UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☑

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended

~~October~~April 30, ~~2020~~2021

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37867

Dell Technologies Inc.

(Exact name of registrant as specified in its charter)


Delaware						80-0890963
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

One Dell Way, Round Rock, Texas 78682

(Address of principal executive offices) (Zip Code)

1-800-289-3355

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class C Common Stock, par value $0.01 per share	DELL	New York Stock Exchange

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 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of ~~November 27, 2020,~~June 1, 2021, there were ~~749,804,378~~763,690,159 shares of the registrant’s common stock outstanding, consisting of ~~263,653,066~~277,588,056 outstanding shares of Class C Common Stock, ~~384,466,095~~384,416,886 outstanding shares of Class A Common Stock, and 101,685,217 outstanding shares of Class B Common Stock.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “may,” “will,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “aim,” “seek,” and similar expressions as they relate to us or our management are intended to identify these forward-looking statements. All statements by us regarding our expected financial position, revenues, cash flows and other operating results, business strategy, legal proceedings, future responses to and effects of the coronavirus disease 2019 (“COVID-19”), and similar matters are forward-looking statements. Our expectations expressed or implied in these forward-looking statements may not turn out to be correct. Our results could be materially different from our expectations because of various risks, including the risks discussed in “Part I — Item 1A — Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January ~~31, 2020~~29, 2021, in this report and in our other periodic and current reports filed with the Securities and Exchange Commission (“SEC”). Any forward-looking statement speaks only as of the date as of which such statement is made, and, except as required by law, we undertake no obligation to update any forward-looking statement after the date as of which such statement was made, whether to reflect changes in circumstances or our expectations, the occurrence of unanticipated events, or otherwise.

Table of Contents

DELL TECHNOLOGIES INC.

TABLE OF CONTENTS

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED)

Index


			Page
Condensed Consolidated Statements of Financial Position as of ~~October~~April 30,~~, 2020~~ 2021 and January ~~31, 2020~~29, 2021			5
Condensed Consolidated Statements of Income ~~(Loss)~~ for the three ~~and~~ ~~nine~~months ended ~~October~~April 30,, 2021 and May 1, 2020 ~~and~~ ~~November 1, 2019~~			6
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three ~~and~~ ~~nine~~months ended ~~October~~April 30,, 2021 and May 1, 2020 ~~and~~ ~~November 1, 2019~~			7
Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~October~~April 30,, 2021 and May 1, 2020 ~~and~~ ~~November 1, 2019~~			8
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three ~~and~~ ~~nine~~months ended ~~October~~April 30,, 2021 and May 1, 2020 ~~and~~ ~~November 1, 2019~~			9
Notes to the Condensed Consolidated Financial Statements			1311
Note 1 — Basis of Presentation			1311

Note 2 — Fair Value Measurements and Investments			14
Note 2 3 — ~~Interim Update to Summary of Significant Accounting Policies~~			16
~~Note 3 — Fair Value Measurements and Investments~~Financial Services			17
Note 4 — ~~Financial Services~~Leases			2026
Note 5 — ~~Leases~~Debt			2928
Note 6 ~~— Debt~~			31
~~Note 7~~ — Derivative Instruments and Hedging Activities			3633
Note 87 — ~~Business Combinations,~~ Goodwill and Intangible Assets			4137
Note 9 8 — Deferred Revenue			39
Note 9 — Commitments and Contingencies			40
Note 1 0 — Income and Other Taxes			42
Note 1 1 — Accumulated Other Comprehensive Income (Loss)			43
Note 1 2 — Non-Controlling Interests			44
Note 1 3 — Capitalization			45
Note 101 4 — ~~Commitments and Contingencies~~Earnings Per Share			4647
Note 111 5 — ~~Income and Other Taxes~~Redeemable Shares			48
Note 121 6 — ~~Accumulated Other Comprehensive Income (Loss)~~Segment Information			5049
Note 131 7 — ~~Non-Controlling Interests~~Supplemental Consolidated Financial Information			52
Note 1418 — ~~Capitalization~~			53
~~Note 15 — Earnings Per Share~~Subsequent Events			55
~~Note 16 — Redeemable Shares~~			56
~~Note 17 — Segment Information~~			57
~~Note 18 — Supplemental Consolidated Financial Information~~			60

Table of Contents

DELL TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in millions; unaudited)


		October 30, 2020		January 31, 2020			April 30, 2021		January 29, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	11,304	$	9,302	Cash and cash equivalents	$	14,244	$	14,201

Accounts receivable, net of allowance of $115 and $94 (Note 18)		11,377		12,484
Short-term financing receivables, net of allowance of $217 and $109 (Note 4)		4,872		4,895
Inventories, net		3,393		3,281
Accounts receivable, net of allowance of $104 and $104 (Note 17)						Accounts receivable, net of allowance of $104 and $104 (Note 17)	10,909		12,788
Short-term financing receivables, net of allowance of $220 and $228 (Note 3)						Short-term financing receivables, net of allowance of $220 and $228 (Note 3)	4,980		5,155
Inventories						Inventories	3,828		3,402
Other current assets	Other current assets	7,668		6,906		Other current assets	8,378		8,021

Total current assets	Total current assets	38,614		36,868		Total current assets	42,339		43,567
Property, plant, and equipment, net	Property, plant, and equipment, net	6,344		6,055		Property, plant, and equipment, net	6,557		6,431
Long-term investments	Long-term investments	1,655		864		Long-term investments	1,670		1,624
Long-term financing receivables, net of allowance of $90 and $40 (Note 4)		5,374		4,848
Long-term financing receivables, net of allowance of $96 and $93 (Note 3)						Long-term financing receivables, net of allowance of $96 and $93 (Note 3)	5,261		5,339
Goodwill	Goodwill	40,643		41,691		Goodwill	40,839		40,829
Intangible assets, net	Intangible assets, net	15,257		18,107		Intangible assets, net	13,729		14,429
Other non-current assets	Other non-current assets	11,061		10,428		Other non-current assets	11,357		11,196
Total assets	Total assets	$	118,948	$	118,861	Total assets	$	121,752	$	123,415
LIABILITIES, REDEEMABLE SHARES, AND STOCKHOLDERS’ EQUITY	LIABILITIES, REDEEMABLE SHARES, AND STOCKHOLDERS’ EQUITY					LIABILITIES, REDEEMABLE SHARES, AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Short-term debt	Short-term debt	$	6,536	$	7,737	Short-term debt	$	8,748	$	6,362
Accounts payable	Accounts payable	19,792		20,065		Accounts payable	21,545		21,696
Accrued and other	Accrued and other	8,715		9,773		Accrued and other	7,728		9,549
Short-term deferred revenue	Short-term deferred revenue	15,259		14,881		Short-term deferred revenue	16,835		16,525

Total current liabilities	Total current liabilities	50,302		52,456		Total current liabilities	54,856		54,132
Long-term debt	Long-term debt	43,325		44,319		Long-term debt	37,935		41,622
Long-term deferred revenue	Long-term deferred revenue	13,422		12,919		Long-term deferred revenue	14,541		14,276
Other non-current liabilities	Other non-current liabilities	5,433		5,383		Other non-current liabilities	5,276		5,360
Total liabilities	Total liabilities	112,482		115,077		Total liabilities	112,608		115,390
Commitments and contingencies (Note 10)
Redeemable shares (Note 16)		527		629
Commitments and contingencies (Note 9)						Commitments and contingencies (Note 9)	0		0
Redeemable shares (Note 15)						Redeemable shares (Note 15)	558		472
Stockholders’ equity (deficit):	Stockholders’ equity (deficit):					Stockholders’ equity (deficit):
Common stock and capital in excess of $0.01 par value (Note 14)		16,719		16,091
Common stock and capital in excess of $0.01 par value (Note 13)						Common stock and capital in excess of $0.01 par value (Note 13)	16,950		16,849
Treasury stock at cost	Treasury stock at cost	(305)		(65)		Treasury stock at cost	(305)		(305)
Accumulated deficit	Accumulated deficit	(14,978)		(16,891)		Accumulated deficit	(12,864)		(13,751)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(553)		(709)		Accumulated other comprehensive loss	(294)		(314)
Total Dell Technologies Inc. stockholders’ equity (deficit)		883		(1,574)
Total Dell Technologies Inc. stockholders’ equity						Total Dell Technologies Inc. stockholders’ equity	3,487		2,479
Non-controlling interests	Non-controlling interests	5,056		4,729		Non-controlling interests	5,099		5,074
Total stockholders’ equity	Total stockholders’ equity	5,939		3,155		Total stockholders’ equity	8,586		7,553
Total liabilities, redeemable shares, and stockholders’ equity	Total liabilities, redeemable shares, and stockholders’ equity	$	118,948	$	118,861	Total liabilities, redeemable shares, and stockholders’ equity	$	121,752	$	123,415

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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DELL TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME ~~(LOSS)~~

(in millions, except per share amounts; unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019			April 30, 2021		May 1, 2020
Net revenue:	Net revenue:									Net revenue:
Products	Products	$	17,352	$	17,275	$	50,127	$	51,765	Products	$	18,034	$	16,038
Services	Services	6,130		5,569		17,985		16,357		Services	6,453		5,859
Total net revenue	Total net revenue	23,482		22,844		68,112		68,122		Total net revenue	24,487		21,897
Cost of net revenue:	Cost of net revenue:									Cost of net revenue:
Products	Products	13,789		13,558		39,923		40,526		Products	14,214		12,804
Services	Services	2,432		2,160		6,919		6,347		Services	2,615		2,240
Total cost of net revenue	Total cost of net revenue	16,221		15,718		46,842		46,873		Total cost of net revenue	16,829		15,044
Gross margin	Gross margin	7,261		7,126		21,270		21,249		Gross margin	7,658		6,853
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general, and administrative	Selling, general, and administrative	4,772		5,028		14,419		15,677		Selling, general, and administrative	4,960		4,886
Research and development	Research and development	1,360		1,262		3,884		3,667		Research and development	1,323		1,265
Total operating expenses	Total operating expenses	6,132		6,290		18,303		19,344		Total operating expenses	6,283		6,151
Operating income	Operating income	1,129		836		2,967		1,905		Operating income	1,375		702
Interest and other, net	Interest and other, net	273		(677)		(929)		(2,000)		Interest and other, net	(388)		(566)
Income (loss) before income taxes		1,402		159		2,038		(95)
Income before income taxes										Income before income taxes	987		136
Income tax expense (benefit)	Income tax expense (benefit)	521		(393)		(124)		(5,208)		Income tax expense (benefit)	49		(46)
Net income	Net income	881		552		2,162		5,113		Net income	938		182
Less: Net income attributable to non-controlling interests	Less: Net income attributable to non-controlling interests	49		53		139		905		Less: Net income attributable to non-controlling interests	51		39
Net income attributable to Dell Technologies Inc.	Net income attributable to Dell Technologies Inc.	$	832	$	499	$	2,023	$	4,208	Net income attributable to Dell Technologies Inc.	$	887	$	143

Earnings per share attributable to Dell Technologies Inc.	Earnings per share attributable to Dell Technologies Inc.									Earnings per share attributable to Dell Technologies Inc.
Dell Technologies Common Stock — Basic	Dell Technologies Common Stock — Basic	$	1.11	$	0.69	$	2.73	$	5.84	Dell Technologies Common Stock — Basic	$	1.17	$	0.19
Dell Technologies Common Stock — Diluted	Dell Technologies Common Stock — Diluted	$	1.08	$	0.66	$	2.64	$	5.50	Dell Technologies Common Stock — Diluted	$	1.13	$	0.19

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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DELL TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions; unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019			April 30, 2021		May 1, 2020
Net income	Net income	$	881	$	552	$	2,162	$	5,113	Net income	$	938	$	182

Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax									Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	Foreign currency translation adjustments	(21)		50		243		(186)		Foreign currency translation adjustments	(7)		(146)

Cash flow hedges:	Cash flow hedges:									Cash flow hedges:
Change in unrealized gains (losses)		45		(47)		(45)		210
Reclassification adjustment for net gains included in net income		84		(71)		(24)		(197)
Change in unrealized (losses) gains										Change in unrealized (losses) gains	(1)		167
Reclassification adjustment for net losses (gains) included in net income										Reclassification adjustment for net losses (gains) included in net income	27		(100)
Net change in cash flow hedges	Net change in cash flow hedges	129		(118)		(69)		13		Net change in cash flow hedges	26		67
Pension and other postretirement plans:	Pension and other postretirement plans:									Pension and other postretirement plans:
Recognition of actuarial net gains (losses) from pension and other postretirement plans	Recognition of actuarial net gains (losses) from pension and other postretirement plans	1		0		(21)		8		Recognition of actuarial net gains (losses) from pension and other postretirement plans	1		(7)
Reclassification adjustments for net losses from pension and other postretirement plans	Reclassification adjustments for net losses from pension and other postretirement plans	(1)		0		3		0		Reclassification adjustments for net losses from pension and other postretirement plans	0		2
Net change in actuarial net gains (losses) from pension and other postretirement plans	Net change in actuarial net gains (losses) from pension and other postretirement plans	0		0		(18)		8		Net change in actuarial net gains (losses) from pension and other postretirement plans	1		(5)

Total other comprehensive income (loss), net of tax expense (benefit) of $9 and $(6), respectively, and $(3) and $1, respectively		108		(68)		156		(165)
Total other comprehensive income (loss), net of tax expense (benefit) of $(2) and $10, respectively										Total other comprehensive income (loss), net of tax expense (benefit) of $(2) and $10, respectively	20		(84)
Comprehensive income, net of tax	Comprehensive income, net of tax	989		484		2,318		4,948		Comprehensive income, net of tax	958		98
Less: Net income attributable to non-controlling interests	Less: Net income attributable to non-controlling interests	49		53		139		905		Less: Net income attributable to non-controlling interests	51		39
Less: Other comprehensive income (loss) attributable to non-controlling interests		1		(1)		0		0
Less: Other comprehensive loss attributable to non-controlling interests										Less: Other comprehensive loss attributable to non-controlling interests	0		(3)
Comprehensive income attributable to Dell Technologies Inc.	Comprehensive income attributable to Dell Technologies Inc.	$	939	$	432	$	2,179	$	4,043	Comprehensive income attributable to Dell Technologies Inc.	$	907	$	62

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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DELL TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions; unaudited)


		Nine Months Ended					Three Months Ended
		October 30, 2020		November 1, 2019			April 30, 2021		May 1, 2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	2,162	$	5,113	Net income	$	938	$	182
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	Adjustments to reconcile net income to net cash provided by (used in) operating activities:					Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	4,017		4,608		Depreciation and amortization	1,239		1,316
Stock-based compensation expense	Stock-based compensation expense	1,219		886		Stock-based compensation expense	435		370
Deferred income taxes	Deferred income taxes	(219)		(5,927)		Deferred income taxes	(170)		(225)
Other, net	Other, net	(322)		866		Other, net	(82)		104
Changes in assets and liabilities, net of effects from acquisitions and dispositions:	Changes in assets and liabilities, net of effects from acquisitions and dispositions:					Changes in assets and liabilities, net of effects from acquisitions and dispositions:
Accounts receivable	Accounts receivable	885		800		Accounts receivable	1,850		1,284
Financing receivables	Financing receivables	(624)		(592)		Financing receivables	276		(14)
Inventories	Inventories	(198)		364		Inventories	(396)		(352)
Other assets and liabilities	Other assets and liabilities	(2,175)		(2,445)		Other assets and liabilities	(2,292)		(2,234)
Accounts payable	Accounts payable	(216)		299		Accounts payable	(125)		(1,538)
Deferred revenue	Deferred revenue	1,001		1,811		Deferred revenue	565		311
Change in cash from operating activities	Change in cash from operating activities	5,530		5,783		Change in cash from operating activities	2,238		(796)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of investments	Purchases of investments	(296)		(142)		Purchases of investments	(146)		(56)
Maturities and sales of investments	Maturities and sales of investments	98		449		Maturities and sales of investments	256		39
Capital expenditures and capitalized software development costs	Capital expenditures and capitalized software development costs	(1,584)		(1,876)		Capital expenditures and capitalized software development costs	(625)		(559)
Acquisition of businesses and assets, net	Acquisition of businesses and assets, net	(405)		(2,437)		Acquisition of businesses and assets, net	(10)		(38)
Divestitures of businesses and assets, net	Divestitures of businesses and assets, net	2,187		(3)		Divestitures of businesses and assets, net	0		120
Other	Other	26		27		Other	6		9
Change in cash from investing activities	Change in cash from investing activities	26		(3,982)		Change in cash from investing activities	(519)		(485)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Proceeds from the issuance of common stock	Proceeds from the issuance of common stock	389		451		Proceeds from the issuance of common stock	160		116
Repurchases of parent common stock	Repurchases of parent common stock	(240)		(6)		Repurchases of parent common stock	(9)		(240)
Repurchases of subsidiary common stock	Repurchases of subsidiary common stock	(890)		(1,686)		Repurchases of subsidiary common stock	(434)		(300)
Proceeds from debt	Proceeds from debt	14,772		17,656		Proceeds from debt	2,726		10,135
Repayments of debt	Repayments of debt	(17,244)		(18,948)		Repayments of debt	(4,070)		(5,405)
Other	Other	(270)		(67)		Other	(11)		(42)
Change in cash from financing activities	Change in cash from financing activities	(3,483)		(2,600)		Change in cash from financing activities	(1,638)		4,264
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(67)		(100)		Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(5)		(136)
Change in cash, cash equivalents, and restricted cash	Change in cash, cash equivalents, and restricted cash	2,006		(899)		Change in cash, cash equivalents, and restricted cash	76		2,847
Cash, cash equivalents, and restricted cash at beginning of the period	Cash, cash equivalents, and restricted cash at beginning of the period	10,151		10,240		Cash, cash equivalents, and restricted cash at beginning of the period	15,184		10,151
Cash, cash equivalents, and restricted cash at end of the period	Cash, cash equivalents, and restricted cash at end of the period	$	12,157	$	9,341	Cash, cash equivalents, and restricted cash at end of the period	$	15,260	$	12,998

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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DELL TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in millions; continued on next page; unaudited)

~~Three Months Ended October 30, 2020~~

Common Stock and Capital in Excess of Par Value Treasury Stock
Issued Shares Amount Shares Amount Accumulated Deficit Accumulated Other Comprehensive Income/(Loss) Dell Technologies Stockholders’ Equity (Deficit) Non-Controlling Interests Total Stockholders’ Equity (Deficit)
Balances as of July 31, 2020 753 $ 16,356 8 $ (305) $ (15,810) $ (660) $ (419) $ 4,977 $ 4,558
Net income — — — — 832 — 832 49 881
Foreign currency translation adjustments — — — — — (21) (21) — (21)
Cash flow hedges, net change — — — — — 128 128 1 129
Issuance of common stock 4 46 — — — — 46 — 46
Stock-based compensation expense — 126 — — — — 126 310 436
Revaluation of redeemable shares — 83 — — — — 83 — 83
Impact from equity transactions of non-controlling interests — 108 — — — — 108 (281) (173)
Balances as of October 30, 2020 757 $ 16,719 8 $ (305) $ (14,978) $ (553) $ 883 $ 5,056 $ 5,939


	Common Stock and Capital in Excess of Par Value			Treasury Stock
	Issued Shares	Amount		Shares	Amount		Accumulated Deficit		Accumulated Other Comprehensive Income/(Loss)		Dell Technologies Stockholders’ Equity (Deficit)		Non-Controlling Interests		Total Stockholders’ Equity (Deficit)
Balances as of January 29, 2021	761	$	16,849	8	$	(305)	$	(13,751)	$	(314)	$	2,479	$	5,074	$	7,553

Net income	—	—		—	—		887		—		887		51		938
Foreign currency translation adjustments	—	—		—	—		—		(7)		(7)		—		(7)
Cash flow hedges, net change	—	—		—	—		—		26		26		—		26
Pension and other post-retirement	—	—		—	—		—		1		1		—		1
Issuance of common stock	11	19		—	—		—		—		19		—		19
Stock-based compensation expense	—	166		—	—		—		—		166		269		435

Revaluation of redeemable shares	—	(86)		—	—		—		—		(86)		—		(86)
Impact from equity transactions of non-controlling interests	—	2		—	—		—		—		2		(295)		(293)

Balances as of April 30, 2021	772	$	16,950	8	$	(305)	$	(12,864)	$	(294)	$	3,487	$	5,099	$	8,586

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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DELL TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(continued; in ~~millions; continued on next page;~~ millions; unaudited)

~~Nine Months Ended October 30, 2020~~

Common Stock and Capital in Excess of Par Value Treasury Stock
Issued Shares Amount Shares Amount Accumulated Deficit Accumulated Other Comprehensive Income/(Loss) Dell Technologies
Stockholders’ Equity (Deficit) Non-Controlling Interests Total Stockholders’ Equity (Deficit)
Balances as of January 31, 2020 745 $ 16,091 2 $ (65) $ (16,891) $ (709) $ (1,574) $ 4,729 $ 3,155
Adjustment for adoption of accounting standards (Note 1) — — — — (110) — (110) — (110)
Net income — — — — 2,023 — 2,023 139 2,162
Foreign currency translation adjustments — — — — — 243 243 — 243
Cash flow hedges, net change — — — — — (69) (69) 0 (69)
Pension and other post-retirement — — — — — (18) (18) — (18)
Issuance of common stock 12 124 — — — — 124 — 124
Stock-based compensation expense — 332 — — — — 332 887 1,219
Treasury stock repurchases — — 6 (240) — — (240) — (240)
Revaluation of redeemable shares — 102 — — — — 102 — 102
Impact from equity transactions of non-controlling interests — 70 — — — — 70 (699) (629)
Balances as of October 30, 2020 757 $ 16,719 8 $ (305) $ (14,978) $ (553) $ 883 $ 5,056 $ 5,939


	Common Stock and Capital in Excess of Par Value			Treasury Stock
	Issued Shares	Amount		Shares	Amount		Accumulated Deficit		Accumulated Other Comprehensive Income/(Loss)		Dell Technologies Stockholders’ Equity (Deficit)		Non-Controlling Interests		Total Stockholders’ Equity (Deficit)
Balances as of January 31, 2020	745	$	16,091	2	$	(65)	$	(16,891)	$	(709)	$	(1,574)	$	4,729	$	3,155
Adjustment for adoption of accounting standard	—	—		—	—		(110)		—		(110)		—		(110)
Net income	—	—		—	—		143		—		143		39		182
Foreign currency translation adjustments	—	—		—	—		—		(146)		(146)		—		(146)
Cash flow hedges, net change	—	—		—	—		—		70		70		(3)		67
Pension and other post-retirement	—	—		—	—		—		(5)		(5)		—		(5)
Issuance of common stock	3	9		—	—		—		—		9		—		9
Stock-based compensation expense	—	92		—	—		—		—		92		278		370
Treasury stock repurchases	—	—		6	(240)		—		—		(240)		—		(240)
Revaluation of redeemable shares	—	188		—	—		—		—		188		—		188
Impact from equity transactions of non-controlling interests	—	(41)		—	—		—		—		(41)		(189)		(230)

Balances as of May 1, 2020	748	$	16,339	8	$	(305)	$	(16,858)	$	(790)	$	(1,614)	$	4,854	$	3,240

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)~~

~~(continued; in millions; unaudited)~~

~~Three Months Ended November 1, 2019~~

Common Stock and Capital in Excess of Par Value Treasury Stock
Issued Shares Amount Shares Amount Accumulated Deficit Accumulated Other Comprehensive Income/(Loss) Dell Technologies Stockholders’ Equity (Deficit) Non-Controlling Interests Total Stockholders’ Equity (Deficit)
Balances as of August 2, 2019 726 $ 15,956 2 $ (65) $ (17,775) $ (565) $ (2,449) $ 5,544 $ 3,095
Net income — — — — 499 — 499 53 552
Foreign currency translation adjustments — — — — — 50 50 — 50
Cash flow hedges, net change — — — — — (117) (117) (1) (118)
Issuance of common stock 5 67 — — — — 67 — 67
Stock-based compensation expense — 61 — — — — 61 261 322
Revaluation of redeemable shares — 90 — — — — 90 — 90
Impact from equity transactions of non-controlling interests — 18 — — (23) — (5) (176) (181)
Balances as of November 1, 2019 731 $ 16,192 2 $ (65) $ (17,299) $ (632) $ (1,804) $ 5,681 $ 3,877

~~The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.~~

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)~~

~~(continued; in millions; unaudited)~~

~~Nine Months Ended November 1, 2019~~

Common Stock and Capital in Excess of Par Value Treasury Stock
Issued Shares Amount Shares Amount Accumulated Deficit Accumulated Other Comprehensive Income/(Loss) Dell Technologies
Stockholders’ Equity (Deficit) Non-Controlling Interests
Total Stockholders’ Equity (Deficit)
Balances as of February 2, 2019 721 $ 16,114 2 $ (63) $ (21,349) $ (467) $ (5,765) $ 4,823 $ (942)
Adjustment for adoption of accounting standards — — — — 3 — 3 — 3
Net income — — — — 4,208 — 4,208 905 5,113
Foreign currency translation adjustments — — — — — (186) (186) — (186)
Cash flow hedges, net change — — — — — 13 13 0 13
Pension and other post-retirement — — — — — 8 8 — 8
Issuance of common stock 10 152 — — — — 152 — 152
Stock-based compensation expense — 165 — — — — 165 721 886
Treasury stock repurchases — — 0 (2) — — (2) — (2)
Revaluation of redeemable shares — 262 — — — — 262 — 262
Impact from equity transactions of non-controlling interests — (501) — — (161) — (662) (768) (1,430)
Balances as of November 1, 2019 731 $ 16,192 2 $ (65) $ (17,299) $ (632) $ (1,804) $ 5,681 $ 3,877

~~The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.~~

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 — BASIS OF PRESENTATION

References in these Notes to the Condensed Consolidated Financial Statements to the “Company” or “Dell Technologies” mean Dell Technologies Inc. individually and together with its consolidated subsidiaries.

Basis of Presentation — The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes filed with the U.S. Securities and Exchange Commission (“SEC”) in the Company’s Annual Report on Form 10-K for the fiscal year ended January ~~31, 2020.~~29, 2021. These Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of Dell Technologies Inc. as of ~~October~~April 30, ~~2020~~2021 and January ~~31, 2020,~~29, 2021 and the results of its operations, ~~and~~ corresponding comprehensive income (loss) ~~for the three and nine months ended October 30, 2020 and November 1, 2019,~~ and its cash flows for the ~~nine~~three months ended ~~October~~April 30, ~~2020~~2021 and ~~November~~May 1, ~~2019.~~2020.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and the accompanying Notes. Management has considered the actual and potential economic ~~implications of the outbreak~~impacts of the coronavirus disease 2019 (“COVID-19”) pandemic on the Company’s critical and significant accounting estimates. Actual results could differ materially from those estimates. The results of operations, ~~and~~ comprehensive income (loss) ~~for the three~~, and ~~nine months ended October 30, 2020 and November 1, 2019 and the~~ cash flows for the ~~nine~~three months ended ~~October~~April 30, ~~2020~~2021 and ~~November~~May 1, ~~2019~~2020 are not necessarily indicative of the results to be expected for the full fiscal year or for any other fiscal period.

The Company’s fiscal year is the 52- or 53-week period ending on the Friday nearest January 31. ~~The~~Both the fiscal year ended ~~January 31, 2020 (“Fiscal 2020”) was a 52-week period, and the fiscal year ending~~ January 29, 2021 (“Fiscal 2021”) ~~will be a~~and fiscal year ending January 28, 2022 (“Fiscal 2022”) are 52-week ~~period.~~periods.

Principles of Consolidation — These Condensed Consolidated Financial Statements include the accounts of Dell Technologies and its wholly-owned subsidiaries, as well as the accounts of VMware, Inc. and SecureWorks Corp. (“Secureworks”), each of which is majority-owned by Dell Technologies. All intercompany transactions have been eliminated.

Unless the context indicates otherwise, references in these Notes to the Condensed Consolidated Financial Statements to “VMware” mean the VMware reportable segment, which reflects the operations of VMware, Inc. (NYSE: VMW) within Dell Technologies.

The Company also consolidates Variable Interest Entities ("VIEs") where it has been determined that the Company is the primary beneficiary of the applicable entities’ operations. For each VIE, the primary beneficiary is the party that has both the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to such VIE. In evaluating whether the Company is the primary beneficiary of each entity, the Company evaluates its power to direct the most significant activities of the VIE by considering the purpose and design of each entity and the risks each entity was designed to create and pass through to its respective variable interest holders. The Company also evaluates its economic interests in each of the VIEs. See Note 3 of the Notes to the Condensed Consolidated Financial Statements for more information regarding consolidated VIEs.

~~Revenue Reclassification~~

Spin-off of VMware, Inc.— ~~For the fiscal year ended January 31, 2020,~~On April 14, 2021, Dell Technologies ~~made certain reclassifications of net revenue between~~entered into a Separation and Distribution Agreement with VMware, Inc, in which Dell Technologies owns a majority equity stake. Subject to the ~~products~~terms and ~~services categories on~~conditions set forth in the ~~Consolidated Statements of Income (Loss), which impacted previously reported amounts for~~Separation and Distribution Agreement, the ~~three and nine months ended November 1, 2019. The reclassifications were made to provide a more meaningful representation of the nature of certain service and software-as-a-service offerings~~businesses of VMware, Inc. ~~Prior period results were recast~~will be separated from the remaining businesses of Dell Technologies through a series of transactions that will result in the pre-transaction stockholders of Dell Technologies owning shares in two, separate public companies: (1) VMware, Inc., which will own the businesses of VMware, Inc. and its subsidiaries, and (2) Dell Technologies, which will own Dell Technologies’ other businesses and subsidiaries (the “VMware Spin-off”).

VMware, Inc. will pay a cash dividend, pro rata, to ~~conform with these changes, and resulted~~each of the holders of VMware, Inc. common stock in an ~~increase~~aggregate amount equal to ~~services revenue~~an amount to be mutually agreed by the Company and VMware, Inc. between $11.5 billion and $12.0 billion, subject to the satisfaction of certain conditions of payment. Immediately following such payment, the separation of VMware, Inc. from the Company will occur, including through the termination or settlement of certain intercompany accounts and intercompany contracts and the other transactions. Upon the closing of the transaction, Dell Technologies intends to use net proceeds from its pro rata share of the cash dividend to repay debt.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The transaction is expected to close during the fourth quarter of calendar 2021, subject to certain closing conditions, including receipt of a favorable private letter ruling from the Internal Revenue Service that the transaction will qualify as tax-free for Dell Technologies stockholders for U.S. federal income tax purposes. Either Dell Technologies or VMware, Inc. may terminate the Separation and Distribution Agreement if the VMware Spin-off is not completed on or before January 28, 2022, among other termination rights.

In connection with and upon consummation of the VMware Spin-off, Dell Technologies and VMware, Inc. will enter into a Commercial Framework Agreement (the “CFA”). The CFA will provide a framework under which Dell Technologies and VMware, Inc. can continue their strategic commercial relationship after the transaction. The CFA will have an ~~equal~~initial term of five years, with automatic one-year renewals occurring annually thereafter, subject to certain terms and ~~offsetting decrease~~conditions.

The announcement of the planned VMware Spin-off did not have any impact to ~~product revenue of $210 million and $584 million for~~ the ~~three and nine months ended November 1, 2019, respectively. Total net revenue as previously reported remains unchanged.~~Company’s Condensed Consolidated Financial Statements or segment reporting. The Company ~~did not recast cost~~will report VMware results as discontinued operations upon the closing of ~~goods sold for~~ the ~~related revenue reclassifications due to immateriality.~~transaction.

RSA Security Divestiture — On ~~February 18,~~September 1, 2020, Dell Technologies ~~announced its entry into a definitive agreement with~~completed the sale of RSA Security to a consortium led by Symphony Technology Group, Ontario Teachers’ Pension Plan Board and AlpInvest Partners ~~to sell RSA Security. On September 1, 2020, the parties closed the transaction. At the completion of the sale, the Company received~~for total cash consideration of approximately $2.082 billion, resulting in a pre-tax gain on sale of $338 million. The Company ultimately recorded a $21 million loss, net of $359 million in tax expense due to the relatively low tax basis for the assets sold, particularly goodwill. The transaction included the sale of RSA Archer, RSA NetWitness Platform, RSA SecurID, RSA Fraud and Risk Intelligence, and RSA Conference and was intended to further simplify Dell Technologies’ product portfolio and corporate structure. Prior to the divestiture, RSA Security’s operating results were included within Other businesses and did not qualify for presentation as a discontinued operation.

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

VMware, Inc. Acquisition of Pivotal — On December 30, 2019, VMware, Inc. completed its acquisition of Pivotal Software, Inc. (“Pivotal”) from the Company by merger (the “Pivotal acquisition”), with Pivotal surviving the merger as a wholly-owned subsidiary of VMware, Inc. Each outstanding share of Pivotal’s Class A common stock (other than shares held by Pivotal stockholders who properly exercised their appraisal rights under Delaware law) was converted into the right to receive $15.00 in cash, without interest, and each outstanding share of Pivotal’s Class B common stock was converted into the right to receive 0.0550 of a share of Class B common stock of VMware, Inc. Dell Technologies, which held all outstanding shares of Pivotal’s Class B common stock, received approximately 7.2 million shares of Class B common stock of VMware, Inc. in the transaction.. As of the transaction date, Pivotal’s Class A common stock (NYSE: PVTL) ceased to be listed and traded on the New York Stock Exchange (“NYSE”).

Due to the Company’s ownership of a controlling interest in Pivotal, the Company and VMware, Inc. accounted for the acquisition of the controlling interest in Pivotal as a transaction between entities under common control, and, consequently, the transaction had no net effect toon the Company’s consolidated financial statements. Subsequent to the Pivotal acquisition, Pivotal operates as a wholly-owned subsidiary of VMware, Inc. and Dell Technologies reports Pivotal results within the VMware reportable segment. Prior to the Pivotal acquisition, Pivotal results were reported within Other businesses. This change in Pivotal segment classification was reflected retrospectively ~~and is presented~~ in ~~Note 17 of~~ the ~~Notes to the Condensed Consolidated Financial Statements.~~Company’s reportable segment results.

Class V Transaction — On December 28, 2018, the Company completed a transaction (the “Class V transaction”) in which it paid $14.0 billion in cash and issued 149,387,617 shares of its Class C Common Stock to holders of its Class V Common Stock in exchange for all outstanding shares of Class V Common Stock. The non-cash consideration portion of the Class V transaction totaled $6.9 billion. As a result of the Class V transaction, the tracking stock feature of the Company’s capital structure associated with the Class V Common Stock was terminated. The Class C Common Stock is traded on the NYSE.

The merger pursuant to which the Class V transaction was effected and the Class V transaction have been accounted for as a hybrid liability and equity transaction involving the repurchase of outstanding common stock, with the consideration consisting of a variable combination of cash and shares. Upon settlement, the accounting for the Class V transaction reflected that the outstanding Class V Common Stock was canceled and exchanged for shares of Class C Common Stock at $120.00 per share in cash or combination of cash and shares, depending on each holder’s election and subject to proration of the cash elections.

EMC Merger Transaction — On September 7, 2016, the Company completed its acquisition of EMC Corporation (“EMC”) by merger (the “EMC merger transaction”). The consolidated results of EMC are included in Dell Technologies’ consolidated results presented in these financial statements.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Recently Issued Accounting Pronouncements

Reference Rate Reform — In March 2020, the Financial Accounting Standards Board (“FASB”) issued guidance which provides temporary optional expedients and exceptions to GAAP guidance on contract modifications and certain hedging relationships to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate to alternative reference rates. The Company may elect to apply the amendments prospectively through December 31, 2022. Adoption of the new guidance is not expected to have a material impact on the Company’s financial results.

Recently Adopted Accounting Pronouncements

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity — In August 2020, the Financial Accounting Standards Board (“FASB”) issued guidance to simplify the accounting for convertible debt instruments and convertible preferred stock, and the derivatives scope exception for contracts in an entity's own equity. In addition, the guidance on calculating diluted earnings per share has been simplified and made more internally consistent. Public entities must adopt the new guidance for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted for fiscal periods beginning after December 15, 2020. The Company ~~will~~ early ~~adopt~~adopted this ~~guidance for the fiscal year beginning~~standard as of January 30, ~~2021 on a modified retrospective basis. Adoption of the new guidance is not expected to have a material~~2021. There was no impact on the ~~Company’s financial results.~~Condensed Consolidated Financial Statements or to diluted earnings per share as of the adoption date.

Simplifying Accounting for Income Taxes — In December 2019, the FASB issued guidance to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, Income Taxes, and by clarifying and amending existing guidance in order to improve consistent application of GAAP for other areas of Topic 740. Public entities must adopt the new guidance for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted for fiscal periods beginning after December 15, 2019. The Company will adopt this guidance for the fiscal year beginning January 30, 2021. The Company is currently evaluating the impact of adoption of this guidance.

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

~~Recently Adopted Accounting Pronouncements~~

~~Measurement of Credit Losses on Financial Instruments~~— In June 2016, the FASB issued amended guidance which replaces the current incurred loss impairment methodology for measurement of credit losses on financial instruments with a methodology (the “current expected credit losses model” or “CECL model”) that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Under the CECL model, the allowance for losses on financial assets, measured at amortized cost, reflects management’s estimate of credit losses over the remaining expected life of such assets.

The Company adopted the standard (the “new CECL standard”) as of February 1, 2020 using the modified retrospective method, with the cumulative-effect adjustment to the opening balance of stockholders’ equity (deficit) as of the adoption date. The cumulative effect of adopting the new CECL standard resulted in an increase of $111 million and $27 million to the allowance for expected credit losses within financing receivables, net and accounts receivable, net, respectively, on the Condensed Consolidated Statements of Financial Position, and a corresponding decrease of $28 million to other non-current liabilities related to deferred taxes and $110 million to stockholders’ equity (deficit) as of February 1, 2020. See Note 2, Note 4, and Note 18 of the Notes to the Condensed Consolidated Financial Statements for additional information about the Company’s allowance for financing receivables losses and allowance for expected credit losses of accounts receivable.

~~Intangibles - Goodwill and Other - Internal-Use Software~~ —In August 2018, the FASB issued guidance on a customer’s accounting for implementation costs incurred in a cloud-computing arrangement when hosted by a vendor. The guidance provides that, in a hosting arrangement that is a service contract, certain implementation costs should be capitalized and amortized over the term of the arrangement. The Company adopted the standard (the “new cloud computing standard”) during the three months ended ~~May 1, 2020 using the prospective method.~~April 30, 2021. The impact of the adoption of this standard was immaterial to the Condensed Consolidated Financial Statements.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 2 ~~— INTERIM UPDATE TO SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

As discussed in Note 1 of the Notes to the Condensed Consolidated Financial Statements, the Company adopted the new CECL standard as of February 1, 2020 using the modified retrospective method. The new impairment methodology for measurement of credit losses on financial instruments reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Additionally, the Company adopted the new cloud computing standard during the three months ended May 1, 2020 using the prospective method. In a cloud-computing hosting arrangement hosted by a vendor that is a service contract, certain implementation costs should be capitalized and amortized over the term of the arrangement. The following accounting policies have been updated as part of the adoption of the new standards.

~~Allowance for Expected Credit Losses~~ — The Company recognizes an allowance for losses on accounts receivable in an amount equal to the current expected credit losses. The estimation of the allowance is based on an analysis of historical loss experience, current receivables aging, and management’s assessment of current conditions and reasonable and supportable expectation of future conditions, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. The Company assesses collectibility by pooling receivables where similar characteristics exist and evaluates receivables individually when specific customer balances no longer share those risk characteristics and are considered at risk or uncollectible. The expense associated with the allowance for expected credit losses is recognized in selling, general, and administrative expenses.

~~Allowance for Financing Receivables Losses~~ — The Company recognizes an allowance for losses on financing receivables in an amount equal to the probable losses net of recoveries. The allowance for losses is determined based on various factors, including lifetime expected losses determined using macroeconomic forecast assumptions and management judgments applicable to and through the expected life of the portfolios as well as past due receivables, receivable type, and customer risk profile. Both fixed and revolving receivable loss rates are affected by macroeconomic conditions, including the level of gross domestic product (“GDP”) growth, the level of commercial capital equipment investment, unemployment rates, and the credit quality of the borrower.

Customer account principal and interest are charged to the allowance for losses when an account is deemed to be uncollectible or generally when the account is 180 days delinquent. While the Company does not generally place financing receivables on non-accrual status during the delinquency period, accrued interest is included in the allowance for loss calculation and, therefore, the Company is adequately reserved in the event of charge off. Recoveries on receivables previously charged off as uncollectible are recorded to the allowance for financing receivables losses. The expense associated with the allowance for financing receivables losses is recognized as cost of net revenue.

~~Capitalized Software Development Costs~~ — The Company capitalizes certain internal and external costs to acquire or create internal use software which are incurred subsequent to the completion of the preliminary project stage. Development costs are generally amortized on a straight-line basis over five years. Costs associated with maintenance and minor enhancements to the features and functionality of the Company’s website are expensed as incurred.

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

~~NOTE 3~~ — FAIR VALUE MEASUREMENTS AND INVESTMENTS

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of the dates indicated:


		October 30, 2020								January 31, 2020									April 30, 2021								January 29, 2021
		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs				Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs					Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs				Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
		(in millions)																	(in millions)
Assets:	Assets:																	Assets:
Cash and cash equivalents:	Cash and cash equivalents:																	Cash and cash equivalents:
Money market funds	Money market funds	$	6,562	$	0	$	0	$	6,562	$	4,621	$	0	$	0	$	4,621	Money market funds	$	8,936	$	0	$	0	$	8,936	$	8,846	$	0	$	0	$	8,846

Equity and other securities	Equity and other securities	553		0		0		553		12		0		0		12		Equity and other securities	327		0		0		327		449		0		0		449
Derivative instruments	Derivative instruments	0		52		0		52		0		81		0		81		Derivative instruments	0		69		0		69		0		104		0		104
Total assets	Total assets	$	7,115	$	52	$	0	$	7,167	$	4,633	$	81	$	0	$	4,714	Total assets	$	9,263	$	69	$	0	$	9,332	$	9,295	$	104	$	0	$	9,399
Liabilities:	Liabilities:																	Liabilities:
Derivative instruments	Derivative instruments	$	0	$	181	$	0	$	181	$	0	$	68	$	0	$	68	Derivative instruments	$	0	$	103	$	0	$	103	$	0	$	133	$	0	$	133
Total liabilities	Total liabilities	$	0	$	181	$	0	$	181	$	0	$	68	$	0	$	68	Total liabilities	$	0	$	103	$	0	$	103	$	0	$	133	$	0	$	133

The following section describes the valuation methodologies the Company uses to measure financial instruments at fair value:

Money Market Funds — The Company’s investments in money market funds that are classified as cash equivalents hold underlying investments with a weighted average maturity of 90 days or less and are recognized at fair value. The valuations of these securities are based on quoted prices in active markets for identical assets, when available, or pricing models whereby all significant inputs are observable or can be derived from or corroborated by observable market data. The Company reviews security pricing and assesses liquidity on a quarterly basis. As of ~~October~~April 30, ~~2020,~~2021, the Company’s U.S. portfolio had no material exposure to money market funds with a fluctuating net asset value.

Equity and Other Securities — The majority of the Company’s investments in equity and other securities that are measured at fair value on a recurring basis consist of strategic investments in publicly-traded companies. The valuation of these securities is based on quoted prices in active markets.

Derivative Instruments — The Company’s derivative financial instruments consist primarily of foreign currency forward and purchased option contracts and interest rate swaps. The fair value of the portfolio is determined using valuation models based on market observable inputs, including interest rate curves, forward and spot prices for currencies, and implied volatilities. Credit risk is also factored into the fair value calculation of the Company’s derivative financial instrument portfolio. See Note 76 of the Notes to the Condensed Consolidated Financial Statements for a description of the Company’s derivative financial instrument activities.

Deferred Compensation Plans — The Company offers deferred compensation plans for eligible employees, which allow participants to defer payment for a portion of their compensation. Assets were the same as liabilities associated with the plans at approximately ~~$277~~$340 million and ~~$241~~$308 million as of ~~October~~April 30, ~~2020~~2021 and January ~~31, 2020,~~29, 2021, respectively, and are included in other assets and other liabilities on the Condensed Consolidated Statements of Financial Position. The net impact to the Condensed Consolidated Statements of Income ~~(Loss)~~ is not material since changes in the fair value of the assets substantially offset changes in the fair value of the liabilities. As such, assets and liabilities associated with these plans have not been included in the recurring fair value table above.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis — Certain assets are measured at fair value on a nonrecurring basis and therefore are not included in the recurring fair value table above. These assets consist primarily of non-financial assets such as goodwill and intangible assets. See Note 87 of the Notes to the Condensed Consolidated Financial Statements for additional information about goodwill and intangible assets.

