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Dell Inc. (DELL)

Q4 2006 Earnings Conference Call

February 16th 2006, 5:00 PM.

Executives:

Lynn Tyson, Vice President of Investor Relations & Global Corporate Communication

Jim Schneider, Chief Financial Officer

Kevin Rollins, Chief Executive Officer and President

Michael Dell, Chairman

Analysts:

Richard Gardner, Citigroup

Tony Sacconaghi, Sanford Bernstein

Ben Reitzes, UBS

Laura Conigliaro, Goldman Sachs

Harry Blount, Lehman Brothers

Rebecca Runkle, Morgan Stanley

Keith Bachman, Banc of America

Richard Farmer, Merrill Lynch

Bill Shope, JP Morgan

Andrew Neff, Bear Stearns

Richard Chu, SG Cowen

Steve Fortuna, Prudential Equity Group

Joel Wagonfeld, First Albany

Operator

Good afternoon, and welcome to the Dell, Incorporated Fourth Quarter Fiscal Year 2006 Conference Call. I'd like to inform all participants this call is being recorded at the request of Dell. This broadcast is the copyrighted property of Dell, Inc. Any rebroadcast of this information, in whole or in part, without the prior written permission of Dell, Incorporated is prohibited. As a reminder, Dell is also simulcasting this presentation with slides at www.dell.com/investor. Later we will conduct a question-and-answer session. If you have a question, simply press "*", then the number "1" on your telephone keypad at anytime during the presentation. I'd like to turn the call over to Ms. Lynn A. Tyson, Vice President of Investor Relations and Global Corporate Communication. Ms. Tyson, you may begin.

Lynn A. Tyson, Vice President of Investor Relations and Global Corporate Communication

Thank you. With me today are Chairman Michael Dell; Chief Executive Officer, Kevin Rollins; and Chief Financial Officer, Jim Schneider. Jim will review the fourth-quarter and full-year fiscal year '06 results, as well as our outlook for the quarter, Kevin will follow with his perspective on the market and our strategy, and then we will take your questions.

As the operator said, we have posted our earnings presentation on our Website. I strongly encourage you to read this deck for additional financial and operating information, as well as a reconciliation of our GAAP to non-GAAP results. Upcoming Investor Relations events include our April Analyst Meeting, which will be held in Austin, Texas on April 5th and 6th. Reminders have been sent out via email, and online registration will be sent out next week. The main meeting will be held on April 6th, and on April 5th, similar to last year, we will be hosting executive briefings on strategic areas of our business. These briefings require preregistration; space is extremely limited and will be sold on a first-come-first-serve basis.

Finally, I'd like to remind you that all statements made during this call that relate to future results and events, including our first-quarter outlook discussion, are forward-looking statements that are based on our current expectations. Actual results could differ materially from those projected in the forward-looking statements because of a number of risks and uncertainties, which were discussed in our annual and quarterly SEC filings, and in the cautionary statement contained in our press release and on our website. I'd now like to turn the call over to Jim.

Jim Schneider, Chief Financial Officer

Thanks, Lynn. On our third-quarter call we highlighted several areas of focus, including executional consistency and customer experience, balanced growth in every price band to drive industry-leading revenue and earnings growth, growth outside of the United States, and product leadership. In our fourth quarter we made progress in all these areas, which yielded revenues of $15.2 billion and earnings of $0.43 per share. In the quarter revenue increased 13% year-over-year, driven by growth outside the United States of 21%. Storage growth accelerated to 41%, and enhanced services were up 26%.

As you know, we had an extra week in the quarter that contributed about 2 to 3 points of added growth, which was slightly more than we expected. We shipped over 10 million units globally in the quarter. We gained share and strengthened our lead as the number-one systems company in the United States. We grew share in 16 of 19 direct countries in Europe, and we grew more than two times the industry in Asia-Pacific and Japan, and we are in a tie-up for the number-two position overall.

Operating income was $1.2 billion. Operating margin was down to 8.2% in the quarter as we drove higher revenue. EPS of $0.43 includes a benefit of an adjustment to the full-year tax rate which was worth $0.01 per share. As I've mentioned in the past, we expect our tax rate to continue to decline overtime, as our mix of income outside the United States increases. Cash flow from operations was $1.6 billion, with free cash flow of almost 2 billion. Please see our web deck for a reconciliation of cash flow from operations to our free cash flow. We spent $2 billion dollars to repurchase 66 million shares, which helped to reduce our weighted shares outstanding by 7% versus the fourth quarter of last year. Our cash conversion cycle was a negative 44 days, and we ended the quarter with 11.7 billion in cash and investments.

Lastly, I want to call your attention to our balance sheet. Starting in Q4, we have broken out our Dell Financial Services financing receivables. Many of you have asked for this detail, and overtime we will continue to increase our disclosures relative to DFS. By any measure, fiscal year 2006 was a strong year for Dell, as we drove industry-leading growth, profitability and liquidity. Overall revenue is up 14% to $56 billion, with revenue outside the United States, up 21%. Non-desktop revenue was 62% of our revenue mix, up 400 basis points from the prior year. Enhanced services revenue is up 33%, mobility revenue is up 19%, and storage revenue is up 38%. Units were up 19% as we shipped a record 37 million units, increasing our share in every major region of the world.

GAAP EPS for the year was $1.46, up 24%. We generated non-GAAP EPS of $1.56, up 21%. Please refer to our web deck for reconciliation of non-GAAP to GAAP. Our cash flow from operations was $4.8 billion, and for the full year we spent 7.2 billion to repurchase almost 205 million shares, more than four times the number of options we granted for the full year.

Turning to our products and services performance in the quarter, our total enterprise business, which includes servers, storage, and associated services and software and peripherals, grew 21%. Storage revenue is up 41% year-over-year, and Dell was the fastest-growing storage vendor in the quarter. Our annual run rate is now over $2 billion, and we believe we grew more than three times faster than the industry, excluding Dell, in the SAN space. Server revenue is up 10% year-over-year, led by solid growth in Asia-Pacific, Japan and EMEA (Europe, the Middle East and Africa). Our worldwide server share was up 1.6 percentage points year-over-year to 25%.

In Europe, we shipped over 100,000 servers for the first time in a quarter, and at the Imperial College in the UK, we implemented one of the largest supercomputers in Europe, powered by over 500 PowerEdge 1855 Blade Servers, capable of 12 million calculations per second. And in Japan, we delivered a 1200 Blade high-performance computing cluster to a leading research institution. We are excited about our new ninth-generation servers due in the first half of the year, and we have numerous opportunities going forward.

