10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended August 3, 2001

Commission File Number: 0-17017

Dell Computer Corporation

(Exact name of registrant as specified in its charter)

Delaware
(State of incorporation) 74-2487834
(I.R.S. Employer ID No.)

807 Las Cimas Parkway, Building 2

Austin, Texas 78746

(Address of principal executive offices)

(512) 338-4400

(Telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months and (2) has been subject to such filing requirements for the past 90 days.     Yes  þ      No  o

As of the close of business on August 31, 2001, 2,610 million shares of the registrant’s common stock, par value $.01 per share, were outstanding.

TABLE OF CONTENTS

PART I -- FINANCIAL INFORMATION
	ITEM 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
	ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
PART II -- OTHER INFORMATION
	ITEM 1. Legal Proceedings
	ITEM 4. Submission of Matters to a Vote of Security Holders
	ITEM 6. Exhibits and Reports on Form 8-K
SIGNATURE
EX-3.1 Restated Certificate of Incorporation

PART I — FINANCIAL INFORMATION

ITEM 1.  Financial Statements

DELL COMPUTER CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(in millions, except per share amounts; unaudited)

			August 3,			February 2,
			2001			2001
ASSETS
Current assets:
	Cash and cash equivalents		$	4,160		$	4,910
	Short-term investments			405			528
	Accounts receivable, net			2,709			2,895
	Inventories			292			400
	Other			936			758
		Total current assets		8,502			9,491
Property, plant and equipment, net				851			996
Investments				3,241			2,418
Other non-current assets				582			530
		Total assets	$	13,176		$	13,435
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable		$	4,587		$	4,286
	Accrued and other			2,347			2,257
		Total current liabilities		6,934			6,543
Long-term debt				520			509
Other				772			761
		Total liabilities		8,226			7,813
Stockholders’ equity:
	Preferred stock and capital in excess of $0.01 par value; shares authorized: 5; shares issued and outstanding: none			—			—
	Common stock and capital in excess of $0.01 par value; shares authorized: 7000; shares issued: 2,626 and 2,601, respectively			5,286			4,795
	Retained earnings			479			839
	Treasury stock, at cost; 17 shares and no shares, respectively			(739	)		—
	Other comprehensive income (loss)			(2	)		62
	Other			(74	)		(74	)
		Total stockholders’ equity		4,950			5,622
		Total liabilities and stockholder’s equity	$	13,176		$	13,435

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DELL COMPUTER CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(in millions, except per share amounts; unaudited)

			Three Months Ended					Six Months Ended
			August 3,			July 28,		August 3,			July 28,
			2001			2000		2001			2000
Net revenue			$	7,611		$	7,670	$	15,639		$	14,950
Cost of revenue				6,281			6,036		12,861			11,824
	Gross margin			1,330			1,634		2,778			3,126
Operating expenses:
	Selling, general and administrative			672			774		1,409			1,524
	Research, development and engineering			113			124		236			241
	Special charge			482			—		482			—
		Total operating expenses		1,267			898		2,127			1,765
		Operating income		63			736		651			1,361
Investment and other income (loss), net				(207	)		125		(149	)		250
	Income (loss) before income taxes and cumulative effect of change in accounting principle			(144	)		861		502			1,611
Income tax provision (benefit)				(43	)		258		141			483
	Income (loss) before cumulative effect of change in accounting principle			(101	)		603		361			1,128
Cumulative effect of change in accounting principle, net				—			—		—			59
	Net income (loss)		$	(101	)	$	603	$	361		$	1,069
Earnings (loss) per common share:
	Before cumulative effect of change in accounting principle:
		Basic	$	(0.04	)	$	0.23	$	0.14		$	0.44
		Diluted	$	(0.04	)	$	0.22	$	0.13		$	0.41
	After cumulative effect of change in accounting principle:
		Basic	$	(0.04	)	$	0.23	$	0.14		$	0.41
		Diluted	$	(0.04	)	$	0.22	$	0.13		$	0.39
	Weighted average shares outstanding:
		Basic		2,601			2,582		2,600			2,578
		Diluted		2,601			2,726		2,743			2,731

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

DELL COMPUTER CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions; unaudited)

				Six Months Ended
				August 3,			July 28,
				2001			2000
Cash flows from operating activities:
	Net income (loss)			$	361		$	1,069
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			125			108
		Tax benefits of employee stock plans			163			470
		Special charge			742			—
		Gain on sale of investments			(12	)		(165	)
		Other			141			119
Changes in:
	Operating working capital				213			111
	Non-current assets and liabilities				40			239
			Net cash provided by operating activities		1,773			1,951
Cash flows from investing activities:
	Investments:
		Purchases			(2,662	)		(1,567	)
		Maturities and sales			1,703			991
	Capital expenditures				(145	)		(236	)
			Net cash used in investing activities		(1,104	)		(812	)
Cash flows from financing activities:
	Purchase of common stock				(1,490	)		(1,021	)
	Issuance of common stock under employee plans				166			182
	Other				13			4
			Net cash used in financing activities		(1,311	)		(835	)
Effect of exchange rate changes on cash					(108	)		(37	)
Net increase (decrease) in cash					(750	)		267
Cash and cash equivalents at beginning of period					4,910			3,809
Cash and cash equivalents at end of period				$	4,160		$	4,076

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DELL COMPUTER CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 — BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Dell Computer Corporation (the “Company”) should be read in conjunction with the consolidated financial statements and notes thereto filed with the U.S. Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2001. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to present fairly the financial position of the Company and its consolidated subsidiaries at August 3, 2001, and the results of their operations and their cash flows for the interim periods ended August 3, 2001 and July 28, 2000. Certain prior period amounts have been reclassified to conform to the current period presentation.

Effective with the beginning of the second quarter of fiscal 2002, the Company began holding repurchased shares of its common stock as treasury stock. Historically, the Company retired all such repurchased shares. As of August 3, 2001, the Company held 17 million shares in treasury stock at an aggregate cost of $739 million.

NOTE 2 — SPECIAL CHARGES

During the second quarter of fiscal 2002, the Company undertook a program to further reduce its workforce and to exit certain activities during fiscal 2002 to align its cost structure with ongoing economic and industry conditions. A special charge of $482 million related to these actions was recorded in operating expenses in the second quarter. A summary of this charge is as follows (in millions):

							Non-			Liability at
		Total					Cash			August 3,
		Charge		Paid			Charges			2001
Employee separations		$	134	$	(54	)	$	—		$	80
Facility consolidations			169		(8	)		(79	)		82
Other asset impairments and exit costs			179		(2	)		(152	)		25
	Total	$	482	$	(64	)	$	(231	)	$	187

The Company announced plans to eliminate approximately 4,000 employee positions worldwide from various business functions and job classes. Substantially all of the employees have been separated from the Company. Included in the other asset impairments and exit costs is $75 million to write down goodwill and intellectual property associated with the acquisition of ConvergeNet Technologies, Inc. to current fair value.

