DELL COMPUTER CORP, 10-Q, 1995-06-14

DELL COMPUTER CORP
10-Q, 1995-06-14
ELECTRONIC COMPUTERS

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<PAGE> 1
================================================================================

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1995

COMMISSION FILE NUMBER:0-17017

DELL COMPUTER CORPORATION
(Exact name of registrant as specified in its charter)

2112 KRAMER LANE, BUILDING 1
AUSTIN, TEXAS 78758-4012
(512) 338-4400
(Address, zip code and telephone number of registrant's principal executive
offices)

A DELAWARE CORPORATION IRS EMPLOYER ID NO. 74-2487834

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 TWELVE MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---

AS OF JUNE 12, 1995, 45,286,029 SHARES OF THE REGISTRANT'S COMMON STOCK,
PAR VALUE $.01 PER SHARE, WERE OUTSTANDING.

================================================================================
<PAGE> 2

PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DELL COMPUTER CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)

ASSETS

<TABLE>
<CAPTION>
APRIL 30, JANUARY 29,
1995 1995
-------------- -------------
<S> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . $ 94,632 $ 42,953
Short-term investments . . . . . . . . . . . . . . . . . . 423,404 484,294
Accounts receivable, net . . . . . . . . . . . . . . . . . 588,288 537,974
Inventories . . . . . . . . . . . . . . . . . . . . . . . 337,803 292,925
Other current assets . . . . . . . . . . . . . . . . . . . 108,998 112,215
---------------- --------------
Total current assets . . . . . . . . . . . . . . . . 1,553,125 1,470,361
Property, plant and equipment, net . . . . . . . . . . . . . 123,301 116,981
Other assets . . . . . . . . . . . . . . . . . . . . . . . . 6,197 6,658
---------------- --------------
$ 1,682,623 $ 1,594,000
================ ==============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . $ 417,716 $ 447,071
Accrued liabilities . . . . . . . . . . . . . . . . . . . 309,781 279,402
Income taxes . . . . . . . . . . . . . . . . . . . . . . . 44,516 24,937
---------------- --------------
Total current liabilities . . . . . . . . . . . . . . 772,013 751,410
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 113,472 113,429
Other liabilities . . . . . . . . . . . . . . . . . . . . . 83,642 77,425
Commitments and contingencies
Stockholders' equity:
Preferred stock: $.01 par value; shares authorized:
5,000,000; shares issued and outstanding: 60,000 and
1,250,000, respectively . . . . . . . . . . . . . . . . . . 1 13
Common stock: $.01 par value; shares authorized:
100,000,000; shares issued and outstanding:
45,070,499 and 39,679,638, respectively . . . . . . . . . . 451 397
Additional paid-in capital . . . . . . . . . . . . . . . . . 363,833 356,768
Unrealized loss on short-term investments . . . . . . . . . (1,497) (2,628)
Retained earnings . . . . . . . . . . . . . . . . . . . . . 360,381 311,217
Cumulative translation adjustment . . . . . . . . . . . . . (9,673) (14,031)
---------------- --------------
Total stockholders' equity . . . . . . . . . . . . . 713,496 651,736
---------------- --------------
$ 1,682,623 $ 1,594,000
================ ==============

The accompanying notes are an integral part of these condensed consolidated financial statements.

</TABLE>

1
<PAGE> 3

DELL COMPUTER CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------
APRIL 30, MAY 1,
1995 1994
-------------- ---------------
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,135,933 $ 766,632
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . 899,780 596,800
------------- --------------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . 236,153 169,832
Operating expenses:
Selling, general and administrative . . . . . . . . . . . . . . 127,611 94,877
Research, development and engineering . . . . . . . . . . . . . 20,879 14,970
------------- --------------
Total operating expenses . . . . . . . . . . . . . . . . . . 148,490 109,847
------------- --------------
Operating income . . . . . . . . . . . . . . . . . . . . . . 87,663 59,985
Financing and other income (expense), net . . . . . . . . . . . . (769) (32,531)
------------- --------------
Income before income taxes . . . . . . . . . . . . . . . . . . 86,894 27,454
Provision for income taxes . . . . . . . . . . . . . . . . . . . . 25,196 8,481
------------- --------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,698 18,973
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . 11,638 2,187
------------- --------------
Net income applicable to common stockholders . . . . . . . . . . . $ 50,060 $ 16,786
============= ==============
Earnings per common share:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.11 $ .42
============= ==============
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.05 $ --
============= ==============

The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>

2
<PAGE> 4

DELL COMPUTER CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
APRIL 30, MAY 1,
1995 1994
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 61,698 $ 18,973
Charges to income not requiring cash outlays:
Depreciation and amortization . . . . . . . . . . . . . . . . 9,012 7,571
Net loss on investment derivatives . . . . . . . . . . . . . . -- 9,283
Net (gain) loss on short-term investments . . . . . . . . . . (250) 15,500
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 628 586
Changes in:
Operating working capital . . . . . . . . . . . . . . . . . . (63,027) (41,351)
Non-current assets and liabilities . . . . . . . . . . . . . 2,259 7,228
----------- -----------
Net cash provided by operating activities . . . . . . . . . 10,320 17,790
Cash flows from investing activities:
Short-term investments:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . (1,191,021) (884,170)
Maturities and other redemptions . . . . . . . . . . . . . . 1,252,939 818,322
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 83,000
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . (14,408) (15,537)
----------- -----------
Net cash provided by investing activities . . . . . . . . . 49,510 1,615
Cash flows from financing activities:
Preferred stock dividends paid . . . . . . . . . . . . . . . . . (12,533) (2,187)
Issuance of common stock under employee plans . . . . . . . . . 6,695 4,898
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (82) (145)
----------- -----------
Net cash provided by (used in) financing activities . . . . (5,920) 2,566
Effect of exchange rate changes on cash . . . . . . . . . . . . . (2,231) 926
----------- -----------
Net increase in cash . . . . . . . . . . . . . . . . . . . . . . . 51,679 22,897
Cash at beginning of period . . . . . . . . . . . . . . . . . . . 42,953 3,355
----------- -----------
Cash at end of period . . . . . . . . . . . . . . . . . . . . . . $ 94,632 $ 26,252
=========== ===========

See Note 6 for Supplemental Condensed Consolidated Statement of Cash Flows information.
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>

3
<PAGE> 5

DELL COMPUTER CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 -- BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto filed with the Securities and Exchange Commission (the
"Commission") in the Company's fiscal 1995 Annual Report on Form 10-K, as
amended. In the opinion of management, the accompanying condensed consolidated
financial statements reflect all adjustments (consisting only of normal
recurring accruals) considered necessary to present fairly the financial
position of Dell Computer Corporation and its consolidated subsidiaries at
April 30, 1995 and January 29, 1995, and the results of their operations for
the three-month periods ended April 30, 1995 and May 1, 1994. Operating
results for the three-month period ended April 30, 1995 are not necessarily
indicative of the results that may be expected for the fiscal year ending
January 28, 1996.

NOTE 2 -- PREFERRED STOCK CONVERSION

On February 21, 1995, the Company offered to pay a cash premium of $8.25
for each outstanding share of its Series A Convertible Preferred Stock (the
"Preferred Stock") that was converted to common stock. The offer of premium
upon conversion was available to holders of the Preferred Stock through the
closing of the special conversion period on March 22, 1995. The Company also
offered to register the resale of the shares of common stock issued upon
conversion of the Preferred Stock with the Commission for a 50-day period which
ends June 15, 1995. Holders of 1,190,000 shares of Preferred Stock elected to
convert and, as a result, received an aggregate of approximately 5.0 million
shares of common stock and $9.8 million in cash during the first quarter of
1996. The $9.8 million conversion premium and $0.5 million expenses of the
conversion offer were treated as an additional dividend on the Preferred Stock
for financial reporting purposes. Accordingly, $11.6 million, comprised of the
conversion premium, conversion offer expenses and dividends, was deducted from
net income for the first quarter of 1996 to determine the net income applicable
to common stockholders. In addition, the weighted average shares outstanding
used to compute primary earnings per common share for the first quarter of 1996
includes the shares of common stock issued upon conversion from the closing of
the conversion period until the end of the quarter. The conversion of
Preferred Stock had the effect of reducing primary earnings per common share by
$0.27 and fully diluted earnings per common share by $0.21 for the first
quarter of 1996.

NOTE 3 -- SHORT-TERM INVESTMENTS AND INVESTMENT DERIVATIVES

The Company realized losses on short-term investments of $10.9 million
(net) in the first quarter of 1995, primarily due to a $15.5 million write-down
of certain of the Company's short-term investments as a result of interest rate
increases in the United States, Canadian, Japanese and European interest rate
markets. Additionally, $22.6 million of realized and unrealized losses on
interest rate derivatives were recognized in the first quarter of 1995,
primarily as a result of these same interest rate increases. The Company
discontinued its investment derivative program in the second quarter of 1995.

NOTE 4 -- COMMITMENTS AND CONTINGENCIES

4
<PAGE> 6

has denied or is in the process of denying the claims and intends to vigorously
defend the suits. The suits naming the Company are just a few of many lawsuits
of this type that have been filed, often naming Apple, Atex, Compaq, IBM,
Keytronic and other major suppliers of keyboard products. The Company
currently is not able to predict the outcome of these suits. It is possible
that the Company may be named in additional suits. Ultimate resolution of the
litigation against the Company may depend on progress in resolving this type of
litigation overall. However, the Company does not believe that the outcome of
these matters will have a material adverse effect on the Company's financial
condition or results of operations.

