November 6, 2002

Jim VandersliceVice Chairman

Boston College

www.dell.com

Dell: The Facts

• Pioneer and leader in direct business

• Leader in e-business

• Fortune 50 Company -- $32+ Billion in Global

Revenue

• Global Company > Operating in 190 Countries

• World’s #2 Computer Systems Company

(temporarily)

• #1 in Customer Satisfaction

• Approximately 38,000 Employees Worldwide

• Market Capitalization of $70 Billion

www.dell.com

Foundation in Direct Model:Fundamentally Advantaged

Ownership of value chain/informationStructural costs•OPEX•Manufacturing•Warranty

CustomerExperience

Model advantages unique to Dell & take significant time/cost to replicate

Suppliers DELL Customers

Direct Model

Competitor Model

Suppliers OEM Customers

Outsourcing Channel

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LIQUIDITY$869 million in cash flow from operations4 days of inventory*$8.6 billion in cash & investments*CCC -37 days*

PROFITABILITY Gross margins = 17.9%

Operating Margin = 8.0% OPEX percent of revenue = 9.9%*

GROWTHDell units +18%, market down -5%Units #2 WW, #1 USFavorable mix shift to enterprise

• Delivered $0.19 EPS and $8.5 billion in revenues

• Repurchased 14 million shares of stock• Shipped record number of units during

quarter

* Value ties or sets company record

Executing the Direct Model:Q2FY03 Performance

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Fundamental #1

Take RisksTake Risks

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Dell’s Enterprise Success

#1 in Servers (U.S.)

#2 in Servers (Worldwide)

#1 in Workstations (Worldwide)

Storage revenues grew 72 percent year-over-year in Q2

Dell EMC and PowerConnect Ahead of Expectations

www.dell.com

Leveraging our Core Business

0%

4%

8%

12%

16%

20%

1995 1997 1999 2001

Source: IDC

Market Share -- WW Corporate

Continue to gain share in all products & segments:

• #1 in WW Corporate• #1 in WW SMB• #1 in WW Public• #3 in WW Consumer• #1 in WW Desktops• #1 in WW Notebooks• #2 in WW Servers

Continue to grow profitable $3.5 billion software & peripherals business

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Fundamental #2

Efficiency WinsEfficiency Wins

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Executing the Direct Model:Significant Cost Advantage

Competitor OPEX greater than 2x Dell

Dell focused on maintaining advantage

Translated cost adv. into profitable share gains• WW share incr. from

9.7% in Q1’00 to 15% in Q2’02

• 55% increase in 10 quarters

0%

5%

10%

15%

20%

25%

30%

35%

Q3'0

0

Q4'0

0

Q1'0

1

Q2'0

1

Q3'0

1

Q4'0

1

Q1'0

2

Q2'0

2

Operating Expense Over Time (% sales)

HPQ

Source: Company Financial Statements

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U.S.Install Base

Benefit

U.S. Current Year

Warranty Cost Reduction

ROW Current Year

Warranty CostReduction

$430M

Total COGSBenefit

$105M

$150M

$175M

$255MCurrent Year

Shipments

Dell Confiden tial 8/19/2002 , 1

FY’03 Cost Governance ChallengeOn Target to Exceed Challenge!On Target to Exceed Challenge!

Adv

anta

ged

Com

mod

itie

s

Str

uctu

ral

Mate

rial

Tra

nsfo

rmat

ion

War

rant

y CO

GS

Adv

anta

ged

Com

mod

itie

s

Str

uctu

ral

Mate

rial

Tra

nsfo

rmat

ion

War

rant

y CO

GS

Committed

FY03 YTD TargetFY03 YTD Target

Adv

anta

ged

Com

mod

itie

s

Str

uctu

ral

Mate

rial

Tra

nsfo

rmat

ion

War

rant

y CO

GS

Challenge

Alli

ance

dS

avin

gs

Str

uct

ura

l Mat

eri

al

Tra

nsf

orm

atio

n

War

ran

ty C

OG

S

$916M FY03

$290M $27MTarget $364M$236M $916M

$1,046M

$292M$292M

Levers

$376M

$72M$72M

$255M $51M $364M

$128M$128M $83M$83M $9M$9M

FY03 YTD ActualFY03 YTD Actual $148M$148M $89M$89M $18M$18M $97M$97M $352M$352M

•Service Labor rates

•Product Quality Improvements

•Global Site Optimization

•Inventory management

A key focus area for the company is to reduce cost by $1B in FY03. Warranty cost reduction is a major component of this initiative. At the end of Q2 FY03, Dell’s warranty cost reduction projection for FY03 consisted of the following:

FY03 Initiatives – Warranty Cost Reduction

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Fundamental #3

Speed is LifeSpeed is Life

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Historical Cash Conversion Cycle (Q1 FY99 – Q4 FY02)