In addition to the $482 million charge described above, the Company also recorded an impairment charge of $260 million during the second quarter reflecting other than temporary declines in fair value of certain investments. This charge is reflected in investment and other income (loss), net.

During the fourth quarter of fiscal 2001, the Company undertook a program to reduce its workforce and to exit certain facilities during fiscal year 2002. Total charges recorded were $105 million. As of August 3, 2001, $44 million remains in accrued and other liabilities related to this charge, substantially all of which relates to costs for abandonment of facilities.

NOTE 3 — INVENTORIES

		August 3,		February 2,
		2001		2001
		(in millions)
Inventories:
	Production materials	$	122	$	95
	Work-in-process and finished goods		170		305
		$	292	$	400

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NOTE 4 — EARNINGS PER COMMON SHARE

Basic earnings per share are based on the weighted effect of all common shares issued and outstanding and are calculated by dividing net income by the weighted average shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted average number of common shares used in the basic earnings per share calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive common shares outstanding. The following table sets forth the computation of basic and diluted earnings per share (in millions, except per share amounts):

			Three Months Ended					Six Months Ended
			August 3,			July 28,		August 3,		July 28,
			2001			2000		2001		2000
Net income (loss)			$	(101	)	$	603	$	361	$	1,069
	Weighted average shares outstanding:
		Basic		2,601			2,582		2,600		2,578
		Employee stock options and other		—			144		143		153
		Diluted		2,601			2,726		2,743		2,731
Earnings (loss) per common share:
	Before cumulative effect of change in accounting principle:
		Basic	$	(0.04	)	$	0.23	$	0.14	$	0.44
		Diluted	$	(0.04	)	$	0.22	$	0.13	$	0.41
	After cumulative effect of change in accounting principle:
		Basic	$	(0.04	)	$	0.23	$	0.14	$	0.41
		Diluted	$	(0.04	)	$	0.22	$	0.13	$	0.39

For the three-months ended August 3, 2001, 130 employee stock options and other were excluded from the computation of diluted earnings per share due to the antidilutive effect.

NOTE 5 — COMPREHENSIVE INCOME

The Company’s comprehensive income is comprised of net income, foreign currency translation adjustments, unrealized gains and losses on derivative financial instruments, and unrealized gains and losses on marketable securities classified as available-for-sale. Comprehensive income for the three- and six-month periods ended August 3, 2001 and July 28, 2000, was as follows (in millions):

			Three Months Ended						Six Months Ended
			August 3,			July 28,			August 3,			July 28,
			2001			2000			2001			2000
Comprehensive income (loss):
	Net income		$	(101	)	$	603		$	361		$	1,069
	Foreign currency translations			—			(2	)		1			—
	Unrealized gains (losses) on derivative financial instruments			(39	)		—			9			—
	Unrealized gains (losses) on marketable securities			3			372			(74	)		275
		Total comprehensive income (loss)	$	(137	)	$	973		$	297		$	1,344

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NOTE 6 — SEGMENT INFORMATION

The Company has three reportable business segments: the Americas, Europe, and Asia Pacific-Japan regions.

The accounting policies of the geographic segments are the same as those described in the summary of significant accounting policies in the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2001. The Company allocates resources to and evaluates performance of its geographic segments based on balanced priorities of liquidity, profitability and growth. Transfers between geographic areas are recorded using internal transfer prices set by the Company. During the three-month period ended August 3, 2001, the Asia Pacific-Japan region began producing notebook computer systems for the Americas region.

The table below presents information about the Company’s reportable segments for the three- and six-month periods ended August 3, 2001 and July 28, 2000:

		Three Months Ended August 3, 2001
						Asia Pacific
		Americas		Europe		-Japan		Eliminations			Consolidated
		(in millions)
Net revenue from unaffiliated customers		$	5,402	$	1,483	$	726	$	—		$	7,611
Transfers between geographic segments			3		—		357		(360	)		—
	Total net revenue	$	5,405	$	1,483	$	1,083	$	(360	)	$	7,611
Operating income		$	465	$	88	$	38	$	(4	)	$	587
Special charge												(482	)
Corporate expenses												(42	)
	Total operating income										$	63
Depreciation and amortization		$	37	$	11	$	7	$	—		$	55
Corporate depreciation and amortization												5
	Total depreciation and amortization										$	60
Identifiable assets		$	2,262	$	980	$	555	$	—		$	3,797
General corporate assets												9,379
	Total assets										$	13,176

		Three Months Ended July 28, 2000
						Asia Pacific
		Americas		Europe		-Japan		Eliminations			Consolidated
		(in millions)
Net revenue from unaffiliated customers		$	5,586	$	1,454	$	630	$	—		$	7,670
Transfers between geographic segments			14		2		2		(18	)		—
	Total net revenue	$	5,600	$	1,456	$	632	$	(18	)	$	7,670
Operating income		$	663	$	102	$	52	$	—		$	817
Corporate expenses												(81	)
	Total operating income										$	736
Depreciation and amortization		$	25	$	14	$	6	$	—		$	45
Corporate depreciation and amortization												11
	Total depreciation and amortization										$	56
Identifiable assets		$	2,928	$	1,089	$	499	$	—		$	4,516
General corporate assets												8,894
	Total assets										$	13,410

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		Six Months Ended August 3, 2001
						Asia Pacific
		Americas		Europe		-Japan		Eliminations			Consolidated
		(in millions)
Net revenue from unaffiliated customers		$	10,847	$	3,235	$	1,557	$	—		$	15,639
Transfers between geographic segments			11		1		357		(369	)		—
	Total net revenue	$	10,858	$	3,236	$	1,914	$	(369	)	$	15,639
Operating income		$	891	$	219	$	99	$	(4	)	$	1,205
Special charge												(482	)
Corporate expenses												(72	)
	Total operating income										$	651
Depreciation and amortization		$	78	$	24	$	13	$	—		$	115
Corporate depreciation and amortization												10
	Total depreciation and amortization										$	125
Identifiable assets		$	2,262	$	980	$	555	$	—		$	3,797
General corporate assets												9,379
	Total assets										$	13,176

		Six Months Ended July 28, 2000
						Asia Pacific
		Americas		Europe		-Japan		Eliminations			Consolidated
		(in millions)
Net revenue from unaffiliated customers		$	10,709	$	3,027	$	1,214	$	—		$	14,950
Transfers between geographic segments			29		3		2		(34	)		—
	Total net revenue	$	10,738	$	3,030	$	1,216	$	(34	)	$	14,950
Operating income		$	1,227	$	185	$	99	$	—		$	1,511
Corporate expenses												(150	)
	Total operating income										$	1,361
Depreciation and amortization		$	52	$	27	$	11	$	—		$	90
Corporate depreciation and amortization												18
	Total depreciation and amortization										$	108
Identifiable assets		$	2,928	$	1,089	$	499	$	—		$	4,516
General corporate assets												8,894
	Total assets										$	13,410

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ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Statements in this Report that relate to future results and events are based on the Company’s current expectations. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties. For a discussion of factors affecting the Company’s business and prospects, see “Item 1 — Business — Factors Affecting the Company’s Business and Prospects” in the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2001.

