 412 | $ | 366 | $ | 412 | |||||||
Non-current portion | $ | 176 | $ | 176 | $ | 176 | $ | 176 |
(a) | Changes in cost estimates related to pre-existing warranties are aggregated with accruals for new standard warranty contracts. The Company's warranty liability process does not differentiate between estimates made for pre-existing warranties and new warranty obligations. |
(b) | Includes the impact of foreign currency exchange rate fluctuations. |
Foreign Currency Translation Adjustments | Investments | Cash Flow Hedges | Pension and Other Postretirement Plans | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||
(in millions) | |||||||||||||||||||
Balances as of February 2, 2018 | $ | 179 | $ | 22 | $ | (103 | ) | $ | 32 | $ | 130 | ||||||||
Adjustment for adoption of accounting standards (Note 1) | — | (61 | ) | — | 3 | (58 | ) | ||||||||||||
Other comprehensive income (loss) before reclassifications | (603 | ) | (1 | ) | 241 | — | (363 | ) | |||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | — | (1 | ) | (46 | ) | — | (47 | ) | |||||||||||
Total change for the period | (603 | ) | (63 | ) | 195 | 3 | (468 | ) | |||||||||||
Less: Change in comprehensive loss attributable to non-controlling interests | — | (2 | ) | (2 | ) | — | (4 | ) | |||||||||||
Balances as of August 3, 2018 | $ | (424 | ) | $ | (39 | ) | $ | 94 | $ | 35 | $ | (334 | ) |
Three Months Ended | |||||||||||||||||||||||
August 3, 2018 | August 4, 2017 | ||||||||||||||||||||||
Investments | Cash Flow Hedges | Total | Investments | Cash Flow Hedges | Total | ||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Total reclassifications, net of tax: | |||||||||||||||||||||||
Net revenue | $ | — | $ | 77 | $ | 77 | $ | — | $ | (49 | ) | $ | (49 | ) | |||||||||
Cost of net revenue | — | — | — | — | (21 | ) | (21 | ) | |||||||||||||||
Interest and other, net | — | — | — | (2 | ) | — | (2 | ) | |||||||||||||||
Total reclassifications, net of tax | $ | — | $ | 77 | $ | 77 | $ | (2 | ) | $ | (70 | ) | $ | (72 | ) | ||||||||
Six Months Ended | |||||||||||||||||||||||
August 3, 2018 | August 4, 2017 | ||||||||||||||||||||||
Investments | Cash Flow Hedges | Total | Investments | Cash Flow Hedges | Total | ||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Total reclassifications, net of tax: | |||||||||||||||||||||||
Net revenue | $ | — | $ | 46 | $ | 46 | $ | — | $ | (32 | ) | $ | (32 | ) | |||||||||
Cost of net revenue | — | — | — | — | (17 | ) | (17 | ) | |||||||||||||||
Interest and other, net | 1 | — | 1 | (3 | ) | — | (3 | ) | |||||||||||||||
Total reclassifications, net of tax | $ | 1 | $ | 46 | $ | 47 | $ | (3 | ) | $ | (49 | ) | $ | (52 | ) |
Six Months Ended | |||
August 3, 2018 | |||
(in millions) | |||
Net loss attributable to Dell Technologies Inc. | $ | (1,135 | ) |
Transfers (to) from the non-controlling interests: | |||
Increase in Dell Technologies Inc. additional paid-in-capital for equity issuances and other equity activity | 606 | ||
Decrease in Dell Technologies Inc. additional paid-in-capital for equity issuances and other equity activity | (535 | ) | |
Net transfers from non-controlling interests | 71 | ||
Change from net loss attributable to Dell Technologies Inc. and transfers to/from the non-controlling interests | $ | (1,064 | ) |
Three Months Ended | Six Months Ended | ||||||||||||||
August 3, 2018 | August 4, 2017 | August 3, 2018 | August 4, 2017 | ||||||||||||
Earnings (loss) per share attributable to Dell Technologies Inc. - basic: | |||||||||||||||
Class V Common Stock - basic | $ | 1.61 | $ | 1.00 | $ | 3.97 | $ | 1.60 | |||||||
DHI Group - basic | $ | (1.44 | ) | $ | (1.65 | ) | $ | (3.39 | ) | $ | (3.94 | ) | |||
Earnings (loss) per share attributable to Dell Technologies Inc. - diluted: | |||||||||||||||
Class V Common Stock - diluted | $ | 1.58 | $ | 1.00 | $ | 3.91 | $ | 1.59 | |||||||
DHI Group - diluted | $ | (1.45 | ) | $ | (1.66 | ) | $ | (3.40 | ) | $ | (3.95 | ) |
Three Months Ended | Six Months Ended | ||||||||||||||
August 3, 2018 | August 4, 2017 | August 3, 2018 | August 4, 2017 | ||||||||||||
(in millions) | |||||||||||||||
Numerator: Class V Common Stock | |||||||||||||||
Net income attributable to Class V Common Stock - basic | $ | 320 | $ | 204 | $ | 790 | $ | 329 | |||||||
Incremental dilution from VMware, Inc. attributable to Class V Common Stock (a) | (5 | ) | (2 | ) | (12 | ) | (4 | ) | |||||||
Net income attributable to Class V Common Stock - diluted | $ | 315 | $ | 202 | $ | 778 | $ | 325 | |||||||
Numerator: DHI Group | |||||||||||||||
Net loss attributable to DHI Group - basic | $ | (819 | ) | $ | (936 | ) | $ | (1,925 | ) | $ | (2,232 | ) | |||
Incremental dilution from VMware, Inc. attributable to DHI Group (a) | (4 | ) | (2 | ) | (8 | ) | (3 | ) | |||||||
Net loss attributable to DHI Group - diluted | $ | (823 | ) | $ | (938 | ) | $ | (1,933 | ) | $ | (2,235 | ) | |||
Denominator: Class V Common Stock weighted-average shares outstanding | |||||||||||||||
Weighted-average shares outstanding - basic | 199 | 203 | 199 | 205 | |||||||||||
Dilutive effect of options, restricted stock units, restricted stock, and other (b) | — | — | — | — | |||||||||||
Weighted-average shares outstanding - diluted | 199 | 203 | 199 | 205 | |||||||||||
Weighted-average shares outstanding - antidilutive (b) | — | — | — | — | |||||||||||
Denominator: DHI Group weighted-average shares outstanding | |||||||||||||||
Weighted-average shares outstanding - basic | 567 | 566 | 568 | 566 | |||||||||||
Dilutive effect of options, restricted stock units, restricted stock, and other | — | — | — | — | |||||||||||
Weighted-average shares outstanding - diluted | 567 | 566 | 568 | 566 | |||||||||||
Weighted-average shares outstanding - antidilutive (c) | 47 | 36 | 48 | 37 |
(a) | The incremental dilution from VMware, Inc. represents the impact of VMware, Inc.'s dilutive securities on the diluted earnings (loss) per share of the DHI Group and the Class V Common Stock, respectively, and is calculated by multiplying the difference between VMware, Inc.'s basic and diluted earnings (loss) per share by the number of shares of VMware, Inc. common stock held by the Company. |
(b) | The dilutive effect of Class V Common Stock-based incentive awards was not material to the calculation of the weighted-average Class V Common Stock shares outstanding. The antidilutive effect of these awards was also not material. |
(c) | Stock-based incentive awards have been excluded from the calculation of the DHI Group's diluted earnings (loss) per share because their effect would have been antidilutive, as the Company had a net loss from continuing operations attributable to the DHI Group for the periods presented. |
Three Months Ended | Six Months Ended | ||||||||||||||
August 3, 2018 | August 4, 2017 | August 3, 2018 | August 4, 2017 | ||||||||||||
(in millions) | |||||||||||||||
Net income attributable to Class V Common Stock | $ | 320 | $ | 204 | $ | 790 | $ | 329 | |||||||
Net loss attributable to DHI Group | (819 | ) | (936 | ) | (1,925 | ) | (2,232 | ) | |||||||
Net loss attributable to Dell Technologies Inc. | $ | (499 | ) | $ | (732 | ) | $ | (1,135 | ) | $ | (1,903 | ) |
Authorized | Issued | Outstanding | ||||||
(in millions of shares) | ||||||||
Common stock as of February 2, 2018 | ||||||||
Class A | 600 | 410 | 410 | |||||
Class B | 200 | 137 | 137 | |||||
Class C | 7,900 | 24 | 23 | |||||
Class D | 100 | — | — | |||||
Class V | 343 | 223 | 199 | |||||
9,143 | 794 | 769 | ||||||
Common stock as of August 3, 2018 | ||||||||
Class A | 600 | 410 | 410 | |||||
Class B | 200 | 137 | 137 | |||||
Class C | 7,900 | 24 | 22 | |||||
Class D | 100 | — | — | |||||
Class V | 343 | 223 | 199 | |||||
9,143 | 794 | 768 |
• | For stock options to purchase Class C Common Stock subject to service requirements, the intrinsic value of the option is multiplied by the portion of the option for which services have been rendered. Upon exercise of the option, the amount in temporary equity represents the fair value of the Class C Common Stock. |
• | For stock appreciation rights, restricted stock units ("RSUs"), or RSAs, any of which stock award types are subject to service requirements, the fair value of the share is multiplied by the portion of the share for which services have been rendered. |
• | For share-based arrangements that are subject to the occurrence of a contingent event, those amounts are not reclassified to temporary equity until the contingency has been satisfied. Contingent events include the achievement of performance-based metrics. |
Three Months Ended | Six Months Ended | ||||||||||||||
August 3, 2018 | August 4, 2017 | August 3, 2018 | August 4, 2017 | ||||||||||||
(in millions) | |||||||||||||||
Consolidated net revenue: | |||||||||||||||
Infrastructure Solutions Group | $ | 9,227 | $ | 7,467 | $ | 17,894 | $ | 14,428 | |||||||
Client Solutions Group | 11,128 | 9,866 | 21,399 | 18,914 | |||||||||||
VMware | 2,194 | 1,984 | 4,222 | 3,802 | |||||||||||
Reportable segment net revenue | 22,549 | 19,317 | 43,515 | 37,144 | |||||||||||
Other businesses (a) | 574 | 543 | 1,153 | 1,072 | |||||||||||
Unallocated transactions (b) | (1 | ) | (4 | ) | (3 | ) | (5 | ) | |||||||
Impact of purchase accounting (c) | (180 | ) | (335 | ) | (367 | ) | (690 | ) | |||||||
Total net revenue | $ | 22,942 | $ | 19,521 | $ | 44,298 | $ | 37,521 | |||||||
Consolidated operating income (loss): | |||||||||||||||
Infrastructure Solutions Group | $ | 1,012 | $ | 647 | $ | 1,951 | $ | 1,153 | |||||||
Client Solutions Group | 425 | 528 | 958 | 853 | |||||||||||
VMware | 736 | 728 | 1,349 | 1,339 | |||||||||||
Reportable segment operating income | 2,173 | 1,903 | 4,258 | 3,345 | |||||||||||
Other businesses (a) | (49 | ) | (29 | ) | (99 | ) | (52 | ) | |||||||
Unallocated transactions (b) | (16 | ) | (8 | ) | (25 | ) | (2 | ) | |||||||
Impact of purchase accounting (c) | (215 | ) | (406 | ) | (437 | ) | (829 | ) | |||||||
Amortization of intangibles | (1,526 | ) | (1,740 | ) | (3,048 | ) | (3,516 | ) | |||||||
Transaction-related expenses (d) | (104 | ) | (138 | ) | (270 | ) | (329 | ) | |||||||
Other corporate expenses (e) | (276 | ) | (247 | ) | (545 | ) | (554 | ) | |||||||
Total operating loss | $ | (13 | ) | $ | (665 | ) | $ | (166 | ) | $ | (1,937 | ) |
(a) | Pivotal, SecureWorks, RSA Security, Virtustream, and Boomi constitute "Other businesses" and do not meet the requirements for a reportable segment, either individually or collectively. The results of Other businesses are not material to the Company's overall results. |
(b) | Unallocated transactions includes long-term incentives, certain short-term incentive compensation expenses, and other corporate items that are not allocated to Dell Technologies' reportable segments. |
(c) | Impact of purchase accounting includes non-cash purchase accounting adjustments that are primarily related to the EMC merger transaction. |
(d) | Transaction-related expenses includes acquisition, integration, and divestiture related costs. |
(e) | Other corporate expenses includes severance and facility action costs as well as stock-based compensation expense. |
Three Months Ended | Six Months Ended | ||||||||||||||
August 3, 2018 | August 4, 2017 | August 3, 2018 | August 4, 2017 | ||||||||||||
(in millions) | |||||||||||||||
Net revenue: | |||||||||||||||
Infrastructure Solutions Group: | |||||||||||||||
Servers and networking | $ | 5,061 | $ | 3,777 | $ | 9,646 | $ | 7,033 | |||||||
Storage | 4,166 | 3,690 | 8,248 | 7,395 | |||||||||||
Total ISG net revenue | 9,227 | 7,467 | 17,894 | 14,428 | |||||||||||
Client Solutions Group: | |||||||||||||||
Commercial | 8,109 | 7,207 | 15,472 | 13,549 | |||||||||||
Consumer | 3,019 | 2,659 | 5,927 | 5,365 | |||||||||||
Total CSG net revenue | 11,128 | 9,866 | 21,399 | 18,914 | |||||||||||
VMware: | |||||||||||||||
Total VMware net revenue | 2,194 | 1,984 | 4,222 | 3,802 | |||||||||||
Total segment net revenue | $ | 22,549 | $ | 19,317 | $ | 43,515 | $ | 37,144 |
August 3, 2018 | February 2, 2018 | ||||||
(in millions) | |||||||
Inventories, net: | |||||||
Production materials | $ | 1,502 | $ | 967 | |||
Work-in-process | 782 | 514 | |||||
Finished goods | 1,358 | 1,197 | |||||
Total inventories, net | $ | 3,642 | $ | 2,678 | |||
Other non-current liabilities: | |||||||
Warranty liability | $ | 176 | $ | 172 | |||
Deferred and other tax liabilities | 6,046 | 6,590 | |||||
Other | 565 | 515 | |||||
Total other non-current liabilities | $ | 6,787 | $ | 7,277 |
August 3, 2018 | February 2, 2018 | ||||||
(in millions) | |||||||
Cash and cash equivalents | $ | 15,312 | $ | 13,942 | |||
Restricted cash - current assets | 473 | 423 | |||||
Restricted cash - other non-current assets | 20 | 13 | |||||
Total cash, cash equivalents, and restricted cash | $ | 15,805 | $ | 14,378 |
• | Infrastructure Solutions Group ("ISG") — Our Infrastructure Solutions Group, provides comprehensive data solutions and services, including storage, server, networking and services. Our comprehensive portfolio of advanced storage solutions includes traditional storage solutions as well as next-generation storage solutions (such as all-flash arrays, scale-out file, object platforms, and software-defined solutions), while our server portfolio includes high-performance rack, blade, tower, and hyperscale servers. Our networking portfolio helps our business customers transform and modernize their infrastructure, mobilize and enrich end-user experiences, and accelerate business applications and processes. ISG also offers attached software, peripherals, and services, including support and deployment, configuration, and extended warranty services. |
• | Client Solutions Group ("CSG") — CSG includes branded hardware (such as PCs, workstations, and notebooks) and branded peripherals (such as displays and projectors), as well as third-party software and peripherals. CSG also offers attached services, including support and deployment, configuration, and extended warranty services. |
• | VMware — The VMware reportable segment ("VMware") reflects the operations of VMware, Inc. (NYSE: VMW) within Dell Technologies. See Exhibit 99.1 filed with this report for further details on the differences between VMware reportable segment results and VMware, Inc. results. |
• | Pivotal (NYSE: PVTL) provides a leading cloud-native platform that makes software development and IT operations a strategic advantage for customers. Pivotal's cloud-native platform, Pivotal Cloud Foundry, accelerates and streamlines software development by reducing the complexity of building, deploying and operating new cloud-native applications and modernizing legacy applications. On April 24, 2018, Pivotal completed a registered underwritten initial public offering of its Class A common stock. |
• | SecureWorks (NASDAQ: SCWX) is a leading global provider of intelligence-driven information security solutions singularly focused on protecting its clients from cyber attacks. SecureWorks’s solutions enable organizations of varying size and complexity to fortify their cyber defenses to prevent security breaches, detect malicious activity in near real time, prioritize and respond rapidly to security incidents and predict emerging threats. |
• | RSA Security provides essential cybersecurity solutions engineered to enable organizations to detect, investigate, and respond to advanced attacks, confirm and manage identities, and, ultimately, help reduce IP theft, fraud, and cybercrime. |
• | Virtustream offers cloud software and infrastructure-as-a-service solutions that enable customers to migrate, run, and manage mission-critical applications in cloud-based IT environments, which is a key element of our strategy to help customers support their applications in a variety of cloud-native environments. Beginning in the first quarter of Fiscal 2019, Virtustream results are reported within other businesses, rather than within ISG. This change in reporting structure did not impact our previously reported consolidated financial results, but our prior period segment results have been recast to reflect the change. |
• | Boomi specializes in cloud-based integration, connecting information between existing on-premise and cloud-based applications to ensure business processes are optimized, data is accurate and workflow is reliable. |
• | Amortization of Intangible Assets — Amortization of intangible assets primarily consists of amortization of customer relationships, developed technology, and trade names. In connection with the EMC merger transaction and the acquisition of Dell Inc. by Dell Technologies Inc. on October 29, 2013, referred to as the going-private transaction, all of the tangible and intangible assets and liabilities of EMC and Dell, respectively, were accounted for and recognized at fair value on the transaction dates. Accordingly, for the periods presented, amortization of intangible assets represents amortization associated with intangible assets recognized in connection with the EMC merger transaction and the going-private transaction. Amortization charges for purchased intangible assets are significantly impacted by the timing and magnitude of our acquisitions, and these charges may vary in amount from period to period. We exclude these charges for purposes of calculating the non-GAAP financial measures presented below to facilitate a more meaningful evaluation of our current operating performance and comparisons to our past operating performance. |
• | Impact of Purchase Accounting — The impact of purchase accounting includes purchase accounting adjustments, related to the EMC merger transaction and, to a lesser extent, the going-private transaction, recorded under the acquisition method of accounting in accordance with the accounting guidance for business combinations. This guidance prescribes that the purchase price be allocated to assets acquired and liabilities assumed based on the estimated fair value of such assets and liabilities on the date of the transaction. Accordingly, all of the assets and liabilities acquired in the EMC merger transaction and the going-private transaction were accounted for and recognized at fair value as of the respective transaction dates, and the fair value adjustments are being amortized over the estimated useful lives in the periods following the transactions. The fair value adjustments primarily relate to deferred revenue, inventory, and property, plant, and equipment. The purchase accounting adjustments and related amortization of those adjustments are reflected in our GAAP results; however, we evaluate the operating results of the underlying businesses on a non-GAAP basis, after removing such adjustments. We believe that excluding the impact of purchase accounting provides results that are useful in understanding our current operating performance and provides more meaningful comparisons to our past operating performance. |
• | Transaction-related Expenses — Transaction-related expenses consist of acquisition, integration, and divestiture related costs, and are expensed as incurred. These expenses primarily represent costs for legal, banking, consulting, and advisory services, as well as certain compensatory retention awards directly related to the EMC merger transaction. During the first six months of Fiscal 2019, this category also included approximately $116 million of expenses incurred in the first quarter of Fiscal 2019 related to integration of our inventory policies and management process related to customer evaluation units. |
• | Other Corporate Expenses — Other corporate expenses consists of severance, facility action costs, and stock-based compensation expense associated with equity awards. Severance costs are primarily related to severance and benefits for employees terminated pursuant to cost savings initiatives. Facility action costs were $5 million and $14 million, respectively, during the second quarter and first six months of Fiscal 2019, compared to $29 million and $109 million, respectively, during the second quarter and first six months of Fiscal 2018. We continue to integrate owned and leased facilities and may incur additional costs as we seek opportunities for operational efficiencies. Other corporate expenses vary from period to period and are significantly impacted by the timing and nature of these events. Therefore, although we may incur these types of expenses in the future, we believe that eliminating these charges for purposes of calculating the non-GAAP financial measures presented below facilitates a more meaningful evaluation of our current operating performance and comparisons to our past operating performance. |
• | Aggregate Adjustment for Income Taxes — The aggregate adjustment for income taxes is the estimated combined income tax effect for the adjustments described above. During the first six months of Fiscal 2019, this category also includes approximately $154 million of tax benefits resulting from the impact of adopting the new revenue standard in the first quarter of Fiscal 2019. The tax effects are determined based on the tax jurisdictions where the above items were incurred. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
August 3, 2018 | % Change | August 4, 2017 | August 3, 2018 | % Change | August 4, 2017 | ||||||||||||||||
(in millions, except percentages) | |||||||||||||||||||||
Product net revenue | $ | 18,149 | 20 | % | $ | 15,102 | $ | 34,820 | 21 | % | $ | 28,736 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||||||
Impact of purchase accounting | 18 | 50 | 35 | 105 | |||||||||||||||||
Non-GAAP product net revenue | $ | 18,167 | 20 | % | $ | 15,152 | $ | 34,855 | 21 | % | $ | 28,841 | |||||||||
Services net revenue | $ | 4,793 | 8 | % | $ | 4,419 | $ | 9,478 | 8 | % | $ | 8,785 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||||||
Impact of purchase accounting | 162 | 285 | 332 | 585 | |||||||||||||||||
Non-GAAP services net revenue | $ | 4,955 | 5 | % | $ | 4,704 | $ | 9,810 | 5 | % | $ | 9,370 | |||||||||
Net revenue | $ | 22,942 | 18 | % | $ | 19,521 | $ | 44,298 | 18 | % | $ | 37,521 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||||||
Impact of purchase accounting | 180 | 335 | 367 | 690 | |||||||||||||||||
Non-GAAP net revenue | $ | 23,122 | 16 | % | $ | 19,856 | $ | 44,665 | 17 | % | $ | 38,211 | |||||||||
Product gross margin | $ | 3,206 | 38 | % | $ | 2,327 | $ | 6,271 | 52 | % | $ | 4,138 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||||||
Amortization of intangibles | 718 | 920 | 1,428 | 1,870 | |||||||||||||||||
Impact of purchase accounting | 23 | 63 | 46 | 128 | |||||||||||||||||
Transaction-related expenses | 21 | 6 | 137 | 8 | |||||||||||||||||
Other corporate expenses | 2 | 3 | 6 | 6 | |||||||||||||||||
Non-GAAP product gross margin | $ | 3,970 | 20 | % | $ | 3,319 | $ | 7,888 | 28 | % | $ | 6,150 | |||||||||
Services gross margin | $ | 2,917 | 10 | % | $ | 2,641 | $ | 5,730 | 8 | % | $ | 5,287 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||||||
