Acquisitions (Notes)

9 Months Ended

Nov. 02, 2012

Business Combinations [Abstract]

Acquisitions

NOTE 8 — ACQUISITIONS

On September 27, 2012, Dell completed its acquisition for all of the outstanding shares of common stock of Quest Software Inc. ("Quest Software"), a global provider of IT management software, for a purchase price of approximately $2.5 billion, paid in cash. Dell recorded approximately $1.7 billion in goodwill and $1.1 billion in intangible assets related to its acquisition of Quest Software.

During the nine months endedNovember 2, 2012, Dell also acquired AppAssure Software, Inc., Clerity Solutions, Inc., SonicWALL Inc. (“SonicWALL”), Wyse Technology, Inc. ("Wyse Technology"), and Make Technologies Inc. Of these, SonicWALL and Wyse Technology were the larger acquisitions. SonicWALL is a global technology company that offers advanced network security and data protection software solutions, and Wyse Technology is a global provider of client computing solutions designed to extend desktop virtualization offerings. The total purchase consideration for all of these acquisitions, excluding Quest Software, was approximately $2.4 billion in cash for all of their outstanding shares.

All of the above acquisitions will be integrated into Dell's Commercial segments.

Dell has recorded these transactions using the acquisition method of accounting and recorded the assets acquired and liabilities assumed at fair value at the date of acquisition. The excess of the purchase prices over the estimated fair values was recorded as goodwill. Any changes in the estimated fair values of the net assets recorded for these acquisitions prior to the finalization of more detailed analyses, but not to exceed one year from the date of acquisition, will change the amount of the purchase price allocable to goodwill. Any subsequent changes to any purchase price allocations that are material to Dell's consolidated financial results will be adjusted retroactively. 

The following table summarizes the fair value of the assets acquired and liabilities assumed by major class for all the acquisitions completed during the period:

	Estimated Cost			Weighted-Average Useful Life
	(in millions)			(in years)
Intangible Assets:
Amortizable intangible assets:
Customer relationships	$	681		7.0
Technology	1,252			5.6
Non-compete agreements	5			4.4
Trade names	77			6.6
Total amortizable intangible assets	2,015			6.1
In-process research and development	108
Total intangible assets	2,123
Cash and investments	385
Goodwill	3,374
Deferred revenue	(408		)
Deferred tax liability, net	(519		)
Other liabilities and noncontrolling interest assumed, net of assets acquired(a)	(50		)
Total	$	4,905

____________________

^(a)   In conjunction with Dell's acquisition of Quest Software, Dell acquired a controlling ownership interest in a privately-held company. The fair value of the noncontrolling interest related to this investment was $21 million at the date of acquisition. Actual results of operations from this investment attributable to Dell were not material and as such are not presented separately on Dell's Condensed Consolidated Statement of Income for the three and nine months ending November 2, 2012.

Dell's preliminary estimate for goodwill acquired during the nine months endedNovember 2, 2012, was $3.4 billion. This amount primarily represents synergies associated with combining the acquired companies with Dell to provide Dell's customers with a broader range of IT solutions. This goodwill is not deductible for tax purposes.

In conjunction with these acquisitions, Dell will incur $264 million in compensation-related retention expenses that will be expensed over a period of up to five years. There was no contingent consideration related to these acquisitions.

The results of operations for acquisitions completed during the nine months endedNovember 2, 2012, which primarily consist of SonicWALL, Wyse Technology, and Quest Software, are included in Dell's results of operations from each respective acquisition date. For the three and nine months endedNovember 2, 2012, the results of all businesses acquired during Fiscal 2013 contributed $227 million and $352 million to Dell's net revenue, respectively, and reduced net income by $67 million and $98 million, respectively. These results include the impacts of amortization of purchased intangible assets and acquisition-related expenses.

The following table provides unaudited pro forma results of operations for the three and nine months endedNovember 2, 2012, and October 28, 2011, as if Dell's Fiscal 2013 acquisitions had been acquired at the beginning of the fiscal year ended February 3, 2012. The pro forma amounts presented below exclude $85 million in merger related fees that were reported in Quest Software's historical financial results. The pro forma results are adjusted for amortization of intangible assets, fair value adjustments for deferred revenue, acquisition-related expenses, the elimination of sales between Dell and its acquirees, and the related tax effects for these items, but do not include any anticipated cost synergies or other effects of the planned integration of the acquisitions. Accordingly, such pro forma results are not necessarily indicative of the results that actually would have occurred had the acquisitions been completed on the dates indicated, nor are they indicative of the future operating results of the combined company.

	Three Months Ended				Nine Months Ended
	November 2, 2012		October 28, 2011		November 2, 2012		October 28, 2011
	(in millions, except per share data, unaudited)
Pro forma net sales	$	13,861	$	15,693	$	43,352	$	47,002
Pro forma net income	$	474	$	828	$	1,772	$	2,507
Pro forma earnings per share - basic	$	0.27	$	0.46	$	1.01	$	1.35
Pro forma earnings per share - diluted	$	0.27	$	0.45	$	1.01	$	1.34