All percentage amounts and ratios were calculated using the underlying data in thousands. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full fiscal year.

Results of Operations

During the second quarter and first six months of fiscal 2002, the Company continued to optimize the profitable (excluding the special charge) share growth strategy it began to execute during the fourth quarter of fiscal 2001. Overall, net unit shipments increased significantly compared to the industry, and the Company widened its lead as the world’s No. 1 supplier of computer systems. At the same time soft demand and global economic weakness has continued to result in lower overall technology spending and a highly competitive industry pricing environment. This pricing environment — together with the Company’s practice of rapidly passing component cost declines to its customers — has resulted in lower average revenue per unit, relatively flat to down net revenues on a year-over-year and sequential basis, and downward pressure on gross margins and operating margins. Management currently expects to maintain its strategy of profitable market share growth with a focus on stabilizing overall profitability relative to revenue growth.

The following table sets forth for the periods indicated the percentage of consolidated net revenue represented by certain items in the Company’s Condensed Consolidated Statement of Operations.

			Percentage of Consolidated Net Revenue
			Three Months Ended						Six Months Ended
			August 3,			July 28,			August 3,			July 28,
			2001			2000			2001			2000
Net revenue:
	Americas			71.0	%		72.8	%		69.3	%		71.6	%
	Europe			19.5			19.0			20.7			20.3
	Asia Pacific-Japan			9.5			8.2			10.0			8.1
				100.0			100.0			100.0			100.0
		Gross margin		17.5			21.3			17.8			20.9
Selling, general and administrative				8.8			10.1			9.0			10.2
Research, development and engineering				1.5			1.6			1.5			1.6
Special charge				6.4			—			3.1			—
		Total operating expenses		16.7			11.7			13.6			11.8
		Operating income		0.8			9.6			4.2			9.1
Investment and other income (loss), net				(2.7	)		1.6			(1.0	)		1.7
	Income (loss) before income taxes and cumulative effect of change in accounting principle			(1.9	)		11.2			3.2			10.8
		Net income (loss)		(1.3	)%		7.9	%		2.3	%		7.2	%

Net Revenue

For the second quarter and first six months of fiscal 2002, consolidated net revenue decreased 1% and increased 5%, respectively, over the comparable periods in fiscal 2001 and decreased 5% sequentially. Overall net revenue has been adversely impacted as growth in net unit shipments has been offset by declines in average per-unit revenues.

Net unit shipments for the second quarter grew 19% year-over-year and 1% sequentially as the Company continues to profitably grow market share in all regions and product categories. Net unit shipments of the Company’s enterprise systems, which include servers, storage products and workstations, grew 33% over the same period a year ago and 1% sequentially. For the second straight quarter the Company ranked No. 1 in the United States for server shipments. Additionally, during the quarter the Company became the world’s No. 1

8

supplier of notebook computer systems, as shipments increased 22% compared to the prior year period and decreased 1% sequentially. Desktop shipments increased 18% year-over-year and increased 1% sequentially.

In the Americas region, net revenue declined 3% in the second quarter of fiscal 2002 compared to the same quarter of fiscal 2001, and declined 1% sequentially. Net revenue in the Europe region increased 2% during the second quarter of fiscal 2002 compared to the same period of fiscal 2001, while declining 15% sequentially. In Asia Pacific-Japan, net revenue increased 15% year-over-year and declined 13% sequentially. The market factors that affected the Americas (and the U.S. in particular) in the first quarter — rapidly softening industry unit demand and declining per-unit revenues — spread to Europe and Asia Pacific-Japan in the second quarter. Europe and Asia Pacific-Japan were also negatively impacted by seasonal demand patterns in UK/ Ireland and in Japan, respectively.

Average revenue per unit sold in the second quarter of fiscal year 2002 decreased 17% compared to the same period a year ago and 6% sequentially. This decrease was primarily due to price reductions resulting from component cost declines and the Company’s strategy of leveraging its direct-to-customer model to drive profitable market share growth. Management expects that the current pricing environment will likely continue in the near future as the Company and its competitors experience soft demand and continued uncertainty in the overall economy.

Gross Margin

As a percentage of consolidated net revenue, gross margin decreased from 21.3% in the second quarter of fiscal 2001 to 17.5% in the same period of fiscal 2002, while declining 0.5% sequentially. On a year-to-date basis, gross margin decreased from 20.9% during the first six months of fiscal 2001 to 17.8% during the first six months of fiscal 2002. Most of the year-over-year decrease occurred as a result of intense price competition and the Company’s strategy to drive profitable market share growth. Based on the industry, economic and other factors discussed above, the Company currently expects that this gross margin environment will likely continue to be challenging, but the Company’s intent is to stabilize operating margins. Management believes that the strength of the Company’s direct-to-customer business model, as well as its strong liquidity position, result in the Company being better positioned than its competitors to profitably grow market share in the current business climate.

Operating Expenses

The following table presents certain information regarding the Company’s operating expenses during the periods indicated:

			Three Months Ended						Six Months Ended
			August 3,			July 28,			August 3,			July 28,
			2001			2000			2001			2000
Operating Expenses:
	Selling, general and administrative		$	672		$	774		$	1,409		$	1,524
		Percentage of net revenue		8.8	%		10.1	%		9.0	%		10.2	%
	Research, development and engineering		$	113		$	124		$	236		$	241
		Percentage of net revenue		1.5	%		1.6	%		1.5	%		1.6	%
	Special charge		$	482			—		$	482			—
		Percentage of net revenue		6.4	%		—			3.1	%		—
	Total operating expenses		$	1,267		$	898		$	2,127		$	1,765
		Percentage of net revenue		16.7	%		11.7	%		13.6	%		11.8	%

Selling, general and administrative expenses, excluding the special charge, decreased in absolute dollar amounts and as a percentage of revenue for the first six months and the second quarter of fiscal 2002 from the same periods of fiscal 2001. As revenue growth expectations were trimmed during fiscal 2001 and into 2002, management has taken steps to manage expenses relative to actual growth rates, and as a result, selling, general and administrative expenses as a percentage of net revenues have declined for five consecutive quarters, excluding special charges.

