NOTE 15—SEGMENT INFORMATION
The Company’s reportable segments are based on the following product and services business units:
| • | Client Solutions |
| • | Enterprise Solutions Group (“ESG”) |
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DENALI HOLDING INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
| • | Dell Software Group (“DSG”) |
| • | Dell Services |
In the first quarter of the fiscal year ended January 29, 2016, Denali redefined the categories within Client Solutions and ESG to reflect the way the Company currently organizes products and services within these business units. None of these changes impacted the Company’s consolidated or total business unit results. Prior period amounts have been reclassified to conform to the current year presentation.
Client Solutions includes sales to commercial and consumer customers of desktops, thin client products, notebooks, and services and third-party software and peripherals closely tied to the sale of Client Solutions hardware. ESG includes servers, networking, and storage, as well as services and third-party software and peripherals that are closely tied to the sale of ESG hardware. DSG includes systems management, security software solutions, and information management software offerings. Dell Services includes a broad range of IT and business services, including infrastructure, cloud, applications, and business process services.
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 operating income for management reporting purposes excludes the impact of purchase accounting, amortization of intangible assets, unallocated corporate expenses, severance and facility action costs, acquisition-related charges, and costs related to the going-private transaction. See Note 3 of the Notes to the Audited Consolidated Financial Statements for more information on the going-private transaction. The Company does not allocate assets to the above reportable segments for internal reporting purposes.
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DENALI HOLDING INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents a reconciliation of net revenue by Denali’s reportable segments to Denali’s consolidated net revenue as well as a reconciliation of consolidated segment operating income to Denali’s consolidated operating income:
| Successor | Predecessor | |||||||||||||||||
| Fiscal Year Ended January 29, 2016 |
Fiscal Year Ended January 30, 2015 |
October 29, 2013 through January 31, 2014 |
February 2, 2013 through October 28, 2013 |
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| (in millions) | ||||||||||||||||||
| Consolidated net revenue: |
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| Client Solutions |
$ | 35,877 | $ | 39,634 | $ | 9,839 | $ | 28,101 | ||||||||||
| Enterprise Solutions Group |
14,978 | 14,714 | 3,500 | 10,875 | ||||||||||||||
| Dell Software Group |
1,362 | 1,493 | 360 | 951 | ||||||||||||||
| Dell Services |
2,842 | 2,982 | 739 | 2,219 | ||||||||||||||
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|
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| Segment net revenue |
55,059 | 58,823 | 14,438 | 42,146 | ||||||||||||||
| Corporate (a) |
333 | 272 | 61 | 156 | ||||||||||||||
| Impact of purchase accounting (b) |
(506 | ) | (976 | ) | (424 | ) | — | |||||||||||
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|
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| Total net revenue |
$ | 54,886 | $ | 58,119 | $ | 14,075 | $ | 42,302 | ||||||||||
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| Consolidated operating income (loss): |
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| Client Solutions |
$ | 1,410 | $ | 2,051 | $ | 289 | $ | 1,070 | ||||||||||
| Enterprise Solutions Group |
1,052 | 1,230 | 270 | 867 | ||||||||||||||
| Dell Software Group |
(1 | ) | (30 | ) | (52 | ) | (196 | ) | ||||||||||
| Dell Services |
152 | 124 | 2 | (44 | ) | |||||||||||||
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| Segment operating income |
2,613 | 3,375 | 509 | 1,697 | ||||||||||||||
| Impact of purchase accounting (b) |
(616 | ) | (1,116 | ) | (1,252 | ) | — | |||||||||||
| Amortization of intangible assets |
(2,189 | ) | (2,299 | ) | (584 | ) | (594 | ) | ||||||||||
| Corporate (a) |
26 | (182 | ) | 102 | — | |||||||||||||
| Other (c) |
(217 | ) | (200 | ) | (573 | ) | (585 | ) | ||||||||||
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| Total operating income (loss) |
$ | (383 | ) | $ | (422 | ) | $ | (1,798 | ) | $ | 518 | |||||||