As of ~~October~~April 30, ~~2020~~2021 and January ~~31, 2020,~~29, 2021, the Company held private strategic investments of ~~$936 million~~$1.1 billion and ~~$852 million,~~$1.0 billion, respectively. As these investments represent early-stage companies without readily determinable fair values, they are not included in the recurring fair value table above.

The Company has elected to apply the measurement alternative for these investments. Under the alternative, the Company measures investments without readily determinable fair values at cost, less impairment, adjusted by observable price changes. The Company must make a separate election to use the alternative for each eligible investment and is required to reassess at each reporting period whether an investment qualifies for the alternative. In evaluating these investments for impairment or observable price changes, the Company uses inputs including pre- and post-money valuations of recent financing events and the impact of those events on its fully diluted ownership percentages, as well as other available information regarding the issuer’s historical and forecasted performance.

Carrying Value and Estimated Fair Value of Outstanding Debt — The following table presents the carrying value and estimated fair value of the Company’s outstanding debt as described in Note 65 of the Notes to the Condensed Consolidated Financial Statements, including the current portion, as of the dates indicated:


		October 30, 2020				January 31, 2020					April 30, 2021				January 29, 2021
		Carrying Value		Fair Value		Carrying Value		Fair Value			Carrying Value		Fair Value		Carrying Value		Fair Value
		(in billions)									(in billions)
Senior Secured Credit Facilities	Senior Secured Credit Facilities	$	8.6	$	8.6	$	8.8	$	9.0	Senior Secured Credit Facilities	$	6.2	$	6.3	$	6.2	$	6.3
First Lien Notes	First Lien Notes	$	18.3	$	22.0	$	20.5	$	23.9	First Lien Notes	$	18.3	$	22.7	$	18.3	$	22.8
Unsecured Notes and Debentures	Unsecured Notes and Debentures	$	1.2	$	1.5	$	1.2	$	1.5	Unsecured Notes and Debentures	$	0.8	$	1.2	$	1.2	$	1.6
Senior Notes	Senior Notes	$	2.6	$	2.8	$	2.6	$	2.8	Senior Notes	$	1.6	$	1.7	$	2.7	$	2.8
EMC Notes	EMC Notes	$	1.0	$	1.0	$	1.6	$	1.6	EMC Notes	$	1.0	$	1.0	$	1.0	$	1.0
VMware Notes and VMware Term Loan Facility		$	4.7	$	5.3	$	5.5	$	5.6
VMware Notes										VMware Notes	$	4.7	$	5.2	$	4.7	$	5.3
Margin Loan Facility	Margin Loan Facility	$	4.0	$	3.9	$	4.0	$	3.9	Margin Loan Facility	$	4.0	$	3.9	$	4.0	$	3.9

The fair values of the outstanding debt shown in the table above, as well as the debt of Dell Financial Services (“DFS”) ~~debt~~and its affiliates described in Note 43 of the Notes to the Condensed Consolidated Financial Statements, were determined based on observable market prices in a less active market or based on valuation methodologies using observable inputs and were categorized as Level 2 in the fair value hierarchy. The carrying value of DFS debt approximates fair value.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Investments

The following table presents the carrying value of the Company’s investments as of the dates indicated:


		October 30, 2020								January 31, 2020									April 30, 2021								January 29, 2021
		Cost		Unrealized Gain		Unrealized (Loss)		Carrying Value		Cost		Unrealized Gain		Unrealized (Loss)		Carrying Value			Cost		Unrealized Gain		Unrealized (Loss)		Carrying Value		Cost		Unrealized Gain		Unrealized (Loss)		Carrying Value
		(in millions)																	(in millions)
Equity and other securities	Equity and other securities	$	944	$	579	$	(34)	$	1,489	$	783	$	116	$	(35)	$	864	Equity and other securities	$	1,328	$	198	$	(121)	$	1,405	$	907	$	677	$	(145)	$	1,439
Fixed income debt securities	Fixed income debt securities	163		3		0		166		0		0		0		0		Fixed income debt securities	256		9		0		265		176		9		0		185
Total securities	Total securities							$	1,655							$	864	Total securities							$	1,670							$	1,624

Equity and other securities — The Company has strategic investments in publicly-traded and privately-held companies. For the ~~nine~~three months ended ~~October~~April 30, ~~2020,~~2021, the equity and other securities without readily determinable fair values of ~~$936 million~~$1.1 billion increased by ~~$112~~$198 million, primarily due to upward adjustments for observable price changes, offset by ~~$31~~$26 million of downward adjustments primarily attributable to ~~impairments.~~observable price changes. The remainder of equity and other securities consists of publicly-traded investments that are measured at fair value on a recurring basis.

In September 2020, 1 of the Company’s strategic investments, which previously did not have a readily determinable fair value, completed its initial public offering which resulted in it having a readily determinable fair value and in the recognition of an unrealized gain of $465 million for the three and nine months ended October 30, 2020, which is reflected in the table above. The unrealized gain is reflected in Other, net as a non-cash adjustment within cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows. As of October 30, 2020, the carrying value of this investment was $543 million.

Fixed income debt securities — The Company has fixed income debt securities carried at amortized cost. The debt securities are held as collateral for borrowings. The Company intends to hold the investments to maturity. Unrealized gains relate to foreign currency impacts.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 43 — FINANCIAL SERVICES

The Company offers or arranges various financing options, services, and alternative payment structures for its customers in North America, Europe, Australia, and New Zealand through Dell Financial Services and its affiliates (“DFS”). The Company also arranges financing for some of its customers in various countries where DFS does not currently operate as a captive enterprise. The key activities of DFS include originating, collecting, and servicing customer financing arrangements primarily related to the purchase or use of Dell Technologies products and services. In some cases, DFS also offers financing on the purchase of third-party technology products that complement the Dell Technologies portfolio of products and services. New financing originations were ~~$2.1~~$1.9 billion and ~~$2.0~~$1.8 billion for the three months ended ~~October~~April 30, ~~2020~~2021 and ~~November~~May 1, ~~2019, respectively, and $6.5 billion and $5.7 billion for the nine months ended October 30,~~ 2020, ~~and November 1, 2019,~~ respectively.

The Company’s loan and lease arrangements with customers are aggregated into the following categories:

Revolving loans — Revolving loans offered under private label credit financing programs provide qualified customers with a revolving credit line for the purchase of products and services offered by Dell Technologies. These private label credit financing programs are referred to as Dell Preferred Account (“DPA”) and Dell Business Credit (“DBC”). The DPA product is primarily offered to individual consumer customers, and the DBC product is primarily offered to small and medium-sized commercial customers. Revolving loans in the United States bear interest at a variable annual percentage rate that is tied to the prime rate. Based on historical payment patterns, revolving loan transactions are typically repaid within twelve months on average. Due to the short-term nature of the revolving loan portfolio, the carrying value of the portfolio approximates fair value.

Fixed-term leases and loans — The Company enters into financing arrangements with customers who seek lease financing for equipment. Pursuant to the current lease accounting standard effective February 2, 2019, new DFS leases are classified as sales-type leases, direct financing leases, or operating leases. ~~When the terms of the DFS lease transfer control of the underlying asset to the lessee, the contract is typically classified as a sales-type lease.~~ Direct financing leases are immaterial. ~~All other new DFS leases are classified as operating leases.~~ Leases that commenced prior to the effective date of the current lease accounting standard continue to be accounted for under previous lease accounting guidance. Leases with business customers have fixed terms of generally two to four years.

The Company also offers fixed-term loans to qualified small businesses, large commercial accounts, governmental organizations, educational entities, and certain individual consumer customers. These loans are repaid in equal payments including interest and have defined terms of generally three to five years. The fair value of the fixed-term loan portfolio is determined using market observable inputs. The carrying value of these loans approximates fair value.

2017

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Financing Receivables

The following table presents the components of the Company’s financing receivables segregated by portfolio segment as of the dates indicated:


		October 30, 2020						January 31, 2020							April 30, 2021						January 29, 2021
		Revolving		Fixed-term		Total		Revolving		Fixed-term		Total			Revolving		Fixed-term		Total		Revolving		Fixed-term		Total
		(in millions)													(in millions)
Financing receivables, net:	Financing receivables, net:													Financing receivables, net:
Customer receivables, gross (a)	Customer receivables, gross (a)	$	768	$	9,313	$	10,081	$	824	$	8,486	$	9,310	Customer receivables, gross (a)	$	752	$	9,438	$	10,190	$	796	$	9,595	$	10,391
Allowances for losses	Allowances for losses	(142)		(165)		(307)		(70)		(79)		(149)		Allowances for losses	(139)		(177)		(316)		(148)		(173)		(321)
Customer receivables, net	Customer receivables, net	626		9,148		9,774		754		8,407		9,161		Customer receivables, net	613		9,261		9,874		648		9,422		10,070
Residual interest	Residual interest	0		472		472		0		582		582		Residual interest	0		367		367		0		424		424
Financing receivables, net	Financing receivables, net	$	626	$	9,620	$	10,246	$	754	$	8,989	$	9,743	Financing receivables, net	$	613	$	9,628	$	10,241	$	648	$	9,846	$	10,494
Short-term	Short-term	$	626	$	4,246	$	4,872	$	754	$	4,141	$	4,895	Short-term	$	613	$	4,367	$	4,980	$	648	$	4,507	$	5,155
Long-term	Long-term	$	0	$	5,374	$	5,374	$	0	$	4,848	$	4,848	Long-term	$	0	$	5,261	$	5,261	$	0	$	5,339	$	5,339

____________________

(a) Customer receivables, gross includes amounts due from customers under revolving loans, fixed-term loans, fixed-term sales-type or direct financing leases, and accrued interest.

The allowance for losses as of October 30, 2020 includes the adoption of the new CECL standard, which was adopted as of February 1, 2020 using the modified retrospective method. Prior period amounts have not been recast. The provision recognized on the Condensed Consolidated Statements of Income (Loss) for the three and nine months ended October 30, 2020 is based on an assessment of the impact of current and expected future economic conditions, inclusive of the effect of the COVID-19 pandemic on credit losses. The duration and severity of COVID-19 and continued market volatility is highly uncertain and, as such, the impact on expected losses is subject to significant judgment and may cause variability in the Company’s allowance for credit losses in future periods. See Note 1 and Note 2 of the Notes to the Condensed Consolidated Financial Statements for additional information about the new CECL standard.

~~The~~ following tables present the changes in allowance for financing receivable losses for the periods indicated:


		Three Months Ended													Three Months Ended
		October 30, 2020						November 1, 2019							April 30, 2021						May 1, 2020
		Revolving		Fixed-term		Total		Revolving		Fixed-term		Total			Revolving		Fixed-term		Total		Revolving		Fixed-term		Total
		(in millions)													(in millions)
Allowance for financing receivable losses:	Allowance for financing receivable losses:													Allowance for financing receivable losses:
Balances at beginning of period	Balances at beginning of period	$	143	$	180	$	323	$	67	$	71	$	138	Balances at beginning of period	$	148	$	173	$	321	$	70	$	79	$	149
Adjustment for adoption of accounting standard (a)														Adjustment for adoption of accounting standard (a)	0		0		0		40		71		111
Charge-offs, net of recoveries	Charge-offs, net of recoveries	(13)		(6)		(19)		(18)		(6)		(24)		Charge-offs, net of recoveries	(13)		(2)		(15)		(20)		(9)		(29)
Provision charged to income statement	Provision charged to income statement	12		(9)		3		17		13		30		Provision charged to income statement	4		6		10		54		36		90
Balances at end of period	Balances at end of period	$	142	$	165	$	307	$	66	$	78	$	144	Balances at end of period	$	139	$	177	$	316	$	144	$	177	$	321

____________________

(a) The Company adopted the current expected credit losses standard as of February 1, 2020 using the modified retrospective method, with the cumulative-effect adjustment to the opening balance of stockholders’ equity (deficit) as of the adoption date.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Nine Months Ended
October 30, 2020 November 1, 2019
Revolving Fixed-term Total Revolving Fixed-term Total
(in millions)
Allowance for financing receivable losses:
Balances at beginning of period $ 70 $ 79 $ 149 $ 75 $ 61 $ 136
Adjustment for adoption of accounting standard (Note 1) 40 71 111 0 0 0
Charge-offs, net of recoveries (51) (22) (73) (53) (18) (71)
Provision charged to income statement 83 37 120 44 35 79
Balances at end of period $ 142 $ 165 $ 307 $ 66 $ 78 $ 144

Aging

The following table presents the aging of the Company’s customer financing receivables, gross, including accrued interest, segregated by class, as of the dates indicated:


		October 30, 2020								January 31, 2020									April 30, 2021								January 29, 2021
		Current		Past Due 1 — 90 Days		Past Due >90 Days		Total		Current		Past Due 1 — 90 Days		Past Due >90 Days		Total			Current		Past Due 1 — 90 Days		Past Due >90 Days		Total		Current		Past Due 1 — 90 Days		Past Due >90 Days		Total
		(in millions)																	(in millions)
Revolving — DPA	Revolving — DPA	$	548	$	34	$	10	$	592	$	550	$	51	$	20	$	621	Revolving — DPA	$	549	$	21	$	10	$	580	$	578	$	30	$	13	$	621
Revolving — DBC	Revolving — DBC	159		14		3		176		184		15		4		203		Revolving — DBC	158		11		3		172		157		14		4		175
Fixed-term — Consumer and Commercial	Fixed-term — Consumer and Commercial	8,947		299		67		9,313		8,005		373		108		8,486		Fixed-term — Consumer and Commercial	9,035		346		57		9,438		9,192		316		87		9,595
Total customer receivables, gross	Total customer receivables, gross	$	9,654	$	347	$	80	$	10,081	$	8,739	$	439	$	132	$	9,310	Total customer receivables, gross	$	9,742	$	378	$	70	$	10,190	$	9,927	$	360	$	104	$	10,391

Aging is likely to fluctuate as a result of the variability in volume of large transactions entered into over the period, and the administrative processes that accompany those larger transactions. Aging is also impacted by the timing of the Dell Technologies fiscal period end date, relative to calendar month-end customer payment due dates. As a result of these factors, fluctuations in aging from period to period do not necessarily indicate a material change in the collectibility of the portfolio.

Fixed-term consumer and commercial customer receivables are placed on non-accrual status if principal or interest is past due and considered delinquent, or if there is concern about collectibility of a specific customer receivable. These receivables identified as doubtful for collectibility may be classified as current for aging purposes. Aged revolving portfolio customer receivables identified as delinquent are charged off. Receivables are moved back to accrual status when the collection of interest is probable, or the collection of the net investment is no longer doubtful.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Credit Quality

The following ~~table~~tables presents customer receivables, gross, including accrued interest, by credit quality indicator segregated by class and year of origination, as of the ~~date~~dates indicated:


		October 30, 2020																			April 30, 2021
		Fixed-term — Consumer and Commercial																			Fixed-term — Consumer and Commercial
		Fiscal Year of Origination																			Fiscal Year of Origination
		2021		2020		2019		2018		2017		Years Prior		Revolving — DPA (a)		Revolving — DBC (a)		Total			2022		2021		2020		2019		2018		Years Prior		Revolving — DPA (a)		Revolving — DBC (a)		Total
		(in millions)																			(in millions)
Higher	Higher	$	2,591	$	1,961	$	780	$	191	$	32	$	0	$	158	$	48	$	5,761	Higher	$	1,057	$	2,597	$	1,520	$	486	$	107	$	13	$	153	$	45	$	5,978
Mid	Mid	900		736		351		92		13		0		177		52		2,321		Mid	286		1,000		553		190		45		4		176		51		2,305
Lower	Lower	723		572		303		53		14		1		257		76		1,999		Lower	238		728		419		163		27		5		251		76		1,907
Total	Total	$	4,214	$	3,269	$	1,434	$	336	$	59	$	1	$	592	$	176	$	10,081	Total	$	1,581	$	4,325	$	2,492	$	839	$	179	$	22	$	580	$	172	$	10,190


	January 29, 2021
	Fixed-term — Consumer and Commercial
	Fiscal Year of Origination
	2021		2020		2019		2018		2017		Years Prior		Revolving — DPA (a)		Revolving — DBC (a)		Total
	(in millions)
Higher	$	3,125	$	1,802	$	661	$	166	$	26	$	0	$	172	$	47	$	5,999
Mid	1,121		671		287		73		9		0		188		52		2,401
Lower	865		499		243		38		9		0		261		76		1,991
Total	$	5,111	$	2,972	$	1,191	$	277	$	44	$	0	$	621	$	175	$	10,391

____________________

(a) The revolving portfolio is exempt from the requirement to disclose the amortized cost basis by year of origination since determining the appropriate origination year can be complex due to the nature of the revolving portfolio.

The following table presents customer receivables, gross, including accrued interest, by credit quality indicator segregated by class, as of the date indicated, and was not recast to reflect the impact of adoption of the new CECL standard:

January 31, 2020
Fixed-term — Consumer and Commercial Revolving — DPA Revolving — DBC Total
(in millions)
Higher $ 5,042 $ 137 $ 55 $ 5,234
Mid 2,036 175 63 2,274
Lower 1,408 309 85 1,802
Total $ 8,486 $ 621 $ 203 $ 9,310

The categories shown in the tables above segregate customer receivables based on the relative degrees of credit risk. The credit quality indicators for DPA revolving accounts are measured primarily as of each quarter-end date, while all other indicators are generally updated on a periodic basis.

For DPA revolving receivables shown in the table above, the Company makes credit decisions based on proprietary scorecards, which include the customer’s credit history, payment history, credit usage, and other credit agency-related elements. The higher quality category includes prime accounts generally of a higher credit quality that are comparable to U.S. customer FICO scores of 720 or above. The mid-category represents the mid-tier accounts that are comparable to U.S. customer FICO scores from 660 to 719. The lower category is generally sub-prime and represents lower credit quality accounts that are comparable to U.S. customer FICO scores below 660. For the DBC revolving receivables and fixed-term commercial receivables shown in the table above, an internal grading system is utilized that assigns a credit level score based on a number of considerations, including liquidity, operating performance, and industry outlook. The grading criteria and classifications for the fixed-term products differ from those for the revolving products as loss experience varies between these product and customer groups. The credit quality categories cannot be compared between the different classes as loss experience varies substantially between the classes.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Leases

Interest income on sales-type lease receivables was ~~$69~~$64 million and ~~$66~~$65 million for the three months ended ~~October~~April 30, ~~2020~~2021 and ~~November~~May 1, ~~2019, respectively, and $200 million and $196 million for the nine months ended October 30,~~ 2020, ~~and November 1, 2019,~~ respectively.

The following table presents the net revenue, cost of net revenue, and gross margin recognized at the commencement date of sales-type leases for the periods indicated:


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019			April 30, 2021		May 1, 2020
		(in millions)									(in millions)
Net revenue — products	Net revenue — products	$	184	$	251	$	648	$	604	Net revenue — products	$	230	$	215
Cost of net revenue — products	Cost of net revenue — products	102		215		435		475		Cost of net revenue — products	163		159
Gross margin — products	Gross margin — products	$	82	$	36	$	213	$	129	Gross margin — products	$	67	$	56

The following table presents the future maturity of the Company’s fixed-term customer leases and associated financing payments, and reconciles the undiscounted cash flows to the customer receivables, gross recognized on the Condensed Consolidated Statements of Financial Position as of the date indicated:


	~~October~~April 30, ~~2020~~2021
~~Fiscal Years~~	(in millions)
Fiscal ~~2021~~2022 (remaining ~~three~~nine months)	$	~~794~~
~~Fiscal 2022~~	~~2,378~~2,232
Fiscal 2023	~~1,533~~1,819
Fiscal 2024	~~783~~1,086
Fiscal 2025	429
Fiscal 2026 and beyond	~~360~~141
Total undiscounted cash flows	~~5,848~~5,707
Fixed-term loans	~~4,125~~4,399
Revolving loans	~~768~~752
Less: unearned income	~~(660)~~(668)
Total customer receivables, gross	$	~~10,081~~10,190

Operating Leases

The following table presents the components of the Company’s operating lease portfolio included in Property, plant, and equipment, net as of the dates indicated:


		October 30, 2020		January 31, 2020			April 30, 2021		January 29, 2021
		(in millions)					(in millions)
Equipment under operating lease, gross	Equipment under operating lease, gross	$	1,592	$	956	Equipment under operating lease, gross	$	1,921	$	1,746
Less: accumulated depreciation	Less: accumulated depreciation	(328)		(116)		Less: accumulated depreciation	(541)		(432)
Equipment under operating lease, net	Equipment under operating lease, net	$	1,264	$	840	Equipment under operating lease, net	$	1,380	$	1,314

Operating lease income relating to lease payments was ~~$120~~$156 million and ~~$63~~$87 million for the three months ended ~~October~~April 30, ~~2020~~2021 and ~~November~~May 1, ~~2019, respectively, and $310 million and $94 million for the nine months ended October 30,~~ 2020, ~~and November 1, 2019,~~ respectively. Depreciation expense was ~~$92~~$116 million and ~~$40~~$62 million for the three months ended ~~October~~April 30, ~~2020~~2021 and ~~November~~May 1, ~~2019, respectively, and $228 million and $64 million for the nine months ended October 30,~~ 2020, ~~and November 1, 2019,~~ respectively.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table presents the future payments to be received by the Company as lessor in operating lease contracts as of the date indicated:


	~~October~~April 30, ~~2020~~2021
~~Fiscal Years~~	(in millions)
Fiscal ~~2021~~2022 (remaining ~~three~~nine months)	$	~~142~~
~~Fiscal 2022~~	~~526~~525
Fiscal 2023	~~404~~516
Fiscal 2024	~~146~~261
Fiscal 2025	59
Fiscal 2026 and beyond	249
Total	$	~~1,242~~1,370

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

DFS Debt

The Company maintains programs that facilitate the funding of leases, loans, and other alternative payment structures in the capital markets. The majority of DFS debt is non-recourse to Dell Technologies and represents borrowings under securitization programs and structured financing programs, for which the Company’s risk of loss is limited to transferred loan and lease payments and associated equipment. The following table presents DFS debt as of the dates indicated. The table excludes the allocated portion of the Company’s other borrowings, which represents the additional amount considered to fund the DFS business.


		October 30, 2020		January 31, 2020			April 30, 2021		January 29, 2021
		(in millions)					(in millions)
DFS U.S. debt:	DFS U.S. debt:					DFS U.S. debt:
Asset-based financing and securitization facilities	Asset-based financing and securitization facilities	$	2,574	$	2,606	Asset-based financing and securitization facilities	$	2,674	$	3,311
Fixed-term securitization offerings	Fixed-term securitization offerings	3,465		2,593		Fixed-term securitization offerings	3,548		2,961
Other	Other	94		141		Other	198		140
Total DFS U.S. debt	Total DFS U.S. debt	6,133		5,340		Total DFS U.S. debt	6,420		6,412
DFS international debt:	DFS international debt:					DFS international debt:
Securitization facility	Securitization facility	860		743		Securitization facility	784		786
Other borrowings	Other borrowings	791		931		Other borrowings	1,087		1,006
Note payable	Note payable	250		200		Note payable	250		250
Dell Bank Senior Unsecured Eurobonds	Dell Bank Senior Unsecured Eurobonds	1,167		551		Dell Bank Senior Unsecured Eurobonds	1,212		1,212
Total DFS international debt	Total DFS international debt	3,068		2,425		Total DFS international debt	3,333		3,254
Total DFS debt	Total DFS debt	$	9,201	$	7,765	Total DFS debt	$	9,753	$	9,666
Total short-term DFS debt	Total short-term DFS debt	$	4,884	$	4,152	Total short-term DFS debt	$	4,673	$	4,888
Total long-term DFS debt	Total long-term DFS debt	$	4,317	$	3,613	Total long-term DFS debt	$	5,080	$	4,778

DFS U.S. Debt

Asset-Based Financing and Securitization Facilities — The Company maintains separate asset-based financing facilities and a securitization facility in the United States, which are revolving facilities for fixed-term leases and loans and for revolving loans, respectively. This debt is collateralized solely by the U.S. loan and lease payments and associated equipment in the facilities. The debt has a variable interest rate and the duration of the debt is based on the terms of the underlying loan and lease payment streams. As of ~~October~~April 30, ~~2020,~~2021, the total debt capacity related to the U.S. asset-based financing and securitization facilities was $4.1 billion. The Company enters into interest swap agreements to effectively convert a portion of this debt from a floating rate to a fixed rate. See Note 76 of the Notes to the Condensed Consolidated Financial Statements for additional information about interest rate swaps.

The Company’s U.S. securitization facility for revolving loans is effective through June 25, 2022. The Company’s two U.S. asset-based financing facilities for fixed-term leases and loans are effective through August 22, 2021 and July 26, 2022, respectively.

The asset-based financing and securitization facilities contain standard structural features related to the performance of the funded receivables, which include defined credit losses, delinquencies, average credit scores, and minimum collection requirements. In the event one or more of these criteria are not met and the Company is unable to restructure the facility, no further funding of receivables will be permitted and the timing of the Company’s expected cash flows from over-collateralization will be delayed. As of ~~October~~April 30, ~~2020,~~2021, these criteria were met.

Fixed-Term Securitization Offerings — The Company periodically issues asset-backed debt securities under fixed-term securitization programs to private investors. The asset-backed debt securities are collateralized solely by the U.S. fixed-term leases and loans in the offerings, which are held by Special Purpose Entities (“SPEs”), as discussed below. The interest rate on these securities is fixed and ranges from ~~0.31%~~0.21% to 5.92% per annum, and the duration of these securities is based on the terms of the underlying loan and lease payment streams.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

DFS International Debt

Securitization Facility — The Company maintains a securitization facility in Europe for fixed-term leases and loans. This facility is effective through December 21, ~~2020~~2022 and has a total debt capacity of ~~$934~~$970 million as of ~~October~~April 30, ~~2020.~~2021.

The securitization facility contains standard structural features related to the performance of the securitized receivables, which include defined credit losses, delinquencies, average credit scores, and minimum collection requirements. In the event one or more of these criteria are not met and the Company is unable to restructure the program, no further funding of receivables will be permitted and the timing of the Company’s expected cash flows from over-collateralization will be delayed. As of ~~October~~April 30, ~~2020,~~2021, these criteria were met.

Other Borrowings — In connection with the Company’s international financing operations, the Company has entered into revolving structured financing debt programs related to its fixed-term lease and loan products sold in Canada, Europe, Australia, and New Zealand. The Canadian facility, which is collateralized solely by Canadian loan and lease payments and associated equipment, had a total debt capacity of ~~$281~~$366 million as of ~~October~~April 30, ~~2020,~~2021, and is effective through January 16, ~~2023.~~2025. The European facility, which is collateralized solely by European loan and lease payments and associated equipment, had a total debt capacity of ~~$700~~ $727 million as of ~~October~~April 30, ~~2020,~~2021, and is effective through June 14, 2022. The Australia and New Zealand facility, which is collateralized solely by Australia and New Zealand loan and lease payments and associated equipment, had a total debt capacity of ~~$246~~$349 million as of ~~October~~April 30, ~~2020,~~2021, and is effective through ~~December~~April 20, ~~2021.~~2023.

Note Payable — On November 27, 2017 the Company entered into an unsecured credit agreement to fund receivables in Mexico. As of July 31, 2020, the aggregate principal amount of the note payable was $187 million. This note was repaid in full during the three months ended October 30, 2020.

On August 7, 2020, the Company entered into 2 new unsecured credit agreements to fund receivables in Mexico. As of ~~October~~April 30, ~~2020,~~2021, the aggregate principal amount of the notes payable was $250 million. The notes bear interest at an annual rate of 3.37% and will mature on June 1, 2022.

Dell Bank Senior Unsecured Eurobonds — On October 17, 2019, Dell Bank International D.A.C. issued 500 million Euro of 0.625% senior unsecured three year eurobonds due October 2022. On June 24, 2020, Dell Bank International D.A.C. issued an additional 500 million Euro of 1.625% senior unsecured four year eurobonds due June 2024. The issuances of the senior unsecured eurobonds support the expansion of the financing operations in Europe.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Variable Interest Entities

In connection with the asset-based financing facilities, securitization facilities, and fixed-term securitization offerings discussed above, the Company transfers certain U.S. and European loan and lease payments and associated equipment to SPEs that meet the definition of a Variable Interest Entity (“VIE”) and are consolidated, along with the associated debt detailed above, into the Condensed Consolidated Financial Statements, as the Company is the primary beneficiary of those VIEs. The SPEs are bankruptcy-remote legal entities with separate assets and liabilities. The purpose of the SPEs is to facilitate the funding of customer loan and lease payments and associated equipment in the capital markets.

~~The following table presents financing receivables and equipment under operating leases, net held by the consolidated VIEs as of the dates indicated:~~

October 30, 2020 January 31, 2020
(in millions)
Assets held by consolidated VIEs, net:
Short-term, net $ 3,430 $ 3,316
Long-term, net 4,070 3,348
Assets held by consolidated VIEs, net $ 7,500 $ 6,664

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

Loan and lease payments and associated equipment transferred via securitization through SPEs were $1.6 billion and $1.3 billion for the three months ended October 30, 2020 and November 1, 2019, respectively, and $4.6 billion and $4.1 billion for the nine months ended October 30, 2020 and November 1, 2019, respectively.

Some of the SPEs have entered into financing arrangements with multi-seller conduits that, in turn, issue asset-backed debt securities in the capital markets. ~~The~~ DFS debt outstanding ~~which~~held by the consolidated VIEs is collateralized by the loan and lease payments and associated ~~equipment held by the consolidated VIEs, was $6.9 billion and $5.9 billion as of October 30, 2020 and January 31, 2020, respectively.~~equipment. The Company’s risk of loss related to securitized receivables is limited to the amount by which the Company’s right to receive collections for assets securitized exceeds the amount required to pay interest, principal, and fees and expenses related to the asset-backed securities. The Company provides credit enhancement to the ~~securitizations~~securitization in the form of over-collateralization.

The following table presents financing receivables and equipment under operating leases, net held by the consolidated VIEs as of the dates indicated:


	April 30, 2021		January 29, 2021
	(in millions)
Assets held by consolidated VIEs
Other current assets	$	874	$	838
Financing receivables, net of allowance
Short-term	$	3,478	$	3,534
Long-term	$	3,267	$	3,314
Property, plant, and equipment, net	$	827	$	792
Liabilities held by consolidated VIEs
Debt, net of unamortized debt issuance costs
Short-term	$	4,055	$	4,208
Long-term	$	2,938	$	2,841

Loan and lease payments and associated equipment transferred via securitization through SPEs were $1.4 billion and $1.8 billion for the three months ended April 30, 2021 and May 1, 2020, respectively.

Customer Receivables Sales

To manage certain concentrations of customer credit exposure, the Company may sell selected fixed-term customer receivables to unrelated third parties on a periodic basis, without recourse. The amount of customer receivables sold for this purpose was ~~$414~~$101 million and ~~$406~~$21 million for the ~~nine~~three months ended ~~October~~April 30, ~~2020~~2021 and ~~November~~May 1, ~~2019,~~2020, respectively. The Company’s continuing involvement in ~~the above mentioned~~such customer receivables is primarily limited to servicing arrangements.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 54 — LEASES

The Company enters into leasing transactions in which the Company is the lessee. These lease contracts are typically classified as operating leases. The Company’s lease contracts are generally for office buildings used to conduct its business, and the determination of whether such contracts contain leases generally does not require significant estimates or judgments. The Company also leases certain global logistics warehouses, employee vehicles, and equipment. As of ~~October~~April 30, ~~2020,~~2021, the remaining terms of the Company’s leases range from less than one month to 26approximately 25 years.

The Company also enters into leasing transactions in which the Company is the lessor, primarily through customer financing arrangements offered through DFS. DFS originates leases that are primarily classified as either sales-type leases or operating leases. See Note 43 of the Notes to the Condensed Consolidated Financial Statements for more information on the DFS lease portfolio and related lease disclosures.

In adopting the current lease accounting standard effective February 2, 2019, the Company elected to apply a transition method that does not require the retrospective application to periods prior to the effective date. Financial information associated with the Company’s leases in which the Company is the lessee is contained in this Note. As of ~~October~~both April 30, ~~2020~~2021 and January ~~31, 2020,~~29, 2021, there were no material finance leases for which the Company was a lessee.

The following table presents components of lease costs included in the Condensed Consolidated Statements of Income ~~(Loss)~~ for the periods indicated:


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019			April 30, 2021		May 1, 2020
		(in millions)									(in millions)
Operating lease costs	Operating lease costs	$	129	$	134	$	384	$	377	Operating lease costs	$	142	$	131
Variable costs	Variable costs	37		41		113		120		Variable costs	33		44
Total lease costs	Total lease costs	$	166	$	175	$	497	$	497	Total lease costs	$	175	$	175

During both the ~~nine~~three months ended ~~October~~April 30, ~~2020~~2021 and ~~November~~May 1, ~~2019,~~2020, sublease income, finance lease costs, and short-term lease costs were immaterial.

The following table presents supplemental information related to operating leases included in the Condensed Consolidated Statements of Financial Position as of the dates indicated:


		Classification	October 30, 2020			January 31, 2020					Classification	April 30, 2021			January 29, 2021
			(in millions, except for term and discount rate)						(in millions, except for term and discount rate)
Operating lease right of use (“ROU”) assets		Other non-current assets	$	2,179		$	1,780
Operating lease ROU assets										Operating lease ROU assets	Other non-current assets	$	2,088		$	2,117

Current operating lease liabilities	Current operating lease liabilities	Accrued and other current liabilities	$	424		$	432			Current operating lease liabilities	Accrued and other current liabilities	$	440		$	436
Non-current operating lease liabilities	Non-current operating lease liabilities	Other non-current liabilities	1,829			1,360				Non-current operating lease liabilities	Other non-current liabilities	1,791			1,787
Total operating lease liabilities	Total operating lease liabilities		$	2,253		$	1,792			Total operating lease liabilities		$	2,231		$	2,223

Weighted-average remaining lease term (in years)	Weighted-average remaining lease term (in years)		8.85			8.57				Weighted-average remaining lease term (in years)		8.76			8.85
Weighted-average discount rate	Weighted-average discount rate		3.56		%	3.81		%		Weighted-average discount rate		3.40		%	3.47		%

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table presents supplemental cash flow information related to leases for the periods indicated:


		Nine Months Ended					Three Months Ended
		October 30, 2020		November 1, 2019			April 30, 2021		May 1, 2020
		(in millions)					(in millions)
Cash paid for amounts included in the measurement of lease liabilities — operating cash outflows from operating leases	Cash paid for amounts included in the measurement of lease liabilities — operating cash outflows from operating leases	$	384	$	367	Cash paid for amounts included in the measurement of lease liabilities — operating cash outflows from operating leases	$	134	$	131

ROU assets obtained in exchange for new operating lease liabilities	ROU assets obtained in exchange for new operating lease liabilities	$	763	$	495	ROU assets obtained in exchange for new operating lease liabilities	$	117	$	120

The following table presents the future ~~maturity~~maturities of the Company’s operating lease liabilities under non-cancelable leases and reconciles the undiscounted cash flows for these leases to the lease liability recognized on the Condensed Consolidated Statements of Financial Position as of the date indicated:


	~~October~~April 30, ~~2020~~2021
~~Fiscal Years~~	(in millions)
Fiscal ~~2021~~2022 (remaining ~~three~~nine months)	$	~~110~~
~~Fiscal 2022~~	~~476~~351
Fiscal 2023	~~429~~469
Fiscal 2024	~~317~~347
Fiscal 2025	~~237~~260
Fiscal 2026	211
Thereafter	~~1,131~~1,010
Total lease payments	~~2,700~~2,648
Less: Imputed interest	~~(447)~~(417)
Total	$	~~2,253~~2,231
Current operating lease liabilities	$	~~424~~440
Non-current operating lease liabilities	$	~~1,829~~1,791

Future lease commitments after Fiscal ~~2025~~2026 include the ground lease on VMware, Inc.’s Palo Alto, California ~~headquarter~~headquarters facilities, which expires in Fiscal 2047.

As of ~~October~~April 30, ~~2020,~~2021, the Company has additional operating leases that have not yet commenced of ~~$81~~$97 million. These operating leases will commence during Fiscal ~~2021~~2022 with lease terms of one year to 10 years.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 65 — DEBT

The following table presents the Company’s outstanding debt as of the dates indicated:


		October 30, 2020		January 31, 2020			April 30, 2021		January 29, 2021
		(in millions)					(in millions)
Secured Debt	Secured Debt					Secured Debt
Senior Secured Credit Facilities:	Senior Secured Credit Facilities:					Senior Secured Credit Facilities:

2.75% Term Loan B-1 Facility due September 2025		$	4,691	$	4,738

1.90% Term Loan A-4 Facility due December 2023		679		679

2.00% Term Loan B-2 Facility due September 2025						2.00% Term Loan B-2 Facility due September 2025	$	3,135	$	3,143
1.90% Term Loan A-6 Facility due March 2024	1.90% Term Loan A-6 Facility due March 2024	3,316		3,497		1.90% Term Loan A-6 Facility due March 2024	3,134		3,134
First Lien Notes:	First Lien Notes:					First Lien Notes:

4.42% due June 2021		0		4,500
5.45% due June 2023	5.45% due June 2023	3,750		3,750		5.45% due June 2023	3,750		3,750
4.00% due July 2024	4.00% due July 2024	1,000		1,000		4.00% due July 2024	1,000		1,000
5.85% due July 2025	5.85% due July 2025	1,000		0		5.85% due July 2025	1,000		1,000
6.02% due June 2026	6.02% due June 2026	4,500		4,500		6.02% due June 2026	4,500		4,500
4.90% due October 2026	4.90% due October 2026	1,750		1,750		4.90% due October 2026	1,750		1,750
6.10% due July 2027	6.10% due July 2027	500		0		6.10% due July 2027	500		500
5.30% due October 2029	5.30% due October 2029	1,750		1,750		5.30% due October 2029	1,750		1,750
6.20% due July 2030	6.20% due July 2030	750		0		6.20% due July 2030	750		750
8.10% due July 2036	8.10% due July 2036	1,500		1,500		8.10% due July 2036	1,500		1,500
8.35% due July 2046	8.35% due July 2046	2,000		2,000		8.35% due July 2046	2,000		2,000
Unsecured Debt	Unsecured Debt					Unsecured Debt
Unsecured Notes and Debentures:	Unsecured Notes and Debentures:					Unsecured Notes and Debentures:

4.625% due April 2021	4.625% due April 2021	400		400		4.625% due April 2021	0		400
7.10% due April 2028	7.10% due April 2028	300		300		7.10% due April 2028	300		300
6.50% due April 2038	6.50% due April 2038	388		388		6.50% due April 2038	388		388
5.40% due September 2040	5.40% due September 2040	264		264		5.40% due September 2040	264		264
Senior Notes:	Senior Notes:					Senior Notes:
5.875% due June 2021	5.875% due June 2021	1,075		1,075		5.875% due June 2021	0		1,075
7.125% due June 2024	7.125% due June 2024	1,625		1,625		7.125% due June 2024	1,625		1,625
EMC Notes:	EMC Notes:					EMC Notes:
2.650% due June 2020		0		600
3.375% due June 2023	3.375% due June 2023	1,000		1,000		3.375% due June 2023	1,000		1,000
Debt of Public Subsidiary	Debt of Public Subsidiary					Debt of Public Subsidiary
VMware Notes:	VMware Notes:					VMware Notes:
2.30% due August 2020		0		1,250
2.95% due August 2022	2.95% due August 2022	1,500		1,500		2.95% due August 2022	1,500		1,500
4.50% due May 2025	4.50% due May 2025	750		0		4.50% due May 2025	750		750
4.65% due May 2027	4.65% due May 2027	500		0		4.65% due May 2027	500		500
3.90% due August 2027	3.90% due August 2027	1,250		1,250		3.90% due August 2027	1,250		1,250
4.70% due May 2030	4.70% due May 2030	750		0		4.70% due May 2030	750		750
VMware Term Loan Facility		0		1,500
DFS Debt (Note 4)		9,201		7,765
DFS Debt (Note 3)						DFS Debt (Note 3)	9,753		9,666
Other	Other					Other
2.46% Margin Loan Facility due April 2022	2.46% Margin Loan Facility due April 2022	4,000		4,000		2.46% Margin Loan Facility due April 2022	4,000		4,000
Other	Other	222		84		Other	304		235
Total debt, principal amount	Total debt, principal amount	$	50,411	$	52,665	Total debt, principal amount	$	47,153	$	48,480

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)


		October 30, 2020		January 31, 2020			April 30, 2021		January 29, 2021
		(in millions)					(in millions)
Total debt, principal amount	Total debt, principal amount	$	50,411	$	52,665	Total debt, principal amount	$	47,153	$	48,480
Unamortized discount, net of unamortized premium	Unamortized discount, net of unamortized premium	(217)		(241)		Unamortized discount, net of unamortized premium	(185)		(194)
Debt issuance costs	Debt issuance costs	(333)		(368)		Debt issuance costs	(285)		(302)
Total debt, carrying value	Total debt, carrying value	$	49,861	$	52,056	Total debt, carrying value	$	46,683	$	47,984
Total short-term debt, carrying value	Total short-term debt, carrying value	$	6,536	$	7,737	Total short-term debt, carrying value	$	8,748	$	6,362
Total long-term debt, carrying value	Total long-term debt, carrying value	$	43,325	$	44,319	Total long-term debt, carrying value	$	37,935	$	41,622

During the ~~nine~~three months ended ~~October~~April 30, ~~2020,~~2021, the net decrease in the Company’s debt balance was primarily due to:

•~~retirement~~repayment of ~~$4.5 billion~~$1,075 million principal amount of ~~4.42% First Lien~~the 5.875% Senior Notes due June ~~2021 via repayment of $4,265 million~~2021; and ~~open market repurchases of $235 million;~~

•repayment of ~~$1.5 billion principal amount of VMware Term Loan Facility upon maturity;~~

•~~repayment of $1.25 billion principal amount of 2.30% VMware Notes due August 2020;~~

•~~repayment of $600~~$400 million principal amount of ~~2.650% EMC~~the 4.625% Unsecured Notes due ~~June 2020 upon maturity; and~~

•~~amortization of approximately $229 million of principal under the Company’s term loan facilities.~~April 2021.

~~These decreases in the Company’s debt balance were partially offset by:~~

•~~issuance of $2.25 billion principal amount of First Lien Notes on April 9, 2020, described below;~~

•~~issuance of $2.0 billion principal amount of VMware Notes on April 7, 2020, described below; and~~

•~~incurrence of an additional $1.4 billion, net, in DFS debt to support the expansion of its financing receivables portfolio.~~

~~Secured~~DFS Debt


	April 30, 2021		January 29, 2021
	(in millions)
DFS U.S. debt:
Asset-based financing and securitization facilities	$	2,674	$	3,311
Fixed-term securitization offerings	3,548		2,961
Other	198		140
Total DFS U.S. debt	6,420		6,412
DFS international debt:
Securitization facility	784		786
Other borrowings	1,087		1,006
Note payable	250		250
Dell Bank Senior Unsecured Eurobonds	1,212		1,212
Total DFS international debt	3,333		3,254
Total DFS debt	$	9,753	$	9,666
Total short-term DFS debt	$	4,673	$	4,888
Total long-term DFS debt	$	5,080	$	4,778

~~Senior Secured Credit~~

DFS U.S. Debt

Asset-Based Financing and Securitization Facilities — The Company ~~has entered into a credit agreement that provides for senior secured credit facilities (the “Senior Secured Credit Facilities”) comprising (a) term loan~~maintains separate asset-based financing facilities and ~~(b)~~ a ~~senior secured Revolving Credit Facility,~~securitization facility in the United States, which ~~provides~~are revolving facilities for ~~a borrowing capacity of up to $4.5 billion for general corporate purposes, including capacity for up to $0.5 billion of letters of credit~~fixed-term leases and loans and for ~~borrowings of up to $0.4 billion under swing-line loans.~~

~~As of October 30, 2020, available borrowings under~~revolving loans, respectively. This debt is collateralized solely by the ~~Revolving Credit Facility totaled $4.5 billion.~~U.S. loan and lease payments and associated equipment in the facilities. The ~~Senior Secured Credit Facilities provide that the borrowers have the right at any time, subject to customary conditions, to request incremental term loans or incremental revolving commitments.~~

~~Borrowings under the Senior Secured Credit Facilities bear~~debt has a variable interest ~~at a~~ rate per annum equal to an applicable margin, plus, at the borrowers’ option, either (a) a base rate, or (b) the London Interbank Offered Rate (“LIBOR”). The Term Loan B-1 Facility bears interest at LIBOR plus an applicable margin of 2.00% or a base rate plus an applicable margin of 1.00%. The Term Loan A-4 Facility and the ~~Term Loan A-6 Facility bear interest at LIBOR plus an applicable margin ranging from 1.25% to 2.00% or a base rate plus an applicable margin ranging from 0.25% to 1.00%. Interest~~duration of the debt is ~~payable, in the case of loans bearing interest based on LIBOR, at the end of each interest period (but at least every three months), in arrears and, in the case of loans bearing interest~~ based on the ~~base~~terms of the underlying loan and lease payment streams. As of April 30, 2021, the total debt capacity related to the U.S. asset-based financing and securitization facilities was $4.1 billion. The Company enters into interest swap agreements to effectively convert a portion of this debt from a floating rate ~~quarterly in arrears.~~to a fixed rate. See Note 6 of the Notes to the Condensed Consolidated Financial Statements for additional information about interest rate swaps.