Management believes that the Company will continue to improve efficiencies and control selling, general and administrative expenses relative to revenue growth to continue to optimize overall profitability and grow market share. During the second quarter of fiscal 2002, the Company undertook a program to reduce its

9

workforce and to exit certain activities to further align its cost structure with current economic and industry conditions. A special charge of $482 million related to these actions was recorded in operating expenses in the second quarter. This charge included $134 million related to employee separations, $169 million related to facility consolidations, and $179 million of other asset impairments and exit costs. Other asset impairments and exit costs include $75 million to write down goodwill and intellectual property associated with the acquisition of ConvergeNet Technologies, Inc. to current fair value.

In addition to the $482 million charge, the Company also recorded an impairment charge of $260 million during the second quarter reflecting other than temporary declines in fair value of certain investments. This charge is reflected in investment and other income (loss), net.

The Company announced plans to eliminate approximately 4,000 employee positions (5,700 including the fiscal 2001 special charge) worldwide from various business functions and job classes. Substantially all of the employees have been separated from the Company. These actions, together with those undertaken in the fourth quarter of the prior fiscal year, are expected to result in annual savings of nearly $500 million. These savings are expected to be partially reinvested via pricing, selling incentives, and research and development activities to support continued unit growth in the Company’s enterprise systems. The Company will continue to manage its operating expenses relative to expected revenue growth, and will undertake additional cost-cutting actions if necessary to enable it to continue to optimize profitability and grow market share.

The Company continues to invest in research, development and engineering activities to develop and introduce new products and to support its continued goal of improving and developing efficient procurement, manufacturing and distribution processes. For the three- and six-months ended August 3, 2001, research, development and engineering expenses decreased in absolute dollars and as a percent of revenue as compared to the prior year periods as the Company managed its spending in light of current industry conditions. The Company expects to continue to invest in research, development and engineering activity, with an increasing emphasis on enterprise products, including servers and storage.

Investment and Other Income (Loss), Net

Investment and other income (loss), net primarily includes interest income and expense, gains (losses) from the sale of investments, impairment charges for other than temporary declines in fair value of investments and foreign exchange transaction gains and losses. For the three- and six-months ended August 3, 2001, investment and other income (loss), net, was ($207) million and ($149) million, respectively, including the previously mentioned impairment charges of $260 million to write down the carrying value of certain investments.

Income Taxes

The Company’s effective tax rate was 28% for six-months ended August 3, 2001 as compared to 30% for the second quarter and first six months of fiscal 2001. The differences in the effective tax rates result primarily from changes in the geographical distribution of taxable income. The effective tax rate of 30% for the second quarter of fiscal 2002 results from revising the expected full year fiscal 2002 effective tax rate to 28%. The Company’s effective tax rate is lower than the U.S. federal statutory rate of 35%, principally because of the Company’s geographical distribution of taxable income.

10

Liquidity and Capital Resources

The following table presents selected financial statistics and information (dollars in millions):

	August 3,			February 2,
	2001			2001
Cash and investments	$	7,806		$	7,856
Working capital	$	1,568		$	2,948
Days of sales in accounts receivable		32			32
Days of supply in inventory		4			5
Days in accounts payable		66			58
Cash conversion cycle		(30	)		(21	)

At August 3, 2001, the Company had approximately $7.8 billion of cash and investments. Of that amount, investments in equity securities totaled approximately $456 million with cost approximating fair value. The principal source of the Company’s cash is from its operations. During the first half of fiscal 2002, the Company generated $1.8 billion in cash flows from operating activities, resulting primarily from the Company’s net income, efficient asset management evidenced by a Company record cash conversion cycle of negative 30 days (an improvement of 9 days from the beginning of the fiscal year), and income tax benefits that resulted from the exercise of employee stock options. Capital expenditures during the first six months of fiscal 2002 were $145 million. For all of fiscal year 2002, similar capital expenditures are currently expected to be in the range of $300 to $350 million.

The Company maintains master lease facilities providing the capacity to fund up to $1.2 billion. The combined facilities provide for the ability of the Company to lease certain real property, buildings and equipment to be constructed or acquired. At August 3, 2001, $634 million of the combined facilities had been utilized.

The Company has a share repurchase program that it uses primarily to manage the dilution resulting from shares issued under the Company’s employee stock plans. As of the end of the first quarter of fiscal 2002, the Company had cumulatively repurchased 905 million shares out of its authorized one billion share repurchase program, for an aggregate cost of $8.3 billion. During the second quarter of fiscal 2002, the Company repurchased 17 million shares of common stock for an aggregate cost of $739 million. The Company utilizes equity instrument contracts to facilitate its repurchase of common stock. At August 3, 2001, the Company held equity options and forwards that allow for the purchase of 56 million shares of common stock at an average price of $51 per share. At August 3, 2001, the Company also had outstanding put obligations covering 81 million shares with an average exercise price of $44 per share. The equity instruments are exercisable only at the date of expiration and expire at various dates through the first quarter of fiscal 2004. The outstanding put obligations and forwards at August 3, 2001 permitted net share settlement at the Company’s option and, therefore, did not result in a put obligation liability on the accompanying Condensed Consolidated Statement of Financial Position.

Management believes that the Company’s cash provided from operations will continue to be sufficient to support its operations and capital requirements. The Company anticipates that it will continue to utilize its strong liquidity and cash flows to expand the Company’s presence in high-end systems (servers, storage, notebooks, and complimentary products), expand geographically, improve the efficiency and effectiveness of its direct-to-customer model, and repurchase its common stock.

Factors Affecting the Company’s Business and Prospects

There are numerous factors that affect the Company’s business and the results of its operations. These factors include general economic and business conditions; the level of demand for the Company’s products and services; the level and intensity of competition in the technology industry and the pricing pressures that have resulted; the ability of the Company to timely and effectively manage periodic product transitions, as well as component availability and cost; the ability of the Company to develop new products based on new or evolving technology and the market’s acceptance of those products; the ability of the Company to manage its inventory levels to minimize excess inventory, declining inventory values and obsolescence; the product, customer and geographic sales mix of any particular period; the Company’s ability to recover its investments in venture capital activities; and the Company’s ability to effectively manage its operating costs. For a discussion of these and other factors affecting the Company’s business and prospects, see “Item 1 — Business — Factors

11

Affecting the Company’s Business and Prospects” in the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2001.

ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk

For a description of the Company’s market risks, see “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk” in the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2001.

12

PART II — OTHER INFORMATION

ITEM 1.  Legal Proceedings

The Company is subject to various legal proceedings and claims arising in the ordinary course of business. The Company’s management does not expect that the outcome in any of these legal proceedings, individually or collectively, will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

ITEM 4.  Submission of Matters to a Vote of Security Holders

The annual meeting of the Company’s stockholders was held on July 19, 2001. At that meeting, one proposal was submitted to a vote of the Company’s stockholders — to elect four Class I directors (with Donald J. Carty, William H. Gray III, Judy C. Lewent and Thomas W. Luce III being the nominees). At the close of business on the record date for the meeting (which was May 25, 2001), there were 2,605,412,659 shares of common stock outstanding and entitled to be voted at the meeting. Holders of 2,220,360,334 shares of common stock (representing a like number of votes) were present at the meeting, either in person or by proxy. The following table sets forth the results of the voting:

		Number of Votes
Proposal		For		Withheld
Proposal 1. Election of directors:
	Donald J. Carty		2,201,907,071		18,453,263
	William H. Gray III		2,201,545,833		18,814,501
	Judy C. Lewent		2,200,753,412		19,606,922
	Thomas W. Luce III		2,163,539,062		56,821,272

Consequently, the stockholders elected each of the directors nominated by the Board.

ITEM 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits.

Exhibit
No.		Description of Exhibit
	3.1	— Restated Certificate of Incorporation, filed July 16, 2001.

(b)  Reports on Form 8-K.

         None.

13

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DELL COMPUTER CORPORATION

September 17, 2001

/s/ JAMES M. SCHNEIDER

James M. Schneider

Senior Vice President and Chief

Financial Officer

(On behalf of the registrant and as principal

accounting and financial officer)

14

EXHIBIT INDEX

EXHIBIT
NUMBER		DESCRIPTION
	3.1	— Restated Certificate of Incorporation, filed July 16, 2001.

EX-3.1

   1
                                                                     EXHIBIT 3.1


                            DELL COMPUTER CORPORATION

                      RESTATED CERTIFICATE OF INCORPORATION

         This Restated Certificate of Incorporation was duly adopted by the
corporation's Board of Directors on March 1, 2000 in accordance with Section 245
of the General Corporation Law of the State of Delaware. It only restates and
integrates, and does not further amend, the provisions of the corporation's
original Certificate of Incorporation (which was filed with the Secretary of
State of the State of Delaware on October 22, 1987), as such original
Certificate of Incorporation had theretofore been amended or supplemented. There
is no discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation.

         FIRST:  The name of the corporation is DELL COMPUTER CORPORATION.

         SECOND: The address of the registered office of the corporation in the
State of Delaware is 2711 Centerville Road, Suite 400, in the City of
Wilmington, County of New Castle. The name of the registered agent of the
corporation at such address is Corporation Service Company.

         THIRD: The nature of the business or purposes to be conducted or
promoted by the corporation is to engage in any lawful business, act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.

         FOURTH: The total number of shares of capital stock of the Corporation
shall be seven billion and five million (7,005,000,000), which shall consist of
five million (5,000,000) shares of Preferred Stock, of the par value of $.01 per
share, and seven billion (7,000,000,000) shares of Common Stock, of the par
value of $.01 per share.

         The following is a statement fixing certain of the designations and
powers, voting powers, preferences, and relative, participating, optional or
other rights of the Preferred Stock and the Common Stock of the corporation, and
the qualifications, limitations or restrictions thereof, and the authority with
respect thereto expressly granted to the Board of Directors of the corporation
to fix any such provisions not fixed by this Certificate:

I.       Preferred Stock

         The Board of Directors is hereby expressly vested with the authority to
adopt a resolution or resolutions providing for the issue of authorized but
unissued shares of Preferred Stock, which shares may be issued from time to time
in one or more series and in such amounts as may be determined by the Board of
Directors in such resolution or resolutions. The powers, voting powers,
designations, preferences, and relative, participating, optional or other
rights, if any, of each series of Preferred Stock and the qualifications,
limitations or restrictions, if any, of such preferences and/or rights
(collectively the "Series Terms"), shall be such as are stated and expressed in
a resolution or resolutions providing for the creation or revision of such
Series Terms (a "Preferred Stock Series Resolution") adopted by the Board of
Directors or a committee of the Board of Directors to which such responsibility
is specifically and lawfully delegated. The powers of the Board with respect to
the Series Terms of a particular series (any of which powers, other than voting
powers, may by resolution of the Board of Directors be


   2

specifically delegated to one or more of its committees, except as prohibited by
law) shall include, but not be limited to, determination of the following:

                  (1) The number of shares constituting that series and the
         distinctive designation of that series, or any increase or decrease
         (but not below the number of shares thereof then outstanding) in such
         number;

                  (2) The dividend rate on the shares of that series, whether
         such dividends, if any, shall be cumulative, and, if so, the date or
         dates from which dividends payable on such shares shall accumulate, and
         the relative rights of priority, if any, of payment of dividends on
         shares of that series;

                  (3) Whether that series shall have voting rights, in addition
         to the voting rights provided by law, and, if so, the terms of such
         voting rights;

                  (4) Whether that series shall have conversion privileges with
         respect to shares of any other class or classes of stock or of any
         other series of any class of stock, and, if so, the terms and
         conditions of such conversion, including provision for adjustment of
         the conversion rate upon occurrence of such events as the Board of
         Directors shall determine;

                  (5) Whether the shares of that series shall be redeemable,
         and, if so, the terms and conditions of such redemption, including
         their relative rights of priority, if any, of redemption, the date or
         dates upon or after which they shall be redeemable, provisions
         regarding redemption notices, and the amount per share payable in case
         of redemption, which amount may vary under different conditions and at
         different redemption dates;

                  (6) Whether that series shall have a sinking fund for the
         redemption or purchase of shares of that series, and, if so, the terms
         and amount of such sinking fund;

                  (7) The rights of the shares of that series in the event of
         voluntary or involuntary liquidation, dissolution, or winding up of the
         corporation, and the relative rights of priority, if any, of payment of
         shares of that series;

                  (8) The conditions or restrictions upon the creation of
         indebtedness of the corporation or upon the issuance of additional
         Preferred Stock or other capital stock ranking on a parity therewith,
         or senior thereto, with respect to dividends or distribution of assets
         upon liquidation;

                  (9) The conditions or restrictions with respect to the
         issuance of, payment of dividends upon, or the making of other
         distributions to, or the acquisition or redemption of, shares ranking
         junior to the Preferred Stock or to any series thereof with respect to
         dividends or distribution of assets upon liquidation; and

                  (10) Any other designations, powers, preferences, and rights,
         including, without limitation any qualifications, limitations, or
         restrictions thereof.