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| (a) | Corporate primarily consists of unallocated transactions and certain security offerings. |
| (b) | Impact of purchase accounting in the successor periods includes amortization of intangibles and costs related to the going-private transaction. |
| (c) | Other costs include severance, facility, acquisition, and compensation expenses and costs related to the going-private transaction. |
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DENALI HOLDING INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents net revenue by product and services categories:
| Successor | Predecessor | |||||||||||||||||
| Fiscal Year Ended January 29, 2016 |
Fiscal Year Ended January 30, 2015 |
October 29, 2013 through January 31, 2014 |
February 2, 2013 through October 28, 2013 |
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| (in millions) | ||||||||||||||||||
| Net revenue: |
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| Client Solutions: |
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| Commercial |
$ | 21,297 | $ | 23,988 | $ | 5,782 | $ | 16,172 | ||||||||||
| Consumer |
9,167 | 9,886 | 2,568 | 7,350 | ||||||||||||||
| Third-party software and after-point-of-sale peripherals |
5,413 | 5,760 | 1,489 | 4,579 | ||||||||||||||
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| Total Client Solutions net revenue |
35,877 | 39,634 | 9,839 | 28,101 | ||||||||||||||
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| Enterprise Solutions Group: |
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| Servers and networking |
12,761 | 12,368 | 2,888 | 9,013 | ||||||||||||||
| Storage |
2,217 | 2,346 | 612 | 1,862 | ||||||||||||||
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| Total ESG net revenue |
14,978 | 14,714 | 3,500 | 10,875 | ||||||||||||||
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| Dell Software Group: |
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| Total Dell Software Group net revenue |
1,362 | 1,493 | 360 | 951 | ||||||||||||||
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| Dell Services: |
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| Infrastructure and cloud services |
1,679 | 1,734 | 426 | 1,309 | ||||||||||||||
| Applications and business process services |
1,163 | 1,248 | 313 | 910 | ||||||||||||||
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| Total Dell Services revenue |
2,842 | 2,982 | 739 | 2,219 | ||||||||||||||
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| Total segment net revenue |
$ | 55,059 | $ | 58,823 | $ | 14,438 | $ | 42,146 | ||||||||||
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The following tables present net revenue and long-lived asset information allocated between the United States and foreign countries:
| Successor | Predecessor | |||||||||||||||||
| Fiscal Year Ended January 29, 2016 |
Fiscal Year Ended January 30, 2015 |
October 29, 2013 through January 31, 2014 |
February 2, 2013 through October 28, 2013 |
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| (in millions) | ||||||||||||||||||
| Net revenue: |
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| United States |
$ | 27,421 | $ | 28,079 | $ | 6,441 | $ | 21,370 | ||||||||||
| Foreign countries |
27,465 | 30,040 | 7,634 | 20,932 | ||||||||||||||
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| Total net revenue |
$ | 54,886 | $ | 58,119 | $ | 14,075 | $ | 42,302 | ||||||||||
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DENALI HOLDING INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
| Successor | ||||||||
| January 29, 2016 |
January 30, 2015 |
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| (in millions) | ||||||||
| Long-lived assets: |
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| United States |
$ | 1,627 | $ | 1,838 | ||||
| Foreign countries |
643 | 792 | ||||||
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| Total long-lived assets |
$ | 2,270 | $ | 2,630 | ||||
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The allocation between domestic and foreign net revenue is based on the location of the customers. Net revenue from any single foreign country did not constitute more than 10% of Denali’s consolidated net revenues for the fiscal year ended January 29, 2016, the fiscal year ended January 30, 2015, the successor period ended January 31, 2014, or the predecessor period ended October 28, 2013. Long-lived assets from any single foreign country did not constitute more than 10% of Denali’s consolidated long-lived assets as of January 29, 2016 or January 30, 2015.