Amortization of intangibles | — | — | 46 | — | |||||||||||||||||
Impact of purchase accounting | 162 | 285 | 332 | 585 | |||||||||||||||||
Transaction-related expenses | — | 4 | — | 9 | |||||||||||||||||
Other corporate expenses | 17 | 10 | 35 | 29 | |||||||||||||||||
Non-GAAP services gross margin | $ | 3,096 | 5 | % | $ | 2,940 | $ | 6,143 | 4 | % | $ | 5,910 | |||||||||
Gross margin | $ | 6,123 | 23 | % | $ | 4,968 | $ | 12,001 | 27 | % | $ | 9,425 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||||||
Amortization of intangibles | 718 | 920 | 1,428 | 1,870 | |||||||||||||||||
Impact of purchase accounting | 185 | 348 | 378 | 713 | |||||||||||||||||
Transaction-related expenses | 21 | 10 | 137 | 17 | |||||||||||||||||
Other corporate expenses | 19 | 13 | 41 | 35 | |||||||||||||||||
Non-GAAP gross margin | $ | 7,066 | 13 | % | $ | 6,259 | $ | 13,985 | 16 | % | $ | 12,060 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
August 3, 2018 | % Change | August 4, 2017 | August 3, 2018 | % Change | August 4, 2017 | ||||||||||||||||
(in millions, except percentages) | |||||||||||||||||||||
Operating expenses | $ | 6,136 | 9 | % | $ | 5,633 | $ | 12,167 | 7 | % | $ | 11,362 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||||||
Amortization of intangibles | (808 | ) | (820 | ) | (1,620 | ) | (1,646 | ) | |||||||||||||
Impact of purchase accounting | (30 | ) | (58 | ) | (59 | ) | (116 | ) | |||||||||||||
Transaction-related expenses | (83 | ) | (128 | ) | (133 | ) | (312 | ) | |||||||||||||
Other corporate expenses | (257 | ) | (234 | ) | (504 | ) | (519 | ) | |||||||||||||
Non-GAAP operating expenses | $ | 4,958 | 13 | % | $ | 4,393 | $ | 9,851 | 12 | % | $ | 8,769 | |||||||||
Operating loss | $ | (13 | ) | 98 | % | $ | (665 | ) | $ | (166 | ) | 91 | % | $ | (1,937 | ) | |||||
Non-GAAP adjustments: | |||||||||||||||||||||
Amortization of intangibles | 1,526 | 1,740 | 3,048 | 3,516 | |||||||||||||||||
Impact of purchase accounting | 215 | 406 | 437 | 829 | |||||||||||||||||
Transaction-related expenses | 104 | 138 | 270 | 329 | |||||||||||||||||
Other corporate expenses | 276 | 247 | 545 | 554 | |||||||||||||||||
Non-GAAP operating income | $ | 2,108 | 13 | % | $ | 1,866 | $ | 4,134 | 26 | % | $ | 3,291 | |||||||||
Net loss | $ | (461 | ) | 38 | % | $ | (739 | ) | $ | (999 | ) | 49 | % | $ | (1,942 | ) | |||||
Non-GAAP adjustments: | |||||||||||||||||||||
Amortization of intangibles | 1,526 | 1,740 | 3,048 | 3,516 | |||||||||||||||||
Impact of purchase accounting | 215 | 406 | 437 | 829 | |||||||||||||||||
Transaction-related expenses | 104 | 138 | 270 | 329 | |||||||||||||||||
Other corporate expenses | 276 | 247 | 545 | 554 | |||||||||||||||||
Aggregate adjustment for income taxes | (311 | ) | (680 | ) | (778 | ) | (1,413 | ) | |||||||||||||
Non-GAAP net income | $ | 1,349 | 21 | % | $ | 1,112 | $ | 2,523 | 35 | % | $ | 1,873 |
Three Months Ended | Six Months Ended | ||||||||||||||||||||
August 3, 2018 | % Change | August 4, 2017 | August 3, 2018 | % Change | August 4, 2017 | ||||||||||||||||
(in millions, except percentages) | |||||||||||||||||||||
Net loss | $ | (461 | ) | 38 | % | $ | (739 | ) | $ | (999 | ) | 49 | % | $ | (1,942 | ) | |||||
Adjustments: | |||||||||||||||||||||
Interest and other, net (a) | 455 | 545 | 925 | 1,117 | |||||||||||||||||
Income tax benefit | (7 | ) | (471 | ) | (92 | ) | (1,112 | ) | |||||||||||||
Depreciation and amortization | 1,931 | 2,142 | 3,845 | 4,354 | |||||||||||||||||
EBITDA | $ | 1,918 | 30 | % | $ | 1,477 | $ | 3,679 | 52 | % | $ | 2,417 | |||||||||
EBITDA | $ | 1,918 | 30 | % | $ | 1,477 | $ | 3,679 | 52 | % | $ | 2,417 | |||||||||
Adjustments: | |||||||||||||||||||||
Stock-based compensation expense | 216 | 208 | 415 | 409 | |||||||||||||||||
Impact of purchase accounting (b) | 145 | 335 | 367 | 692 | |||||||||||||||||
Transaction-related expenses (c) | 85 | 138 | 251 | 329 | |||||||||||||||||
Other corporate expenses (d) | 95 | 22 | 130 | 128 | |||||||||||||||||
Adjusted EBITDA | $ | 2,459 | 13 | % | $ | 2,180 | $ | 4,842 | 22 | % | $ | 3,975 |
(a) | See "Results of Operations — Interest and Other, Net" for more information on the components of interest and other, net. |
(b) | This amount includes the non-cash purchase accounting adjustments related to the EMC merger transaction and the going-private transaction. |
(c) | Transaction-related expenses consist of acquisition, integration, and divestiture related costs. |
(d) | Consists of severance and facility action costs. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||
August 3, 2018 | August 4, 2017 | August 3, 2018 | August 4, 2017 | ||||||||||||||||||||||||||||||
Dollars | % of Net Revenue | % Change | Dollars | % of Net Revenue | Dollars | % of Net Revenue | % Change | Dollars | % of Net Revenue | ||||||||||||||||||||||||
(in millions, except percentages) | |||||||||||||||||||||||||||||||||
Net revenue: | |||||||||||||||||||||||||||||||||
Product | $ | 18,149 | 79.1 | % | 20 | % | $ | 15,102 | 77.4 | % | $ | 34,820 | 78.6 | % | 21 | % | $ | 28,736 | 76.6 | % | |||||||||||||
Services | 4,793 | 20.9 | % | 8 | % | 4,419 | 22.6 | % | 9,478 | 21.4 | % | 8 | % | 8,785 | 23.4 | % | |||||||||||||||||
Total net revenue | $ | 22,942 | 100.0 | % | 18 | % | $ | 19,521 | 100.0 | % | $ | 44,298 | 100.0 | % | 18 | % | $ | 37,521 | 100.0 | % | |||||||||||||
Gross margin: | |||||||||||||||||||||||||||||||||
Product (a) | $ | 3,206 | 17.7 | % | 38 | % | $ | 2,327 | 15.4 | % | $ | 6,271 | 18.0 | % | 52 | % | $ | 4,138 | 14.4 | % | |||||||||||||
Services (b) | 2,917 | 60.9 | % | 10 | % | 2,641 | 59.8 | % | 5,730 | 60.5 | % | 8 | % | 5,287 | 60.2 | % | |||||||||||||||||
Total gross margin | $ | 6,123 | 26.7 | % | 23 | % | $ | 4,968 | 25.4 | % | $ | 12,001 | 27.1 | % | 27 | % | $ | 9,425 | 25.1 | % | |||||||||||||
Operating expenses | $ | 6,136 | 26.8 | % | 9 | % | $ | 5,633 | 28.8 | % | $ | 12,167 | 27.5 | % | 7 | % | $ | 11,362 | 30.3 | % | |||||||||||||
Operating loss | $ | (13 | ) | (0.1 | )% | 98 | % | $ | (665 | ) | (3.4 | )% | $ | (166 | ) | (0.4 | )% | 91 | % | $ | (1,937 | ) | (5.2 | )% | |||||||||
Net loss | $ | (461 | ) | (2.0 | )% | 38 | % | $ | (739 | ) | (3.8 | )% | $ | (999 | ) | (2.3 | )% | 49 | % | $ | (1,942 | ) | (5.2 | )% | |||||||||
Net loss attributable to Dell Technologies Inc. | $ | (499 | ) | (2.2 | )% | 32 | % | $ | (732 | ) | (3.7 | )% | $ | (1,135 | ) | (2.6 | )% | 40 | % | $ | (1,903 | ) | (5.1 | )% | |||||||||
Non-GAAP Financial Information | |||||||||||||||||||||||||||||||||
Non-GAAP net revenue: | |||||||||||||||||||||||||||||||||
Product | $ | 18,167 | 78.6 | % | 20 | % | $ | 15,152 | 76.3 | % | $ | 34,855 | 78.0 | % | 21 | % | $ | 28,841 | 75.5 | % | |||||||||||||
Services | 4,955 | 21.4 | % | 5 | % | 4,704 | 23.7 | % | 9,810 | 22.0 | % | 5 | % | 9,370 | 24.5 | % | |||||||||||||||||
Total non-GAAP net revenue | $ | 23,122 | 100.0 | % | 16 | % | $ | 19,856 | 100.0 | % | $ | 44,665 | 100.0 | % | 17 | % | $ | 38,211 | 100.0 | % | |||||||||||||
Non-GAAP gross margin: | |||||||||||||||||||||||||||||||||
Product (a) | $ | 3,970 | 21.9 | % | 20 | % | $ | 3,319 | 21.9 | % | $ | 7,888 | 22.6 | % | 28 | % | $ | 6,150 | 21.3 | % | |||||||||||||
Services (b) | 3,096 | 62.5 | % | 5 | % | 2,940 | 62.5 | % | 6,097 | 62.2 | % | 3 | % | 5,910 | 63.1 | % | |||||||||||||||||
Total non-GAAP gross margin | $ | 7,066 | 30.6 | % | 13 | % | $ | 6,259 | 31.5 | % | $ | 13,985 | 31.3 | % | 16 | % | $ | 12,060 | 31.6 | % | |||||||||||||
Non-GAAP operating expenses | $ | 4,958 | 21.4 | % | 13 | % | $ | 4,393 | 22.1 | % | $ | 9,851 | 22.1 | % | 12 | % | $ | 8,769 | 22.9 | % | |||||||||||||
Non-GAAP operating income | $ | 2,108 | 9.1 | % | 13 | % | $ | 1,866 | 9.4 | % | $ | 4,134 | 9.3 | % | 26 | % | $ | 3,291 | 8.6 | % | |||||||||||||
Non-GAAP net income | $ | 1,349 | 5.8 | % | 21 | % | $ | 1,112 | 5.6 | % | $ | 2,523 | 5.6 | % | 35 | % | $ | 1,873 | 4.9 | % | |||||||||||||
EBITDA | $ | 1,918 | 8.3 | % | 30 | % | $ | 1,477 | 7.4 | % | $ | 3,679 | 8.2 | % | 52 | % | $ | 2,417 | 6.3 | % | |||||||||||||
Adjusted EBITDA | $ | 2,459 | 10.6 | % | 13 | % | $ | 2,180 | 11.0 | % | $ | 4,842 | 10.8 | % | 22 | % | $ | 3,975 | 10.4 | % |
(a) | Product gross margin percentages represent product gross margin as a percentage of product net revenue, and non-GAAP product gross margin percentages represent non-GAAP product gross margin as a percentage of non-GAAP product net revenue. |
(b) | Services gross margin percentages represent services gross margin as a percentage of services net revenue, and non-GAAP services gross margin percentages represent non-GAAP services gross margin as a percentage of non-GAAP services net revenue. |
• | Product Net Revenue — Product net revenue includes revenue from the sale of hardware products and software licenses. During the second quarter of Fiscal 2019, product net revenue and non-GAAP product net revenue both increased 20%, and during the first six months of Fiscal 2019, product net revenue and non-GAAP product net revenue both increased 21%. These increases were attributable to an increase in product revenue for ISG, CSG, and VMware, driven by strength in sales across all product categories. |
• | Services Net Revenue — Services net revenue includes revenue from our services offerings and support services related to hardware products and software licenses. During the second quarter of Fiscal 2019, services net revenue and non-GAAP services net revenue increased 8% and 5%, respectively. During the first six months of Fiscal 2019, services net revenue |
• | Products — During the second quarter of Fiscal 2019, product gross margin increased 38% to $3.2 billion, and product gross margin percentage increased 230 basis points to 17.7%. During the second quarter of Fiscal 2019, non-GAAP product gross margin increased 20% to $4.0 billion, and non-GAAP product gross margin percentage remained constant at 21.9%. These increases in product gross margin and non-GAAP product gross margin were driven primarily by increases in product revenue in all three business units due to strength in sales of ISG servers and storage, CSG commercial products, and VMware software licenses. Product gross margin also benefited from a decrease in the impact of amortization of intangibles and purchase accounting adjustments. Product gross margin percentage increased primarily as a result of a decrease in the impact of amortization of intangibles and purchase accounting adjustments. Non-GAAP product gross margin percentage remained unchanged, due to increases in product gross margin percentages for ISG and VMware that were offset by a decrease in product gross margin percentage for CSG. |
• | Services — During the second quarter of Fiscal 2019, services gross margin increased 10% to $2.9 billion, and services gross margin percentage increased 110 basis points to 60.9%. Services gross margin and gross margin percentage increased due to growth in services gross margin across all business units, particularly in VMware services and ISG support and deployment. Services gross margin also benefited from a decrease in purchase accounting adjustments, which totaled $0.2 billion and $0.3 billion, respectively, during the second quarter of Fiscal 2019 and Fiscal 2018. Excluding |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||
August 3, 2018 | August 4, 2017 | August 3, 2018 | August 4, 2017 | ||||||||||||||||||||||||||||||
Dollars | % of Net Revenue | % Change | Dollars | % of Net Revenue | Dollars | % of Net Revenue | % Change | Dollars | % of Net Revenue | ||||||||||||||||||||||||
(in millions, except percentages) | |||||||||||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||
Selling, general, and administrative | $ | 4,961 | 21.7 | % | 9 | % | $ | 4,540 | 23.2 | % | $ | 9,905 | 22.4 | % | 8 | % | $ | 9,136 | 24.4 | % | |||||||||||||
Research and development | 1,175 | 5.1 | % | 8 | % | 1,093 | 5.6 | % | 2,262 | 5.1 | % | 2 | % | 2,226 | 5.9 | % | |||||||||||||||||
Total operating expenses | $ | 6,136 | 26.8 | % | 9 | % | $ | 5,633 | 28.8 | % | $ | 12,167 | 27.5 | % | 7 | % | $ | 11,362 | 30.3 | % | |||||||||||||
Other Financial Information | |||||||||||||||||||||||||||||||||
Non-GAAP operating expenses | $ | 4,958 | 21.4 | % | 13 | % | $ | 4,393 | 22.1 | % | $ | 9,851 | 22.1 | % | 12 | % | $ | 8,769 | 22.9 | % |
• | Selling, General, and Administrative — Selling, general, and administrative ("SG&A") expenses increased 9% and 8%, respectively, during the second quarter and first six months of Fiscal 2019. The increases in SG&A expenses were primarily driven by investments in our go-to-market capabilities and higher performance-driven commission costs. |
• | Research and Development — Research and development ("R&D") expenses are primarily composed of personnel-related expenses related to product development. R&D expenses as a percentage of net revenue for the second quarter of Fiscal 2019 and Fiscal 2018 were approximately 5.1% and 5.6%, respectively. In comparison, R&D expenses as a percentage of net revenue for the first six months of Fiscal 2019 and Fiscal 2018 were approximately 5.1% and 5.9%, respectively. The decreases in R&D expenses as a percentage of net revenue was attributable to revenue growth that outpaced the scale of R&D investments. As our industry continues to change and as the needs of our customers evolve, we intend to support R&D initiatives to innovate and introduce new and enhanced solutions into the market. |
Three Months Ended | Six Months Ended | ||||||||||||||
August 3, 2018 | August 4, 2017 | August 3, 2018 | August 4, 2017 | ||||||||||||
(in millions) | |||||||||||||||
Interest and other, net: | |||||||||||||||
Investment income, primarily interest | $ | 85 | $ | 47 | $ | 163 | $ | 85 | |||||||
Gain (loss) on investments, net | 139 | 26 | 246 | 25 | |||||||||||
Interest expense | (622 | ) | (598 | ) | (1,218 | ) | (1,195 | ) | |||||||
Foreign exchange | (34 | ) | (15 | ) | (111 | ) | (42 | ) | |||||||
Other | (23 | ) | (5 | ) | (5 | ) | 10 | ||||||||
Total interest and other, net | $ | (455 | ) | $ | (545 | ) | $ | (925 | ) | $ | (1,117 | ) |
Three Months Ended | Six Months Ended | ||||||||||||||||||
August 3, 2018 | % Change | August 4, 2017 | August 3, 2018 | % Change | August 4, 2017 | ||||||||||||||
(in millions, except percentages) | |||||||||||||||||||
Net Revenue: | |||||||||||||||||||
Servers and networking | $ | 5,061 | 34% | $ | 3,777 | $ | 9,646 | 37% | $ | 7,033 | |||||||||
Storage | 4,166 | 13% | 3,690 | 8,248 | 12% | 7,395 | |||||||||||||
Total ISG net revenue | $ | 9,227 | 24% | $ | 7,467 | $ | 17,894 | 24% | $ | 14,428 | |||||||||
Operating Income: | |||||||||||||||||||
ISG operating income | $ | 1,012 | 56% | $ | 647 | $ | 1,951 | 69% | $ | 1,153 | |||||||||
% of segment net revenue | 11.0 | % | 8.7 | % | 10.9 | % | 8.0 | % |
Three Months Ended | Six Months Ended | ||||||||||||||||||
August 3, 2018 | % Change | August 4, 2017 | August 3, 2018 | % Change | August 4, 2017 | ||||||||||||||
(in millions, except percentages) | |||||||||||||||||||
Net Revenue: | |||||||||||||||||||
Commercial | $ | 8,109 | 13% | $ | 7,207 | $ | 15,472 | 14% | $ | 13,549 | |||||||||
Consumer | 3,019 | 14% | 2,659 | 5,927 | 10% | 5,365 | |||||||||||||
Total CSG net revenue | $ | 11,128 | 13% | $ | 9,866 | $ | 21,399 | 13% | $ | 18,914 | |||||||||
Operating Income: | |||||||||||||||||||
CSG operating income | $ | 425 | (20)% | $ | 528 | $ | 958 | 12% | $ | 853 | |||||||||
% of segment net revenue | 3.8 | % | 5.4 | % | 4.5 | % | 4.5 | % |
Three Months Ended | Six Months Ended | ||||||||||||||||||
August 3, 2018 | % Change | August 4, 2017 | August 3, 2018 | % Change | August 4, 2017 | ||||||||||||||
(in millions, except percentages) | |||||||||||||||||||
Net Revenue: | |||||||||||||||||||
VMware net revenue | $ | 2,194 | 11% | $ | 1,984 | $ | 4,222 | 11% | $ | 3,802 | |||||||||
Operating Income: | |||||||||||||||||||
VMware operating income | $ | 736 | 1% | $ | 728 | $ | 1,349 | 1% | $ | 1,339 | |||||||||
% of segment net revenue | 33.5 | % | 36.7 | % | 32.0 | % | 35.2 | % |
August 3, 2018 | February 2, 2018 | ||||||
(in millions) | |||||||
Cash and cash equivalents, and available borrowings: | |||||||
Cash and cash equivalents (a) | $ | 15,312 | $ | 13,942 | |||
Remaining available borrowings under revolving credit facilities | 4,914 | 4,875 | |||||
Total cash, cash equivalents, and available borrowings | $ | 20,226 | $ | 18,817 |
August 3, 2018 | February 2, 2018 | ||||||
(in millions) | |||||||
Restricted Subsidiary Debt | |||||||
Core debt: | |||||||
Senior Secured Credit Facilities and First Lien Notes | $ | 30,459 | $ | 30,595 | |||
Unsecured Notes and Debentures | 1,952 | 2,452 | |||||
Senior Notes | 3,250 | 3,250 | |||||
EMC Notes | 3,000 | 5,500 | |||||
DFS allocated debt | (1,563 | ) | (1,892 | ) | |||
Total core debt | 37,098 | 39,905 | |||||
DFS related debt: | |||||||
DFS debt | 5,586 | 4,796 | |||||
DFS allocated debt | 1,563 | 1,892 | |||||
Total DFS related debt | 7,149 | 6,688 | |||||
Other | 2,057 | 2,054 | |||||
Unrestricted Subsidiary Debt | |||||||
VMware Notes | 4,000 | 4,000 | |||||
Other | — | 47 | |||||
Total unrestricted subsidiary debt | 4,000 | 4,047 | |||||
Total debt, principal amount | 50,304 | 52,694 | |||||
Carrying value adjustments | (784 | ) | (823 | ) | |||
Total debt, carrying value | $ | 49,520 | $ | 51,871 |
Six Months Ended | |||||||
August 3, 2018 | August 4, 2017 | ||||||
(in millions) | |||||||
Net change in cash from: | |||||||
Operating activities | $ | 3,792 | $ | 2,105 | |||
Investing activities | (162 | ) | (1,290 | ) | |||
Financing activities | (1,987 | ) | (1,077 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (216 | ) | 48 | ||||
Change in cash and cash equivalents | $ | 1,427 | $ | (214 | ) |
Exhibit Number | Description | |
101 .INS†† | XBRL Instance Document. | |
101 .SCH†† | XBRL Taxonomy Extension Schema Document. | |
101 .CAL†† | XBRL Taxonomy Extension Calculation Linkbase Document. | |
101 .DEF†† | XBRL Taxonomy Extension Definition Linkbase Document. | |
101 .LAB†† | XBRL Taxonomy Extension Label Linkbase Document. | |
101 .PRE†† | XBRL Taxonomy Extension Presentation Linkbase Document. |
†† | Filed with this report. | |
††† | Furnished with this report. |
DELL TECHNOLOGIES INC. | ||
By: | /s/ MAYA MCREYNOLDS | |
Maya McReynolds | ||
Senior Vice President, Corporate Finance and | ||
Chief Accounting Officer | ||
(On behalf of registrant and as principal accounting officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Dell Technologies Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
September 11, 2018 | /s/ MICHAEL S. DELL | |
Michael S. Dell | ||
Chairman and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Dell Technologies Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
September 11, 2018 | /s/ THOMAS W. SWEET | |
Thomas W. Sweet | ||
Executive Vice President and Chief Financial Officer |
September 11, 2018 | /s/ MICHAEL S. DELL | |
Michael S. Dell | ||
Chairman and Chief Executive Officer |
September 11, 2018 | /s/ THOMAS W. SWEET | |
Thomas W. Sweet | ||
Executive Vice President and Chief Financial Officer |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
August 3, 2018 | August 3, 2018 | ||||||||||||||||||||||
VMware Reportable Segment | Adjustments and Eliminations (a) | VMware | VMware Reportable Segment | Adjustments and Eliminations (a) | VMware | ||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Net revenue | $ | 2,194 | $ | (20 | ) | $ | 2,174 | $ | 4,222 | $ | (39 | ) | $ | 4,183 | |||||||||
Cost of net revenue | 267 | 38 | 305 | 519 | 82 | 601 | |||||||||||||||||
Gross margin | 1,927 | (58 | ) | 1,869 | 3,703 | (121 | ) | 3,582 | |||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Selling, general, and administrative | 800 | 79 | 879 | 1,592 | 165 | 1,757 | |||||||||||||||||
Research and development | 391 | 90 | 481 | 762 | 172 | 934 | |||||||||||||||||
Total operating expenses | 1,191 | 169 | 1,360 | 2,354 | 337 | 2,691 | |||||||||||||||||
Operating income (loss) | $ | 736 | $ | (227 | ) | $ | 509 | $ | 1,349 | $ | (458 | ) | $ | 891 | |||||||||
Interest and other income (expense), net attributable to VMware | 263 | 1,056 | |||||||||||||||||||||
Income before income taxes attributable to VMware | 772 | 1,947 | |||||||||||||||||||||
Income tax provision attributable to VMware | 128 | 361 | |||||||||||||||||||||
Net income attributable to VMware | $ | 644 | $ | 1,586 |
(a) | Adjustments and eliminations primarily consist of intercompany sales and allocated expenses, as well as expenses that are excluded from the VMware reportable segment, such as amortization of intangible assets, stock-based compensation expense, severance, and integration and acquisition-related costs. |
Three Months Ended | Six Months Ended | ||||||
August 3, 2018 | August 3, 2018 | ||||||
(in millions) | |||||||
Net income attributable to VMware | $ | 644 | $ | 1,586 | |||
Less: Net income attributable to non-controlling interests | (121 | ) | (294 | ) | |||
Net income attributable to Class V Group | 523 | 1,292 | |||||
Less: DHI Group's 38.90% weighted average retained interest in Class V Group | (203 | ) | (503 | ) | |||
Class V Common Stock economic interest in Class V Group | $ | 320 | $ | 789 |
VMware | ||||
August 3, 2018 | ||||
(in millions) | ||||
VMware balance sheet information | ||||
Total assets (1)(2) | $ | 23,409 | ||
Total liabilities (1)(2) | 13,017 | |||
VMware total net assets | $ | 10,392 | ||
Class V Group | ||||
August 3, 2018 | ||||
(in millions) | ||||
VMware total net assets | $ | 10,392 | ||
Less: Net assets attributable to non-controlling interests (3) | (1,968 | ) | ||
Net assets attributable to Class V Group | 8,424 | |||
Less: DHI Group's 38.90% retained interest in Class V Group | (3,277 | ) | ||
Class V Common Stock economic interest in Class V Group | $ | 5,147 | ||
Inter-group assets (4) | $ | — | ||
Inter-group liabilities (4) | $ | — |
(1) | Represents VMware's unadjusted assets and liabilities as of August 3, 2018 as consolidated into the Company's Consolidated Statements of Financial Position. |
(2) | As determined by Dell Technologies' board of directors, the Company has not allocated any assets or liabilities between the DHI Group and the Class V Group. |
(3) | Reflects the impact of non-controlling interests on net assets attributable to the Company, which had an ownership interest of approximately 81.1% of VMware’s outstanding shares of common stock as of August 3, 2018. |
(4) | Represents inter-group assets/liabilities between the Class V Group and the DHI Group in accordance with the Tracking Stock Policy. The Tracking Stock Policy states that any ordinary course commercial inter-group transactions are intended, to the extent practicable, to be on terms consistent with terms that would be applicable to arm's-length dealings with unrelated third parties. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
August 4, 2017 | August 4, 2017 | ||||||||||||||||||||||
