[December 23, 2014]

Fitch Upgrades Dell's IDR to 'BB'; Outlook Positive

Fitch Ratings has upgraded the long-term Issuer Default Rating (IDR) of Dell (News - Alert), Inc. (Dell) and its direct wholly-owned subsidiary, Dell International Inc. (Dell International), to 'BB' from 'BB-'. A full list of rating actions follows at the end of this release. The Rating Outlook is revised to Positive from Stable.

KEY RATINGS DRIVERS

Dell's ratings and Outlook reflect:

--Dell's use of free cash flow (FCF) to repay debt and Fitch's expectations for core leverage to fall below 3x by the end of fiscal 2015 (Jan. 31, 2015). Fitch estimates Dell will have reduced core debt (excluding debt related to financing activities) by $3.3 billion during fiscal 2015.

--Adequate financial flexibility supported by Dell's significant cash balance, the majority of which is overseas, a largely undrawn $2 billion asset-based revolving credit facility, partially offset by a significant and increased working capital deficit that could weigh on liquidity if revenue materially declines.

--Fitch's belief that Dell remains committed to using FCF primarily for debt reduction, consistent with the company's objective of returning ratings to investment grade. Fitch also believes the company could use a portion of FCF for acquisitions to plug product gaps.

Dell has reduced core leverage since the close of the LBO on Oct. 29, 2013 through Oct. 31, 2014 primarily due to sustainable cost-reduction actions and increasing Enterprise Solutions Group demand (driven by PowerEdge Servers) and favorable conditions in the commercial PC market (e.g. expiration of Windows XP support).

--Credit metrics improved as expected, especially core (non-financing), excluding purchase price accounting adjustments (PPA). Fitch estimates Dell's total core leverage will drop below 3x by the end of fiscal 2015 (Jan. 31, 2015) compared with 4.6x at Nov. 1, 2013.

--Significant scale, which provides procurement efficiencies for memory, hard disk drives and other components utilized across the hardware business, specifically PCs, servers and storage.

--Highly diversified revenue base by customer and geography (approximately half outside U.S.)

Ratings concerns center on:

--The majority of Dell's revenue remains transactional and derived from Client Solutions predominantly in the commercial market (formerly End User Computing). Commercial PC demand has benefitted from Microsoft's (News - Alert) end of support for Windows XP in April 2014 but the commercialXP refresh is nearing completion, potentially moderating near-term commercial PC demand.

Consumer PC demand remains weak and Fitch believes meaningful improvement is unlikely, given continued tablet substitution in this space.

--Aggressive industry pricing environment for PCs and servers, particularly for the hyperscale server market.

--Limited financial flexibility to make significant acquisitions to fill product and service gaps that may arise as technologies evolve.

RATINGS SENSITIVITIES

Positive rating actions could occur if:

--Consistent positive trends for a sustained period in Client Solutions and ESG in conjunction with further debt reduction from FCF results in Fitch's expectations for core leverage sustained below 2.5x;

--Less reliance on secured debt in capital structure.

Negative rating actions could occur if:

--Pre-dividend FCF margin remains below 2% for a sustained period;

--Core leverage exceeds 3.5x for a sustained period from significant revenue declines, likely the result of Dell's inability to offset further PC market erosion with stronger results from enterprise, software and services businesses.

Fitch upgrades Dell's ratings as follows:

Dell Inc.

--Long-term IDR to 'BB' from BB-;

--Senior unsecured debt to 'BB' from 'B+'.

Dell International Inc.

--Long-term IDR to 'BB' from BB-;

--Senior secured first lien ABL facility to 'BBB-' from 'BB+';

--Senior secured first lien term loans to 'BBB-' from 'BB+';

--Senior secured notes to 'BBB-' from 'BB+'.

The Rating Outlook is revised to Positive from Stable.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research

--'Corporate Rating Methodology' (May 28, 2014).

Applicable Criteria and Related Research:

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=961335

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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