In March 1995, the Company was named along with twelve other personal
computer and/or computer monitor manufacturers in a complaint filed by the
District Attorney for Merced County, California. The complaint alleges that
each of the defendants has engaged in false and/or misleading advertising with
regard to the size of computer monitor screens and seeks unspecified damages
and injunctive relief. In May 1995, several other district attorneys in other
California counties joined this lawsuit as co-plaintiffs. The Company is
vigorously contesting the allegations of the complaint and does not believe
that the litigation of the complaint or its outcome will have a material
adverse effect on the Company's financial condition or results of operations.

In May 1995, the Company was named, along with two other personal computer
manufacturers and one computer monitor vendor, in a class action complaint
filed in the California Superior Court for Marin County. The complaint alleges
that each of the defendants has engaged in false and/or misleading advertising
with regard to the size of computer monitor screens. The plaintiffs seek
restitution in the form of refunds or product exchange, damages, punitive
damages and attorneys' fees. The Company plans to vigorously contest the
allegations of the complaint. This litigation is currently at a preliminary
stage and no discovery has occurred to date. As such, it is too early for the
Company to adequately evaluate the likelihood of the plaintiffs prevailing in
their claims. There can be no assurance that an adverse determination in this
litigation would not have a material adverse effect on the Company's financial
condition or results of operations.

On June 9, 1995, the Company was served with a class action complaint filed
in State District Court in Travis County, Texas. The complaint alleges that
the Company has included "used parts" in its "new" computer systems and has
failed to adequately inform its customers and prospective customers of that
practice. According to the complaint, these facts constitute fraud, negligent
misrepresentation, breach of contract and breach of warranty. The plaintiffs
seek refund of the purchase price for computer systems purchased from the
Company, damages in an unspecified amount, injunctive relief, interest and
attorneys' fees. The Company plans to vigorously contest the allegations of
the complaint. This litigation is at a very preliminary stage and no discovery
has occurred to date. As such, it is too early for the Company to adequately
evaluate the likelihood of the plaintiffs prevailing in their claims. There
can be no assurance that an adverse determination in this litigation would not
have a material adverse effect on the Company's financial condition or results
of operations.

NOTE 5 -- EARNINGS PER COMMON SHARE

Primary earnings per common share are computed by dividing net income
applicable to common stockholders by the weighted average number of common
shares and common stock equivalents (if dilutive) outstanding during each
period. Common stock equivalents include stock options. The Preferred Stock
is not a common stock equivalent for purposes of computing earnings per common
share. The number of common stock equivalents outstanding is computed using
the treasury stock method. The weighted average shares outstanding used to
compute primary earnings per common share for the first quarter of 1996
includes the shares of common stock issued upon conversion of the Preferred
Stock from the closing of the conversion period until the end of the quarter.
Shares used in the calculation of fully diluted earnings per common share have
been adjusted for the assumed conversion of the Company's outstanding Preferred
Stock.

5
<PAGE> 7

NOTE 6 -- SUPPLEMENTAL FINANCIAL INFORMATION (IN THOUSANDS)

Supplemental Condensed Consolidated Statement of Financial Position
Information:

<TABLE>
<CAPTION>
APRIL 30, JANUARY 29,
1995 1995
------------- --------------
<S> <C> <C>
Inventories:
Production materials . . . . . . . . . . . . . . . . . . . $ 291,365 $ 262,150
Work-in-process and finished goods . . . . . . . . . . . . 46,438 30,775
------------- --------------
$ 337,803 $ 292,925
============= ==============
</TABLE>

Supplemental Condensed Consolidated Statement of Operations Information:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------
APRIL 30, MAY 1,
1995 1994
------------ -------------
<S> <C> <C>
Financing and other income (expense), net:
Investment income (loss), net:
Short-term investments . . . . . . . . . . . . . . . . $ 5,612 $ (10,889)
Investment derivatives . . . . . . . . . . . . . . . . -- (22,607)
Interest expense . . . . . . . . . . . . . . . . . . . . . (4,019) (2,170)
Foreign currency transactions . . . . . . . . . . . . . . (1,331) 2,540
Other . . . . . . . . . . . . . . . . . . . . . . . . . . (1,031) 595
=========== =============
$ (769) $ (32,531)
=========== =============
Weighted average shares used to compute earnings
per common share:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . 45,254 40,315
=========== =============
Fully diluted . . . . . . . . . . . . . . . . . . . . . . 48,772 --
=========== =============
</TABLE>

Supplemental Condensed Consolidated Statement of Cash Flows Information:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------
APRIL 30, MAY 1,
1995 1994
------------- ---------------
<S> <C> <C>
Changes in operating working capital accounts:
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . $ (25,025) $ (37,113)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . (42,261) 9,964
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . (34,914) 17,322
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . 15,619 (3,764)
Other current assets . . . . . . . . . . . . . . . . . . . . . . 2,720 (31,659)
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . 19,519 3,742
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,315 157
---------------- ---------------
$ (63,027) $ (41,351)
================ ===============

Changes in non-current assets and liabilities:
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,186 $ 40
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . 1,073 7,188
---------------- ---------------
$ 2,259 $ 7,228
================ ===============
</TABLE>

6
<PAGE> 8

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Unless otherwise indicated, all references to years in connection with
financial information refer to the Company's fiscal years and all references to
quarters in connection with financial information refer to the Company's fiscal
quarters. All percentage amounts used in describing operating results are
based on the related dollar amounts rounded to the nearest thousand which are
set forth in the Condensed Consolidated Financial Statements and related notes
thereto.

RESULTS OF OPERATIONS

The Company reported net income for the first quarter of 1996 of $61.7
million or $1.11 primary earnings per common share compared with net income of
$19.0 million or $.42 primary earnings per common share for the comparable
period in 1995. The conversion of Preferred Stock in the first quarter of 1996
had the effect of reducing primary earnings per common share by $0.27. Net
income for the first quarter of 1995 was reduced by $26.3 million, or $0.65
primary earnings per common share, due to after-tax losses on certain
investment derivatives and short-term investments.

The following table sets forth for the periods indicated the percentage
of consolidated net sales represented by certain items in the Company's
condensed consolidated statements of operations.

<TABLE>
<CAPTION>
PERCENTAGE OF CONSOLIDATED NET SALES
------------------------------------
THREE MONTHS ENDED
------------------------------------
APRIL 30, MAY 1,
1995 1994
--------------- -------------
<S> <C> <C>
Net sales:
Americas . . . . . . . . . . . . . . . . . . . . . . 62.2% 67.1%
Europe . . . . . . . . . . . . . . . . . . . . . . . 30.7 30.4
Other international . . . . . . . . . . . . . . . . . 7.1 2.5
------ ------
Consolidated net sales . . . . . . . . . . . . . . 100.0 100.0
Cost of sales . . . . . . . . . . . . . . . . . . . . 79.2 77.8
------ ------
Gross profit . . . . . . . . . . . . . . . . . . . 20.8 22.2
Operating expenses:
Selling, general and administrative . . . . . . . . . 11.3 12.4
Research, development and engineering . . . . . . . . 1.8 1.9
------ ------
Total operating expenses . . . . . . . . . . . . . 13.1 14.3
------ ------
Operating income . . . . . . . . . . . . . . . 7.7 7.9
Financing and other income (expense), net . . . . . . (0.1) (4.3)
------ ------
Income before income taxes . . . . . . . . . . . . . 7.6 3.6
Provision for income taxes . . . . . . . . . . . . . . 2.2 1.1
------ ------
Net income . . . . . . . . . . . . . . . . . . . . . 5.4 2.5
Preferred stock dividends . . . . . . . . . . . . . . . 1.0 0.3
------ ------
Net income applicable to common
stockholders . . . . . . . . . . . . . . . . . . 4.4% 2.2%
====== ======
</TABLE>

Net Sales

Consolidated net sales increased 48% to $1.14 billion for the first quarter
of 1996 compared with $766.6 million for the first quarter of 1995. Unit
volumes increased 37% and average revenue per unit increased 8% primarily due
to strong demand for the Company's higher priced Pentium(TM) processor-based
products and notebook computers. The Company's consolidated net sales
(expressed in United States dollars) benefited by approximately 2.6% in the
first quarter of 1996 as a result of fluctuations in the average value of the
United States dollar relative to its average value in the comparable period of
the prior year, net of foreign currency hedging results.

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<PAGE> 9

Consolidated net sales consisted primarily of sales of computer systems,
including hardware, certain software and accessories, which amounted to 87% of
consolidated net sales in the first quarters of both 1996 and 1995. The
remainder of consolidated net sales was comprised of revenue from sales of
computer peripherals as well as other hardware, software and accessories sold
separately from computer systems and from sales of extended service contracts.
Sales of the Company's Pentium processor-based products increased to 55% of
system revenue in the first quarter of 1996 from 10% of system revenue in the
first quarter of 1995, an increase in revenue of $475.5 million or 749%. Sales
of Pentium processor-based products in the first quarter of 1996 increased by
$138.4 million or 35% from the fourth quarter of 1995, in which quarter such
sales represented 44% of system revenue. The Company's rapid introduction of
Pentium processor-based systems relative to its competitors and increased
customer acceptance of these systems resulted in the substantial increase in
sales of such systems. This shift in demand toward Pentium processor-based
products was evident in the Company's sales of 486-based products, which
decreased to 45% of system revenue in the first quarter of 1996 from 90% of
system revenue in the comparable period of the prior year and 56% of system
revenue in the fourth quarter of 1995.