VMware Reportable Segment | Adjustments and Eliminations (a) | VMware | VMware Reportable Segment | Adjustments and Eliminations (a) | VMware | ||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Net revenue | $ | 1,984 | $ | (52 | ) | $ | 1,932 | $ | 3,802 | $ | (104 | ) | $ | 3,698 | |||||||||
Cost of net revenue | 246 | 24 | 270 | 484 | 75 | 559 | |||||||||||||||||
Gross margin | 1,738 | (76 | ) | 1,662 | 3,318 | (179 | ) | 3,139 | |||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Selling, general, and administrative | 673 | 136 | 809 | 1,304 | 301 | 1,605 | |||||||||||||||||
Research and development | 337 | 91 | 428 | 675 | 174 | 849 | |||||||||||||||||
Total operating expenses | 1,010 | 227 | 1,237 | 1,979 | 475 | 2,454 | |||||||||||||||||
Operating income (loss) | $ | 728 | $ | (303 | ) | $ | 425 | $ | 1,339 | $ | (654 | ) | $ | 685 | |||||||||
Interest and other income (expense), net attributable to VMware | 69 | 89 | |||||||||||||||||||||
Income before income taxes attributable to VMware | 494 | 774 | |||||||||||||||||||||
Income tax provision attributable to VMware | 88 | 124 | |||||||||||||||||||||
Net income attributable to VMware | $ | 406 | $ | 650 |
(a) | Adjustments and eliminations primarily consist of intercompany sales and allocated expenses, as well as expenses that are excluded from the VMware reportable segment, such as amortization of intangible assets, stock-based compensation expense, severance, and integration and acquisition-related costs. |
Three Months Ended | Six Months Ended | ||||||
August 4, 2017 | August 4, 2017 | ||||||
(in millions) | |||||||
Net income attributable to VMware | $ | 406 | $ | 650 | |||
Less: Net income attributable to non-controlling interests | (75 | ) | (118 | ) | |||
Net income attributable to Class V Group | 331 | 532 | |||||
Less: DHI Group's 38.36% weighted average retained interest in Class V Group | (127 | ) | (204 | ) | |||
Class V Common Stock economic interest in Class V Group | $ | 204 | $ | 328 |
VMware | ||||
February 2, 2018 | ||||
(in millions) | ||||
VMware balance sheet information | ||||
Total assets (1)(2) | $ | 21,206 | ||
Total liabilities (1)(2) | 12,582 | |||
VMware total net assets | $ | 8,624 | ||
Class V Group | ||||
February 2, 2018 | ||||
(in millions) | ||||
VMware total net assets | $ | 8,624 | ||
Less: Net assets attributable to non-controlling interests (3) | (1,561 | ) | ||
Net assets attributable to Class V Group | 7,063 | |||
Less: DHI Group's 38.90% retained interest in Class V Group | (2,748 | ) | ||
Class V Common Stock economic interest in Class V Group | $ | 4,315 | ||
Inter-group assets (4) | $ | — | ||
Inter-group liabilities (4) | $ | — |
(1) | Represents VMware's unadjusted assets and liabilities as of February 2, 2018 as consolidated into the Company's Consolidated Statements of Financial Position. |
(2) | As determined by Dell Technologies' board of directors, the Company has not allocated any assets or liabilities between the DHI Group and the Class V Group. |
(3) | Reflects the impact of non-controlling interests on net assets attributable to the Company, which had an ownership interest of approximately 81.9% of VMware’s outstanding shares of common stock as of February 2, 2018. |
(4) | Represents inter-group assets/liabilities between the Class V Group and the DHI Group in accordance with the Tracking Stock Policy. The Tracking Stock Policy states that any ordinary course commercial inter-group transactions are intended, to the extent practicable, to be on terms consistent with terms that would be applicable to arm's-length dealings with unrelated third parties. |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Aug. 03, 2018 |
Sep. 05, 2018 |
|
Entity Information [Line Items] | ||
Entity Registrant Name | Dell Technologies Inc. | |
Entity Central Index Key | 0001571996 | |
Current Fiscal Year End Date | --02-01 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Aug. 03, 2018 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding - Class V | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 199,356,591 | |
Entity Common Stock, Shares Outstanding - Class A | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 409,538,423 | |
Entity Common Stock, Shares Outstanding - Class B | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 136,986,858 | |
Entity Common Stock, Shares Outstanding - Class C | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 22,182,729 |
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Parenthetical) - $ / shares |
Aug. 03, 2018 |
Feb. 02, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - Parenthetical - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Aug. 03, 2018 |
Aug. 04, 2017 |
Aug. 03, 2018 |
Aug. 04, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||||
Tax expense (benefit) | $ 5 | $ 0 | $ 7 | $ 15 |
BASIS OF PRESENTATION |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION | BASIS OF PRESENTATION References in these Notes to the Condensed Consolidated Financial Statements to the "Company" or "Dell Technologies" mean Dell Technologies Inc. individually and together with its consolidated subsidiaries. Basis of Presentation — The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes included in the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2018, and the recast audited Consolidated Financial Statements and accompanying Notes for the fiscal years ended February 2, 2018 and February 3, 2017 (the "Recast Financial Statements") and other financial information included in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission (the "SEC") on August 6, 2018. The Recast Financial Statements were recast from and supersede the audited Consolidated Financial Statements for the fiscal years ended February 2, 2018 and February 3, 2017 included in the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2018. Such audited Consolidated Financial Statements were recast to present certain previously reported financial statements and other related financial information on a basis consistent with the new accounting standards adopted during the three months ended May 4, 2018. Further, segment information was recast to conform with certain segment reporting changes the Company made during the three months ended May 4, 2018. See below for additional information regarding recently adopted accounting pronouncements. These Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of Dell Technologies Inc. as of August 3, 2018, the results of its operations and corresponding comprehensive income (loss) for the three and six months ended August 3, 2018 and August 4, 2017, and its cash flows for the six months ended August 3, 2018 and August 4, 2017. The February 2, 2018 condensed consolidated balance sheet included herein was derived from the Recast Financial Statements. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and the accompanying Notes. Actual results could differ materially from those estimates. The results of operations and comprehensive income (loss) for the three and six months ended August 3, 2018 and August 4, 2017 and the cash flows for the six months ended August 3, 2018 and August 4, 2017 are not necessarily indicative of the results to be expected for the full fiscal year or for any other fiscal period. The Company's fiscal year is the 52- or 53-week period ending on the Friday nearest January 31. The fiscal year ended February 2, 2018 ("Fiscal 2018") was a 52-week period, and the fiscal year ending February 1, 2019 ("Fiscal 2019") will be a 52-week period. Principles of Consolidation — These Condensed Consolidated Financial Statements include the accounts of Dell Technologies and its wholly-owned subsidiaries, as well as the accounts of SecureWorks Corp. ("SecureWorks"), VMware, Inc., and Pivotal Software, Inc. ("Pivotal"), each of which is majority-owned by Dell Technologies. All intercompany transactions have been eliminated. Unless the context indicates otherwise, references in these Notes to the Condensed Consolidated Financial Statements to "VMware" mean the VMware reportable segment, which reflects the operations of VMware, Inc. (NYSE: VMW) within Dell Technologies. See Exhibit 99.1 filed with the quarterly report on Form 10-Q for the quarterly period ended August 3, 2018 for information on the differences between VMware reportable segment results and VMware, Inc. results. EMC Merger Transaction — On September 7, 2016, the Company completed its acquisition by merger of EMC Corporation ("EMC"), referred to as the EMC merger transaction. The consolidated results of EMC are included in Dell Technologies' consolidated results presented in these financial statements. Pivotal Initial Public Offering — On April 24, 2018, Pivotal completed a registered underwritten initial public offering ("IPO") of its Class A common stock. The results of Pivotal's operations are included in other businesses. For more information regarding the Company's ownership of Pivotal, see Note 14 of the Notes to the Condensed Consolidated Financial Statements. Recently Issued Accounting Pronouncements Leases — In February 2016, the Financial Accounting Standards Board ("FASB") issued amended guidance on the accounting for leasing transactions. The primary objective of this update is to increase transparency and comparability among organizations by requiring lessees to recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. The guidance also makes some changes to lessor accounting and requires additional disclosures about all leasing arrangements. Companies are required to use a modified retrospective approach, with the option of applying the requirements of the standard either (1) retrospectively to each prior comparative reporting period presented, or (2) retrospectively at the beginning of the period of adoption. The Company will adopt this standard for the fiscal year beginning February 2, 2019, and will apply it at the beginning of the period of adoption through a cumulative-effect adjustment to retained earnings. In the area of lessee accounting, the Company anticipates that the most significant change will be recognition of right-of-use assets and lease liabilities on the Consolidated Statements of Financial Position. In the area of lessor accounting, the Company anticipates that the most significant change will be an increase to future originations of operating leases due to elimination of the third-party residual value guarantee insurance in the sales-type lease test. Measurement of Credit Losses on Financial Instruments — In June 2016, the FASB issued amended guidance which replaces the current incurred loss impairment methodology for measurement of credit losses on financial instruments with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Public entities must adopt the new guidance for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for fiscal periods beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on the Consolidated Financial Statements. Simplifying the Test for Goodwill Impairment — In January 2017, the FASB issued amended guidance to simplify the subsequent measurement of goodwill by removing Step 2 of the goodwill impairment test. Instead, under the amendments in the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. Public entities must adopt the new guidance in fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of the new guidance but does not expect that the standard will have an impact on its Consolidated Financial Statements. Recently Adopted Accounting Pronouncements Revenue from Contracts with Customers — In May 2014, the FASB issued amended guidance on the recognition of revenue from contracts with customers. The objective of the new standard is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede substantially all of the existing revenue recognition guidance, including industry-specific guidance. The new standard requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further, the new standard requires additional disclosures to help enable users of the financial statements to better understand the nature, amount, timing, risks, and judgments related to revenue recognition and related cash flows from contracts with customers. Concurrently, the FASB issued guidance on the accounting for costs to fulfill or obtain a customer contract. The Company adopted these standards during the three months ended May 4, 2018 using the full retrospective method, which requires the Company to recast each prior period presented consistent with the new guidance. The Company recorded a credit of approximately $1 billion to retained earnings as of January 29, 2016 to reflect the cumulative effect of the adoption. See tables provided below which present the impact of the new accounting standards to the Company's previously reported financial results. See also Note 2 of the Notes to the Condensed Consolidated Financial Statements for a summary of significant policies related to the new accounting standards. Recognition and Measurement of Financial Assets and Financial Liabilities — In January 2016, the FASB issued amended guidance that generally requires changes in the fair value of equity investments, other than those accounted for under the equity method, to be recognized through net income, rather than other comprehensive income. For equity investments without readily determinable fair values, the Company is no longer permitted to use the cost method of accounting. The Company has elected to apply the measurement alternative for those investments. Under the alternative, the Company measures investments without readily determinable fair values at cost, less impairment, adjusted by observable price changes on a prospective basis. The Company must make a separate election to use the alternative for each eligible investment, and is required to reassess at each reporting period whether an investment qualifies for the alternative. The Company adopted this standard during the three months ended May 4, 2018. Adoption of the standard was applied through a cumulative one-time adjustment to accumulated deficit of $56 million for the accumulated unrealized gain previously recorded in other comprehensive income. The impact of the standard on the Condensed Consolidated Statements of Income (Loss) during the three and six months ended August 3, 2018 was a gain of approximately $123 million and $223 million, respectively, recognized in interest and other, net, and the impact in future periods will depend on the relative changes in market price of the equity investments. Classification of Certain Cash Receipts and Cash Payments — In August 2016, the FASB issued amended guidance on the presentation and classification of eight specific cash flow issues with the objective of reducing existing diversity in practice. Companies should reflect any adjustments on a retrospective basis, if practicable; otherwise, adoption is required to be applied as of the earliest date practicable. The Company adopted this standard during the three months ended May 4, 2018. Prior period amounts on the Condensed Consolidated Statements of Cash Flows have been recast to conform with current period presentation as shown in the reconciliation provided below. Intra-Entity Transfers of Assets Other Than Inventory — In October 2016, the FASB issued amended guidance on the accounting for income taxes. The new guidance requires companies to recognize the income tax effects of intra-entity asset transfers, other than transfers of inventory, when the transfer occurs instead of when the asset is sold to a third party. The new guidance was applied on a modified-retrospective basis with the cumulative-effect adjustment to accumulated deficit as of the beginning of the period of adoption. The Company early adopted this guidance during the three months ended May 5, 2017. At adoption, approximately $84 million was reclassified from other non-current liabilities to accumulated deficit, resulting in a net credit to accumulated deficit. Statement of Cash Flows, Restricted Cash — In November 2016, the FASB issued amended guidance requiring entities to include restricted cash and restricted cash equivalents in cash balances on the cash flow statement, and also to provide a supplemental reconciliation of cash, cash equivalents and restricted cash. Public entities must adopt the new guidance for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard during the three months ended May 4, 2018. See Note 19 of the Notes to the Condensed Consolidated Financial Statements for supplemental cash flow information. Prior period amounts on the Condensed Consolidated Statements of Cash Flows have been recast to conform with current period presentation as shown in the reconciliation provided below. Clarifying the Definition of a Business — In January 2017, the FASB issued amended guidance to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Public entities must adopt the new guidance for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The new guidance did not have a material impact on the Company's conclusions regarding transactions that were assessed in the current period. Derivatives and Hedging — In August 2017, the FASB issued amended guidance that will make more financial and non-financial hedging strategies eligible for hedge accounting. The amended guidance changes how companies assess effectiveness, and also amends the presentation and disclosure requirements. The guidance is intended to simplify the application of hedge accounting and increase transparency as to the scope and results of hedging programs. Immediate early adoption is permitted in any interim or annual period. The Company elected to early adopt this standard during the three months ended May 4, 2018. The impact of the adoption of the standard was immaterial to the Condensed Consolidated Financial Statements. Income Statement - Reporting Comprehensive Income — In February 2018, the FASB issued guidance that will permit entities to reclassify the tax effects stranded in accumulated other comprehensive income to accumulated deficit as a result of U.S. Tax Reform, discussed in Note 12 of the Notes to the Condensed Consolidated Financial Statements. The guidance gives entities the option to reclassify these amounts, but requires new disclosures regardless of whether they elect to do so. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company elected to early adopt this standard during the three months ended May 4, 2018, and recorded the impact of the adoption as a cumulative adjustment to accumulated deficit. The impact of the adoption was immaterial to the Condensed Consolidated Financial Statements. Impacts to Previously Reported Periods The following tables present the impact of the new accounting standards to the Company's previously reported financial results. Selected Captions from the Condensed Consolidated Statement of Financial Position
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The above impacts are summarized as follows: Accounts receivable, net. The adoption of the new revenue standard resulted in an increase to accounts receivable, net primarily due to the following two factors:
Other assets. The adoption of the new revenue standard resulted in an increase in other assets due to capitalization of the costs to obtain a contract, as well as the accounts receivable, net of impacts discussed above. Deferred revenue. The adoption of the new revenue standard resulted in a decline in deferred revenue due to earlier recognition of revenue for software licenses, and less of the aggregate transaction price being allocated to extended warranty. Deferred revenue was also reduced by the impact of variable consideration (i.e., price concessions, rebates, and refunds). The reduction in deferred revenue was partially offset by an increase resulting from the change in presentation of deferred costs on third-party software offerings, which are reported in other assets, and are either sold on a standalone basis or as an attached component of the Company's hardware offering. The Company previously reported the associated deferred revenue net of these deferred costs in deferred revenue. Condensed Consolidated Statement of Income (Loss)
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The above impacts are summarized as follows: Net revenue. The adoption of the new revenue standard resulted in an increase to net revenue due to earlier revenue recognition than permitted under the previous standard. Products revenue vs. services revenue. The adoption of the new revenue standard resulted in a change to the classification of products revenue vs. services revenue, due to the following factors:
Operating expenses. The adoption of the new revenue standard resulted in a decrease to operating expenses due to the deferral of the incremental direct costs of obtaining a contract. Selected Captions from the Condensed Consolidated Statement of Cash Flows
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INTERIM UPDATE TO SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||
INTERIM UPDATE TO SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | INTERIM UPDATE TO SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES As mentioned previously in Note 1 of the Notes to the Condensed Consolidated Financial Statements, the Company adopted amended guidance on the recognition of revenue from contracts with customers during the three months ended May 4, 2018, using the full retrospective method. The following accounting policies have been updated as part of the adoption of the new standard. Revenue Recognition — The Company enters into a variety of agreements to provide a wide portfolio of products and services offerings to its customers. These agreements have varying requirements depending on the goods and services being sold, the rights and obligations conveyed, and the legal jurisdiction of the arrangement. Revenue is recognized either over time or at a point in time, depending on when the underlying goods or services are transferred to the customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for delivering those goods or services. The following five steps are applied to recognize revenue:
The best evidence of SSP is the observable price of a good or service when the Company sells that good or service separately in similar circumstances to similar customers. If a directly observable price is available, it must be utilized for the SSP. If a directly observable price is not available, the SSP must be estimated. The Company estimates SSP by considering multiple factors including, but not limited to, pricing practices, internal costs, and profit objectives as well as overall market conditions which include geographic or regional specific factors, competitive positioning, and competitor actions. SSP can include fixed and variable components. Variable components are estimated based on the most likely outcome or expected value of the variable components.