                                       2
   3

         Any of the Series Terms, including voting rights, of any series may be
made dependent upon facts ascertainable outside the Certificate of Incorporation
and the Preferred Stock Series Resolution, provided that the manner in which
such facts shall operate upon such Series Terms is clearly and expressly set
forth in the Certificate of Incorporation or in the Preferred Stock Series
Resolution.

         Subject to the provisions of this Article Fourth, shares of one or more
series of Preferred Stock may be authorized or issued from time to time as shall
be determined by and for such consideration as shall be fixed by the Board of
Directors or a designated committee thereof, in an aggregate amount not
exceeding the total number of shares of Preferred Stock authorized by this
Certificate of Incorporation. Except in respect of series particulars fixed by
the Board of Directors or its committee as permitted hereby, all shares of
Preferred Stock shall be of equal rank and shall be identical. All shares of any
one series of Preferred Stock so designated by the Board of Directors shall be
alike in every particular, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon shall be
cumulative.

         Attached hereto as Exhibit A is a Certificate of Designations of Series
A Junior Participating Preferred Stock, which was filed on December 4, 1995 and
sets forth the Series Terms of the only series of Preferred Stock that is
currently effective.

II.      Common Stock

         1. Dividends. Subject to the provisions of any Preferred Stock Series
Resolution, the Board of Directors may, in its discretion, out of funds legally
available for the payment of dividends and at such times and in such manner as
determined by the Board of Directors, declare and pay dividends on the Common
Stock of the corporation.

         No dividend (other than a dividend in capital stock ranking on a parity
with the Common Stock or cash in lieu of fractional shares with respect to such
stock dividend) shall be declared or paid on any share or shares of any class of
stock or series thereof ranking on a parity with the Common Stock in respect of
payment of dividends for any dividend period unless there shall have been
declared, for the same dividend period, like proportionate dividends on all
shares of Common Stock then outstanding.

         2. Liquidation. In the event of any liquidation, dissolution or winding
up of the corporation, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the corporation and
payment or setting aside for payment of any preferential amount due to the
holders of any other class or series of stock, the holders of the Common Stock
shall be entitled to receive ratably any or all assets remaining to be paid or
distributed.

         3. Voting Rights. Subject to any special voting rights set forth in any
Preferred Stock Series Resolution, the holders of the Common Stock of the
corporation shall be entitled at all meetings of stockholders to one vote for
each share of such stock held by them.

III.     Senior, Parity or Junior Stock

         Whenever reference is made in this Article Fourth to shares "ranking
senior to" another class of stock or "on a parity with" another class of stock,
such reference shall mean and



                                       3
   4

include all other shares of the corporation in respect of which the rights of
the holders thereof as to the payment of dividends or as to distributions in the
event of a voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the corporation are given preference over, or rank on an equality
with, as the case may be, the rights of the holders of such other class of
stock. Whenever reference is made to shares "ranking junior to" another class of
stock, such reference shall mean and include all shares of the corporation in
respect of which the rights of the holders thereof as to the payment of
dividends and as to distributions in the event of a voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the corporation are
junior and subordinate to the rights of the holders of such class of stock.

         Except as otherwise provided herein or in any Preferred Stock Series
Resolution, each series of Preferred Stock ranks on a parity with each other and
each ranks senior to the Common Stock. Common Stock ranks junior to the
Preferred Stock.

IV.      Liquidation Notices

         Written notice of any voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the corporation, stating a payment date and the
place where the distributable amounts shall be payable, shall be given by mail,
postage prepaid, not less than thirty (30) days prior to the payment date stated
therein, to the holders of record of the Preferred Stock, if any, at their
respective addresses as the same shall appear on the books of the corporation.

V.       Reservation and Retirement of Shares

         The corporation shall at all times reserve and keep available, out of
its authorized but unissued shares of Common Stock or out of shares of Common
Stock held in its treasury, the full number of shares of Common Stock into which
all shares of any series of Preferred Stock having conversion privileges from
time to time outstanding are convertible.

         Unless otherwise provided in a Preferred Stock Series Resolution with
respect to a particular series of Preferred Stock, all shares of Preferred Stock
redeemed or acquired (as a result of conversion or otherwise) shall be retired
and restored to the status of authorized but unissued shares.

VI.      No Preemptive Rights

         Subject to the provisions of any Preferred Stock Series Resolution, no
holder of shares of stock of the corporation shall have any preemptive or other
rights, except as such rights are expressly provided by contract, to purchase or
subscribe for or receive any shares of any class, or series thereof, of stock of
the corporation, whether now or hereafter authorized, or any warrants, options,
bonds, debentures or other securities convertible into, exchangeable for or
carrying any right to purchase any shares of any class, or series thereof, of
stock; but subject to the provisions of any Preferred Stock Series Resolution,
such additional shares of stock and such warrants, options, bonds, debentures or
other securities convertible into, exchangeable for or carrying any right to
purchase any shares of any class, or series thereof, of stock may be issued or
disposed of by the Board of Directors to such persons, and on such terms and for
such lawful consideration, as in its discretion it shall deem advisable or as to
which the corporation shall have by binding contract agreed.




                                       4
   5

         FIFTH: OMITTED

         SIXTH: The number of directors of the corporation shall be fixed as
specified or provided for in the by-laws of the corporation. Election of
directors need not be by written ballot unless the bylaws shall so provide. No
holders of Preferred Stock or Common Stock of the corporation shall have any
right to cumulate votes in the election of directors.

         SEVENTH: The directors shall be classified, with respect to the time
for which they severally hold office, into three classes, as nearly equal in
number a possible, as shall be provided in the manner specified in the by-laws
of the Corporation, one class to be originally elected for a term expiring on
the annual meeting of stockholders to be held in 1992, another class to be
originally elected for a term expiring at the annual meeting of stockholders to
be held in 1993, and another class to be originally elected for a term expiring
at the annual meeting of stock holders to be held in 1994, with each class to
hold office until its successor is elected and qualified. At each annual meeting
of the stockholders of the Corporation, the successors of the class of directors
whose term expires at that meeting shall be elected to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election.

         Any director may be removed from office, but only for cause, by a vote
of the holders of a majority of the shares then issued and outstanding. Cause
shall mean willful and gross misconduct by the director that is materially
adverse to the best interests of the Corporation, as determined conclusively by
a majority of the disinterested directors of the Corporation.