Revenue from the Company's Latitude(TM) family of notebook computers, which
began with the introduction of the Latitude notebook computer line on February
21, 1994, represented 17% of system revenue in the first quarter of 1996, up
from 2% in the first quarter of 1995 and 14% in the fourth quarter of 1995.
This increase in first quarter notebook computer revenue was due primarily to
strong customer acceptance of the Company's Latitude XP notebook computer line
introduced in August 1994. The Company further expanded its Latitude family of
notebook computers in May 1995 with the introduction of nine new notebook
models, including the Company's first Pentium processor-based notebook
computers. Revenue from the Company's desktop product lines represented 80% of
system revenue (or $789.4 million) in the first quarter of 1996 versus 94% of
system revenue (or $619.4 million) in the comparable period of the prior year
and 80% of system revenue (or $723.3 million) in the fourth quarter of 1995.
Sales from the server product line represented 3% of system revenue (or $25.6
million) in the first quarter of 1996, 4% of system revenue (or $28.7 million)
in the first quarter of 1995 and 6% of system revenue (or $49.2 million) in the
fourth quarter of 1995. The 6% for the fourth quarter of 1995 included certain
high-end desktop products that were generally used as low-end servers;
excluding sales of those products, server sales for the fourth quarter of 1995
were approximately 4% of system revenue.

The Company believes that its success is largely dependent upon continued
growth of its notebook product line, its ability to expand its presence in the
network server market and its ability to continue to efficiently manage the
transition to Pentium processor-based computers and other technological
advancements as they become commercially available. There can be no assurance
that the Company's development activities will be successful, that product
technologies will be available to the Company, that the Company will be able to
deliver commercial quantities of computer products in a timely manner or that
such products will achieve market acceptance. Some new products introduced by
the Company are intended to replace existing products. Although the Company
monitors the products that are intended to be replaced and attempts to phase
out the manufacture of those products in a timely manner, there can be no
assurance that such transitions will be executed without adversely affecting
the Company's results of operations or financial condition.

Consolidated net sales from the Americas (United States, Canada, Mexico and
Latin America) increased 37% to $706.2 million for the first quarter of 1996
from $514.3 million in the first quarter of 1995 and increased 2% from $691.3
million in the fourth quarter of 1995. Net revenue from the Company's European
operations increased 50% to $348.4 million from $232.8 million in the first
quarters of 1996 and 1995, respectively, and increased 17% from $298.0 million
in the fourth quarter of 1995. Other international sales increased 317% to
$81.3 million for the first quarter of 1996 from $19.5 million in the
comparable period in 1995 primarily due to sales growth in Japan where revenue
has more than tripled compared to the first quarter of 1995. Other
international sales increased 87% in the first quarter of 1996 from $43.4
million in the fourth quarter of 1995, again primarily due to sales growth in
Japan. The Company believes that a significant opportunity exists for
continued growth in international operations, and during the first quarter of
1996, the Company began construction of a 238,000 square foot combination
office and manufacturing facility on a nine-acre site in Penang, Malaysia, to
meet the needs of its expanding Asia-Pacific business. Dell intends to
continue to expand its

8
<PAGE> 10

international activities by increasing its market presence in existing markets
through ongoing revisions and improvement of its marketing and sales
compensation programs to more effectively reach its customers, by improving its
support systems, by pursuing additional distribution opportunities and by
entering new markets. There can be no assurance that the Company will
successfully manage the construction of its Malaysian facility, that the
facility will meet the needs of its expanding Asia-Pacific business or that the
Company will be successful in its efforts to expand its international
activities.

Consolidated net sales to national accounts, consisting of sales to major
corporate, government and education accounts and value-added resellers,
increased 47% to $720.4 million for the first quarter of 1996 from $490.9
million in the first quarter of 1995. Sales to medium- to small-sized
businesses and individuals increased 51% to $415.5 million from $275.7 million
in the first quarters of 1996 and 1995, respectively, despite the decline in
sales to mass merchant and other consumer retailers as a result of the
discontinuation of traditional consumer retailer sales in the United States and
Canada in July 1994. Revenue from consumer retailers in the United States and
Canada represented 7% of consolidated net sales in the first quarter of 1995.

The Company does not believe that backlog is a meaningful indicator of
sales that can be expected for any period. The Company attempts to reduce
manufacturing costs by more efficiently managing its flow of customer orders
into production, which resulted in an increase in backlog to $135.6 million at
April 30, 1995, compared with $95.0 million at January 29, 1995. Consistent
with the Company's unconditional 30-day return policy, customers may cancel or
reschedule orders without penalty prior to commencement of manufacturing.

Gross Profit Margin

Gross profit increased $66.3 million in the first quarter of 1996 from the
comparable period in the prior year primarily as a result of the increase in
unit volumes and in average revenue per unit previously discussed. However,
the Company's gross profit as a percentage of consolidated net sales decreased
to 20.8% for the first quarter of 1996 from 22.2% for the first quarter of 1995
and was relatively flat with 21.0% in the fourth quarter of 1995. The decrease
in gross profit margin in the first quarter of 1996 from the comparable period
in 1995 resulted from pricing actions taken by the Company in the United States
to enhance its competitive position, as well as from growth in sales of certain
of the Company's lower margin desktop products. This decrease was partially
offset by a shift in the Company's overall sales mix towards higher margin
notebook computers, which grew as a percentage of system revenue from 2% in the
first quarter of 1995 to 17% in the first quarter of 1996, and by favorable
foreign currency fluctuations, net of hedging results.

The Company may take pricing actions as it attempts to maintain a
competitive mix of price, performance and customer services while managing its
liquidity, profitability and growth. The Company attempts to mitigate the
effects of price reductions by improving product mix, further reducing
component costs and lowering operating costs. There can be no assurance that
pricing actions will be effective in stimulating higher levels of sales or that
cost reduction efforts will offset the effects of pricing actions on the
Company's gross margins.

The Company's manufacturing process requires a high volume of quality
components that are procured from third party suppliers. Reliance on
suppliers, as well as industry supply conditions, generally involves several
risks, including the possibility of defective parts, a shortage of components,
increases in component costs and reduced control over delivery schedules, any
or all of which could adversely affect the Company's financial results. The
Company has several single supplier relationships and the lack of availability
of timely and reliable supply of components from these sources could adversely
affect the Company's business. Even when multiple suppliers are available, the
Company may establish a working relationship with a single source when the
Company believes it is advantageous due to performance, quality, support,
delivery, capacity and price considerations. While the Company has supply
agreements with certain suppliers, such agreements typically only specify
general terms and conditions, subject to release of purchase orders by the
Company and acceptance thereof by the component supplier. In addition,
alternative sources of supply are not available for some of the Company's
single sourced components. Where alternative sources are available,
qualification of the alternative suppliers and establishment of reliable
supplies of components from such sources may result in delays and could
adversely affect the Company's

9
<PAGE> 11

manufacturing processes and results of operations. The Company occasionally
experiences delays in receiving certain components, which can cause delays in
the shipment of some products to customers. Additionally, the Company has
occasionally experienced certain defective components, which can affect the
reliability and reputation of its products. There can be no assurance that the
Company will be able to continue to obtain additional supplies of reliable
components in a timely or cost-effective manner. In particular, the Company
obtains its supply of microprocessors from Intel Corporation, although certain
comparable microprocessors are available from other sources. The Company is
continuing to increase its shipments of products incorporating Intel's Pentium
microprocessor.

In November 1994, an inaccuracy in Intel's Pentium microprocessor was
publicized that, in some cases, may cause errors in division. Based on
information from Intel Corporation, the Company believes only a limited number
of its Pentium microprocessor customers perform calculations affected by the
inaccuracy. Nonetheless, Intel has offered replacement microprocessors to
end-users for any Pentium microprocessor exhibiting this inaccuracy. By early
February 1995, all of the Company's new shipments of Pentium processor-based
products contained the corrected Pentium microprocessors. Although the Company
previously shipped products which included Pentium microprocessors which
exhibited the inaccuracy, the Company believes that the costs associated with
the replacement of such microprocessors will not have a material adverse effect
on the Company's results of operations or financial condition.

Operating Expenses

Operating expenses increased 35% to $148.5 million in the first quarter of
1996 from $109.8 million in the comparable period of the prior year. However,
operating expenses as a percentage of consolidated net sales decreased to 13.1%
for the first quarter of 1996 from 14.3% for the first quarter of 1995.
Selling, general and administrative expenses increased 35% to $127.6 million in
the first quarter of 1996 from $94.9 million in the first quarter of the prior
year. The increase in selling, general and administrative expenses resulted
from increased compensation-related expenses as the Company strengthened its
management team and increased staffing to meet the demands of its growth and
increased costs relating to the Company's investment in global information
systems. Research, development and engineering expenses increased 39% to $20.9
million in the first quarter of 1996 from $14.9 million in the first quarter of
1995. The increase in research, development and engineering expenses resulted
primarily from higher compensation expense relating to an increase in headcount
and higher development costs related to notebook computers.