The Company reports revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrently with specific revenue-producing transactions. The Company has elected the following practical expedients with the adoption of the new revenue standard:
The following summarizes the nature of revenue recognized and the manner in which the Company accounts for sales transactions. Products Product revenue consists of hardware and software license sales that are delivered, sold as a subscription or sold on a consumption basis. Hardware includes notebooks and desktop PCs, servers, storage hardware, and other hardware-related devices. Software license sales include non-essential, stand-alone software applications. Software applications provide customers with resource management, backup and archiving, information security, information management and intelligence, data analytics, and server virtualization capabilities. Revenue from the sale of hardware products is recognized when control has transferred to the customer, which typically occurs when the hardware has been shipped to the customer, risk of loss has transferred to the customer, the Company has a present right to payment, and customer acceptance has been satisfied. Customer acceptance is satisfied if acceptance is obtained from the customer, if all acceptance provisions lapse, or if the Company has evidence that all acceptance provisions will be, or have been, satisfied. Revenue from software license sales is generally recognized when control has transferred to the customer, which is typically upon shipment, electronic delivery, or when the software is available for download by the customer. For certain arrangements, including software subscriptions and certain software license agreements which provide customers control to certain product performance obligations over time, revenue is recognized based on usage or ratably over the term of the arrangement based on the pattern of delivery of the product to the customer. Invoices for products are generally issued as control transfers, which is typically upon shipment or electronic delivery. There was no significant revenue in any period presented related to performance obligations satisfied or partially satisfied in prior periods. Services Services revenue consists of revenue from sales of support services, including hardware support that extends beyond the Company's standard warranties, software maintenance, and installation; professional services; training; SaaS; and IaaS. Revenue associated with undelivered performance obligations is deferred and recorded as control is transferred to the customer over time. Revenue from fixed-price support or maintenance contracts sold for both hardware and software is recognized on a straight-line basis over the period of performance because the Company is required to provide services at any given time. Other services revenue is recognized when the Company performs the services and the customers receive and consume the benefits. Invoices for services may be issued at the start of a service term, which is typically the case for support and deployment services, or as services are rendered, which is typically the case for professional services, training, SaaS, and IaaS. Other Revenue from leasing arrangements is not subject to the revenue standard for contracts with customers, and remains separately accounted for under existing lease accounting guidance. The Company records revenue from the sale of equipment under sales-type leases as product revenue in an amount equal to the present value of minimum lease payments at the inception of the lease. Sales-type leases also produce financing income, which is included in products net revenue in the Consolidated Statements of Income (Loss) and is recognized at consistent rates of return over the lease term. The Company also offers qualified customers fixed-term loans and revolving credit lines for the purchase of products and services offered by the Company. Financing income attributable to these loans is recognized in products net revenue on an accrual basis. Disaggregation of Revenue — The Company's revenue is presented on a disaggregated basis on the Condensed Consolidated Statements of Income (Loss) and in Note 18 of the Notes to the Condensed Consolidated Financial Statements based on an evaluation of disclosures outside of the financial statements, information regularly reviewed by the chief operating decision maker for evaluating the financial performance of operating segments, and other information that is used to evaluate the Company's financial performance or make resource allocations. This information includes revenue from products and services, revenue from reportable segments, and revenue by major product categories within the segments. Contract Assets — Contract assets are rights to consideration in exchange for goods or services that the Company has transferred to a customer when such a right is conditional on something other than the passage of time. Such amounts have been insignificant to date. Contract Liabilities — Contract liabilities primarily consist of deferred revenue. Deferred revenue is recorded when the Company has a right to invoice or payments have been received for undelivered products or services, or in situations where revenue recognition criteria have not been met. Deferred revenue also represents amounts received in advance for extended warranty services and software maintenance. Revenue is recognized on these items when the revenue recognition criteria are met, generally resulting in ratable recognition over the contract term. The Company also has deferred revenue related to undelivered hardware and professional services, consisting of installations and consulting engagements, which are recognized as the Company's performance obligations under the contract are completed. See Note 9 of the Notes to the Condensed Consolidated Financial Statements for additional information about deferred revenue. Costs to Obtain a Contract — The incremental direct costs of obtaining a contract primarily consist of sales commissions and employer taxes related to commission payments. The Company has elected, as a practical expedient, to expense as incurred costs to obtain a contract equal to or less than one year in duration. For contracts greater than one year in duration, the associated costs to obtain a contract are deferred and amortized over the period of contract performance or a longer period, generally the estimated life of the customer relationship, if renewals are expected and the renewal commission is not commensurate with the initial commission. Deferred costs to obtain a contract are typically amortized over a period of three to seven years, depending on the contract term and expectation of the period of benefit for the costs, which may exceed the contract term. Amortization expense is recognized on a straight-line basis and included in selling, general, and administrative expenses in the Condensed Consolidated Statements of Income (Loss). The Company periodically reviews these deferred costs to determine whether events or changes in circumstances have occurred that could impact the carrying value or period of benefit of the deferred sales commissions. There were no material impairment losses for deferred sales commissions during the six months ended August 3, 2018 and August 4, 2017. Deferred costs to obtain a contract as of August 3, 2018 and February 2, 2018 were $1.0 billion and $0.8 billion, respectively. Deferred costs to obtain a contract are classified as current assets and other non-current assets on the Condensed Consolidated Statements of Financial Position, based on when the expense is expected to be recognized. Amortization of costs to obtain a contract during the three months ended August 3, 2018 and August 4, 2017 was $113 million and $62 million, respectively. Amortization of costs to obtain a contract during the six months ended August 3, 2018 and August 4, 2017 was $219 million and $115 million, respectively. |
FAIR VALUE MEASUREMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS The following table presents the Company's hierarchy for its assets and liabilities measured at fair value on a recurring basis as of August 3, 2018 and February 2, 2018:
____________________ (a) The Company did not transfer any securities between levels during the six months ended August 3, 2018. The following section describes the valuation methodologies the Company uses to measure financial instruments at fair value: Money Market Funds — The Company's investment in money market funds that are classified as cash equivalents hold underlying investments with a weighted average maturity of 90 days or less and are recognized at fair value. The valuations of these securities are based on quoted prices in active markets for identical assets, when available, or pricing models whereby all significant inputs are observable or can be derived from or corroborated by observable market data. The Company reviews security pricing and assesses liquidity on a quarterly basis. As of August 3, 2018, the Company's U.S. portfolio had no material exposure to money market funds with a fluctuating net asset value. Equity and Other Securities — The majority of the Company's investments in equity and other securities that are measured at fair value on a recurring basis consist of strategic investments in publicly-traded companies. The valuation of these securities is based on quoted prices in active markets. Debt Securities — The majority of the Company's debt securities consists of various fixed income securities such as U.S. government and agencies, U.S. corporate, and foreign. Valuation is based on pricing models whereby all significant inputs, including benchmark yields, reported trades, broker-dealer quotes, issue spreads, benchmark securities, bids, offers, and other market related data, are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset. Inputs are documented in accordance with the fair value measurements hierarchy. The Company reviews security pricing and assesses liquidity on a quarterly basis. See Note 4 of the Notes to the Condensed Consolidated Financial Statements for additional information about investments. Derivative Instruments — The Company's derivative financial instruments consist primarily of foreign currency forward and purchased option contracts and interest rate swaps. The fair value of the portfolio is determined using valuation models based on market observable inputs, including interest rate curves, forward and spot prices for currencies, and implied volatilities. Credit risk is also factored into the fair value calculation of the Company's derivative instrument portfolio. See Note 7 of the Notes to the Condensed Consolidated Financial Statements for a description of the Company's derivative financial instrument activities. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis — Certain assets are measured at fair value on a nonrecurring basis and therefore are not included in the recurring fair value table above. These assets consist primarily of non-financial assets such as goodwill and intangible assets. See Note 8 of the Notes to the Condensed Consolidated Financial Statements for additional information about goodwill and intangible assets. As of August 3, 2018 and February 2, 2018, the Company held strategic investments of $582 million and $485 million, respectively. As these investments represent early-stage companies without readily determinable fair values, they are not included in the recurring fair value table above. The Company has elected to apply the measurement alternative for these investments. Under the alternative, the Company measures investments without readily determinable fair values at cost, less impairment, adjusted by observable price changes. The Company must make a separate election to use the alternative for each eligible investment and is required to reassess at each reporting period whether an investment qualifies for the alternative. In evaluating these investments for impairment or observable price changes, the Company uses inputs including pre- and post-money valuations of recent financing events and the impact of those on its fully diluted ownership percentages, as well as other available information regarding the issuer's historical and forecasted performance. Carrying Value and Estimated Fair Value of Outstanding Debt — The following table summarizes the carrying value and estimated fair value of the Company's outstanding debt as described in Note 6 of the Notes to the Condensed Consolidated Financial Statements, including the current portion, as of the dates indicated:
The fair values of the outstanding debt shown in the table above, as well as the DFS debt described in Note 5 of the Notes to the Condensed Consolidated Financial Statements, were determined based on observable market prices in a less active market or based on valuation methodologies using observable inputs and were categorized as Level 2 in the fair value hierarchy. The fair value of DFS debt approximates carrying value. |
INVESTMENTS |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENTS | INVESTMENTS The following table summarizes, by major security type, the carrying value and amortized cost of the Company's investments. All debt security investments with remaining effective maturities in excess of one year and substantially all equity and other securities are recorded as long-term investments in the Condensed Consolidated Statements of Financial Position.
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The Company's investments in debt securities are classified as available-for-sale securities, which are carried at fair value. As of August 3, 2018, the aggregate fair value of investments held in a continuous unrealized loss position for greater than 12 months was $1.5 billion, and the unrealized loss on these investments was $25 million. As of February 2, 2018, the aggregate fair value of investments held in a continuous unrealized loss position for greater than 12 months was $1.9 billion, and the unrealized loss on these investments was $25 million. The maturities of debt securities held as of August 3, 2018 are as follows:
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FINANCIAL SERVICES |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FINANCIAL SERVICES | FINANCIAL SERVICES The Company offers or arranges various financing options and services for its customers in North America, Europe, Australia, and New Zealand through Dell Financial Services and its affiliates ("DFS"). The key activities of DFS include originating, collecting, and servicing customer receivables primarily related to the purchase of Dell Technologies products and services. In some cases, DFS also offers financing on the purchase of third-party technology products that complement the Dell Technologies portfolio of products and services. New financing originations were $1.9 billion and $1.6 billion for the three months ended August 3, 2018 and August 4, 2017, respectively, and were $3.6 billion and $2.7 billion for the six months ended August 3, 2018 and August 4, 2017, respectively. Financing Receivables The Company's financing receivables are aggregated into the following categories:
The following table summarizes the components of the Company's financing receivables segregated by portfolio segment as of August 3, 2018 and February 2, 2018:
____________________ (a) Customer financing receivables, gross, includes accrued interest. The following tables present the allowance for financing receivable losses for the three months ended August 3, 2018 and August 4, 2017, and the six months ended August 3, 2018 and August 4, 2017, and changes in allowance for financing receivable losses for the respective periods:
The following table summarizes the aging of the Company's customer financing receivables, gross, including accrued interest, as of August 3, 2018 and February 2, 2018, segregated by class:
Aging is likely to fluctuate quarter to quarter as a result of the variability in volume of large transactions entered into over the period, and the administrative processes that accompany those larger transactions. As such, fluctuations in aging do not necessarily indicate a material change in the credit quality of the portfolio. Credit Quality The following table summarizes customer receivables, gross, including accrued interest, by credit quality indicator segregated by class, as of August 3, 2018 and February 2, 2018. The categories shown in the table below segregate customer receivables based on the relative degrees of credit risk. The credit quality indicators for DPA revolving accounts are measured primarily as of each quarter-end date, while all other indicators are generally updated on a periodic basis. For DPA revolving receivables shown in the table below, the Company makes credit decisions based on proprietary scorecards, which include the customer's credit history, payment history, credit usage, and other credit agency-related elements. The higher quality category includes prime accounts generally of a higher credit quality that are comparable to U.S. customer FICO scores of 720 or above. The mid-category represents the mid-tier accounts that are comparable to U.S. customer FICO scores from 660 to 719. The lower category is generally sub-prime and represents lower credit quality accounts that are comparable to U.S. customer FICO scores below 660. For the DBC revolving receivables and fixed-term commercial receivables shown in the table below, an internal grading system is utilized that assigns a credit level score based on a number of considerations, including liquidity, operating performance, and industry outlook. The grading criteria and classifications for the fixed-term products differ from those for the revolving products as loss experience varies between these product and customer groups. The credit quality categories cannot be compared between the different classes as loss experience varies substantially between the classes.
DFS Debt The Company maintains programs that facilitate the funding of financing receivables in the capital markets. The following table summarizes DFS debt as of the periods indicated. The table excludes the allocated portion of the Company's other borrowings, which represents the additional amount considered to fund the DFS business.
DFS U.S. Debt Securitization Facilities — The Company maintains separate securitization facilities in the United States for fixed-term leases and loans and revolving loans. This debt is collateralized solely by the U.S. financing receivables in the facilities. The debt has a variable interest rate and the duration of this debt is based on the terms of the underlying financing receivables. As of August 3, 2018, the total debt capacity related to the U.S. securitization facilities was $3.5 billion. The Company enters into interest swap agreements to effectively convert a portion of its securitization debt from a floating rate to a fixed rate. See Note 7 of the Notes to the Condensed Consolidated Financial Statements for additional information about interest rate swaps. The Company's U.S. securitization facility for revolving loans is effective through June 1, 2020. The Company's two U.S. securitization facilities for fixed-term leases and loans are effective through February 10, 2020 and February 22, 2020. The securitization facilities contain standard structural features related to the performance of the securitized receivables, which include defined credit losses, delinquencies, average credit scores, and minimum collection requirements. In the event one or more of these criteria are not met and the Company is unable to restructure the facility, no further funding of receivables will be permitted and the timing of the Company's expected cash flows from over-collateralization will be delayed. As of August 3, 2018, these criteria were met. Fixed-Term Securitization Offerings — The Company periodically issues asset-backed debt securities under fixed-term securitization programs to private investors. The asset-backed debt securities are collateralized solely by the U.S. fixed-term financing receivables in the offerings, which are held by Special Purpose Entities ("SPEs"), as discussed below. The interest rate on these securities is fixed and ranges from 0.85% to 3.85% per annum, and the duration of these securities is based on the terms of the underlying financing receivables. DFS International Debt Securitization Facility — The Company maintains a securitization facility in Europe for fixed-term leases and loans. This facility is effective through January 13, 2019. As of August 3, 2018, the total debt capacity related to the international securitization facility was $695 million. The securitization facility contains standard structural features related to the performance of the securitized receivables which include defined credit losses, delinquencies, average credit scores, and minimum collection requirements. In the event one or more of these criteria are not met and the Company is unable to restructure the program, no further funding of receivables will be permitted and the timing of the Company's expected cash flows from over-collateralization will be delayed. As of August 3, 2018, these criteria were met. Other Structured Facilities — In connection with the Company's international financing operations, the Company has entered into revolving structured financing debt programs related to its fixed-term lease and loan products sold in Canada, Europe, Australia, and New Zealand. The Canadian facility, which is collateralized solely by Canadian financing receivables, had a total debt capacity of $192 million as of August 3, 2018, and is effective through January 16, 2023. The European facility, which is collateralized solely by European financing receivables, had a total debt capacity of $463 million as of August 3, 2018, and is effective through December 14, 2020. The Australia and New Zealand facility, which is collateralized solely by the Australia and New Zealand financing receivables, had a total debt capacity of $88 million as of August 3, 2018, and is effective through January 29, 2020. Note Payable — On November 27, 2017, the Company entered into an unsecured credit agreement to fund receivables in Mexico. As of August 3, 2018, the aggregate principal amount of the note payable is $200 million. The note bears interest at either the applicable London interbank offered rate ("LIBOR") plus 2.25%, for the borrowings denominated in U.S. dollars, or the Mexican Interbank Equilibrium Interest Rate ("TIIE") plus 2.00%, for the borrowings denominated in Mexican pesos. The note will mature on December 1, 2020. Although the note is unsecured, the Company intends to manage the note in the same manner as its structured financing programs, so that the collections from financing receivables in Mexico will be used to pay down principal and interest of the note. Variable Interest Entities In connection with the securitization facilities and offerings discussed above, the Company transfers certain U.S. and European customer financing receivables to SPEs that meet the definition of a Variable Interest Entity ("VIE") and are consolidated, along with the associated debt, into the Consolidated Financial Statements, as the Company is the primary beneficiary of those VIEs. The SPEs are bankruptcy-remote legal entities with separate assets and liabilities. The purpose of the SPEs is to facilitate the funding of customer receivables in the capital markets. The following table shows financing receivables held by the consolidated VIEs as of the respective dates:
Financing receivables transferred via securitization through SPEs were $1.2 billion and $1.0 billion for the three months ended August 3, 2018 and August 4, 2017, respectively, and $2.5 billion and $1.9 billion for the six months ended August 3, 2018 and August 4, 2017, respectively. Some of the SPEs have entered into financing arrangements with multi-seller conduits that, in turn, issue asset-backed debt securities in the capital markets. The DFS debt outstanding, which is collateralized by the financing receivables held by the consolidated VIEs, was $4.6 billion and $3.9 billion as of August 3, 2018 and February 2, 2018, respectively. The Company's risk of loss related to securitized receivables is limited to the amount by which the Company's right to receive collections for assets securitized exceeds the amount required to pay interest, principal, and fees and expenses related to the asset-backed securities. The Company provides credit enhancement to the securitization in the form of over-collateralization. Financing Receivable Sales To manage certain concentrations of customer credit exposure, the Company may sell selected fixed-term financing receivables to unrelated third parties on a periodic basis. The amount of financing receivables sold was $271 million and $228 million for the six months ended August 3, 2018 and August 4, 2017, respectively. |
