Dell: Analyzing financial statement

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Dell: Analyzing financial statement

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products, from desktop personal computers (PC) to peripherals. Founded in 1984 in Texas by then-student Michael Dell, the company was as of January 2012 the third largest PC vendor in the world . Conducting its business worldwide through numerous subsidiaries, Dell provides IT solutions and services delivered directly by Dell, through its famous feature of direct-sales model and configure-to-order approach manufacturing, establishing a direct link with the final customers. Dell also uses other distribution channels such as retailers, third-party solution providers, system integrator's, and third-party reseller's.

Its business segments are divided between: large enterprises, public (meaning educational institutions, government, health care…), small and medium business, consumer (meaning individuals).Dell's main activity consists of assembling PC components and parts manufactured by third-party suppliers, as is the majority of the client products sold under Dell's brand name. These suppliers provide Dell with all the necessary components such as: the motherboard, the graphic card, the screen, processors… Dell's manufacturing process consists of assembly, software installation and functional testing.

To ensure quality to the final customer, all components, parts, sub-assemblies and systems obtained from third-party suppliers must take a quality control test to assess their conformity with Dell's good manufacturing process.

Dell's overview
Obtain outside information about the company and its industry. Include the following information in your group presentation
Describe four or five key business risks related to the client's business and industry
What notable accounting considerations are there for companies in this industry?
What legal or regulatory matters are of concern for the company and its industry?
Analyze the company's financial strength
After analyzing the financial statements and key risks, please answer the following questions
1. Would you but this company's stock? Why or Why Not?
2. Would you work for this company based upon its financial performance? Why or Why Not?
3. If you were a banker would you lend money to this company? Why or Why Not?
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[...] 12 b. How is the financial strength likely to change in the next year or so? 12 c. What is the quality of earnings? (i.e. How does the company compare with others in the industry?) After Analyzing the Financial Statements and Key Risks, please answer the following questions: 13 a. Would you but this company's stock? Why or Why Not? 13 b. Would you work for this company based upon its financial performance? Why or Why Not? 13 c. [...]

[...] The interesting point that we will discuss further, is that those raw materials are purchased from a large number of vendors. Depending on the product, multiple sources are not always available, forcing Dell to rely on single-source vendors, which may constitute a risk factor. d. How large is DELL in terms of sales, assets, and employees? Regarding sales, the company recorded revenues of $62,071 million during the fiscal year that ended in February 2012[2] (fiscal year 2012), which corresponds to an increase of over fiscal year 2011. [...]

[...] And how might that information be useful in understanding the company's financial statements? Item 1 and Item 1A of the Form 10-K are full of extremely valuable information to better understand the company's financial statements. These two items encompasses: Dell's activities and business core: business strategy, offer segmentation, sales & markets, risk factors Dell as a corporate entity: human resources, executive leadership . The general context in which Dell evolves: competition, geographic locations, patents, government regulations All of this allows us to have a better view on the company's strategy and future developments. [...]

[...] The net profit was $3,492 million in fiscal year 2012, a skyrocketing increase of over fiscal year 2011. Assets were established at $44,533 billion in February 2012, with the immense majority recorded under the line “Corporate” ($36,171). Compared to fiscal year 2011, this is an increase of 15%. Headcount was reported as approximately 109,400 employees divided between 106,700 regular employees and 2,700 temporary workers, as increase compared to 2011 (respectively 100,300 and 3,000) employees at the end of fiscal year 2011 were located in the US, and 66,800 employees were located overseas. [...]

[...] The industry estimates indicate that in mature markets, the PC shipments will decline by in 2012. Dell faces a very strong competition. Acer, Apple, HP, Lenovo, etc Furthermore, in the European and Asian netbooks markets the company faces intense competition from Asustek. Also, in the smartphone segment, Dell competes with Apple, Research In Motion and HTC. Intense competition may affect the company's operating performance and market share in coming years. b. What are the five or six most important factors for success in this business? [...]

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