The Company believes that its ability to manage operating costs is an
important factor in its ability to remain price competitive. However, the
Company will invest in key global information systems through 1998 to manage
and support its growth. No assurance can be given that the Company's efforts
to manage future operating expenses will be successful.

10
<PAGE> 12

Financing and Other Income (Expense), net

Financing and other income (expense), net was ($.8) million for the first
quarter of 1996 compared with ($32.5) million for the first quarter of 1995.
The table below sets forth for the periods indicated the components of
financing and other income (expense), net:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------
APRIL 30, MAY 1,
1995 1994
------------- -------------
<S> <C> <C>
Financing and other income (expense), net:
Investment income (loss), net:
Short-term investments . . . . . . . . . . . . . . . . . . $ 5,612 $ (10,889)
Investment derivatives . . . . . . . . . . . . . . . . . . -- (22,607)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . (4,019) (2,170)
Foreign currency transactions . . . . . . . . . . . . . . . . (1,331) 2,540
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,031) 595
=========== =============
$ (769) $ (32,531)
=========== =============
</TABLE>

Short-term investment income (loss) was $5.6 million in the first quarter
of 1996 compared with ($10.9) million in the first quarter of 1995. The
investment loss for the first quarter of 1995 was primarily due to a $15.5
million write-down of certain of the Company's short-term investments as a
result of interest rate increases in the United States, Canadian, Japanese and
European interest rate markets. The Company accounts for highly liquid
investments with maturities of three months or less at date of acquisition as
short-term investments and reflects the related cash flows as investing cash
flows. As a result, a significant portion of its gross investment maturities
and purchases disclosed as investing cash flows is related to highly liquid
investments.

Realized and unrealized net losses on interest rate derivatives recognized
in income were ($22.6) million in the first quarter of 1995. The losses were
primarily a result of interest rate increases in the United States, Canadian,
Japanese and European interest rate markets. The Company closed all remaining
investment derivatives during the second quarter of 1995. The Company intends
to use derivative financial instruments only to manage its exposure to
fluctuations in foreign currency exchange rates and to manage market risk on
components of its debt and equity.

All of the Company's foreign exchange and interest rate derivative
instruments involve elements of market and credit risk in excess of the amounts
recognized in the financial statements. The counterparties to financial
instruments consist of a number of major financial institutions. In addition
to limiting the amount of agreements and contracts it enters into with any one
party, the Company regularly monitors the credit quality of the financial
institutions which are counterparties to these financial instruments. The
Company does not anticipate nonperformance by the counterparties.

Interest expense increased in the first quarter of 1996 to $4.0 million
from $2.2 million in the first quarter of 1995. The increase in interest
expense in 1996 was primarily due to higher borrowings and higher interest
rates in the first quarter of 1996. Concurrently with the issuance of the 11%
Senior Notes (the "Notes") in the third quarter of 1994, the Company entered
into interest rate swap agreements to manage the interest costs associated with
the Notes. The swap agreements effectively changed the Company's interest rate
exposure from a fixed-rate to a floating-rate basis. However, in response to
increasing interest rates, in August 1994, the Company entered into offsetting
swap agreements to effectively change its interest rate exposure from a
floating-rate basis to a fixed-rate basis. The interest rate swap agreements
mature on August 15, 1998, the first available redemption date of the Notes.
At the end of the first quarter of 1996, the Company had outstanding receive
fixed/pay floating interest rate swaps with an aggregate notional amount of
$100 million offset by receive floating/pay fixed interest rate swaps with an
aggregate notional amount of $100 million. The weighted average interest rate
on the Notes, adjusted by the swaps, was 13.8% for the first quarter of 1996
and 10.3% for the first quarter of 1995.

11
<PAGE> 13

Net foreign currency transaction gains (losses) were ($1.4) million for the
first quarter of 1996 compared to $2.6 million for the first quarter of 1995
primarily due to the weakening of the United States dollar relative to other
major foreign currencies.

Financing fees and other income (expense) were ($1.0) million in the first
quarter of 1996 compared with $.6 million in the first quarter of 1995. The
increase in financing fees and other income (expense) was primarily due to
higher financing-related expenses incurred in 1996 in connection with the
refinancing of debt and credit facilities.

Income Tax

The Company's effective tax rate was 29.0% for the first quarter of 1996
compared with 30.9% for the first quarter of 1995. The change in the effective
tax rate resulted from changes in the geographical distribution of income and
losses.

Fluctuations in Operating Results

The Company's operating results may fluctuate from period to period and
will depend on numerous factors, including, but not limited to, customer demand
and market acceptance of the Company's products, new product introductions,
product obsolescence, component price fluctuations, varying product mix,
foreign currency exchange rates, foreign currency and interest rate hedging and
other factors. In addition, the Company has operated without a material
backlog so that net sales in a given quarter are dependent on customer orders
received in that quarter and operating expenditures are primarily based on
forecasts of customer demand. As a result, if demand does not meet the
Company's expectations in any given period, the sales shortfall may result in
an increased impact on operating results due to the Company's inability to
adjust operating expenditures quickly enough to compensate for such shortfall.
The Company's business is sensitive to the spending patterns of its customers,
which in turn are subject to prevailing economic conditions and other factors
beyond the Company's control. The Company's results of operations could be
materially adversely affected by changes in economic conditions or customer
spending patterns for personal computer products.

HEDGING ACTIVITIES

The results of the Company's international operations are affected by
changes in exchange rates between certain foreign currencies and the United
States dollar. The financial statements of the Company's international sales
subsidiaries have generally been measured using the local currency as the
functional currency. An increase in the value of the United States dollar
increases costs incurred by the Company's international operations because many
of its component purchases are denominated in the United States dollar.
Changes in exchange rates may negatively affect the Company's consolidated net
sales (as expressed in United States dollars) and gross profit margins from
international operations. Effective January 30, 1995, most of the Company's
European sales are made from a U.S. dollar functional currency entity.

The purpose of the Company's hedging program is to reduce the Company's
exposure to the risk that the dollar-value equivalent of anticipated cash flows
will be adversely affected by changes in foreign currency exchange rates. The
Company attempts to reduce its exposure to currency fluctuations involving
anticipated, but not firmly committed, transactions and involving transactions
with firm foreign currency commitments through the use of purchased foreign
currency option contracts and forward contracts.

Realized and unrealized gains or losses and premiums on foreign currency
purchased option contracts that are designated and effective as hedges of
probable anticipated, but not firmly committed, foreign currency transactions
are deferred and recognized in income in the same period as the hedged
transaction. The risk of loss associated with purchased options is limited to
premium amounts paid for the option contracts, which could be significant.
Forward contracts designated as hedges of anticipated transactions are
accounted for on a mark-to-market basis and included in income as a component
of net sales or cost of sales, depending upon which

12
<PAGE> 14

transaction is hedged. Transaction exposures representing firm foreign
currency commitments are generally hedged using foreign exchange forward
contracts. Forward contracts related to transaction exposures are accounted
for on a mark-to-market basis with realized and unrealized gains or losses
included in financing and other income (expense) as an offset to the underlying
hedged transaction. The risk of loss associated with forward contracts is
limited to the exchange rate differential from the time the contract is made
until the time it is settled.

The Company enters into foreign currency purchased options and, to a lesser
extent, forward contracts to hedge a portion of its anticipated, but not firmly
committed, transactions including sales by international subsidiaries, which
includes international sales by a U.S. dollar functional currency entity and
intercompany shipments to certain international subsidiaries, and foreign
currency denominated purchases of certain components. Foreign currency
purchased options generally expire in twelve months or less and forward
contracts generally mature in three months or less. The principal hedge
currencies are the German mark, the British pound and the Japanese yen. At
April 30, 1995, the Company held purchased option contracts that were
designated and effective as hedges of anticipated sales by international
subsidiaries with a total notional amount of $787.9 million and a combined net
realized and unrealized loss of $3.8 million. At April 30, 1995, the Company
held purchased options that were designated and effective as hedges of foreign
currency denominated purchases with a total notional amount of $62.0 million
and a combined net realized and unrealized gain of $6.6 million. Forward
contracts with maturity dates of less than three months designated to hedge
foreign currency transaction exposures of $42.7 million were outstanding at
April 30, 1995.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash flow from operating activities for the first three
months of 1996 was $10.3 million. The Company's primary source of cash during
the quarter resulted from short-term investment activity, where maturities,
redemptions and sales exceeded purchases by $63.9 million. Working capital
totaled $781.1 million at April 30, 1995 compared with $719.0 million at
January 29, 1995. Days in accounts receivable at the end of the first quarter
of 1996 remained unchanged from 47 days at the end of 1995. Days in accounts
payable decreased to 42 days at the end of the first quarter of 1996 from 49
days at the end of 1995. Inventory levels increased slightly to 34 days of
supply at the end of the first quarter of 1996 from 32 days at the end of 1995.
Maintaining the Company's current inventory level is dependent upon the
Company's ability to achieve targeted revenue and product mix, to further
minimize complexities in its product line and to maximize commonality of parts.
There can be no assurance that the Company will be able to maintain these low
inventory levels in future periods.