The ~~Term Loan B-1 Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1% of the original principal amount.~~Company’s U.S. securitization facility for revolving loans is effective through June 25, 2022. The Term Loan A-4 Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 5% of the original principal amount in each of the first four years after the facility closing date of December 20, 2018,Company’s two U.S. asset-based financing facilities for fixed-term leases and 80% of the original principal amount in the fifth year after December 20, 2018. The Term Loan A-6 Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 5% of the original principal amount in each of the first four years after the facility closing date of March 13, 2019,loans are effective through August 22, 2021 and ~~80% of the original principal amount in the fifth year after March 13, 2019. The Revolving Credit Facility has no amortization.~~July 26, 2022, respectively.

The ~~borrowers may voluntarily repay outstanding loans under~~asset-based financing and securitization facilities contain standard structural features related to the ~~term loan facilities~~performance of the funded receivables, which include defined credit losses, delinquencies, average credit scores, and minimum collection requirements. In the event one or more of these criteria are not met and the ~~Revolving Credit Facility at any time without premium or penalty, other than customary “breakage” costs.~~Company is unable to restructure the facility, no further funding of receivables will be permitted and the timing of the Company’s expected cash flows from over-collateralization will be delayed. As of April 30, 2021, these criteria were met.

Fixed-Term Securitization Offerings —The Company periodically issues asset-backed debt securities under fixed-term securitization programs to private investors. The asset-backed debt securities are collateralized solely by the U.S. fixed-term leases and loans in the offerings, which are held by Special Purpose Entities (“SPEs”), as discussed below. The interest rate on these securities is fixed and ranges from 0.21% to 5.92% per annum, and the duration of these securities is based on the terms of the underlying loan and lease payment streams.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All obligations of the borrowers under the Senior Secured Credit Facilities and certain swap agreements, cash management arrangements, and certain letters of credit provided by any lender or agent party to the Senior Secured Credit Facilities or any of its affiliates and certain other persons are secured by (a) a first-priority security interest in certain tangible and intangible assets of the borrowers and the guarantors and (b) a first-priority pledge of 100% of the capital stock of the borrowers, Dell Inc., a wholly-owned subsidiary of the Company (“~~Dell~~”~~), and each wholly-owned material restricted subsidiary of the borrowers and the guarantors, in each case subject to certain thresholds, exceptions, and permitted liens.~~DFS International Debt

~~First Lien Notes~~Securitization Facility — ~~Dell International L.L.C.~~The Company maintains a securitization facility in Europe for fixed-term leases and ~~EMC Corporation, both~~loans. This facility is effective through December 21, 2022 and has a total debt capacity of ~~which are wholly-owned subsidiaries~~$970 million as of ~~Dell Technologies Inc., completed private offerings of multiple series of senior secured notes (collectively, the “First Lien Notes”) which were issued on June 1, 2016, March 20, 2019, and~~ April 9, 2020 in aggregate principal amounts of $20.0 billion, $4.5 billion, and $2.25 billion, respectively. Interest on the First Lien Notes is payable semiannually. The First Lien Notes are secured on a pari passu basis with the Senior Secured Credit Facilities, on a first-priority basis by substantially all of the tangible and intangible assets of the issuers and guarantors that secure obligations under the Senior Secured Credit Facilities, including pledges of all capital stock of the issuers, Dell, and certain wholly-owned material subsidiaries of the issuers and the guarantors, subject to certain exceptions.30, 2021.

The ~~Company has agreed to use commercially reasonable efforts to register with the SEC notes having terms substantially identical~~securitization facility contains standard structural features related to the ~~terms~~performance of the ~~First Lien Notes as part~~securitized receivables, which include defined credit losses, delinquencies, average credit scores, and minimum collection requirements. In the event one or more of ~~an offer~~these criteria are not met and the Company is unable to ~~exchange such registered notes for~~restructure the ~~First Lien Notes. The Company~~program, no further funding of receivables will be ~~obligated to pay additional interest on~~permitted and the ~~First Lien Notes if it fails to consummate such an exchange offer within five years after the closing date~~timing of the ~~EMC merger transaction, in the case~~Company’s expected cash flows from over-collateralization will be delayed. As of ~~the First Lien Notes issued on June 1, 2016, and within five years after their respective issue dates, in the case of the First Lien Notes issued on March 20, 2019 and~~ April ~~9, 2020.~~30, 2021, these criteria were met.

~~China Revolving Credit Facility~~Other Borrowings — ~~— The~~In connection with the Company’s international financing operations, the Company has entered into revolving structured financing debt programs related to its fixed-term lease and loan products sold in Canada, Europe, Australia, and New Zealand. The Canadian facility, which is collateralized solely by Canadian loan and lease payments and associated equipment, had a ~~new revolving credit~~total debt capacity of $366 million as of April 30, 2021, and is effective through January 16, 2025. The European facility, ~~for China (the “China Revolving Credit Facility”)~~which is collateralized solely by European loan and lease payments and associated equipment, had a total debt capacity of $727 million as of April 30, 2021, and is effective ~~May 25, 2020.~~through June 14, 2022. The ~~new terms provide for~~Australia and New Zealand facility, which is collateralized solely by Australia and ~~non-collateralized principal amounts not to exceed $1.0 billion Chinese renminbi~~New Zealand loan and ~~$1.8 billion Chinese renminbi, respectively, or equivalent amounts in U.S. dollars. Outstanding borrowings under the collateralized portion~~lease payments and associated equipment, had a total debt capacity of the China Revolving Credit Facility bear interest at the loan prime rate (“LPR”) less 0.2%, for borrowings denominated in Chinese renminbi, or LIBOR plus 1.0%, for borrowings denominated in U.S. dollars,$349 million as of April 30, 2021, and outstanding borrowings under the non-collateralized portion bear interest at LPR less 0.2%, for borrowings denominated in Chinese renminbi, or LIBOR plus 1.4%, for borrowings denominated in U.S. dollars. The new facility expired on August 30, 2020.

During the fiscal year ended January 31, 2020, the Company renewed the credit agreement for its legacy China revolving credit facility with a bank lender, which provided an uncommitted line with an aggregate principal amount not to exceed $500 million at an interest rate of LIBOR plus 0.6% per annum. The facility was terminated upon expiration on February 26, 2020.

~~Unsecured Debt~~

~~Unsecured Notes and Debentures~~ — The Company has outstanding unsecured notes and debentures (collectively, the “Unsecured Notes and Debentures”) that were issued by Dell prior to the acquisition of Dell by Dell Technologies Inc. in the going-private transaction that closed in October 2013. Interest on these borrowings is ~~payable semiannually.~~effective through April 20, 2023.

~~Senior Notes~~Note Payable — ~~The senior~~On August 7, 2020, the Company entered into 2 new unsecured ~~notes (collectively,~~credit agreements to fund receivables in Mexico. As of April 30, 2021, the ~~“Senior Notes”) were issued on June 22, 2016 in an~~ aggregate principal amount of ~~$3.25 billion. Interest~~the notes payable was $250 million. The notes bear interest at an annual rate of 3.37% and will mature on ~~these borrowings is payable semiannually.~~June 1, 2022.

~~EMC Notes~~Dell Bank Senior Unsecured Eurobonds — — On ~~September 7, 2016, EMC had outstanding $2.5 billion aggregate principal amount~~October 17, 2019, Dell Bank International D.A.C. issued 500 million Euro of ~~its 1.875% Notes~~0.625% senior unsecured three year eurobonds due October 2022. On June 24, 2020, Dell Bank International D.A.C. issued an additional 500 million Euro of 1.625% senior unsecured four year eurobonds due June 2018, which the Company fully repaid during the three months ended August 3, 2018, $2.0 billion aggregate principal amount of its 2.650% Notes due June 2020, and $1.0 billion aggregate principal amount of its 3.375% Notes due June 2023 (collectively, the “EMC Notes”). Interest on these borrowings is payable semiannually.

~~VMware Notes~~ — VMware, Inc. completed public offerings of unsecured senior notes in the aggregate amounts of $4.0 billion and $2.0 billion on August 21, 2017 and April 7, 2020, respectively (the “VMware Notes”). None2024. The issuances of the ~~net proceeds of such borrowings will be made available to~~senior unsecured eurobonds support the expansion of the financing operations or satisfy any corporate purposes of Dell Technologies, other than the operations and corporate purposes of VMware, Inc. and VMware, Inc.’s subsidiaries. Interest on these borrowings is payable semiannually.

in Europe.

3324

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Variable Interest Entities

~~VMware Revolving Credit Facility~~

~~— On September 12, 2017, VMware, Inc.~~

Some of the SPEs have entered into ~~an unsecured~~financing arrangements with multi-seller conduits that, in turn, issue asset-backed debt securities in the capital markets. DFS debt outstanding held by the consolidated VIEs is collateralized by the loan and lease payments and associated equipment. The Company’s risk of loss related to securitized receivables is limited to the amount by which the Company’s right to receive collections for assets securitized exceeds the amount required to pay interest, principal, and fees and expenses related to the asset-backed securities. The Company provides credit ~~agreement, establishing a revolving credit facility (the “VMware Revolving Credit Facility”) with a syndicate~~enhancement to the securitization in the form of ~~lenders that provides~~over-collateralization.

The following table presents financing receivables and equipment under operating leases, net held by the ~~company with a borrowing capacity~~consolidated VIEs as of ~~up to $1.0~~the dates indicated:


	April 30, 2021		January 29, 2021
	(in millions)
Assets held by consolidated VIEs
Other current assets	$	874	$	838
Financing receivables, net of allowance
Short-term	$	3,478	$	3,534
Long-term	$	3,267	$	3,314
Property, plant, and equipment, net	$	827	$	792
Liabilities held by consolidated VIEs
Debt, net of unamortized debt issuance costs
Short-term	$	4,055	$	4,208
Long-term	$	2,938	$	2,841

Loan and lease payments and associated equipment transferred via securitization through SPEs were $1.4 billion and $1.8 billion for ~~VMware, Inc. general corporate purposes. Commitments under~~ the ~~VMware Revolving Credit Facility~~three months ended April 30, 2021 and May 1, 2020, respectively.

Customer Receivables Sales

To manage certain concentrations of customer credit exposure, the Company may sell selected fixed-term customer receivables to unrelated third parties on a periodic basis, without recourse. The amount of customer receivables sold for this purpose was $101 million and $21 million for the three months ended April 30, 2021 and May 1, 2020, respectively. The Company’s continuing involvement in such customer receivables is primarily limited to servicing arrangements.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 4 — LEASES

The Company enters into leasing transactions in which the Company is the lessee. These lease contracts are ~~available~~typically classified as operating leases. The Company’s lease contracts are generally for ~~a period~~office buildings used to conduct its business, and the determination of ~~five years,~~whether such contracts contain leases generally does not require significant estimates or judgments. The Company also leases certain global logistics warehouses, employee vehicles, and equipment. As of April 30, 2021, the remaining terms of the Company’s leases range from less than one month to approximately 25 years.

The Company also enters into leasing transactions in which ~~may be extended, subject~~the Company is the lessor, primarily through customer financing arrangements offered through DFS. DFS originates leases that are primarily classified as either sales-type leases or operating leases. See Note 3 of the Notes to the ~~satisfaction~~Condensed Consolidated Financial Statements for more information on the DFS lease portfolio and related lease disclosures.

Financial information associated with the Company’s leases in which the Company is the lessee is contained in this Note. As of ~~certain conditions, by up~~both April 30, 2021 and January 29, 2021, there were no material finance leases for which the Company was a lessee.

The following table presents components of lease costs included in the Condensed Consolidated Statements of Income for the periods indicated:


	Three Months Ended
	April 30, 2021		May 1, 2020
	(in millions)
Operating lease costs	$	142	$	131
Variable costs	33		44
Total lease costs	$	175	$	175

During both the three months ended April 30, 2021 and May 1, 2020, sublease income, finance lease costs, and short-term lease costs were immaterial.

The following table presents supplemental information related to ~~2 one year periods.~~ operating leases included in the Condensed Consolidated Statements of Financial Position as of the dates indicated:


	Classification	April 30, 2021			January 29, 2021
		(in millions, except for term and discount rate)
Operating lease ROU assets	Other non-current assets	$	2,088		$	2,117

Current operating lease liabilities	Accrued and other current liabilities	$	440		$	436
Non-current operating lease liabilities	Other non-current liabilities	1,791			1,787
Total operating lease liabilities		$	2,231		$	2,223

Weighted-average remaining lease term (in years)		8.76			8.85
Weighted-average discount rate		3.40		%	3.47		%

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The ~~credit agreement contains certain representations, warranties,~~following table presents supplemental cash flow information related to leases for the periods indicated:


	Three Months Ended
	April 30, 2021		May 1, 2020
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities — operating cash outflows from operating leases	$	134	$	131

ROU assets obtained in exchange for new operating lease liabilities	$	117	$	120

The following table presents the future maturities of the Company’s operating lease liabilities under non-cancelable leases and ~~covenants. Commitment fees, interest rates, and other terms~~reconciles the undiscounted cash flows for these leases to the lease liability recognized on the Condensed Consolidated Statements of ~~borrowing under~~Financial Position as of the ~~VMware Revolving Credit Facility may vary based~~date indicated:


	April 30, 2021
	(in millions)
Fiscal 2022 (remaining nine months)	$	351
Fiscal 2023	469
Fiscal 2024	347
Fiscal 2025	260
Fiscal 2026	211
Thereafter	1,010
Total lease payments	2,648
Less: Imputed interest	(417)
Total	$	2,231
Current operating lease liabilities	$	440
Non-current operating lease liabilities	$	1,791

Future lease commitments after Fiscal 2026 include the ground lease on VMware, Inc.’s external credit ratings. None of the net proceeds of such borrowings will be made available to support the operations or satisfy any corporate purposes of Dell Technologies, other than the operations and corporate purposes of VMware, Inc. and VMware, Inc.’s subsidiaries. As of October 30, 2020, there were 0 outstanding borrowings under the VMware Revolving Credit Facility.

~~VMware Term Loan Facility~~— On September 26, 2019, VMware, Inc. entered into a senior unsecured term loan facility (the “VMware Term Loan Facility”) with a syndicate of lenders that provided VMware, Inc. with a borrowing capacity of up to $2.0 billion through February 7, 2020, for VMware, Inc. general corporate purposes. During the three months ended October 30, 2020, VMware, Inc. repaid the outstanding borrowings of $1.5 billion under the VMware Term Loan Facility.Palo Alto, California headquarters facilities, which expires in Fiscal 2047.

As of ~~January 31, 2020,~~April 30, 2021, the ~~outstanding borrowings under the VMware Term Loan Facility were $1.5 billion. None~~Company has additional operating leases that have not yet commenced of ~~the net proceeds~~$97 million. These operating leases will commence during Fiscal 2022 with lease terms of ~~such borrowings were made available~~one year to ~~support the operations or satisfy any corporate purposes of Dell Technologies, other than the operations and corporate purposes of VMware, Inc. and VMware, Inc.’s subsidiaries.~~10 years.

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 5 — DEBT

The following table presents the Company’s outstanding debt as of the dates indicated:


	April 30, 2021		January 29, 2021
	(in millions)
Secured Debt
Senior Secured Credit Facilities:
2.00% Term Loan B-2 Facility due September 2025	$	3,135	$	3,143
1.90% Term Loan A-6 Facility due March 2024	3,134		3,134
First Lien Notes:
5.45% due June 2023	3,750		3,750
4.00% due July 2024	1,000		1,000
5.85% due July 2025	1,000		1,000
6.02% due June 2026	4,500		4,500
4.90% due October 2026	1,750		1,750
6.10% due July 2027	500		500
5.30% due October 2029	1,750		1,750
6.20% due July 2030	750		750
8.10% due July 2036	1,500		1,500
8.35% due July 2046	2,000		2,000
Unsecured Debt
Unsecured Notes and Debentures:
4.625% due April 2021	0		400
7.10% due April 2028	300		300
6.50% due April 2038	388		388
5.40% due September 2040	264		264
Senior Notes:
5.875% due June 2021	0		1,075
7.125% due June 2024	1,625		1,625
EMC Notes:
3.375% due June 2023	1,000		1,000
Debt of Public Subsidiary
VMware Notes:
2.95% due August 2022	1,500		1,500
4.50% due May 2025	750		750
4.65% due May 2027	500		500
3.90% due August 2027	1,250		1,250
4.70% due May 2030	750		750
DFS Debt (Note 3)	9,753		9,666
Other
2.46% Margin Loan Facility due April 2022	4,000		4,000
Other	304		235
Total debt, principal amount	$	47,153	$	48,480

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)


	April 30, 2021		January 29, 2021
	(in millions)
Total debt, principal amount	$	47,153	$	48,480
Unamortized discount, net of unamortized premium	(185)		(194)
Debt issuance costs	(285)		(302)
Total debt, carrying value	$	46,683	$	47,984
Total short-term debt, carrying value	$	8,748	$	6,362
Total long-term debt, carrying value	$	37,935	$	41,622

During the three months ended April 30, 2021, the net decrease in the Company’s debt balance was primarily due to:

•repayment of $1,075 million principal amount of the 5.875% Senior Notes due June 2021; and

•repayment of $400 million principal amount of the 4.625% Unsecured Notes due April 2021.

DFS Debt


	April 30, 2021		January 29, 2021
	(in millions)
DFS U.S. debt:
Asset-based financing and securitization facilities	$	2,674	$	3,311
Fixed-term securitization offerings	3,548		2,961
Other	198		140
Total DFS U.S. debt	6,420		6,412
DFS international debt:
Securitization facility	784		786
Other borrowings	1,087		1,006
Note payable	250		250
Dell Bank Senior Unsecured Eurobonds	1,212		1,212
Total DFS international debt	3,333		3,254
Total DFS debt	$	9,753	$	9,666
Total short-term DFS debt	$	4,673	$	4,888
Total long-term DFS debt	$	5,080	$	4,778

DFS U.S. Debt

Asset-Based Financing and Securitization Facilities —The Company maintains separate asset-based financing facilities and a securitization facility in the United States, which are revolving facilities for fixed-term leases and loans and for revolving loans, respectively. This debt is collateralized solely by the U.S. loan and lease payments and associated equipment in the facilities. The debt has a variable interest rate and the duration of the debt is based on the terms of the underlying loan and lease payment streams. As of April 30, 2021, the total debt capacity related to the U.S. asset-based financing and securitization facilities was $4.1 billion. The Company enters into interest swap agreements to effectively convert a portion of this debt from a floating rate to a fixed rate. See Note 6 of the Notes to the Condensed Consolidated Financial Statements for additional information about interest rate swaps.

Fixed-Term Securitization Offerings —The Company periodically issues asset-backed debt securities under fixed-term securitization programs to private investors. The asset-backed debt securities are collateralized solely by the U.S. fixed-term leases and loans in the offerings, which are held by Special Purpose Entities (“SPEs”), as discussed below. The interest rate on these securities is fixed and ranges from 0.21% to 5.92% per annum, and the duration of these securities is based on the terms of the underlying loan and lease payment streams.

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

DFS International Debt

Securitization Facility —The Company maintains a securitization facility in Europe for fixed-term leases and loans. This facility is effective through December 21, 2022 and has a total debt capacity of $970 million as of April 30, 2021.

Other Borrowings —In connection with the Company’s international financing operations, the Company has entered into revolving structured financing debt programs related to its fixed-term lease and loan products sold in Canada, Europe, Australia, and New Zealand. The Canadian facility, which is collateralized solely by Canadian loan and lease payments and associated equipment, had a total debt capacity of $366 million as of April 30, 2021, and is effective through January 16, 2025. The European facility, which is collateralized solely by European loan and lease payments and associated equipment, had a total debt capacity of $727 million as of April 30, 2021, and is effective through June 14, 2022. The Australia and New Zealand facility, which is collateralized solely by Australia and New Zealand loan and lease payments and associated equipment, had a total debt capacity of $349 million as of April 30, 2021, and is effective through April 20, 2023.

Note Payable — On August 7, 2020, the Company entered into 2 new unsecured credit agreements to fund receivables in Mexico. As of April 30, 2021, the aggregate principal amount of the notes payable was $250 million. The notes bear interest at an annual rate of 3.37% and will mature on June 1, 2022.

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Variable Interest Entities

Some of the SPEs have entered into financing arrangements with multi-seller conduits that, in turn, issue asset-backed debt securities in the capital markets. DFS debt outstanding held by the consolidated VIEs is collateralized by the loan and lease payments and associated equipment. The Company’s risk of loss related to securitized receivables is limited to the amount by which the Company’s right to receive collections for assets securitized exceeds the amount required to pay interest, principal, and fees and expenses related to the asset-backed securities. The Company provides credit enhancement to the securitization in the form of over-collateralization.

The following table presents financing receivables and equipment under operating leases, net held by the consolidated VIEs as of the dates indicated:


	April 30, 2021		January 29, 2021
	(in millions)
Assets held by consolidated VIEs
Other current assets	$	874	$	838
Financing receivables, net of allowance
Short-term	$	3,478	$	3,534
Long-term	$	3,267	$	3,314
Property, plant, and equipment, net	$	827	$	792
Liabilities held by consolidated VIEs
Debt, net of unamortized debt issuance costs
Short-term	$	4,055	$	4,208
Long-term	$	2,938	$	2,841

Customer Receivables Sales

To manage certain concentrations of customer credit exposure, the Company may sell selected fixed-term customer receivables to unrelated third parties on a periodic basis, without recourse. The amount of customer receivables sold for this purpose was $101 million and $21 million for the three months ended April 30, 2021 and May 1, 2020, respectively. The Company’s continuing involvement in such customer receivables is primarily limited to servicing arrangements.

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 4 — LEASES

The Company enters into leasing transactions in which the Company is the lessee. These lease contracts are typically classified as operating leases. The Company’s lease contracts are generally for office buildings used to conduct its business, and the determination of whether such contracts contain leases generally does not require significant estimates or judgments. The Company also leases certain global logistics warehouses, employee vehicles, and equipment. As of April 30, 2021, the remaining terms of the Company’s leases range from less than one month to approximately 25 years.

The Company also enters into leasing transactions in which the Company is the lessor, primarily through customer financing arrangements offered through DFS. DFS originates leases that are primarily classified as either sales-type leases or operating leases. See Note 3 of the Notes to the Condensed Consolidated Financial Statements for more information on the DFS lease portfolio and related lease disclosures.

Financial information associated with the Company’s leases in which the Company is the lessee is contained in this Note. As of both April 30, 2021 and January 29, 2021, there were no material finance leases for which the Company was a lessee.

The following table presents components of lease costs included in the Condensed Consolidated Statements of Income for the periods indicated:


	Three Months Ended
	April 30, 2021		May 1, 2020
	(in millions)
Operating lease costs	$	142	$	131
Variable costs	33		44
Total lease costs	$	175	$	175

During both the three months ended April 30, 2021 and May 1, 2020, sublease income, finance lease costs, and short-term lease costs were immaterial.

The following table presents supplemental information related to operating leases included in the Condensed Consolidated Statements of Financial Position as of the dates indicated:


	Classification	April 30, 2021			January 29, 2021
		(in millions, except for term and discount rate)
Operating lease ROU assets	Other non-current assets	$	2,088		$	2,117

Current operating lease liabilities	Accrued and other current liabilities	$	440		$	436
Non-current operating lease liabilities	Other non-current liabilities	1,791			1,787
Total operating lease liabilities		$	2,231		$	2,223

Weighted-average remaining lease term (in years)		8.76			8.85
Weighted-average discount rate		3.40		%	3.47		%

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table presents supplemental cash flow information related to leases for the periods indicated:


	Three Months Ended
	April 30, 2021		May 1, 2020
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities — operating cash outflows from operating leases	$	134	$	131

ROU assets obtained in exchange for new operating lease liabilities	$	117	$	120

The following table presents the future maturities of the Company’s operating lease liabilities under non-cancelable leases and reconciles the undiscounted cash flows for these leases to the lease liability recognized on the Condensed Consolidated Statements of Financial Position as of the date indicated:


	April 30, 2021
	(in millions)
Fiscal 2022 (remaining nine months)	$	351
Fiscal 2023	469
Fiscal 2024	347
Fiscal 2025	260
Fiscal 2026	211
Thereafter	1,010
Total lease payments	2,648
Less: Imputed interest	(417)
Total	$	2,231
Current operating lease liabilities	$	440
Non-current operating lease liabilities	$	1,791

Future lease commitments after Fiscal 2026 include the ground lease on VMware, Inc.’s Palo Alto, California headquarters facilities, which expires in Fiscal 2047.

As of April 30, 2021, the Company has additional operating leases that have not yet commenced of $97 million. These operating leases will commence during Fiscal 2022 with lease terms of one year to 10 years.

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 5 — DEBT

The following table presents the Company’s outstanding debt as of the dates indicated:


	April 30, 2021		January 29, 2021
	(in millions)
Secured Debt
Senior Secured Credit Facilities:
2.00% Term Loan B-2 Facility due September 2025	$	3,135	$	3,143
1.90% Term Loan A-6 Facility due March 2024	3,134		3,134
First Lien Notes:
5.45% due June 2023	3,750		3,750
4.00% due July 2024	1,000		1,000
5.85% due July 2025	1,000		1,000
6.02% due June 2026	4,500		4,500
4.90% due October 2026	1,750		1,750
6.10% due July 2027	500		500
5.30% due October 2029	1,750		1,750
6.20% due July 2030	750		750
8.10% due July 2036	1,500		1,500
8.35% due July 2046	2,000		2,000
Unsecured Debt
Unsecured Notes and Debentures:
4.625% due April 2021	0		400
7.10% due April 2028	300		300
6.50% due April 2038	388		388
5.40% due September 2040	264		264
Senior Notes:
5.875% due June 2021	0		1,075
7.125% due June 2024	1,625		1,625
EMC Notes:
3.375% due June 2023	1,000		1,000
Debt of Public Subsidiary
VMware Notes:
2.95% due August 2022	1,500		1,500
4.50% due May 2025	750		750
4.65% due May 2027	500		500
3.90% due August 2027	1,250		1,250
4.70% due May 2030	750		750
DFS Debt (Note 3)	9,753		9,666
Other
2.46% Margin Loan Facility due April 2022	4,000		4,000
Other	304		235
Total debt, principal amount	$	47,153	$	48,480

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)


	April 30, 2021		January 29, 2021
	(in millions)
Total debt, principal amount	$	47,153	$	48,480
Unamortized discount, net of unamortized premium	(185)		(194)
Debt issuance costs	(285)		(302)
Total debt, carrying value	$	46,683	$	47,984
Total short-term debt, carrying value	$	8,748	$	6,362
Total long-term debt, carrying value	$	37,935	$	41,622

During the three months ended April 30, 2021, the net decrease in the Company’s debt balance was primarily due to:

•repayment of $1,075 million principal amount of the 5.875% Senior Notes due June 2021; and

•repayment of $400 million principal amount of the 4.625% Unsecured Notes due April 2021.

Secured Debt

Senior Secured Credit Facilities—The Company has entered into a credit agreement that provides for senior secured credit facilities (the “Senior Secured Credit Facilities”) comprising (a) term loan facilities and (b) a senior secured Revolving Credit Facility, which provides for a borrowing capacity of up to $4.5 billion for general corporate purposes, including capacity for up to $0.5 billion of letters of credit and for borrowings of up to $0.4 billion under swing-line loans.

As of April 30, 2021, available borrowings under the Revolving Credit Facility totaled $4.5 billion. The Senior Secured Credit Facilities provide that the borrowers have the right at any time, subject to customary conditions, to request incremental term loans or incremental revolving commitments.

On February 18, 2021, the Company entered into an eighth refinancing amendment to the credit agreement for the Senior Secured Credit Facilities to refinance the existing term B loans (the “Original Term B Loans”) with a new term loan B facility consisting of an aggregate principal amount of $3,143 million refinancing term B-2 loans (the “Refinancing Term B-2 Loans”) maturing on September 19, 2025. Proceeds from the Refinancing Term B-2 Loans, together with other funds available to the borrowers, were used to repay in full the Original Term B Loans and all accrued and unpaid fees in respect thereof.

Except for a change in the interest rate, the Refinancing Term B-2 Loans have substantially the same terms as the Original Term B Loans under the sixth refinancing amendment to the Senior Secured Credit Agreement. Amortization payments on the Refinancing Term B-2 Loans are equal to 0.25% of the aggregate principal amount of Refinancing Term B-2 Loans outstanding on the effective date of the eighth refinancing amendment, payable at the end of each fiscal quarter, commencing with the fiscal quarter ended April 30, 2021.

Borrowings under the Senior Secured Credit Facilities bear interest at a rate per annum equal to an applicable margin, plus, at the borrowers’ option, either (a) a base rate, or (b) the London Interbank Offered Rate (“LIBOR”). The Term Loan A-6 Facility bears interest at LIBOR plus an applicable margin ranging from 1.25% to 2.00% or a base rate plus an applicable margin ranging from 0.25% to 1.00%. The Refinancing Term B-2 Loans bear interest at LIBOR plus an applicable margin of 1.75% or a base rate plus an applicable margin of 0.75%. Interest is payable, in the case of loans bearing interest based on LIBOR, at the end of each interest period (but at least every three months), in arrears and, in the case of loans bearing interest based on the base rate, quarterly in arrears.

The Term Loan A-6 Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 5% of the original principal amount in each of the first four years after the facility closing date of March 13, 2019, and 80% of the original principal amount in the fifth year after March 13, 2019. The Revolving Credit Facility has no amortization.

The borrowers may voluntarily repay outstanding loans under the term loan facilities and the Revolving Credit Facility at any time without premium or penalty, other than customary “breakage” costs.

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

All obligations of the borrowers under the Senior Secured Credit Facilities and certain swap agreements, cash management arrangements, and certain letters of credit provided by any lender or agent party to the Senior Secured Credit Facilities or any of its affiliates and certain other persons are secured by (a) a first-priority security interest in certain tangible and intangible assets of the borrowers and the guarantors and (b) a first-priority pledge of 100% of the capital stock of the borrowers, Dell Inc., a wholly-owned subsidiary of the Company (“Dell”), and each wholly-owned material restricted subsidiary of the borrowers and the guarantors, in each case subject to certain thresholds, exceptions, and permitted liens.

First Lien Notes — Dell International L.L.C. and EMC Corporation, both of which are wholly-owned subsidiaries of Dell Technologies Inc., completed private offerings of multiple series of senior secured notes (collectively, the “First Lien Notes”) which were issued on June 1, 2016, March 20, 2019, and April 9, 2020 in aggregate principal amounts of $20.0 billion, $4.5 billion, and $2.25 billion, respectively. Interest on the First Lien Notes is payable semiannually. The First Lien Notes are secured on a pari passu basis with the Senior Secured Credit Facilities, on a first-priority basis by substantially all of the tangible and intangible assets of the issuers and guarantors that secure obligations under the Senior Secured Credit Facilities, including pledges of all capital stock of the issuers, Dell, and certain wholly-owned material subsidiaries of the issuers and the guarantors, subject to certain exceptions.

The Company agreed to use commercially reasonable efforts to register with the SEC notes having terms substantially identical to the terms of the First Lien Notes as part of an offer to exchange such registered notes for the First Lien Notes. The Company will be obligated to pay additional interest on the First Lien Notes if it fails to consummate such an exchange offer within five years after the closing date of the EMC merger transaction, in the case of the First Lien Notes issued on June 1, 2016, and within five years after their respective issue dates, in the case of the First Lien Notes issued on March 20, 2019 and April 9, 2020. On April 15, 2021, Dell International L.L.C., EMC Corporation and the guarantors of the First Lien Notes (collectively, the “Registrants”) filed a registration statement with the SEC relating to the proposed exchange offer of such registered notes.

Subsequent to the three months ended April 30, 2021, on May 13, 2021, the Registrants filed an amendment to the registration statement, which was declared effective on May 17, 2021. In addition, on May 17, 2021, the Registrants filed a prospectus with the SEC and launched the exchange offer. The exchange offer expires at 5:00 p.m., New York City time, on June 15, 2021, unless extended by Dell International L.L.C. and EMC Corporation. During this period holders of the First Lien Notes may elect to tender their unregistered outstanding notes for freely tradable exchange notes that have been registered under the Securities Act. The Company does not currently intend to extend the expiration date.

Unsecured Debt

Unsecured Notes and Debentures — The Company has outstanding unsecured notes and debentures (collectively, the “Unsecured Notes and Debentures”) that were issued by Dell prior to the acquisition of Dell by Dell Technologies Inc. in the going-private transaction that closed in October 2013. Interest on outstanding borrowings is payable semiannually.

Senior Notes — The senior unsecured notes (collectively, the “Senior Notes”) were issued on June 22, 2016 in an aggregate principal amount of $3.25 billion. Interest on outstanding borrowings is payable semiannually.

EMC Notes— On September 7, 2016, EMC had outstanding $2.5 billion aggregate principal amount of its 1.875% Notes due June 2018, $2.0 billion aggregate principal amount of its 2.650% Notes due June 2020, and $1.0 billion aggregate principal amount of its 3.375% Notes due June 2023 (collectively, the “EMC Notes”). Interest on outstanding borrowings is payable semiannually.

VMware Notes — VMware, Inc. completed public offerings of unsecured senior notes in the aggregate amounts of $4.0 billion and $2.0 billion on August 21, 2017 and April 7, 2020, respectively (the “VMware Notes”). None of the net proceeds of such borrowings will be made available to support the operations or satisfy any corporate purposes of Dell Technologies, other than the operations and corporate purposes of VMware, Inc. and VMware, Inc.’s subsidiaries. Interest on outstanding borrowings is payable semiannually.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

VMware Revolving Credit Facility — On September 12, 2017, VMware, Inc. entered into an unsecured credit agreement, establishing a revolving credit facility (the “VMware Revolving Credit Facility”) with a syndicate of lenders that provides the company with a borrowing capacity of up to $1.0 billion for VMware, Inc. general corporate purposes. Commitments under the VMware Revolving Credit Facility are available for a period of five years, which may be extended, subject to the satisfaction of certain conditions, by up to 2 one year periods. The credit agreement contains certain representations, warranties, and covenants. Commitment fees, interest rates, and other terms of borrowing under the VMware Revolving Credit Facility may vary based on VMware, Inc.’s external credit ratings. None of the net proceeds of such borrowings will be made available to support the operations or satisfy any corporate purposes of Dell Technologies, other than the operations and corporate purposes of VMware, Inc. and VMware, Inc.’s subsidiaries. As of April 30, 2021, there were 0 outstanding borrowings under the VMware Revolving Credit Facility.

DFS Debt

See Note 43 and Note 76 of the Notes to the Condensed Consolidated Financial Statements, respectively, for discussion of DFS debt and the interest rate swap agreements that hedge a portion of that debt.

Other

Margin Loan Facility — On April 12, 2017, the Company entered into the Margin Loan Facility in an aggregate principal amount of $2.0 ~~billion, under which VMW Holdco LLC, a wholly-owned subsidiary of EMC, is the borrower.~~billion. In connection with the Class V transaction described in Note 1 of the Notes to the Condensed Consolidated Financial Statements, on December 20, 2018, the Company amended the Margin Loan Facility to increase the aggregate principal amount to $3.35 billion. In connection with obtaining the Term Loan A-6 Facility during the fiscal year ended January 31, 2020, the Company increased the aggregate principal amount of the Margin Loan Facility to $4.0 billion.

~~During the three months ended May 1, 2020, due to volatility in the U.S. stock market resulting from the outbreak of COVID-19,~~ VMware Holdco LLC, ~~proactively pledged additional shares~~a wholly-owned subsidiary of ~~VMware, Inc. common stock to secure its obligations~~EMC, is the borrower under the Margin Loan Facility, ~~agreement. This resulted in an aggregate number of shares pledged of~~which is secured by approximately 76 million shares of Class B common stock of VMware, Inc. and approximately 24 million shares of Class A common stock of VMware, Inc.

Loans under the Margin Loan Facility bear interest at a rate per annum payable, at the borrower’s option, either at (a) a base rate plus 1.25% per annum or (b) a LIBOR-based rate plus 2.25% per annum. Interest under the Margin Loan Facility is payable quarterly. The Margin Loan Facility will mature in April 2022. The borrower may voluntarily repay outstanding loans under the Margin Loan Facility at any time without premium or penalty, other than customary “breakage” costs, subject to certain minimum threshold amounts for prepayment.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Aggregate Future Maturities

The following table presents the aggregate future maturities of the Company’s debt as of ~~October~~April 30, ~~2020~~2021 for the periods indicated:


		Maturities by Fiscal Year															Maturities by Fiscal Year
		2021 (remaining three months)		2022		2023		2024		2025		Thereafter		Total			2022 (remaining nine months)		2023		2024		2025		2026		Thereafter		Total
		(in millions)															(in millions)
Senior Secured Credit Facilities and First Lien Notes	Senior Secured Credit Facilities and First Lien Notes	$	0	$	172	$	286	$	7,384	$	1,047	$	18,297	$	27,186	Senior Secured Credit Facilities and First Lien Notes	$	31	$	213	$	6,007	$	1,758	$	4,017	$	12,743	$	24,769
Unsecured Notes and Debentures	Unsecured Notes and Debentures	0		400		0		0		0		952		1,352		Unsecured Notes and Debentures	0		0		0		0		0		952		952
Senior Notes and EMC Notes	Senior Notes and EMC Notes	0		1,075		0		1,000		1,625		0		3,700		Senior Notes and EMC Notes	0		0		1,000		1,625		0		0		2,625
VMware Notes	VMware Notes	0		0		1,500		0		0		3,250		4,750		VMware Notes	0		1,500		0		0		750		2,500		4,750
DFS Debt	DFS Debt	2,012		3,481		2,654		356		692		6		9,201		DFS Debt	3,844		4,249		774		850		36		0		9,753
Margin Loan Facility	Margin Loan Facility	0		0		4,000		0		0		0		4,000		Margin Loan Facility	0		4,000		0		0		0		0		4,000
Other	Other	3		12		12		156		8		31		222		Other	11		11		171		78		8		25		304
Total maturities, principal amount	Total maturities, principal amount	2,015		5,140		8,452		8,896		3,372		22,536		50,411		Total maturities, principal amount	3,886		9,973		7,952		4,311		4,811		16,220		47,153
Associated carrying value adjustments	Associated carrying value adjustments	(1)		(10)		(14)		(38)		(83)		(404)		(550)		Associated carrying value adjustments	(6)		(15)		(32)		(71)		(47)		(299)		(470)
Total maturities, carrying value amount	Total maturities, carrying value amount	$	2,014	$	5,130	$	8,438	$	8,858	$	3,289	$	22,132	$	49,861	Total maturities, carrying value amount	$	3,880	$	9,958	$	7,920	$	4,240	$	4,764	$	15,921	$	46,683

Covenants and Unrestricted Net Assets — The credit agreement for the Senior Secured Credit Facilities contains customary negative covenants that generally limit the ability of Denali Intermediate Inc., a wholly-owned subsidiary of Dell Technologies (“Denali Intermediate”), Dell, and Dell’s and Denali Intermediate’s other restricted subsidiaries to incur debt, create liens, make fundamental changes, enter into asset sales, make certain investments, pay dividends or distribute or redeem certain equity interests, prepay or redeem certain debt, and enter into certain transactions with affiliates. The indenture governing the Senior Notes contains customary negative covenants that generally limit the ability of Denali Intermediate, Dell, and Dell’s and Denali Intermediate’s other restricted subsidiaries to incur additional debt or issue certain preferred shares, pay dividends on or make other distributions in respect of capital stock or make other restricted payments, make certain investments, sell or transfer certain assets, create liens on certain assets to secure debt, consolidate, merge, sell, or otherwise dispose of all or substantially all assets, enter into certain transactions with affiliates, and designate subsidiaries as unrestricted subsidiaries. The negative covenants under such credit agreements and indenture are subject to certain exceptions, qualifications, and “baskets.” The indentures governing the First Lien Notes, the Unsecured Notes and Debentures, and the EMC Notes variously impose limitations, subject to specified exceptions, on creating certain liens, entering into sale and lease-back transactions, and entering into certain asset sales. The foregoing credit agreements and indentures contain customary events of default, including failure to make required payments, failure to comply with covenants, and the occurrence of certain events of bankruptcy and insolvency.

As of ~~October~~April 30, ~~2020,~~2021, the Company had certain consolidated subsidiaries that were designated as unrestricted subsidiaries for all purposes of the applicable credit agreements and the indentures governing the First Lien Notes and the Senior Notes. Substantially all of the net assets of the Company’s consolidated subsidiaries were restricted, with the exception of the Company’s unrestricted subsidiaries, primarily VMware, Inc., Secureworks, and their respective subsidiaries, as of ~~October~~April 30, ~~2020.~~2021.

The ~~Term Loan A-4 Facility, the~~ Term Loan A-6 Facility and the Revolving Credit Facility are subject to a first lien leverage ratio covenant that is tested at the end of each fiscal quarter of Dell with respect to Dell’s preceding four fiscal quarters. The Company was in compliance with all financial covenants as of ~~October~~April 30, ~~2020.~~2021.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 76 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

As part of its risk management strategy, the Company uses derivative instruments, primarily foreign currency forward and option contracts and interest rate swaps, to hedge certain foreign currency and interest rate exposures, respectively.

The Company’s objective is to offset gains and losses resulting from these exposures with gains and losses on the derivative contracts used to hedge the exposures, thereby reducing volatility of earnings and protecting the fair values of assets and liabilities. The earnings effects of the derivative instruments are presented in the same income statement line items as the earnings effects of the hedged items. For derivatives designated as cash flow hedges, the Company assesses hedge effectiveness both at the onset of the hedge and at regular intervals throughout the life of the derivative. The Company does not have any derivatives designated as fair value hedges.

Foreign Exchange Risk

The Company uses foreign currency forward and option contracts designated as cash flow hedges to protect against the foreign currency exchange rate risks inherent in its forecasted transactions denominated in currencies other than the U.S. Dollar. Hedge accounting is applied based upon the criteria established by accounting guidance for derivative instruments and hedging activities. The risk of loss associated with purchased options is limited to premium amounts paid for the option contracts. The risk of loss associated with forward contracts is equal to the exchange rate differential from the time the contract is entered into until the time it is settled. The majority of these contracts typically expire in twelve months or less.

During the three ~~and nine~~ months ended ~~October~~April 30, ~~2020~~2021 and ~~November~~May 1, ~~2019,~~2020, the Company did not discontinue any cash flow hedges related to foreign exchange contracts that had a material impact on the Company’s results of operations due to the probability that the forecasted cash flows would not occur.

The Company uses forward contracts to hedge monetary assets and liabilities denominated in a foreign currency. These contracts generally expire in three months or less, are considered economic hedges, and are not designated for hedge accounting. The change in the fair value of these instruments represents a natural hedge as their gains and losses offset the changes in the underlying fair value of the monetary assets and liabilities due to movements in currency exchange rates.

In connection with expanded offerings of DFS in Europe, forward contracts are used to hedge financing receivables denominated in foreign currencies other than Euro. These contracts are not designated for hedge accounting and most expire within three years or less.

Interest Rate Risk

The Company uses interest rate swaps to hedge the variability in cash flows related to the interest rate payments on structured financing debt. The interest rate swaps economically convert the variable rate on the structured financing debt to a fixed interest rate to match the underlying fixed rate being received on fixed-term customer leases and loans. These contracts are not designated for hedge accounting and most expire within three years or less.

Interest rate swaps are utilized to manage the interest rate risk, at a portfolio level, associated with DFS operations in Europe. The interest rate swaps economically convert the fixed rate on financing receivables to a three-month Euribor floating rate basis in order to match the floating rate nature of the banks’ funding pool. These contracts are not designated for hedge accounting and most expire within five years or less.