DEBT |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBT | DEBT The following table summarizes the Company's outstanding debt as of the dates indicated:
During the six months ended August 3, 2018, the Company repaid $3 billion principal amount of its unsecured notes and $136 million principal amount of its term loan facilities. Additionally, during the six months ended August 3, 2018, the Company issued an additional $868 million, net, in DFS debt to support the expansion of its financing receivables portfolio. Secured Debt Senior Secured Credit Facilities — The Company has entered into a credit agreement that provides for senior secured credit facilities (the "Senior Secured Credit Facilities") in the aggregate principal amount of $17.6 billion comprising (a) term loan facilities and (b) a senior secured Revolving Credit Facility, which includes capacity for up to $0.5 billion of letters of credit and for borrowings of up to $0.4 billion under swing-line loans. As of August 3, 2018, available borrowings under the Revolving Credit Facility totaled $3.3 billion. The Senior Secured Credit Facilities provide that the borrowers have the right at any time, subject to customary conditions, to request incremental term loans or incremental revolving commitments. Borrowings under the Senior Secured Credit Facilities bear interest at a rate per annum equal to an applicable margin, plus, at the borrowers' option, either (a) a base rate, which, under the Term Loan B Facility, is subject to an interest rate floor of 1.75% per annum, and under all other borrowings is subject to an interest rate floor of 0% per annum, or (b) a London interbank offered rate ("LIBOR"), which, under the Term Loan B Facility, is subject to an interest rate floor of 0.75% per annum, and under all other borrowings is subject to an interest rate floor of 0% per annum. Interest is payable, in the case of loans bearing interest based on LIBOR, at the end of each interest period (but at least every three months), in arrears and, in the case of loans bearing interest based on the base rate, quarterly in arrears. The Term Loan A-2 Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 5% of the original principal amount in the first year after the closing date of the refinancing transaction on October 20, 2017, 10% of the original principal amount in each of the second and third years after October 20, 2017, and 70% of the original principal amount in the fourth year after October 20, 2017. The Term Loan B Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1% of the original principal amount. The Term Loan A-3 Facility and the Revolving Credit Facility have no amortization. The Term Loan A-3 Facility requires the borrowers to prepay outstanding borrowings under these facilities with 100% of the net cash proceeds of certain non-ordinary course asset sales or dispositions. The borrowers may voluntarily repay outstanding loans under the term loan facilities and the Revolving Credit Facility at any time without premium or penalty, other than customary "breakage" costs. All obligations of the borrowers under the Senior Secured Credit Facilities and certain swap agreements, cash management arrangements, and certain letters of credit provided by any lender or agent party to the Senior Secured Credit Facilities or any of its affiliates and certain other persons are secured by (a) a first-priority security interest in certain tangible and intangible assets of the borrowers and the guarantors and (b) a first-priority pledge of 100% of the capital stock of the borrowers, Dell Inc., a wholly‑owned subsidiary of the Company ("Dell"), and each wholly-owned material restricted subsidiary of the borrowers and the guarantors, in each case subject to certain thresholds, exceptions, and permitted liens. First Lien Notes — The senior secured notes (collectively, the "First Lien Notes") were issued on June 1, 2016 in an aggregate principal amount of $20.0 billion. Interest on these borrowings is payable semiannually. The First Lien Notes are secured, on a pari passu basis with the Senior Secured Credit Facilities, on a first-priority basis by substantially all of the tangible and intangible assets of the issuers and guarantors that secure obligations under the Senior Secured Credit Facilities, including pledges of all capital stock of the issuers, Dell, and certain wholly-owned material subsidiaries of the issuers and the guarantors, subject to certain exceptions. The Company has agreed to use commercially reasonable efforts to register with the SEC notes having terms substantially identical to the terms of the First Lien Notes as part of an offer to exchange such registered notes for the First Lien Notes. The Company will be obligated to pay additional interest on the First Lien Notes if it fails to consummate such an exchange offer within five years after the closing date of the EMC merger transaction. China Revolving Credit Facility — On October 31, 2017, the Company entered into a credit agreement (the "China Revolving Credit Facility") with a bank lender for a secured revolving loan facility in an aggregate principal amount not to exceed $500 million. Borrowings under the China Revolving Credit Facility bear interest at LIBOR plus 0.6% per annum. The Company may voluntarily repay outstanding loans under the China Revolving Credit Facility at any time without premium or penalty, other than customary "breakage" costs. The facility will expire on October 31, 2018. As of August 3, 2018, there were no outstanding borrowings under the China Revolving Credit Facility. Unsecured Debt Unsecured Notes and Debentures — The Company has outstanding unsecured notes and debentures (collectively, the "Unsecured Notes and Debentures") that were issued prior to the acquisition of Dell by Dell Technologies Inc. in the going-private transaction that closed in October 2013. Interest on these borrowings is payable semiannually. Senior Notes — The senior unsecured notes (collectively, the "Senior Notes") were issued on June 22, 2016 in an aggregate principal amount of $3.25 billion. Interest on these borrowings is payable semiannually. EMC Notes — On September 7, 2016, EMC had outstanding $2.5 billion aggregate principal amount of its 1.875% Notes due June 2018, which the Company fully repaid during the three months ended August 3, 2018, $2.0 billion aggregate principal amount of its 2.650% Notes due June 2020, and $1.0 billion aggregate principal amount of its 3.375% Notes due June 2023 (collectively, the "EMC Notes"). Interest on these borrowings is payable semiannually. The EMC Notes remain outstanding following the closing of the EMC merger transaction. VMware Notes — On August 21, 2017, VMware, Inc. completed a public offering of unsecured senior notes in the aggregate amount of $4.0 billion, consisting of outstanding principal due on the following dates: $1.25 billion due August 21, 2020, $1.50 billion due August 21, 2022, and $1.25 billion due August 21, 2027 (collectively, the "VMware Notes"). The VMware Notes bear interest, payable semiannually, at annual rates of 2.30%, 2.95%, and 3.90%, respectively. None of the net proceeds of such borrowings will be made available to support the operations or satisfy any corporate purposes of Dell Technologies, other than the operations and corporate purposes of VMware, Inc. and VMware, Inc.’s subsidiaries. VMware Revolving Credit Facility — On September 12, 2017, VMware, Inc. entered into an unsecured credit agreement, establishing a revolving credit facility (the "VMware Revolving Credit Facility"), with a syndicate of lenders that provides the company with a borrowing capacity of up to $1.0 billion which may be used for VMware, Inc. general corporate purposes. Commitments under the VMware Revolving Credit Facility are available for a period of five years, which may be extended, subject to the satisfaction of certain conditions, by up to two one year periods. The credit agreement contains certain representations, warranties, and covenants. Commitment fees, interest rates, and other terms of borrowing under the VMware Revolving Credit Facility may vary based on VMware, Inc.’s external credit ratings. None of the net proceeds of such borrowings will be made available to support the operations or satisfy any corporate purposes of Dell Technologies, other than the operations and corporate purposes of VMware, Inc. and VMware, Inc.’s subsidiaries. As of August 3, 2018, there were no outstanding borrowings under the VMware Revolving Credit Facility. DFS Debt See Note 5 and Note 7 of the Notes to the Condensed Consolidated Financial Statements, respectively, for discussion of DFS debt and the interest rate swap agreements that hedge a portion of that debt. Other Margin Loan Facility — On April 12, 2017, the Company entered into the Margin Loan Facility in an aggregate principal amount of $2.0 billion. VMW Holdco LLC, a wholly-owned subsidiary of EMC, is the borrower under the Margin Loan Facility, which is secured by 60 million shares of Class B common stock of VMware, Inc. and 20 million shares of Class A common stock of VMware, Inc. Loans under the Margin Loan Facility bear interest at a rate per annum payable, at the borrower's option, either at (a) a base rate plus 1.25% per annum or (b) a LIBOR-based rate plus 2.25% per annum. Interest under the Margin Loan Facility is payable quarterly. The Margin Loan Facility will mature in April 2022. The borrower may voluntarily repay outstanding loans under the Margin Loan Facility at any time without premium or penalty, other than customary "breakage" costs, subject to certain minimum threshold amounts for prepayment. Pivotal Revolving Credit Facility — On September 7, 2017, Pivotal entered into a credit agreement (the "Pivotal Revolving Credit Facility") that provides for a senior secured revolving loan facility in an aggregate principal amount not to exceed $100 million. The credit facility contains customary representations, warranties, and covenants, including financial covenants. The credit agreement will expire on September 8, 2020, unless it is terminated earlier. None of the net proceeds of borrowings under the facility will be made available to support the operations or satisfy any corporate purposes of Dell Technologies, other than the operations and corporate purposes of Pivotal and Pivotal's subsidiaries. As of August 3, 2018, there were no outstanding borrowings under the Pivotal Revolving Credit Facility. Aggregate Future Maturities As of August 3, 2018, aggregate future maturities of the Company's debt were as follows:
Covenants and Unrestricted Net Assets — The credit agreement for the Senior Secured Credit Facilities contains customary negative covenants that generally limit the ability of Denali Intermediate Inc., a wholly-owned subsidiary of Dell Technologies ("Dell Intermediate"), Dell, and Dell's and Denali Intermediate's other restricted subsidiaries to incur debt, create liens, make fundamental changes, enter into asset sales, make certain investments, pay dividends or distribute or redeem certain equity interests, prepay or redeem certain debt, and enter into certain transactions with affiliates. The indenture governing the Senior Notes contains customary negative covenants that generally limit the ability of Denali Intermediate, Dell, and Dell's and Denali Intermediate's other restricted subsidiaries to incur additional debt or issue certain preferred shares, pay dividends on or make other distributions in respect of capital stock or make other restricted payments, make certain investments, sell or transfer certain assets, create liens on certain assets to secure debt, consolidate, merge, sell, or otherwise dispose of all or substantially all assets, enter into certain transactions with affiliates, and designate subsidiaries as unrestricted subsidiaries. The negative covenants under such credit agreements and indenture are subject to certain exceptions, qualifications, and "baskets." The indentures governing the First Lien Notes, the Unsecured Notes and Debentures, and the EMC Notes variously impose limitations, subject to specified exceptions, on creating certain liens, entering into sale and lease-back transactions, and entering into certain asset sales. The foregoing credit agreements and indentures contain customary events of default, including failure to make required payments, failure to comply with covenants, and the occurrence of certain events of bankruptcy and insolvency. As of August 3, 2018, the Company had certain consolidated subsidiaries that were designated as unrestricted subsidiaries for all purposes of the applicable credit agreements and the indentures governing the First Lien Notes and the Senior Notes. The Term Loan A-2 Facility, the Term Loan A-3 Facility, and the Revolving Credit Facility are subject to a first lien net leverage ratio covenant that is tested at the end of each fiscal quarter of Dell with respect to Dell's preceding four fiscal quarters. The Company was in compliance with all financial covenants as of August 3, 2018. |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Derivative Instruments As part of its risk management strategy, the Company uses derivative instruments, primarily foreign currency forward and option contracts and interest rate swaps, to hedge certain foreign currency and interest rate exposures, respectively. The Company's objective is to offset gains and losses resulting from these exposures with gains and losses on the derivative contracts used to hedge the exposures, thereby reducing volatility of earnings and protecting the fair values of assets and liabilities. The earnings effects of the derivative instruments are presented in the same income statement line items as the earnings effects of the hedged items. For derivatives designated as cash flow hedges, the Company assesses hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative. The Company does not have any derivatives designated as fair value hedges. Foreign Exchange Risk The Company uses foreign currency forward and option contracts designated as cash flow hedges to protect against the foreign currency exchange rate risks inherent in its forecasted transactions denominated in currencies other than the U.S. dollar. Hedge accounting is applied based upon the criteria established by accounting guidance for derivative instruments and hedging activities. The risk of loss associated with purchased options is limited to premium amounts paid for the option contracts. The risk of loss associated with forward contracts is equal to the exchange rate differential from the time the contract is entered into until the time it is settled. The majority of these contracts typically expire in twelve months or less. During the six months ended August 3, 2018 and August 4, 2017, the Company did not discontinue any cash flow hedges related to foreign exchange contracts that had a material impact on the Company's results of operations due to the probability that the forecasted cash flows would not occur. The Company uses forward contracts to hedge monetary assets and liabilities denominated in a foreign currency. These contracts generally expire in three months or less, are considered economic hedges, and are not designated for hedge accounting. The change in the fair value of these instruments represents a natural hedge as their gains and losses offset the changes in the underlying fair value of the monetary assets and liabilities due to movements in currency exchange rates. In connection with the expanded offerings of DFS in Europe, forward contracts are used to hedge financing receivables denominated in foreign currencies. These contracts are not designated for hedge accounting and most expire within three years or less. Interest Rate Risk The Company uses interest rate swaps to hedge the variability in cash flows related to the interest rate payments on structured financing debt. The interest rate swaps economically convert the variable rate on the structured financing debt to a fixed interest rate to match the underlying fixed rate being received on fixed-term customer leases and loans. These contracts are not designated for hedge accounting and most expire within three years or less. Interest rate swaps are utilized to manage the interest rate risk, at a portfolio level, associated with DFS operations in Europe. The interest rate swaps economically convert the fixed rate on financing receivables to a three-month Euribor floating rate basis in order to match the floating rate nature of the banks' funding pool. These contracts are not designated for hedge accounting and most expire within three years or less. The Company utilizes cross currency amortizing swaps to hedge the currency and interest rate risk exposure associated with the securitization program that was established in Europe in January 2017. The cross currency swaps combine a Euro-based interest rate swap with a British Pound or U.S. Dollar foreign exchange forward contract in which the Company pays a fixed British Pound or U.S. Dollar amount and receives a floating amount in Euro linked to the one-month Euribor. The notional value of the swaps amortizes in line with the expected cash flows and run-off of the securitized assets. The swaps mature within five years or less and are not designated for hedge accounting. Notional Amounts of Outstanding Derivative Instruments The notional amounts of the Company's outstanding derivative instruments were as follows as of the dates indicated:
Effect of Derivative Instruments Designated as Hedging Instruments on the Condensed Consolidated Statements of Financial Position and the Condensed Consolidated Statements of Income (Loss)
Effect of Derivative Instruments Not Designated as Hedging Instruments on the Condensed Consolidated Statement of Income (Loss)
Fair Value of Derivative Instruments in the Condensed Consolidated Statements of Financial Position The Company presents its foreign exchange derivative instruments on a net basis in the Condensed Consolidated Statements of Financial Position due to the right of offset by its counterparties under master netting arrangements. The fair value of those derivative instruments presented on a gross basis as of each date indicated below was as follows:
The following tables present the gross amounts of the Company's derivative instruments, amounts offset due to master netting agreements with the Company's counterparties, and the net amounts recognized in the Condensed Consolidated Statements of Financial Position.
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GOODWILL AND INTANGIBLE ASSETS |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS Goodwill The following table presents goodwill allocated to the Company's business segments as of August 3, 2018 and February 2, 2018, and changes in the carrying amount of goodwill for the respective periods:
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Goodwill and indefinite-lived intangible assets are tested for impairment annually during the third fiscal quarter and whenever events or circumstances may indicate that an impairment has occurred. Based on the results of the annual impairment test, which was a quantitative test for certain goodwill reporting units and a qualitative test for others, no impairment of goodwill or indefinite-lived intangible assets existed for any reporting unit as of November 3, 2017. As a result of this analysis, it was determined that the excess of fair value over carrying amount was greater than 20% for all of the Company's existing goodwill reporting units as of November 3, 2017, with the exception of the Core Storage, Servers, and Networking goodwill reporting unit within the Infrastructure Solutions Group segment, which had an excess of fair value over carrying amount of 18% as of such date. Management will continue to monitor the Core Storage, Servers, and Networking goodwill reporting unit and consider potential impacts to the impairment assessment. Goodwill and indefinite-lived intangible assets were assessed during the three months ended May 4, 2018 to consider the impact of segment reporting changes. No indications of impairment were identified as a result of these changes. The Company did not have any accumulated goodwill impairment charges as of August 3, 2018. Management exercised significant judgment related to the above assessment, including the identification of goodwill reporting units, assignment of assets and liabilities to goodwill reporting units, assignment of goodwill to reporting units, and determination of the fair value of each goodwill reporting unit. The fair value of each goodwill reporting unit is generally estimated using a combination of public company multiples and discounted cash flow methodologies. This analysis requires significant judgment, including estimation of future cash flows, which is dependent on internal forecasts, the estimation of the long-term growth rate of the Company's business, and the determination of the Company's weighted average cost of capital. Changes in these estimates and assumptions could materially affect the fair value of the goodwill reporting unit, potentially resulting in a non-cash impairment charge. Intangible Assets The Company's intangible assets as of August 3, 2018 and February 2, 2018 were as follows:
Amortization expense related to definite-lived intangible assets was approximately $1.5 billion and $1.7 billion for the three months ended August 3, 2018 and August 4, 2017, respectively, and $3.0 billion and $3.5 billion during the six months ended August 3, 2018 and August 4, 2017, respectively. The amortization expense for the fiscal year ended February 2, 2018 was primarily related to the intangible assets acquired in the EMC merger transaction. There were no material impairment charges related to intangible assets during the three months ended August 3, 2018 and August 4, 2017. Estimated future annual pre-tax amortization expense of definite-lived intangible assets as of August 3, 2018 over the next five fiscal years and thereafter is as follows:
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DEFERRED REVENUE |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEFERRED REVENUE | DEFERRED REVENUE Deferred Revenue — Deferred revenue is recorded for support and deployment services, software maintenance, professional services, training, and SaaS when the Company has a right to invoice or payments have been received for undelivered products or services where transfer of control has not occurred. Revenue is recognized on these items when the revenue recognition criteria are met, generally resulting in ratable recognition over the contract term. The Company also has deferred revenue related to undelivered hardware and professional services, consisting of installations and consulting engagements, which are recognized as the Company's performance obligations under the contract are completed. Changes in the Company's deferred revenue are presented in the following table for the period indicated:
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Remaining Performance Obligations — Remaining performance obligations represent the aggregate amount of the transaction price allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligations include deferred revenue plus unbilled amounts not yet recorded in deferred revenue. The aggregate amount of the transaction price allocated to remaining performance obligations does not include amounts owed under cancelable contracts where there is no substantive termination penalty. The Company applied the practical expedient to exclude the value of remaining performance obligations for contracts for which revenue is recognized at the amount to which the Company has the right to invoice for services performed. The Company also applied the practical expedient to not disclose the amount of transaction price allocated to remaining performance obligations for the periods prior to adoption of the new revenue standard. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidation, adjustments for revenue that has not materialized, and adjustments for currency. The value of the transaction price allocated to remaining performance obligations as of August 3, 2018 was approximately $29 billion. The Company expects to recognize approximately 62% of remaining performance obligations as revenue in the next 12 months, and the remainder thereafter. |
WARRANTY LIABILITY |
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Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
WARRANTY LIABILITY | WARRANTY LIABILITY The Company records a liability for its standard limited warranties at the time of sale for the estimated costs that may be incurred. The liability for standard warranties is included in accrued and other current liabilities and other non-current liabilities in the Condensed Consolidated Statements of Financial Position. Changes in the Company's liability for standard limited warranties are presented in the following table for the periods indicated.