The Company utilized $14.4 million of cash during the first three
months of 1996 to construct facilities and to acquire information systems and
personal computer office equipment. Total capital expenditures for 1996 are
expected to be approximately $100 million, primarily related to the
construction of manufacturing and administrative facilities, the acquisition
and development of an integrated management information system and the
acquisition of computer equipment for internal use. The Company believes that
its cash and short-term investments and its cash flow from operating activities
will be adequate to fund its planned 1996 capital expenditures.

The Company had a line of credit facility which expired June 8, 1995,
and bore interest at a defined Base Rate or Eurocurrency Rate with covenants
based on quarterly income, maintenance of net worth, a maximum ratio of total
liabilities to tangible net worth and a maximum inventory level. The line of
credit also contained certain restrictions on the payment of cash dividends on
the Company's common stock. Maximum amounts available under the credit
facility were limited to $90 million less the aggregate of outstanding letters
of credit. During the commitment period, the Company was obligated to pay a
fee on the unused portion of the credit facility. No borrowings were
outstanding under this credit facility as of April 30, 1995, and the maximum
available totaled $81.7 million as of April 30, 1995.

Effective June 8, 1995, the Company entered into a series of line of
credit facilities, each of which bears interest at a defined Base Rate or
Eurocurrency Rate with a covenant based on quarterly maintenance of net worth.

13
<PAGE> 15

Maximum aggregate amounts available under the new credit facilities are limited
to $100 million less the aggregate of outstanding letters of credit under these
facilities. During the commitment period, the Company is obligated to pay a
fee on the unused portion of the credit facilities. No borrowings or letters
of credit were outstanding under these credit facilities as of June 12, 1995,
and the maximum available totaled $100 million.

The Company's subsidiary, Dell Receivables Corporation, has a
Receivables Purchase Agreement which expires June 22, 1996, pursuant to which
the Company may raise up to $100 million through the sale of interests in
certain of its accounts receivable. The Company is obligated to pay a
commitment fee on the unused portion of the amount available under the
Receivables Purchase Agreement. As of April 30, 1995, this facility was unused.

Repayment of the Company's $100 million in 11% Senior Notes due August
15, 2000, a $14 million loan secured by its facilities in Round Rock, Texas and
its operating lease commitments constitute the Company's long-term commitments
to use cash.

Management believes that sufficient resources will be available to meet
the Company's cash requirements through at least the next twelve months. Cash
requirements for periods beyond the next twelve months depend on the Company's
profitability, its ability to manage working capital requirements and its rate
of growth.

14
<PAGE> 16

PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As of May 15, 1995, the Company has been named as a defendant in 27
repetitive stress injury lawsuits, most of which are in New York state courts
or United States District Courts for the New York City area. Several are in
state courts in New Jersey. One is in the Federal District Court for the
Eastern District of Pennsylvania, and one is in Federal District Court in
Kansas. The allegations in all of these lawsuits are similar. Each plaintiff
alleges that he or she suffers from symptoms generally known as "repetitive
stress injury," which allegedly were caused by the design or manufacture of the
keyboard supplied with the computer the plaintiff used. The Company has denied
or is in the process of denying the claims and intends to vigorously defend the
suits. The suits naming the Company are just a few of many lawsuits of this
type that have been filed, often naming Apple, Atex, Compaq, IBM, Keytronic and
other major suppliers of keyboard products. The Company currently is not able
to predict the outcome of these suits. It is possible that the Company may be
named in additional suits. Ultimate resolution of the litigation against the
Company may depend on progress in resolving this type of litigation overall.
However, the Company does not believe that the outcome of these matters will
have a material adverse effect on the Company's financial condition or results
of operations.

For additional information about a Federal Trade Commission inquiry and a
State of California Attorney General investigation into the Company's
advertising and marketing claims regarding monitor screen sizes, see Item 3 of
the Company's Annual Report on Form 10-K for the fiscal year ended January 29,
1995.

15
<PAGE> 17

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10 Severance Agreement, dated April 28, 1995, between the Company and L. Scott Flaig
11 Statement Re Computation of Per Share Earnings
27 Financial Data Schedule
</TABLE>

(b) Reports on Form 8-K

The registrant filed no Current Reports on Form 8-K during the
first quarter of 1996. On June 2, 1995, the registrant filed a Current Report
on Form 8-K dated May 2, 1995, which reported under Item 5 recent developments
in certain legal proceedings that are described under Item 1 of Part II of this
Report.

16
<PAGE> 18

SIGNATURE

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 COMPUTER CORPORATION

June 14, 1995 /s/ Thomas J. Meredith
Thomas J. Meredith
Chief Financial Officer
(On behalf of the registrant and as
principal financial officer)

17
<PAGE> 19

INDEX TO EXHIBITS

<PAGE> 1
[DELL LOGO]

April 28, 1995

Mr. L. Scott Flaig
68 Pascal Lane
Austin, Texas 78746

Dear Scott:

This letter sets forth the mutual agreement (the "Agreement") between Dell
Computer Corporation for itself and its subsidiaries (collectively, the
"Company") and you regarding your voluntary election to terminate your
employment by the Company.

1. You and Dell agree that this Agreement is entered into in connection
with the amicable termination of your employment by Dell, and that your
employment will be terminated effective 11:59 p.m. local time in Austin, Texas
on July 31, 1995 (the "Termination Effective Date"). The Company agrees to pay
to you in full all of your salary and every other type of benefit due and owing
to you or accrued to you (including any accrued right to present or future
deferred compensation) through and including the Termination Effective Date.
Disability insurance benefits will be discontinued on the Termination Effective
Date.

2. You agree that you are not entitled to receive from Dell, or from any
of its officers, managers, directors, employees, agents or representatives, any
form of consideration or the payment of any amount other than (i)
reimbursement of expenses incurred but not yet submitted of approximately
$350.00 or submitted but not yet reimbursed, and (ii) what is expressly set
forth in this Agreement. You agree that you are not entitled to receive from
Dell any payment or distribution of any other type of property, except as
expressly set forth in this Agreement. You further agree that as of the date
of this Agreement, April 28, 1995, (the "Execution Date") you do not own and do
not hold any rights to outstanding vested and unexercised stock options to
purchase shares of Dell's Common Stock from the Company with the exception of
the following shares at the indicated exercise prices: 12,000 shares at $30.69
per share; and 4,000 share at $22.50 per share. As provided in the option
agreements, the period for you to exercise all of such options will expire and
terminate automatically without further notice 30 days after the Termination
Effective Date. In addition, as provided in the option agreements, if you fail
to exercise any or all of the options listed in this paragraph prior to the
expiration of said 30 day
<PAGE> 2
Mr. L. Scott Flaig
April 28, 1995
Page 2

period, you will lose the right to acquire the shares subject to any of such
options which remain unexercised at that time, and all of such unexercised
options shall become null and void and of no further force or effect without
any further action or notice of any kind. In the exercise of such options, as
well as in connection with any other transactions involving Dell's securities,
you understand and agree that you are and will be subject to all the
requirements of applicable laws, rules and regulations.

3. On the Execution Date, you resigned from all positions as a corporate
officer or director of Dell Computer Corporation and its subsidiaries and
affiliates, without prejudice to your rights to compensation through the
Termination Effective Date. You agree that upon reasonable request from Dell's
General Counsel, you will separately confirm such resignations in writing.

4. You agree that the consideration and promises set forth in this
Agreement constitute full and adequate consideration to support this Agreement
and each provision hereof. In addition to the other consideration granted to
you in this Agreement, the Company agrees to allow you to retain, as your sole
property, the Dell Desktop Computer, printer, and fax machine used in your home
and the Dell Latitude XP notebook computer currently in your possession. You
shall have access to these items and to your personal office during regular
office hours until 5:00 p.m. local time on Saturday, April 29, 1995 as
necessary to remove these items and your personal belongings.

5. Your vested balance in Dell's 401(k) Plan Trust (if any) and Dell's
Deferred Compensation Plan will be available for you to withdraw or roll over
in accordance with the provisions of the Plan after the Termination Effective
Date, subject to applicable laws and regulations. Any balance you may have in
Dell's Employee Stock Purchase Plan will also be used to purchase stock prior
to the Termination Effective Date as provided in the Plan or available for you
to withdraw in accordance with the provisions of the Plan.

6. From and after the Effective Date, you will have no duties, obligations
or responsibilities to perform any work or services for or on behalf of the
Company except as expressly provided in this Agreement. You will be free to
undertake other employment after the Termination Effective Date so long as your
employment and services do not contravene any other provision of this
Agreement. For the period between the Execution Date and the Termination
Effective Date, you may undertake consulting arrangements only with the written
consent of Dell's Vice President for Human Resources. The Company represents
and agrees that it has and shall continue to have after the Execution Date, an
obligation, in accordance with the provisions of Dell's Charter and Bylaws, to
indemnify you against, and hold you harmless from, any and all third party
claims, demands and causes of action (including those based on negligence or
gross negligence but excluding those based on intentional misconduct or the
willful violation of any statute or law), and from all liability, damages,
fines, penalties and other assessments or obligations of any kind (including
costs of defense and amounts paid in settlement) asserted by any third party to
the extent attributable to your status as an employee or officer (except for
claims based on intentional misconduct or the willful violation of any statute
based on intentional misconduct or the willful violation of any statute or
law). This indemnity shall be limited as
<PAGE> 3
Mr. L. Scott Flaig
April 28, 1995
Page 3

necessary to assure compliance by the Company with any law, rule or regulation
prohibiting indemnification of the Company's officers or employees for specific
kinds of claims. The Company also represents that you are and will continue to
be an "insured" with respect to any claim which may become subject to the
foregoing indemnity under all policies of insurance maintained by the Company
from time to time insuring such risks.