The Company utilizes cross currency amortizing swaps to hedge the currency and interest rate risk exposure associated with the securitization program that was established in Europe in January 2017. The cross currency swaps combine a Euro-based interest rate swap with a British Pound or U.S. Dollar foreign exchange forward contract in which the Company pays a fixed British Pound or U.S. Dollar amount and receives a floating amount in Euros linked to the one-month Euribor. The notional value of the swaps amortizes in line with the expected cash flows and run-off of the securitized assets. The swaps are not designated for hedge accounting and expire within five years or less.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Derivative Instruments

Notional Amounts of Outstanding Derivative Instruments


		October 30, 2020		January 31, 2020			April 30, 2021		January 29, 2021
		(in millions)					(in millions)
Foreign exchange contracts:	Foreign exchange contracts:					Foreign exchange contracts:
Designated as cash flow hedging instruments	Designated as cash flow hedging instruments	$	6,436	$	8,703	Designated as cash flow hedging instruments	$	6,967	$	6,840
Non-designated as hedging instruments	Non-designated as hedging instruments	8,808		7,711		Non-designated as hedging instruments	9,449		9,890
Total	Total	$	15,244	$	16,414	Total	$	16,416	$	16,730
Interest rate contracts:	Interest rate contracts:					Interest rate contracts:
Non-designated as hedging instruments	Non-designated as hedging instruments	$	5,164	$	4,043	Non-designated as hedging instruments	$	6,011	$	5,859

Effect of Derivative Instruments Designated as Hedging Instruments on the Condensed Consolidated Statements of Financial Position and the Condensed Consolidated Statements of Income ~~(Loss)~~


Derivatives in Cash Flow Hedging Relationships	Derivatives in Cash Flow Hedging Relationships	Gain (Loss) Recognized in Accumulated OCI, Net of Tax, on Derivatives		Location of Gain (Loss) Reclassified from Accumulated OCI into Income	Gain (Loss) Reclassified from Accumulated OCI into Income		Derivatives in Cash Flow Hedging Relationships	Gain (Loss) Recognized in Accumulated OCI, Net of Tax, on Derivatives		Location of Gain (Loss) Reclassified from Accumulated OCI into Income	Gain (Loss) Reclassified from Accumulated OCI into Income
		(in millions)			(in millions)			(in millions)			(in millions)
For the three months ended October 30, 2020
For the three months ended April 30, 2021							For the three months ended April 30, 2021
				Total net revenue	$	(88)				Total net revenue	$	(29)
Foreign exchange contracts	Foreign exchange contracts	$	45	Total cost of net revenue	4		Foreign exchange contracts	$	(1)	Total cost of net revenue	2
Interest rate contracts	Interest rate contracts	0		Interest and other, net	0		Interest rate contracts	0		Interest and other, net	0
Total	Total	$	45		$	(84)	Total	$	(1)		$	(27)

For the three months ended November 1, 2019
For the three months ended May 1, 2020							For the three months ended May 1, 2020
				Total net revenue	$	71				Total net revenue	$	96
Foreign exchange contracts	Foreign exchange contracts	$	(47)	Total cost of net revenue	0		Foreign exchange contracts	$	167	Total cost of net revenue	4
Interest rate contracts	Interest rate contracts	0		Interest and other, net	0		Interest rate contracts	0		Interest and other, net	0
Total	Total	$	(47)		$	71	Total	$	167		$	100

For the nine months ended October 30, 2020
				Total net revenue	$	17
Foreign exchange contracts		$	(45)	Total cost of net revenue	7
Interest rate contracts		0		Interest and other, net	0
Total		$	(45)		$	24

For the nine months ended November 1, 2019
				Total net revenue	$	197
Foreign exchange contracts		$	210	Total cost of net revenue	0
Interest rate contracts		0		Interest and other, net	0
Total		$	210		$	197

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

Effect of Derivative Instruments Not Designated as Hedging Instruments on the Condensed Consolidated Statements of Income ~~(Loss)~~


		Three Months Ended				Nine Months Ended						Three Months Ended
		October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019		Location of Gain (Loss) Recognized		April 30, 2021		May 1, 2020		Location of Gain (Loss) Recognized
		(in millions)										(in millions)
Gain (Loss) Recognized:	Gain (Loss) Recognized:										Gain (Loss) Recognized:
Foreign exchange contracts	Foreign exchange contracts	$	(127)	$	13	$	87	$	(46)	Interest and other, net	Foreign exchange contracts	$	(24)	$	52	Interest and other, net
Interest rate contracts	Interest rate contracts	1		1		(43)		(21)		Interest and other, net	Interest rate contracts	1		(39)		Interest and other, net
Total	Total	$	(126)	$	14	$	44	$	(67)		Total	$	(23)	$	13

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Fair Value of Derivative Instruments in the Condensed Consolidated Statements of Financial Position

The Company presents its foreign exchange derivative instruments on a net basis in the Condensed Consolidated Statements of Financial Position due to the right of offset by its counterparties under master netting arrangements. The following tables present the fair value of those derivative instruments presented on a gross basis as of the dates indicated:


		October 30, 2020											April 30, 2021
		Other Current Assets		Other Non- Current Assets		Other Current Liabilities		Other Non-Current Liabilities		Total Fair Value			Other Current Assets		Other Non- Current Assets		Other Current Liabilities		Other Non-Current Liabilities		Total Fair Value
		(in millions)											(in millions)
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:											Derivatives designated as hedging instruments:
Foreign exchange contracts in an asset position	Foreign exchange contracts in an asset position	$	22	$	0	$	59	$	0	$	81	Foreign exchange contracts in an asset position	$	45	$	0	$	19	$	0	$	64
Foreign exchange contracts in a liability position	Foreign exchange contracts in a liability position	0		0		(13)		0		(13)		Foreign exchange contracts in a liability position	(20)		0		(19)		0		(39)
Net asset (liability)	Net asset (liability)	22		0		46		0		68		Net asset (liability)	25		0		0		0		25
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:											Derivatives not designated as hedging instruments:
Foreign exchange contracts in an asset position	Foreign exchange contracts in an asset position	37		1		79		0		117		Foreign exchange contracts in an asset position	111		0		57		0		168
Foreign exchange contracts in a liability position	Foreign exchange contracts in a liability position	(19)		0		(274)		(2)		(295)		Foreign exchange contracts in a liability position	(76)		0		(127)		(7)		(210)
Interest rate contracts in an asset position	Interest rate contracts in an asset position	0		11		0		0		11		Interest rate contracts in an asset position	0		9		0		0		9
Interest rate contracts in a liability position	Interest rate contracts in a liability position	0		0		0		(30)		(30)		Interest rate contracts in a liability position	0		0		0		(26)		(26)
Net asset (liability)	Net asset (liability)	18		12		(195)		(32)		(197)		Net asset (liability)	35		9		(70)		(33)		(59)
Total derivatives at fair value	Total derivatives at fair value	$	40	$	12	$	(149)	$	(32)	$	(129)	Total derivatives at fair value	$	60	$	9	$	(70)	$	(33)	$	(34)

		January 31, 2020											January 29, 2021
		Other Current Assets		Other Non- Current Assets		Other Current Liabilities		Other Non-Current Liabilities		Total Fair Value			Other Current Assets		Other Non- Current Assets		Other Current Liabilities		Other Non-Current Liabilities		Total Fair Value
		(in millions)											(in millions)
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:											Derivatives designated as hedging instruments:
Foreign exchange contracts in an asset position	Foreign exchange contracts in an asset position	$	108	$	0	$	15	$	0	$	123	Foreign exchange contracts in an asset position	$	28	$	0	$	18	$	0	$	46
Foreign exchange contracts in a liability position	Foreign exchange contracts in a liability position	(2)		0		(3)		0		(5)		Foreign exchange contracts in a liability position	(10)		0		(15)		0		(25)
Net asset (liability)	Net asset (liability)	106		0		12		0		118		Net asset (liability)	18		0		3		0		21
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:											Derivatives not designated as hedging instruments:
Foreign exchange contracts in an asset position	Foreign exchange contracts in an asset position	136		0		39		0		175		Foreign exchange contracts in an asset position	184		0		58		0		242
Foreign exchange contracts in a liability position	Foreign exchange contracts in a liability position	(162)		0		(81)		(6)		(249)		Foreign exchange contracts in a liability position	(108)		0		(159)		(4)		(271)
Interest rate contracts in an asset position	Interest rate contracts in an asset position	0		1		0		0		1		Interest rate contracts in an asset position	0		10		0		0		10
Interest rate contracts in a liability position	Interest rate contracts in a liability position	0		0		0		(32)		(32)		Interest rate contracts in a liability position	0		0		0		(31)		(31)
Net asset (liability)	Net asset (liability)	(26)		1		(42)		(38)		(105)		Net asset (liability)	76		10		(101)		(35)		(50)
Total derivatives at fair value	Total derivatives at fair value	$	80	$	1	$	(30)	$	(38)	$	13	Total derivatives at fair value	$	94	$	10	$	(98)	$	(35)	$	(29)

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following tables present the gross amounts of the Company’s derivative instruments, amounts offset due to master netting agreements with the Company’s counterparties, and the net amounts recognized in the Condensed Consolidated Statements of Financial Position as of the dates indicated:


		October 30, 2020													April 30, 2021
		Gross Amounts of Recognized Assets/ (Liabilities)		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets/ (Liabilities) Presented in the Statement of Financial Position		Gross Amounts not Offset in the Statement of Financial Position				Net Amount			Gross Amounts of Recognized Assets/ (Liabilities)		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets/ (Liabilities) Presented in the Statement of Financial Position		Gross Amounts not Offset in the Statement of Financial Position				Net Amount of Assets/ (Liabilities) Recognized in the Statement of Financial Position
								Financial Instruments		Cash Collateral Received or Pledged											Financial Instruments		Cash Collateral Received or Pledged
		(in millions)													(in millions)
Derivative instruments:	Derivative instruments:													Derivative instruments:
Financial assets	Financial assets	$	209	$	(157)	$	52	$	0	$	0	$	52	Financial assets	$	242	$	(173)	$	69	$	0	$	0	$	69
Financial liabilities	Financial liabilities	(338)		157		(181)		0		(4)		(185)		Financial liabilities	(276)		173		(103)		0		6		(97)
Total derivative instruments	Total derivative instruments	$	(129)	$	0	$	(129)	$	0	$	(4)	$	(133)	Total derivative instruments	$	(34)	$	0	$	(34)	$	0	$	6	$	(28)

		January 31, 2020													January 29, 2021
		Gross Amounts of Recognized Assets/ (Liabilities)		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets/ (Liabilities) Presented in the Statement of Financial Position		Gross Amounts not Offset in the Statement of Financial Position				Net Amount			Gross Amounts of Recognized Assets/ (Liabilities)		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets/ (Liabilities) Presented in the Statement of Financial Position		Gross Amounts not Offset in the Statement of Financial Position				Net Amount of Assets/ (Liabilities) Recognized in the Statement of Financial Position
								Financial Instruments		Cash Collateral Received or Pledged											Financial Instruments		Cash Collateral Received or Pledged
		(in millions)													(in millions)
Derivative instruments:	Derivative instruments:													Derivative instruments:
Financial assets	Financial assets	$	299	$	(218)	$	81	$	0	$	0	$	81	Financial assets	$	298	$	(194)	$	104	$	0	$	0	$	104
Financial liabilities	Financial liabilities	(286)		218		(68)		0		15		(53)		Financial liabilities	(327)		194		(133)		0		2		(131)
Total derivative instruments	Total derivative instruments	$	13	$	0	$	13	$	0	$	15	$	28	Total derivative instruments	$	(29)	$	0	$	(29)	$	0	$	2	$	(27)

4036

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 87 — ~~BUSINESS COMBINATIONS,~~ GOODWILL AND INTANGIBLE ASSETS

~~Business Combinations~~

~~VMware, Inc. Acquisitions~~

~~SaltStack, Inc.~~ — During the three months ended October 30, 2020, VMware, Inc. completed the acquisition of SaltStack, Inc., a developer of intelligent, event-driven automation software, to broaden VMware, Inc.’s Cloud Management capabilities from infrastructure to applications. The total purchase price, net of cash acquired, was $51 million. The purchase price primarily included $29 million of intangible assets and $24 million of goodwill that is 0t expected to be deductible for tax purposes. The identifiable intangible assets, which primarily consisted of completed technology, have estimated useful lives of three years.

~~Datrium, Inc.~~— During the three months ended July 31, 2020, VMware, Inc. completed the acquisition of Datrium, Inc., a provider of cloud-native disaster recovery solutions, to broaden the VMware Site Recovery Disaster Recovery as a Service offerings. The total purchase price, net of cash acquired, was $137 million. The purchase price primarily included $25 million of identifiable intangible assets and $91 million of goodwill that is 0t expected to be deductible for tax purposes. The identifiable intangible assets, which primarily consisted of completed technology, have estimated useful lives of three years to five years.

~~Lastline, Inc.~~— During the three months ended July 31, 2020, VMware, Inc. completed the acquisition of Lastline, Inc., a provider of network-based security breach detection products and services, to enhance capabilities for network detection and threat analysis on VMware NSX and SD-WAN offerings. The total purchase price, net of cash acquired, was $114 million. The purchase price primarily included $29 million of identifiable intangible assets and $86 million of goodwill that is 0t expected to be deductible for tax purposes. The identifiable intangible assets, which primarily consisted of completed technology, have estimated useful lives of one year to four years.

~~Nyansa, Inc.~~— During the three months ended May 1, 2020, VMware, Inc. completed the acquisition of Nyansa, Inc., a developer of artificial intelligence-based network analytics, to accelerate the delivery of end-to-end monitoring and troubleshooting capabilities within VMware SD-WAN by VeloCloud. The total purchase price, net of cash acquired, was $38 million. The purchase price primarily included $14 million of identifiable intangible assets and $24 million of goodwill that is 0t expected to be deductible for tax purposes. The identifiable intangible assets, which primarily consisted of completed technology, have estimated useful lives of one year to four years.

~~Other Fiscal 2021 Acquisitions~~— During the nine months ended October 30, 2020, VMware, Inc. completed 3 other acquisitions, which were not material individually to the Condensed Consolidated Financial Statements. VMware, Inc. expects these acquisitions to enhance its product features and capabilities for VMware Carbon Black Cloud and vRealize Operations offerings. The aggregate purchase price for these 3 acquisitions, net of cash acquired, was $44 million and primarily included $35 million of identifiable intangible assets and $16 million of goodwill, of which $24 million is expected to be deductible for tax purposes. The identifiable intangible assets, which primarily consisted of completed technology, have estimated useful lives of one year to five years.

For each of the acquisitions completed during the nine months ended October 30, 2020, the excess of the purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill, which management believes represents synergies expected from combining the technologies of VMware, Inc. with those of the acquired businesses. The estimated fair value assigned to the tangible assets, identifiable intangible assets, and assumed liabilities were based on management's estimates and assumptions. The initial allocation of the purchase price was based on preliminary valuations and assumptions and is subject to change within the measurement period. VMware, Inc. expects to finalize the allocation of the purchase price within the measurement period.

The pro forma financial information assuming these Fiscal 2021 acquisitions had occurred as of the beginning of the fiscal year prior to the fiscal year of acquisition, as well as the revenue and earnings generated during the current fiscal year, were not material for disclosure purposes.

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

Goodwill

The Infrastructure Solutions Group, Client Solutions Group, and VMware reporting units are consistent with the reportable segments identified in Note 1716 of the Notes to the Condensed Consolidated Financial Statements. Offerings within Other businesses as defined below represent separate reporting units.

The following table presents goodwill allocated to the Company’s reportable segments and changes in the carrying amount of goodwill as of the dates indicated:

Infrastructure Solutions Group Client Solutions Group VMware Other Businesses (a) Total
(in millions)
Balance as of January 31, 2020 $ 15,089 $ 4,237 $ 20,532 $ 1,833 $ 41,691
Goodwill acquired (b) 0 0 230 8 238
Impact of foreign currency translation 90 0 0 9 99
Goodwill divested (c) 0 0 0 (1,385) (1,385)
Balance as of October 30, 2020 $ 15,179 $ 4,237 $ 20,762 $ 465 $ 40,643


	Infrastructure Solutions Group		Client Solutions Group		VMware		Other Businesses (a)		Total
	(in millions)
Balance as of January 29, 2021	$	15,324	$	4,237	$	20,802	$	466	$	40,829

Impact of foreign currency translation	10		0		0		0		10



Balance as of April 30, 2021	$	15,334	$	4,237	$	20,802	$	466	$	40,839

____________________

(a) ~~As of October 30, 2020, goodwill~~Goodwill allocated to Other businesses consists of Secureworks, Virtustream, and Boomi.

~~(b) Primarily VMware, Inc. business combinations completed during the nine months ended October 30, 2020, as discussed above.~~

(c) During the three months ended October 30, 2020, Dell Technologies closed the transaction to sell RSA Security. Prior to the divestiture, RSA Security was included in Other businesses. See Note 1 of the Notes to the Condensed Consolidated Financial Statements for additional information about the divestiture of RSA Security.

Goodwill Impairment Tests — Goodwill and indefinite-lived intangible assets are tested for impairment annually during the third fiscal quarter and whenever events or circumstances may indicate that an impairment has occurred. As a result of the changes in the current economic environment related to the COVID-19 pandemic, the Company considered whether there was a potential triggering event requiring the evaluation of whether goodwill of any of the reporting units should be tested for impairment. The Company determined there was no triggering event in previous quarters during Fiscal 2021 and noNo impairment test was performed other than the Company’s annual impairment review in the third quarter of Fiscal 2021.

For the annual impairment review in the third quarter of Fiscal 2021, the Company elected to bypass the assessment of qualitative factors to determine whether it was more likely than not that the fair value of a reporting unit was less than its carrying amount, including goodwill. In electing to bypass the qualitative assessment, the Company proceeded directly to performing a quantitative goodwill impairment test to measure the fair value of each goodwill reporting unit relative to its carrying amount, and to determine the amount of goodwill impairment loss to be recognized, if any.

Management exercised significant judgment related to the above assessment, including the identification of goodwill reporting units, assignment of assets and liabilities to goodwill reporting units, assignment of goodwill to reporting units, and determination of the fair value of each goodwill reporting unit. The fair value of each goodwill reporting unit is generally estimated using a combination of public company multiples and discounted cash flow methodologies, unless the reporting unit relates to a publicly-traded entity (VMware, Inc. or Secureworks), in which case the fair value is determined based primarily on the public company market valuation. The discounted cash flow and public company multiples methodologies require significant judgment, including estimation of future ~~cash flows,~~revenues, gross margins, and operating expenses, which is dependent on internal forecasts, current and anticipated economic conditions and trends, selection of market multiples through assessment of the reporting unit’s performance relative to peer competitors, the estimation of the long-term revenue growth rate and discount rate of the Company’s business, and the determination of the Company’s weighted average cost of capital. Changes in these estimates and assumptions could materially affect the fair value of the goodwill reporting unit, potentially resulting in a non-cash impairment charge.

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

The fair value of the indefinite-lived trade names is generally estimated using discounted cash flow methodologies. The discounted cash flow methodology requires significant judgment, including estimation of future revenue, ~~which is dependent on internal forecasts,~~ the estimation of the long-term revenue growth rate of the Company’s business and the determination of the Company’s weighted average cost of capital and royalty rates. Changes in these estimates and assumptions could materially affect the fair value of the indefinite-lived intangible assets, potentially resulting in a non-cash impairment charge.

Based on the results of the annual impairment test performed during the ~~three months~~fiscal year ended ~~October 30, 2020,~~January 29, 2021, the fair values of each of the reporting units exceeded their carrying values.

During the fiscal year ended January 31, 2020, an interim impairment assessment of Virtustream was required. There were no remaining balances of Virtustream goodwill, intangible assets, or property, plant, and equipment as of January 31, 2020 following the gross asset impairment charge of $619 million (comprised of $207 million of goodwill, $266 million of intangible assets, net, and $146 million of property, plant, and equipment, net) recognized during the fiscal year ended January 31, 2020, and a gross goodwill impairment charge of $190 million recognized during the fiscal year ended February 1, 2019. The impairment was reflected in Other, net within cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows.

Table of Contents

DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Intangible Assets

The following table presents the Company’s intangible assets as of the dates indicated:


		October 30, 2020						January 31, 2020							April 30, 2021						January 29, 2021
		Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net			Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
		(in millions)													(in millions)
Customer relationships	Customer relationships	$	22,399	$	(15,004)	$	7,395	$	22,950	$	(13,821)	$	9,129	Customer relationships	$	22,394	$	(15,864)	$	6,530	$	22,394	$	(15,448)	$	6,946
Developed technology	Developed technology	15,484		(11,758)		3,726		15,707		(10,974)		4,733		Developed technology	15,499		(12,409)		3,090		15,488		(12,136)		3,352
Trade names	Trade names	1,266		(885)		381		1,306		(816)		490		Trade names	1,285		(931)		354		1,285		(909)		376
Definite-lived intangible assets	Definite-lived intangible assets	39,149		(27,647)		11,502		39,963		(25,611)		14,352		Definite-lived intangible assets	39,178		(29,204)		9,974		39,167		(28,493)		10,674
Indefinite-lived trade names	Indefinite-lived trade names	3,755		—		3,755		3,755		—		3,755		Indefinite-lived trade names	3,755		—		3,755		3,755		—		3,755
Total intangible assets	Total intangible assets	$	42,904	$	(27,647)	$	15,257	$	43,718	$	(25,611)	$	18,107	Total intangible assets	$	42,933	$	(29,204)	$	13,729	$	42,922	$	(28,493)	$	14,429

Amortization expense related to definite-lived intangible assets was approximately ~~$0.8~~$0.7 billion and ~~$1.1~~$0.9 billion for the three months ended ~~October~~April 30, ~~2020~~2021 and ~~November~~May 1, ~~2019, respectively, and $2.5 billion and $3.3 billion for the nine months ended October 30,~~ 2020, ~~and November 1, 2019,~~ respectively. There were 0 material impairment charges related to intangible assets during the three ~~and nine~~ months ended ~~October~~April 30, ~~2020. During the nine months ended November~~2021 or May 1, ~~2019, an impairment charge related to Virtustream intangible assets, net was approximately $266 million.~~2020.

During the three months ended May 1, 2020, the Company recognized proceeds and a gain of $120 million from the sale of certain internally developed intellectual property assets.

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

The following table presents the estimated future annual pre-tax amortization expense of definite-lived intangible assets as of the date indicated:

October 30, 2020
Fiscal Years (in millions)
2021 (remaining three months) $ 846
2022 2,698
2023 1,820
2024 1,451
2025 1,101
Thereafter 3,586
Total $ 11,502


	April 30, 2021
	(in millions)
Fiscal 2022 (remaining nine months)	$	1,993
Fiscal 2023	1,826
Fiscal 2024	1,457
Fiscal 2025	1,107
Fiscal 2026	861
Thereafter	2,730
Total	$	9,974

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 98 — DEFERRED REVENUE

Deferred Revenue — Deferred revenue is recorded for support and deployment services, software maintenance, professional services, training, and software-as-a-service when the Company has a right to invoice or payments have been received for undelivered products or services where transfer of control has not occurred. Revenue is recognized on these items when the revenue recognition criteria are met, generally resulting in ratable recognition over the contract term. The Company also has deferred revenue related to undelivered hardware and professional services, consisting of installations and consulting engagements, which are recognized as the Company’s performance obligations under the contract are completed.

The following table presents the changes in the Company’s deferred revenue for the periods indicated:


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019			April 30, 2021		May 1, 2020
		(in millions)									(in millions)
Deferred revenue:	Deferred revenue:									Deferred revenue:
Deferred revenue at beginning of period	Deferred revenue at beginning of period	$	28,791	$	25,348	$	27,800	$	24,010	Deferred revenue at beginning of period	$	30,801	$	27,800
Revenue deferrals	Revenue deferrals	5,432		5,326		17,560		16,201		Revenue deferrals	6,480		5,423
Revenue recognized	Revenue recognized	(5,542)		(4,922)		(16,418)		(14,459)		Revenue recognized	(5,905)		(5,356)
Other (a) (b)		0		151		(261)		151
Other (a)										Other (a)	0		(250)
Deferred revenue at end of period	Deferred revenue at end of period	$	28,681	$	25,903	$	28,681	$	25,903	Deferred revenue at end of period	$	31,376	$	27,617
Short-term deferred revenue	Short-term deferred revenue	$	15,259	$	13,787	$	15,259	$	13,787	Short-term deferred revenue	$	16,835	$	14,766
Long-term deferred revenue	Long-term deferred revenue	$	13,422	$	12,116	$	13,422	$	12,116	Long-term deferred revenue	$	14,541	$	12,851

____________________

(a) For the ~~nine~~three months ended ~~October 30,~~May 1, 2020, Other ~~consists~~represents the reclassification of ~~divested~~RSA Security deferred revenue ~~from the sale of RSA Security.~~to liabilities held for sale. See Note 1 of the Notes to the Condensed Consolidated Financial Statements for more information about the divestiture of RSA Security. ~~For the three months ended October 30, 2020, there was no impact to deferred revenue because RSA Security was previously classified as held for sale.~~

~~(b) For the three and nine months ended November 1, 2019, Other consists of acquired deferred revenue from Carbon Black, Inc. by VMware, Inc.~~

Remaining Performance Obligations — Remaining performance obligations represent the aggregate amount of the transaction price allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligations include deferred revenue plus unbilled amounts not yet recorded in deferred revenue. The value of the transaction price allocated to remaining performance obligations as of ~~October~~April 30, ~~2020~~2021 was approximately ~~$38~~$42 billion. The Company expects to recognize approximately ~~63%~~61% of remaining performance obligations as revenue in the next twelve months, and the remainder thereafter.

The aggregate amount of the transaction price allocated to remaining performance obligations does not include amounts owed under ~~cancelable~~cancellable contracts where there is no substantive termination penalty. The Company applied the practical expedient to exclude the value of remaining performance obligations for contracts for which revenue is recognized at the amount to which the Company has the right to invoice for services performed.

Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidation, adjustments for revenue that have not materialized, and adjustments for currency.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 109 — COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company is involved in various claims, suits, assessments, investigations, and legal proceedings that arise from time to time in the ordinary course of its business, including those identified below, consisting of matters involving consumer, antitrust, tax, intellectual property, and other issues on a global basis.

The Company accrues a liability when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. The Company reviews these accruals at least quarterly and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other relevant information. To the extent new information is obtained and the Company’s views on the probable outcomes of claims, suits, assessments, investigations, or legal proceedings change, changes in the Company’s accrued liabilities would be recorded in the period in which such a determination is made. For some matters, the amount of liability is not probable or the amount cannot be reasonably estimated and therefore accruals have not been made.

The following is a discussion of the Company’s significant legal matters and other proceedings:

Class Actions Related to the Class V Transaction — NaN purported stockholders brought putative class action complaints arising out of the Class V transaction described in Note ~~1of~~1 of the Notes to the Condensed Consolidated Financial Statements. The actions were captioned Hallandale Beach Police and Fire Retirement Plan v. Michael Dell et al. (Civil Action No. 2018-0816-JTL), Howard Karp v. Michael Dell et al. (Civil Action No. 2019-0032-JTL), Miramar Police Officers’ Retirement Plan v. Michael Dell et al. (Civil Action No. 2019-0049-JTL), and Steamfitters Local 449 Pension Plan v. Michael Dell et al. (Civil Action No. 2019-0115-JTL). The four actions were consolidated in the Delaware Chancery Court into In Re Dell Class V Litigation (Consol. C.A. No. 2018-0816-JTL), which names as defendants the Company’s board of directors and certain stockholders of the Company, including Michael S. Dell. The plaintiffs generally allege that the defendants breached their fiduciary duties to the former holders of Class V Common Stock in connection with the Class V transaction by allegedly causing the Company to enter into a transaction that favored the interests of the controlling stockholders at the expense of such former stockholders. The plaintiffs seek, among other remedies, a judicial declaration that the defendants breached their fiduciary duties and an award of damages, fees, and costs. The plaintiffs filed an amended complaint in August 2019 making substantially similar allegations to those described above. The defendants filed a motion to dismiss the action in September 2019. The court denied the motion in June 2020 and the case ~~has now moved~~is currently in the discovery phase. Trial is currently scheduled to ~~discovery.~~begin on May 3, 2022.

Patent Litigation — On April 25, 2019, Cirba Inc. ~~(“Cirba”~~and Cirba IP, Inc. (collectively, “Cirba”) filed a lawsuit against VMware, Inc. in the United States District Court for the District of Delaware (the “Delaware Court”), alleging 2 patent infringement claims and 3 trademark infringement-related ~~claims. On May 6, 2019, Cirba filed a motion seeking a preliminary injunction tied to 1 of the 2 patents it alleges VMware, Inc. infringes.~~claims (the “First Action”). Following a hearing on August 6, 2019, the Delaware Court denied Cirba’s preliminary injunction ~~motion and set the case for trial in mid-January 2020.~~motion. On August 20, 2019, VMware, Inc. filed counterclaims against Cirba, asserting among other claims that Cirba is infringing 4 VMware, Inc. patents. The Delaware Court severed those claims from the January 2020 trial on Cirba’s ~~claims, and the trial on VMware, Inc.’s patent claims is currently set for September 2021. The trial on Cirba’s claims in the Delaware court was completed on January 23, 2020, and on~~claims. On January 24, 2020, ~~the~~a jury returned a verdict ~~finding~~ that VMware, Inc. had willfully infringed ~~the~~Cirba’s 2 ~~asserted~~ patents and ~~awarding~~awarded approximately $237 million in damages. ~~The~~As to Cirba’s trademark-related claims, the jury ~~further~~ found that VMware, Inc. was not ~~liable on Cirba’s trademark infringement-related claims.~~liable. A total of $237 million was accrued for the ~~Delaware action,~~First Action as of January 31, 2020, which ~~reflects~~reflected the estimated losses that ~~are~~were considered both probable and reasonably estimable at ~~this~~that time. The parties filed the post-trial motions in which VMware, Inc. moved to set aside the verdict and reduce the damages award, and Cirba moved for a permanent injunction, enhanced damages, setting of an ongoing royalty rate, and an award of pre-judgment and post-judgment interest and supplemental damages. A hearing was held in the Delaware court on those motions on May 15, 2020, and the Delaware court has taken those motions under advisement. VMware, Inc. intends to vigorously defend itself in this matter, including, if necessary, via an appeal. Final resolution of this matter could be materially different from the amount accrued. The amount accrued for this matter iswas included in Accrued and other in the ~~Condensed~~ Consolidated Statements of Financial Position as of ~~October 30, 2020 and~~ January 31, 2020, and the charge was classified in Selling, general and administrative in the Consolidated Statements of Income (Loss) ~~during~~for the fiscal year ended January 31, 2020. On March 9, 2020, the parties filed post-trial motions in the First Action. On December 21, 2020, the Delaware Court granted VMware, Inc.’s request for a new trial based, in part, on Cirba’s Inc.’s lack of standing, set aside the verdict and damages award, and denied Cirba’s post-trial motions (the “Post-Trial Order”).

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

On October 22, 2019, VMware, Inc. filed a separate ~~patent infringement~~ lawsuit against Cirba in the United States District Court for the Eastern District of Virginia ~~asserting that Cirba infringes~~for infringing 4 additional VMware, Inc. ~~patents.~~patents (The “Second Action”). The Virginia court transferred ~~these patent claims~~the Second Action to ~~Delaware.~~the Delaware Court on February 25, 2020. On March 23, 2020, Cirba filed a counterclaim asserting 1 additional patent against VMware, Inc. The Delaware Court consolidated the First and Second Actions and ordered a consolidated trial on all of the parties’ patent infringement claims and counterclaims. On May 3, 2021, the Court denied Cirba’s motion to certify the Post-Trial Order to enable an interlocutory appeal to the United States Court of Appeals for the Federal Circuit. Also, on May 3, 2021, the Court granted Cirba’s motion for leave to assert an additional patent against VMware, Inc. Separately, in February 2021, the U.S. Patent and Trademark Office (“PTO”) granted VMware, Inc.’s ex parte reexamination request as to the ‘687 patent (which was at issue in the January 2020 trial and subject to the Court’s new trial order). In addition, in May 2021, the PTO’s Patent Trial and Appeal Board instituted Inter Partes Review (“IPR”) of the ‘492 patent in response to VMware, Inc.’s IPR petition. As of January 29, 2021, VMware, Inc. reassessed its estimated loss accrual for the First Action based on the Post-Trial Order and determined that a loss was no longer probable and reasonably estimable with respect to the consolidated First and Second Actions. Accordingly, the estimated loss accrual recognized during the fiscal year ended January 31, 2020 totaling $237 million was adjusted to $0 with the credit included in Selling, general, and administrative in the Consolidated Statements of Income (Loss) for the fiscal year ended January 29, 2021. VMware, Inc. has reported that is unable at this time to assess whether, or to what extent, it may be found liable and, if found liable, what the damages may be. VMware, Inc. intends to vigorously defend itself in this matter.

Class Actions Related to VMware, Inc.’s Acquisition of Pivotal — NaN purported stockholders brought putative class action complaints arising out of VMware, Inc.’s acquisition of Pivotal Software, Inc. on December 30, 2019 as described in Note 1 of the Notes to the Condensed Consolidated Financial Statements. The 2 actions were consolidated in the Delaware Chancery Court into In re: Pivotal Software, Inc. Stockholders Litigation (Civil Action No. 2020-0440-KSJM). The complaint names as defendants the Company, VMware, Inc., Michael S. Dell, and certain officers of Pivotal. The plaintiffs generally allege that the defendants breached their fiduciary duties to the former holders of Pivotal Class A Common Stock in connection with VMware, Inc.’s acquisition of Pivotal by allegedly causing Pivotal to enter into a transaction that favored the interests of Pivotal’s controlling stockholders at the expense of such former stockholders. The plaintiffs seek, among other remedies, a judicial declaration that the defendants breached their fiduciary duties and an award of damages, fees, and costs.

Other Litigation — ~~The various legal proceedings in which Dell is involved include commercial and intellectual property litigation.~~ Dell does not currently anticipate that any of these matters will have a material adverse effect on its business, financial condition, results of operations, or cash flows.

In accordance with the relevant accounting guidance, the Company provides disclosures of matters where it is at least reasonably possible that the Company could experience a material loss exceeding the amounts already accrued for these or other proceedings or matters. In addition, the Company also discloses matters based on its consideration of other matters and qualitative factors, including the experience of other companies in the industry, and investor, customer, and employee relations considerations. As of ~~October~~April 30, ~~2020,~~2021, the Company does not believe there is a reasonable possibility that a material loss exceeding the amounts already accrued for these or other proceedings or matters has been incurred. However, since the ultimate resolution of any such proceedings and matters is inherently unpredictable, the Company’s business, financial condition, results of operations, or cash flows could be materially affected in any particular period by unfavorable outcomes in one or more of these proceedings or matters. Whether the outcome of any claim, suit, assessment, investigation, or legal proceeding, individually or collectively, could have a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows will depend on a number of variables, including the nature, timing, and amount of any associated expenses, amounts paid in settlement, damages, or other remedies or consequences.

Indemnifications

In the ordinary course of business, the Company enters into contractual arrangements under which it may agree to indemnify ~~the third party to such arrangements from any~~other parties for losses incurred ~~relating to the services it performs on behalf of the Company or for losses arising~~ from certain events as defined in the ~~particular~~relevant contract, such as litigation, regulatory penalties, or claims relating to past performance. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments related to these indemnifications have not been material to the Company.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 1110 — INCOME AND OTHER TAXES

For the three months ended ~~October~~April 30, ~~2020 and November 1, 2019,~~2021, the Company’s effective income tax ~~rates were 37.2% and -247.2%~~rate was 5.0% on pre-tax income of ~~$1.4 billion and $159 million, respectively.~~$987 million. For the ~~nine~~three months ended ~~October 30,~~May 1, 2020, ~~and November 1, 2019,~~ the Company’s effective income tax ~~rates were -6.1% and 5482.1%~~rate was -33.8% on pre-tax income of ~~$2.0 billion and pre-tax losses of $95 million, respectively.~~$136 million. The changes in the Company’s effective income tax ~~rates are~~rate is primarily driven by higher discrete tax ~~items~~benefits on higher pre-tax income and a change in the Company’s jurisdictional mix of income.

~~The~~For the three months ended April 30, 2021, the Company’s effective income tax ~~rates~~rate includes discrete tax benefits of $103 million related to stock-based compensation. In comparison, for the three ~~and nine~~ months ended October 30, 2020 include a discrete tax expense of $359 million relating to the divestiture of RSA Security during the periods due to the relatively low tax basis for the assets sold, particularly goodwill. For the nine months ended October 30,May 1, 2020, the Company’s effective income tax rate ~~also~~ includes a discrete tax ~~benefits~~benefit of ~~$746 million related to an audit settlement and~~ $59 million from an intra-entity asset transfer of certain of Pivotal’s intellectual property to an Irish subsidiary that was completed by VMware, Inc. ~~For~~during the ~~nine months ended November 1, 2019, the Company’s~~quarter. The effective income tax rate ~~includes~~for future quarters of Fiscal 2022 may be impacted by the actual mix of jurisdictions in which income is generated, as well as the impact of any discrete tax benefits of $4.9 billion related to similar intra-entity asset transfers. The tax benefit for each intra-entity asset transfer was recorded as a deferred tax asset in the period of the transaction and represents the book and tax basis difference on the transferred assets measured based on the intellectual property’s current fair value and applicable Irish statutory tax rate. The Company expects to be able to realize the deferred tax assets resulting from these intra-entity asset transfers. The Company’s effective income tax rates for the three and nine months ended November 1, 2019 also include discrete tax benefits of $305 million related to an audit settlement.items.

The differences between the estimated effective income tax rates and the U.S. federal statutory rate of 21% principally result from the Company’s geographical distribution of income, differences between the book and tax treatment of certain items, and the discrete tax items discussed above. In certain jurisdictions, the Company’s tax rate is significantly less than the applicable statutory rate as a result of tax holidays. The majority of the Company’s foreign income that is subject to these tax holidays and lower tax rates is attributable to Singapore ~~China,~~ and ~~Malaysia.~~China. A significant portion of these income tax benefits ~~relates~~relate to a tax holiday that will be effective until January 31, 2029. The Company’s other tax holidays will expire in whole or in part during fiscal years 2022 through 2030. Many of these tax holidays and reduced tax rates may be extended when certain conditions are met or may be terminated early if certain conditions are not met. As of ~~October~~April 30, ~~2020,~~2021, the Company was not aware of any matters of non-compliance related to these tax holidays. ~~The effective income tax rate for future quarters of Fiscal 2021 may be impacted by the actual mix of jurisdictions in which income is generated.~~

~~During the nine months ended October 30, 2020, the Company effectively settled the~~The Internal Revenue Service (“IRS”) ~~audit for fiscal years 2010 through 2014, for which the Company made a cash payment of $435 million to the IRS on August 3, 2020. The IRS~~ is currently examining fiscal years 2015 through 2019. The Company believes it has valid positions supporting its tax returns and that it is adequately reserved.

The Company is also currently under income tax audits in various state and foreign jurisdictions. The Company is undergoing negotiations, and in some cases contested proceedings, relating to tax matters with the taxing authorities in these jurisdictions. The Company believes that it has valid positions supporting its tax returns and that it has provided adequate reserves related to all matters contained in tax periods open to examination. Although the Company believes it has made adequate provisions for the uncertainties surrounding these audits, should the Company experience unfavorable outcomes, such outcomes could have a material impact on its results of operations, financial position, and cash flows. With respect to major U.S., state and foreign taxing jurisdictions, the Company is generally not subject to tax examinations for years prior to the fiscal year ended January 29, 2010.

Judgment is required in evaluating the Company’s uncertain tax positions and determining the Company’s provision for income taxes. The unrecognized tax benefits were $1.4 billion ~~and $2.5 billion~~ as of ~~October~~both April 30, ~~2020~~2021 and January ~~31, 2020, respectively,~~29, 2021, and are included in ~~accrued and other and~~ other non-current liabilities in the Condensed Consolidated Statements of Financial Position. The Company does not anticipate a significant change to the total amount of unrecognized tax benefits within the next twelve months.

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

The Company takes certain non-income tax positions in the jurisdictions in which it operates and has received certain non-income tax assessments from various jurisdictions. The Company believes that a material loss in these matters is not probable and that it is not reasonably possible that a material loss exceeding amounts already accrued has been incurred. The Company believes its positions in these non-income tax litigation matters are supportable and that it ultimately will prevail in the matters. In the normal course of business, the Company’s positions and conclusions related to its non-income taxes could be challenged and assessments may be made. To the extent new information is obtained and the Company’s views on its positions, probable outcomes of assessments, or litigation change, changes in estimates to the Company’s accrued liabilities would be recorded in the period in which such a determination is made. In the resolution process for income tax and non-income tax audits, the Company is required in certain situations to provide collateral guarantees or indemnification to regulators and tax authorities until the matter is resolved.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 1211 — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) is presented in stockholders’ equity (deficit) in the Condensed Consolidated Statements of Financial Position and consists of amounts related to foreign currency translation adjustments, unrealized net gains (losses) on cash flow hedges, and actuarial net gains (losses) from pension and other postretirement plans.

The following table presents changes in accumulated other comprehensive income (loss), net of tax, by the following components as of the dates indicated:


		Foreign Currency Translation Adjustments		Cash Flow Hedges		Pension and Other Postretirement Plans			Accumulated Other Comprehensive Income (Loss)			Foreign Currency Translation Adjustments		Cash Flow Hedges		Pension and Other Postretirement Plans		Accumulated Other Comprehensive Income (Loss)
		(in millions)						(in millions)
Balances as of January 31, 2020		$	(678)	$	14	$	(45)		$	(709)
Balances as of January 29, 2021											Balances as of January 29, 2021	$	(150)	$	(86)	$	(78)	$	(314)

Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	243		(45)		(21)			177		Other comprehensive income (loss) before reclassifications	(7)		(1)		1		(7)
Amounts reclassified from accumulated other comprehensive income (loss)	Amounts reclassified from accumulated other comprehensive income (loss)	0		(24)		3			(21)		Amounts reclassified from accumulated other comprehensive income (loss)	0		27		0		27
Total change for the period	Total change for the period	243		(69)		(18)			156		Total change for the period	(7)		26		1		20
Less: Change in comprehensive income (loss) attributable to non-controlling interests	Less: Change in comprehensive income (loss) attributable to non-controlling interests	0		0		0			0		Less: Change in comprehensive income (loss) attributable to non-controlling interests	0		0		0		0
Balances as of October 30, 2020		$	(435)	$	(55)	$	(63)		$	(553)
Balances as of April 30, 2021											Balances as of April 30, 2021	$	(157)	$	(60)	$	(77)	$	(294)

Amounts related to the Company’s cash flow hedges are reclassified to net income during the same period in which the items being hedged are recognized in earnings. See Note 76 of the Notes to the Condensed Consolidated Financial Statements for more information on the Company’s derivative instruments.

~~Table of Contents~~

~~DELL TECHNOLOGIES INC.~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(unaudited)~~

The following table presents reclassifications out of accumulated other comprehensive income (loss), net of tax, to net income for the periods indicated:


		Three Months Ended													Three Months Ended
		October 30, 2020						November 1, 2019								April 30, 2021						May 1, 2020
		Cash Flow Hedges		Pensions		Total		Cash Flow Hedges		Pensions		Total				Cash Flow Hedges		Pensions		Total		Cash Flow Hedges		Pensions		Total
		(in millions)													(in millions)
Total reclassifications, net of tax:	Total reclassifications, net of tax:													Total reclassifications, net of tax:
Net revenue	Net revenue	$	(88)	$	0	$	(88)	$	71	$	0	$	71	Net revenue		$	(29)	$	0	$	(29)	$	96	$	0	$	96
Cost of net revenue	Cost of net revenue	4		0		4		0		0		0		Cost of net revenue		2		0		2		4		0		4
Operating expenses	Operating expenses	0		1		1		0		0		0		Operating expenses		0		0		0		0		(2)		(2)

Total reclassifications, net of tax	Total reclassifications, net of tax	$	(84)	$	1	$	(83)	$	71	$	0	$	71	Total reclassifications, net of tax		$	(27)	$	0	$	(27)	$	100	$	(2)	$	98

		Nine Months Ended
		October 30, 2020						November 1, 2019
		Cash Flow Hedges		Pensions		Total		Cash Flow Hedges		Pensions		Total
		(in millions)
Total reclassifications, net of tax:
Net revenue		$	17	$	0	$	17	$	197	$	0	$	197
Cost of net revenue		7		0		7		0		0		0
Operating expenses		0		(3)		(3)		0		0		0

Total reclassifications, net of tax		$	24	$	(3)	$	21	$	197	$	0	$	197

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 1312 — NON-CONTROLLING INTERESTS

VMware, Inc. — The non-controlling interests’ share of equity in VMware, Inc. is reflected as a component of the non-controlling interests in the Condensed Consolidated Statements of Financial Position and was $5.0 billion ~~and $4.6 billion~~ as of ~~October~~both April 30, ~~2020~~2021 and January ~~31, 2020, respectively.~~29, 2021. As of ~~October~~April 30, ~~2020~~2021 and January ~~31, 2020,~~29, 2021, the Company held approximately ~~80.4%~~80.7% and ~~80.9%~~80.6%, respectively, of the outstanding equity interest in VMware, Inc.