         Vacancies and newly created directorships resulting from any increase
in the authorized number of directors may be filled by a majority of the
directors then in office, although less than a quorum, or the sole remaining
director, and shall not be filled by the stockholders; any director so chosen
shall hold office until the next election of the class for which such director
shall have been chosen, and until his successor shall be duly elected and shall
qualify, unless sooner displaced.

         Notwithstanding anything contained in this Certificate of Incorporation
to the contrary, the affirmative vote of the holders of at least 66 2/3% of the
shares of the Corporation's voting stock issued and outstanding shall be
required to alter, amend, adopt any provision inconsistent with or repeal this
Article Seventh.

         EIGHTH: Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of such holders and may not be effected by any consent in
writing by such holders. Notwithstanding anything contained in this Certificate
of Incorporation to the contrary, the affirmative vote of the holders of at
least 66 2/3% of the shares of the Corporation's stock issued and outstanding
shall be required to alter, amend, adopt any provision inconsistent with or
repeal this Article Eighth.

         NINTH: The Board of Directors is hereby expressly authorized to adopt,
amend or repeal the by-laws of the Corporation or adopt new by-laws, without any
action on the part of the stockholders, by the vote of a majority of the
directors; provided, however, that no such adoption, amendment, or repeal shall
be valid with respect to by-law provisions which have been adopted, amended, or
repealed by the stockholders; and further provided, that by-laws adopted or
amended by the Directors and any powers thereby conferred may be amended,
altered, or repealed by the stockholders. Notwithstanding the foregoing and
anything in this Certificate of Incorporation to the contrary, Article II
Section 1, Article II Section 4, Article II



                                       5
   6


Section 12, Article III Section 6, Article III Section 7, Article III Section 12
and Article IX of the by-laws shall not be amended, repealed, altered or added
to by the stockholders, and no provision inconsistent therewith shall be adopted
by the stockholders without the affirmative vote of the holders of at least 66
2/3% of the Corporation's voting stock issued and outstanding. Notwithstanding
anything contained in this Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least 66 2/3% of the Corporation's voting
stock issued and outstanding shall be required to alter, amend, adopt any
provision inconsistent with or repeal this Article Ninth.

         TENTH: A director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for such liability as is expressly not subject to
limitation under the General Corporation Law of the State of Delaware, as the
same exists or may hereafter be amended to further limit or eliminate such
liability. Moreover, the corporation shall, to the fullest extent permitted by
law, indemnify any and all officers and directors of the corporation, and may,
to the fullest extent permitted by law or to such lesser extent as is determined
in the discretion of the Board of Directors, indemnify any and all other persons
whom it shall have power to indemnify, from and against all expenses,
liabilities or other matters arising out of their status as such or their acts,
omissions or services rendered in such capacities. The corporation shall have
the power to purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability.

         ELEVENTH: The corporation shall have the right, subject to any express
provisions or restrictions contained in the Certificate of Incorporation or
by-laws of the corporation, from time to time, to amend the Certificate of
incorporation or any provision thereof in any manner now or hereafter provided
by law, and all rights and powers of any kind conferred upon a director or
stockholder of the corporation by this Certificate of Incorporation or any
amendment thereof are conferred subject to such right.

         I, the undersigned, being Secretary of the Corporation, do execute and
file this Restated Certificate of Incorporation, having been so authorized by
resolution of the corporation's Board of Directors dated March 1, 2001.


                                                  /s/ THOMAS B. GREEN
                                                  ------------------------------
                                                  Thomas B. Green


                                       6
   7


                                    EXHIBIT A

The attached Certificate of Designations of Series A Junior Participating
Preferred Stock, which was filed on December 4, 19995, is not affected by the
filing of this Restated Certificate of Incorporation, and will remain in full
force and affect.



   8





                           CERTIFICATE OF DESIGNATIONS

                                       Of

                  SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

                                       Of

                            DELL COMPUTER CORPORATION

                         (Pursuant to Section 151 of the
                        Delaware General Corporation Law)

                        -------------------------------

         Dell Computer Corporation, a corporation organized and existing under
the General Corporation Law of the State of Delaware (hereinafter called the
"Corporation", hereby certifies that the following resolution was adopted by the
Board of Directors of the Corporation as required by Section 151 of the General
Corporation Law at a meeting duly called and held on November 29, 1995:

         RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Certificate
of Incorporation, the Board of Directors hereby creates a series of Preferred
Stock, par value $.01 per share (the "Preferred Stock"), of the Corporation and
hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:

         Series A Junior Participating Preferred Stock:

         Section I. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 200,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.

         Section II. Dividends and Distributions.

                  A. Subject to the rights of the holders of any shares of any
         series of Preferred Stock (or any similar stock) ranking prior and
         superior to the Series A Preferred Stock with respect to dividends, the
         holders of shares of Series A Preferred Stock, in preference to the
         holders of Common Stock, par value $.01 per share (the "Common Stock"),
         of the Corporation, and of any other junior stock, shall be entitled to
         receive, when, as and if



   9

         declared by the Board of Directors out of funds legally available for
         the purpose, quarterly dividends payable in cash on the first day of
         March, June, September and December in each year (each such date being
         referred to herein as a "Quarterly Dividend Payment Date"), commencing
         on the first Quarterly Dividend Payment Date after the first issuance
         of a share or fraction of a share of Series A Preferred Stock, in an
         amount per share (rounded to the nearest cent) equal to the greater of
         (a) $1 or (b) subject to the provision for adjustment hereinafter set
         forth, 1000 times the aggregate per share amount of all cash dividends,
         and 1000 times the aggregate per share amount (payable in kind) of all
         non-cash dividends or other distributions, other than a dividend
         payable in shares of Common Stock or a subdivision of the outstanding
         shares of Common Stock (by reclassification or otherwise), declared on
         the Common Stock since the immediately preceding Quarterly Dividend
         Payment Date or, with respect to the first Quarterly Dividend Payment
         Date, since the first issuance of any share or fraction of a share of
         Series A Preferred Stock. In the event the Corporation shall at any
         time declare or pay any dividend on the Common Stock payable in shares
         of Common Stock, or effect a subdivision or combination or
         consolidation of the outstanding shares of Common Stock (by
         reclassification or otherwise than by payment of a dividend in shares
         of Common Stock) into a greater or lesser number of shares of Common
         Stock, then in each such case the amount to which holders of shares of
         Series A Preferred Stock were entitled immediately prior to such event
         under clause (b) of the preceding sentence shall be adjusted by
         multiplying such amount by a fraction, the numerator of which is the
         number of shares of Common Stock outstanding immediately after such
         event and the denominator of which is the number of shares of Common
         Stock that were outstanding immediately prior to such event.