7. The Company is immediately entitled to receive and recover from you
any of the profits received by you from the stock options with accelerated
vesting, as further described in Paragraph 17, in the event, and only in the
event, and to the extent, and only to the extent, of any loss or expense
incurred by the Company due to your breach of any provision of this Agreement,
including any provision requiring future compliance with the Federal Securities
Laws, to the extent that such loss or expense would otherwise be recoverable in
an action for breach of the Agreement.

8. You agree that by execution of this Agreement you fully, finally,
completely and generally release the Company and each of its officers,
managers, directors, control persons, employees, agents and representatives,
individually and separately, from any and all claims, actions, liabilities,
obligations, demands, and/or causes of action, of whatever kind or character,
whether known or unknown, arising from, relating to, or in any way connected
with (i) any of the foregoing persons, (ii) your employment, resignation or
termination of employment with the Company, (iii) your decision to move to or
from or accept employment in Austin, Texas, (iv) your severance of employment
with your former employer prior to accepting employment with the Company, and
(v) any act or omission that has occurred on or before the Execution Date in
connection with any activity related to any of the foregoing persons or to any
activity, statements, controversy or dispute related to your employment,
resignation or termination of employment with the Company. The foregoing
release does not cover any claim, demand, or cause of action to the extent that
it arises out of any breach of or default under this Agreement or any other act
or omission after the Execution Date.

9. The release set forth in Paragraph 8 above shall be construed as
broadly as possible and shall include without limitation: (1) any tort,
contractual or other claim you may have; (2) any claim arising out of or in
connection with the initiation, termination or existence of your employment
relationship with the Company, or any act, service or omission performed or not
performed by or on behalf of the Company; (3) any claim arising under the
Federal Age Discrimination in Employment Act, the Civil Rights Act of 1964, or
any applicable Texas statute or regulation; and (4) except as to rights under
the plans described in Paragraph 5 above and the stock options described in
Paragraph 2 above and Paragraph 17 below, any claim regarding accrued vacation,
bonuses, deferred compensation or any other form of tangible or intangible
benefit from or attributable to the Company or any of the persons described in
Paragraph 8. You represent that you have not assigned to any other person any
of the claims and causes of action described in this Paragraph and in Paragraph
8 and that you have the full right to grant the release set forth in this
Agreement.
<PAGE> 4
Mr. L. Scott Flaig
April 28, 1995
Page 4

10. The Company hereby fully, finally, completely and generally releases
you from any and all claims, actions, demands and/or causes of action, of
whatever kind or character, whether known or unknown, arising from, relating
to, or in any way connected with any act or omission by you that has occurred
on or before the Execution Date in connection with your employment by the
Company; provided, however, that such release shall not be applicable to any
acts or omissions by you which constitute willful or intentional misconduct, or
willful or intentional wrongdoing. The foregoing release does not cover any
claim, demand, or cause of action to the extent that it arises out of any
breach of or default under this Agreement or any other act or omission after
the Execution Date.

11. The release set forth in Paragraph 10 above shall be construed as
broadly as possible and shall include without limitation: (1) any tort,
contractual or other claim the Company may have; (2) any claim arising out of
or in connection with the initiation, termination or existence of your
employment relationship with the Company; and (3) any claim arising out of any
act, service or omission performed or not performed by you; but shall not
include any act or omission by you which constitutes willful or intentional
misconduct, or willful or intentional wrongdoing. The Company represents that
it has not assigned to any other person any of the claims and causes of action
described in this Paragraph and in Paragraph 10 and that it has the full right
to grant the release set forth in this Agreement.

12. You represent that you do not have in your possession or under your
control any correspondence, any memoranda, or any other documents or tangible
media of any kind (whether duplicated, copies or originals) which contain any
information belonging to the Company or related in any manner whatsoever to its
business. You agree that you will not take any such documents or media as
described above from the control or premises of the Company, and that if you
should find yourself in the possession of any of the same, you will return all
of the same (and any duplications and copies thereof) to the Company
immediately. You will have the right to review the Company's records at any
reasonable time upon reasonable notice, and to make copies or extracts thereof,
as necessary to respond to any third party claim, demand, or inquiry into the
propriety of your conduct while employed by the Company, provided that the
Company may take any measures deemed by it to be necessary (including denial of
access by you) to protect its trade secrets or Confidential and Proprietary
Information as herein defined.

13. For the duration of the "Restriction Period" (which for purposes of
this Agreement shall be defined to mean the period from the Execution Date,
through and including July 31, 1996), except as permitted under Paragraph 4
above, as incidental to the negotiation and documentation of this agreement, or
as otherwise requested or permitted by the Company, you will not return to the
place of business where you were employed by the Company, you will not travel
to or visit any of the Company's business locations, and you will not call or
visit any of the Company's employees during working hours or in any way or at
any time disrupt or undertake any activity that would have a tendency to
disrupt the business endeavors of the Company or its employees. Upon the
Company's prior request or permission, you may visit the Company for the
purpose of establishing and maintaining a business relationship between your
new employer, or any person for whom you may be consulting, and the Company.
<PAGE> 5
Mr. L. Scott Flaig
April 28, 1995
Page 5

14. You acknowledge that the Company conducts business in all fifty states
of the United States and in numerous foreign nations including but not limited
to the countries of the U.K., Ireland, France, Germany, Spain, Italy,
Switzerland, Finland, Norway, Sweden, Canada, Mexico, Australia, Japan,
Malaysia, Hong Kong, the Czech Republic and Poland. You further acknowledge
and agree that in your position with the Company you have since November 1993
represented the Company throughout the world; that you have received from the
Company unique and special knowledge and training which was not previously
available to you before your employment with the Company; that the Company
possesses and utilizes at the Execution Date trade secrets not known or used by
the Company's competitors, which trade secrets give the Company an advantage
over its competitors; that during your employment with the Company you have
received knowledge of and confidential information about the Company's trade
secrets including but not limited to those relating to its production,
research, marketing, service, support, pricing and sales practices and
policies; that at the Execution Date the Company's manufacturing,
administrative and other premises are restricted by security procedures put
in place by the Company and that Company-hired security guards are on duty at
all times to monitor and protect the Company's premises and information; that
it would take any person or entity a significant amount of time to enter any of
the Company's markets and to achieve substantial commercial success in such
markets because the necessary understanding of any technical data and
information relating to such markets (and to their customers, pricing, product
offerings and service delivery methods) would be difficult and costly to
develop; that you were involved in organizing the Company's manufacturing
practices and had access to the Company's sales data; and that unauthorized use
by you of the knowledge, information, data and trade secrets of the Company
described above would seriously damage the Company and hinder its ability to do
business worldwide. The character of any knowledge or information as a trade
secret will be determined from time to time according to the facts then
prevailing and applicable law. Nothing in this Paragraph 14 will cause any
knowledge or information which is not in fact a trade secret to be treated as
such.

15. Non-Competition. For the duration of the Restriction Period, you agree
that, without the prior written approval of the Company's Vice President of
Human Resources, you will not manage, operate, join, control or participate in,
directly or indirectly, consult on behalf of or for the benefit of, or derive
any benefit whatsoever from or be an officer, director, employee, partner,
agent, or consultant of, any business or activity, or any parent, subsidiary or
affiliate of any of the following companies: Compaq Computer Corporation,
Gateway 2000, Inc., International Business Machines, Inc., Apple Computer, Inc.
(the "Competitors"). You will not be in violation of this Paragraph 15 merely
because you own publicly traded securities issued by a Competitor as long as
you own less than 5% of any class of such securities then outstanding. The
prohibition of this Paragraph 15 will cease to apply if and when there is a
final judicial determination by a court of competent jurisdiction that the
Company has committed a substantial breach or default in the performance of any
of its material obligations under this Agreement.

16. You agree that the non-competition provision set forth in Paragraph 15
is ancillary to this Agreement, that this Agreement is an otherwise enforceable
agreement, and that the non-
<PAGE> 6
Mr. L. Scott Flaig
April 28, 1995
Page 6

competition provision is therefore ancillary to an otherwise enforceable
agreement. You further agree that the non-competition provision contains
reasonable limitations as to the time, geographical area and scope of activity
for which you are to be restrained; that the limitations of this Agreement and
your covenant not to compete with the Company do not impose a greater restraint
than is necessary to protect the goodwill or other business interests of the
Company; and that the primary purpose of this Agreement does not obligate you
to render personal services to the Company.