As a result of VMware, Inc.’s acquisition of the non-controlling interest in Pivotal from Pivotal’s public shareholders on December 30, 2019, as described in Note 1 of the Notes to the Condensed Consolidated Financial Statements, the non-controlling interests’ share of equity in Pivotal is only reflected as a component of the non-controlling interest through December 30, 2019. Pivotal’s Class A common stock ceased to be listed and traded on the NYSE as of the acquisition date, and there was 0 non-controlling interest in Pivotal as of October 30, 2020 and January 31, 2020.

Secureworks — The non-controlling interests’ share of equity in Secureworks is reflected as a component of the non-controlling interests in the Condensed Consolidated Statements of Financial Position and was ~~$94~~$101 million and ~~$88~~$96 million as of ~~October~~April 30, ~~2020~~2021 and January ~~31, 2020,~~29, 2021, respectively. As of ~~October~~April 30, ~~2020~~2021 and January ~~31, 2020,~~29, 2021, the Company held approximately ~~85.9%~~84.6% and ~~86.8%~~85.7%, respectively, of the outstanding equity interest in Secureworks, excluding restricted stock awards (“RSAs”)~~. As of October 30, 2020~~ and ~~January 31, 2020, the Company held approximately 85.1%~~83.8% and ~~86.2%~~84.9%, respectively, ~~of the outstanding equity interest in Secureworks,~~ including RSAs.

The following table presents the effect of changes in the Company’s ownership interest in VMware, Inc. and Secureworks on the Company’s equity for the period indicated:


	~~Nine~~Three Months Ended
	~~October~~April 30, ~~2020~~2021
	(in millions)
Net income attributable to Dell Technologies Inc.	$	~~2,023~~887
Transfers (to)/from the non-controlling interests:
Increase in Dell Technologies Inc. additional paid-in-capital for equity issuances and other equity activity	~~774~~251
Decrease in Dell Technologies Inc. additional paid-in-capital for equity issuances and other equity activity	~~(704)~~(249)
Net transfers to non-controlling interests	702
Change from net income attributable to Dell Technologies Inc. and transfers to the non-controlling interests	$	~~2,093~~889

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 1413 — CAPITALIZATION

The following table presents the Company’s authorized, issued, and outstanding common stock as of the dates indicated:


		Authorized	Issued	Outstanding		Authorized	Issued	Outstanding
		(in millions)				(in millions)
Common stock as of October 30, 2020
Common stock as of April 30, 2021					Common stock as of April 30, 2021
Class A	Class A	600	385	385	Class A	600	385	385
Class B	Class B	200	102	102	Class B	200	102	102
Class C	Class C	7,900	270	262	Class C	7,900	285	277
Class D	Class D	100	0	0	Class D	100	0	0
Class V	Class V	343	0	0	Class V	343	0	0
		9,143	757	749		9,143	772	764

Common stock as of January 31, 2020
Common stock as of January 29, 2021					Common stock as of January 29, 2021
Class A	Class A	600	385	385	Class A	600	385	385
Class B	Class B	200	102	102	Class B	200	102	102
Class C	Class C	7,900	258	256	Class C	7,900	274	266
Class D	Class D	100	0	0	Class D	100	0	0
Class V	Class V	343	0	0	Class V	343	0	0
		9,143	745	743		9,143	761	753

Under the Company’s certificate of incorporation as amended and restated upon the completion of the Class V transaction described in Note 1 of the Notes to the Condensed Consolidated Financial Statements, the Company is prohibited from issuing any of the authorized shares of Class V Common Stock.

Preferred Stock

The Company is authorized to issue 1000000 shares of preferred stock, par value $0.01 per share. As of ~~October~~April 30, ~~2020~~2021 and January ~~31, 2020,~~29, 2021, 0 shares of preferred stock were issued or outstanding.

Common Stock

Dell Technologies Common Stock — The Class A Common Stock, the Class B Common Stock, the Class C Common Stock, and the Class D Common Stock are collectively referred to as Dell Technologies Common Stock. The par value for all classes of Dell Technologies Common Stock is $0.01 per share. The Class A Common Stock, the Class B Common Stock, the Class C Common Stock, and the Class D Common Stock share equally in dividends declared or accumulated and have equal participation rights in undistributed earnings.

Voting Rights — Each holder of record of (a) Class A Common Stock is entitled to 10 votes per share of Class A Common Stock; (b) Class B Common Stock is entitled to 10 votes per share of Class B Common Stock; (c) Class C Common Stock is entitled to 1 vote per share of Class C Common Stock; and (d) Class D Common Stock is not entitled to any vote on any matter except to the extent required by provisions of Delaware law (in which case such holder is entitled to 1 vote per share of Class D Common Stock).

Conversion Rights — Under the Company’s certificate of incorporation, at any time and from time to time, any holder of Class A Common Stock or Class B Common Stock has the right to convert all or any of the shares of Class A Common Stock or Class B Common Stock, as applicable, held by such holder into shares of Class C Common Stock on a one-to-one basis. During the ~~nine~~three months ended ~~October~~April 30, ~~2020,~~2021, the Company issued ~~72,727~~49,209 shares of Class C Common Stock to stockholders upon the conversion of the same number of shares of Class A Common Stock into Class C Common Stock in accordance with the Company’s certificate of incorporation.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Repurchases of Common Stock

Dell Technologies Common Stock Repurchases by Dell Technologies

On February 24, 2020, the Company’s board of directors approved a stock repurchase program under which the Company is authorized to repurchase up to $1.0 billion of shares of the Class C Common Stock over a 24-month period expiring on February 28, 2022, of which approximately $760 million remained available as of ~~October~~April 30, ~~2020.~~2021. During the ~~nine~~three months ended ~~October 30,~~May 1, 2020, the Company repurchased approximately 6 million shares of Class C Common Stock for approximately $240 ~~million. During the three months ended May 1, 2020, the Company~~million and subsequently suspended activity under its stock repurchase program. ~~During the nine months ended November 1, 2019, Dell Technologies Common Stock repurchases were immaterial.~~

To the extent not retired, shares repurchased under the repurchase program are placed in the Company’s treasury.

VMware, Inc. Class A Common Stock Repurchases by VMware, Inc.

On May 29, 2019, VMware, Inc.’s board of directors authorized the repurchase of up to $1.5 billion of VMware, Inc.’s Class A common stock through January 29, 2021. On July 15, 2020, VMware, Inc.’s board of directors extended authorization of VMware, Inc.’s existing repurchase program and authorized the repurchase of up to an additional $1.0 billion of VMware, Inc.’s Class A common stock through January 28, 2022. As of ~~October~~April 30, ~~2020,~~2021, the cumulative authorized amount remaining for stock repurchases was ~~$1.4 billion.~~$684 million.

During the ~~nine~~three months ended ~~October~~April 30, ~~2020,~~2021, VMware, Inc. repurchased ~~4.2~~2.5 million shares of its Class A common stock in the open market for approximately ~~$566~~$371 million. During the ~~nine~~three months ended ~~November~~May 1, ~~2019,~~2020, VMware, Inc. repurchased ~~7.3~~approximately 1.5 million shares of its Class A common stock in the open market for approximately $1.3 billion, of which approximately $0.2 billion impacted Dell Technologies’ accumulated deficit balance as of November 1, 2019 as a result of the full depletion of VMware, Inc’s additional paid-in capital in the same period.$181 million.

All shares repurchased under VMware, Inc.’s stock repurchase programs are retired.

The above VMware, Inc. Class A common stock repurchases for the ~~nine~~three months ended ~~October~~April 30, ~~2020~~2021 and ~~November~~May 1, ~~2019~~2020 exclude shares repurchased to settle employee tax withholding related to the vesting of VMware, Inc. stock awards of ~~$315~~$52 million and ~~$442~~$154 million, respectively.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 1514 — EARNINGS PER SHARE

Basic earnings per share is based on the weighted-average effect of all common shares issued and outstanding and is 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 exercise or conversion of all potentially dilutive instruments. The Company excludes equity instruments from the calculation of diluted earnings per share if the effect of including such instruments is antidilutive.

The Class A Common Stock, the Class B Common Stock, the Class C Common Stock, and the Class D Common Stock are collectively referred to as Dell Technologies Common Stock.

For purposes of calculating earnings per share, the Company uses the two-class method. As all classes of Dell Technologies Common Stock share the same rights in dividends, basic and diluted earnings per share are the same for each class of Dell Technologies Common Stock.

The following table presents the basic and diluted earnings per share for the periods indicated:


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019			April 30, 2021		May 1, 2020
Earnings per share attributable to Dell Technologies Inc.	Earnings per share attributable to Dell Technologies Inc.									Earnings per share attributable to Dell Technologies Inc.
Dell Technologies Common Stock — Basic	Dell Technologies Common Stock — Basic	$	1.11	$	0.69	$	2.73	$	5.84	Dell Technologies Common Stock — Basic	$	1.17	$	0.19
Dell Technologies Common Stock — Diluted	Dell Technologies Common Stock — Diluted	$	1.08	$	0.66	$	2.64	$	5.50	Dell Technologies Common Stock — Diluted	$	1.13	$	0.19

The following table presents the computation of basic and diluted earnings per share for the periods indicated:


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019			April 30, 2021		May 1, 2020
		(in millions)									(in millions)
Numerator: Dell Technologies Common Stock	Numerator: Dell Technologies Common Stock									Numerator: Dell Technologies Common Stock
Net income attributable to Dell Technologies — basic	Net income attributable to Dell Technologies — basic	$	832	$	499	$	2,023	$	4,208	Net income attributable to Dell Technologies — basic	$	887	$	143
Incremental dilution from VMware, Inc. attributable to Dell Technologies (a)	Incremental dilution from VMware, Inc. attributable to Dell Technologies (a)	(3)		(6)		(8)		(81)		Incremental dilution from VMware, Inc. attributable to Dell Technologies (a)	(2)		(2)
Net income attributable to Dell Technologies — diluted	Net income attributable to Dell Technologies — diluted	$	829	$	493	$	2,015	$	4,127	Net income attributable to Dell Technologies — diluted	$	885	$	141

Denominator: Dell Technologies Common Stock weighted-average shares outstanding	Denominator: Dell Technologies Common Stock weighted-average shares outstanding									Denominator: Dell Technologies Common Stock weighted-average shares outstanding
Weighted-average shares outstanding — basic	Weighted-average shares outstanding — basic	747		725		742		720		Weighted-average shares outstanding — basic	757		740
Dilutive effect of options, restricted stock units, restricted stock, and other	Dilutive effect of options, restricted stock units, restricted stock, and other	24		25		22		30		Dilutive effect of options, restricted stock units, restricted stock, and other	25		15
Weighted-average shares outstanding — diluted	Weighted-average shares outstanding — diluted	771		750		764		750		Weighted-average shares outstanding — diluted	782		755
Weighted-average shares outstanding — antidilutive	Weighted-average shares outstanding — antidilutive	0		0		1		0		Weighted-average shares outstanding — antidilutive	0		8

____________________

(a)The incremental dilution from VMware, Inc. represents the impact of VMware, Inc.’s dilutive securities on diluted earnings per share of Dell Technologies Common Stock, and is calculated by multiplying the difference between VMware, Inc.’s basic and diluted earnings per share by the number of shares of VMware, Inc. common stock held by the Company. For the three and nine months ended November 1, 2019, the incremental dilution from VMware, Inc. was calculated by the Company without regard to VMware, Inc.’s required retrospective adjustments for the Pivotal acquisition in its stand-alone financial statements, and there was no incremental dilution from Pivotal due to its net loss position. For both periods presented, there was no incremental dilution from Secureworks due to its net loss position.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 1615 — REDEEMABLE SHARES

Awards under the Company’s stock incentive plans include certain rights that allow the holder to exercise a put feature for the underlying Class A or Class C Common Stock after a six month holding period following the issuance of such common stock. The put feature requires the Company to purchase the stock at its fair market value. Accordingly, these awards and such common stock are subject to reclassification from equity to temporary equity, and the Company determines the award amounts to be classified as temporary equity as follows:

•For stock options to purchase Class C Common Stock subject to service requirements, the intrinsic value of the option is multiplied by the portion of the option for which services have been rendered. Upon exercise of the option, the amount in temporary equity represents the fair value of the Class C Common Stock.

•For stock appreciation rights, restricted stock units, or restricted stock awards, any of which stock award types are subject to service requirements, the fair value of the share is multiplied by the portion of the share for which services have been rendered.

•For share-based arrangements that are subject to the occurrence of a contingent event, those amounts are reclassified to temporary equity based on a probability assessment performed by the Company on a periodic basis. Contingent events include the achievement of performance-based metrics.

In connection with the Class V transaction described in Note 1 of the Notes to the Condensed Consolidated Financial Statements, the put feature provisions were amended to provide that the put feature ~~applicable to transfers of Dell Technologies securities~~ will terminate upon the earlier of ~~two years after the expiration on~~ June 27, ~~2019 of~~2021 or the ~~post-transaction lock-up or~~ consummation of any underwritten public offering of shares of Class C Common Stock.

The following table presents the amount of redeemable shares classified as temporary equity and summarizes the award type as of the dates indicated:


		October 30, 2020		January 31, 2020			April 30, 2021		January 29, 2021
		(in millions)					(in millions)
Redeemable shares classified as temporary equity	Redeemable shares classified as temporary equity	$	527	$	629	Redeemable shares classified as temporary equity	$	558	$	472

Issued and outstanding unrestricted common shares	Issued and outstanding unrestricted common shares	2		2		Issued and outstanding unrestricted common shares	1		2
Restricted stock units	Restricted stock units	0		1		Restricted stock units	1		0
Restricted stock awards		0		0

Outstanding stock options	Outstanding stock options	9		15		Outstanding stock options	3		6

The ~~decrease~~increase in the value of redeemable shares during the ~~nine~~three months ended ~~October~~April 30, ~~2020~~2021 was primarily attributable to an increase in Class C Common stock fair value, offset by a reduction in the number of shares eligible for put rights.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 1716 — SEGMENT INFORMATION

The Company has 3 reportable segments that are based on the following business units: Infrastructure Solutions Group (“ISG”); Client Solutions Group (“CSG”); and VMware.

On December 30, 2019, VMware, Inc. completed its acquisition of Pivotal. Due to the Company’s ownership of a controlling interest in Pivotal, the Company and VMware, Inc. accounted for the Pivotal acquisition as a transaction between entities under common control, and consequently the transaction had no net effect to the Company’s consolidated financial statements. Pivotal now operates as a wholly-owned subsidiary of VMware, Inc. and Dell Technologies reports Pivotal results within the VMware reportable segment. Previously, Pivotal results were reported within Other businesses. Prior period results have been recast to conform with the current period presentation.

ISG enables the digital transformation of the Company’s customers through its trusted multi-cloud and big data solutions, which are built upon a modern data center infrastructure. The ISG comprehensive portfolio of advanced storage solutions includes traditional storage solutions as well as next-generation storage solutions (such as all-flash arrays, scale-out file, object platforms, and software-defined solutions), while the Company’s server portfolio includes high-performance rack, blade, tower, and hyperscale servers. The ISG networking portfolio helps business customers transform and modernize their infrastructure, mobilize and enrich end-user experiences, and accelerate business applications and processes. ISG also offers attached software, peripherals, and services, including support and deployment, configuration, and extended warranty services.

CSG includes sales to commercial and consumer customers of branded hardware (such as desktops, workstations, and notebooks) and branded peripherals (such as displays and projectors), as well as services and third-party software and peripherals. CSG also offers attached software, peripherals, and services, including support and deployment, configuration, and extended warranty services.

VMware works with customers in the areas of hybrid and multi-cloud, modern applications, networking, security, and digital workspaces, helping customers manage their IT resources across private clouds and complex multi-cloud, multi-device environments. VMware enables its customers to digitally transform their operations as they ready their applications, infrastructure, and employees for constantly evolving business needs.

The reportable segments disclosed herein are based on information reviewed by the Company’s management to evaluate the business segment results. The Company’s measure of segment revenue and segment operating income for management reporting purposes excludes the impact of Other businesses, unallocated corporate transactions, the impact of purchase accounting, amortization of intangible assets, transaction-related expenses, stock-based compensation expense, and other corporate expenses, as applicable. The Company does not allocate assets to the above reportable segments for internal reporting purposes.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table presents a reconciliation of net revenue by the Company’s reportable segments to the Company’s consolidated net revenue as well as a reconciliation of consolidated segment operating income to the Company’s consolidated operating income for the periods indicated:


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019			April 30, 2021		May 1, 2020
		(in millions)									(in millions)
Consolidated net revenue:	Consolidated net revenue:									Consolidated net revenue:
Infrastructure Solutions Group	Infrastructure Solutions Group	$	8,024	$	8,390	$	23,800	$	25,213	Infrastructure Solutions Group	$	7,911	$	7,569
Client Solutions Group	Client Solutions Group	12,286		11,410		34,593		34,068		Client Solutions Group	13,305		11,104
VMware	VMware	2,893		2,671		8,556		7,779		VMware	2,991		2,755
Reportable segment net revenue	Reportable segment net revenue	23,203		22,471		66,949		67,060		Reportable segment net revenue	24,207		21,428
Other businesses (a)	Other businesses (a)	314		456		1,288		1,311		Other businesses (a)	290		517
Unallocated transactions (b)	Unallocated transactions (b)	4		1		4		1		Unallocated transactions (b)	2		0
Impact of purchase accounting (c)	Impact of purchase accounting (c)	(39)		(84)		(129)		(250)		Impact of purchase accounting (c)	(12)		(48)
Total consolidated net revenue	Total consolidated net revenue	$	23,482	$	22,844	$	68,112	$	68,122	Total consolidated net revenue	$	24,487	$	21,897

Consolidated operating income:	Consolidated operating income:									Consolidated operating income:
Infrastructure Solutions Group	Infrastructure Solutions Group	$	882	$	996	$	2,587	$	2,889	Infrastructure Solutions Group	$	788	$	732
Client Solutions Group	Client Solutions Group	1,002		739		2,309		2,514		Client Solutions Group	1,090		592
VMware	VMware	837		709		2,504		2,055		VMware	841		773
Reportable segment operating income	Reportable segment operating income	2,721		2,444		7,400		7,458		Reportable segment operating income	2,719		2,097
Other businesses (a)	Other businesses (a)	3		0		105		(48)		Other businesses (a)	(5)		65
Unallocated transactions (b)	Unallocated transactions (b)	1		(2)		(1)		(29)		Unallocated transactions (b)	0		(1)
Impact of purchase accounting (c)	Impact of purchase accounting (c)	(49)		(96)		(165)		(299)		Impact of purchase accounting (c)	(25)		(63)
Amortization of intangibles	Amortization of intangibles	(845)		(1,057)		(2,547)		(3,334)		Amortization of intangibles	(709)		(855)
Transaction-related expenses (d)	Transaction-related expenses (d)	(52)		(76)		(211)		(165)		Transaction-related expenses (d)	(51)		(76)
Stock-based compensation expense (e)	Stock-based compensation expense (e)	(436)		(322)		(1,219)		(886)		Stock-based compensation expense (e)	(435)		(370)
Other corporate expenses (f)	Other corporate expenses (f)	(214)		(55)		(395)		(792)		Other corporate expenses (f)	(119)		(95)
Total consolidated operating income	Total consolidated operating income	$	1,129	$	836	$	2,967	$	1,905	Total consolidated operating income	$	1,375	$	702

____________________

(a)Secureworks, Virtustream, and Boomi constitute ~~“Other businesses”~~Other businesses and do not meet the requirements for a reportable segment, either individually or collectively. The results of Other businesses are not material to the Company’s overall results. On September 1, 2020, the Company completed the sale of RSA Security. Prior to the divestiture, RSA Security’s results were included ~~in “Other~~within Other businesses.” See Note 1 of the Notes to the Condensed Consolidated Financial Statements for more information about the ~~sale~~divestiture of RSA Security.

(b)Unallocated transactions includes other corporate items that are not allocated to Dell Technologies’ reportable segments.

(c)Impact of purchase accounting includes non-cash purchase accounting adjustments that are primarily related to the EMC merger transaction.

(d)Transaction-related expenses includes acquisition, integration, and divestiture related costs.

(e)Stock-based compensation expense consists of equity awards granted based on the estimated fair value of those awards at grant date.

(f)Other corporate expenses includes impairment charges, severance, facility action, and other costs. ~~During the nine months ended November 1, 2019, this category includes Virtustream gross impairment charges of $619 million.~~

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table presents the disaggregation of net revenue by reportable segment, and by major product categories within the segments for the periods indicated:


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019			April 30, 2021		May 1, 2020
		(in millions)									(in millions)
Net revenue:	Net revenue:									Net revenue:
Infrastructure Solutions Group:	Infrastructure Solutions Group:									Infrastructure Solutions Group:
Servers and networking	Servers and networking	$	4,164	$	4,241	$	12,118	$	12,858	Servers and networking	$	4,109	$	3,758
Storage	Storage	3,860		4,149		11,682		12,355		Storage	3,802		3,811
Total ISG net revenue	Total ISG net revenue	8,024		8,390		23,800		25,213		Total ISG net revenue	7,911		7,569
Client Solutions Group:	Client Solutions Group:									Client Solutions Group:
Commercial	Commercial	8,783		8,330		25,456		25,714		Commercial	9,803		8,634
Consumer	Consumer	3,503		3,080		9,137		8,354		Consumer	3,502		2,470
Total CSG net revenue	Total CSG net revenue	12,286		11,410		34,593		34,068		Total CSG net revenue	13,305		11,104
VMware:	VMware:									VMware:
Total VMware net revenue	Total VMware net revenue	2,893		2,671		8,556		7,779		Total VMware net revenue	2,991		2,755
Total segment net revenue	Total segment net revenue	$	23,203	$	22,471	$	66,949	$	67,060	Total segment net revenue	$	24,207	$	21,428

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 1817 — SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION

The following table presents additional information on selected accounts included in the Condensed Consolidated Statements of Financial Position as of the dates indicated:


		October 30, 2020		January 31, 2020			April 30, 2021		January 29, 2021
		(in millions)					(in millions)
Cash, cash equivalents, and restricted cash:	Cash, cash equivalents, and restricted cash:					Cash, cash equivalents, and restricted cash:
Cash and cash equivalents	Cash and cash equivalents	$	11,304	$	9,302	Cash and cash equivalents	$	14,244	$	14,201
Restricted cash - other current assets (a)	Restricted cash - other current assets (a)	761		730		Restricted cash - other current assets (a)	930		891
Restricted cash - other non-current assets (a)	Restricted cash - other non-current assets (a)	92		119		Restricted cash - other non-current assets (a)	86		92
Total cash, cash equivalents, and restricted cash	Total cash, cash equivalents, and restricted cash	$	12,157	$	10,151	Total cash, cash equivalents, and restricted cash	$	15,260	$	15,184
Inventories, net:	Inventories, net:					Inventories, net:
Production materials	Production materials	$	1,687	$	1,590	Production materials	$	2,023	$	1,717
Work-in-process	Work-in-process	710		563		Work-in-process	739		677
Finished goods	Finished goods	996		1,128		Finished goods	1,066		1,008
Total inventories, net	Total inventories, net	$	3,393	$	3,281	Total inventories, net	$	3,828	$	3,402

Property, plant, and equipment, net:						Property, plant, and equipment, net:
Computer equipment						Computer equipment	6,839		6,506
Land and buildings						Land and buildings	4,670		4,745
Machinery and other equipment						Machinery and other equipment	3,960		3,933
Total property, plant, and equipment						Total property, plant, and equipment	15,469		15,184
Accumulated depreciation and amortization						Accumulated depreciation and amortization	(8,912)		(8,753)
Total property, plant, and equipment, net						Total property, plant, and equipment, net	6,557		6,431
Other non-current assets:	Other non-current assets:					Other non-current assets:
Deferred and other tax assets	Deferred and other tax assets	$	6,127	$	5,960	Deferred and other tax assets	$	6,351	$	6,230
Operating lease ROU assets	Operating lease ROU assets	2,179		1,780		Operating lease ROU assets	2,088		2,117
Deferred commissions	Deferred commissions	1,028		998		Deferred commissions	1,111		1,094
Other	Other	1,727		1,690		Other	1,807		1,755
Total other non-current assets	Total other non-current assets	$	11,061	$	10,428	Total other non-current assets	$	11,357	$	11,196
Other non-current liabilities:
Deferred and other tax liabilities		$	2,184	$	3,110
Operating lease liabilities		1,829		1,360
Warranty liability		130		155
Other		1,290		758
Total other non-current liabilities		$	5,433	$	5,383

____________________

(a) Restricted cash primarily includes cash required to be held in escrow pursuant to DFS securitization ~~arrangements and VMware, Inc. restricted cash.~~arrangements.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Trade Receivables — Allowance for Expected Credit Losses

Allowance for expected credit losses of trade receivables as of October 30, 2020 includes the impact of adoption of the new CECL standard, which was adopted as of February 1, 2020 using the modified retrospective method, as described in Note 1 of the Notes to the Condensed Consolidated Financial Statements. The provision recognized on the Condensed Consolidated Statements of Income (Loss) during the three and nine months ended October 30, 2020 is based on an assessment of the impact of current and expected future conditions, inclusive of the effect of the COVID-19 pandemic on credit losses. The duration and severity of COVID-19 and continued market volatility is highly uncertain and, as such, the impact on expected credit losses is subject to significant judgment and may cause variability in the Company’s allowance for credit losses in future periods.

The following table presents the changes in the Company’s allowance for expected credit losses for the periods indicated:


		Three Months Ended		Nine Months Ended			Three Months Ended
		October 30, 2020		October 30, 2020			April 30, 2021		May 1, 2020
		(in millions)					(in millions)
Trade Receivables - Allowance for expected credit losses:
Trade Receivables — Allowance for expected credit losses:						Trade Receivables — Allowance for expected credit losses:
Balance at beginning of period	Balance at beginning of period	$	146	$	94	Balance at beginning of period	$	104	$	94
Adjustment for adoption of the new CECL standard (Note 1)		0		27
Adjustment for adoption of accounting standard (a)						Adjustment for adoption of accounting standard (a)	0		27

Provision charged to income statement	Provision charged to income statement	(4)		43		Provision charged to income statement	10		36
Bad debt write-offs	Bad debt write-offs	(27)		(49)		Bad debt write-offs	(10)		(13)
Balance at end of period	Balance at end of period	$	115	$	115	Balance at end of period	$	104	$	144

____________________

(a)The Company adopted the current expected credit losses standard as of February 1, 2020 using the modified retrospective method, with the cumulative-effect adjustment to the opening balance of stockholders’ equity (deficit) as of the adoption date.

Warranty Liability

The following table presents changes in the Company’s liability for standard limited warranties for the periods indicated:


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019			April 30, 2021		May 1, 2020
		(in millions)									(in millions)
Warranty liability:	Warranty liability:									Warranty liability:
Warranty liability at beginning of period	Warranty liability at beginning of period	$	479	$	525	$	496	$	524	Warranty liability at beginning of period	$	473	$	496

Costs accrued for new warranty contracts and changes in estimates for pre-existing warranties (a) (b)	Costs accrued for new warranty contracts and changes in estimates for pre-existing warranties (a) (b)	219		211		573		651		Costs accrued for new warranty contracts and changes in estimates for pre-existing warranties (a) (b)	202		148
Service obligations honored	Service obligations honored	(206)		(216)		(577)		(655)		Service obligations honored	(217)		(168)
Warranty liability at end of period	Warranty liability at end of period	$	492	$	520	$	492	$	520	Warranty liability at end of period	$	458	$	476
Current portion	Current portion	$	362	$	351	$	362	$	351	Current portion	$	345	$	333
Non-current portion	Non-current portion	$	130	$	169	$	130	$	169	Non-current portion	$	113	$	143

____________________

(a)Changes in cost estimates related to pre-existing warranties are aggregated with accruals for new standard warranty contracts. The Company’s warranty liability process does not differentiate between estimates made for pre-existing warranties and new warranty obligations.

(b)Includes the impact of foreign currency exchange rate fluctuations.

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DELL TECHNOLOGIES INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Severance Charges

The Company incurs costs related to employee severance and records a liability for these costs when it is probable that employees will be entitled to termination benefits and the amounts can be reasonably estimated. The liability related to these actions is included in accrued and other current liabilities in the Condensed Consolidated Statements of Financial Position. The following table presents the activity related to the Company’s severance liability for the periods indicated:


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019			April 30, 2021		May 1, 2020
		(in millions)									(in millions)
Severance liability:	Severance liability:									Severance liability:
Severance liability at beginning of period	Severance liability at beginning of period	$	168	$	115	$	196	$	146	Severance liability at beginning of period	$	138	$	196
Severance charges to provision	Severance charges to provision	226		44		417		141		Severance charges to provision	30		98
Cash paid and other (a)	Cash paid and other (a)	(181)		(44)		(400)		(172)		Cash paid and other (a)	(74)		(168)
Severance liability at end of period	Severance liability at end of period	$	213	$	115	$	213	$	115	Severance liability at end of period	$	94	$	126

____________________

(a)Other adjustments include the impact of foreign currency exchange rate fluctuations.

The following table presents severance charges as included in the Condensed Consolidated Statements of Income ~~(Loss)~~ for the periods indicated:


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019			April 30, 2021		May 1, 2020
		(in millions)									(in millions)
Severance charges:	Severance charges:									Severance charges:
Cost of net revenue	Cost of net revenue	$	46	$	0	$	58	$	14	Cost of net revenue	$	13	$	10
Selling, general, and administrative	Selling, general, and administrative	139		31		308		103		Selling, general, and administrative	14		81
Research and development	Research and development	41		13		51		24		Research and development	3		7
Total severance charges	Total severance charges	$	226	$	44	$	417	$	141	Total severance charges	$	30	$	98

Interest and Other, Net

The following table provides information regarding interest and other, net for the periods indicated:

Three Months Ended Nine Months Ended
October 30, 2020 November 1, 2019 October 30, 2020 November 1, 2019
(in millions)
Interest and other, net:
Investment income, primarily interest $ 11 $ 41 $ 47 $ 127
Gain on investments, net (a) 489 18 591 160
Interest expense (566) (654) (1,855) (2,045)
Foreign exchange (31) (43) (130) (123)
Other (b) 370 (39) 418 (119)
Total interest and other, net $ 273 $ (677) $ (929) $ (2,000)

~~____________________~~


	Three Months Ended
	April 30, 2021		May 1, 2020
	(in millions)
Interest and other, net:
Investment income, primarily interest	$	11	$	24
Gain on investments, net	157		94
Interest expense	(510)		(672)
Foreign exchange	(49)		(99)
Other	3		87
Total interest and other, net	$	(388)	$	(566)

~~(a)~~Includes a $465 million gain on the fair value adjustment of a strategic investment during three months ended October 30, 2020. See Note 3 of the Notes to the Condensed Consolidated Financial Statements for more information.

~~(b)~~Includes a pre-tax gain of $338 million on the sale of RSA Security during three months ended October 30, 2020. See Note 1 of the Notes to the Condensed Consolidated Financial Statements for more information.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 18 — SUBSEQUENT EVENTS

Debt Repayment — Subsequent to April 30, 2021, the Company repaid $1 billion principal amount of the Margin Loan Facility due April 2022.

Boomi Divestiture — On May 1, 2021, Dell Technologies announced its entry into a definitive agreement with Francisco Partners and TPG Capital to sell Boomi and certain related assets from the Company in a cash transaction valued at $4 billion, subject to certain closing adjustments. The transaction is expected to close by the end of calendar 2021, subject to customary closing conditions. The transaction is intended to support the Company’s focus on fueling growth by continuing to modernize Dell Technologies’ core infrastructure and PC businesses and by expanding in high-priority areas, including hybrid and private cloud, edge, telecom and Apex.

Boomi is included within Other Businesses and does not meet the requirements for a reportable segment.

Other than the matters identified above, there were no known events occurring after April 30, 2021 and up until the date of the issuance of this report that would materially affect the information presented herein.

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ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes included in the Company’s annual report on Form 10-K for the fiscal year ended January ~~31, 2020~~29, 2021 and the unaudited Condensed Consolidated Financial Statements included in this report. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs, and that are subject to numerous risks and uncertainties. Our actual results may differ materially from those expressed or implied in any forward-looking statements.

Unless otherwise indicated, all results presented are prepared in a manner that complies, in all material respects, with accounting principles generally accepted in the United States of America (“GAAP”). Additionally, unless otherwise indicated, all changes identified for the current-period results represent comparisons to results for the prior corresponding fiscal period.

Unless the context indicates otherwise, references in this report to “we,” “us,” “our,” the “Company,” and “Dell Technologies” mean Dell Technologies Inc. and its consolidated subsidiaries, references to “Dell” mean Dell Inc. and Dell Inc.’s consolidated subsidiaries, and references to “EMC” mean EMC Corporation and EMC Corporation’s consolidated subsidiaries.

Our fiscal year is the 52- or 53-week period ending on the Friday nearest January 31. We refer to our fiscal year ending January ~~29, 2021~~28, 2022 and our fiscal year ended January ~~31, 2020~~29, 2021 as “Fiscal ~~2021”~~2022” and “Fiscal ~~2020,~~2021,” respectively. Fiscal ~~2021~~2022 and Fiscal ~~2020~~2021 include 52 weeks.

INTRODUCTION

Dell Technologies is a leading global end-to-end technology provider, with a comprehensive portfolio of IT hardware, software, and services solutions spanning both traditional infrastructure and emerging multi-cloud technologies that enable our customers tohelps organizations build their digital future and transform how they work, live, and ~~live.~~play. We ~~operate globally across key functional areas such as~~provide customers with the industry’s broadest and most innovative technology and ~~product development, marketing, go-to-market,~~services portfolio for the data era, spanning both traditional infrastructure and ~~global services, and are supported by Dell Financial Services.~~emerging multi-cloud technologies. We continue to seamlessly deliver differentiated and holistic IT solutions to our customers, which has driven significant revenue growth and share gains.

Dell Technologies operates with significant scale and an unmatched breadth of complementary offerings. Digital transformation has become essential to all businesses, and we have expanded our portfolio to include holistic solutions that enable our customers to drive their ongoing digital transformation initiatives. Dell Technologies’ integrated solutions help customers modernize their IT infrastructure, manage and operate in a multi-cloud world, address workforce transformation, and provide critical solutions tothat keep people and organizations connected, which has proven even more important in this current time of disruption caused by the coronavirus ~~disease 2019 (“COVID-19”)~~ pandemic. We are ~~providing essential solutions to our~~helping customers ~~during this period of accelerated~~accelerate their digital ~~transformation~~transformations to improve and strengthen business and workforce productivity. With our extensive portfolio and our commitment to innovation, we ~~have the ability to~~ offer secure, integrated solutions that extend from the edge to the core to the cloud, and we are at the forefront of the software-defined and cloud native infrastructure era. ~~Our~~As further evidence of our commitment to innovation, we are evolving and expanding our IT as-a-Service and cloud offerings through Apex, and in May of Fiscal 2022, we announced new offers within our Apex portfolio. Apex will provide our customers with greater flexibility to scale IT to meet their evolving business needs and budgets.

Dell Technologies’ end-to-end portfolio is supported by a ~~differentiated~~world-class organization with unmatched size and scale. We operate globally in 180 countries across key functional areas, including technology and product development, marketing, sales, financial services, and global services. Our go-to-market engine ~~which~~ includes a ~~43,000-person~~39,000-person sales force and a global network of over 200,000 channel ~~partners,~~partners. Dell Financial Services and its affiliates (“DFS”) offer customer payment flexibility and enable synergies across the business. We employ 34,000 full-time service and support professionals and maintain more than 2,400 vendor-managed service centers. We manage a world-class supply chain that ~~together drive~~drives long-term growth and operating ~~efficiencies.~~efficiencies, with approximately $70 billion in annual procurement expenditures and over 750 parts distribution centers. Together, these elements provide a critical foundation for our success, enabling us to offer unparalleled capability to our customers and making us the integrator of choice.

In October 2020, Dell Technologies announced Project APEX, which will simplify how our customers can consume IT as-a-Service—across storage, servers, networking, hyper-converged infrastructure, PCs and broader solutions. As we release these solutions over time, businesses will be able to buy and implement IT with a simple, consistent cloud experience across our extensive product portfolio. Dell Technologies Cloud Console will give customers a single self-service interface to manage every aspect of their cloud and as-a-Service journey. Dell Technologies Storage as-a-Service will be deployed and managed on-premises by Dell Technologies.

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Spin-off of VMware, Inc.

On April 14, 2021, Dell Technologies entered into a Separation and Distribution Agreement with VMware, Inc, in which Dell Technologies owns a majority equity stake. Subject to the terms and conditions set forth in the Separation and Distribution Agreement, the businesses of VMware, Inc. will be separated from the remaining businesses of Dell Technologies through a series of transactions that will result in the pre-transaction stockholders of Dell Technologies owning shares in two, separate public companies: (1) VMware, Inc., which will own the businesses of VMware, Inc. and its subsidiaries, and (2) Dell Technologies, which will own Dell Technologies’ other businesses and subsidiaries (the “VMware Spin-off”).

VMware, Inc. will pay a cash dividend, pro rata, to each of the holders of VMware, Inc. common stock in an aggregate amount equal to an amount to be mutually agreed by the Company and VMware, Inc. between $11.5 billion and $12.0 billion, subject to the satisfaction of certain conditions of payment. Immediately following such payment, the separation of VMware, Inc. from the Company will occur, including through the termination or settlement of certain intercompany accounts and intercompany contracts and the other transactions. Upon the closing of the transaction, Dell Technologies intends to use net proceeds from its pro rata share of the cash dividend to repay debt.

In connection with and upon consummation of the VMware Spin-off, Dell Technologies and VMware, Inc. will enter into a Commercial Framework Agreement (the “CFA”). The CFA will provide a framework under which Dell Technologies and VMware, Inc. can continue their strategic commercial relationship after the transaction. The CFA will have an initial term of five years, with automatic one-year renewals occurring annually thereafter, subject to certain terms and conditions.

The transaction announcement did not have any impact on our Condensed Consolidated Financial Statements or segment reporting. We will report VMware results as discontinued operations upon the closing of the transaction.

Products and Services

We design, develop, manufacture, market, sell, and support a wide range of comprehensive and integrated solutions, products, and services. We are organized into the following business units, which are our reportable segments: Infrastructure Solutions Group; Client Solutions Group; and VMware.

•Infrastructure Solutions Group (“ISG”) — ISG enables the digital transformation of our customers through our trusted multi-cloud and big data solutions, which are built upon a modern data center infrastructure. ISG works with customers in the area of hybrid cloud deployment with the goal of simplifying, streamlining, and automating cloud operations. ISG solutions are built for ~~multicloud~~multi-cloud environments and are optimized to run cloud native workloads in both public and private clouds, as well as traditional on-premise workloads.

Our comprehensive portfolio of advanced storage solutions includes traditional ~~storage solutions~~ as well as next-generation storage solutions (such as all-flash arrays, scale-out file, object platforms, and software-defined solutions). We have simplified our storage portfolio to ensure that we deliver the technology needed for our customers’ digital transformation. We continue to make enhancements to our portfolio of storage solutions ~~offerings~~ and expect that these ~~offerings, including our new PowerStore storage array released in May 2020,~~enhancements will drive long-term improvements in the business. In May 2020, we released our new PowerStore offering, a differentiated midrange storage solution that enables seamless updates using microservices and container-based software architecture.

Our server portfolio includes high-performance rack, blade, tower, and hyperscale servers, optimized for artificial intelligence and machine learning workloads. Our networking portfolio helps our business customers transform and modernize their infrastructure, mobilize and enrich end-user experiences, and accelerate business applications and processes.

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Our strengths in server, storage, and virtualization software solutions enable us to offer leading converged and hyper-converged solutions, allowing our customers to accelerate their IT transformation by acquiring scalable integrated IT solutions instead of building and assembling their own IT platforms. ISG also offers attached software, peripherals, and services, including support and deployment, configuration, and extended warranty services.

Approximately half of ISG revenue is generated by sales to customers in the Americas, with the remaining portion derived from sales to customers in the Europe, Middle East, and Africa region (“EMEA”) and the Asia-Pacific and Japan region (“APJ”).

•Client Solutions Group (“CSG”) — CSG includes branded hardware (such as desktops, workstations, and notebooks) and branded peripherals (such as displays and projectors), as well as third-party software and peripherals. Our computing devices are designed with our commercial and consumer customers’ needs in mind, and we seek to optimize performance, reliability, manageability, design, and security. In addition to our traditional hardware business, we have a portfolio of thin client offerings that we believe will allow us to benefit from the growth trends in cloud computing. For our customers that are seeking to simplify client lifecycle management, ~~Dell~~our PC as a Service offering combines hardware, software, lifecycle services, and financing into one all-encompassing solution that provides predictable pricing per seat per month through Dell Financial Services. CSG also offers attached software, peripherals, and services, including support and deployment, configuration, and extended warranty services.

Approximately half of CSG revenue is generated by sales to customers in the Americas, with the remaining portion derived from sales to customers in EMEA and APJ.

•VMware — The VMware reportable segment (“VMware”) reflects the operations of VMware, Inc. (NYSE: VMW) within Dell Technologies. VMware works with customers in the areas of hybrid and multi-cloud, modern applications, networking, security, and digital workspaces, helping customers manage their IT resources across private clouds and complex multi-cloud, multi-device environments. VMware’s portfolio supports and addresses the key IT priorities of customers: accelerating their cloud journey, modernizing their applications, empowering digital workspaces, transforming networking, and embracing intrinsic security. VMware enables its customers to digitally transform their operations as they ready their applications, infrastructure, and employees for constantly evolving business needs.

~~During the third quarter of Fiscal 2020, VMware, Inc. completed its acquisition of Carbon Black, Inc. (“Carbon Black”), a developer of cloud-native endpoint protection.~~

On December 30, 2019, VMware, Inc. completed its acquisition of Pivotal Software, Inc. (“Pivotal”). Before the transaction, Pivotal was a majority-owned subsidiary of Dell Technologies through EMC and VMware, Inc. Pivotal provides a leading cloud-native platform that makes software development and IT operations a strategic advantage for

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customers. Pivotal’s cloud-native platform, Pivotal Cloud Foundry, accelerates and streamlines software development by reducing the complexity of building, deploying, and operating new cloud-native applications, and modernizing legacy applications. With the acquisition, which aligns key software assets, VMware, Inc. will drive and build on a comprehensive development platform with Kubernetes.

Dell Technologies now reports Pivotal results within the VMware reportable segment, and the historical segment results have been recast to reflect this change. Pivotal results were previously reported within other businesses. See Note 17 of the Notes to the Condensed Consolidated Financial Statements included in this report for the recast of segment results.

Approximately half of VMware revenue is generated by sales to customers in the United States.

Our other businesses, described below, consist of product and service offerings of Secureworks, Virtustream, and Boomi, each of which is majority-owned by Dell Technologies. These businesses are not classified as reportable segments, either individually or collectively, as the results of the businesses are not material to our overall results and the businesses do not meet the criteria for reportable segments.

•��Secureworks (NASDAQ: SCWX) is a leading global provider of intelligence-driven information security solutions singularly focused on protecting its clients from cyber attacks. The solutions offered by Secureworks enable organizations of varying size and complexity to fortify their cyber defenses to prevent security breaches, detect malicious activity in near real time, prioritize and respond rapidly to security incidents, and predict emerging threats.

•Virtustream offers cloud software and infrastructure-as-a-service solutions that enable customers to migrate, run, and manage mission-critical applications in cloud-based IT environments.

•Boomi specializes in cloud-based integration, connecting information between existing on-premise and cloud-based applications to ensure that business processes are optimized, data is accurate and workflow is reliable.