Enhanced services revenue grew 26% year-over-year to $1.4 billion, and our deferred revenues were up 200 million sequentially to $3.6 billion. We are now doing more than 500 major enterprise migrations per year, and we have migrated over 4 million exchange and active directory users. We are doing more than 3 million hardware installations per year, and we have more than 1.8 million seats under management. Outside the Americas, enhanced services revenue were up 57% year-over-year, driven by our expanded global network of over 52,000 service professionals in 180 countries.

In software and peripherals, revenue grew 22%, driven by our displays business. In the quarter, Dell maintained its large lead as the number-one worldwide LCD vendor, where we are almost double the next closest vendor. We introduced the 30 inch UltraSharp LCD monitor for advanced gamers, workstation users and media professionals. This monitor won a PC Magazine Editors’ Choice award in January, as well as the Best of CES Award for display.

In televisions, we launched new 32 inch and 37 inch LCDs and the 50 inch plasma. And our 42 inch high-definition plasma was awarded a PC Magazine Editors’ Choice Award in 2005. In Imaging, revenue was up 17% year-over-year. Going forward we are focusing on all-in-one inkjet, where we have 15% share in the United States, and lasers, where we have an 11% U.S. share.

Reflecting our emerging leadership in printing and imaging, Dell is ranked number one in J.D Power's inaugural Printer Customer Satisfaction Survey, where we were cited for providing excellent price for performance and support to business users. And the Dell 964 all-in-one printer won the Red Dot Award for Industrial Design Excellence. The Red Dot Design Award is Europe's most prestigious recognition for industrial design excellence, and is the most competitive design award in the world.

In the fast-growing mobility space, revenue is up 22% on 47% unit growth. During the quarter we introduced the Inspiron E1705, our first dual-core widescreen notebook, with a high-end graphics card for multimedia on the go. Unlike our customers in the United States, notebook customers in the UK, Germany and France will have the option of selecting built-in mobile broadband technology in the first half of this year.

Desktop PC revenue increased 1% year-over-year, impacted in part by the shift to mobility. As I mentioned earlier, revenue outside the United States was up 21% year-over-year, and reached a record 43% of Dell's revenue in the quarter. In Europe, units were up 25% and revenue grew 18% year-over-year. Growth was fueled by another strong quarter in Germany, where revenue is up 23%. In addition, we increased our headcount in the country by 50% with the opening of our new customer contact center in Halle.

We also saw strong growth in other strategically important European countries, and as recognition of the strength of our global brand, the Financial Times annual CEO survey of the most respected companies ranked Dell number 11 overall and number two in customer service, leading all others in the IT industry. This international survey polls over 900 CEOs across 25 countries. In Asia-Pacific and Japan, units were up 27% and revenue was up 21% year-over-year, as we approach 10% share for the combined region.

During the quarter we hit several key milestones in this region. Growth in Japan outpaced the industry, led by overall services growth of 75% and storage growth of 27%. In China, units grew 28% year-over-year, with strong profitability, demonstrating that the direct model can excel as well outside of the United States as it does in the U.S. We have almost 10% share and we shipped the first units from our new Xiamen manufacturing facility, which has effectively doubled our China capacity. And online, our direct model is readily embraced, with 24 million site visitors to Dell.com in APJ, including 7 million in China.

In Americas International, revenue was up 33% year-over-year. In Mexico, Dell won a five-year contract with the Secretary of Public Education. Under this contract, Dell is installing computers, printers, projectors and other equipment in over 30,000 classrooms throughout the country. In the United States we gained share overall, and we expect to be the number-one vendor in all customer segments for the eighth consecutive quarter. Our corporate revenues, including small, medium and large corporate accounts, were up 12% year-over-year, as customers continued to refresh and upgrade their IT infrastructure.

In the U.S. consumer business, we are committed to balanced growth at all price points while delivering healthy profitability. In the fourth quarter we aligned our consumer and small businesses segments, and generated solid growth in revenue and profits versus the third quarter. In addition, we re-asserted our leadership in the premium space, where we unveiled three new products that deliver previously unavailable features to enhance high-end gaming and mobile computing.

The liquid cooled XPS Renegade is the first system to support NVIDIA graphic cards linking four processors. The Inspiron 17 inch widescreen notebook is the first dual-core notebook with the high-end NVIDIA GeForce, and the 30 inch UltraSharp LCD monitor I mentioned earlier establishes a new standard in widescreen displays. These additions helped drive a 20% year-over-year increase in XPS units and a 20% sequential improvement in XPS product mix in U.S. consumer.

Before I turn it over to Kevin, let me touch on our first quarter of fiscal 2007. As Lynn noted, these comments contain forward-looking statements. For the first quarter we are forecasting revenue of 14.2 to 14.6 billion, up 6 to 9% year-over-year. Taking the extra selling days in the fourth quarter and normal seasonality into account, we expect Q1 revenue to be down between 2 and 5% sequentially. We expect income, interest and other income of about $55 million, a tax rate of 23.75%, and at least 1.2 billion of share repurchase. For the first quarter we expect EPS between $0.39 and $0.41, excluding almost $0.03 of stock compensation. Beginning in Q1 our GAAP earnings will include the impact of equity-based compensation expense. Now let me turn it over to Kevin for a more detailed discussion of our strategy.

Kevin Rollins, Chief Executive Officer and President

Thanks, Jim. There are three points I'd like to make. First, we grew faster than the market, and we're taking share across our portfolio of products, customer segments and countries. Second, we are reigniting our focus on the customer. Superior experience and service is our trademark, and our direct model affords us an unparalleled connection to our customers. We intend to dramatically extend our advantages, and we are already seeing positive trends. Third, this year is shaping up to be a great one, as several technology trends make 2006 particularly exciting for our customers.

First, growth. As we've done historically, Dell is dedicated to meeting the needs of our customers and growing faster than the market in capturing share. China is a perfect example of this. We are on a $2 billion run rate and growing at a multiple of the industry in revenue and units. Our operating income is healthy, and we're growing revenue and profits faster than any other company. We're now serving over 2000 cities with a full array of Dell products and services, and customers are embracing the advantages of the Dell direct relationship model, just as they have in over 180 other countries around the globe.

Our pace of sales progress in India is very similar to China only a few years ago. India's industry shipments are expected to grow from about 4 million units today to 10 million units in 2009, and we're moving into phase two of our plans. Today we are ramping sales capacity, and revenue is coming along with it, up 44% year-over-year. We will also begin manufacturing in India in the next couple of years.