17. As separate consideration for the non-competition provision set forth
in Paragraph 16, the Company and you hereby amend the stock option grant
agreements relating to stock options previously granted to you, but currently
unvested, so as to accelerate the vesting dates for the following currently
unvested options which you hold to purchase shares of Dell's Common Stock
at the indicated exercise prices per share: 24,999 shares at $.01 per
share, including 8,333 shares presently scheduled to vest on June 1, 1995;
8,000 shares at $22.50 per share; 7,596 shares at $26.00 per share, including
3,798 shares presently scheduled to vest on June 29, 1995. The vesting dates
for each of such options are hereby accelerated so as to cause 100% of each
such option to vest on the Execution Date. You understand and agree that you
will have no right to exercise options or purchase Dell's Common Stock from the
Company except as set forth in this letter Agreement, and you and the Company
further agree that the stock option agreements between you and the Company
which relate to the options described in this Paragraph 17 are amended to the
extent necessary (and only to the extent necessary) to accelerate the vesting
dates for the options described in this Paragraph 17. You also understand and
agree that your right to exercise options and purchase Dell's Common Stock in
accordance with this Agreement is further conditioned upon your compliance with
the provisions of the stock option agreements (as amended hereby) in effect
between you and the Company, and upon your full and complete compliance with
the remaining provisions of this paragraph 17.

In addition to your other holdings of the Company's stock (which include 15,000
shares with respect to which the Two Year Restriction, as defined below, will
expire on June 1, 1995), on the Termination Effective Date you will own 5,000
shares of the Company's Common Stock which were issued to you as of June 1,
1994 prior to the Execution Date upon your exercise of an option under the
Special and Nonstatutory Stock Option Agreement under Dell Computer Corporation
1989 Stock Option Plan dated November 16, 1992 (the "1992 Option Agreement")
and which are subject to restrictions on transfer (the "Two Year Restriction")
for a period of two years ending June 1, 1996 in accordance with the paragraph
of the 1992 Option Agreement entitled "Limitations on Ownership of Common Stock
received on Exercise." These 5,000 shares are currently held by the Company
under the terms of the 1992 Option Agreement. In addition, 60% of the 24,999
shares at $.01 per share referred to in the first full sentence of this
Paragraph 17 will also be subject to the Two Year restriction.

The Company hereby waives the Two Year Restriction as to the 60% of the 24,999
shares and the 5,000 shares described above, it being the intent of this waiver
that those shares not be subject after the Execution Date to any restriction on
transfer imposed by the 1992 Option Agreement.
<PAGE> 7
Mr. L. Scott Flaig
April 28, 1995
Page 7

The 5,000 shares held by the Company as described above shall remain in the
Company's custody and shall not be delivered to you unless and until, no
earlier than five business days prior to June 1, 1996, you execute and deliver
to the Company a Sworn Affidavit (the "Compliance Affidavit"), in the form
attached hereto as Exhibit A, in which you attest under oath that as of the
date of the affidavit and at all times prior thereto, you are and have been in
full and complete compliance with the terms of this Agreement. Failure to
timely deliver the fully executed Compliance Affidavit will result in the
forfeiture of all rights you may have or claim to these 5,000 shares and/or to
any proceeds (gain) you would otherwise have been entitled to upon the sale of
those shares.

You acknowledge and agree that the rights granted to you by the provisions of
this Paragraph 17 were not otherwise available to you and constitute
substantial independent consideration for your agreement not to compete set
forth in Paragraph 15.

18. You agree that it shall be your sole responsibility to comply with all
applicable laws related to the exercise of the options described in Paragraphs
2 and 17 of this Agreement, and sale of such shares, and the use and
disposition of all proceeds therefrom, and to pay all applicable taxes, fees
and other charges related thereto.

19. As further separate consideration for the non-competition provision set
forth in Paragraph 16, the Company agrees (i) to pay you $131,875.00 by check
on the Termination Effective Date; (ii) to be responsible for the payments to
continue health insurance provided under Dell's group policy pursuant to the
conditions of COBRA through December 31, 1995, said payments to be aggregated
to include consideration for taxes incurred by you with respect to said
payments and paid to you in a lump sum by check on the Termination Effective
Date; (iii) to pay reasonable attorney's fees incurred by you with respect to
the negotiation and preparation of this Agreement; and (iv) to pay for all
services provided to you by Price, Waterhouse & Company through the preparation
of your tax return for 1995 in accordance with your present entitlements to
Price, Waterhouse Tax Preparation Services.

20. Non-Solicitation. You agree that you will not, during the Restriction
Period, alone or with others, directly or indirectly, solicit or recruit for
your benefit, or for the benefit of any person or entity, the employment or
other services of any person who is an employee of the Company or who within
the six month period preceding such solicitation or recruitment has been an
employee of the Company. You agree that you will not, during the Restriction
Period, cause or facilitate (by providing information or otherwise) the
solicitation or the recruitment of such employment or other services by or for
the benefit of any person or organization with which you may be associated.

21. In addition to the other agreements contained herein, you agree that
you will not use, publish, misappropriate or disclose in any manner, directly
or indirectly, for yourself or for the benefit of any other person or entity,
any Confidential and Proprietary Information. "Confidential and Proprietary
Information" means, without limitation, any information that you
<PAGE> 8
Mr. L. Scott Flaig
April 28, 1995
Page 8

have learned or originated during your employment with the Company, to the
extent that such information is related to the products, marketing plans, sales
plans, operating procedures, properties, or financial condition, prospects, or
results of operations of the Company, which information is commercially
valuable and is not publicly available to or readily ascertainable by third
parties through proper means, and any information disclosed by third parties in
confidence to the Company. Confidential and Proprietary Information
specifically includes, without limitation, all such information of the kinds
described in subparagraphs A through G below:

A. Manufacturing and research processes currently in use,
planned or under development, including design rules, device
characteristics, process flow, manufacturing capabilities and yields.

B. Computer product, process and device strategies planned or
under development, including device specifications, system
architectures, logic designs, circuit implementations and long-range
plans.

C. Software products in use, planned or under development,
including operating system adaptations or enhancements, language
compilers, interpreters and translators, system design and evaluation
tools, and application and diagnostic programs.

D. Information relating to Company employees; actual and
anticipated relationships between the Company and other companies or
persons; sales levels, profit levels, pricing and other unpublished
financial data; and budget, staffing compensation, equipment and
related plans.

E. Information relating to the Company's customer, supplier and
vendor relationships. This includes performance requirements,
development and delivery schedules, device and product pricing and
quantities, and other information communicated to the Company by its
customers, suppliers or vendors.

F. Information relating to the compensation, skills, and work
histories of the Company's employees.

G. Any Intellectual Property defined below and any copyrightable
works described below, except as publicly disclosed in patents and
other publicly available documents.

22. You agree that all discoveries, ideas, improvements or inventions you
have created, conceived, developed or discovered, alone or with others, during
your employment with the Company which relate to the Company's business or
which result from the use of the Company's equipment, supplies, facilities or
information, and which are protectable under applicable patent or copyright
laws (collectively, the "Intellectual Property"), in whatever form, is the
Company's sole and exclusive property. You hereby assign to the Company all
of your rights in any Intellectual Property. You agree that you will assist
the Company at the Company's expense in all ways in the future, including
giving evidence and executing any documents deemed helpful or
<PAGE> 9
Mr. L. Scott Flaig
April 28, 1995
Page 9

necessary by the Company, to establish, perfect and register worldwide, at the
Company's expense, the Company's title and exclusive ownership in the
Intellectual Property. You agree that you will not do anything in conflict
with the Company's rights in the Intellectual Property and that you will
cooperate fully to protect the Intellectual Property against misappropriation
or infringement.

23. You agree that the Company is the copyright owner in all copyrightable
works of every kind and description created or developed by you, solely or
jointly with others, during the time of your employment with the Company. If
so requested at any time, and for no additional consideration, you will execute
in writing any acknowledgments or assignments of copyright ownership of such
works as may be appropriate in the opinion of the Company for preservation of
the worldwide ownership in the Company of such copyrights.

24. You agree that your obligations pursuant to Paragraphs 21 and 22 with
respect to the Intellectual Property will survive the satisfaction or
completion of any other term of this Agreement and will continue for the
duration of the Restriction Period as to Paragraph 21 and in perpetuity as to
Paragraph 22 except as otherwise specified herein. You and the Company
acknowledge that you have entered into previous agreements with the Company
from time to time, including the "Special Nonstatutory Stock Option Agreement
under Dell Computer Corporation 1989 Stock Option Plan" dated November 1992, in
respect of Confidential and Proprietary Information and Intellectual Property,
covenants not to compete, non-solicitation and non-hire provisions, and
provisions concerning non contravention of your employment agreement; and you
and the Company agree that all such agreements are merged into and superseded
by the provisions of this Agreement, the intent being that your only
obligations with respect to Confidential and Proprietary Information and
Intellectual Property, covenants not to compete, non-solicitation and non-hire
provisions, and provisions concerning non contravention of your employment
agreement, shall be as provided herein.

25. You acknowledge that your breach of any of the non-competition,
non-solicitation, non-disclosure or non-use provisions set forth above will
cause irreparable harm to the Company, for which there may be no adequate
remedy at law and for which the ascertainment of damages would be difficult.
You therefore agree that in the event of your breach of any such provision, in
addition to and without having to prove the inadequacy of other remedies at
law, the Company shall be entitled to receive specific performance by you of
any such provision that you have breached, and the Company will furthermore be
entitled to the issuance of a court order directing full and immediate
injunctive relief against you without the Company being required to post any
bond or other security therefore. However, the provisions of this paragraph
should not be interpreted in any way as a limitation on the Company's right to
obtain money damages against you in the event of a breach of any of the
provisions set forth above.