~~On February 18, 2020,~~ In May, 2021, we announced our entry into a definitive agreement with Francisco Partners and TPG Capital to sell Boomi and certain related assets from the Company in a cash transaction valued at $4 billion, subject to certain closing adjustments. The transaction is expected to close by the end of calendar 2021, subject to customary closing conditions.

On September 1, 2020, we completed the sale of RSA Security to a consortium of investors ~~to sell RSA Security. On September 1, 2020, the parties closed the transaction. At the completion of the sale, we received~~for total cash consideration of approximately $2.082 billion, resulting in a pre-tax gain on sale of $338 million. The Company ultimately recorded a $21 million loss net of taxes. The transaction was intended to further simplify our product portfolio and corporate structure. Prior to the divestiture, RSA Security’s operating results were included within Other businesses. See Note 1 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about this transaction.

~~We believe the collaboration, innovation, and coordination~~58

Table of the operations and strategies across all segments of our business, as well as our differentiated go-to-market model, will continue to drive revenue synergies. Through our coordinated research and development activities, we are able to jointly engineer leading innovative solutions that incorporate the distinct set of hardware, software, and services across all segments of our business.Contents

Our products and services offerings are continually evolving in response to industry dynamics. As a result, reclassifications of certain products and services solutions in major product categories may be required. For further discussion regarding our current reportable segments, see “Results of Operations — Business Unit Results” and Note 1716 of the Notes to the Condensed Consolidated Financial Statements included in this report.

Dell Financial Services

~~Dell Financial Services and its affiliates (“DFS”) support~~DFS supports our businesses by offering and arranging various financing options and services for our customers primarily in North America, Europe, Australia, and New Zealand. DFS originates, collects, and services customer receivables primarily related to the purchase or use of our product, software, and service solutions. We also arrange financing for some of our customers in various countries where DFS does not currently operate as a captive. DFS further strengthens our customer relationships through its flexible consumption models, which enable us to offer our customers the option to pay over time and, in certain cases, based on utilization, providing them with financial flexibility to meet their changing technological requirements. The results of these operations are allocated to our segments based on the underlying product or service financed. In response to the COVID-19 pandemic, we are continuing to focus on supporting our customers and are providing up to $9 billion in financing support by offering low or zero percent interest rate programs as well as payment deferral options. The financial impact to DFS and our securitization and structured financing programs is not expected to be

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~~material.~~ For additional information about our financing arrangements, see Note 43 of the Notes to the Condensed Consolidated Financial Statements included in this report.

Strategic Investments and Acquisitions

As part of our strategy, we will continue to evaluate opportunities for strategic investments through our venture capital investment arm, Dell Technologies Capital, with a focus on emerging technology areas that are relevant to all segments of our business and that will complement our existing portfolio of solutions. Our investment areas include storage, software-defined networking, management and orchestration, security, machine learning and artificial intelligence, Big Data and analytics, cloud, Internet of Things (“IoT”), and software development operations. As of both April 30, 2021 and January 29, 2021, Dell Technologies held strategic investments of $1.4 billion. In addition to these investments, we also may make disciplined acquisitions targeting businesses that advance our strategic objectives. ~~As of October 30, 2020 and January 31, 2020, Dell Technologies held strategic investments of $1.5 billion and $0.9 billion, respectively.~~

Business Trends and Challenges

COVID-19 Pandemic and Response — In March 2020, the World Health Organization (“WHO”) declared the outbreak of ~~the~~ COVID-19 a ~~global~~ pandemic. This declaration ~~has been~~was followed by significant governmental measures implemented in the United States and globally, including travel bans and restrictions, shelter-in-place orders, limitations and closures of non-essential businesses, and social distancing requirements in efforts to slow down and control the spread of the virus.

The health of our employees, customers, business partners, and communities remains our primary focus. ~~We have taken~~During Fiscal 2021, we took numerous actions ~~to date~~ in response to COVID-19, including a swift implementation of our business continuity plans. Our crisis management team isremains actively engaged to respond to changes in our environment quickly and effectively, and to ensure that our ~~preparedness plans and~~ongoing response activities are aligned with recommendations of the WHO and the U.S. Centers for Disease Control and Prevention, and with governmental regulations. We ~~have~~are adjusting restrictions previously implemented ~~broad travel restrictions~~as new information becomes available, governmental regulations are updated, and ~~moved to virtual-only events.~~vaccines become more widely distributed. Most of our employees were previously equipped with remote work capabilities over the past several years, ~~thus enabling~~which enabled us to quickly establish a work-from-home posture for the majority of our employees. Further, we implemented pandemic-specific protocols for our essential employees whose jobs require them to be on-site or with customers. ~~With the virus surging again across many~~We are deploying return-to-site processes in certain regions ~~we are being cautious with~~based on ongoing assessments of local conditions by our ~~return-to-site protocols~~management team. We will continue to monitor regional conditions and ~~will continue~~utilize remote work practices to ensure the health and safety of our employees, customers, and business partners.

We ~~are working~~continue to work closely with our customers and business partners to support them as they expand their own remote work solutions and contingency plans ~~helping~~and to help them access our products and services remotely. ~~We have benefited from our~~Our agility, our breadth, and our ~~scale.~~scale will continue to benefit us in serving our customers and business partners during this period of accelerated digital transformation and uncertainty relating to the effects of COVID-19. Notable actions we have taken include the following:

•Our global sales teams ~~embraced a new selling process and are~~continue to successfully ~~supporting~~support our customers and partners remotely.

•We are helping to address our customers’ cash flow requirements by expanding our as-a-service and financing offerings.

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•Our close relationships and ability to connect directly with our customers through our e-commerce business have enabled us to quickly meet the immediate demands of the new work- and learn-from-home environments.

•The strength, scale, and resiliency of our global supply chain have afforded us flexibility to manage through ~~this challenging time.~~the significant disruption that has occurred in the supply chain environment. We adapted in real time to events ~~unfolding real-time~~as they unfolded by applying predictive analytics to model a variety of outcomes to respond quickly to the changing environment. We optimized our global supply chain footprint to maximize factory uptime, for both Dell Technologies and our suppliers, by working through various local governmental regulations and mandates. During this ~~time,~~period, we established robust safety measures to protect the health and safety of our essential team members.

•We continue to drive innovation and excellence in engineering with a largely remote workforce. Engineers and product teams ~~recently delivered~~continued to deliver several critical solutions, including cloud updates, ~~and~~ key client product refreshes, ~~as well as the May 2020 launch of the~~ PowerStore midrange storage ~~solution.~~and software, and recently announced IT as-a-service and cloud offerings within the Apex portfolio.

During ~~the first nine months of~~ Fiscal 2021, we took ~~certain~~ precautionary measures to increase our cash position and preserve financial flexibility. We also ~~made~~took a series of prudent ~~decisions~~steps to manage expenses and preserve liquidity ~~including but not~~

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~~limited to~~that included, among others, global hiring limitations, a reduction in consulting, contractor and ~~contractor~~facilities-related costs, global travel restrictions, and a temporary suspension of the Dell 401(k) match program for U.S. ~~employees,~~employees. Effective January 1, 2021, we resumed the Dell 401(k) match program, and ~~lower facilities-related costs.~~in the fourth quarter of Fiscal 2021, we began to reinstate selected employee-related compensation benefits. We will ~~evaluate these actions as we set~~continue to invest in long-term projects to support our ~~annual~~growth and innovation initiatives, while focusing on operating ~~plan for Fiscal 2022, taking into account current conditions, and expect that some~~expense controls in certain areas of the ~~benefits of these cost reduction initiatives recognized during Fiscal 2021 will phase out over time.~~business. All of these actions are aligned with our strategy, which remains unchanged, of focusing on gaining share, integrating and innovating across the Dell Technologies portfolio, and strengthening our capital structure.

~~We saw unique demand dynamics during~~The impact of COVID-19 accelerated digital transformation, and we continue to see opportunities to create value and grow through the ~~first nine months~~remainder of Fiscal ~~2021. In ISG, the~~2022 in response to resilient demand environment weakened as enterprise customers directed more of their investments towards remote work and business continuity solutions. In CSG, overall demand was stronger than expected as customers sought to enable work and learn from home solutions. For additional information about impacts of COVID-19 onfor our ~~operations, see “Results of Operations—Consolidated Results” and “—Business Unit Results.”~~

We are unable to accurately predict the full impact this unprecedented environment may have on our results of operations, financial condition, liquidity and cash flows due to numerous uncertainties involved, including the progression of the COVID-19 pandemic, governmental responses, and the timing of recovery.IT solutions driven by a technology-enabled world. We will continue to actively monitor global events and ~~make~~pursue prudent decisions to navigate in this uncertain and ever-changing environment. ~~We believe we are well-positioned for long-term success, and that we will continue to lead the industry with innovative solutions and the essential technology that the world needs now more than ever.~~

Dell Technologies Vision and Innovation — Our vision is to be the essential technology company for the data era and a leader in end-user computing, software-defined data center solutions, data management, virtualization, IoT, and cloud software. We believe that our results will benefit from an integrated go-to-market strategy, including enhanced coordination across all segments of our business, and from our differentiated products and solutions capabilities. We intend to continue to execute on our business model and seek to balance liquidity, profitability, and growth to position our company for long-term success.

We are seeing an accelerated rate of change in the IT industry. We seek to address our customers’ evolving needs and their broader digital transformation objectives as they embrace the hybrid multi-cloud environment of today. For many customers, ~~right now,~~ a top digital priority is to build stable and resilient remote operational capabilities. We are seeing demand for simpler, more agile IT across multiple clouds. The pandemic ~~has~~ accelerated the introduction and adoption of new technologies to ensure productivity and collaboration from anywhere. In light of this rapid pace of innovation, we continue to invest in research and development, sales, and other key areas of our business to deliver superior products and solutions capabilities and to drive long-term sustainable growth.

~~ISG~~ — We expect that ISG will continue to be impacted by the changing nature of the IT infrastructure market and competitive environment. The overall server demand environment was down for the first nine months of Fiscal 2021 and remains varied among international regions. In the fourth quarter of Fiscal 2021, we expect ISG demand to be slightly lower than the prior year’s sequential growth based on the continued softness in data center spending. We will continue to be selective in determining whether to pursue certain large hyperscale and other server transactions as we drive for balanced growth and profitability. With our scale and strong solutions portfolio, we believe we are well-positioned to respond to ongoing competitive dynamics. We continue to focus on customer base expansion and lifetime value of customer relationships.

Cloud-native applications are expected to continue as a primary growth driver in the infrastructure market as IT organizations increasingly adopt cloud native architectures. We believe the complementary cloud solutions across our business strongly position us to meet these demands for our customers, who are increasingly looking to leverage cloud native architectures, whether on-premises, private or public.

The unprecedented data growth throughout all industries is generating continued demand for our storage solutions and services. We benefit by offering solutions that address the emerging trends of enterprises deploying software-defined storage, hyper-converged infrastructure, and modular solutions based on server-centric architectures. These trends are changing the way customers are consuming our traditional storage offerings. We continue to expand our offerings in external storage arrays, which incorporate flexible, cloud-based functionality. Through our research and development efforts, we are developing new solutions in this rapidly changing industry that we believe will enable us to continue to provide superior solutions to our customers.

~~CSG~~ — Our CSG offerings are an important element of our strategy, generating strong cash flow and opportunities for cross-selling of complementary solutions. During the first nine months of Fiscal 2021, CSG demand was strong in certain product

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lines, particularly for notebooks and gaming systems, while demand for commercial desktops decreased. These demand dynamics were driven by the imperative for remote work and remote learning solutions, as business, government, and education customers sought to maintain productivity in the midst of COVID-19. We continue to deploy Dell PC as a Service offerings for customers who are seeking simplified solutions and lifecycle management with predictable pricing through DFS. We expect that the CSG demand environment will to continue to be cyclical. CSG demand in the fourth quarter of the fiscal year is typically stronger due to holiday purchasing patterns, and in Fiscal 2021 we expect CSG demand in the fourth quarter to be slightly above normal seasonality. We remain committed to our long-term strategy for CSG and will continue to innovate across the portfolio, while benefiting from consolidation trends that are occurring in the markets in which we compete. Competitive dynamics will continue to be a factor in our CSG business as we seek to balance profitability and growth.

~~Recurring Revenue and Consumption Models~~— Our customers are interested in new and innovative models that address how they consume our solutions. We offer options including as-a-service, utility, leases, and immediate pay models, all designed to match customers’ consumption and financing preferences. Our multi-year agreements typically result in recurring revenue streams over the term of the arrangement. We expect that our flexible consumption models will further strengthen our customer relationships and provide a foundation for growth in recurring revenue.

Supply Chain — During ~~Fiscal 2020, we recognized benefits to our ISG and CSG operating results from significant component cost declines. During~~ the first ~~nine months~~quarter of Fiscal ~~2021,~~2022, component costs ~~continued to decline~~declined in the aggregate, but ~~at a lower rate than in Fiscal 2020. In recent quarters ISG experienced some~~we expect the overall component cost ~~inflation, particularly~~environment to shift to inflationary for ~~servers. The component~~the remainder of Fiscal 2022. Component cost ~~trending is~~trends are dependent on the strength or weakness of actual end-user demand and supply dynamics, which will continue to evolve and ultimately impact the translation of the cost environment to pricing and operating results.

Dell Technologies maintains limited-source supplier relationships for certain components, because the relationships are advantageous in the areas of performance, quality, support, delivery, capacity, and price considerations. In recent periods, we have been impacted by industry-wide component supply constraints in certain product offerings, ~~some~~due to increasing demand as a result of ~~which resulted from COVID-19 driven demand patterns.~~the shift to the “do-anything-from-anywhere” environment coupled with overall macroeconomic recovery. Delays in the supply of limited-source components ~~including as a result of COVID-19,~~across multiple industry segments are affecting the timing of shipments of certain products in desired quantities or configurations. We expect to continue navigating supply chain constraints through the remainder of Fiscal 2022. Additionally, we have experienced increased freight costs for expedited shipments of components

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and rate increases in the freight network as capacity remains constrained, which we expect will continue through the remainder of Fiscal 2022.

~~Macro-Economic~~ISG — We expect that ISG will continue to be impacted by the changing nature of the IT infrastructure market and competitive environment. During the first quarter of Fiscal 2022, ISG benefited from improvements in the macroeconomic environment which are forecasted to continue through the remaining nine months of Fiscal 2022. The cost environment will continue to fluctuate depending on supplier capacity and demand for certain components and, for the remainder of Fiscal 2022, we expect overall component costs to shift to inflationary, specifically for servers. With our scale and strong solutions portfolio, we believe we are well-positioned to respond to ongoing competitive dynamics. Within servers and networking, we will continue to be selective in determining whether to pursue certain large hyperscale and other server transactions as we drive for balanced growth and profitability. We continue to focus on customer base expansion and lifetime value of customer relationships.

Cloud-native applications are expected to continue as a primary growth driver in the infrastructure market. We believe the complementary cloud solutions across our business position us to meet these demands for our customers. The unprecedented data growth throughout all industries is generating continued demand for our storage solutions and services. We benefit by offering solutions that address the emerging trends of enterprises deploying software-defined storage, hyper-converged infrastructure, and modular solutions based on server-centric architectures. These trends are changing the way customers are consuming our traditional storage offerings. We continue to expand our offerings in external storage arrays, which incorporate flexible, cloud-based functionality.

Through our research and development efforts, we are developing new solutions in this rapidly changing industry that we believe will enable us to continue to provide superior solutions to our customers. Our customer base includes a growing number of service providers, such as cloud service providers, software-as-a-service companies, consumer webtech providers, and telecommunications companies. These service providers turn to Dell Technologies for our advanced solutions that enable efficient service delivery at cloud scale. Through our collaborative, customer-focused approach to innovation, we strive to deliver new and relevant solutions and software to the market quickly and efficiently.

CSG — Our CSG offerings are an important element of our strategy, generating strong cash flow and opportunities for cross-selling of complementary solutions. During the first quarter of Fiscal 2022, CSG net revenue continued to be strong across product lines, driven by ongoing high demand for remote work and learning solutions, along with gaming systems.

While we expect that the CSG demand environment will continue to be subject to seasonal trends, we anticipate continued strong CSG demand through the remaining nine months of Fiscal 2022, in line with industry demand forecasts. The cost environment will continue to fluctuate depending on supplier capacity and demand for certain components and, for the remainder of Fiscal 2022, we expect overall component costs to shift to inflationary. The cost environment coupled with competitive dynamics continue to be a factor in our CSG business and will impact pricing and operating results as we seek to balance profitability and growth. We remain committed to our long-term strategy for CSG and will continue to make investments to innovate across the portfolio, while benefiting from consolidation trends that are occurring in the markets in which we compete.

Recurring Revenue and Consumption Models— Our customers are interested in new and innovative models that address how they consume our solutions. We offer options including as-a-service, utility, leases, and immediate pay models, all designed to match customers’ consumption and financing preferences. Our multiyear agreements typically result in recurring revenue streams over the term of the arrangement. In May of Fiscal 2022, we announced new offers within our Apex portfolio to evolve and expand our IT as-a-Service and cloud offerings. We expect that our flexible consumption models and as-a-service offerings through Apex will further strengthen our customer relationships and provide a foundation for growth in recurring revenue.

Macroeconomic Risks and Uncertainties — The impacts of trade protection measures, including increases in tariffs and trade barriers, and changes in government policies and international trade arrangements may affect our ability to conduct business in some non-U.S. markets. We monitor and seek to mitigate these risks with adjustments to our manufacturing, supply chain, and distribution networks.

We manage our business on a U.S. dollar basis. However, we have a large global presence, generating approximately half of our revenue by sales to customers outside of the United States during both the first ~~nine~~three months of Fiscal ~~2021~~2022 and Fiscal ~~2020.~~2021. As a result, our revenue can be impacted by fluctuations in foreign currency exchange rates. We utilize a comprehensive

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hedging strategy intended to mitigate the impact of foreign currency volatility over time, and we adjust pricing when possible to further minimize foreign currency impacts.

Key Performance Metrics

Our key performance metrics are net revenue, operating income, adjusted EBITDA, and cash flows from operations, which are discussed elsewhere in this ~~report.~~management’s discussion and analysis.

~~Class V Transaction~~

On December 28, 2018, we completed a transaction (“Class V transaction”) in which we paid $14.0 billion in cash and issued 149,387,617 shares of our Class C Common Stock to holders of our Class V Common Stock in exchange for all outstanding shares of Class V Common Stock. The non-cash consideration portion of the Class V transaction totaled $6.9 billion. As a result of the Class V transaction, the tracking stock feature of Dell Technologies’ capital structure was terminated. The Class C Common Stock is traded on the New York Stock Exchange.

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~~VMware, Inc. Ownership~~

On July 15, 2020, we announced that we are exploring potential alternatives with respect to our ownership in VMware, Inc., including a potential spin-off of that ownership interest to Dell Technologies’ stockholders. Although this process is currently only at an exploratory stage, we believe a spin-off could benefit both Dell Technologies’ and VMware, Inc.’s stockholders by simplifying capital structures and enhancing strategic flexibility, while still maintaining a mutually beneficial strategic and commercial partnership. Any potential spin-off would not occur prior to September 2021. Other strategic options include maintaining the status quo with respect to our ownership interest in VMware, Inc.

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NON-GAAP FINANCIAL MEASURES

In this management’s discussion and analysis, we use supplemental measures of our performance which are derived from our consolidated financial information but which are not presented in our consolidated financial statements prepared in accordance with GAAP. These non-GAAP financial measures include non-GAAP product net revenue; non-GAAP services net revenue; non-GAAP net revenue; non-GAAP product gross margin; non-GAAP services gross margin; non-GAAP gross margin; non-GAAP operating expenses; non-GAAP operating income; non-GAAP net income; earnings before interest and other, net, taxes, depreciation, and amortization (“EBITDA”); and adjusted EBITDA.

We use non-GAAP financial measures to supplement financial information presented on a GAAP basis. Management considers these non-GAAP measures in evaluating our operating trends and performance. Moreover, we believe these non-GAAP financial measures provide our stakeholders with useful and transparent information to help them evaluate our operating results by facilitating an enhanced understanding of our operating performance and enabling them to make more meaningful period to period comparisons. There are limitations to the use of the non-GAAP financial measures presented in this report. Our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

Non-GAAP product net revenue, non-GAAP services net revenue, non-GAAP net revenue, non-GAAP product gross margin, non-GAAP services gross margin, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, and non-GAAP net income, as defined by us, exclude amortization of intangible assets, the impact of purchase accounting, transaction-related expenses, stock-based compensation expense, other corporate expenses and, for non-GAAP net income, fair value adjustments on equity ~~adjustments~~investments and an aggregate adjustment for income taxes. As the excluded items have a material impact on our financial results, our management compensates for this limitation by relying primarily on our GAAP results and using non-GAAP financial measures supplementally or for projections when comparable GAAP financial measures are not available. The non-GAAP financial measures are not meant to be considered as indicators of performance in isolation from or as a substitute for net revenue, gross margin, operating expenses, operating income, or net income prepared in accordance with GAAP, and should be read only in conjunction with financial information presented on a GAAP basis.

Reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure are presented below. We encourage you to review the reconciliations in conjunction with the presentation of the non-GAAP financial measures for each of the periods presented. The discussion below includes information on each of the excluded items as well as our reasons for excluding them from our non-GAAP results. In future fiscal periods, we may exclude such items and may incur income and expenses similar to these excluded items. Accordingly, the exclusion of these items and other similar items in our non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent, or unusual.

~~Revenue Reclassification~~ — During Fiscal 2020, Dell Technologies made certain reclassifications of net revenue between the products and services categories on the Consolidated Statement of Net Income (Loss), which impacted previously reported amounts for the third quarter and first nine months of Fiscal 2020. The reclassifications were made to provide a more meaningful representation of the nature of certain service and software-as-a-service offerings of VMware, Inc. The reclassifications resulted in an increase to services revenue and an equal and offsetting decrease to product revenue of $210 million and $584 million for the third quarter and first nine months of Fiscal 2020, respectively. Total net revenue as previously reported remains unchanged. The Company did not recast cost of goods sold for the related revenue reclassifications due to immateriality.

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The following is a summary of the items excluded from the most comparable GAAP financial measures to calculate our non-GAAP financial measures:

•Amortization of Intangible Assets — Amortization of intangible assets primarily consists of amortization of customer relationships, developed technology, and trade names. In connection with our acquisition by merger of EMC on September 7, 2016, referred to as the EMC merger transaction, and the acquisition of Dell Inc. by Dell Technologies Inc. on October 29, 2013, referred to as the going-private transaction, all of the tangible and intangible assets and liabilities of EMC and Dell, respectively, were accounted for and recognized at fair value on the transaction dates. Accordingly, for the periods presented, amortization of intangible assets primarily represents amortization associated with intangible assets recognized in connection with the EMC merger transaction and the going-private transaction. Amortization charges for purchased intangible assets are significantly impacted by the timing and magnitude of our acquisitions, and these charges may vary in amount from period to period. We exclude these charges for purposes of calculating the non-GAAP financial measures presented below to facilitate a more meaningful evaluation of our current operating performance and comparisons to our past operating performance.

•Impact of Purchase Accounting — The impact of purchase accounting includes purchase accounting adjustments related to the EMC merger transaction and, to a lesser extent, the going-private transaction, recorded under the acquisition method of accounting in accordance with the accounting guidance for business combinations. This guidance prescribes that the purchase price be allocated to assets acquired and liabilities assumed based on the estimated fair value of such assets and liabilities on the date of the transaction. Accordingly, all of the assets and liabilities acquired in the EMC merger transaction and the going-private transaction were accounted for and recognized at fair value as of the respective

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transaction dates, and the fair value adjustments are being amortized over the estimated useful lives in the periods following the transactions. The fair value adjustments primarily relate to deferred revenue ~~inventory,~~ and property, plant, and equipment. Although the purchase accounting adjustments and related amortization of those adjustments are reflected in our GAAP results, we evaluate the operating results of the underlying businesses on a non-GAAP basis, after removing such adjustments. We believe that excluding the impact of purchase accounting provides results that are useful in understanding our current operating performance and provides more meaningful comparisons to our past operating performance.

•Transaction-related Expenses — Transaction-related expenses typically consist of acquisition, integration, and divestiture related costs and are expensed as incurred. These expenses primarily represent costs for legal, banking, consulting, and advisory services. From time to time, this category also may include transaction-related gains on divestitures of businesses or asset sales. During the first quarter of Fiscal 2021, we recognized a gain of $120 million on the sale of certain intellectual property assets. ~~During the third quarter of Fiscal 2021, we recognized a pre-tax gain of $338 million on the sale of RSA Security.~~ We exclude these items for purposes of calculating the non-GAAP financial measures presented below to facilitate a more meaningful evaluation of our current operating performance and comparisons to our past operating performance. ~~See Note 1 and Note 8 of the Notes to the Condensed Consolidated Financial Statements for additional information about the divestiture of RSA Security and acquisitions by VMware, Inc., respectively.~~

•Stock-based Compensation Expense — Stock-based compensation expense consists of equity awards granted based on the estimated fair value of those awards at grant date. We estimate the fair value of service-based stock options using the Black-Scholes valuation model. To estimate the fair value of performance-based awards containing a market condition, we use the Monte Carlo valuation model. For all other share-based awards, the fair value is based on the closing price of the Class C Common Stock as reported on the NYSE on the date of grant. Although stock-based compensation is an important aspect of the compensation of our employees and executives, the fair value of the stock-based awards may bear little resemblance to the actual value realized upon the vesting or future exercise of the related stock-based awards. We believe that excluding stock-based compensation expense for purposes of calculating the non-GAAP financial measures presented below facilitates a more meaningful evaluation of our current operating performance and comparisons to our past operating performance.

•Other Corporate Expenses — Other corporate expenses ~~consists~~consist primarily of impairment charges, severance, facility action, and other costs. Severance costs are primarily related to severance and benefits for employees terminated pursuant to cost savings initiatives. We continue to ~~integrate owned and leased~~optimize our facilities footprint and may incur additional costs as we seek opportunities for operational efficiencies. Other corporate expenses vary from period to period and are significantly impacted by the timing and nature of these events. Therefore, although we may incur these types of expenses in the future, we believe that eliminating these charges for purposes of calculating the non-GAAP financial measures presented below facilitates a more

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meaningful evaluation of our current operating performance and comparisons to our past operating performance. ~~During the first nine months of Fiscal 2020, this category included Virtustream gross impairment charges of $619 million.~~

•Fair Value Adjustments on Equity Investments — Fair value adjustments on equity investments primarily consists of the gain (loss) on strategic investments, which includes the recurring fair value adjustments of investments in publicly-traded companies, as well as those in privately-held companies, which are adjusted for observable price changes and, to a lesser extent, any potential impairments. During the third quarter and first nine months of Fiscal 2021, this category included an unrealized gain of $465 million related to one of our strategic investments. See Note 3 of the Notes to the Condensed Consolidated Financial Statements for additional information on our strategic investment activity. Given the volatility in the ongoing adjustments to the valuation of these strategic investments, we believe that excluding these gains and losses for purposes of calculating non-GAAP net income presented below facilitates a more meaningful evaluation of our current operating performance and comparisons to our past operating performance.

•Aggregate Adjustment for Income Taxes — The aggregate adjustment for income taxes is the estimated combined income tax effect for the adjustments described above, as well as an adjustment for discrete tax items. Due to the variability in recognition of discrete tax items from period to period, we believe that excluding these benefits or charges for purposes of calculating non-GAAP net income facilitates a more meaningful evaluation of our current operating performance and comparisons to our past operating performance. The tax effects for the adjustments described above are determined based on the tax jurisdictions ~~where~~in which the ~~above~~ items were incurred. See Note 1110 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information about our income ~~taxes, including discrete tax items.~~taxes.

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The table below presents a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP measure for the periods indicated:


		Three Months Ended						Nine Months Ended							Three Months Ended
		October 30, 2020		% Change		November 1, 2019		October 30, 2020		% Change		November 1, 2019			April 30, 2021		% Change		May 1, 2020
		(in millions, except percentages)													(in millions, except percentages)
Product net revenue	Product net revenue	$	17,352	—	%	$	17,275	$	50,127	(3)	%	$	51,765	Product net revenue	$	18,034	12	%	$	16,038
Non-GAAP adjustments:	Non-GAAP adjustments:													Non-GAAP adjustments:
Impact of purchase accounting	Impact of purchase accounting	2				5		8				15		Impact of purchase accounting	—				4
Non-GAAP product net revenue	Non-GAAP product net revenue	$	17,354	—	%	$	17,280	$	50,135	(3)	%	$	51,780	Non-GAAP product net revenue	$	18,034	12	%	$	16,042

Services net revenue	Services net revenue	$	6,130	10	%	$	5,569	$	17,985	10	%	$	16,357	Services net revenue	$	6,453	10	%	$	5,859
Non-GAAP adjustments:	Non-GAAP adjustments:													Non-GAAP adjustments:
Impact of purchase accounting	Impact of purchase accounting	37				79		121				235		Impact of purchase accounting	12				44
Non-GAAP services net revenue	Non-GAAP services net revenue	$	6,167	9	%	$	5,648	$	18,106	9	%	$	16,592	Non-GAAP services net revenue	$	6,465	10	%	$	5,903

Net revenue	Net revenue	$	23,482	3	%	$	22,844	$	68,112	—	%	$	68,122	Net revenue	$	24,487	12	%	$	21,897
Non-GAAP adjustments:	Non-GAAP adjustments:													Non-GAAP adjustments:
Impact of purchase accounting	Impact of purchase accounting	39				84		129				250		Impact of purchase accounting	12				48
Non-GAAP net revenue	Non-GAAP net revenue	$	23,521	3	%	$	22,928	$	68,241	—	%	$	68,372	Non-GAAP net revenue	$	24,499	12	%	$	21,945

Product gross margin	Product gross margin	$	3,563	(4)	%	$	3,717	$	10,204	(9)	%	$	11,239	Product gross margin	$	3,820	18	%	$	3,234
Non-GAAP adjustments:	Non-GAAP adjustments:													Non-GAAP adjustments:
Amortization of intangibles	Amortization of intangibles	376				517		1,122				1,555		Amortization of intangibles	276				372
Impact of purchase accounting	Impact of purchase accounting	3				7		13				20		Impact of purchase accounting	1				7
Transaction-related expenses		—				—		—				(5)

Stock-based compensation expense	Stock-based compensation expense	7				3		17				9		Stock-based compensation expense	9				4
Other corporate expenses	Other corporate expenses	12				2		15				11		Other corporate expenses	3				2
Non-GAAP product gross margin	Non-GAAP product gross margin	$	3,961	(7)	%	$	4,246	$	11,371	(11)	%	$	12,829	Non-GAAP product gross margin	$	4,109	14	%	$	3,619

Services gross margin	Services gross margin	$	3,698	8	%	$	3,409	$	11,066	11	%	$	10,010	Services gross margin	$	3,838	6	%	$	3,619
Non-GAAP adjustments:	Non-GAAP adjustments:													Non-GAAP adjustments:
Amortization of intangibles		(1)				—		—				—

Impact of purchase accounting	Impact of purchase accounting	37				79		121				235		Impact of purchase accounting	12				44
Transaction-related expenses		—				—		—				—

Stock-based compensation expense	Stock-based compensation expense	44				30		124				82		Stock-based compensation expense	49				36
Other corporate expenses	Other corporate expenses	32				4		40				32		Other corporate expenses	10				7
Non-GAAP services gross margin	Non-GAAP services gross margin	$	3,810	8	%	$	3,522	$	11,351	10	%	$	10,359	Non-GAAP services gross margin	$	3,909	5	%	$	3,706

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		Three Months Ended						Nine Months Ended							Three Months Ended
		October 30, 2020		% Change		November 1, 2019		October 30, 2020		% Change		November 1, 2019			April 30, 2021		% Change		May 1, 2020
		(in millions, except percentages)													(in millions, except percentages)
Gross margin	Gross margin	$	7,261	2	%	$	7,126	$	21,270	—	%	$	21,249	Gross margin	$	7,658	12	%	$	6,853
Non-GAAP adjustments:	Non-GAAP adjustments:													Non-GAAP adjustments:
Amortization of intangibles	Amortization of intangibles	375				517		1,122				1,555		Amortization of intangibles	276				372
Impact of purchase accounting	Impact of purchase accounting	40				86		134				255		Impact of purchase accounting	13				51
Transaction-related expenses		—				—		—				(5)

Stock-based compensation expense	Stock-based compensation expense	51				33		141				91		Stock-based compensation expense	58				40
Other corporate expenses	Other corporate expenses	44				6		55				43		Other corporate expenses	13				9
Non-GAAP gross margin	Non-GAAP gross margin	$	7,771	—	%	$	7,768	$	22,722	(2)	%	$	23,188	Non-GAAP gross margin	$	8,018	9	%	$	7,325

Operating expenses	Operating expenses	$	6,132	(3)	%	$	6,290	$	18,303	(5)	%	$	19,344	Operating expenses	$	6,283	2	%	$	6,151
Non-GAAP adjustments:	Non-GAAP adjustments:													Non-GAAP adjustments:
Amortization of intangibles	Amortization of intangibles	(470)				(540)		(1,425)				(1,779)		Amortization of intangibles	(433)				(483)
Impact of purchase accounting	Impact of purchase accounting	(9)				(10)		(31)				(44)		Impact of purchase accounting	(12)				(12)
Transaction-related expenses	Transaction-related expenses	(52)				(76)		(211)				(170)		Transaction-related expenses	(51)				(76)
Stock-based compensation expense	Stock-based compensation expense	(385)				(289)		(1,078)				(795)		Stock-based compensation expense	(377)				(330)
Other corporate expenses	Other corporate expenses	(170)				(49)		(340)				(749)		Other corporate expenses	(106)				(86)
Non-GAAP operating expenses	Non-GAAP operating expenses	$	5,046	(5)	%	$	5,326	$	15,218	(4)	%	$	15,807	Non-GAAP operating expenses	$	5,304	3	%	$	5,164

Operating income	Operating income	$	1,129	35	%	$	836	$	2,967	56	%	$	1,905	Operating income	$	1,375	96	%	$	702
Non-GAAP adjustments:	Non-GAAP adjustments:													Non-GAAP adjustments:
Amortization of intangibles	Amortization of intangibles	845				1,057		2,547				3,334		Amortization of intangibles	709				855
Impact of purchase accounting	Impact of purchase accounting	49				96		165				299		Impact of purchase accounting	25				63
Transaction-related expenses	Transaction-related expenses	52				76		211				165		Transaction-related expenses	51				76
Stock-based compensation expense	Stock-based compensation expense	436				322		1,219				886		Stock-based compensation expense	435				370
Other corporate expenses	Other corporate expenses	214				55		395				792		Other corporate expenses	119				95
Non-GAAP operating income	Non-GAAP operating income	$	2,725	12	%	$	2,442	$	7,504	2	%	$	7,381	Non-GAAP operating income	$	2,714	26	%	$	2,161

Net income	Net income	$	881	60	%	$	552	$	2,162	(58)	%	$	5,113	Net income	$	938	415	%	$	182
Non-GAAP adjustments:	Non-GAAP adjustments:													Non-GAAP adjustments:
Amortization of intangibles	Amortization of intangibles	845				1,057		2,547				3,334		Amortization of intangibles	709				855
Impact of purchase accounting	Impact of purchase accounting	49				96		165				299		Impact of purchase accounting	25				63
Transaction-related (income) expenses		(286)				76		(247)				165
Transaction-related expenses														Transaction-related expenses	51				(44)
Stock-based compensation expense	Stock-based compensation expense	436				322		1,219				886		Stock-based compensation expense	435				370
Other corporate expenses	Other corporate expenses	106				55		287				792		Other corporate expenses	119				95
Fair value adjustments on equity investments	Fair value adjustments on equity investments	(489)				(18)		(591)				(160)		Fair value adjustments on equity investments	(157)				(94)
Aggregate adjustment for income taxes	Aggregate adjustment for income taxes	169				(695)		(1,067)				(6,024)		Aggregate adjustment for income taxes	(301)				(284)
Non-GAAP net income	Non-GAAP net income	$	1,711	18	%	$	1,445	$	4,475	2	%	$	4,405	Non-GAAP net income	$	1,819	59	%	$	1,143

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In addition to the above measures, we also use EBITDA and adjusted EBITDA to provide additional information for evaluation of our operating performance. Adjusted EBITDA excludes purchase accounting adjustments, ~~related to the EMC merger transaction and the going-private transaction, acquisition, integration, and divestiture related costs, severance, facility action,~~stock-based compensation expense, transaction-related expenses, and other ~~costs, and stock-based compensation expense.~~corporate expenses. We believe that, due to the non-operational nature of the purchase accounting entries, it is appropriate to exclude these adjustments.

As is the case with the non-GAAP measures presented above, users should consider the limitations of using EBITDA and adjusted EBITDA, including the fact that those measures do not provide a complete measure of our operating performance. EBITDA and adjusted EBITDA do not purport to be alternatives to net income (loss) as measures of operating performance or to cash flows from operating activities as a measure of liquidity. In particular, EBITDA and adjusted EBITDA are not intended to be a measure of free cash flow available for management’s discretionary use, as these measures do not consider certain cash requirements, such as working capital needs, capital expenditures, contractual commitments, interest payments, tax payments, and other debt service requirements.

The table below presents a reconciliation of EBITDA and adjusted EBITDA to net income for the periods indicated:


		Three Months Ended						Nine Months Ended							Three Months Ended
		October 30, 2020		% Change		November 1, 2019		October 30, 2020		% Change		November 1, 2019			April 30, 2021		% Change		May 1, 2020
		(in millions, except percentages)													(in millions, except percentages)
Net income	Net income	$	881	60	%	$	552	$	2,162	(58)	%	$	5,113	Net income	$	938	415	%	$	182
Adjustments:	Adjustments:													Adjustments:
Interest and other, net (a)	Interest and other, net (a)	(273)				677		929				2,000		Interest and other, net (a)	388				566
Income tax expense (benefit) (b)	Income tax expense (benefit) (b)	521				(393)		(124)				(5,208)		Income tax expense (benefit) (b)	49				(46)
Depreciation and amortization	Depreciation and amortization	1,361				1,494		4,017				4,608		Depreciation and amortization	1,239				1,316
EBITDA	EBITDA	$	2,490	7	%	$	2,330	$	6,984	7	%	$	6,513	EBITDA	$	2,614	30	%	$	2,018

EBITDA	EBITDA	$	2,490	7	%	$	2,330	$	6,984	7	%	$	6,513	EBITDA	$	2,614	30	%	$	2,018
Adjustments:	Adjustments:													Adjustments:
Stock-based compensation expense	Stock-based compensation expense	436				322		1,219				886		Stock-based compensation expense	435				370
Impact of purchase accounting (c)	Impact of purchase accounting (c)	39				84		129				251		Impact of purchase accounting (c)	16				48
Transaction-related expenses (d)	Transaction-related expenses (d)	52				76		211				165		Transaction-related expenses (d)	51				76
Other corporate expenses (e)	Other corporate expenses (e)	214				45		395				771		Other corporate expenses (e)	119				95
Adjusted EBITDA	Adjusted EBITDA	$	3,231	13	%	$	2,857	$	8,938	4	%	$	8,586	Adjusted EBITDA	$	3,235	24	%	$	2,607

____________________

(a)See “Results of Operations — Interest and Other, Net” for more information on the components of interest and other, net.

(b)See Note 1110 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information on discrete tax items recorded during the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021~~2022 and Fiscal ~~2020.~~2021.

(c)This amount includes the non-cash purchase accounting adjustments related to the EMC merger transaction and the going-private ~~transaction.~~transaction, excluding depreciation.

(d)Transaction-related expenses consist of acquisition, integration, and divestiture related costs.

(e)Other corporate expenses ~~includes~~include impairment charges, severance, facility action, and other costs.

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RESULTS OF OPERATIONS

Consolidated Results

The following table summarizes our consolidated results for each of the periods presented. Unless otherwise indicated, all changes identified for the current period results represent comparisons to results for the prior corresponding fiscal period.


		Three Months Ended										Nine Months Ended											Three Months Ended
		October 30, 2020						November 1, 2019				October 30, 2020						November 1, 2019					April 30, 2021						May 1, 2020
		Dollars		% of Net Revenue		% Change		Dollars		% of Net Revenue		Dollars		% of Net Revenue		% Change		Dollars		% of Net Revenue			Dollars		% of Net Revenue		% Change		Dollars		% of Net Revenue
		(in millions, except percentages)																					(in millions, except percentages)
Net revenue:	Net revenue:																					Net revenue:
Products ~~(a)~~	Products ~~(a)~~	$	17,352	73.9	%	—	%	$	17,275	75.6	%	$	50,127	73.6	%	(3)	%	$	51,765	76.0	%	Products ~~(a)~~	$	18,034	73.6	%	12	%	$	16,038	73.2	%
Services ~~(a)~~	Services ~~(a)~~	6,130		26.1	%	10	%	5,569		24.4	%	17,985		26.4	%	10	%	16,357		24.0	%	Services ~~(a)~~	6,453		26.4	%	10	%	5,859		26.8	%
Total net revenue	Total net revenue	$	23,482	100.0	%	3	%	$	22,844	100.0	%	$	68,112	100.0	%	—	%	$	68,122	100.0	%	Total net revenue	$	24,487	100.0	%	12	%	$	21,897	100.0	%
Gross margin:	Gross margin:																					Gross margin:
Products ~~(b)~~(a)	Products ~~(b)~~(a)	$	3,563	20.5	%	(4)	%	$	3,717	21.5	%	$	10,204	20.4	%	(9)	%	$	11,239	21.7	%	Products ~~(b)~~(a)	$	3,820	21.2	%	18	%	$	3,234	20.2	%
Services ~~(c)~~(b)	Services ~~(c)~~(b)	3,698		60.3	%	8	%	3,409		61.2	%	11,066		61.5	%	11	%	10,010		61.2	%	Services ~~(c)~~(b)	3,838		59.5	%	6	%	3,619		61.8	%
Total gross margin	Total gross margin	$	7,261	30.9	%	2	%	$	7,126	31.2	%	$	21,270	31.2	%	—	%	$	21,249	31.2	%	Total gross margin	$	7,658	31.3	%	12	%	$	6,853	31.3	%
Operating expenses	Operating expenses	$	6,132	26.1	%	(3)	%	$	6,290	27.5	%	$	18,303	26.9	%	(5)	%	$	19,344	28.4	%	Operating expenses	$	6,283	25.7	%	2	%	$	6,151	28.1	%
Operating income	Operating income	$	1,129	4.8	%	35	%	$	836	3.7	%	$	2,967	4.4	%	56	%	$	1,905	2.8	%	Operating income	$	1,375	5.6	%	96	%	$	702	3.2	%
Net income	Net income	$	881	3.8	%	60	%	$	552	2.4	%	$	2,162	3.2	%	(58)	%	$	5,113	7.5	%	Net income	$	938	3.8	%	415	%	$	182	0.8	%
Net income attributable to Dell Technologies Inc.	Net income attributable to Dell Technologies Inc.	$	832	3.5	%	67	%	$	499	2.2	%	$	2,023	3.0	%	(52)	%	$	4,208	6.2	%	Net income attributable to Dell Technologies Inc.	$	887	3.6	%	520	%	$	143	0.7	%

Non-GAAP Financial Information	Non-GAAP Financial Information																					Non-GAAP Financial Information
																							Three Months Ended
																							April 30, 2021						May 1, 2020
																							Dollars		% of Non-GAAP Net Revenue		% Change		Dollars		% of Non-GAAP Net Revenue
																							(in millions, except percentages)
Non-GAAP net revenue:	Non-GAAP net revenue:																					Non-GAAP net revenue:
Products (a)		$	17,354	73.8	%	—	%	$	17,280	75.4	%	$	50,135	73.5	%	(3)	%	$	51,780	75.7	%
Services (a)		6,167		26.2	%	9	%	5,648		24.6	%	18,106		26.5	%	9	%	16,592		24.3	%
Products ~~(b)~~																						Products ~~(b)~~	$	18,034	73.6	%	12	%	$	16,042	73.1	%
Services ~~(c)~~																						Services ~~(c)~~	6,465		26.4	%	10	%	5,903		26.9	%
Total non-GAAP net revenue	Total non-GAAP net revenue	$	23,521	100.0	%	3	%	$	22,928	100.0	%	$	68,241	100.0	%	—	%	$	68,372	100.0	%	Total non-GAAP net revenue	$	24,499	100.0	%	12	%	$	21,945	100.0	%
Non-GAAP gross margin:	Non-GAAP gross margin:																					Non-GAAP gross margin:
Products ~~(b)~~		$	3,961	22.8	%	(7)	%	$	4,246	24.6	%	$	11,371	22.7	%	(11)	%	$	12,829	24.8	%
Services ~~(c)~~		3,810		61.8	%	8	%	3,522		62.4	%	11,351		62.7	%	10	%	10,359		62.4	%
Products (a)																						Products (a)	$	4,109	22.8	%	14	%	$	3,619	22.6	%
Services (b)																						Services (b)	3,909		60.5	%	5	%	3,706		62.8	%
Total non-GAAP gross margin	Total non-GAAP gross margin	$	7,771	33.0	%	—	%	$	7,768	33.9	%	$	22,722	33.3	%	(2)	%	$	23,188	33.9	%	Total non-GAAP gross margin	$	8,018	32.7	%	9	%	$	7,325	33.4	%
Non-GAAP operating expenses	Non-GAAP operating expenses	$	5,046	21.5	%	(5)	%	$	5,326	23.2	%	$	15,218	22.3	%	(4)	%	$	15,807	23.1	%	Non-GAAP operating expenses	$	5,304	21.6	%	3	%	$	5,164	23.6	%
Non-GAAP operating income	Non-GAAP operating income	$	2,725	11.6	%	12	%	$	2,442	10.7	%	$	7,504	11.0	%	2	%	$	7,381	10.8	%	Non-GAAP operating income	$	2,714	11.1	%	26	%	$	2,161	9.8	%
Non-GAAP net income	Non-GAAP net income	$	1,711	7.3	%	18	%	$	1,445	6.3	%	$	4,475	6.6	%	2	%	$	4,405	6.4	%	Non-GAAP net income	$	1,819	7.4	%	59	%	$	1,143	5.2	%
EBITDA	EBITDA	$	2,490	10.6	%	7	%	$	2,330	10.2	%	$	6,984	10.2	%	7	%	$	6,513	9.5	%	EBITDA	$	2,614	10.7	%	30	%	$	2,018	9.2	%
Adjusted EBITDA	Adjusted EBITDA	$	3,231	13.7	%	13	%	$	2,857	12.5	%	$	8,938	13.1	%	4	%	$	8,586	12.6	%	Adjusted EBITDA	$	3,235	13.2	%	24	%	$	2,607	11.9	%

____________________

(a) During Fiscal 2020, Dell Technologies made certain reclassifications of net revenue between the products and services categories on the Consolidated Statement of Net Income (Loss), which impacted previously reported amounts for the third quarter and first nine months of Fiscal 2020. The Company did not recast cost of goods sold for the related revenue reclassifications due to immateriality. The reclassifications resulted in an increase to services revenue and an equal and offsetting decrease to product revenue of $210 million and $584 million for the third quarter and first nine months of Fiscal 2020, respectively. Total net revenue as previously reported remains unchanged.

