Dell Working Capital

Dell's Working Capital Harvard Business School Case #201-029 Case Software #XLS039

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Table A

Days Supply of Inventory (DSI)a 1993b 55

1994b 33

1995b 32

Apple Computer

52

85

54

Compaq Computer

72

60

73

IBM

64

57

48

Dell Computer

Source: Dell Computer Corporation Fiscal 1993-1995 Annual Reports; case writer estimates from Apple Computer, Compaq Computer, and IBM Fiscal 1992-1994 Annual Reports. a

DSI = (Net Ending Inventory)/(Quarterly COGS/90 Days)

Dell’s fiscal calendar ends in January; Apple’s in September; Compaq and IBM’s in December. The DSI for 1995 represents Dell’s DSI for the quarter ended on 1/29/95, Apple’s on 9/30/94, and Compaq’s and IBM’s on 12/31/94. b

Exhibit 1

Dell’s annual worldwide sales dollar growth versus industry.

Calendar Year 1991 1992 1993 1994 1995

Della 63% 126% 43% 21% 52%

Industry -2% 7% 15% 37% 31%

Source: Dell Computer Corporation Fiscal 1996 Annual Report; case writer estimates from industry market share data from International Data Corporation.

a

Dell’s fiscal year closest in alignment to calendar year stated.

Exhibit 2

Q193 Q293 Q393 Q493 Q194 Q294 Q394 Q494 Q195 Q295 Q395 Q495 Q196 Q296 Q396 Q496

Working Capital Financial Ratios for Dell. DSIa 40 44 47 55 55 41 33 33 32 35 35 32 34 36 37 31

DSOb 54 51 52 54 58 53 53 50 53 49 50 47 47 50 49 42

DPOc 46 55 51 53 56 43 45 42 45 44 46 44 42 43 43 33

CCCd 48 40 48 56 57 51 41 41 40 40 39 35 39 43 43 40

Source: Dell Computer Corporation fiscal 1993-1996 annual and quarterly reports. a

DSI (Days Sales of Inventory) = Net Inventory / (Quarterly COGS/90).

b

DSO (Days Sales Outstanding) = Net Accounts Receivables / (Quarterly Sales/90).

c d

DPO (Days Payables Outstanding) = Accounts Payables / (Quarterly COGS/90). CCC (Cash Conversion Cycle) = DSI + DSO – DPO.

Exhibit 3

Percent of Dell Computer Systems Sales by Microprocessor.

Computer Systems 386 models 486 models Pentium models

FY94 7% 92% 1%

FY95 0% 71% 29%

Source: Dell Computer Corporation Fiscal 1994-96 Annual Reports.

FY96 0% 25% 75%

Exhibit 4

Profit & Loss Statements for Dell Computer Corporation (millions of dollars).

Fiscal Year Sales Cost of Sales Gross Margin Operating Expenses Operating Income Financing & Other Income Income Taxes Net Profit

1996 $5,296 4,229 1,067 690 377 6 111 272

1995 $3,475 2,737 738 489 249 (36) 64 149

Source: Dell Computer Corporation Fiscal 1996 Annual Report.

1994 $2,873 2,440 433 472 (39) 0 (3) (36)

1993 $2,014 1,565 449 310 139 4 41 102

1992 $890 608 282 215 67 7 23 51

Exhibit 5

Balance Sheets for Dell Computer Corporation (millions of dollars).

January 28, 1996 Current Assets: Cash Short Term Investments Accounts Receivables, net Inventories Other Total Current Assets Property, Plant & Equipment, net Other Total Assets Current Liabilities: Accounts Payable Accrued and Other Liabilities Total Current Liabilities Long Term Debt Other Liabilities Total Liabilities Stockholders’ Equity: Preferred Stocka Common Stocka Retained Earnings Other Total Stockholders’ Equity

Year Ended January 29, 1995

55 591 726 429 156 1,957 179 12 2,148

43 484 538 293 112 1,470 117 7 1,594

3 334 411 220 80 1,048 87 5 1,140

466 473 939 113 123 1,175

403 349 752 113 77 942

NA NA 538 100 31 669

6 430 570 (33) 973 2,148

120 242 311 (21) 652 1,594

NA NA NA NA 471 1,140

Source: Dell Computer Corporation Fiscal 1994-1996 Annual Reports. a

January 30, 1994

1,190,000 shares of preferred stock converted to common stock in fiscal year 1996.