Dell Inc.
(NASDAQ: DELL SEHK: 4331), an American
computer-hardware company based in Round Rock,
Texas, develops, manufactures, sells and
supports personal computers, servers, data
storage devices, network switches, personal
digital assistants (PDAs), software, computer
peripherals, and certain other products. As of
2006 Dell employed more than 50,000 people
worldwide. Formerly holding a substantial lead
in PC sales, it recently slipped behind
Hewlett-Packard (HP) in this market.
According to the Fortune 500 2006 list, Dell
ranks as the 25th-largest company in the
United States by revenue. In 2006, Fortune
magazine ranked Dell as No. 8 on its annual
list of the most-admired companies in the
United States. One publication has identified
Dell as one of 38 high-performance companies
in the S&P 500 which consistently
out-performed the market over the previous 15
years.
Origins and evolution
Michael Dell, while still a student at the
University of Texas at Austin in 1984, founded
the company as PC's Limited (complete with
greengrocer's apostrophe) with just $1000.
Operating from Michael Dell's off-campus dorm
room at Dobie Center, the startup aimed to
sell IBM-compatible computers built from stock
components. Michael Dell started trading in
the belief that by selling personal computer
systems directly to customers, PC's Limited
could better understand customers' needs and
provide the most effective computing solutions
to meet those needs. Michael Dell dropped out
of school in order to focus full-time on his
fledgling business.
In 1985 the company produced (in China) the
first computer of its own design (the "Turbo
PC"), which contained an Intel 8088-compatible
processor running at a speed of 8 MHz. It
advertised the systems in national computer
magazines for sale directly to consumers, and
custom-assembled each ordered unit according
to a selection of options. This offered buyers
prices lower than those of retail brands, but
with greater convenience than assembling the
components themselves. Although not the first
company to use this model, PC's Limited became
one of the first to succeed with it. The
company grossed more than $6 million in its
first year.
In 1987, PC's Limited set up its first
on-site-service programs in order to
compensate for the lack of local retailers
prepared to act as service centers. Also in
1987, the company set up its first operations
in the United Kingdom; eleven more
international operations followed within the
next four years. In June 1988, Dell's market
capitalization grew by $30 million to $80
million from its initial public offering of
3.5 million shares at $8.50 a share. The
company changed its name to "Dell Computer
Corporation" in 1988.
In 1990, Dell Computer Corporation tried
selling its products indirectly through
warehouse-clubs and computer-superstores, but
met with little success, and the company
re-focused on its more successful
direct-to-consumer sales model. In 1992,
Fortune magazine included Dell Computer
Corporation in its list of the world's 500
largest companies.
In 1996 Dell began selling computers via its
web site.
In 1999, Dell overtook Compaq to become the
largest seller of personal computers in the
United States of America with $25 billion in
revenue reported in January 2000. To recognize
the company's expansion beyond computers, the
stockholders approved changing the company
name to "Dell Inc." at the annual company
meeting in 2003.
In March 2004 Dell attempted to expand by
tapping into the multimedia and
home-entertainment markets with the
introduction of televisions, handhelds, and
digital audio players. Dell has also produced
Dell-brand printers for home and small-office
use. Michael Dell stepped aside as Chief
Executive Officer (CEO) on July 16, 2004, but
retained his position as Chairman of the
Board. Kevin Rollins, who had held a number of
executive posts at Dell, became the new CEO.
On December 22, 2004, the company announced
that it would build a new assembly-plant near
Winston-Salem, North Carolina; the city and
county provided Dell with $37.2 million in
incentive packages; the state provided
approximately $250 million in incentives and
tax breaks.
In January 2005 the share of sales coming from
international markets increased, as revealed
in the company's press releases for the first
two quarters of its fiscal 2005 year.
In February 2005, Dell appeared in first place
in a ranking of the "Most Admired Companies"
published by Fortune magazine.
In November 2005, BusinessWeek magazine
published an article titled "It's Bad to Worse
at Dell" about shortfalls in projected
earnings and sales, with a
worse-than-predicted third-quarter financial
performance — a bad omen for a company that
had routinely underestimated its earnings.