Dell

Compaq

Hewlett Packard

IBM

Sun

Q1FY99

Q2 Q3 Q4 Q1FY00

Q2 Q3 Q4 Q1FY01

Q2 Q3 Q4 Q1FY02

Q2 Q3 Q4(50)

0

50

100

Cas

h C

on

ver

sio

n C

ycle

(D

ays)

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Fundamental #4

Grow or DieGrow or Die

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4.3%

12.7%

5.7%

9.7%

22.8%

15.0%

7.1%

4.7%

10.5%

27.2%

0%

10%

20%

30%

US EMEA APAC Japan Worldwide

Mkt. Position 1 2 4 4 2

Dell Y/YGrowth 23% 5% 13% 10% 18%

Dell Premium 25% 9% 11% 23% 20%

Dell CY ‘02 Q2 ShareDell CY ‘01 Q2 Share

Dell Gaining Share in All Regions

www.dell.com

Selectively identify markets

Extending the Direct Model:

Method for Extension

Fit our economics – large, profitable, standardizingLeverage our capabilities

Enter with low investmentPartnership with existing playerBrand 3rd party products

Layer in new capabilities/offerings over time Take ownership of the value

chainImprove margins

Direct Model extends into new markets, we:

www.dell.com

Standardizing, adjacent to core, leverage existing channelAddressable market now ~$30 billionEMC Partnership• Continues to progress; revenues up 65% Q/Q

• Introduction of the co-branded CX600

Opportunities for Growth:External Storage

$0 B

$5 B

$10 B

$15 B

$20 B

$25 B

$30 B

$35 B

DELL PowerVaultDELL EMC

2

DELL PowerVaultand

DAS

NASSAN

Storage HW Addressable Market

Addressable market

doubles with EMC Alliance

www.dell.com

Fundamental #5

Exceed ExpectationsExceed Expectations

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On-Time, Reliable DeliveryProduct AvailabilityTime to RepairPrice/PerformanceTotal Cost of OwnershipVolume Discounts

Significant Lead In: On-Time, Reliable DeliveryOverall HW PerformancePrice/PerformanceTotal Cost of OwnershipVolume DiscountsOverall Satisfaction

Out-of-Box QualityReplacement Parts AvailabilityPrice/PerformanceTotal Cost of OwnershipVolume DiscountsOverall Satisfaction

DellCompaqHewlett PackardIBMGatewayToshiba

Category Leader In:

Desktops Notebooks Servers

80 8279

83

86

7881

81

8482

84

86

70

75

80

85

90

TBR

Cat

egor

y R

anki

ng

10 of 13 Categories 10 of 15 Categories 12 of 16 Categories

Source: TBR Customer Satisfaction Study, Q4 01

79

The Customer Experience

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Fundamental #6

Be Relevant to CustomersBe Relevant to Customers

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1994$4B

1996 $8B

Large Customers Small Customers (Business and Consumer)

LargeCompanies

MidsizeCompanies Government Small

Customers

GlobalEnterpriseAccounts

LargeCompanies

MidsizeCompanies

CivilianDept. of Defense

& Intelligence

State & Local

SmallCompanies Consumers

Education & Healthcare

Higher Ed. K-12 Healthcare

2001$32B

1998 $18B

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Companies that Work in Isolation Continue to

Overspend

Source: Dell, Company Financials

0%

5%

10%

15%

20%

SUNW DELL

Sun R&DInefficiency:

8%

19%

11%

3rd Party R&D

In-house R&D3rd Party R&D

In-house R&D

Server R&D as Percent of Revenues

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Fundamental #7

ListenListen

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Customers Told Us …

Linux

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Differentiated PerformanceO

pera

tin

g I

ncom

e

%

Revenue Growth Y/Y - Q2'02

-10

0

10

20

30%

-40 -30 -20 -10 0 10 20%

$5BRev

• Dell performance among upper echelon of enterprise companies

www.dell.com

Fundamental #8

Build Strong RelationshipsBuild Strong Relationships

www.dell.com

                                                                   

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Fundamental #9

Believe in YourselfBelieve in Yourself

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Performing in a Weak Market

-25%

0%

25%

Q4 FY00 Q4 FY01 Q4 FY02

Un

it G

row

th

9%

12%

15%

Mar

ket

Sh

are

WW Market Unit Growth

Dell Market Share

Dell GrowthPremium

16% 11% 7% 2% 35% 23% 23% 21% 18%

www.dell.com

5%

10%

15%

20%

25%

Q3 97 Q1 98 Q3 98 Q1 99 Q3 99 Q1 00 Q3 00 Q1 01 Q3 01 Q1 02

Customers Prefer Dell:Market Share Up +158%

HPQ down -23%

DELL up +158%

IBM down -19%

Source: IDC

WW

Mark

et

Sh

are

Worldwide Unit Market ShareAll Products – Last 5 Years

Questions& Answers