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COMMITMENTS AND CONTINGENCIES |
6 Months Ended |
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Aug. 03, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Legal Matters The Company is involved in various claims, suits, assessments, investigations, and legal proceedings that arise from time to time in the ordinary course of its business, including those identified below, consisting of matters involving consumer, antitrust, tax, intellectual property, and other issues on a global basis. The Company accrues a liability when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. The Company reviews these accruals at least quarterly and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other relevant information. To the extent new information is obtained and the Company's views on the probable outcomes of claims, suits, assessments, investigations, or legal proceedings change, changes in the Company's accrued liabilities would be recorded in the period in which such a determination is made. For some matters, the amount of liability is not probable or the amount cannot be reasonably estimated and therefore accruals have not been made. The following is a discussion of the Company's significant legal matters and other proceedings: Appraisal Proceedings — On October 29, 2013, Dell Technologies acquired Dell in a transaction referred to as the going-private transaction. Holders of shares of Dell common stock who did not vote on September 12, 2013 in favor of the proposal to adopt the amended going-private transaction agreement and who properly demanded appraisal of their shares and who otherwise comply with the requirements of Section 262 of the Delaware General Corporate Law ("DGCL") are entitled to seek appraisal for, and obtain payment in cash for the judicially determined "fair value" (as defined pursuant to Section 262 of the DGCL) of, their shares in lieu of receiving the going-private transaction consideration. Dell initially recorded a liability of $13.75 for each share with respect to which appraisal has been demanded and as to which the demand has not been withdrawn, together with interest at the statutory rate discussed below. The Court of Chancery ruled that the fair value of the appraisal shares as of October 29, 2013, the date on which the going-private transaction became effective, was $17.62 per share. This ruling would entitle the holders of the remaining 5,505,630 shares subject to the appraisal proceedings to $17.62 per share, plus interest at a statutory rate, compounded quarterly. On November 21, 2016, the Court of Chancery entered final judgment in the appraisal action. On November 22, 2016, Dell filed a notice of appeal to the Delaware Supreme Court, which issued a decision on December 14, 2017. In its decision, the Delaware Supreme Court reversed, in part, and affirmed, in part, the decision of the Delaware Court of Chancery. On January 2, 2018, the Delaware Supreme Court issued its formal mandate remanding the matter to the Court of Chancery for further proceedings consistent with its opinion. In accordance with direction by the Court of Chancery, the parties submitted proposals to the Court of Chancery outlining the remaining issues to be adjudicated. The liability for the appraisal proceedings was approximately $129 million as of February 2, 2018. On May 8, 2018, the Company entered into an agreement to settle a portion of the liability related to the appraisal proceedings in the amount of approximately $70 million, and on May 18, 2018, this portion of the liability was fully paid. The Company settled with the remaining plaintiffs as of July 16, 2018 in the amount of approximately $30 million. The remaining liability accrual was released to Interest and other, net during the three months ended August 3, 2018. As of August 3, 2018, there was no remaining liability for appraisal proceedings. Securities Litigation — On May 22, 2014, a securities class action seeking compensatory damages was filed in the United States District Court for the Southern District of New York, captioned the City of Pontiac Employee Retirement System vs. Dell Inc. et. al. (Case No. 1:14-cv-03644). The action names as defendants Dell Inc. and certain current and former executive officers, and alleges that Dell made false and misleading statements about Dell's business operations and products between February 22, 2012 and May 22, 2012, which resulted in artificially inflated stock prices. The case was transferred to the United States District Court for the Western District of Texas, where the defendants filed a motion to dismiss. On September 16, 2016, the Court denied the motion to dismiss and the case is proceeding with discovery. The defendants believe the claims asserted are without merit and the risk of material loss is remote. Copyright Levies — The Company's obligation to collect and remit copyright levies in certain European Union ("EU") countries may be affected by the resolution of legal proceedings pending in Germany and other EU member states against various companies, including Dell subsidiaries. The plaintiffs in those proceedings generally seek to impose or modify the levies with respect to sales of such equipment as multifunction devices, phones, personal computers, storage devices, and printers, alleging that such products enable the copying of copyrighted materials. Some of the proceedings also challenge whether the levy schemes in those countries comply with EU law. Certain EU member countries that do not yet impose levies on digital devices are expected to implement legislation to enable them to extend existing levy schemes, while some other EU member countries are expected to limit the scope of levy schemes and their applicability in the digital hardware environment. Dell, other companies, and various industry associations have opposed the extension of levies to the digital environment and have advocated alternative models of compensation to rights holders. The Company continues to collect levies in certain EU countries where it has determined that based on local laws it is probable that it has a payment obligation. The amount of levies is generally based on the number of products sold and the per-product amounts of the levies, which vary. The Company accrues a liability when it believes that it is both probable that a loss has been incurred and when it can reasonably estimate the amount of the loss. CamSoft Litigation — CamSoft Data Systems, Inc. ("CamSoft") filed in 2009 a lawsuit, captioned CamSoft Data Systems, Inc. v. Southern Electronics Supply, Inc., et al., in the 19th Judicial District Court, Parish of East Baton Rouge, Louisiana, alleging that Dell conspired with others to misappropriate CamSoft’s trade secrets relating to municipal wireless video surveillance systems and engaged in unfair trade practices. CamSoft asserted Louisiana state law claims for misappropriation of trade secrets, unfair trade practices, antitrust and other torts. CamSoft seeks compensatory and punitive damages in excess of $2 billion. The Company believes the claims are without merit and has motions to dismiss pending before the court. The case is scheduled for trial in October 2018. Other Litigation — The various legal proceedings in which Dell is involved include commercial litigation and a variety of patent suits. In some of these cases, Dell is the sole defendant. More often, particularly in the patent suits, Dell is one of a number of defendants in the electronics and technology industries. Dell is actively defending a number of patent infringement suits, and several pending claims are in various stages of evaluation. While the number of patent cases varies over time, Dell does not currently anticipate that any of these matters will have a material adverse effect on its business, financial condition, results of operations, or cash flows. As of August 3, 2018, the Company does not believe there is a reasonable possibility that a material loss exceeding the amounts already accrued for these or other proceedings or matters has been incurred. However, since the ultimate resolution of any such proceedings and matters is inherently unpredictable, the Company's business, financial condition, results of operations, or cash flows could be materially affected in any particular period by unfavorable outcomes in one or more of these proceedings or matters. Whether the outcome of any claim, suit, assessment, investigation, or legal proceeding, individually or collectively, could have a material adverse effect on the Company's business, financial condition, results of operations, or cash flows will depend on a number of variables, including the nature, timing, and amount of any associated expenses, amounts paid in settlement, damages, or other remedies or consequences. Indemnifications In the ordinary course of business, the Company enters into contractual arrangements under which it may agree to indemnify the third party to such arrangements from any losses incurred relating to the services it performs on behalf of the Company or for losses arising from certain events as defined in the particular contract, such as litigation or claims relating to past performance. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments related to these indemnifications have not been material to the Company. |
INCOME AND OTHER TAXES |
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Aug. 03, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME AND OTHER TAXES | INCOME AND OTHER TAXES For the three months ended August 3, 2018 and August 4, 2017, the Company's effective income tax rates were 1.5% and 38.9%, respectively, on pre-tax losses of $0.5 billion and $1.2 billion, respectively. For the six months ended August 3, 2018 and August 4, 2017, the Company's effective income tax rates were 8.4% and 36.4%, respectively, on pre-tax losses of $1.1 billion and $3.1 billion, respectively. The changes in the Company's effective income tax rates for the three and six months ended August 3, 2018 compared to the prior periods were primarily attributable to impacts of U.S. Tax Reform. The change in the Company's effective income tax rate for the six months ended August 3, 2018 was also impacted by discrete tax benefits resulting from the impact of adopting the new revenue standard. The Tax Cuts and Jobs Act of 2017 ("U.S. Tax Reform" or the "Act") was signed into law on December 22, 2017. Among other things, U.S. Tax Reform lowers the U.S. corporate income tax rate to 21% from 35%, establishes a modified territorial system requiring a mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries (the "Transition Tax"), requires a minimum tax on certain future earnings generated by foreign subsidiaries while providing for future tax-free repatriation of earnings through a 100% dividends-received deduction, and places limitations on the deductibility of net interest expense. GAAP requires the effect of a change in tax laws to be recognized in the period that includes the enactment date. Due to the complexities involved in accounting for the enactment of U.S. Tax Reform, the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118"), which allows companies to record provisional amounts in earnings for the first year following the Act's enactment, with those provisional amounts required to be finalized by the end of that year. In accordance with GAAP and SAB 118, for the fiscal year ended February 2, 2018, the Company recognized a provisional tax benefit of $0.5 billion, which was primarily driven by a $1.5 billion tax benefit related to the remeasurement of deferred tax assets and liabilities, offset by $1.0 billion of current and future income tax expenses related to the Transition Tax. The Company’s provisional estimates for the Transition Tax are based on its initial analysis using available information and estimates. In accordance with SAB 118, the Company’s provisional benefit will be adjusted once the analysis is complete, but no later than the fourth quarter of the fiscal year ending February 1, 2019. The Company continues to collect and process the data necessary to complete the analysis. In addition, the U.S. Treasury Department issued proposed regulations as guidance for the Transition Tax on August 1, 2018. The Company is also evaluating the impact of this guidance on the calculation of its provisional benefit. As a result, no adjustments have been made to the provisional amount recorded for the fiscal year ended February 2, 2018. Revisions to the Company’s provisional estimates may be material to the Company. Any final guidance to be issued by the U.S. Treasury Department also could further affect the provisional calculation. Additionally, when the Company files its U.S. tax return for the fiscal year ended February 2, 2018, any changes to the tax positions for temporary differences compared to the estimates used for the provisional estimate will result in an adjustment of the estimated tax benefit recorded as of February 2, 2018. The differences between the estimated effective income tax rates and the U.S. federal statutory rate of 21% principally result from the Company's geographical distribution of income and differences between the book and tax treatment of certain items. In certain jurisdictions, the Company's tax rate is significantly less than the applicable statutory rate as a result of tax holidays. The majority of the Company's foreign income that is subject to these tax holidays and lower tax rates is attributable to Singapore, China, and Malaysia. A significant portion of these income tax benefits is related to a tax holiday that will expire at the end of the fiscal year ending February 1, 2019. The Company is currently seeking new terms for the affected subsidiary beyond the fiscal year ending February 1, 2019, and it is uncertain whether any terms will be agreed upon. The Company's other tax holidays will expire in whole or in part during fiscal years 2019 through 2023. Many of these tax holidays and reduced tax rates may be extended when certain conditions are met or may be terminated early if certain conditions are not met. The Company's U.S. federal income tax returns for fiscal years 2007 through 2009 are currently under consideration by the Office of Appeals of the Internal Revenue Service (the "IRS"). The IRS issued a Revenue Agent's Report ("RAR") related to those years during the fiscal year ended February 3, 2017. The IRS has proposed adjustments primarily relating to transfer pricing matters with which the Company disagrees and is contesting through the IRS administrative appeals process. In May 2017, the IRS commenced a federal income tax audit for fiscal years 2010 through 2014, which could take several years to complete. Prior to the EMC merger transaction, EMC received a RAR for its tax years 2009 and 2010. On May 5, 2017, EMC received an RAR for its tax year 2011. The Company has been contesting certain adjustments proposed in these RARs through the IRS administrative appeals process and, during the three months ended August 3, 2018, reached an agreement on the contested issues with the IRS. The terms are not material to the Company’s results of operations, financial position, or cash flows. The Company is also currently under income tax audits in various state and foreign jurisdictions. The Company is undergoing negotiations, and in some cases contested proceedings, relating to tax matters with the taxing authorities in these jurisdictions. The Company believes that it has provided adequate reserves related to all matters contained in tax periods open to examination. Although the Company believes it has made adequate provisions for the uncertainties surrounding these audits, should the Company experience unfavorable outcomes, such outcomes could have a material impact on its results of operations, financial position, and cash flows. With respect to major U.S. state and foreign taxing jurisdictions, the Company is generally not subject to tax examinations for years prior to the fiscal year ended February 2, 2007. Judgment is required in evaluating the Company's uncertain tax positions and determining the Company's provision for income taxes. The unrecognized tax benefits were $3.3 billion and $3.2 billion as of August 3, 2018 and February 2, 2018, respectively, and are included in other non-current liabilities in the Condensed Consolidated Statements of Financial Position. The Company does not anticipate a significant change to the total amount of unrecognized tax benefits within the next twelve months. The Company takes certain non-income tax positions in the jurisdictions in which it operates and has received certain non-income tax assessments from various jurisdictions. The Company believes that a material loss in these matters is not probable and that it is not reasonably possible that a material loss exceeding amounts already accrued has been incurred. The Company believes its positions in these non-income tax litigation matters are supportable and that it ultimately will prevail in the matters. In the normal course of business, the Company's positions and conclusions related to its non-income taxes could be challenged and assessments may be made. To the extent new information is obtained and the Company's views on its positions, probable outcomes of assessments, or litigation change, changes in estimates to the Company's accrued liabilities would be recorded in the period in which such a determination is made. In the resolution process for income tax and non-income tax audits, in certain situations the Company is required to provide collateral guarantees or indemnification to regulators and tax authorities until the matter is resolved. |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated other comprehensive income (loss) is presented in stockholders' equity in the Condensed Consolidated Statements of Financial Position and consists of amounts related to foreign currency translation adjustments, unrealized net gains (losses) on investments, unrealized net gains (losses) on cash flow hedges, and actuarial net gains (losses) from pension and other postretirement plans. The following table presents changes in accumulated other comprehensive income (loss), net of tax, by the following components for the periods indicated:
Amounts related to investments are reclassified to net income when gains and losses are realized. See Note 3 and Note 4 of the Notes to the Condensed Consolidated Financial Statements for more information on the Company's investments. Amounts related to the Company's cash flow hedges are reclassified to net income during the same period in which the items being hedged are recognized in earnings. See Note 7 of the Notes to the Condensed Consolidated Financial Statements for more information on the Company's derivative instruments. The following tables present reclassifications out of accumulated other comprehensive income (loss), net of tax, to net income (loss) for the periods presented:
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NON-CONTROLLING INTERESTS |
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Noncontrolling Interest [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
NON-CONTROLLING INTERESTS | NON-CONTROLLING INTERESTS VMware, Inc. — The non-controlling interests' share of equity in VMware, Inc. is reflected as a component of the non-controlling interests in the accompanying Condensed Consolidated Statements of Financial Position and was $5.6 billion and $5.2 billion as of August 3, 2018 and February 2, 2018, respectively. As of August 3, 2018 and February 2, 2018, the Company held approximately 81.1% and 81.9%, respectively, of the outstanding equity interest in VMware, Inc. Pivotal — On April 24, 2018, Pivotal completed a registered underwritten IPO of its Class A common stock. In conjunction with the IPO, all of Pivotal's preferred equity shares were converted into shares of its common stock on a one-to-one basis, such that upon completion of its IPO, Pivotal's outstanding capital stock consisted solely of common stock. The non-controlling interests' share of equity in Pivotal is reflected as a component of the non-controlling interest in the accompanying Condensed Consolidated Statements of Financial Position and was $921 million and $489 million as of August 3, 2018 and February 2, 2018, respectively. The increase in non-controlling interest for Pivotal is primarily due to the IPO completed during the three months ended May 4, 2018. As of August 3, 2018 and February 2, 2018, the Company held approximately 64.9% and 77.1%, respectively, of the outstanding equity interest in Pivotal. SecureWorks — The non-controlling interests' share of equity in SecureWorks is reflected as a component of the non-controlling interests in the accompanying Condensed Consolidated Statements of Financial Position and was $96 million and $90 million as of August 3, 2018 and February 2, 2018, respectively. As of August 3, 2018 and February 2, 2018, the Company held approximately 86.5% and 87.1%, respectively, of the outstanding equity interest in SecureWorks, excluding restricted stock awards ("RSAs"). As of August 3, 2018 and February 2, 2018, the Company held approximately 85.6% and 86.3%, respectively, of the outstanding equity interest in SecureWorks, including RSAs. The effect of changes in the Company's ownership interest in VMware, Inc., Pivotal, and SecureWorks on the Company's equity was as follows:
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EARNINGS (LOSS) PER SHARE |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS (LOSS) PER SHARE | EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share is based on the weighted-average effect of all common shares issued and outstanding and is calculated by dividing net income (loss) by the weighted-average shares outstanding during the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares used in the basic earnings (loss) per share calculation plus the number of common shares that would be issued assuming exercise or conversion of all potentially dilutive instruments. The Company excludes equity instruments from the calculation of diluted earnings (loss) per share if the effect of including such instruments is antidilutive. The Company has two groups of common stock, denoted as the DHI Group Common Stock and the Class V Common Stock. The DHI Group Common Stock consists of four classes of common stock, referred to as Class A Common Stock, Class B Common Stock, Class C Common Stock, and Class D Common Stock. The DHI Group generally refers to the direct and indirect interest of Dell Technologies in all of Dell Technologies' business, assets, properties, liabilities, and preferred stock other than those attributable to the Class V Group, as well as the DHI Group's retained interest in the Class V Group equal to approximately 39% of the Company's economic interest in the Class V Group as of August 3, 2018. The Class V Common Stock is intended to track the economic performance of approximately 61% of the Company's economic interest in the Class V Group as of such date. The Class V Group consists solely of VMware, Inc. common stock held by the Company. As of August 3, 2018, the Class V Group consisted of approximately 331 million shares of VMware, Inc. common stock. See Note 16 of the Notes to the Condensed Consolidated Financial Statements and Exhibit 99.1 filed with the Company's quarterly report on Form 10-Q for the quarterly period ended August 3, 2018 for more information regarding the allocation of earnings from Dell Technologies' interest in VMware, Inc. between the DHI Group and the Class V Common Stock. For purposes of calculating earnings (loss) per share, the Company used the two-class method. As all classes of DHI Group Common Stock share the same rights in dividends, basic and diluted earnings (loss) per share are the same for each class of DHI Group Common Stock. The following table sets forth basic and diluted earnings (loss) per share for each of the periods presented:
The following table sets forth the computation of basic and diluted earnings (loss) per share for each of the periods presented:
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The following table presents a reconciliation to the consolidated net income (loss) attributable to Dell Technologies Inc.:
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CAPITALIZATION |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CAPITALIZATION | CAPITALIZATION The following table summarizes the Company's authorized, issued, and outstanding common stock as of the dates indicated:
Preferred Stock The Company is authorized to issue one million shares of preferred stock, par value $.01 per share. As of August 3, 2018, no shares of preferred stock were issued or outstanding. Common Stock DHI Group Common Stock and DHI Group— The Class A Common Stock, the Class B Common Stock, the Class C Common Stock, and the Class D Common Stock are collectively referred to as the DHI Group Common Stock. The par value for all classes of DHI Group Common Stock is $.01 per share. The Class A Common Stock, the Class B Common Stock, the Class C Common Stock, and the Class D Common Stock share equally in dividends declared or accumulated and have equal participation rights in undistributed earnings. The DHI Group generally refers to the direct and indirect interest of Dell Technologies in all of Dell Technologies' business, assets, properties, liabilities, and preferred stock other than those attributable to the Class V Group, as well as the DHI Group's retained interest in the Class V Group. Class V Common Stock and Class V Group — In connection with the EMC merger transaction, the Company authorized 343 million shares of Class V Common Stock. The Class V Common Stock is a type of common stock commonly referred to as a tracking stock, which is a class of common stock that is intended to track the economic performance of a defined set of assets and liabilities. As of August 3, 2018, the 199 million shares of outstanding Class V Common Stock were intended to track the economic performance of approximately 61% of Dell Technologies' economic interest in the Class V Group. The Class V Group as of such date consisted solely of approximately 331 million shares of VMware, Inc. common stock held by the Company. The remaining 39% economic interest in the Class V Group as of August 3, 2018 was represented by the approximately 127 million retained interest shares held by the DHI Group. Repurchases of Common Stock; Treasury Stock Class V Common Stock Repurchases by Dell Technologies Inc. Since the date of the EMC merger transaction, the Company has authorized several programs to repurchase shares of its Class V Common Stock. Of the $2.1 billion total authorized for repurchases under the programs, $676 million remained available as of August 3, 2018, all of which is attributable to the DHI Group Repurchase Program, which the board of directors suspended on December 13, 2016 until such time as it authorizes the reinstatement of that program. During the three months ended August 3, 2018, the Company did not repurchase any Class V Common Stock. During the three months ended August 4, 2017, the Company repurchased 0.4 million shares of Class V Common Stock for an aggregate purchase price of $23 million. The repurchase of these shares was funded by proceeds received by the Class V Group from the sale by a subsidiary of the Company of shares of Class A common stock of VMware, Inc. owned by such subsidiary. Share repurchases made by VMware, Inc. of its Class A common stock from a subsidiary of the Company do not affect the determination of the respective interests of the Class V Common Stock and the DHI Group in the Class V Group. See Exhibit 99.1 filed with the quarterly report on Form 10-Q for the three months ended August 3, 2018 for more information regarding Unaudited Attributed Financial Information for the Class V Group. All shares of Class V Common Stock repurchased by the Company pursuant to the repurchase programs are held as treasury stock at cost. DHI Group Common Stock Repurchases During the three months ended August 3, 2018 the Company repurchased an immaterial number of shares of DHI Group Common Stock for approximately $10 million. During the three months ended August 4, 2017, the Company did not repurchase any shares of DHI Group Common Stock. All shares of DHI Group Common Stock repurchased by the Company are held as treasury stock at cost. VMware, Inc. Class A Common Stock Repurchases by VMware, Inc. Since the date of the EMC merger transaction, VMware, Inc.'s board of directors has authorized the repurchase of a total of $2.2 billion of VMware, Inc.'s Class A common stock, of which $876 million remained available as of August 3, 2018. During the three months ended August 3, 2018 and August 4, 2017, VMware, Inc. did not repurchase any shares of its Class A common stock. All shares repurchased under VMware, Inc.'s stock repurchase programs are retired. Class V Transaction On July 2, 2018, the Company announced that it had completed its evaluation of potential strategic business opportunities. As a result of such evaluation, the Company has determined to pursue a transaction, referred to as the "Class V transaction," pursuant to an Agreement and Plan of Merger (the "Merger Agreement"), dated as of July 1, 2018, between the Company and Teton Merger Sub Inc. ("Merger Sub"), a Delaware corporation and wholly-owned subsidiary of the Company. The Merger Agreement provides, among other things and subject to the terms and conditions set forth therein, that Merger Sub will be merged with and into the Company (the "Merger"), with the Company continuing as the surviving corporation. The Merger Agreement provides that, subject to the terms and conditions thereof, at the effective time of the Merger (the "Effective Time"), each share of Class V Common Stock that is issued and outstanding immediately prior to the Effective Time will be canceled and converted into the right to receive, at the holder’s election, (i) 1.3665 shares (the "Share Consideration") of Class C Common Stock or (ii) $109.00 in cash, without interest (the "Cash Consideration"), subject to an aggregate amount of Cash Consideration that may be received by holders of Class V Common Stock in the Merger not exceeding $9 billion (the "Aggregate Cash Consideration Cap"). If the total amount of Cash Consideration elected by holders of Class V Common Stock would exceed the Aggregate Cash Consideration Cap, a portion of the shares with respect to which a holder elects to receive the Cash Consideration equal to a fraction, the numerator of which is the Aggregate Cash Consideration Cap and the denominator of which is the aggregate amount of Cash Consideration elected by holders, will be converted into the right to receive the Cash Consideration and the remaining portion of such shares held by such holders will be converted into the right to receive the Share Consideration. Any share of Class V Common Stock for which a valid election to receive Cash Consideration is not in effect at the Effective Time will be converted into Share Consideration. Upon consummation of the Merger, all shares of the Class V Common Stock would be delisted from the New York Stock Exchange and the Class C Common Stock would be listed on the New York Stock Exchange. In addition, pursuant to the Merger Agreement, as of the Effective Time and unless otherwise agreed by the Company and a holder of a Class V Common Stock-based equity award granted by the Company (a "Class V Award"), each Class V Award will be converted into a new equity award on the same terms and conditions (including applicable vesting requirements and deferral provisions) with respect to the number of shares of Class C Common Stock that is equal to the number of shares of Class V Common Stock that were subject to the Class V Award multiplied by 1.3665 (rounded down to the nearest whole share). The exercise price for any Class V Award options so converted will equal the exercise price of such Class V Award options immediately prior to the Effective Time divided by 1.3665 (rounded up to the nearest whole penny). In connection with the Merger Agreement, the board of directors of VMware, Inc. declared a conditional $11 billion one‑time special cash dividend pro rata to holders of VMware, Inc. common stock. Immediately prior to the completion of the Class V transaction, subject to the satisfaction of other conditions of the Class V transaction, as well as certain other conditions, VMware, Inc. will pay the special cash dividend to its stockholders. Approximately $8.95 billion of the VMware, Inc. cash dividend will be received by the Company and used to fund all or substantially all of the Cash Consideration paid to holders of the Class V Common Stock in the Class V transaction. The Company will fund any remaining cash consideration, which is not expected to be material, from cash on hand. The obligation of the Company to complete the Merger and the Class V transaction is subject to stockholder approval and certain other closing conditions as further described in a Current Report on Form 8-K filed by the Company with the SEC on July 2, 2018. |
REDEEMABLE SHARES |
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Temporary Equity Disclosure [Abstract] | |||||||||||||
REDEEMABLE SHARES | REDEEMABLE SHARES Awards under the Company's stock incentive plans include certain rights that allow the holder to exercise a put feature for the underlying Class A or Class C Common Stock after a six month holding period following the issuance of such common stock. The put feature requires the Company to purchase the stock at its fair market value. Accordingly, these awards and such common stock are subject to reclassification from equity to temporary equity, and the Company determines the award amounts to be classified as temporary equity as follows:
The amount of redeemable shares classified as temporary equity as of August 3, 2018 was $2.1 billion, which consisted of 2.2 million issued and outstanding unrestricted common shares, 1.3 million RSUs, 0.4 million RSAs, and 27.0 million outstanding stock options. The amount of redeemable shares classified as temporary equity as of February 2, 2018 was $384 million, which consisted of 2.9 million issued and outstanding unrestricted common shares, 0.4 million RSUs, 0.1 million RSAs, and 15.3 million outstanding stock options. The increase in the value of redeemable shares during the six months ended August 3, 2018 was primarily attributable to an increase in DHI Group Common Stock fair value, as well as the reassessment of vesting of performance-based awards. |