Turning to the customer, we ceded some ground on a core attribute of our Dell direct model, and that is our unparalleled customer satisfaction experience. As the management team, we deem this unacceptable, and have established aggressive goals and implemented programs designed to drive personal accountability across the entire organization. To address capacity issues, we've opened or announced 10 global contact centers, including Oklahoma City, Edmonton, Manilla, Halle and Gurgaon, India. To improve hold times, we increased our Americas telephone support staff by approximately 20%, and our E-support staff by approximately 60%. To make the online experience more robust, we're making IT investments, including simplifying content and navigation on Dell.com, and dramatically improving our online E-support capabilities. And this year, after more than 130,000 sessions and 95% of customers saying that they would use the tool again, we're expanding our TechConnect remote diagnostics tool to Dell agents worldwide. We're seeing progress, and believe these changes will establish a new and a higher standard of customer satisfaction, further extending Dell's lead as a customer-focused company.

Finally, the Dell model is optimized to bring the most relevant technology to our customers, and 2006 is shaping up to be a particularly exciting year. In the enterprise, the trend is toward smaller, more powerful standardized systems where Dell is uniquely positioned. Today, 95% of industry server units are one and two-socket servers, with 70% of revenue in IT infrastructures, messaging and Web serving workloads. And our PowerEdge 1855 Blade Server now has an even wider range of connectivity with the Cisco Catalyst embedded Switch 3030. This is Dell's sweet spot. The cost of networking storage has been reduced by 91% in just four years, and we are launching this spring and summer new PowerVault and Dell/EMC solutions that will utilize four gigabit Fibre Channel, iSCSI, SAS and SATA technologies that will drive significant additional increases in performance. These improvements are propelling low-cost solutions up into the data center and down into small and medium-sized organizations.

For example, small-medium business storage spending is expected to double over the next four years. In client, we see the personal computer increasingly becoming the center of the digital lifestyle. Dramatic innovations are also on the horizon, including multicore CPUs, quad-core GPUs, and the new Vista operating system and the high-definition drives like Blu-ray, which is capable of storing 10 times the capacity of the current single-layer DVD.

In closing, we know from history that when we focus on the core unique attributes of the Dell model, including customer experience and great technology at a superior value, we can consistently drive industry-leading growth, profitability and liquidity. With that, I'd like to open it up for questions. Operator?

Questions-and-Answer Session

Operator

Ladies and Gentlemen, we will now begin the question-and-answer portion of today's call. If you have a question, please press "*" "1" on your telephone keypad. You will be announced prior to asking a question. If you would like to withdraw your question, press "*" "2". One moment please for the first question. Your first question comes from the line of Richard Gardner with Citigroup

Q - Richard Gardner

Great, thank you. Just a question on SG&A. I was hoping you could maybe give us a sense of how you manage to keep SG&A so low, given that you are in the midst of investments like customer experience and so forth. And then maybe, Jim, if you could give us a sense of how to think about operating margins going into the first fiscal quarter, given that you have a mix shift away from customer, you've got a 13-week quarter, so a week less of expenses. Should we be expecting operating margins to trend up sequentially? Thank you.

A - Jim Schneider

If you look at our OpEx, Richard, actually in dollars we had quite a bit of an increase. So, that wasn't much different than what we planned; it was actually the extra revenue that we drove in the quarter that leveraged off the OpEx. I think you'll see it climb back up as a percent of revenue in Q1. So that also has an impact on kind of the net operating margins. We usually kind of struggle in the first quarter with the operating margins. You get an uplift a bit from not having the consumer business, but because your revenues typically decline a bit sequentially, we've got some years we've been able to kind of keep the margins flat. And in fact, we have a pretty tough compare with the year ago quarter when you see some of the guidance. That was probably on a relative basis one of the better quarters we had in the past half-dozen quarters. You had operating income, I think that was the highest it was in the past few years. So we are kind of working off a tough compare year-over-year. But normally sequentially you see the operating margins be compressed a bit. You get some margin increase from, on a gross margin basis not having the consumer, like you mentioned, but then OpEx typically goes up. So we're trying to keep it at generally a push, I would say. Again, I'm not trying to forecast either the gross margin or the OpEx; again, we're just trying to balance this to get the best profitability we can.

Q - Richard Gardner

Okay, thanks Jim.

Operator

Your next question comes from the line of Tony Sacconaghi of Sanford Bernstein.

Q - Tony Sacconaghi

Hi, yes. Thank you. I have a couple of questions please. Firstly, I'm struggling to understand why gross margins deteriorated so significantly, both sequentially and year-over-year in the quarter. If you look at things like unit growth versus revenue growth, units up 15, revenues up 14, those look reasonable, don't point to any really bad pricing. There was a strong mix shift to enterprise and notebook; that should have helped gross margins. But again, gross margin was down substantially. Can you help reconcile and explain what's going on? I have a follow-up.

A - Jim Schneider

I think part of it, we talked about this coming into the quarter, that depending on what the opportunities were for us to grow, we would balance that with what the profitability looked like on any individual sale or segments. So we actually overachieved on the revenue line, and also at the end of the day on the EPS line, which is what we're really shooting for at the end of the day. So I think the margins came down somewhat. I actually talked about coming into the quarter that I expected that to happen. And with us able to leverage the OpEx, we're able to be a little bit more aggressive on pricing. So I think it was exactly the way that we want to work the model overtime.

Q - Tony Sacconaghi

Were there any areas where you were particularly aggressive in choosing to pursue revenue, to pursue this trade-up between revenue and gross margin across your product family?

A - Jim Schneider

I think we did it selectively. If you look at the growth in notebooks, it's one of the things you said may hold that up. But if you actually look at the growth rates for ourselves and our competitors in notebooks, in terms of units versus revenue, we had 47% unit growth in notebooks and about 25% or so growth in revenue. So, you can see there's been a lot of pricing compression in notebooks, and it's a place we want to continue to grow. I think in a number of cases, we were a little bit more aggressive. Again, it's not all that much different. At the end of the day we're trying to balance this down to a reasonable operating income percentage. You can see again when you get some revenue growth how you can leverage your OpEx.

Q - Tony Sacconaghi

Just on a different topic, Jim, can you comment a little bit, I think the extra week doesn't have many precedents at Dell, so many investors tend to look at year-over-year on the revenue side. So if I do look at year-over-year on the revenue side, this quarter you did 13%, you said maybe the extra week gave you 2 to 3 percentage points. So adjusting for that, you did 10 to 11% year-over-year. You have an easier compare year-over-year in Q1, you have the same number of weeks in Q1, and the midpoint of your guidance is 7.5%. So sequentially, why, are you being conservative here, or are things fundamentally worse looking into Q1? But if we look at it on this basis, it does feel like you're anticipating a step down in the business, in business level run rate, Q1 versus Q4.