                  B. The Corporation shall declare a dividend or distribution on
         the Series A Preferred Stock as provided in paragraph (A) of this
         Section immediately after it declares a dividend or distribution on the
         Common Stock (other than a dividend payable in shares of Common Stock);
         provided that, in the event no dividend or distribution shall have been
         declared on the Common Stock during the period between any Quarterly
         Dividend Payment Date and the next subsequent Quarterly Dividend
         Payment Date, a dividend of $1 per share on the Series A Preferred
         Stock shall nevertheless be payable on such subsequent Quarterly
         Dividend Payment Date.

                  C. Dividends shall begin to accrue and be cumulative on
         outstanding shares of Series A Preferred Stock from the Quarterly
         Dividend Payment Date next preceding the date of issue of such shares,
         unless the date of issue of such shares is prior to the record date for
         the first Quarterly Dividend Payment Date, in which case dividends on
         such shares shall begin to accrue from the date of issue of such
         shares, or unless the date of issue is a Quarterly Dividend Payment
         Date or is a date after the record date for the determination of
         holders of shares of Series A Preferred Stock entitled to receive a
         quarterly dividend and before such Quarterly Dividend Payment Date, in
         either of which events such dividends shall begin to accrue and be
         cumulative from such Quarterly Dividend Payment Date. Accrued but
         unpaid dividends shall not bear interest. Dividends paid on the shares
         of Series A Preferred Stock in an amount less than the total amount of


   10


         such dividends at the time accrued and payable on such shares shall be
         allocated pro rata on a share-by-share basis among all such shares at
         the time outstanding. The Board of Directors may fix a record date for
         the determination of holders of shares of Series A Preferred Stock
         entitled to receive payment of a dividend or distribution declared
         thereon, which record date shall be not more than 60 days prior to the
         date fixed for the payment thereof.

         Section III. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:

                  A. Subject to the provision for adjustment hereinafter set
         forth, each share of Series A Preferred Stock shall entitle the holder
         thereof to 1000 votes on all matters submitted to a vote of the
         stockholders of the Corporation. In the event the Corporation shall at
         any time declare or pay any dividend on the Common Stock payable in
         shares of Common Stock, or effect a subdivision or combination or
         consolidation of the outstanding shares of Common Stock (by
         reclassification or otherwise than by payment of a dividend in shares
         of Common Stock) into a greater or lesser number of shares of Common
         Stock, then in each such case the number of votes per share to which
         holders of shares of Series A Preferred Stock were entitled immediately
         prior to such event shall be adjusted by multiplying such number by a
         fraction, the numerator of which is the number of shares of Common
         Stock outstanding immediately after such event and the denominator of
         which is the number of shares of Common Stock that were outstanding
         immediately prior to such event.

                  B. Except as otherwise provided herein, in any other
         Certificate of Designations creating a series of Preferred Stock or any
         similar stock, or by law, the holders of shares of Series A Preferred
         Stock and the holders of shares of Common Stock and any other capital
         stock of the Corporation having general voting rights shall vote
         together as one class on all matters submitted to a vote of
         stockholders of the Corporation.

                  C. Except as set forth herein, or as otherwise provided by
         law, holders of Series A Preferred Stock shall have no special voting
         rights and their consent shall not be required (except to the extent
         they are entitled to vote with holders of Common Stock as set forth
         herein) for taking any corporate action.

         Section IV. Certain Restrictions.

                  A. Whenever quarterly dividends or other dividends or
         distributions payable on the Series A Preferred Stock as provided in
         Section 2 are in arrears, thereafter and until all accrued and unpaid
         dividends and distributions, whether or not declared, on shares of
         Series A Preferred Stock outstanding shall have been paid in full, the
         Corporation shall not:


   11

                           1. declare or pay dividends, or make any other
                  distributions, on any shares of stock ranking junior (either
                  as to dividends or upon liquidation, dissolution or winding
                  up) to the Series A Preferred Stock;

                           2. declare or pay dividends, or make any other
                              distributions, on any shares of stock ranking on a
                              parity (either as to dividends or upon
                              liquidation, dissolution or winding up) with the
                              Series A Preferred Stock, except dividends paid
                              ratably on the Series A Preferred Stock and all
                              such parity stock on which dividends are payable
                              or in arrears in proportion to the total amounts
                              to which the holders of all such shares are then
                              entitled;

                           3. redeem or purchase or otherwise acquire for
                              consideration shares of any stock ranking junior
                              (either as to dividends or upon liquidation,
                              dissolution or winding up) to the Series A
                              Preferred Stock, provided that the Corporation may
                              at any time redeem, purchase or otherwise acquire
                              shares of any such junior stock in exchange for
                              shares of any stock of the Corporation ranking
                              junior (either as to dividends or upon
                              dissolution, liquidation or winding up) to the
                              Series A Preferred Stock: or

                           4. redeem or purchase or otherwise acquire for
                  consideration any shares of Series A Preferred Stock, or any
                  shares of stock ranking on a parity with the Series A
                  Preferred Stock, except in accordance with a purchase offer
                  made in writing or by publication (as determined by the Board
                  of Directors) to all holders of such shares upon such terms as
                  the Board of Directors, after consideration of the respective
                  annual dividend rates and other relative rights and
                  preferences of the respective series and classes, shall
                  determine in good faith will result in fair and equitable
                  treatment among the respective series or classes.

                  B. The Corporation shall not permit any subsidiary of the
         Corporation to purchase or otherwise acquire for consideration any
         shares of stock of the Corporation unless the Corporation could, under
         paragraph (A) of this Section 4, purchase or otherwise acquire such
         shares at such time and in such manner.

         Section V. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.

         Section VI. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of






   12


stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received $1000 per share, plus
an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, provided that the holders
of shares of Series A Preferred Stock shall be entitled to receive an aggregate
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 1000 times the aggregate amount to be distributed per share to holders
of shares of Common Stock, or (2) to the holders of shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except distributions made ratably on the
Series A Preferred stock and all such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

         Section VII. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

         Section VIII. No Redemption. The shares of Series A Preferred Stock
shall not be redeemable.



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         Section IX. Rank. The Series A Preferred Stock shall rank, with respect
to the payment of dividends and the distribution of assets, junior to all series
of any other class of the Corporation's Preferred Stock.

         Section X. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.

         IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its Chairman of the Board and attested by its
Secretary this 29th day of November, 1995.


                                                  /s/ MICHAEL S. DELL
                                                  ------------------------------
                                                  Chairman of the Board

Attest:

/s/ THOMAS B. GREEN
------------------------
Secretary