~~Table of Contents~~

~~(b)~~ Product gross margin percentages represent product gross margin as a percentage of product net revenue, and non-GAAP product gross margin percentages represent non-GAAP product gross margin as a percentage of non-GAAP product net revenue.

~~(c)~~(b) Services gross margin percentages represent services gross margin as a percentage of services net revenue, and non-GAAP services gross margin percentages represent non-GAAP services gross margin as a percentage of non-GAAP services net revenue.

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Overview

During the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021,~~2022, our net revenue ~~increased 3%~~ and remained flat, respectively, as we benefited from the strength of our broad technology solutions portfolio, which helped us navigate market volatility and competitive pressures, particularly due to the COVID-19 environment. During the third quarter and first nine months of Fiscal 2021, our non-GAAP net revenue ~~also~~both increased ~~3% and remained flat, respectively. Increases~~12% due to an increase in net revenue for CSG, and ~~VMware~~to a lesser extent, increases in net revenue ~~were offset~~for ISG and VMware, driven by ~~a decline in~~the "do-anything-from-anywhere" economy where technology enables connectivity and outcomes for everyone. CSG net revenue benefited from ongoing high demand for remote work and learning solutions, along with gaming systems, and ISG net revenue ~~for both~~benefited from improvements in the ~~third~~macroeconomic environment during the first quarter ~~and first nine months~~ of Fiscal 2021. The increase in CSG net revenue was primarily driven by growth in consumer solutions and continued strong demand for commercial notebooks, partially offset by lower demand for commercial desktops.2022. VMware net revenue increased due to growth in sales of subscriptions and software-as-a-service (“SaaS”) offerings and software maintenance. ~~ISG net revenue decreased~~

During the first quarter of Fiscal 2022, our operating income and non-GAAP operating income increased 96% and 26%, respectively, primarily due to an increase in operating income for CSG, and to a ~~weaker demand environment as customers continued to direct their investments towards remote work~~lesser extent, increases in operating income for ISG and ~~business continuity solutions. Although we are~~VMware. Operating income during the first quarter of Fiscal 2022 also benefited from a decrease in amortization of intangible assets.

Operating cash flows during the ~~midst of unprecedented uncertainty as a result~~first quarter of the ~~ongoing~~fiscal year are typically lower due to seasonal sales trends affecting parts of our business as well as the timing of annual personnel-related payments. Cash provided by operating activities was $2.2 billion for the first quarter of Fiscal 2022 compared to cash used in operating activities of $0.8 billion for the first quarter of Fiscal 2021. The increase in operating cash flows was driven by strong profitability coupled with favorable working capital dynamics during the first quarter of Fiscal 2022, compared to unfavorable working capital impacts related to the COVID-19 pandemic ~~we believe we are well-positioned~~during the first quarter of Fiscal 2021. See “Market Conditions, Liquidity, and Capital Commitments” for ~~long-term profitable growth while also maintaining the~~further information on our cash flow metrics.

We continue to see opportunities to create value and grow in Fiscal 2022 in response to resilient demand for our IT solutions driven by a technology-enabled world. We have demonstrated our ability to adjust as needed to changing market conditions with complementary solutions across all segments of our business, an agile workforce, and the strength of our global supply chain. As we continue to innovate and modernize our core offerings, we believe Dell Technologies is well-positioned for long-term profitable growth.

During the third quarter and first nine months of Fiscal 2021, our operating income increased 35% and 56%, respectively, primarily driven by lower selling, general, and administrative expenses as we realized the benefit of cost reduction initiatives. During the third quarter of Fiscal 2021, operating income benefited from increases in operating income for CSG and VMware, and a decrease in amortization of intangible assets. These benefits were partially offset by a decrease in operating income for ISG and increases in stock-based compensation expense and severance costs. During the first nine months of Fiscal 2021, the increase in operating income was primarily attributable to the absence of Virtustream impairment charges of $619 million recognized in the first nine months of Fiscal 2020. Operating income for the first nine months of Fiscal 2021 also benefited from increases in operating income for VMware and other businesses and a decrease in amortization of intangible assets. These benefits were partially offset by decreases in operating income for CSG and ISG and increases in stock-based compensation expense and severance costs.

Amortization of intangible assets, stock-based compensation expense, and other corporate expenses that impacted our operating income totaled $1.5 billion and $1.4 billion for the third quarter of Fiscal 2021 and Fiscal 2020, respectively, and $4.2 billion and $5.0 billion for the first nine months of Fiscal 2021 and Fiscal 2020, respectively. Excluding these costs, and the impact of purchase accounting and transaction-related expenses, our non-GAAP operating income increased 12% and 2% during the third quarter and first nine months of Fiscal 2021, respectively. The 12% increase in non-GAAP operating income during the third quarter of Fiscal 2021 was due to increases in operating income for CSG and VMware, which were partially offset by a decrease in operating income for ISG. The 2% increase in non-GAAP operating income during the first nine months of Fiscal 2020 was due to increases in operating income for VMware and other businesses, which were partially offset by decreases in operating income for CSG and ISG.

Cash provided by operating activities was $5.5 billion and $5.8 billion for the first nine months of Fiscal 2021 and Fiscal 2020, respectively. Operating cash flows declined slightly during the first nine months of Fiscal 2021 as the strong profitability during the period was offset by unfavorable working capital impacts of an increase in inventory, decline in growth rate of deferred revenue, and timing of purchases and payments to vendors. COVID-19 impacts to working capital continued to

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~~normalize during the third quarter of Fiscal 2021. See “Market Conditions, Liquidity, and Capital Commitments” for further information on our cash flow metrics.~~

Net Revenue

During the ~~third~~first quarter of Fiscal ~~2021,~~2022, our net revenue and non-GAAP net revenue both increased 3%12%. The increases in net revenue and non-GAAP net revenue during the ~~third~~first quarter of Fiscal ~~2021~~2022 were ~~primarily attributable~~due to ~~increases~~an increase in net revenue for CSG, and ~~VMware, which were partially offset by~~to a ~~decrease~~lesser extent, increases in net revenue for ISG ~~net revenue.~~and VMware. See “Business Unit Results” for further information. ~~During the first nine months of Fiscal 2021, our revenue and non-GAAP net revenue both remained flat as increases in net revenue for CSG and VMware were offset by a decrease in ISG net revenue.~~

•Product Net Revenue — Product net revenue includes revenue from the sale of hardware products and software licenses. During the ~~third~~first quarter of Fiscal ~~2021,~~2022, product net revenue and non-GAAP product net revenue both ~~remained flat as~~increased 12% due to an increase in product net revenue for CSG ~~was offset by a decrease in product net revenue for ISG. During the first nine months of Fiscal 2021, product net revenue~~ and, ~~non-GAAP product net revenue both decreased 3% primarily due~~ to a ~~decrease~~lesser extent, an increase in product net revenue for ISG.

•Services Net Revenue — Services net revenue includes revenue from our services offerings and support services related to hardware products and software licenses. During the ~~third~~first quarter of Fiscal ~~2021,~~2022, services net revenue and non-GAAP services net revenue both increased 10% ~~and 9%, respectively. During the first nine months of Fiscal 2021, services net revenue and non-GAAP services net revenue increased 10% and 9%, respectively.~~. These increases were primarily attributable to increases in services net revenue for CSG ~~third-party software~~support and maintenance as well as VMware SaaS and ~~VMware~~ software ~~and in particular, increases in subscription-based licenses.~~maintenance services. A substantial portion of services net revenue is derived from offerings that have been deferred over a period of time, and, as a result, reported services net revenue growth rates will be different than reported product net revenue growth rates.

From a geographical perspective, ~~during the third quarter and first nine months of Fiscal 2021, net revenue increased in the Americas due to strong CSG performance. These increases were offset by declines in~~ net revenue generated by sales to customers in ~~APJ as a result of a weaker demand environment.~~

~~Gross Margin~~

~~During the third quarter and first nine months of Fiscal 2021, our gross margin~~all regions increased ~~2% to $7.3 billion and remained flat at $21.3 billion, respectively. The increase in our gross margin~~ during the ~~third~~first quarter of Fiscal ~~2021 was~~2022 driven by ~~favorable impacts of gross margin increases in~~strong CSG and VMware and a decrease in amortization of intangible assets, partially offset by gross margin decreases for ISG and other businesses. During the first nine months of Fiscal 2021, our gross margin remained relatively flat as favorable impacts of gross margin increases for VMware and a decrease in amortization of intangible assets were offset by gross margin decreases for CSG and ISG.performance.

During the third quarter and first nine months of Fiscal 2021, our gross margin percentage decreased 30 basis points to 30.9% and remained flat at 31.2% basis points, respectively. The decrease in our gross margin percentage during the third quarter of Fiscal 2021 was primarily driven by decreases in gross margin percentage for ISG due to higher product costs and a shift in mix due to strong CSG sales, which was partially offset by a decrease in amortization of intangible assets. During the first nine months of Fiscal 2021, gross margin percentage remained flat as the beneficial impact of a decrease in amortization of intangible assets was offset by decreases in gross margin percentage for ISG and CSG, as well as by a decrease due to a shift in product mix due to strong CSG sales.

Our gross margin included the impact of amortization of intangibles and purchase accounting adjustments of $0.4 billion and $0.6 billion for the third quarter of Fiscal 2021 and Fiscal 2020, respectively, and $1.3 billion and $1.8 billion during the first nine months of Fiscal 2021 and Fiscal 2020, respectively. Excluding these costs, transaction-related expenses, stock-based compensation expense, and other corporate expenses, non-GAAP gross margin during the third quarter and first nine months of Fiscal 2021 remained flat at $7.8 billion and decreased 2% to $22.7 billion, respectively.

Non-GAAP gross margin percentage decreased 90 basis points to 33.0% and 60 basis points to 33.3% during the third quarter and first nine months of Fiscal 2021, respectively. The decrease in our non-GAAP gross margin percentage during the third quarter of Fiscal 2021 was due to decreases in gross margin percentage for ISG due to higher product costs and a shift in mix due to strong CSG sales. During the first nine months of Fiscal 2021 the decrease in our non-GAAP gross margin percentage

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~~was attributable~~Gross Margin

During the first quarter of Fiscal 2022, our gross margin increased 12% to ~~decreases~~$7.7 billion. Excluding the impact of amortization of intangibles, purchase accounting adjustments, transaction-related expenses, stock-based compensation expense, and other corporate expenses, our non-GAAP gross margin increased 9% to $8.0 billion. Both gross margin and non-GAAP gross margin benefited from an increase in gross margin ~~percentage~~ for ~~ISG~~CSG and, ~~CSG, as well as a decrease due~~ to a ~~shift~~lesser extent, an increase in ~~product mix due to strong CSG sales.~~

•~~Products~~ ~~— During~~gross margin for VMware. These benefits were partially offset by the impact of the divestiture of RSA Security during the third quarter of Fiscal 2021, ~~product~~which resulted in a decrease in gross margin ~~decreased 4%~~for other businesses during the first quarter of Fiscal 2022 compared to ~~$3.6 billion, and product~~the first quarter of Fiscal 2021.

During the first quarter of Fiscal 2022, our gross margin percentage ~~decreased 100 basis points~~remained flat at 31.3% due to ~~20.5%. The decrease in product gross margin was primarily driven by higher product costs for ISG partially offset by~~favorable impacts of an increase in gross margin percentage for CSG and a decrease in amortization of intangible assets. ~~Product~~These favorable impacts were offset by a shift in overall gross margin mix to CSG and a decrease in gross margin percentage for ISG. Non-GAAP gross margin percentage decreased 70 basis points to 32.7% during the ~~third~~first quarter of Fiscal 2021 due to a shift in product mix due to strong CSG sales. During the third quarter of Fiscal 2021, non-GAAP product gross margin decreased 7% to $4.0 billion, and non-GAAP product gross margin percentage decreased 180 basis points to 22.8% due to the same CSG and ISG dynamics discussed above.

During the first nine months of Fiscal 2021, product gross margin decreased 9% to $10.2 billion, and product gross margin percentage decreased 130 basis points to 20.4%. The decreases in product gross margin and product gross margin percentage were primarily2022 driven by higher product costs for ISG and a shift in product mix due to strong CSG sales. These unfavorable impacts were partially offset by a decrease in amortization of intangibles. During the first nine months of Fiscal 2021, non-GAAP product gross margin decreased 11% to $11.4 billion, and non-GAAP product gross margin percentage decreased 210 basis points to 22.7% due to the same CSG and ISG dynamics discussed above.

•Products — During the first quarter of Fiscal 2022, product gross margin increased 18% to $3.8 billion and non-GAAP product gross margin increased 14% to $4.1 billion. The increases in product gross margin and non-GAAP product gross margin were primarily driven by the favorable impact of an increase in CSG product gross margin.

During the first quarter of Fiscal 2022, product gross margin percentage increased 100 basis points to 21.2% and non-GAAP product gross margin percentage increased 20 basis points to 22.8% The increases in product gross margin percentage and non-GAAP product gross margin percentage were due to favorable impacts of an increase in product gross margin percentage for CSG and a decrease in amortization of intangible assets. These favorable impacts were partially offset by a shift in overall product gross margin mix to CSG and a decrease in product gross margin percentage for ISG.

•Services — During the ~~third~~first quarter of Fiscal ~~2021,~~2022, services gross margin increased 8%6% to ~~$3.7~~$3.8 billion ~~and services gross margin percentage decreased 90 basis points to 60.3%. Services gross margin increased~~primarily due to growth in VMware SaaS and software maintenance ~~and CSG third-party software and maintenance, particularly subscription-based licenses,~~services as well as ~~a decrease~~growth in ~~purchase accounting adjustments.~~CSG support and maintenance. Excluding purchase accounting adjustments, transaction-related expenses, stock-based compensation expense, and other corporate expenses, non-GAAP services gross margin increased 8%5% to ~~$3.8~~$3.9 billion during the ~~third~~first quarter of Fiscal ~~2021 primarily due to~~2022 as a result of the same CSG and VMware growth ~~in VMware software maintenance and CSG third-party software and maintenance, and in particular, increases in subscription-based licenses.~~drivers discussed above.

During the ~~third~~first quarter of Fiscal ~~2021,~~2022, services gross margin percentage decreased 90230 basis points to ~~60.3%~~59.5% and non-GAAP services gross margin percentage decreased 60230 basis points to ~~61.8%~~60.5%. These decreases were ~~driven by decreases in services gross margin percentage for CSG, partially offset by increases~~primarily due to a decrease in services gross margin percentages across all reportable segments driven by an increase in employee-related costs and, for ~~VMware and ISG.~~ISG, a shift in services mix.

During the first nine months of Fiscal 2021, services gross margin increased 11% to $11.1 billion due to growth in VMware software maintenance and CSG third-party software and maintenance, and in particular, increases in subscription-based licenses, as well as a decrease in purchase accounting adjustments. Excluding purchase accounting adjustments, transaction-related expenses, stock-based compensation expense, and other corporate expenses, non-GAAP services gross margin increased 10% to $11.4 billion during the first nine months of Fiscal 2021 primarily due to growth in VMware software maintenance and CSG third-party software and maintenance, particularly subscription-based licenses.

During the first nine months of Fiscal 2021, services gross margin percentage increased 30 basis points to 61.5% and non-GAAP services gross margin percentage increased 30 basis points to 62.7% primarily due to an increase in VMware services gross margin percentage.

Vendor Programs and Settlements

Our gross margin is affected by our ability to achieve competitive pricing with our vendors and contract manufacturers, including through our negotiation of a variety of vendor rebate programs to achieve lower net costs for the various components we include in our products. Under these programs, vendors provide us with rebates or other discounts from the list prices for the components, which are generally elements of their pricing strategy. We account for vendor rebates and other discounts as a reduction in cost of net revenue. We manage our costs on a total net cost basis, which includes supplier list prices reduced by vendor rebates and other discounts.

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The terms and conditions of our vendor rebate programs are largely based on product volumes and are generally negotiated either at the beginning of the annual or quarterly period, depending on the program. The timing and amount of vendor rebates and other discounts we receive under the programs may vary from period to period, reflecting changes in the competitive environment. We monitor our component costs and seek to address the effects of any changes to terms that might arise under our vendor rebate programs. Our gross margins for the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021~~2022 and Fiscal ~~2020~~2021 were not materially affected by any changes to the terms of our vendor rebate programs, as the amounts we received under these programs were generally stable relative to our total net cost. We are not aware of any significant changes to vendor pricing or rebate programs that may impact our results in the near term.

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Operating Expenses

The following table presents information regarding our operating expenses for the periods indicated:


		Three Months Ended										Nine Months Ended											Three Months Ended
		October 30, 2020						November 1, 2019				October 30, 2020						November 1, 2019					April 30, 2021						May 1, 2020
		Dollars		% of Net Revenue		% Change		Dollars		% of Net Revenue		Dollars		% of Net Revenue		% Change		Dollars		% of Net Revenue			Dollars		% of Net Revenue		% Change		Dollars		% of Net Revenue
		(in millions, except percentages)																					(in millions, except percentages)
Operating expenses:	Operating expenses:																					Operating expenses:
Selling, general, and administrative	Selling, general, and administrative	$	4,772	20.3	%	(5)	%	$	5,028	22.0	%	$	14,419	21.1	%	(8)	%	$	15,677	23.0	%	Selling, general, and administrative	$	4,960	20.3	%	2	%	$	4,886	22.3	%
Research and development	Research and development	1,360		5.8	%	8	%	1,262		5.5	%	3,884		5.7	%	6	%	3,667		5.4	%	Research and development	1,323		5.4	%	5	%	1,265		5.8	%
Total operating expenses	Total operating expenses	$	6,132	26.1	%	(3)	%	$	6,290	27.5	%	$	18,303	26.8	%	(5)	%	$	19,344	28.4	%	Total operating expenses	$	6,283	25.7	%	2	%	$	6,151	28.1	%

Other Financial Information
																							Three Months Ended
																							April 30, 2021						May 1, 2020
																							Dollars		% of Non-GAAP Net Revenue		% Change		Dollars		% of Non-GAAP Net Revenue
																							(in millions, except percentages)
Non-GAAP operating expenses	Non-GAAP operating expenses	$	5,046	21.4	%	(5)	%	$	5,326	23.2	%	$	15,218	22.3	%	(4)	%	$	15,807	23.1	%	Non-GAAP operating expenses	$	5,304	21.6	%	3	%	$	5,164	23.5	%

During the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021,~~2022, total operating expenses ~~decreased 3% and 5%, respectively,~~increased 2% primarily due to ~~a decrease in selling, general, and administrative expenses, offset partially by~~ an increase in ~~research~~employee-related compensation and ~~development expenses.~~benefits. Our operating expenses include amortization of intangible assets, the impact of purchase accounting, transaction-related expenses, stock-based compensation expense, and other corporate expenses. In aggregate, these items totaled ~~$1.1 billion and~~ $1.0 billion for both the ~~third~~first quarter of Fiscal ~~2021~~2022 and Fiscal ~~2020, respectively, and $3.1 billion and $3.5 billion for the first nine months of Fiscal 2021 and Fiscal 2020, respectively.~~2021. Excluding these costs, total non-GAAP operating expenses ~~decreased 5% and 4%~~increased 3% for the ~~third~~first quarter ~~and first~~of Fiscal 2022. We expect that operating expenses will increase for the remaining nine months of Fiscal 2022, relative to the same period in Fiscal 2021, ~~respectively.~~as a result of the reintroduction of expenses that were temporarily reduced during Fiscal 2021 in response to COVID-19 pandemic.

•Selling, General, and Administrative — Selling, general, and administrative (“SG&A”) expenses ~~decreased 5% and 8%, respectively,~~increased 2% during the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021. The decreases in SG&A expenses were~~2022 primarily due to ~~measures taken as a result of the COVID-19 pandemic, which included global hiring limitations, reduction~~an increase in ~~consulting~~employee-related compensation and ~~contractor costs, global travel restrictions, suspension of the Dell 401(k) match program for U.S. employees, and lower facilities-related costs, as well as to~~benefits, partially offset by a decrease in travel-related expenses and amortization of intangible assets. With respect to our cost reduction initiatives, we expect that some of the benefits which we recognized during the third quarter and first nine months of Fiscal 2021 will phase out over time. These favorable impacts to SG&A expenses were partially offset by increases in stock-based compensation expense and severance costs during the third quarter and first nine months of Fiscal 2021. Additionally, during the first nine months of Fiscal 2021, the decrease in SG&A expenses reflected the absence of Virtustream impairment charges of $619 million recognized in the first nine months of Fiscal 2020.

•Research and Development — Research and development (“R&D”) expenses are primarily composed of personnel-related expenses ~~related~~incurred to ~~product development.~~develop the software that powers our solutions. R&D expenses as a percentage of net revenue were approximately ~~5.8%~~5.4% and ~~5.5%~~5.8% for the ~~third~~first quarter of Fiscal ~~2021~~2022 and Fiscal ~~2020, respectively, and 5.7% and 5.4% for the first nine months of Fiscal~~ 2021, ~~and Fiscal 2020,~~ respectively. ~~R&D expenses as a percentage of net revenue increased during the third quarter and first nine months of Fiscal 2021 primarily due~~We intend to ~~an increase in compensation-related expense, including stock-based compensation expense, driven by VMware. As our industry continues to change and as the needs of our customers evolve, we intend~~continue to support R&D initiatives to innovate and introduce new and enhanced solutions into the market.

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We continue to make ~~selective~~targeted investments designed to enable growth, marketing, and R&D, while balancing these investments with our efforts to drive cost efficiencies in the business. We also expect to continue to make investments in support of our own digital transformation to modernize and streamline our IT operations.

Operating Income

During the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021,~~2022, our operating income increased ~~35% and 56%, respectively,~~96% primarily driven by lower selling, general, and administrative expenses as we realized the benefit of cost reduction initiatives. During the third quarter of Fiscal 2021, operating income benefited from increasesdue to an increase in operating income for CSG, and ~~VMware,~~to a lesser extent, increases in operating income for ISG and VMware. Operating income during the first quarter of Fiscal 2022 also benefited from a decrease in amortization of intangible assets. These benefits were partially offset by a decrease in operating income for ISG and increases in stock-based compensation expense and severance costs. During the first nine months of Fiscal 2021, the increase in operating income was primarily attributable to the absence of Virtustream impairment charges of $619 million recognized in the first nine months of Fiscal 2020. Operating income during the first nine months of Fiscal 2021 also benefited from increases in operating income for VMware and other businesses and a decrease in amortization of intangible assets. These benefits were partially offset by decreases in operating income for CSG and ISG and increases in stock-based compensation expense and severance costs.

Amortization of intangible assets and stock-based compensation expense ~~and other corporate expenses that impacted our operating income~~ totaled ~~$1.5~~$1.1 billion and ~~$1.4 billion for the third quarter of Fiscal 2021 and Fiscal 2020, respectively, and $4.2 billion and $5.0~~$1.2 billion for the first ~~nine months~~quarter of Fiscal ~~2021~~2022 and Fiscal ~~2020,~~2021, respectively. Excluding these costs, and the impact of purchase accounting, transaction-related expenses, and ~~transaction-related~~other corporate expenses, our non-GAAP operating income increased ~~12%~~26% to $2.7 billion ~~and 2% to $7.5 billion~~ during the ~~third quarter and~~ first ~~nine months of Fiscal 2021, respectively. Non-GAAP operating income increased 12% for the third~~ quarter of Fiscal ~~2021~~2022. The increase in non-GAAP operating income for the first quarter of Fiscal 2022 was due to ~~increases~~an increase in operating income for CSG, and ~~VMware, which were partially offset by~~to a ~~decrease in operating income for ISG. Non-GAAP operating income increased 2% during the first nine months of Fiscal 2021 due to~~lesser extent, increases in operating income for ~~VMware~~ISG and ~~other businesses, which were partially offset by decreases in operating income for CSG and ISG.~~VMware.

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Interest and Other, Net

The following table ~~provides~~presents information regarding interest and other, net for the periods indicated:


		Three Months Ended				Nine Months Ended					Three Months Ended
		October 30, 2020		November 1, 2019		October 30, 2020		November 1, 2019			April 30, 2021		May 1, 2020
		(in millions)									(in millions)
Interest and other, net:	Interest and other, net:									Interest and other, net:
Investment income, primarily interest	Investment income, primarily interest	$	11	$	41	$	47	$	127	Investment income, primarily interest	$	11	$	24
Gain on investments, net	Gain on investments, net	489		18		591		160		Gain on investments, net	157		94
Interest expense	Interest expense	(566)		(654)		(1,855)		(2,045)		Interest expense	(510)		(672)
Foreign exchange	Foreign exchange	(31)		(43)		(130)		(123)		Foreign exchange	(49)		(99)
Other	Other	370		(39)		418		(119)		Other	3		87
Total interest and other, net	Total interest and other, net	$	273	$	(677)	$	(929)	$	(2,000)	Total interest and other, net	$	(388)	$	(566)

During the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021,~~2022, the change in interest and other, net was favorable by ~~$950~~$178 million ~~and $1,071 million, respectively,~~ primarily ~~driven by a $465 million gain on the fair value adjustment of one of our strategic investments, a pre-tax gain of $338 million on the sale of RSA Security reflected in Other in the table above, and~~due to a decrease in interest expense ~~due to~~resulting from debt ~~paydown~~paydowns over the periods. During the first nine months of Fiscal 2021, interest and other, net also benefited from a gain of $120 million recognized from the sale of certain intellectual property assets during the first quarter of Fiscal 2021.

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Income and Other Taxes

The following table presents information regarding our income and other taxes for the periods indicated:


	Three Months Ended
	April 30, 2021			May 1, 2020
	(in millions, except percentages)
Income before income taxes	$	987		$	136
Income tax expense (benefit)	$	49		$	(46)
Effective income tax rate	5.0		%	-33.8		%

For the ~~third~~first quarter of Fiscal ~~2021~~2022 and Fiscal ~~2020,~~2021, our effective income tax ~~rates were 37.2%~~rate was 5.0% on pre-tax income of ~~$1.4 billion~~$987 million and ~~-247.2%~~-33.8% on pre-tax income of ~~$159 million, respectively. For the first nine months of Fiscal 2021 and Fiscal 2020, our effective income tax rates were -6.1% on pre-tax income of $2.0 billion and 5482.1% on pre-tax losses of $95~~$136 million, respectively. The ~~changes~~change in our effective income tax ~~rates were~~rate was primarily driven by higher discrete tax items on higher pre-tax income and ~~changes~~a change in our jurisdictional mix of income.

For the ~~third~~first quarter ~~and~~of Fiscal 2022, our effective income tax rate includes discrete tax benefits of $103 million related to stock-based compensation. In comparison, for the first ~~nine months~~quarter of Fiscal 2021, our effective income tax ~~rates include~~rate includes a discrete tax ~~expense~~benefit of $359 million related to the divestiture of RSA Security during the period. Our effective income tax rate for the first nine months of Fiscal 2021 also includes discrete tax benefits of $746 million related to an audit settlement and $59 million from an intra-entity asset transfer of certain of Pivotal’s intellectual property to an Irish subsidiary that was completed by VMware, Inc. ~~For the first nine months of Fiscal 2020, our~~The effective income tax rate ~~includes~~for future quarters of Fiscal 2022 may be impacted by the actual mix of jurisdictions in which income is generated, as well as the impact of any discrete tax benefits of $4.9 billion related to similar intra-entity asset transfers. The tax benefit for each intra-entity asset transfer was recorded as a deferred tax asset in the period of the transaction and represents the book and tax basis difference on the transferred assets measured based on the applicable Irish statutory tax rate. We expect to be able to realize the deferred tax assets resulting from these intra-entity asset transfers. Our effective income tax rates for the third quarter and first nine months of Fiscal 2020 also include discrete tax benefits of $305 million related to an audit settlement.items.

Our effective income tax rate can fluctuate depending on the geographic distribution of our worldwide earnings, as our foreign earnings are generally taxed at lower rates than in the United States. The differences between our effective income tax rate and the U.S. federal statutory rate of 21% principally result from the geographical distribution of income, differences between the book and tax treatment of certain items, and the discrete tax items discussed above. In certain jurisdictions, our tax rate is significantly less than the applicable statutory rate as a result of tax holidays. The majority of our foreign income that is subject to these tax holidays and lower tax rates is attributable to Singapore ~~China,~~ and ~~Malaysia.~~China. A significant portion of these income tax benefits relates to a tax holiday that will be effective until January 31, 2029. Our other tax holidays will expire in whole or in part during Fiscal 2022 through Fiscal 2030. Many of these tax holidays and reduced tax rates may be extended when certain conditions are met or may be terminated early if certain conditions are not met. As of ~~October~~April 30, ~~2020,~~2021, we were not aware of any matters of non-compliance related to these tax holidays. ~~The effective income tax rate for future quarters of Fiscal 2021 may be impacted by the actual mix of jurisdictions in which income is generated.~~

For further discussion regarding tax matters, including the status of income tax audits, see Note 1110 of the Notes to the Condensed Consolidated Financial Statements included in this report.

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Net Income

During the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021,~~2022, net income increased ~~60%~~415% to ~~$0.9 billion and decreased 58% to $2.2 billion, respectively. The increase in net income during the third quarter of Fiscal 2021 was~~$938 million primarily due to net gains recognized in interest and other, net, and an increase in income taxes. The decrease in net income during the first nine months of Fiscal 2021 was primarily due to lower discrete tax benefits, which were partially offset by an increase in operating ~~income.~~

income coupled with a decrease in interest expense. Net income includes amortization of intangible assets, the impact of purchase accounting, transaction-related expenses, stock-based compensation expense, other corporate expenses, fair value adjustments on equity investments, and discrete tax items. Excluding these costs and the related tax impacts, non-GAAP net income increased ~~18%~~59% to ~~$1.7 billion and 2% to $4.5~~$1.8 billion during the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021, respectively.~~2022. The ~~increases~~increase in non-GAAP net income during the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021 were~~2022 was primarily attributable to ~~increases~~an increase in non-GAAP operating income ~~and increases~~coupled with a decrease in ~~non-GAAP income taxes.~~interest expense.

~~Table of Contents~~

Non-controlling Interests

~~During the third quarter and first nine months of Fiscal 2021, net~~Net income attributable to non-controlling interests ~~was $49 million and $139 million, respectively, and consisted~~consists of net income or loss attributable to our non-controlling interests in VMware, Inc. and Secureworks. During the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2020,~~2022 and Fiscal 2021, net income attributable to non-controlling interests was ~~$53~~$51 million and ~~$905~~$39 million, respectively, and consisted of net income or loss attributable to our non-controlling interests in VMware, Inc., Secureworks, and Pivotal. Pivotal was acquired by VMware, Inc. on December 30, 2019 and, as a result, we no longer have a separate non-controlling interest in Pivotal.respectively. The ~~decreases~~increase in net income attributable to non-controlling interests during the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021 were attributable~~2022 was primarily due to ~~decreases~~an increase in net income attributable to our non-controlling interest in VMware, Inc. For more information about our non-controlling interests, see Note 1312 of the Notes to the Condensed Consolidated Financial Statements included in this report.

Net Income Attributable to Dell Technologies Inc.

Net income attributable to Dell Technologies Inc. represents net income and an adjustment for non-controlling interests. During the ~~third~~first quarter of Fiscal 2022 and ~~first nine months of~~ Fiscal 2021, net income attributable to Dell Technologies Inc. was ~~$0.8 billion~~$887 million and ~~$2.0 billion, respectively. During the third quarter and first nine months of Fiscal 2020, net income attributable to Dell Technologies Inc. was $0.5 billion and $4.2 billion,~~$143 million, respectively. The increase in net income attributable to Dell Technologies Inc. during the ~~third~~first quarter of Fiscal ~~2021~~2022 was primarily attributable to an increase in net income for the period. ~~During the first nine months of Fiscal 2021, the decrease in net income attributable to Dell Technologies Inc. was primarily attributable to a decrease in net income for the period.~~

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Business Unit Results

Our reportable segments are based on the following business units: ISG, CSG, and VMware. A description of our three business units is provided under “Introduction.” See Note 1716 of the Notes to the Condensed Consolidated Financial Statements included in this report for a reconciliation of net revenue and operating income by reportable segment to consolidated net revenue and consolidated operating income, respectively.

Infrastructure Solutions Group

The following table presents net revenue and operating income attributable to ISG for the periods indicated:


		Three Months Ended								Nine Months Ended									Three Months Ended
		October 30, 2020			% Change		November 1, 2019			October 30, 2020			% Change		November 1, 2019				April 30, 2021			% Change		May 1, 2020
		(in millions, except percentages)																	(in millions, except percentages)
Net revenue:	Net revenue:																	Net revenue:
Servers and networking	Servers and networking	$	4,164		(2)	%	$	4,241		$	12,118		(6)	%	$	12,858		Servers and networking	$	4,109		9	%	$	3,758
Storage	Storage	3,860			(7)	%	4,149			11,682			(5)	%	12,355			Storage	3,802			—	%	3,811
Total ISG net revenue	Total ISG net revenue	$	8,024		(4)	%	$	8,390		$	23,800		(6)	%	$	25,213		Total ISG net revenue	$	7,911		5	%	$	7,569

Operating income:	Operating income:																	Operating income:
ISG operating income	ISG operating income	$	882		(11)	%	$	996		$	2,587		(10)	%	$	2,889		ISG operating income	$	788		8	%	$	732
% of segment net revenue	% of segment net revenue	11.0		%			11.9		%	10.9		%			11.5		%	% of segment net revenue	10.0		%			9.7		%

Net Revenue — During the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021,~~2022, ISG net revenue ~~decreased 4%~~increased 5%, benefiting from improvements to the macroeconomic environment and ~~6%, respectively, due to decreases~~ in ~~sales of servers and networking and storage. ISG net revenue decreased primarily due~~particular, improving server demand, compared to a weaker demand environment during the first quarter of Fiscal 2021 as a result of COVID-19, when customers ~~restricted technology spending and directed~~shifted their investments toward remote work and business continuity solutions.

~~Revenue~~Net revenue from the sales of servers and networking ~~decreased 2% and 6%~~increased 9% during the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021, respectively,~~2022 primarily driven by declines in units sold of our PowerEdge servers due to the broader macro-economic environment, including the effects of COVID-19. During the third quarter of Fiscal 2021, the decline in volume was largely offset by improvement in average selling prices for servers. During the first nine months of Fiscal 2021, servers and networking revenue was impacted by an overall decrease in average selling prices for servers resulting from competitive pressures in certain geographies in the first half of Fiscal 2021. Storage revenue decreased 7% and 5% during the third quarter and first nine months of Fiscal 2021, respectively, primarily due to declinesincrease in demand for our ~~core~~PowerEdge servers. Net revenue from the sales of storage ~~solutions~~was flat during the first quarter of Fiscal 2022 compared to the first quarter of Fiscal 2021. However, we are seeing improvements in the storage business, particularly in our midrange storage offerings, ~~partially offset~~driven by ~~increased~~ demand growth for our new PowerStore storage array, as well as hyperconverged ~~infrastructure solutions.~~infrastructure. We continue to make enhancements to our storage solutions offerings and expect that these offerings, including ~~our new~~ PowerStore, ~~storage array released in May 2020,~~ will drive long-term improvements in the business.

ISG customers are interested in new and innovative models that address how they consume our solutions. We offer options including as-a-service, utility, leases, and immediate pay models, all designed to match customers’ consumption and financing preferences. Our ~~multi-year~~multiyear agreements typically result in recurring revenue streams over the term of the arrangement. We expect our flexible consumption models and as-a-service offerings through Apex will further strengthen our customer relationships and provide a foundation for growth in recurring revenue.

From a geographical perspective, net revenue attributable to ISG ~~decreased~~increased in ~~all~~the EMEA and APJ regions during ~~both~~ the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021, driven by a weaker demand environment as a result~~2022. Net revenue attributable to ISG in the Americas decreased slightly during the first quarter of ~~pervasive global COVID-19 disruptions.~~Fiscal 2022.

Operating Income — During the ~~third~~first quarter of Fiscal ~~2021,~~2022, ISG operating income as a percentage of net revenue ~~decreased 90~~increased 30 basis points to ~~11.0%~~10.0%. ~~During~~The increase in operating income percentage during the first ~~nine months~~quarter of Fiscal ~~2021,~~2022 was driven by a decrease in ISG operating ~~income~~expenses as a percentage of net revenue ~~decreased 60 basis points to 10.9%.~~resulting from continued operating expense discipline. The ~~declines~~decrease in ISG operating ~~income percentages during the third quarter and first nine months of Fiscal 2021 were driven~~expenses percentage was partially offset by ~~declines in gross margin percentages for servers and networking, which were attributable to commodity inflation and competitive pricing dynamics. The declines~~a decrease in ISG gross margin percentage ~~during~~due to a shift in ISG gross margin mix to servers and networking, coupled with a shift within the ~~third quarter~~gross margin mix of storage solutions.

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~~and first nine months of Fiscal 2021 were partially offset by decreases in operating expenses as a percentage of net revenue, as we realized the benefit of cost reduction initiatives.~~

Client Solutions Group

The following table presents net revenue and operating income attributable to CSG for the periods indicated:


		Three Months Ended								Nine Months Ended									Three Months Ended
		October 30, 2020			% Change		November 1, 2019			October 30, 2020			% Change		November 1, 2019				April 30, 2021			% Change		May 1, 2020
		(in millions, except percentages)																	(in millions, except percentages)
Net revenue:	Net revenue:																	Net revenue:
Commercial	Commercial	$	8,783		5	%	$	8,330		$	25,456		(1)	%	$	25,714		Commercial	$	9,803		14	%	$	8,634
Consumer	Consumer	3,503			14	%	3,080			9,137			9	%	8,354			Consumer	3,502			42	%	2,470
Total CSG net revenue	Total CSG net revenue	$	12,286		8	%	$	11,410		$	34,593		2	%	$	34,068		Total CSG net revenue	$	13,305		20	%	$	11,104

Operating income:	Operating income:																	Operating income:
CSG operating income	CSG operating income	$	1,002		36	%	$	739		$	2,309		(8)	%	$	2,514		CSG operating income	$	1,090		84	%	$	592
% of segment net revenue	% of segment net revenue	8.2		%			6.5		%	6.7		%			7.4		%	% of segment net revenue	8.2		%			5.3		%

Net Revenue — During the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021,~~2022, CSG net revenue increased ~~8% and 2%, respectively, primarily due to increases in commercial and consumer notebook sales, partially offset by decreases in commercial desktop sales. Much of this demand was~~20% driven by ~~the imperative~~ongoing strong demand for remote work and remote learning solutions, ~~as business, government, and education customers sought to maintain productivity in the midst of COVID-19.~~along with gaming systems.

Commercial revenue increased 5%14% during the ~~third~~first quarter of Fiscal ~~2021,~~2022 primarily due to ~~increased demand for commercial notebooks, and particularly for entry-level~~an increase in sales of commercial notebooks driven by ~~customers in education and state and local government. The increase in~~continued strong demand for ~~commercial notebooks was~~remote work and remote learning solutions, partially offset by lower demand for commercial desktops ~~during the third quarter of Fiscal 2021. Commercial revenue decreased 1% during the first nine months of Fiscal 2020 primarily~~and an overall decline in commercial average selling prices, in part due to ~~lower demand for~~a product mix shift within commercial ~~desktops, the effects of which were largely offset by an increase in demand for~~toward entry-level commercial ~~notebooks, driven by customers in education and state and local government.~~notebooks.

Consumer revenue increased ~~14% and 9%~~42% during the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021, respectively,~~2022 due to ~~continued strong~~an increase in demand across all consumer product offerings, particularly for consumer notebooks and high-end ~~and~~ gaming systems, compared to the unique demand environment for consumer products during the first quarter of Fiscal 2021, particularly in retail, as a result of disruption introduced by the COVID-19 pandemic. This increased demand was coupled with an increase in average selling prices ~~for our higher-priced~~of certain consumer ~~notebooks.~~product lines during the first quarter of Fiscal 2022.

From a geographical perspective, net revenue attributable to CSG increased inacross all regions during the ~~Americas and EMEA during both the third~~first quarter ~~and first nine months~~ of Fiscal ~~2021. These increases were partially offset by declines in net revenue attributable to CSG in APJ during the periods.~~2022.

Operating Income — During the ~~third~~first quarter of Fiscal ~~2021,~~2022, CSG operating income as a percentage of net revenue increased ~~170~~290 basis points to 8.2% ~~primarily due to a decrease in operating expenses as a percentage of revenue, as we realized the benefit of cost reduction initiatives, and to a lesser extent,~~driven by an increase in ~~CSG~~both consumer and commercial gross margin percentage, ~~driven by consumer pricing favorability. During~~which benefited from deflation in the ~~first nine months of Fiscal 2021,~~overall component cost environment. CSG operating income as a percentage of net revenue ~~decreased 70 basis points to 6.7%. This decrease was primarily attributable to~~also benefited from a decrease in CSG gross margin percentage driven by a shift in product mix to entry-level commercial notebooks and lower component cost deflation relative to pricing. The decrease in CSG gross margin percentage was partially offset by a decrease in operating expenses as a percentage of net revenue during the first quarter of Fiscal 2022 as ~~we realized the benefit~~a result of ~~cost reduction initiatives.~~continued operating expense discipline.