Dell acknowledged that faulty capacitors on
the motherboards of the Optiplex GX270 and
GX280 had already cost the company $300
million. The CEO, Kevin Rollins, attributed
the bad performance partially to Dell's focus
on low-end PCs.
On 23 March 2006, Dell purchased the computer
hardware manufacturer Alienware. The plan
anticipated Alienware continuing to operate
independently under its existing management.
Alienware expected to benefit from Dell's
efficient manufacturing system.
On January 31, 2007, Kevin Rollins, CEO of the
company since 2004, resigned abruptly as both
CEO and as a director, and Michael Dell
returned to the CEO role. Investors and many
shareholders had called for Rollins'
resignation because of poor company
performance. At the same time, the company
announced that, for the fourth time in five
quarters, earnings would fail to reach
consensus analyst-estimates.
In February 2007, Dell became the subject of
formal investigations by the US SEC and the US
Attorney General for the Southern District of
New York.
The company has not formally
filed financial reports for either the third
or fourth fiscal quarter of 2006, and several
class action lawsuits have resulted from its
recent financial performance. The company's
lack of formal financial disclosure would
normally subject the company to delisting from
the NASDAQ, but the firm has granted Dell a
waiver, allowing the stock to trade normally.
On March 1, 2007, for the third consecutive
quarter, the company issued a preliminary
quarterly earnings report which showed gross
sales of $14.4 billion, down 5%
year-over-year, and net income of $687 million
(30 cents per share), down 33%. Net earnings
would have declined even more if not for the
effects of eliminated employee bonuses, which
accounted for six cents per share. NASDAQ has
extended the company's deadline for filing
financials to May 4.
Dell and AMD
On August 17, 2006, a Dell press-release
stated that starting in September 2006, Dell
Dimension desktop computers would have AMD
processors and that later in the year Dell
would release a two-socket, multi-processor
server using AMD Opteron processors, moving
away from using Dell's traditional Intel
processors.
CNet's News.com on August 17, 2006 cited
Dell's CEO Kevin Rollins as attributing the
move to AMD processors to cost-advantage and
to AMD technology. AMD's senior VP in
commercial business, Marty Seyer, stated:
"Dell's wider embrace of AMD processor-based
offerings is a win for Dell, for the industry
and most importantly for Dell customers."
On October 23, 2006, Dell announced two new
AMD-based servers — the PowerEdge 6950 and the
PowerEdge SC1435 — marking its entry into the
AMD-based server market.
On November 1, 2006 Dell's website began
offering notebooks with AMD processors (the
Inspiron 1501 with a 15.4" display) with the
choice of a single-core MK-36 processor,
dual-core Turion X2 chips or Mobile Sempron.
Dell and Linux
On February 26, 2007, Dell announced that it
had commenced a program that will result in
the sale and distribution of a range of
computers with pre-installed Linux
distributions instead of Microsoft Windows.
Dell indicated that Novell's SUSE Linux would
appear first. However, Dell on February 27,
2007 announced that its previous announcement
related to certifying the hardware as ready to
work with Novell SUSE Linux and that it (Dell)
has no plans to sell systems pre-installed
with Linux in the near future. On March 28,
2007, Dell announced that it will begin
shipping some desktops and laptops with Linux
pre-installed, although it did not mention any
details such as which distribution of Linux
and which hardware.
Michael Dell's return
As mentioned above, Michael Dell returned to
the company as CEO on January 31, 2007. As
chairman of the board, Mr. Dell had had
significant input into the company's
operations during Rollins' years as CEO. That
said, Michael Dell's return as CEO saw
immediate changes in the company's operations,
the exodus of many senior vice-presidents and
new blood brought in from outside the company.