26. You and the Company agree to maintain in confidence the terms of this
Agreement and not to disclose the same publicly or to any third parties except
as may be required in compliance with the requirements of applicable law or
this Agreement. You and the Company further agree to the joint issuance of a
press release prepared by the Company and approved by you, and that
<PAGE> 10
Mr. L. Scott Flaig
April 28, 1995
Page 10

thereafter, except as provided in the next sentences, neither you nor any
representative of the Company will make further comment, on or off the record,
for attribution or otherwise with regard to the circumstances of your departure
except as authorized in writing in advance by the party about whom the comment
is made. In addition, you will make no comment, on or off the record, for
attribution or otherwise, during the Restriction Period, about your employment
with the Company, or about the Company or any aspect of its business or
operations, without the express prior written agreement of the Company, except
as you may be required to do so under oath in response to a subpoena. You also
agree that in the event you breach this covenant of confidentiality and the
Company is damaged as a result of such breach, you shall be personally liable
for all damages arising from such breach, including reasonable attorneys' fees
and costs incurred by the Company in pursuing such claim against you. Neither
the Company nor any person acting on behalf of the Company shall make any
disparaging remark to any person concerning your employment, your performance
or conduct as an employee of the Company, or the termination of your employment
with the Company.

27. You agree that all time periods which commence with the termination of
your employment with the Company begin to run as of the Termination Effective
Date.

28. This Agreement shall be governed in all respects by the internal laws
of the State of Texas, excluding its rules regarding conflicts of laws, and all
venue hereunder shall be solely in Travis County, Texas.

29. In the event of litigation or other proceeding (through and including,
without limitation, any appeals process) to enforce the provisions of this
Agreement, the prevailing party shall be entitled to recover reasonable
attorney's fees and costs of such litigation or other proceeding from the
non-prevailing party.

30. You agree that you have had sufficient opportunity to thoroughly
discuss the implications of this Agreement with independent legal counsel of
your choice and that you have retained legal counsel of your choice to review
this Agreement and to advise you regarding same prior to your signing and
delivering this agreement to the Company. In signing the Agreement, you agree
that you have not relied on or been induced to execute this Agreement by any
statement, representations or agreements made by any person other than what is
expressly set forth in this Agreement.

31. This Agreement constitutes the entire agreement of the parties and,
except as otherwise provided herein, supersedes any and all prior and/or
contemporaneous oral or written agreements with the Company concerning the
subject matter hereof. This Agreement may not be modified except by a written
instrument executed by you and by an authorized officer of the Company.

32. Any waiver of any term or condition of this Agreement shall be
effective only if set forth in a written document signed by an authorized
officer of the Company. A waiver of any breach or any failure to enforce any
of the terms or conditions of this Agreement shall not in any way
<PAGE> 11
Mr. L. Scott Flaig
April 28, 1995
Page 11

affect, limit or waive a party's rights under this Agreement at any time to
enforce strict compliance thereafter with each and every term or condition of
this Agreement. Any decision by the Company to enforce its rights or withhold
the performance of its obligations under this Agreement will be made by a
majority of the Board of Directors of Dell Computer Corporation.

33. If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law effective during the term
hereof, such provision shall be fully severable. In such event, this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof and the remaining portions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance from this Agreement.
Furthermore, in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as part of this Agreement a new provision or a
reformed provision as similar in terms and effect to such illegal, invalid or
unenforceable provision as may be legal and enforceable.

34. Any notice required or permitted under this Agreement shall be given
by certified mail, receipted overnight courier service, or completed telecopy
transmission to the party entitled thereto, addressed as follows:

If to you: Scott Flaig
68 Pascal Lane
Austin, Texas 78746

With copy to: Clark, Thomas & Winters,
a Professional Corporation
700 Lavaca Street, 12th Floor
Austin, Texas 78701
Attn: C. Joseph Cain
Telecopy: (512) 474-1129

If to the Company: Dell Computer Corporation
2214 W. Braker Lane, Suite D
Austin, Texas 78758
Attn: General Counsel
Telecopy: (512) 728-3773

Either party may change its notice address by written notice to the other
party. Notice shall be deemed to have been received on the earlier of actual
receipt or the fourth day after dispatch.
<PAGE> 12
Mr. L. Scott Flaig
April 28, 1995
Page 12

35. For purposes of this Agreement, the term "Company" shall be deemed to
include any organization, partnership, corporation, trust or entity controlled
by or under common control with the Company. For this purpose, the concept of
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of another, whether
through the ownership of voting securities, by contract, or otherwise.

36. This Agreement is binding upon and shall inure to the benefit of the
parties and their respective heirs, representatives, successors and assigns.

If this letter accurately sets forth your agreement with respect to
the matters set forth herein, please so signify by signing this letter where
indicated below and then delivering to the Company your executed original of
this Agreement.

DELL COMPUTER CORPORATION

By: /s/ JULIE A. SACKETT
------------------------------
Dated: April 28, 1995
---------------------------

Sworn to and subscribed before me this 28th day of April, 1995.

/s/ JUDY M. PITHA
----------------------------------
Notary Public in and for
The State of Texas
Printed Name: Judy M. Pitha
---------------------
My Commission Expires: 04-04-98
------------

[STAMP]

<PAGE> 13
Mr. L. Scott Flaig
April 28, 1995
Page 13

I have carefully read the foregoing Agreement. On behalf of myself, my
executor, heirs, successors and assigns, I agree to, and agree to be bound by,
each and all of the terms of the Agreement. I acknowledge receipt of a copy of
the Agreement, and I agree to the sufficiency of the consideration and payments
recited in the Agreement.

/s/ SCOTT FLAIG
---------------------------------
Scott Flaig

Dated: 4/28/95
---------------------------

Sworn to and subscribed before me this 28th day of April, 1995.

/s/ LORI BYERLEY
---------------------------------
Notary Public in and for
The State of Texas
[STAMP] Printed Name: Lori Byerley
-------------------
My Commission Expires: 3/27/96
----------
<PAGE> 14

Mr. L. Scott Flaig
April 28, 1995
Page 14

As the spouse of Scott Flaig, I have carefully read the foregoing letter
agreement. On behalf of myself, my executor, heirs, successors and assigns, I
agree to all of its terms, and to be bound by all of its terms, and I
understand that the term "you" as used in the letter shall also be deemed to
include me. I acknowledge receipt of a copy of it and the sufficiency of the
consideration and payments recited in it.

By: /s/ SANDRA M. FLAIG
-------------------------

Dated: 4-28-95
----------------------

Sworn to and subscribed before me
this 28th day of April, 1995.

/s/ LORI BYERLEY
- ------------------------------------
Notary Public, State of Texas [STAMP]

/s/ Lori Byerley
- ------------------------------------
Typed or Printed Name of Notary

<PAGE> 1

EXHIBIT 11

DELL COMPUTER CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------
APRIL 30, 1995 MAY 1, 1994
-------------- -----------
<S> <C> <C>
Primary earnings per common share:
Calculation of weighted average shares:
Weighted average common stock outstanding 41,970 38,109
Weighted average common stock equivalents,
utilizing the treasury stock method 3,284 2,206
-------- --------
Weighted average shares outstanding 45,254 40,315
======== ========

Earnings:
Net income applicable to common stockholders $ 50,060 $ 16,786
======== ========

Earnings per common share $ 1.11 $ 0.42
======== ========

Fully diluted earnings per common share:

Calculation of weighted average shares:
Weighted average common stock outstanding 41,970 38,109
Weighted average common stock equivalents,
utilizing the treasury stock method 3,687 2,051
Assumed conversion of preferred stock 3,115(a) 5,263
-------- --------
Weighted average shares outstanding 48,772 45,423
======== ========

Earnings:

Net income applicable to common stockholders $ 50,060 $ 16,786
Add: preferred dividends 1,292(b) 2,187
-------- --------
Adjusted net income applicable to common
stockholders $ 51,352 $ 18,973
======== ========

Earnings per common share $ 1.05 $ 0.42(c)
======== ========
</TABLE>

_________

(a) Assumes conversion of the 60,000 shares of outstanding Preferred Stock at
the beginning of the quarter and of the remaining Preferred Stock from the
beginning of the quarter to the actual conversion date.

(b) Preferred dividends are exclusive of the conversion premium and expenses of
the conversion offer.

(c) Amount was not disclosed on the face of the Condensed Consolidated
Statement of Operations as there was no further dilution.

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DELL
COMPUTER CORPORATION FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH PERIOD
ENDED APRIL 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-28-1996
<PERIOD-END> APR-30-1995
<CASH> 94,632
<SECURITIES> 423,404
<RECEIVABLES> 588,288
<ALLOWANCES> 0
<INVENTORY> 337,803
<CURRENT-ASSETS> 1,553,125
<PP&E> 123,301
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,682,623
<CURRENT-LIABILITIES> 772,013
<BONDS> 0
<COMMON> 451
0
1
<OTHER-SE> 713,044
<TOTAL-LIABILITY-AND-EQUITY> 1,682,623
<SALES> 1,135,933
<TOTAL-REVENUES> 1,135,933
<CGS> 899,780
<TOTAL-COSTS> 899,780
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,019
<INCOME-PRETAX> 86,894
<INCOME-TAX> 25,196
<INCOME-CONTINUING> 61,698
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,698
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.05

</TABLE>