A - Jim Schneider

I think it if you look at the normal progression, what we've done, and again, we're trying to work both off of what we've done sequentially, and again, how a lot of you have actually seen the business for Q1. So if you kind of step through this, maybe I will just do it quickly sequentially. If we had 15.2 billion in the quarter, if you said the extra week, and this is a little hard to say precisely what that is, but if it looks to us like being maybe about $400 million, you're kind of down to the 14.8. And again, we did forecast a bit of that in Q4, so I feel like we overachieved, or at least at the high-end of the range that we gave out. But if I step that down, and then if I take a small sequential decline, which we have, we've got a 2% decline in other periods, you get a few hundred million dollars more, then it's possible for you to come right smack in the middle of the range that we gave. Another factor to think about is, if I look at the guidance or the data that people have put out from people like yourselves and IDC, some of the other analysts are talking about a revenue growth year-over-year in the first quarter of perhaps 4%, on 11%, 10, 11% unit growth. So I think if you look into our range, we are kind of bucking that trend as we typically do. We would continue to be taking revenue share even at that rate. So the first quarter is always the toughest quarter for us as we come into this. Like every year, it kind of scares us, and we want to make sure that we're giving guidance that we think is appropriate.

Q - Tony Sacconaghi

And just final clarification on that. Are you seeing anything to corroborate unit growth of 10 to 11% for the first quarter? You mentioned analysts are suggesting that it was 15% in Q4. You have had a peek at the quarter so far. Is there anything that you're seeing, either in January or in February, that is suggesting there's a deceleration on a year-over-year growth basis?

A - Kevin Rollins

We're not seeing anything specific in terms of a market slowdown, but we just think that that's probably a more healthy normal growth coming out of a fairly heated last several quarters. Our anticipation is you wouldn't stay at those kind of multi-double-digit mid-teen levels forever. So we just think it's a more prudent way to kind of plan out and balance.

Q - Tony Sacconaghi

Thank you.

Operator

Your next question comes from the line of Ben Reitzes of UBS.

Q - Ben Reitzes

Yeah, good afternoon. Thanks for taking my question. I'm going to talk about the first quarter as well, ask about that. I think it's hard to know what the extra week, some of the reconciliations we've done. But the first quarter seems to be your view of how things are going. You're talking about above-market unit growth, you're talking about, this is, obviously, a 7.5% growth rate is below the 18 to 20% we were talking about a year ago. We are modeling Hewlett-Packard to have comparable growth rate in their PC and enterprise businesses in this quarter. So, is there something more fundamental going on where you're really actually growing in line with your competitors now? Do you still feel the model has the same advantages? And if, the models are going to have HP and Dell having pretty comparable growth this quarter, so I just want to hear how you still feel you have an advantage, and then how you can move away from the pack, maybe go with AMD as well, or if you can comment on that as well, that would be great. Thanks very much.

A - Kevin Rollins

We look at the most recent quarter, and we grew 13% and our competitors grew at about 5.6. As we look at that, that doesn't seem like we're in the pack at all. When we look at what we will do in the coming year, I think our promise to you and the market is we intend to grow; we intend to grow and take share as we have historically. And I think that's kind of where we're going to have to leave you with it. We are not seeing any slowdown, any kind of normal situation, or abnormal situation. If you look at our enterprise systems, our server business grew at about double the nearest competitor. Our enterprise business overall grew at 21%. As far as we can tell, our nearest competitor, enterprise business, grew at about 4.5 to 5. So, I don't think that we're at all concerned about the model being disadvantaged or having any kind of miss on that in the least.

Q - Ben Reitzes

If the Street were to have that perception, though, can you just highlight a few things that you think might take your growth even further away from the pack, maybe on a going forward or sequential basis? Is it the new products, any new partnerships, anything that we can look forward to? Any comment on that? Because we're all on this call getting tons of questions, so I might as well ask you the AMD question.

A - Jim Schneider

Before Kevin even answers that, let me just make one observation. Again, we're only giving guidance one quarter at a time. But to take any one of us, and take ourselves and any one competitor and try to compare what their growth rate is in one quarter year-over-year, where maybe the year-ago quarter we had a great quarter, maybe our competitors just happened to have a really bad quarter, so that their numbers might look really good in any one quarter. So I think to try to do that might not give you the results you're looking for either.

A - Kevin Rollins

In terms of the AMD question, we have nothing to add to that, other than we're always assessing technologies. We've told the Street and our analysts and our customers that continuously. We will continue to do that. We see no need to change at this point in time. In this last quarter with our servers growing at almost double the rate of our kind of next competitor, and enterprise business on a dare, don't see that that's right now become much of a barrier. With that said, we're not an exclusive buyer of Intel only. We have no exclusive arrangement, and we will provide the greatest and the best technology for our customers and favor our investors and our business first.

Q - Ben Reitzes

Thanks a lot.

Operator

Your next question comes from the line of Laura Conigliaro of Goldman Sachs.

Q - Laura Conigliaro

Yes. Thank you. A few questions please. First of all, should we assume that the new lower operating margins are really part of a process of resetting the bar? Or is this more of, say, an interim set of margins before you settle in on what will ultimately turn out to be a more permanent model, which presumably would have the margins higher? Then I have a couple of follow-ups.

A - Kevin Rollins

I think you raise a good point. I think we're assessing right now strategies for the coming year. We believe that we can always do better in our model, and that we have tremendous flexibility and capability to adjust to any market condition with that model. And so we will be doing that, both, did it in the fourth quarter, we're doing it in the first quarter and throughout the year. I think what we would like to do is at our April analyst meeting upcoming, update you on how we're thinking about that and how we might adjust things going forward. I think for right now, though, we feel that we're delivering pretty solid and appropriate guidance today. But we will update you on that come the April time.

Q - Laura Conigliaro

Two more things, and that is, I guess, basically, why are the new lower margins not driving higher revenue, specifically for the first fiscal quarter going forward? It's kind of hard to come away, not to come away with the view that the revenue number that you are suggesting for the first quarter, is it something, is it going to represent something of a pattern going forward?