SEGMENT INFORMATION |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION | SEGMENT INFORMATION The Company has three reportable segments that are based on the following business units: Infrastructure Solutions Group ("ISG"); Client Solutions Group ("CSG"); and VMware. ISG previously included Virtustream product and service offerings. Virtustream's cloud software and infrastructure-as-a-service solutions enable customers to migrate, run, and manage mission-critical applications in cloud-based IT environments. During the three months ended May 4, 2018, the Company made certain segment reporting changes, which included the movement of Virtustream's results from ISG to other businesses. None of these changes impacted the Company's previously reported consolidated financial results, but the Company's prior period segment results have been recast to reflect this change. ISG includes servers, networking, and storage, as well as services and third-party software and peripherals that are closely tied to the sale of ISG hardware. CSG includes sales to commercial and consumer customers of desktops, thin client products, and notebooks, as well as services and third-party software and peripherals that are closely tied to the sale of CSG hardware. VMware offerings include compute, management, cloud, networking, and security storage, mobility, and other end-user computing infrastructure software to businesses that provides a flexible digital foundation for the applications that empower businesses to serve their customers globally. The reportable segments disclosed herein are based on information reviewed by the Company's management to evaluate the business segment results. The Company's measure of segment operating income for management reporting purposes excludes the impact of other businesses, purchase accounting, amortization of intangible assets, unallocated corporate transactions, severance and facility action costs, and transaction-related expenses. The Company does not allocate assets to the above reportable segments for internal reporting purposes. The following table presents a reconciliation of net revenue by the Company's reportable segments to the Company's consolidated net revenue as well as a reconciliation of consolidated segment operating income to the Company's consolidated operating loss:
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The following table presents the disaggregation of net revenue by reportable segment, and by major product categories within the segments:
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SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION |
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Condensed Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION | SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION The following table provides additional information on selected accounts included in the Consolidated Statements of Financial Position as of August 3, 2018 and February 2, 2018:
Supplemental Cash Flow Information The following table presents cash, cash equivalents, and restricted cash as reported on the Condensed Consolidated Statements of Financial Position as of August 3, 2018 and February 2, 2018:
Restricted cash includes cash required to be held in escrow pursuant to DFS securitization arrangements and VMware, Inc. restricted cash. |
SUBSEQUENT EVENTS |
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Aug. 03, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS During August 2018, VMware, Inc. announced that it signed a definitive agreement to acquire CloudHealth Technologies, Inc. ("CloudHealth Technologies"). Total consideration for the acquisition, subject to purchase price adjustments, will consist of approximately $500 million in cash and assumed unvested equity awards of the acquiree. CloudHealth Technologies delivers a cloud operations platform that enables customers to help analyze and manage cloud cost, usage, security, and performance centrally for native public clouds. The transaction is expected to close during the three months ended November 2, 2018 and is subject to regulatory approvals and customary closing conditions. On September 4, 2018, the Company repaid $600 million of the Term Loan A-3 Facility that matures in December 2018. Other than the matters identified above, there were no known events occurring after the balance sheet date and up until the date of the issuance of this report that would materially affect the information presented herein. |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation — The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes included in the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2018, and the recast audited Consolidated Financial Statements and accompanying Notes for the fiscal years ended February 2, 2018 and February 3, 2017 (the "Recast Financial Statements") and other financial information included in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission (the "SEC") on August 6, 2018. The Recast Financial Statements were recast from and supersede the audited Consolidated Financial Statements for the fiscal years ended February 2, 2018 and February 3, 2017 included in the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2018. Such audited Consolidated Financial Statements were recast to present certain previously reported financial statements and other related financial information on a basis consistent with the new accounting standards adopted during the three months ended May 4, 2018. Further, segment information was recast to conform with certain segment reporting changes the Company made during the three months ended May 4, 2018. See below for additional information regarding recently adopted accounting pronouncements. These Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of Dell Technologies Inc. as of August 3, 2018, the results of its operations and corresponding comprehensive income (loss) for the three and six months ended August 3, 2018 and August 4, 2017, and its cash flows for the six months ended August 3, 2018 and August 4, 2017. |
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Use of Estimates | The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and the accompanying Notes. Actual results could differ materially from those estimates. The results of operations and comprehensive income (loss) for the three and six months ended August 3, 2018 and August 4, 2017 and the cash flows for the six months ended August 3, 2018 and August 4, 2017 are not necessarily indicative of the results to be expected for the full fiscal year or for any other fiscal period. |
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Fiscal Period | The Company's fiscal year is the 52- or 53-week period ending on the Friday nearest January 31. The fiscal year ended February 2, 2018 ("Fiscal 2018") was a 52-week period, and the fiscal year ending February 1, 2019 ("Fiscal 2019") will be a 52-week period. |
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Principles of Consolidation and EMC Merger Transaction | Principles of Consolidation — These Condensed Consolidated Financial Statements include the accounts of Dell Technologies and its wholly-owned subsidiaries, as well as the accounts of SecureWorks Corp. ("SecureWorks"), VMware, Inc., and Pivotal Software, Inc. ("Pivotal"), each of which is majority-owned by Dell Technologies. All intercompany transactions have been eliminated. Unless the context indicates otherwise, references in these Notes to the Condensed Consolidated Financial Statements to "VMware" mean the VMware reportable segment, which reflects the operations of VMware, Inc. (NYSE: VMW) within Dell Technologies. See Exhibit 99.1 filed with the quarterly report on Form 10-Q for the quarterly period ended August 3, 2018 for information on the differences between VMware reportable segment results and VMware, Inc. results. EMC Merger Transaction — On September 7, 2016, the Company completed its acquisition by merger of EMC Corporation ("EMC"), referred to as the EMC merger transaction. The consolidated results of EMC are included in Dell Technologies' consolidated results presented in these financial statements. |
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Recently Issued and Adopted Accounting Pronouncements | Recently Issued Accounting Pronouncements Leases — In February 2016, the Financial Accounting Standards Board ("FASB") issued amended guidance on the accounting for leasing transactions. The primary objective of this update is to increase transparency and comparability among organizations by requiring lessees to recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. The guidance also makes some changes to lessor accounting and requires additional disclosures about all leasing arrangements. Companies are required to use a modified retrospective approach, with the option of applying the requirements of the standard either (1) retrospectively to each prior comparative reporting period presented, or (2) retrospectively at the beginning of the period of adoption. The Company will adopt this standard for the fiscal year beginning February 2, 2019, and will apply it at the beginning of the period of adoption through a cumulative-effect adjustment to retained earnings. In the area of lessee accounting, the Company anticipates that the most significant change will be recognition of right-of-use assets and lease liabilities on the Consolidated Statements of Financial Position. In the area of lessor accounting, the Company anticipates that the most significant change will be an increase to future originations of operating leases due to elimination of the third-party residual value guarantee insurance in the sales-type lease test. Measurement of Credit Losses on Financial Instruments — In June 2016, the FASB issued amended guidance which replaces the current incurred loss impairment methodology for measurement of credit losses on financial instruments with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Public entities must adopt the new guidance for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for fiscal periods beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on the Consolidated Financial Statements. Simplifying the Test for Goodwill Impairment — In January 2017, the FASB issued amended guidance to simplify the subsequent measurement of goodwill by removing Step 2 of the goodwill impairment test. Instead, under the amendments in the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. Public entities must adopt the new guidance in fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of the new guidance but does not expect that the standard will have an impact on its Consolidated Financial Statements. Recently Adopted Accounting Pronouncements Revenue from Contracts with Customers — In May 2014, the FASB issued amended guidance on the recognition of revenue from contracts with customers. The objective of the new standard is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede substantially all of the existing revenue recognition guidance, including industry-specific guidance. The new standard requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further, the new standard requires additional disclosures to help enable users of the financial statements to better understand the nature, amount, timing, risks, and judgments related to revenue recognition and related cash flows from contracts with customers. Concurrently, the FASB issued guidance on the accounting for costs to fulfill or obtain a customer contract. The Company adopted these standards during the three months ended May 4, 2018 using the full retrospective method, which requires the Company to recast each prior period presented consistent with the new guidance. The Company recorded a credit of approximately $1 billion to retained earnings as of January 29, 2016 to reflect the cumulative effect of the adoption. See tables provided below which present the impact of the new accounting standards to the Company's previously reported financial results. See also Note 2 of the Notes to the Condensed Consolidated Financial Statements for a summary of significant policies related to the new accounting standards. Recognition and Measurement of Financial Assets and Financial Liabilities — In January 2016, the FASB issued amended guidance that generally requires changes in the fair value of equity investments, other than those accounted for under the equity method, to be recognized through net income, rather than other comprehensive income. For equity investments without readily determinable fair values, the Company is no longer permitted to use the cost method of accounting. The Company has elected to apply the measurement alternative for those investments. Under the alternative, the Company measures investments without readily determinable fair values at cost, less impairment, adjusted by observable price changes on a prospective basis. The Company must make a separate election to use the alternative for each eligible investment, and is required to reassess at each reporting period whether an investment qualifies for the alternative. The Company adopted this standard during the three months ended May 4, 2018. Adoption of the standard was applied through a cumulative one-time adjustment to accumulated deficit of $56 million for the accumulated unrealized gain previously recorded in other comprehensive income. The impact of the standard on the Condensed Consolidated Statements of Income (Loss) during the three and six months ended August 3, 2018 was a gain of approximately $123 million and $223 million, respectively, recognized in interest and other, net, and the impact in future periods will depend on the relative changes in market price of the equity investments. Classification of Certain Cash Receipts and Cash Payments — In August 2016, the FASB issued amended guidance on the presentation and classification of eight specific cash flow issues with the objective of reducing existing diversity in practice. Companies should reflect any adjustments on a retrospective basis, if practicable; otherwise, adoption is required to be applied as of the earliest date practicable. The Company adopted this standard during the three months ended May 4, 2018. Prior period amounts on the Condensed Consolidated Statements of Cash Flows have been recast to conform with current period presentation as shown in the reconciliation provided below. Intra-Entity Transfers of Assets Other Than Inventory — In October 2016, the FASB issued amended guidance on the accounting for income taxes. The new guidance requires companies to recognize the income tax effects of intra-entity asset transfers, other than transfers of inventory, when the transfer occurs instead of when the asset is sold to a third party. The new guidance was applied on a modified-retrospective basis with the cumulative-effect adjustment to accumulated deficit as of the beginning of the period of adoption. The Company early adopted this guidance during the three months ended May 5, 2017. At adoption, approximately $84 million was reclassified from other non-current liabilities to accumulated deficit, resulting in a net credit to accumulated deficit. Statement of Cash Flows, Restricted Cash — In November 2016, the FASB issued amended guidance requiring entities to include restricted cash and restricted cash equivalents in cash balances on the cash flow statement, and also to provide a supplemental reconciliation of cash, cash equivalents and restricted cash. Public entities must adopt the new guidance for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard during the three months ended May 4, 2018. See Note 19 of the Notes to the Condensed Consolidated Financial Statements for supplemental cash flow information. Prior period amounts on the Condensed Consolidated Statements of Cash Flows have been recast to conform with current period presentation as shown in the reconciliation provided below. Clarifying the Definition of a Business — In January 2017, the FASB issued amended guidance to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Public entities must adopt the new guidance for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The new guidance did not have a material impact on the Company's conclusions regarding transactions that were assessed in the current period. Derivatives and Hedging — In August 2017, the FASB issued amended guidance that will make more financial and non-financial hedging strategies eligible for hedge accounting. The amended guidance changes how companies assess effectiveness, and also amends the presentation and disclosure requirements. The guidance is intended to simplify the application of hedge accounting and increase transparency as to the scope and results of hedging programs. Immediate early adoption is permitted in any interim or annual period. The Company elected to early adopt this standard during the three months ended May 4, 2018. The impact of the adoption of the standard was immaterial to the Condensed Consolidated Financial Statements. Income Statement - Reporting Comprehensive Income — In February 2018, the FASB issued guidance that will permit entities to reclassify the tax effects stranded in accumulated other comprehensive income to accumulated deficit as a result of U.S. Tax Reform, discussed in Note 12 of the Notes to the Condensed Consolidated Financial Statements. The guidance gives entities the option to reclassify these amounts, but requires new disclosures regardless of whether they elect to do so. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company elected to early adopt this standard during the three months ended May 4, 2018, and recorded the impact of the adoption as a cumulative adjustment to accumulated deficit. |
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Revenue Recognition | Revenue Recognition — The Company enters into a variety of agreements to provide a wide portfolio of products and services offerings to its customers. These agreements have varying requirements depending on the goods and services being sold, the rights and obligations conveyed, and the legal jurisdiction of the arrangement. Revenue is recognized either over time or at a point in time, depending on when the underlying goods or services are transferred to the customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for delivering those goods or services. The following five steps are applied to recognize revenue:
The best evidence of SSP is the observable price of a good or service when the Company sells that good or service separately in similar circumstances to similar customers. If a directly observable price is available, it must be utilized for the SSP. If a directly observable price is not available, the SSP must be estimated. The Company estimates SSP by considering multiple factors including, but not limited to, pricing practices, internal costs, and profit objectives as well as overall market conditions which include geographic or regional specific factors, competitive positioning, and competitor actions. SSP can include fixed and variable components. Variable components are estimated based on the most likely outcome or expected value of the variable components.
The Company reports revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrently with specific revenue-producing transactions. The Company has elected the following practical expedients with the adoption of the new revenue standard:
The following summarizes the nature of revenue recognized and the manner in which the Company accounts for sales transactions. Products Product revenue consists of hardware and software license sales that are delivered, sold as a subscription or sold on a consumption basis. Hardware includes notebooks and desktop PCs, servers, storage hardware, and other hardware-related devices. Software license sales include non-essential, stand-alone software applications. Software applications provide customers with resource management, backup and archiving, information security, information management and intelligence, data analytics, and server virtualization capabilities. Revenue from the sale of hardware products is recognized when control has transferred to the customer, which typically occurs when the hardware has been shipped to the customer, risk of loss has transferred to the customer, the Company has a present right to payment, and customer acceptance has been satisfied. Customer acceptance is satisfied if acceptance is obtained from the customer, if all acceptance provisions lapse, or if the Company has evidence that all acceptance provisions will be, or have been, satisfied. Revenue from software license sales is generally recognized when control has transferred to the customer, which is typically upon shipment, electronic delivery, or when the software is available for download by the customer. For certain arrangements, including software subscriptions and certain software license agreements which provide customers control to certain product performance obligations over time, revenue is recognized based on usage or ratably over the term of the arrangement based on the pattern of delivery of the product to the customer. Invoices for products are generally issued as control transfers, which is typically upon shipment or electronic delivery. There was no significant revenue in any period presented related to performance obligations satisfied or partially satisfied in prior periods. Services Services revenue consists of revenue from sales of support services, including hardware support that extends beyond the Company's standard warranties, software maintenance, and installation; professional services; training; SaaS; and IaaS. Revenue associated with undelivered performance obligations is deferred and recorded as control is transferred to the customer over time. Revenue from fixed-price support or maintenance contracts sold for both hardware and software is recognized on a straight-line basis over the period of performance because the Company is required to provide services at any given time. Other services revenue is recognized when the Company performs the services and the customers receive and consume the benefits. Invoices for services may be issued at the start of a service term, which is typically the case for support and deployment services, or as services are rendered, which is typically the case for professional services, training, SaaS, and IaaS. Other Revenue from leasing arrangements is not subject to the revenue standard for contracts with customers, and remains separately accounted for under existing lease accounting guidance. The Company records revenue from the sale of equipment under sales-type leases as product revenue in an amount equal to the present value of minimum lease payments at the inception of the lease. Sales-type leases also produce financing income, which is included in products net revenue in the Consolidated Statements of Income (Loss) and is recognized at consistent rates of return over the lease term. The Company also offers qualified customers fixed-term loans and revolving credit lines for the purchase of products and services offered by the Company. Financing income attributable to these loans is recognized in products net revenue on an accrual basis. Disaggregation of Revenue — The Company's revenue is presented on a disaggregated basis on the Condensed Consolidated Statements of Income (Loss) and in Note 18 of the Notes to the Condensed Consolidated Financial Statements based on an evaluation of disclosures outside of the financial statements, information regularly reviewed by the chief operating decision maker for evaluating the financial performance of operating segments, and other information that is used to evaluate the Company's financial performance or make resource allocations. This information includes revenue from products and services, revenue from reportable segments, and revenue by major product categories within the segments. Contract Assets — Contract assets are rights to consideration in exchange for goods or services that the Company has transferred to a customer when such a right is conditional on something other than the passage of time. Such amounts have been insignificant to date. Contract Liabilities — Contract liabilities primarily consist of deferred revenue. Deferred revenue is recorded when the Company has a right to invoice or payments have been received for undelivered products or services, or in situations where revenue recognition criteria have not been met. Deferred revenue also represents amounts received in advance for extended warranty services and software maintenance. Revenue is recognized on these items when the revenue recognition criteria are met, generally resulting in ratable recognition over the contract term. The Company also has deferred revenue related to undelivered hardware and professional services, consisting of installations and consulting engagements, which are recognized as the Company's performance obligations under the contract are completed. See Note 9 of the Notes to the Condensed Consolidated Financial Statements for additional information about deferred revenue. Costs to Obtain a Contract — The incremental direct costs of obtaining a contract primarily consist of sales commissions and employer taxes related to commission payments. The Company has elected, as a practical expedient, to expense as incurred costs to obtain a contract equal to or less than one year in duration. For contracts greater than one year in duration, the associated costs to obtain a contract are deferred and amortized over the period of contract performance or a longer period, generally the estimated life of the customer relationship, if renewals are expected and the renewal commission is not commensurate with the initial commission. Deferred costs to obtain a contract are typically amortized over a period of three to seven years, depending on the contract term and expectation of the period of benefit for the costs, which may exceed the contract term. Amortization expense is recognized on a straight-line basis and included in selling, general, and administrative expenses in the Condensed Consolidated Statements of Income (Loss). The Company periodically reviews these deferred costs to determine whether events or changes in circumstances have occurred that could impact the carrying value or period of benefit of the deferred sales commissions. There were no material impairment losses for deferred sales commissions during the six months ended August 3, 2018 and August 4, 2017. Deferred costs to obtain a contract as of August 3, 2018 and February 2, 2018 were $1.0 billion and $0.8 billion, respectively. Deferred costs to obtain a contract are classified as current assets and other non-current assets on the Condensed Consolidated Statements of Financial Position, based on when the expense is expected to be recognized. |
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Money Market Funds | Money Market Funds — The Company's investment in money market funds that are classified as cash equivalents hold underlying investments with a weighted average maturity of 90 days or less and are recognized at fair value. The valuations of these securities are based on quoted prices in active markets for identical assets, when available, or pricing models whereby all significant inputs are observable or can be derived from or corroborated by observable market data. The Company reviews security pricing and assesses liquidity on a quarterly basis. As of August 3, 2018, the Company's U.S. portfolio had no material exposure to money market funds with a fluctuating net asset value. |
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Marketable Securities | Equity and Other Securities — The majority of the Company's investments in equity and other securities that are measured at fair value on a recurring basis consist of strategic investments in publicly-traded companies. The valuation of these securities is based on quoted prices in active markets. Debt Securities — The majority of the Company's debt securities consists of various fixed income securities such as U.S. government and agencies, U.S. corporate, and foreign. Valuation is based on pricing models whereby all significant inputs, including benchmark yields, reported trades, broker-dealer quotes, issue spreads, benchmark securities, bids, offers, and other market related data, are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset. Inputs are documented in accordance with the fair value measurements hierarchy. The Company reviews security pricing and assesses liquidity on a quarterly basis. See Note 4 of the Notes to the Condensed Consolidated Financial Statements for additional information about investments. |
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Derivative Instruments | Derivative Instruments — The Company's derivative financial instruments consist primarily of foreign currency forward and purchased option contracts and interest rate swaps. The fair value of the portfolio is determined using valuation models based on market observable inputs, including interest rate curves, forward and spot prices for currencies, and implied volatilities. Credit risk is also factored into the fair value calculation of the Company's derivative instrument portfolio. See Note 7 of the Notes to the Condensed Consolidated Financial Statements for a description of the Company's derivative financial instrument activities. Derivative Instruments As part of its risk management strategy, the Company uses derivative instruments, primarily foreign currency forward and option contracts and interest rate swaps, to hedge certain foreign currency and interest rate exposures, respectively. The Company's objective is to offset gains and losses resulting from these exposures with gains and losses on the derivative contracts used to hedge the exposures, thereby reducing volatility of earnings and protecting the fair values of assets and liabilities. The earnings effects of the derivative instruments are presented in the same income statement line items as the earnings effects of the hedged items. For derivatives designated as cash flow hedges, the Company assesses hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative. |
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Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis | Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis — Certain assets are measured at fair value on a nonrecurring basis and therefore are not included in the recurring fair value table above. These assets consist primarily of non-financial assets such as goodwill and intangible assets. See Note 8 of the Notes to the Condensed Consolidated Financial Statements for additional information about goodwill and intangible assets. As of August 3, 2018 and February 2, 2018, the Company held strategic investments of $582 million and $485 million, respectively. As these investments represent early-stage companies without readily determinable fair values, they are not included in the recurring fair value table above. The Company has elected to apply the measurement alternative for these investments. Under the alternative, the Company measures investments without readily determinable fair values at cost, less impairment, adjusted by observable price changes. The Company must make a separate election to use the alternative for each eligible investment and is required to reassess at each reporting period whether an investment qualifies for the alternative. In evaluating these investments for impairment or observable price changes, the Company uses inputs including pre- and post-money valuations of recent financing events and the impact of those on its fully diluted ownership percentages, as well as other available information regarding the issuer's historical and forecasted performance. |
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Warranty Liability | The Company records a liability for its standard limited warranties at the time of sale for the estimated costs that may be incurred. The liability for standard warranties is included in accrued and other current liabilities and other non-current liabilities in the Condensed Consolidated Statements of Financial Position. |
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Legal Liability | The Company accrues a liability when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. The Company reviews these accruals at least quarterly and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other relevant information. To the extent new information is obtained and the Company's views on the probable outcomes of claims, suits, assessments, investigations, or legal proceedings change, changes in the Company's accrued liabilities would be recorded in the period in which such a determination is made. For some matters, the amount of liability is not probable or the amount cannot be reasonably estimated and therefore accruals have not been made. |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of the Impact of New Accounting Standards on Previously Reported Financial Results | The following tables present the impact of the new accounting standards to the Company's previously reported financial results. Selected Captions from the Condensed Consolidated Statement of Financial Position
____________________
The above impacts are summarized as follows: Accounts receivable, net. The adoption of the new revenue standard resulted in an increase to accounts receivable, net primarily due to the following two factors:
Other assets. The adoption of the new revenue standard resulted in an increase in other assets due to capitalization of the costs to obtain a contract, as well as the accounts receivable, net of impacts discussed above. Deferred revenue. The adoption of the new revenue standard resulted in a decline in deferred revenue due to earlier recognition of revenue for software licenses, and less of the aggregate transaction price being allocated to extended warranty. Deferred revenue was also reduced by the impact of variable consideration (i.e., price concessions, rebates, and refunds). The reduction in deferred revenue was partially offset by an increase resulting from the change in presentation of deferred costs on third-party software offerings, which are reported in other assets, and are either sold on a standalone basis or as an attached component of the Company's hardware offering. The Company previously reported the associated deferred revenue net of these deferred costs in deferred revenue. Condensed Consolidated Statement of Income (Loss)
____________________
The above impacts are summarized as follows: Net revenue. The adoption of the new revenue standard resulted in an increase to net revenue due to earlier revenue recognition than permitted under the previous standard. Products revenue vs. services revenue. The adoption of the new revenue standard resulted in a change to the classification of products revenue vs. services revenue, due to the following factors:
Operating expenses. The adoption of the new revenue standard resulted in a decrease to operating expenses due to the deferral of the incremental direct costs of obtaining a contract. Selected Captions from the Condensed Consolidated Statement of Cash Flows
____________________
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FAIR VALUE MEASUREMENTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hierarchy for Assets and Liabilities Measured at Fair Value on a Recurring Basis | The following table presents the Company's hierarchy for its assets and liabilities measured at fair value on a recurring basis as of August 3, 2018 and February 2, 2018:
____________________ (a) The Company did not transfer any securities between levels during the six months ended August 3, 2018. |
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Carrying Value and Estimated Fair Value of Outstanding Debt | The following table summarizes the carrying value and estimated fair value of the Company's outstanding debt as described in Note 6 of the Notes to the Condensed Consolidated Financial Statements, including the current portion, as of the dates indicated:
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INVESTMENTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Investments by Major Security Type, the Carrying Value and Amortized Cost | The following table summarizes, by major security type, the carrying value and amortized cost of the Company's investments. All debt security investments with remaining effective maturities in excess of one year and substantially all equity and other securities are recorded as long-term investments in the Condensed Consolidated Statements of Financial Position.