Departures announced include:
Kevin Rollins, CEO
James Schneider, CFO
John Medica, senior vice president, consumer
products
Joe Marengi, senior vice president, Americas
John Hamlin, senior vice president, worldwide
online operations
Paul McKinnon, senior vice president, human
resources
Rosenda Parra, senior vice president/general
manager, home & small business group
Glenn E. Neland, senior vice president,
procurement
Additions announced include:
Michael Dell, CEO (from chairman of board)
Don Carty, CFO (from board member)
Michael R. Cannon, former CEO of Solectron, as
president, global operations
Ron Garriques, who formerly headed Motorola's
mobile phone unit, as president, consumer
product design
Stephen F. Schuckenbrock, large business
consulting & integration
Mr. Dell announced a number of initiatives and
plans (part of the "Dell 2.0" initiative) to
improve the company's financial performance.
These include:
elimination of 2006 bonuses for employees with
some discretionary awards
reduction in the number of managers reporting
directly to Mr. Dell from 20 to 12
in a noted departure from previous years,
"build, partner, and buy" to increase services
capabilities
reduction of "bureaucracy"
Dell Inc appears to have re-focussed on
reduced costs rather than on innovation, in
line with the company's history of delivering
units at the lowest cost possible via its
direct-sales model. In an interview with
Business Week, Mr. Dell stated "this is a
company which can execute quite a bit better
on things it already knows how to do."
Scope and brands
The corporation markets specific brand names
to different consumer segments. It typically
sells the OptiPlex, Latitude, and Precision
names to medium-sized and large business
customers, where the company's advertising
emphasizes long life-cycles, reliability and
serviceability. The Dimension, Inspiron, and
XPS brands have an orientation towards
consumers, students, and small home office
environments, emphasizing value, performance
and expandability. In 2005 Dell re-introduced
the Dell XPS brand to target the lucrative
gaming market. XPS desktop systems use silver
rather than the black cases found on newer
Dell PCs. Dell has also diversified its
product line to include peripheral products
such as USB keydrives, LCD televisions, and
printers.
Dell uses several brand-names for its product
ranges, including:
OptiPlex for office desktop computer systems
Dimension for consumer Desktop computer
systems
Dell N-Series - Desktop and notebook computers
shipped with Linux or FreeDOS installed
Latitude for commercially-focused notebooks
Inspiron for consumer notebooks
Precision for workstation systems and
high-performance notebooks
PowerEdge for larger corporate servers
PowerVault for direct-attach and some
network-attached storage (NAS)
Dell PowerConnect for network switches.
Dell EMC for storage area networks
XPS for enthusiast/high-performance systems
Axim for PDAs utilizing Microsoft's Windows
Mobile
Dell Digital Jukebox (DJ) MP3 Players
(discontinued, August 18 2006)
Dell monitors LCD/plasma TVs and projectors
for HDTV and monitor
Dell On Call - extended support services
(mainly for the removal of spyware and of
viruses)
Dell Solution Center - extended support
services similar to Dell On Call for EMEA
customers.
Dell Gold Technical Support - a service
contract (for a fee) that provides an
industry-certified technician with a lower
call-volume than in normal queues. Covers
hardware, and software support
Provides three levels of support:
Core (the system itself)
Best Effort (trying to help a customer with an
email problem or software error)
Seamless Support (conferencing a customer in
via an ISP to verify settings).
Dell currently ships Microsoft Windows Vista
as the default operating system for most of
its new computers. But it also offers Red Hat
and SUSE Linux for servers; as well as
"bare-bones" computers without pre-installed
software (N series by default and XPS as well
as Inspiron notebooks upon request) at
significantly lower prices. Due to Dell's
licensing-contract with Microsoft, Dell cannot
offer those systems on their website and
customers have to request them explicitly.
Dell has to ship such systems with a FreeDOS
disk included in the box and must issue a
so-called "Windows refund" or a merchandise
credit after sale of the system at the
"regular" retail price.
When Dell customers elect to use Microsoft
Windows as the operating system of a newly
specified Dell system, Dell bundles a large
quantity of software with it.
Dell has expressed willingness to offer
Apple's new Intel version of the Mac OS X
operating system to its customers, but to this
point Apple has stated that the OS will only
run on Macintosh machines, and will not agree
to licensing Mac OS X to Dell. |