A - Kevin Rollins

We're not sure about that either. We're trying to look at what might the potentialities could be in terms of competitor progression, in terms of overall market growth rate. We do have a couple of anomalous situations like this extra week and the compares. We have seasonality; if you look at anyone else in the technology sector, they're estimating pretty significant Q4 Q1 downturns in their overall growth rate. So we think that this is a prudent way to guide and manage our business to now. We certainly want to do better, and did better in Q4. But we think this is an appropriate guidance level today.

Q - Laura Conigliaro

Finally, you mentioned last quarter and the quarter before the fact that you've kind of pointed out that the execution was not what you would like it to be. How would you assess your own execution this quarter?

A - Kevin Rollins

I think that' it's, in our manufacturing and logistics teams, I think it was superb. I think our sales teams did a pretty good job, probably could do a little bit better there. So I would still say that we have not kind of seen our, hitting on all cylinders yet.

Q - Laura Conigliaro

Thank you.

Operator

Your next question comes from the line of Harry Blount of Lehman Brothers.

Q - Harry Blount

Hi guys. A couple of questions if I might. Jim, the first one is more on the housekeeping side of the equation. You may have mentioned it, but I don't see it in the slide deck. Any comments on where you finished on the deferred revenue for the quarter?

A - Jim Schneider

Yes. It actually was up another $200 million sequentially. It sits right now at $3.6 billion.

Q - Harry Blount

Should we still think of that as contributing somewhere between $0.15 and $0.20 of earnings at the beginning of each quarter?

A - Jim Schneider

I don't think I've ever given out a number like that. But if you think about the amortization of that, it is several hundred million dollars of pretty profitable revenue that is amortized in each quarter.

Q - Harry Blount

If we take a look at the consumer margins, you guys did say on the last call you were going to invest more in customer experience; you re-echoed that on this call. It does look like customer margins did deteriorate sequentially again. When should we see the consumer business basically bottom out?

A - Jim Schneider

It may not either bottom out, or you may see it go up and down. That is a fairly volatile business that we toggle to maintain growth and margin. So I don't think you can necessarily look at just kind of a perfect bottoming out and then a trending up or down. We're going to use that business as a growth vehicle, as an investment vehicle from time to time. It probably is the most volatile sector that we've had in the Company if you go back and look at the P&L for the last 10 years. It just is a little bit more dynamic.

Q - Harry Blount

Just in terms of the macro puts and takes on a longer-term basis, I think directionally people are expecting that the year-over-year federal compares get a bit easier, that also some of the, you start anniversarying on some of the misexecution you guys had a year ago. Could you talk at a high level about some of the puts and takes as we look out over the next six to 12 months?

A - Jim Schneider

As you know, we don't really forecast out there, and are still trying to stay pretty close into the quarter. I think some of the things you've said are true, and that would be our hope as well. But I think you'll have to just hang in there and we'll update you as we go through the quarters as regarding what we're seeing in the Fed buying cycles, education, government buying cycles, to let you know. So we're not really kind of looking out that far yet.

Q - Harry Blount

Okay. Last question is, you guys used to talk about being very focused on driving the business really more on operating income growth rather than revenue growth or margins. You guys have kind of moved away from emphasizing that as a core point, and a little bit more focused on the net income growth. Why should that be the case? Why shouldn't we continue to be principally focused on operating income growth as the primary driver of business going forward?

A - Jim Schneider

You know. I think we're really focused on both. I think, and that was the point I'd made earlier on the compares. I think we're, you had last quarter, the first quarter, you had the highest op income for the period, and as that trended down somewhat during the year, you used to have a tougher compare. But yes, over time we're definitely focused on continuing to drive operating income. I mean, we can buy share back and get the tax rate down, but over time we're only going to produce a really good EPS through op income dollar improvements. So we're focused on both. But again, we want to draw the attention to the fact that things like cash flow are very operating oriented. And if we take that cash flow and turn it into share repurchase, I consider that as much operating as anything else.

Q - Harry Blount

Thank you.

Operator

Your next question comes from the line of Rebecca Runkle of Morgan Stanley.

Q - Rebecca Runkle

Thank you. Two quick questions. First, on linearity, DSO came down quite a bit in the quarter. Could you comment on the linearity that you saw, and in particular competitive dynamics in January? And then I've got a quick follow-up.

A - Jim Schneider

The DSO, consumer growth hasn't been as strong as maybe in the past, but it's still a pretty big piece of the mix here in the fourth quarter, and you convert that into cash. So our DSO always declines in the fourth quarter. In fact, it's actually higher than a year ago, and it's really more of the international mix. So we're not that happy about the DSO, but it did come down in the fourth quarter. What was your other question, Rebecca?

Q - Rebecca Runkle

The second one is on share count and buyback. Obviously, you stepped that up last year, and you talked about the 1.2 billion in the quarter. But can you comment on how we should be thinking about it in general terms, i.e., is it fair to assume that you're attacking this with a goal of taking share count again, down again in '07?

A - Jim Schneider

Absolutely. We have moderated our stock compensation plans, as we've talked about here in this past year. I think we had 40-some million shares granted. And when we bought back 200 million, I think we talked about the $1.2 billion for Q1 being sort of at least, I think you'll continue to see us spend quite a bit of our cash flow. So, this depends on how well the cash generation progresses during the year, but I think you'll see us continue to buy share back and take the count down.

Q - Rebecca Runkle

Perfect. Thank you.

Operator

Your next question comes from the line of Keith Bachman of Banc of America.

Q - Keith Bachman

Hi guys, a couple if I could. Jim, could you just talk, I think you mentioned that normally from the April quarter to the January quarter, or from the January quarter, rather, to the April quarter, your operating margins trend lower. Could you just confirm that? And what are the puts and takes that we should be looking for or thinking about as it relates to the op margin in the April quarter?

A - Jim Schneider

It's really moved around a lot. Last year in the first quarter we did a really good job. I went back, and I recall this quarter pretty well, where we actually were able to keep the op margin at a really strong rate. Again, the challenge that you have is that you always have revenue fall-off in the quarter. We tend to be down, from zero to 2% down. So even if your flat, you have some pressure on keeping your operating expenses, because we're starting to increase the business more in the second quarter. So you've taken on more expenses to grow your business, but yet you have the revenue flat or down. So we usually struggle just to kind of keep the op margin flat. That was really the point that I had made earlier when somebody asked me about that. So that's really sort of our goal to do that. You end up usually with a mix of, your gross margin historically will have to go up a bit to counter a higher percent of revenue in OpEx.

Q - Keith Bachman

Is Dell, as part of that, is Dell undertaking any additional layoffs?

A - Jim Schneider

No, we're actually growing our business. So layoffs are not something we're thinking about.