____________________
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Schedule of Investments Classified by Contractual Maturities of Debt Securities Held | The maturities of debt securities held as of August 3, 2018 are as follows:
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FINANCIAL SERVICES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of the Company's Financing Receivables Segregated by Portfolio Segment | The following table summarizes the components of the Company's financing receivables segregated by portfolio segment as of August 3, 2018 and February 2, 2018:
____________________ (a) Customer financing receivables, gross, includes accrued interest. |
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Schedule of Changes in the Allowance for Financing Receivable Losses | The following tables present the allowance for financing receivable losses for the three months ended August 3, 2018 and August 4, 2017, and the six months ended August 3, 2018 and August 4, 2017, and changes in allowance for financing receivable losses for the respective periods:
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Aging Customer Financing Receivables, Gross, Including Accrued Interest | The following table summarizes the aging of the Company's customer financing receivables, gross, including accrued interest, as of August 3, 2018 and February 2, 2018, segregated by class:
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Credit Quality Indicators | The following table summarizes customer receivables, gross, including accrued interest, by credit quality indicator segregated by class, as of August 3, 2018 and February 2, 2018. The categories shown in the table below segregate customer receivables based on the relative degrees of credit risk. The credit quality indicators for DPA revolving accounts are measured primarily as of each quarter-end date, while all other indicators are generally updated on a periodic basis. For DPA revolving receivables shown in the table below, the Company makes credit decisions based on proprietary scorecards, which include the customer's credit history, payment history, credit usage, and other credit agency-related elements. The higher quality category includes prime accounts generally of a higher credit quality that are comparable to U.S. customer FICO scores of 720 or above. The mid-category represents the mid-tier accounts that are comparable to U.S. customer FICO scores from 660 to 719. The lower category is generally sub-prime and represents lower credit quality accounts that are comparable to U.S. customer FICO scores below 660. For the DBC revolving receivables and fixed-term commercial receivables shown in the table below, an internal grading system is utilized that assigns a credit level score based on a number of considerations, including liquidity, operating performance, and industry outlook. The grading criteria and classifications for the fixed-term products differ from those for the revolving products as loss experience varies between these product and customer groups. The credit quality categories cannot be compared between the different classes as loss experience varies substantially between the classes.
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Funding of Financing Receivables | The following table summarizes DFS debt as of the periods indicated. The table excludes the allocated portion of the Company's other borrowings, which represents the additional amount considered to fund the DFS business.
The following table summarizes the Company's outstanding debt as of the dates indicated:
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Schedule of Financing Receivables Held by the Consolidated VIEs | The following table shows financing receivables held by the consolidated VIEs as of the respective dates:
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DEBT (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding debt | The following table summarizes DFS debt as of the periods indicated. The table excludes the allocated portion of the Company's other borrowings, which represents the additional amount considered to fund the DFS business.
The following table summarizes the Company's outstanding debt as of the dates indicated:
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Aggregate future maturities | As of August 3, 2018, aggregate future maturities of the Company's debt were as follows:
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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notional Amounts of Outstanding Derivative Instruments | The notional amounts of the Company's outstanding derivative instruments were as follows as of the dates indicated:
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Effect of Derivative Instruments on the Condensed Consolidated Statements of Financial Position and the Condensed Consolidated Statements of Income (Loss) | Effect of Derivative Instruments Designated as Hedging Instruments on the Condensed Consolidated Statements of Financial Position and the Condensed Consolidated Statements of Income (Loss)
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Derivatives Not Designated as Hedging Instruments | Effect of Derivative Instruments Not Designated as Hedging Instruments on the Condensed Consolidated Statement of Income (Loss)
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Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The fair value of those derivative instruments presented on a gross basis as of each date indicated below was as follows:
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Fair Value of Derivative Instruments in the Condensed Consolidated Statements of Financial Position - Offsetting Assets | The following tables present the gross amounts of the Company's derivative instruments, amounts offset due to master netting agreements with the Company's counterparties, and the net amounts recognized in the Condensed Consolidated Statements of Financial Position.
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Fair Value of Derivative Instruments in the Condensed Consolidated Statements of Financial Position - Offsetting Liabilities | The following tables present the gross amounts of the Company's derivative instruments, amounts offset due to master netting agreements with the Company's counterparties, and the net amounts recognized in the Condensed Consolidated Statements of Financial Position.
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GOODWILL AND INTANGIBLE ASSETS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Roll Forward of Goodwill Allocated to Business Segments | The following table presents goodwill allocated to the Company's business segments as of August 3, 2018 and February 2, 2018, and changes in the carrying amount of goodwill for the respective periods:
____________________
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Schedule of Definite-lived Intangible Assets | The Company's intangible assets as of August 3, 2018 and February 2, 2018 were as follows:
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Schedule of Indefinite-lived Intangible Assets | The Company's intangible assets as of August 3, 2018 and February 2, 2018 were as follows:
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||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Estimated Future Annual Pre-Tax Amortization Expense of Definite-Lived Intangible Assets | Estimated future annual pre-tax amortization expense of definite-lived intangible assets as of August 3, 2018 over the next five fiscal years and thereafter is as follows:
|
DEFERRED REVENUE (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in deferred revenue | Changes in the Company's deferred revenue are presented in the following table for the period indicated:
____________________
|
WARRANTY LIABILITY (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Product Warranties Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in the Company's liabilities for standard limited warranties | Changes in the Company's liability for standard limited warranties are presented in the following table for the periods indicated.
____________________
|
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Accumulated Other Comprehensive Loss, Net of Tax | The following table presents changes in accumulated other comprehensive income (loss), net of tax, by the following components for the periods indicated:
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Reclassifications Out of Accumulated Other Comprehensive Loss, Net of Tax, to Net Income (Loss) | The following tables present reclassifications out of accumulated other comprehensive income (loss), net of tax, to net income (loss) for the periods presented:
|
NON-CONTROLLING INTERESTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling Interest [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
Effect of Changes in Ownership Interests of Less than Wholly Owned Subsidiaries | The effect of changes in the Company's ownership interest in VMware, Inc., Pivotal, and SecureWorks on the Company's equity was as follows:
|
EARNINGS (LOSS) PER SHARE (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of basic and diluted earnings (loss) per share and reconciliation to consolidated net income (loss) | The following table sets forth basic and diluted earnings (loss) per share for each of the periods presented:
The following table sets forth the computation of basic and diluted earnings (loss) per share for each of the periods presented:
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Reconciliation to the consolidated net income (loss) | The following table presents a reconciliation to the consolidated net income (loss) attributable to Dell Technologies Inc.:
|
CAPITALIZATION (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock by Class | The following table summarizes the Company's authorized, issued, and outstanding common stock as of the dates indicated:
|
SEGMENT INFORMATION (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of revenue from segments to consolidated | The following table presents a reconciliation of net revenue by the Company's reportable segments to the Company's consolidated net revenue as well as a reconciliation of consolidated segment operating income to the Company's consolidated operating loss:
_________________
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Disaggregation of revenue | The following table presents the disaggregation of net revenue by reportable segment, and by major product categories within the segments:
|
SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Information on selected accounts included in the statements of financial position | The following table provides additional information on selected accounts included in the Consolidated Statements of Financial Position as of August 3, 2018 and February 2, 2018:
|
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Supplemental cash flow information | The following table presents cash, cash equivalents, and restricted cash as reported on the Condensed Consolidated Statements of Financial Position as of August 3, 2018 and February 2, 2018:
|
INTERIM UPDATE TO SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Aug. 03, 2018 |
Aug. 04, 2017 |
Aug. 03, 2018 |
Aug. 04, 2017 |
Feb. 02, 2018 |
|
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Deferred costs to obtain a contract | $ 1,000 | $ 1,000 | $ 800 | ||
Amortization of costs to obtain a contract | $ 113 | $ 62 | $ 219 | $ 115 | |
Minimum | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Deferred costs amortization period (in years) | 3 years | 3 years | |||
Maximum | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Deferred costs amortization period (in years) | 7 years | 7 years |
FAIR VALUE MEASUREMENTS - Additional Information (Narrative) (Details) - USD ($) $ in Millions |
Aug. 03, 2018 |
Feb. 02, 2018 |
---|---|---|
Fair Value Disclosures [Abstract] | ||
Investments without readily determinable fair values | $ 582 | $ 485 |
INVESTMENTS - Additional Information (Narrative) (Details) - USD ($) $ in Millions |
Aug. 03, 2018 |
Feb. 02, 2018 |
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Aggregate fair value of investments | $ 1,500 | $ 1,900 |
Unrealized loss on investments | $ 25 | $ 25 |
INVESTMENTS - Schedule of Investments Classified by Contractual Maturities of Debt Securities Held (Details) $ in Millions |
Aug. 03, 2018
USD ($)
|
---|---|
Carrying Value | |
Due within one year | $ 2,504 |
Due after 1 year through 5 years | 2,576 |
Due after 5 years through 10 years | 46 |
Debt securities | 5,126 |
Amortized Cost | |
Due within one year | 2,512 |
Due after 1 year through 5 years | 2,624 |
Due after 5 years through 10 years | 48 |
Debt securities | $ 5,184 |
FINANCIAL SERVICES - Schedule of Financing Receivables Held by the Consolidated VIEs (Details) - Variable Interest Entity, Primary Beneficiary - USD ($) $ in Millions |
Aug. 03, 2018 |
Feb. 02, 2018 |
---|---|---|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Financing receivables held by consolidated VIEs, net | $ 5,173 | $ 4,553 |
Financing Receivables, Short-term, net | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Financing receivables held by consolidated VIEs, net | 2,794 | 2,572 |
Financing Receivables, Long-term, Net | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Financing receivables held by consolidated VIEs, net | $ 2,379 | $ 1,981 |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Notional Amounts of Outstanding Derivative Instruments (Details) - USD ($) $ in Millions |
Aug. 03, 2018 |
Feb. 02, 2018 |
---|---|---|
Foreign exchange contracts | ||
Derivative [Line Items] | ||
Notional amount | $ 12,050 | $ 10,615 |
Foreign exchange contracts | Designated as cash flow hedging instruments | ||
Derivative [Line Items] | ||
Notional amount | 5,989 | 4,392 |
Foreign exchange contracts | Non-designated as hedging instruments | ||
Derivative [Line Items] | ||
Notional amount | 6,061 | 6,223 |
Interest rate contracts | Non-designated as hedging instruments | ||
Derivative [Line Items] | ||
Notional amount | $ 2,356 | $ 1,897 |
GOODWILL AND INTANGIBLE ASSETS - Additional Information (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Aug. 03, 2018 |
Aug. 04, 2017 |
Aug. 03, 2018 |
Aug. 04, 2017 |
Nov. 03, 2017 |
|
Goodwill [Line Items] | |||||
Percentage of fair value over carrying amount for reporting unit | 20.00% | ||||
Accumulated goodwill impairment charges | $ 0 | $ 0 | |||
Amortization expense related to definite-lived intangible assets | 1,500,000,000 | $ 1,700,000,000 | $ 3,000,000,000 | $ 3,500,000,000 | |
Impairment charges related to intangible assets acquired | $ 0 | $ 0 | |||
Core Storage, Servers and Networking | Infrastructure Solutions Group | |||||
Goodwill [Line Items] | |||||
Percentage of fair value over carrying amount for reporting unit | 18.00% |
GOODWILL AND INTANGIBLE ASSETS - Schedule of Estimated Future Annual Pre-Tax Amortization Expense of Definite-Lived Intangible Assets (Details) - USD ($) $ in Millions |
Aug. 03, 2018 |
Feb. 02, 2018 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2019 (remaining six months) | $ 3,050 | |
2020 | 4,308 | |
2021 | 3,346 | |
2022 | 2,636 | |
2023 | 1,756 | |
Thereafter | 6,357 | |
Net | $ 21,453 | $ 24,509 |
DEFERRED REVENUE - Changes in Deferred Revenue (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Aug. 03, 2018 |
Aug. 03, 2018 |
Feb. 02, 2018 |
|
Deferred revenue: | |||
Deferred revenue at beginning of period | $ 20,959 | $ 20,816 | |
Revenue deferrals for new contracts and changes in estimates for pre-existing contracts | 6,123 | 11,460 | |
Revenue recognized | (5,382) | (10,576) | |
Deferred revenue at end of period | 21,700 | 21,700 | |
Short-term deferred revenue | 11,965 | 11,965 | $ 11,606 |
Long-term deferred revenue | $ 9,735 | $ 9,735 | $ 9,210 |
DEFERRED REVENUE - Additional Information (Narrative) (Details) $ in Billions |
Aug. 03, 2018
USD ($)
|
---|---|
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligations | $ 29 |
DEFERRED REVENUE - Remaining Performance Obligation, Expected Timing (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-08-04 |
Aug. 03, 2018 |
---|---|
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation percentage | 62.00% |
Deferred revenue recognition period | 12 months |
WARRANTY LIABILITY (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Aug. 03, 2018 |
Aug. 04, 2017 |
Aug. 03, 2018 |
Aug. 04, 2017 |
Feb. 02, 2018 |
|
Movement in Standard Product Warranty Accrual [Roll Forward] | |||||
Warranty liability at beginning of period | $ 527 | $ 607 | $ 539 | $ 604 | |
Costs accrued for new warranty contracts and changes in estimates for pre-existing warranties | 236 | 223 | 430 | 463 | |
Service obligations honored | (221) | (242) | (427) | (479) | |
Warranty liability at end of period | 542 | 588 | 542 | 588 | |
Current portion | 366 | 412 | 366 | 412 | |
Non-current portion | $ 176 | $ 176 | $ 176 | $ 176 | $ 172 |
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ / shares in Units, $ in Millions |
6 Months Ended | ||||
---|---|---|---|---|---|
Jul. 16, 2018 |
May 08, 2018 |
Aug. 03, 2018 |
Feb. 02, 2018 |
Oct. 29, 2013 |
|
Appraisal Proceedings | |||||
Loss Contingencies [Line Items] | |||||
Settlement amount | $ 30 | $ 70 | |||
Appraisal Proceedings | Dell Inc. | |||||
Loss Contingencies [Line Items] | |||||
Liability recorded for each share | $ 13.75 | ||||
Appraisal Proceedings | Pending Litigation | |||||
Loss Contingencies [Line Items] | |||||
Fair value, appraisal proceedings (in dollars per share) | $ 17.62 | ||||
Number of shares subject to appraisal proceedings (in shares) | 5,505,630 | ||||
Liability accrued | $ 129 | ||||
CamSoft Data Systems, Inc. | Pending Litigation | |||||
Loss Contingencies [Line Items] | |||||
Damages sought | $ 2,000 |
INCOME AND OTHER TAXES (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Aug. 03, 2018 |
Aug. 04, 2017 |
Aug. 03, 2018 |
Aug. 04, 2017 |
Feb. 02, 2018 |
|
Income Tax Disclosure [Abstract] | |||||
Effective income tax rate | 1.50% | 38.90% | 8.40% | 36.40% | |
Pre-tax losses | $ 468 | $ 1,210 | $ 1,091 | $ 3,054 | |
Provisional benefit | 500 | ||||
Tax benefit related to the remeasurement of deferred tax assets and liabilities | 1,500 | ||||
Current and future income tax expenses related to the Transition Tax | 1,000 | ||||
Unrecognized tax benefits | $ 3,300 | $ 3,300 | $ 3,200 |
NON-CONTROLLING INTERESTS - Effect of Changes in Ownership Interests of Less than Wholly Owned Subsidiaries (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Aug. 03, 2018 |
Aug. 04, 2017 |
Aug. 03, 2018 |
Aug. 04, 2017 |
|
Noncontrolling Interest [Abstract] | ||||
Net loss attributable to Dell Technologies Inc. | $ (499) | $ (732) | $ (1,135) | $ (1,903) |
Transfers (to) from the non-controlling interests: | ||||
Increase in Dell Technologies Inc. additional paid-in-capital for equity issuances and other equity activity | 606 | |||
Decrease in Dell Technologies Inc. additional paid-in-capital for equity issuances and other equity activity | (535) | |||
Net transfers from non-controlling interests | 71 | |||
Change from net loss attributable to Dell Technologies Inc. and transfers to/from the non-controlling interests | $ (1,064) |
EARNINGS (LOSS) PER SHARE - Reconciliation of Net Income (Loss) From Continuing Operations (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Aug. 03, 2018 |
Aug. 04, 2017 |
Aug. 03, 2018 |
Aug. 04, 2017 |
|
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||||
Net income (loss) attributable to Dell Technologies Inc. | $ (499) | $ (732) | $ (1,135) | $ (1,903) |
Class V Common Stock | ||||
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||||
Net income (loss) | 320 | 204 | 790 | 329 |
DHI Group | ||||
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||||
Net income (loss) | $ (819) | $ (936) | $ (1,925) | $ (2,232) |
CAPITALIZATION - Schedule of Stock by Class (Details) - shares shares in Millions |
Aug. 03, 2018 |
Feb. 02, 2018 |
---|---|---|
Class of Stock [Line Items] | ||
Authorized | 9,143 | 9,143 |
Issued | 794 | 794 |
Outstanding | 768 | 769 |
Class A | ||
Class of Stock [Line Items] | ||
Authorized | 600 | 600 |
Issued | 410 | 410 |
Outstanding | 410 | 410 |
Class B | ||
Class of Stock [Line Items] | ||
Authorized | 200 | 200 |
Issued | 137 | 137 |
Outstanding | 137 | 137 |
Class C | ||
Class of Stock [Line Items] | ||
Authorized | 7,900 | 7,900 |
Issued | 24 | 24 |
Outstanding | 22 | 23 |
Class D | ||
Class of Stock [Line Items] | ||
Authorized | 100 | 100 |
Issued | 0 | 0 |
Outstanding | 0 | 0 |
Class V | ||
Class of Stock [Line Items] | ||
Authorized | 343 | 343 |
Issued | 223 | 223 |
Outstanding | 199 | 199 |
REDEEMABLE SHARES (Details) - USD ($) shares in Millions, $ in Millions |
6 Months Ended | |
---|---|---|
Aug. 03, 2018 |
Feb. 02, 2018 |
|
Temporary Equity [Line Items] | ||
Holding period | 6 months | |
Redeemable shares classified as temporary equity | $ 2,056 | $ 384 |
Common Stock | ||
Temporary Equity [Line Items] | ||
Redeemable shares issued (in shares) | 2.2 | 2.9 |
Redeemable shares outstanding (in shares) | 2.2 | 2.9 |
RSUs | ||
Temporary Equity [Line Items] | ||
Redeemable shares issued (in shares) | 1.3 | 0.4 |
Redeemable shares outstanding (in shares) | 1.3 | 0.4 |
RSAs | ||
Temporary Equity [Line Items] | ||
Redeemable shares issued (in shares) | 0.4 | 0.1 |
Redeemable shares outstanding (in shares) | 0.4 | 0.1 |
Stock options | ||
Temporary Equity [Line Items] | ||
Redeemable shares issued (in shares) | 27.0 | 15.3 |
Redeemable shares outstanding (in shares) | 27.0 | 15.3 |
SEGMENT INFORMATION - Additional Information (Narrative) (Details) |
6 Months Ended |
---|---|
Aug. 03, 2018
segments
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 3 |
SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION - Information on Selected Accounts Included in the Statements of Financial Position (Details) - USD ($) $ in Millions |
Aug. 03, 2018 |
Feb. 02, 2018 |
Aug. 04, 2017 |
---|---|---|---|
Inventories, net: | |||
Production materials | $ 1,502 | $ 967 | |
Work-in-process | 782 | 514 | |
Finished goods | 1,358 | 1,197 | |
Total inventories, net | 3,642 | 2,678 | |
Other non-current liabilities: | |||
Warranty liability | 176 | 172 | $ 176 |
Deferred and other tax liabilities | 6,046 | 6,590 | |
Other | 565 | 515 | |
Total other non-current liabilities | $ 6,787 | $ 7,277 |
SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION - Supplemental Cash Flow Information (Details) - USD ($) $ in Millions |
Aug. 03, 2018 |
Feb. 02, 2018 |
---|---|---|
Condensed Financial Information Disclosure [Abstract] | ||
Cash and cash equivalents | $ 15,312 | $ 13,942 |
Restricted cash - current assets | 473 | 423 |
Restricted cash - other non-current assets | 20 | 13 |
Total cash, cash equivalents, and restricted cash | $ 15,805 | $ 14,378 |
SUBSEQUENT EVENTS (Details) - USD ($) $ in Millions |
1 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Sep. 04, 2018 |
Aug. 31, 2018 |
Aug. 03, 2018 |
Aug. 04, 2017 |
|
Subsequent Event [Line Items] | ||||
Repayments of debt | $ 6,948 | $ 5,291 | ||
Secured Debt | ||||
Subsequent Event [Line Items] | ||||
Repayments of debt | $ 136 | |||
Term Loan A-3 Facility Due December 2018 | Secured Debt | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Repayments of debt | $ 600 | |||
CloudHealth Technologies, Inc. | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Consideration transferred | $ 500 |
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