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VMware

The following table presents net revenue and operating income attributable to VMware for the periods ~~indicated.~~ During Fiscal 2020, the Company reclassified Pivotal operating results from other businesses to the VMware reportable segment. Prior period results have been recast to conform with the current period presentation.indicated:


		Three Months Ended								Nine Months Ended									Three Months Ended
		October 30, 2020			% Change		November 1, 2019			October 30, 2020			% Change		November 1, 2019				April 30, 2021			% Change		May 1, 2020
		(in millions, except percentages)																	(in millions, except percentages)
Net revenue:	Net revenue:																	Net revenue:
VMware net revenue	VMware net revenue	$	2,893		8	%	$	2,671		$	8,556		10	%	$	7,779		VMware net revenue	$	2,991		9	%	$	2,755

Operating income:	Operating income:																	Operating income:
VMware operating income	VMware operating income	$	837		18	%	$	709		$	2,504		22	%	$	2,055		VMware operating income	$	841		9	%	$	773
% of segment net revenue	% of segment net revenue	28.9		%			26.5		%	29.3		%			26.4		%	% of segment net revenue	28.1		%			28.1		%

Net Revenue — VMware net revenue ~~inclusive of Pivotal,~~ primarily consists of revenue from the sale of software licenses under perpetual licenses and subscription and ~~software-as-a-service (“SaaS”)~~SaaS offerings, as well as related software maintenance services, support, training, consulting services, and hosted services. VMware net revenue for the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021~~2022 increased ~~8% and 10%, respectively,~~9% primarily due to growth in sales of ~~subscriptions~~subscription and SaaS offerings, ~~as well as an increase in sales of software maintenance services. Growth in sales of subscriptions and SaaS offerings was primarily~~ driven by increased demand for ~~hybrid~~ cloud offerings, ~~and digital workspaces. Software~~coupled with continued benefits to software maintenance revenue ~~benefited~~ from maintenance contracts sold in ~~previous~~prior periods.

From a geographical perspective, approximately half of VMware net revenue during the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021~~2022 was generated by sales to customers in the United States. VMware net revenue for the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021~~2022 increased in both the United States and internationally.

Operating Income — During the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021,~~2022, VMware operating income as a percentage of net revenue ~~increased 240 basis points~~remained flat at 28.1% due to ~~28.9% and 290 basis points to 29.3%, respectively. The increases were primarily~~a decrease in VMware gross margin percentage driven by ~~decreases~~headcount growth, offset by a decrease in ~~selling, general, and administrative~~VMware operating expenses as a percentage of net revenue ~~as we benefited from decreased~~driven by lower marketing and travel-related costs. The decrease in travel-related costs ~~resulting~~during the first quarter of Fiscal 2022 resulted from travel restrictions imposed in response to the COVID-19 pandemic. While the COVID-19 pandemic has not had a significant adverse financial impact on VMware operations to date, there continues to be significant uncertainty regarding the economic effects of the COVID-19 pandemic and the extent to which it may have a negative impact on VMware’s sales and results of operations for the remainder of Fiscal 2021 and into Fiscal 2022.

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OTHER BALANCE SHEET ITEMS

Accounts Receivable

We sell products and services directly to customers and through a variety of sales channels, including retail distribution. Our accounts receivable, net, was ~~$11.4~~$10.9 billion and ~~$12.5~~$12.8 billion as of ~~October~~April 30, ~~2020~~2021 and January ~~31, 2020,~~29, 2021, respectively. We maintain an allowance for expected credit losses to cover receivables that may be deemed uncollectible. The allowance for expected credit losses is an estimate based on an analysis of historical loss experience, current receivables aging, and management’s assessment of current conditions and reasonable and supportable expectation of future conditions, as well as specific identifiable customer accounts that are deemed at risk. ~~Our analysis includes assumptions regarding the impact of COVID-19 and continued market volatility, which is highly uncertain and subject to significant judgment.~~ Given this uncertainty, our allowance for expected credit losses in future periods may vary from our current estimates. As of ~~October~~both April 30, ~~2020~~2021 and January ~~31, 2020,~~29, 2021, the allowance for expected credit losses was $115 million and $94 million, respectively. Allowance for expected credit losses of trade receivables as of October 30, 2020 includes the impact of adoption of the new current expected credit losses (“CECL”) standard, which was adopted as of February 1, 2020 using the modified retrospective method.$104 million. Based on our assessment, we believe that we are adequately reserved for expected credit losses. We will continue to monitor the aging of our accounts receivable and take actions, where necessary, to reduce our exposure to credit losses.

Dell Financial Services

Dell Financial Services and its affiliates (“DFS”) support Dell Technologies by offering and arranging various financing options and services for our customers globally, including through captive financing operations in North America, Europe, Australia, and New Zealand. DFS originates, collects, and services customer receivables primarily related to the purchase of our product, software, and service solutions. DFS further strengthens our customer relationships through its flexible consumption models, which enable us to offer our customers the option to pay over time and, in certain cases, based on utilization, to provide them with financial flexibility to meet their changing technological requirements. New financing originations were ~~$2.1~~$1.9 billion and ~~$2.0 billion for the third quarter of Fiscal 2021 and Fiscal 2020, respectively, and $6.5 billion and $5.7~~$1.8 billion for the first ~~nine months~~quarter of Fiscal ~~2021~~2022 and Fiscal ~~2020,~~2021, respectively.

Pursuant to the current lease accounting standard effective February 2, 2019, new DFS leases are classified as sales-type leases, direct financing leases, or operating leases. Amounts due from lessees under sales-type leases or direct financing leases are recorded as part of financing receivables, with interest income recognized over the contract term. On commencement of sales-type leases, we typically qualify for up-front revenue recognition. On originations of operating leases, we record equipment under operating leases, classified as property, plant, and equipment, and recognize rental revenue and depreciation expense, classified as cost of net revenue, over the contract term. Direct financing leases are immaterial. Leases that commenced prior to the effective date of the current lease accounting standard continue to be accounted for under previous lease accounting guidance.

As of ~~October~~April 30, ~~2020~~2021 and January ~~31, 2020,~~29, 2021, our financing receivables, net were $10.2 billion and ~~$9.7~~$10.5 billion, ~~respectively.~~ respectively. We maintain an allowance to cover expected financing receivable credit losses and evaluate credit loss expectations based on our total portfolio. ~~Allowance for expected credit losses of financing receivables as of October 30, 2020 includes the impact of adoption of the CECL standard referred to above.~~ Our ~~analysis includes assumptions regarding the impact of COVID-19 and continued market volatility, which is highly uncertain and subject to significant judgment. Given this uncertainty, our~~ allowance for expected credit losses in future periods may vary from our current estimates. For the ~~third~~first quarter of Fiscal ~~2021~~2022 and Fiscal ~~2020,~~2021, the principal charge-off rate for our financing receivables portfolio was ~~0.7% and 0.9%, respectively. For the first nine months of Fiscal 2021 and Fiscal 2020, the principal charge-off rate for our financing receivables portfolio was 0.9%~~0.5% and 1.0%, respectively. The credit quality of our financing receivables has improved in recent years due to an overall improvement in the credit environment and as the mix of high-quality commercial accounts in our portfolio has continued to increase. We continue to monitor broader economic indicators and their potential impact on future loss performance. We have an extensive process to manage our exposure to customer credit risk, including active management of credit lines and our collection activities. We also sell selected fixed-term financing receivables without recourse to unrelated third parties on a periodic basis, primarily to manage certain concentrations of customer credit exposure. Based on our assessment of the customer financing receivables, we believe that we are adequately reserved.

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We retain a residual interest in equipment leased under our fixed-term lease programs. As of ~~October~~April 30, ~~2020~~2021 and January ~~31, 2020,~~29, 2021, the residual interest recorded as part of financing receivables was ~~$472~~$367 million and ~~$582~~$424 million, respectively. The amount of the residual interest is established at the inception of the lease based upon estimates of the value of the equipment at the end of the lease term using historical studies, industry data, and future value-at-risk demand valuation methods. ~~On a quarterly basis, we~~We assess the carrying amount of our recorded residual values for ~~impairment.~~expected losses. Generally, expected losses as a result of residual value risk on equipment under lease isare not considered to be significant primarily because of the existence of a secondary market with respect to the equipment. The lease agreement also clearly defines applicable return conditions and remedies for non-compliance, to ensure that the leased equipment will be in good operating condition upon return. Model changes and updates, as well as market strength and product acceptance, are monitored and adjustments are made to residual values in accordance with the significance of any such changes. ~~Our remarketing sales staff works~~To mitigate our exposure, we work closely with customers and dealers to manage the sale of ~~lease returns and the recovery of residual exposure.~~returned assets. No ~~impairment~~material expected losses were recorded related to residual assets during the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021~~2022 and Fiscal ~~2020.~~2021.

As of ~~October~~April 30, ~~2020~~2021 and January ~~31, 2020,~~29, 2021, equipment under operating leases, net was ~~$1.3~~$1.4 billion and ~~$0.8~~$1.3 billion, respectively. Based on triggering events, we assess the carrying amount of the equipment under operating leases recorded for impairment. No material impairment losses were recorded related to such equipment during the ~~third~~first quarter ~~and first nine months~~ of Fiscal ~~2021~~2022 and Fiscal ~~2020.~~2021.

See Note 43 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information about our financing receivables and the associated allowances, and the equipment under operating leases.

Off-Balance Sheet Arrangements

As of ~~October~~April 30, ~~2020,~~2021, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition or results of operations.

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MARKET CONDITIONS, LIQUIDITY, AND CAPITAL COMMITMENTS

Market Conditions

We regularly monitor economic conditions and associated impacts on the financial markets and our business. We consistently evaluate the financial health of our supplier base, carefully manage customer credit, diversify counterparty risk, and monitor the concentration risk of our cash and cash equivalents balances globally. We routinely monitor our financial exposure to borrowers and counterparties.

We monitor credit risk associated with our financial counterparties using various market credit risk indicators such as credit ratings issued by nationally recognized credit rating agencies and changes in market credit default swap levels. We perform periodic evaluations of our positions with these counterparties and may limit exposure to any one counterparty in accordance with our policies. We monitor and manage these activities depending on current and expected market developments.

We use derivative instruments to hedge certain foreign currency exposures. We use forward contracts and purchased options designated as cash flow hedges to protect against the foreign currency exchange rate risks inherent in our forecasted transactions denominated in currencies other than the U.S. dollar. In addition, we primarily use forward contracts and may use purchased options to hedge monetary assets and liabilities denominated in a foreign currency. See Note 76 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about our use of derivative instruments.

We are exposed to interest rate risk related to our variable-rate debt portfolio. In the normal course of business, we follow established policies and procedures to manage this risk, including monitoring of our asset and liability mix. As a result, we do not anticipate any material losses from interest rate risk.

The impact of any credit adjustments related to our use of counterparties on our Condensed Consolidated Financial Statements included in this report has been immaterial.

Liquidity and Capital Resources

To support our ongoing business operations, we rely on operating cash flows as our primary source of liquidity. We monitor the efficiency of our balance sheet to ensure that we have adequate liquidity to support our business and strategic initiatives. In addition to internally generated cash, we have access to other capital sources to finance our strategic initiatives and fund growth in our financing operations. Our strategy is to deploy capital from any potential source, whether internally generated cash or debt, depending on the adequacy and availability of that source of capital and whether it can be accessed in a cost-effective manner.

In this unprecedented environment resulting from the COVID-19 pandemic, we are taking actions to strengthen our cash position and preserve financial flexibility, while continuing to prioritize our debt paydown target for the fiscal year.

The following table presents our cash and cash equivalents as well as our available borrowings as of the dates indicated:


		October 30, 2020		January 31, 2020			April 30, 2021		January 29, 2021
		(in millions)					(in millions)
Cash and cash equivalents, and available borrowings:	Cash and cash equivalents, and available borrowings:					Cash and cash equivalents, and available borrowings:
Cash and cash equivalents (a)	Cash and cash equivalents (a)	$	11,304	$	9,302	Cash and cash equivalents (a)	$	14,244	$	14,201
Remaining available borrowings under revolving credit facilities (b)	Remaining available borrowings under revolving credit facilities (b)	5,466		5,972		Remaining available borrowings under revolving credit facilities (b)	5,467		5,467
Total cash, cash equivalents, and available borrowings	Total cash, cash equivalents, and available borrowings	$	16,770	$	15,274	Total cash, cash equivalents, and available borrowings	$	19,711	$	19,668

____________________

(a) Of the ~~$11.3~~$14.2 billion of cash and cash equivalents as of ~~October~~April 30, ~~2020, $3.9~~2021, $5.6 billion was held by VMware, Inc.

(b) Of the $5.5 billion of remaining available borrowings under revolving credit facilities, $1.0 billion was attributable to the VMware Revolving Credit Facility.

Our revolving credit facilities as of ~~October~~April 30, ~~2020 include~~2021 consist of the Revolving Credit Facility ~~which we entered into on May 25, 2020.~~and the VMware Revolving Credit Facility. The Revolving Credit Facility has a maximum aggregate borrowing capacity of $4.5 billion, and available borrowings under this facility are reduced by draws on the facility and outstanding letters of credit. As of ~~October~~April 30, ~~2020,~~2021, there were no

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borrowings outstanding under the facility and remaining available borrowings totaled approximately $4.5 billion. We may regularly use our available borrowings from our Revolving Credit Facility on a short-term basis for general corporate purposes.

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The VMware Revolving Credit Facility has a maximum capacity of $1.0 billion. As of ~~October~~April 30, ~~2020, $1.0 billion was available~~2021, there were no outstanding borrowings under the ~~VMware Revolving Credit Facility.~~facility and remaining available borrowings totaled $1.0 billion. None of the net proceeds of borrowings under the VMware Revolving Credit Facility will be made available to support the operations or satisfy any corporate purposes of Dell Technologies, other than the operations and corporate purposes of VMware, Inc. and VMware, Inc.’s subsidiaries.

See Note 65 of the Notes to the Condensed Consolidated Financial Statements included in this report for additional information about each of the foregoing revolving credit facilities.

We believe that our current cash and cash equivalents, together with cash that will be provided by future operations and borrowings expected to be available under our revolving credit facilities, will be sufficient over at least the next twelve months and for the foreseeable future thereafter to fund our operations, debt service requirements and maturities, capital expenditures, share repurchases, and other corporate needs.

Debt

The following table summarizes our outstanding debt as of the dates indicated:


		October 30, 2020		Increase (decrease)		January 31, 2020			April 30, 2021		Increase (decrease)		January 29, 2021
		(in millions)							(in millions)
Core debt	Core debt							Core debt
Senior Secured Credit Facilities and First Lien Notes	Senior Secured Credit Facilities and First Lien Notes	$	27,186	$	(2,478)	$	29,664	Senior Secured Credit Facilities and First Lien Notes	$	24,769	$	(8)	$	24,777
Unsecured Notes and Debentures	Unsecured Notes and Debentures	1,352		—		1,352		Unsecured Notes and Debentures	952		(400)		1,352
Senior Notes	Senior Notes	2,700		—		2,700		Senior Notes	1,625		(1,075)		2,700
EMC Notes	EMC Notes	1,000		(600)		1,600		EMC Notes	1,000		—		1,000
DFS allocated debt	DFS allocated debt	(870)		625		(1,495)		DFS allocated debt	(415)		251		(666)
Total core debt	Total core debt	31,368		(2,453)		33,821		Total core debt	27,931		(1,232)		29,163
DFS related debt	DFS related debt							DFS related debt
DFS debt	DFS debt	9,201		1,436		7,765		DFS debt	9,753		87		9,666
DFS allocated debt	DFS allocated debt	870		(625)		1,495		DFS allocated debt	415		(251)		666
Total DFS related debt	Total DFS related debt	10,071		811		9,260		Total DFS related debt	10,168		(164)		10,332
Margin Loan Facility and other	Margin Loan Facility and other	4,167		143		4,024		Margin Loan Facility and other	4,304		69		4,235
Debt of public subsidiary	Debt of public subsidiary							Debt of public subsidiary
VMware Notes	VMware Notes	4,750		750		4,000		VMware Notes	4,750		—		4,750
VMware Term Loan Facility		—		(1,500)		1,500
Other		55		(5)		60

Total public subsidiary debt	Total public subsidiary debt	4,805		(755)		5,560		Total public subsidiary debt	4,750		—		4,750
Total debt, principal amount	Total debt, principal amount	50,411		(2,254)		52,665		Total debt, principal amount	47,153		(1,327)		48,480
Carrying value adjustments	Carrying value adjustments	(550)		59		(609)		Carrying value adjustments	(470)		26		(496)
Total debt, carrying value	Total debt, carrying value	$	49,861	$	(2,195)	$	52,056	Total debt, carrying value	$	46,683	$	(1,301)	$	47,984

During the first ~~nine months~~quarter of Fiscal ~~2021,~~2022, the outstanding principal amount of our debt decreased by ~~$2.3~~$1.3 billion to ~~$50.4~~$47.2 billion as of ~~October~~April 30, ~~2020,~~2021, primarily ~~driven by net repayments~~as a result of ~~core debt and VMware, Inc. debt, partially offset by a net increase in DFS debt.~~principal repayments.

We define core debt as the total principal amount of our debt, less DFS related debt, our Margin Loan Facility and other debt, and public subsidiary debt. Our core debt was ~~$31.4~~$27.9 billion as of ~~October~~April 30, ~~2020.~~2021. During the first ~~nine months~~quarter of Fiscal ~~2021,~~2022, the decrease in our core debt was driven by principal ~~repayments. Proceeds~~repayments, including $1,075 million principal amount of ~~$2.082 billion from the sale of RSA Security were used to pay down core debt. Principal repayments included the retirement in full of $4.5 billion principal amount~~

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~~of 4.42% First Lien~~our 5.875% Senior Notes due June 2021 ~~repayment of $600~~and $400 million principal amount of ~~2.650% EMC~~our 4.625% Unsecured Notes due ~~June 2020 upon maturity, and repayment~~April 2021. There are no scheduled maturities of ~~approximately $229 million of term loan facilities. These repayments were partially offset by~~core debt for the ~~issuance of multiple series of First Lien Notes in an aggregate principal amount of $2.25 billion on April 9, 2020.~~remainder Fiscal 2022. See Note 65 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about our debt.

~~There are no scheduled maturities of core debt for the remainder Fiscal 2021, although we intend to continue making core debt principal payments as part of our overall capital allocation strategy.~~

~~During the first nine months~~

Table of Fiscal 2021, we issued an additional $1.4 billion, net, in DFS debt to support the expansion of our financing receivables portfolio, which includes the issuance of 500 million Euro of senior unsecured eurobonds on June 24, 2020. Contents

DFS related debt primarily represents debt from our securitization and structured financing programs. The majority of DFS debt is non-recourse to Dell Technologies and represents borrowings under securitization programs and structured financing programs, for which our risk of loss is limited to transferred lease and loan payments and associated equipment, and under which the credit holders have no recourse to Dell Technologies.

To fund expansion of the DFS business, we balance the use of the securitization and structured financing programs with other sources of liquidity. We approximate the amount of our debt used to fund the DFS business by applying a 7:1 debt to equity ratio to the sum of our financing receivables balance and equipment under our DFS operating leases, net. The debt to equity ratio used is based on the underlying credit quality of the assets. See Note 43 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about our DFS debt.

As of ~~October~~April 30, ~~2020,~~2021, margin loan and other debt primarily consisted of the $4.0 billion Margin Loan Facility.

~~Debt of public subsidiary represents VMware, Inc. indebtedness. The decrease in debt of public subsidiary during the first nine months of Fiscal~~ Subsequent to April 30, 2021, ~~was due to principal repayments by VMware, Inc. of $1.25 billion principal amount of its 2.30% Notes due August 2020 and $1.5~~we repaid $1 billion principal amount of the ~~VMware Term~~Margin Loan Facility. These repayments were partially offset by the issuance of VMware Notes in an aggregate principal amount of $2.0 billion on April 7, 2020. See Note 6 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about VMware, Inc. debt.

Public subsidiary debt represents VMware, Inc. indebtedness. VMware, Inc. and its respective subsidiaries are unrestricted subsidiaries for purposes of the core debt of Dell Technologies. Neither Dell Technologies nor any of its subsidiaries, other than VMware, Inc., is obligated to make payment on the VMware ~~Notes or the VMware Term Loan Facility.~~Notes. None of the net proceeds of the VMware Notes ~~or, as discussed above, the VMware Term Loan Facility~~ will be made available to support the operations or satisfy any corporate purposes of Dell Technologies, other than the operations and corporate purposes of VMware, Inc. and its subsidiaries. See Note 5 of the Notes to the Condensed Consolidated Financial Statements included in this report for more information about VMware, Inc. debt.

~~Our requirements for cash~~In connection with the planned VMware Spin-off announced on April 14, 2021, VMware, Inc. intends to pay ~~principal~~a cash dividend, pro rata, to each of the holders of VMware, Inc. common stock in an aggregate amount equal to an amount to be mutually agreed by Dell Technologies and ~~interest on~~VMware, Inc. between $11.5 billion and $12.0 billion. VMware, Inc. expects to fund the cash dividend, in part, through the incurrence of new indebtedness. The transaction is expected to close during the fourth quarter of calendar 2021, subject to certain closing conditions. Upon the closing of the transaction, we intend to use the net proceeds from our ~~core~~pro rata share of the cash dividend to repay debt, ~~increased significantly due~~as part of our capital strategy to position Dell Technologies for investment grade ratings. See Note 1 of the Notes to the ~~borrowings we incurred to finance~~Condensed Consolidated Financial Statements included in this report for more information about the ~~EMC merger transaction and, to a lesser extent, the Class V transaction.~~ planned VMware Spin-off.

We have made ~~good~~steady progress in paying down ~~core debt since the EMC merger transaction.~~debt. We believe we will continue to be able to make our debt principal and interest payments, including the short-term maturities, from existing and expected sources of cash, primarily from operating cash flows. Cash used for debt principal and interest payments may also include short-term borrowings under our revolving credit facilities. We will continue to focus on ~~paying down core debt.~~deleveraging. Under our variable-rate debt, we could ~~have~~experience variations in our future interest expense from potential fluctuations in ~~LIBOR,~~applicable reference rates, or from possible fluctuations in the level of DFS debt required to meet future demand for customer financing.

We or our affiliates or their related persons, at our or their sole discretion and without public announcement, may purchase, redeem, prepay, refinance, or otherwise retire any amount of our outstanding indebtedness under the terms of such indebtedness at any time and from time to time, in open market or negotiated transactions with the holders of such indebtedness or otherwise, as appropriate market conditions exist.

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Cash Flows

The following table presents a summary of our Condensed Consolidated Statements of Cash Flows for the periods indicated:


		Nine Months Ended					Three Months Ended
		October 30, 2020		November 1, 2019			April 30, 2021		May 1, 2020
		(in millions)					(in millions)
Net change in cash from:	Net change in cash from:					Net change in cash from:
Operating activities	Operating activities	$	5,530	$	5,783	Operating activities	$	2,238	$	(796)
Investing activities	Investing activities	26		(3,982)		Investing activities	(519)		(485)
Financing activities	Financing activities	(3,483)		(2,600)		Financing activities	(1,638)		4,264
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(67)		(100)		Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(5)		(136)
Change in cash, cash equivalents, and restricted cash	Change in cash, cash equivalents, and restricted cash	$	2,006	$	(899)	Change in cash, cash equivalents, and restricted cash	$	76	$	2,847

Operating Activities — Operating cash flows during the first quarter of the fiscal year are typically lower due to seasonal sales trends affecting parts of our business as well as the timing of annual personnel-related payments. Cash provided by operating activities was ~~$5.5~~$2.2 billion for the first ~~nine months~~quarter of Fiscal ~~2021~~2022 compared to ~~$5.8~~cash used in operating activities of $0.8 billion for the first ~~nine months~~quarter of Fiscal ~~2020. Operating~~2021. The increase in operating cash flows ~~declined slightly~~ during the first ~~nine months~~quarter of Fiscal ~~2021 as the~~2022 was driven by strong profitability ~~during the period was offset by~~coupled with favorable working capital dynamics, compared to unfavorable working capital impacts in the first quarter of ~~an increase in inventory, decline in growth rate of deferred revenue, and~~Fiscal 2021 related to the COVID-19 pandemic on timing of ~~purchases~~collections and ~~payments to vendors.~~maintenance of higher inventory levels for continuity of supply. COVID-19 impacts to working capital ~~continued to normalize during~~normalized by the ~~third quarter~~end of Fiscal 2021.

DFS offerings are initially funded through cash on hand at the time of origination, most of which is subsequently replaced with third-party financing. For DFS offerings which qualify as sales-type leases, the initial funding of financing receivables is reflected as an impact to cash flows from operations, and is largely subsequently offset by cash proceeds from financing. For DFS operating leases, which have increased under the current leasing standard, the initial funding is classified as a capital expenditure and reflected as cash flows used in investing activities. DFS new financing originations were ~~$6.5~~$1.9 billion and ~~$5.7~~$1.8 billion during the first ~~nine months~~quarter of Fiscal ~~2021~~2022 and Fiscal ~~2020,~~2021, respectively. As of ~~October~~April 30, ~~2020,~~2021, DFS had $10.2 billion of total net financing receivables and ~~$1.3~~$1.4 billion of equipment under DFS operating leases, net.

Investing Activities — Investing activities primarily consist of cash used to fund capital expenditures for property, plant, and equipment, which includes equipment under DFS operating leases, capitalized software development costs, strategic investments, and the maturities, sales, and purchases of investments. During the first ~~nine months~~quarter of Fiscal ~~2021,~~2022, cash ~~provided by~~used in investing activities was ~~$26~~$519 million and was primarily driven by ~~net cash proceeds from the divestiture of RSA Security during the the third quarter of Fiscal 2021, largely offset by~~ capital ~~expenditures and acquisitions of businesses.~~expenditures. In comparison, cash used in investing activities was ~~$4.0 billion~~$485 million during the first ~~nine months~~quarter of Fiscal ~~2020~~2021 and was primarily driven by capital expenditures ~~and acquisition of businesses, which were~~ partially offset by net cash proceeds from the ~~net sales~~sale of ~~strategic investments.~~certain intellectual property assets.

Financing Activities — Financing activities primarily consist of the proceeds and repayments of debt, cash used to repurchase common stock, and proceeds from the issuance of common stock. Cash used in financing activities ~~of $3.5~~was $1.6 billion during the first ~~nine months~~quarter of Fiscal ~~2021~~2022 and primarily consisted of debt repayments and repurchases of common stock by our public ~~subsidiaries, partially offset~~subsidiaries. In comparison, cash provided by financing activities of $4.3 billion during the first three months of Fiscal 2021 primarily consisted of cash proceeds from the issuances of multiple series of First Lien Notes and VMware Notes. In comparison, cash used in financing activities of $2.6 billion during the first nine months of Fiscal 2020 primarily consisted of repayments of debt and repurchases of common stock by our public subsidiaries.

Capital Commitments

Capital Expenditures — During both the first ~~nine months~~quarter of Fiscal ~~2021~~2022 and Fiscal ~~2020,~~2021, we spent ~~$1.4~~$0.6 billion ~~and $1.6 billion, respectively,~~ on property, plant, and ~~equipment. These expenditures were incurred in connection with our global expansion efforts~~equipment and infrastructure investments made to support future growth, and the funding of equipment under DFS operating leases. During the first nine months of Fiscal 2021 and Fiscal 2020, funding of gross equipment under DFS operating leases was $0.6 billion and $0.7 billion, respectively.capitalized software development costs. Product demand, product mix, and the use of contract manufacturers, as well as ongoing investments in operating and ~~information technology~~IT infrastructure and software development, influence the level and prioritization of our capital expenditures. Aggregate capital expenditures for Fiscal ~~2021~~2022 are currently expected to ~~be approximately $1.9~~total between $2.7 billion and $2.9 billion, of which approximately $0.8 billion is expected to be expended for equipment under DFS operating ~~leases.~~leases and approximately $0.3 billion for capitalized software development costs.

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Purchase Obligations — Purchase obligations are defined as contractual obligations to purchase goods or services that are enforceable and legally binding on us. These obligations specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Purchase obligations do not include contracts that may be canceled without penalty.

We utilize several suppliers to manufacture sub-assemblies for our products. Our efficient supply chain management allows us to enter into flexible and mutually beneficial purchase arrangements with our suppliers in order to minimize inventory risk. Consistent with industry practice, we acquire raw materials or other goods and services, including product components, by issuing to suppliers authorizations to purchase based on our projected demand and manufacturing needs. These purchase orders are typically fulfilled within 30 days and are entered into during the ordinary course of business in order to establish best pricing and continuity of supply for our production.

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Summarized Guarantor Financial Information

As discussed in Note 5 of the Notes to the Condensed Consolidated Financial Statements included in this report, Dell International L.L.C. and EMC Corporation (the “Issuers”), both of which are wholly-owned subsidiaries of Dell Technologies, completed private offerings of multiple series of senior secured notes issued on June 1, 2016, March 20, 2019, and April 9, 2020 (collectively, the “First Lien Notes”). On May 17, 2021, subsequent to the first quarter of Fiscal 2022, the Issuers launched an exchange offer of the outstanding First Lien Notes for registered senior secured notes with substantially similar terms (the “Exchange Notes”). The exchange offer is expected to expire at 5:00 p.m., New York City time, on June 15, 2021, unless extended by the Issuers.

Guarantees — The Exchange Notes are guaranteed on a joint and several unsecured basis by Dell Technologies and on a joint and several secured basis by Denali Intermediate, Inc. (“Denali Intermediate”), Dell and each of Denali Intermediate’s wholly-owned domestic subsidiaries that guarantees the Issuers’ Senior Credit Facility obligations (collectively, the “Guarantors”). Not all of Denali Intermediate’s subsidiaries guarantee the Exchange Notes, including none of Denali Intermediate’s non-wholly-owned subsidiaries, foreign subsidiaries, receivables subsidiaries and subsidiaries designated as unrestricted subsidiaries under the Senior Credit Facility (such non-guarantor subsidiaries, collectively, the “Non-Guarantor Subsidiaries”). SecureWorks Corp., Boomi, Inc., Virtustream, Inc., VMware, Inc., EMC Equity Assets LLC and VMW Holdco L.L.C. (collectively, the “Unrestricted Subsidiaries”) have been designated as unrestricted subsidiaries under the Senior Credit Facility and therefore do not guarantee the Exchange Notes or the Senior Credit Facility obligations. See Exhibit 22.1 filed with this report for a list of subsidiary guarantors and issuers of guaranteed securities.

The guarantees are full and unconditional, subject to certain customary release provisions. The indentures that govern the Exchange Notes provide that guarantees by subsidiaries of Denali Intermediate may be released in the event, among other things, (i) such Guarantor is sold or sells all of its assets in compliance with the applicable provisions of the indentures; (ii) such Guarantor is released from its guaranty under the Senior Credit Facility, including the declaration of such subsidiary as “unrestricted” under the Senior Credit Facility; (iii) the merger, amalgamation or consolidation, or liquidation, of such Guarantor; or (iv) the achievement of investment grade ratings with respect to the Issuers and the Exchange Notes. In addition, all Guarantors will be released from their guarantees if the requirements for legal defeasance or covenant defeasance or to discharge the indentures have been satisfied.

Basis of Preparation of the Summarized Financial Information — The tables below are summarized financial information provided in conformity with Rule 13-01 of the SEC’s Regulation S-X. The summarized financial information of the Issuers and Guarantors (collectively, the “Obligor Group”) is presented on a combined basis, excluding intercompany balances and transactions between entities in the Obligor Group. To the extent material, the Obligor Group’s amounts due from, amounts due to and transactions with Non-Guarantor Subsidiaries have been presented separately. The Obligor Group’s investment balances in Non-Guarantor Subsidiaries have been excluded.

The following table presents summarized results of operations information for the Obligor Group for the period indicated:


	Three Months Ended
	April 30, 2021
	(in millions)
Net revenue (a)	$	5,216
Gross margin (b)	$	1,955
Operating loss (c)	$	(358)
Interest and other, net	(323)
Loss before income taxes	$	(681)
Net loss attributable to Obligor Group	$	(572)

____________________

(a) Includes net revenue from services provided and product sales to Non-Guarantor Subsidiaries of $632 million and $39 million, respectively.

(b) Includes cost of net revenue from resale of solutions purchased from Non-Guarantor Subsidiaries of $587 million.

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The following table presents summarized balance sheet information for the Obligor Group as of the dates indicated:


	April 30, 2021		January 29, 2021
	(in millions)
ASSETS
Current assets	$	11,272	$	12,096
Goodwill and intangible assets	16,000		16,213
Other non-current assets	6,278		6,178
Intercompany loan receivables	3,215		4,714
Total assets	$	36,765	$	39,201
LIABILITIES
Current liabilities	$	14,483	$	15,736
Intercompany payables	4,694		5,527
Total current liabilities	19,177		21,263
Long-term debt	27,881		27,951
Other non-current liabilities	7,611		7,549
Total liabilities	$	54,669	$	56,763

Summarized Affiliate Financial Information

The equity interests of various affiliates within Dell Technologies’ consolidated group have been pledged as collateral for the Exchange Notes. Dell Technologies is therefore subject to Rule 13-02 of the SEC’s Regulation S-X, which requires that summarized financial information for the affiliates whose securities are pledged as collateral (collectively, the “Affiliate Group”) be provided on a combined basis to the extent such information is material and materially different than the corresponding amounts presented in the Consolidated Financial Statements of Dell Technologies. The summarized financial information for the Affiliate Group would produce results materially consistent with information presented in Dell Technologies’ Consolidated Financial Statements and we have therefore not included such information in this report. In particular, the assets, liabilities, and results of operations of the Affiliate Group are not materially different than the corresponding amounts presented in the Consolidated Financial Statements of Dell Technologies, except with respect to the redeemable shares. As of April 30, 2021 and January 29, 2021, the redeemable shares balance was $558 million and $472 million, respectively, as reflected on the Condensed Consolidated Statements of Financial Position included in this report, as compared to no redeemable shares reflected on the Affiliate Group balance sheet as of the respective dates.

Collateral Arrangement — The collateral (“Collateral”) securing the Exchange Notes generally consists of the following, whether now owned or hereafter acquired:

•100% of the equity interests of the Issuers, Dell and each Material Subsidiary (as defined in the applicable indenture) that is a wholly-owned subsidiary of the Issuers and the Guarantors (which pledge, in the case of capital stock of any Foreign Subsidiary or FSHCO (each as defined in the applicable indenture), is limited to 65% of the voting capital stock and 100% of the non-voting capital stock of such Foreign Subsidiary or FSHCO); and

•substantially all tangible and intangible personal property and material fee-owned real property of the Issuers and Guarantors (other than Dell Technologies) including but not limited to, accounts receivable, inventory, equipment, general intangibles (including contract rights), investment property, intellectual property, real property, intercompany notes, instruments, chattel paper and documents, letter of credit rights, commercial tort claims, and proceeds of the foregoing.

See Exhibit 22.1 filed with this report for a list of each affiliate of Dell Technologies whose security is pledged as collateral to secure the Exchange Notes. There is no trading market for the applicable affiliates’ securities pledged as collateral.

Delivery of the Collateral securing the Exchange Notes would be required in certain customary events of default, including failure to make required payments, failure to comply with covenants, and the occurrence of certain events of bankruptcy and insolvency.

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The Collateral may be released in certain circumstances, including, (i) to enable the sale, transfer or other disposition of such property or assets, (ii) upon the release of the guarantee of a Guarantor, (iii) upon such property or asset becoming an “excluded asset” as defined in the indentures governing the Exchange Notes, (iv) upon the achievement of investment grade ratings with respect to the Issuers and the Exchange Notes and (v) to the extent the liens on the Collateral securing the Senior Credit Facility obligations are released (other than in connection with the payment in full of the Senior Credit Facility).

The Collateral does not include, and will not include, among other things, (i) a pledge of the assets or equity interests of certain subsidiaries, including the Unrestricted Subsidiaries and their respective subsidiaries, (ii) any fee-owned real property with a book value of less than $150 million, (iii) any commercial tort claims or letter of credit rights with an individual value of less than $50 million, (iv) any “principal property” as defined in the indentures governing the Unsecured Notes and Debentures of Dell and the EMC Notes, and capital stock of any subsidiary holding “principal property” as defined in the indenture governing the Unsecured Notes and Debentures of Dell, or (v) certain excluded assets.

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ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures about market risk affecting us, see “Part II — Item 7A — Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended January ~~31, 2020.~~29, 2021. Our exposure to market risks has not changed materially from that set forth in our Annual Report.

ITEM 4 — CONTROLS AND PROCEDURES

This report includes the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 under the Securities Exchange Act of 1934 (the “Exchange Act”). See Exhibits 31.1 and 31.2 filed with this report. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

In connection with the preparation of this report, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~October~~April 30, ~~2020.~~2021. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~October~~April 30, ~~2020.~~2021.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended ~~October~~April 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal control over financial reporting. Most of our employees are working remotely for their health and safety during the COVID-19 pandemic. We are continually monitoring and assessing the potential impact of COVID-19 on our internal controls to minimize the impact on their design and operating effectiveness.

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PART II — OTHER INFORMATION

ITEM 1 — LEGAL PROCEEDINGS

The information required by this item is incorporated herein by reference to the information set forth under the caption “Legal Matters” in Note 109 of the Notes to the Condensed Consolidated Financial Statements included in Part I of this report.

ITEM 1A — RISK FACTORS

In addition to the other information set forth in this report, the risks discussed in “Part I — Item 1A — Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January ~~31, 2020~~29, 2021 could materially affect our business, operating results, financial condition, or prospects. Further, as a result of the announcement of our planned VMware Spin-off on April 14, 2021, we are subject to the following additional risks:

Risks Related to the Announced Spin-Off of VMware, Inc.

The previously announced spin-off of VMware, Inc. is contingent upon the satisfaction of a number of conditions, may not be completed on the currently contemplated timeline, or at all, and may not achieve the intended benefits.

On April 14, 2021, we announced that we had entered into a definitive agreement with VMware, Inc. pursuant to which VMware, Inc. will distribute to its stockholders, including us, a special one-time cash dividend, and we will distribute all of the issued and outstanding shares of VMware Common Stock then owned by us to the holders of record of shares of Dell Technologies as of the distribution record date (the “VMware Spin-off”). The VMware Spin-off may not be completed as currently contemplated or at all, and may not provide the benefits that we intend. Completion of the proposed VMware Spin-off is subject to certain conditions, including the payment by VMware, Inc. of its special dividend and receipt of a favorable private letter ruling from the Internal Revenue Service and an opinion that the transaction will qualify as generally tax-free for Dell Technologies stockholders for U.S. federal income tax purposes. The payment by VMware, Inc. of its special dividend is in turn subject to further conditions including, among other matters, the absence of specified material adverse changes to VMware, Inc. prior to declaration of the special dividend, VMware, Inc. satisfying certain credit rating agency criteria, and VMware, Inc. receiving an opinion from an independent firm regarding surplus and solvency matters. The proposed VMware Spin-off is complex in nature, and may be affected by unanticipated developments, disruptions in the credit or equity markets, or changes in general economic conditions. These or other unanticipated developments could delay or prevent the VMware Spin-off or cause it to occur on terms or conditions that are less favorable than anticipated.

If the VMware Spin-off is completed, the transaction may not be successful in accomplishing our objectives. There is the potential for business disruption to each company and significant separation costs. Planning and executing the VMware Spin-off will require significant additional time, effort and expense, and may divert the attention of our management and employees, and those of VMware, Inc., from other aspects of the business operations, and any delays in the completion of the transaction may increase the amount of time, effort, and expense that is devoted to the transaction. The VMware Spin-off could cause our customers or customers of VMware, Inc. to delay or defer decisions to purchase products or renew contracts, or to end their relationships. Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows or the price of our Class C Common Stock. In addition, following the proposed transaction, the combined value of the common stock of the two companies held by our stockholders may not be equal to or greater than what the value of our common stock alone would have been had the proposed VMware Spin-off not occurred.

The risks described in our Annual Report on Form 10-K, ~~and~~ our subsequent SEC reports, and other risks described above are not the only risks facing us. There are additional risks and uncertainties not currently known to us or that we currently deem to be immaterial that also may materially adversely affect our business, operating results, financial condition, or prospects.

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ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Sales of Unregistered Securities

During the first quarter of Fiscal 2022, we issued to employees an aggregate of 605 shares of the Class C Common Stock for an immaterial amount pursuant to exercises of stock options granted under the Dell Inc. Amended and Restated 2002 Long-Term Incentive Plan. The foregoing transactions were effected without registration in reliance on the exemption from registration under the Securities Act of 1933 afforded by Rule 701 thereunder as transactions pursuant to compensatory benefit plans or contracts relating to compensation as provided under such rule.

In February 2021, we issued to a stockholder 49,209 shares of Class C Common Stock upon the conversion of the same number of shares of our Class A Common Stock held by such stockholder. The issuance of the Class C Common Stock in this transaction was made in reliance on the exemption from registration under the Securities Act of 1933 afforded by Section 3(a)(9) thereof. No commission or other remuneration was paid or given directly or indirectly for soliciting the exchange of these securities.

ITEM 5 — OTHER INFORMATION

Iran Threat Reduction and Syria Human Rights Act of 2012

Set forth below is a description of matters reported by us pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 and Section 13(r) of the Exchange Act. Concurrently with the filing of this quarterly report, we are filing a notice pursuant to Section 13(r) of the Exchange Act that such matters have been disclosed in this quarterly report.

On March 2, 2021, the U.S. government designated the Russian Federal Security Service (the “FSB”) as a blocked party under Executive Order 13382. On the same day, the U.S. Department of the Treasury’s Office of Foreign Assets Control issued General License No. 1B (the “OFAC General License”), which generally authorizes U.S. companies to engage in certain licensing, permitting, certification, notification and related transactions with the FSB to the extent such activities are required for the importation, distribution or use of information technology products in the Russian Federation.

As permitted under the OFAC General License, our subsidiary Dell LLC and other subsidiaries periodically file notifications with the FSB in connection with the importation and distribution of our products in the Russian Federation. During our fiscal quarter ended April 30, 2021, Dell LLC filed notifications with the FSB. No payments were issued or received, and no gross revenue or net profits were generated, in connection with these filing activities. Dell Technologies and its subsidiaries do not sell products or provide services to the FSB. To the extent permitted by applicable law, including by the OFAC General License, we expect to continue to file notifications with the FSB to qualify our products for importation and distribution in the Russian Federation.

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ITEM 6 — EXHIBITS

The Company hereby files or furnishes the exhibits listed below:


Exhibit Number						Description
2.1						Separation and Distribution Agreement, dated as April 14, 2021 by and between Dell Technologies Inc. and VMware, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Dell Technologies Inc. (the “Company”) filed with the Securities and Exchange Commission (the “Commission”) on April 14, 2021) (Commission File No. 001-37867).
4.1††						~~Amendment No. 3~~Consent to the Extension of Registration Rights Under the Second Amended and Restated Registration Rights Agreement, dated ~~as of September 15, 2020,~~May 5, 2021, among Dell Technologies Inc.~~, Michael S. Dell~~ and ~~Susan Lieberman Dell Separate Property Trust,~~ SL SPV-2 L.P., Silver Lake Partners IV, L.P., Silver Lake Technology Investors IV, L.P., Silver Lake Partners V DE (AIV), L.P., Silver Lake Technology Investors V, L.P. ~~and Venezio Investments Pte. Ltd.~~
10.1††*10.1						~~Amended~~Eighth Refinancing Amendment, dated as of February 18, 2021, among Denali Intermediate Inc., Dell Inc., Dell International L.L.C., EMC Corporation, Credit Suisse AG, Cayman Islands Branch, as Term Loan B Administrative Agent and ~~Restated~~Collateral Agent, JPMorgan Chase Bank, N.A., as Term Loan A/Revolver Administrative Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on February 18, 2021) (Commission File No. 001-37867).
22.1††						List of Guarantor Subsidiaries and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize Securities of Dell Technologies Inc. ~~Compensation Program for Independent Non-Employee Directors~~
31.1††						Certification of Michael S. Dell, Chairman and Chief Executive Officer, pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2††						Certification of Thomas W. Sweet, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1†††						Certifications of Michael S. Dell, Chairman and Chief Executive Officer, and Thomas W. Sweet, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 .INS††						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101 .SCH††						Inline XBRL Taxonomy Extension Schema Document.
101 .CAL††						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101 .DEF††						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101 .LAB††						Inline XBRL Taxonomy Extension Label Linkbase Document.
101 .PRE††						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104††						Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101).



††						Filed with this report.
†††						Furnished with this report.
*						~~Management contract or compensation plan or arrangement in which directors or executive officers participate.~~

9690

Table of Contents

SIGNATURES

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 TECHNOLOGIES INC.

			By:			/s/ BRUNILDA RIOS
						Brunilda Rios
						Senior Vice President, Corporate Finance and
						Chief Accounting Officer
						(On behalf of registrant and as principal accounting officer)

Date: ~~December~~June 7, ~~2020~~2021

9791


		Page
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6356
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	9387
Item 4.	Controls and Procedures	9487
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	9588
Item 1A.	Risk Factors	9588
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	89
Item 5.	Other Information	89
Item 6.	Exhibits	9690
Signatures		9791


	October 30, 2020
Fiscal Years	(in millions)
2021 (remaining three months)	$	846
2022	2,698
2023	1,820
2024	1,451
2025	1,101
Thereafter	3,586
Total	$	11,502