Q - Keith Bachman

Jim, just going back to the revenue question for April. Just so I understand, part of your comp, because on a year-over-year basis, it's a pretty significant step-up even if you normalize for the 14 weeks. Are you suggesting the April quarter last year had some incremental strength, and therefore the comp is easier? Is that part of your thinking? And related, though, what are the things, what are the areas that you think are most right to get to the difference between 14.2 and 14.6? Is it geographic? Is it notebooks? How should we be thinking about that?

A - Jim Schneider

Let me take the first part of that more sequentially here, because I think when you look at this, the first quarter compared to a year ago, actually last year our growth decelerated during the year. So I think it's something we've all been talking about here already, where if you actually then take some progression this year, you'll just get to some point where perhaps your comps get easier later in the year, and you can have higher growth rates. I think if you look at the way the business has grown sequentially, we had a typical pattern here in Q3 to Q4 without the extra week. I think if you march that through sequentially, we have in some periods been down 2%, Q4 to Q1, and in others we've been flat. So if we can actually keep it flatter, then we'd be at the high end of that range. If you have the low end of that, you might be at the lower end. So it really just depends on how the market reacts and how we execute.

A - Kevin Rollins

And it's also a factor of how our competitors react. We are mindful that there are a number of competitors out there, some of which are not doing very well. So you have to assume competitive shocks to the system. We want to be prepared for those. Our goal is to continue to grow. So, we're just kind of giving you what we believe would be appropriate guidance, given both events we know of and unexpected events that we don't.

Q - Keith Bachman

Okay, thanks guys.

Operator

Your next question comes from the line of Richard Farmer with Merrill Lynch.

Q - Richard Farmer

Thank you, Michael and Kevin.

A - Michael Dell

Richard, we can't hear you.

Q - Richard Farmer

Can you hear me now?

A - Michael Dell

Oh, yes.

Q - Richard Farmer

Okay, thanks. Three quick ones, if I could. First, you mentioned Vista in your remarks. What is your latest thinking on whether Vista will cause a pause in PC spending before the launch, and potentially an acceleration after the launch?

A - Michael Dell

On Vista, typically what happens with these new operating systems is that there is a mechanism in place before they are released to bridge customers from the old to the new, before it comes out. I actually believe that the Vista transition is going to be a pretty powerful catalyst, because it's a much bigger difference in terms of the user experience as compared with the last two or three of these operating system transitions. I'll even go so far as to say that once this gets out into the hands of consumers, six or nine months, I think you'll see a number of consumers kind of coming back to the office and saying, how come my computer is no good? So we think there will be a consumer-led drive to upgrade the desktop in the corporate some time after Vista really starts to take hold in the consumer market. So with dual-core and a number of other features that are coming on the hardware side that can be really exploited on Vista, we think it's going to be a pretty exciting transition cycle.

Q - Richard Farmer

Two other quick ones, please. In supplies growth, you mentioned that that had improved somewhat. Can you provide any color on the magnitude in either dollars or the growth rate in supplies in the quarter? And then, the last question would be, you had some charges in the previous quarter. Have you had any material true-ups or adjustments to any of the inventory or workforce rebalancing reserves that you had established previously?

A - Kevin Rollins

I'm assuming on the first one you're talking about our software and peripherals business?

Q - Richard Farmer

No, sorry. In the printing business, the supplies growth.

A - Kevin Rollins

The consumables; I'm sorry. I think we mentioned that the printing business grew at about 17%. That was paced by a far, far greater than that consumables growth rate, up into the 80, 90%. So it was a strong quarter in terms of the consumables flow, frankly, probably a little too strong. We would prefer our hardware to grow faster than it did, and we will be taking some corrective actions to kind of accelerate that growth rate for the long-term. So very healthy business. Profitability has improved dramatically. 17% is a pretty nice pace against the industry average, but probably not as fast as we would like it to grow. We think we can do better.

A - Jim Schneider

On the other part of the question, on the accruals that we took in the prior quarter, we've been spending against those. We analyzed it here at the end of the year, and we feel like what we booked is appropriate. So I don't really expect that there would be any additional charges coming out of that.

Q - Richard Farmer

Thank you.

Operator

Your next question comes from the line of Bill Shope of JP Morgan.

Q - Bill Shope

Great, thanks. Can you give us an idea of the split within your printer segment growth between inkjet and laser, as I think you've done that in the past? If you could just give us at least a qualitative assessment there. And also, you mentioned that you were going to take some corrective actions to start to stimulate the hardware growth again in printing. Can you give us an idea if that is primarily in laser, inkjet, both, if that's primarily a pricing statement?

A - Jim Schneider

The inkjets were certainly not growing as fast as laser. Laser was up over 40% year-over-year, with color growing over 50% year-over-year. And that was a real focus toward higher-end units. One of the shifts that we went through in the fourth quarter was really away from the low-end single function and toward more the all-in-one higher-value printers, which are also using more ink, and we know what ink usage is, because we sell all the ink directly to the user.

Q - Bill Shope

And the corrective actions you mentioned, that you drive unit growth in printing?

A - Kevin Rollins

I think it's probably focusing on the right products with pricing and marketing activities. It's not particularly rocket science. It was just an issue of, as you know, we've been focusing on a few true-ups and fix-ups over the last several quarters. And during that period of time, printers got kind of left on the side. So now, refocusing on them, focusing the market on the activities, getting pricing a little tighter, at this time now with good products like, are profitable consumable products, like all-in-one printers and lasers will be our focus.

Q - Bill Shope

Lastly, can you comment on the component cost environment and the weekly rate of volume declines?

A - Kevin Rollins

We're somewhere slightly above kind of the average. We are not at the kind of highest we've seen in a long time. We're not really at the lowest, but it's kind of about midpoint to slightly above that. But it's not anything that would either give you pause to overly accelerate or under-accelerate the market.

Q - Bill Shope

And that average is a half a point a week, just to clarify?

A - Jim Schneider

No, actually below that. I think we've been talking about the new average.

A - Kevin Rollins

We haven't seen the kind of traditional point a week for a long time, so we're, much less than that is the average.

Q - Bill Shope

Great. Thanks.

Operator

Your next question comes from the line of Andrew Neff of Bear Stearns.

Q - Andrew Neff

I just want to go over the margin question again, just if you could sort of go through what happened in Europe and Japan, relative to the, quite the strong growth, I mean in operating income growth, where you had a slight decline in Europe. Can you sort of talk through about that guidance that you talked?

A - Jim Schneider

I think, this is something we've talked about. If you actually looked at a quarter before, it was somewhat similar. I think we've gotten to the point where we've got pretty strong operating income as a base there, and WE'RE really working to continue to grow our business. So I think if you look at revenue growth in Europe of 18%, 20% in the quarter before, over 20% revenue growth outside the United States, I think to kind of keep the pressure on and grow share and be able to grow our infrastructure in those markets is really important. So I think we've been really happy with that. It's, again, balancing it, where the U.S. is a much bigger market growing a little slower; we've done really well from a profitability standpoint. So I think, again, you kind of look at a portfolio of businesses and we're making investments outside the U.S.

A - Kevin Rollins

This will sound a little strange to those of you who are not working with, but we have some businesses from time to time make too much money, in our opinion, and they need to grow faster. So we encourage them to actually reduce their margins or operating income and accelerate growth. So you'll see that from time to time as we tweak a country or a segment within a country, and our Asia-Pacific business grew quite nicely at 27% unit growth. And Europe, 25%. We have very focused categories and markets within those regions that we're looking at and trying to grow rapidly. So you might see a little bit up and down; it's probably more indicative of us balancing overall growth and strategic intent than it is a kind of market movement.

Q - Andrew Neff

I mean, the Europe was down on pretty strong sales and APAC Japan was flat. I assume operating income growth at some point.

A - Kevin Rollins

Yeah, we will, absolutely. But there's also in some of those markets, when you look at the after-tax profitability, it's still extremely strong. So we want to make sure we're not slowing down the growth in this particular timeframe as we are growing out those markets, because our share is pretty small.

A - Jim Schneider

Part of it is a function, it's again back to what I said before; when you look at these year-over-year growth in any one quarter, they get a little tougher depending on where you're coming from. So the prior quarter, again, we were relatively flat, and that was actually by design. We've been making our numbers actually outside the United States. So if you actually look at it sequentially, you'll see that EMEA from Q3 to Q4 actually grew their operating income by 38%, and APAC and Japan grew theirs by about 10. So actually their numbers were really on about the plan that we had coming into the quarter.

Q - Andrew Neff

Okay, thanks very much.

Operator

Your next question comes from the line of Richard Chu of SG Cowen & Company.

Q - Richard Chu

Thank you, good afternoon. I apologize for going back to this point, but I must say I'm a little bit puzzled by the effects of the 14th week. Normally, the traditional algorithms that I've grown up with, we think about an extra week as delivering extra operating expenses for sure, but less certain in terms of revenue impact. And in that sense, the exact opposite seems to have happened in Q4, with OpEx up just 4% sequentially. And the shift in Q1 implied by your guidance, I think, again, diametrically opposite to the way I think about it. So, perhaps you could retread that ground. Why would OpEx have been up so little on a sequential basis, given the extra week in Q4 versus Q3?

A - Jim Schneider

That's a good question. If you go back and think about some of the things, we did take some personnel actions in Q3 and had a smaller charge. So we were very conscious of being able to control our operating expenses. Again, if you look at the guidance that we gave, had we come, again, we had some factor in there for the extra week. We weren't sure what it would be, but that was within the guidance range. So again, if we had come in on the lower end of the range, those OpEx percentages would not have looked very good. So we were very conscious about controlling our OpEx in the fourth quarter.

Q - Richard Chu

Does it follow from that that given the cautiousness that the Q4 to Q1 decline in OpEx, that we should see a decline? You are after all going from 14 weeks to 13 weeks.

A - Jim Schneider

Part of what I had mentioned, though, I think if you look at what we're trying to do, and we're going to continue to grow this business, and I think that what you'll see is typically we start adding people kind of later in Q1, so you don't get the revenue, but you start to pick up some expenses. So you have a situation where the revenue typically declines slightly into Q1, but yet you're starting to grow the OpEx sort of going back into ramping from Q2 and Q3 where we start to have revenue growth. So that always puts some OpEx pressure on us in Q1.

A - Kevin Rollins

We also have a situation in our business, this was why were probably a little bit surprised that a lot of our customer base buys based on the entire quarter, based on the month; they don't buy on number of days or weeks. We also have costs that perform that way, some of them that we're paying kind of on a monthly rate, not on a week rate. So it will be a little bit misleading to assume that everything is going to be a week-to-week.

Q - Richard Chu

Two more quick follow-ons. Do you have a printer unit growth number? And then second, the gross margin level for the quarter, it does seem to be undergoing more flux than we have seen in recent years. And I think I'd find it helpful if you can give us a sense of how gross margins in consumer PCs, commercial PCs, desktop, mobile, enterprise, and other major components are shifting, if at all, from levels that they were a year ago. Or whatever other comparison point that you think might be useful to understand how some of the inside pieces are contribute to the downward shift in the aggregate.

A - Jim Schneider

Printer units were actually down on a year-over-year basis. The key here is that we really shifted hard away from single function inkjets into all-in-one inkjets and color lasers. So what you had was a much more significant increase in total imaging revenues. So we really moved our attention and the marketing away from these sort of low-end, bundled, single function printers, which might have driven units but weren't really driving ink, to the more ink-consuming, higher-value printers. Your second question was what about the various components categories within the computer?

Q - Richard Chu

Within your revenue mix, there are a lot of moving parts, and gross margins were down on an aggregate basis. And I wanted to see whether you could help us understand how mix in the various pieces might be contributing, for better or worse, to the margin changes.

A - Jim Schneider

Again, if you look, the margins are down. If you talk about them, though, in like a half-a-percent kind of range, there's no question, and we have talked about this, that the transactional types of volumes, whether it's in consumer, small business, that there has been a contraction in margins in that space. So if I look at that, you'll see some decline in both desktop and the lower end of the notebook range, where you've actually seen margins decline. I think in other places, when you look at profitability for us, server, storage, workstations, all those things are probably similar to what you've had. So it's really more on kind of the lower end of the market, I would say. And we said that we again, we're making profits here. If I look at the consumer business with almost 4% op income, that's still pretty, especially when you compare it to our competitors. But that part of the market has had margin compression.

Q - Richard Chu

Okay. Thank you. I appreciate it.

Operator

Your next question comes from the line of Steve Fortuna with Prudential Equity Group.

Q - Steve Fortuna

Yeah, a series of questions here. First, is it fair to say that HP is making it a lot more difficult for you guys to grow on the printer side, and is it really a big disappointment for you? I'm thinking that the growth rate is fairly unimpressive, and that might be the reason why, at least a couple of points of the reason why growth is slowing for the Company, because maybe you had ideas of growing this business 50, 70, 80%, and its growing more like low double-digits. Maybe you can comment on that first; I've got about three follow-ups.

A - Kevin Rollins

I don't think so. I think we've been pretty open with you about that. I know our competitors grew their printing and imaging about 8%; ours grew about 17. So I don't think that's the problem. I think we're just, we're looking….

Q - Steve Fortuna

This is a big, big, big difference in base.

A - Kevin Rollins

Absolutely there is. And so if, we just didn't focus as much on it. Are we going to grow that business? Yes, we're going to continue to grow it, and we think we're going to grow at a multiple of the industry while we're smaller. But I can't tell you a whole lot more than that. We have not found it harder to grow. We don't compete head-to-head with them. We offer in a different channel and we offer it with our own products. And when we get into the large laser categories, which are growing quite nicely, it was the inkjet business that dropped off pretty much.

A - Jim Schneider

We had a 68% year-over-year increase in printer margins, and I think if we had to do it over again we probably would have been more aggressive.

Q - Steve Fortuna

And then for you, Michael or Kevin, in terms of, the PC margin for Hewlett was 4%. Are you surprised by how high that was? What do you think right now is the true delta in terms of your cost advantage? You've talked about that a lot in previous analyst meetings, trying to look at the inventory as advantage and the direct advantage. And how do you think that's shaken out now, given that your margins are going down and theirs are going up in the PC space?

A - Kevin Rollins

Yes, but ours start off a lot higher. I don't know that the, how our various businesses account for all of the elements of their cost. We don't know exactly how we account for all of the warranty and service elements, so it's a little bit difficult. But when we look at head-to-head competition and maintaining our overall profitability, we have not lost enough of an advantage that I would even find it useful to discuss.

Q - Steve Fortuna

A question for you, Jim. If you had to do the quarter again, would you trade off some revenue growth for a little bit more operating margin? It looks like you bought some revenue on the notebook side with big ASP declines. And I'm just curious; if you had to do it again, would you try to eke out a few more beeps on the OM side and sacrifice some revenue?

A - Jim Schneider

Is that the first time you're asking me if we'd give up some more margin to get some more revenue, you know, depending on whether it gave us more operating income, maybe we would do that. But no, I think we've got, we had a good growth quarter. I think we're really happy. I think extra week aside and all of this, we came out at the high end of the range that we gave out to you. We are up a penny from what we had talked about in that range. So I don't know that on that count we would do a whole lot different.

Q - Steve Fortuna

Two last quickies; I will ask them both at the same time. One is, are you still thinking Europe versus U.S., or the Americas revenue growth kind of a 2-to-1 ratio on a go-forward basis? And then the other one would be, in the extra week that you guys had, was there a skew toward consumer or commercial or enterprise, or Europe or the U.S., in terms of where that additional revenue kind of fell? Did you do better in consumer or commercial, or is there any kind of a geographic thing worth looking at in terms of the extra week's worth of revenue?

A - Kevin Rollins

This is kind of off the top, because I haven't looked exactly at that, but yes, we think Europe in general should be able to grow somewhere in the 2X to kind of the U.S. range, but maybe 1.8 to 2.2. But yes, it should grow faster, in that range. And I would say, because the consumer business trends off in the January timeframe, and it has its kind of lowest in ebb in Q2, the gains would have most likely been made in the corporate and enterprise arena worldwide at the end of that week. That's why we were a little bit guarded on the extra week, because corporations don't buy per day. They have a budget in a quarter that their IT folks are able to spend or not spend and meet. So we did not think we would get a full week's impact out of that extra week due to that.

Q - Steve Fortuna

Perfect, thank.

A - Kevin Rollins

Last question, operator.

Operator

Your final question comes from the line of Joel Wagonfeld of First Albany.

Q - Joel Wagonfeld

Thank you. Three quick questions, if I could. First, is your goal still for OpEx to remain below 10% on a sustainable basis each quarter? Secondly, I'm wondering if you can comment on your TRU; it was up 3% sequentially last quarter. What was it in the January quarter, and what are your expectations going forward? And then finally, I just wanted to return one more time if I could to the revenue guidance. Even if you X out the extra week per the numbers that you gave, the sequential trend is the second worst it's been in 13 years. And I just still, I guess, don't fully understand exactly why that is. You said it's your best guess at this point, but that was what you said last quarter, and you kind of came in at the very high end of the range. So is that possible again for this quarter's guidance as well? Thanks.

A - Jim Schneider

Let me start with the OpEx. I think we were happy that we got it down below 10 points. And we talked about the fact that we have been making investments in customer experience. And I think if we can keep some revenue growth, I think the first quarter could be a little tougher. But yes, absolutely, our plan is to have OpEx below that, because I think the margins, I mean, we are at a point where I think to stay competitive, the margins, it's tough to raise them a lot, and I think we are going to have to continue to be able to control our cost and deliver a good amount of income. I don't know if there's a second one in between, but I'll start with again on the guidance. We're a lot bigger company out. I think when I look at what some of our competitors as well, and even the industry, has guided for the first quarter, there just seems to be a little bit of caution. So, yes, I would agree with you, because I looked at this sequentially. We are probably on the more conservative side of what our sequential guidance has been. So I would agree with you. And if you say could we, could we do better than that? We'd sure hope to, but I think it's prudent to give the kind of guidance we did.

Q - Joel Wagonfeld

The last question was just the TRU. It was up 3% sequentially last quarter. Was it up again in the January quarter, and how would you think about that going forward?

A - Jim Schneider

Some of that when you look at overall TRUs now, and I've said this a few times, some of this unit data for us gets a little less meaningful when you're selling a lot more services, peripherals, you have storage that has no units. It's like the TRU, because when you actually look at it on a box basis, which is why we started to give out a lot more data on actually the hardware side, it's like I mentioned on notebooks, where you have 47% unit growth, and 20-something% revenue growth, you've obviously got a pretty big box or a revenue per unit decline. So all in all, this is part of what we're trying to do, is sell enough adjacencies so we can keep that overall TRU relatively flat.

Kevin Rollins, Chief Executive Officer and President

Great, thank you. Thank you for joining with us. It just would conclude that our focus is going to be, as we mentioned at the outset, continuing to work on our customer experience, provide our customers with the best opportunities, to consider all opportunities for growth. And we look forward to seeing you all at our April analyst conference here in Austin. Thank you very much.

Operator

This concludes today's conference call. We appreciate your participation. You may disconnect at this time.

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Source: Dell Inc. F4Q06 (Qtr Ending Feb 3, 2006) Earnings Conference Call Transcript (DELL)
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