History of Dell

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History of Dell

Dell Incorporated has a simple blue logo in which we see on devices in our everyday world. Laptops,

desktops, data storage systems and more we continually use Dell products to keep our lives on track

and our businesses running each day. But where did it all start with Dell Incorporated? Was it out of agarage like Hewlett-Packard, or was it a different type of company to begin with? Dell Incorporated has

evolved over the years into what we rely on today as a computer based and information technology go-

to Corporation. The companys mere beginnings may be shocking, but also informative; to understand

how such a grand idea all began.

A student at the University of Texas at Austin in 1984, Michael Dell founded the company as PCs

Limitedwith capital of $1000. Thestartupaimed to sell IBM PC-compatible computers built from stock

components. Michael Dell started trading in the belief that by selling personal computer systems

directly to customers, PCs 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, after getting about $300,000 in expansion-capital from his family. In1985, the company produced the first computer of its own design the "Turbo PC", sold for US$795. PCs

Limited 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, Limited became one of the first to

succeed with it. The company grossed more than $73 million in its first year of trading.

The company changed its name to "Dell Computer Corporation" in 1988. In 1989, Dell Computer 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 the company set up its first operations in Ireland, eleven more international

operations followed within the next four years. In June 1988, Dell's market capitalization grew by $30million to $80 million. 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. Michael Dell became the youngest CEO of a

Fortune 500 company.In 1996, Dell began selling computers via its web site.

In 2002, Dell attempted to expand by tapping into the multimedia and home-entertainment markets

with the introduction of televisions, Dell Axim handhelds, and Dell DJ digital audio players. Dell has also

produced Dell-brand printers for home and small-office use. In 2003, at the annual company meeting,

the stockholders approved changing the company name to "Dell Inc." to recognize the company's

expansion beyond computers. In 2004, the company announced that it would build a new assembly-plant near 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 July, Michael Dell stepped

aside as Chief Executive Officer while retaining his position as Chairman of the Board. Kevin Rollins, who

had held a number of executive posts at Dell, became the new CEO.
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In 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 Fortunemagazine. In November

2005 Business Weekmagazine 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. The CEO, Kevin Rollins, attributed

the bad performance partially to Dell's focus on low-end PCs.However in 2005, while earnings and salesgrew, sales growth slowed considerably, and the company stock lost 25% of its value that year. The

slowing sales growth has been attributed to the maturing PC market, which constituted 66% of Dell's

sales, and analysts suggested that Dell needed to make inroads into non-PC businesses segments such as

storage, services and servers. Dell's price advantage was tied to its ultra-lean manufacturing for desktop

PCs, however this became less important as the market shifted to laptops, and as rivals such as Hewlett-

Packard and Acer made their PC operations more efficient. Throughout the entire PC industry, declines

in prices along with commensurate increases in performance meant that Dell had fewer opportunities to

up sell to their customers (a lucrative strategy of encoring buyers to upgrade processor or memory), and

as a result the company was selling a greater proportion of inexpensive PCs than before which eroded

profit margins.There has also been a decline in consumers purchasing PCs through the Web or on the

phone, as increasing numbers were visiting consumer electronics retail stores. As well, many analysts

were looking to innovating companies as the next source of growth in the technology sector. Dell's lowspending on R&D relative to its revenue (compared to Apple Inc.) which worked well in the

commoditized PC market prevented it from making inroads into more lucrative segments such as MP3

players.

In 2006, Dell purchased the computer hardware manufacturer Alienware. Dell Inc.'s plan anticipated

Alienware continuing to operate independently under its existing management. Alienware expected to

benefit from Dell's efficient manufacturing system.Dell's reputation for poor customer service, which

was exacerbated as it moved call centers offshore and as its growth outstripped its technical support

infrastructure, came under increasing scrutiny on the Web. There was also criticism that it used faulty

components for its PCs. There was also a battery recall in August 2006, as a result of a Dell laptopcatching fire which caused much negative attention for the company, although later Sony was found to

be responsible for the faulty batteries. Dell lost its title of the largest PC manufacturer to rival Hewlett

Packard which was invigorated thanks to a restructuring initiated by their CEO.

In 2007, Kevin B. Rollins, CEO of the company since 2004, resigned as both CEO and as a director, and

Michael Dell resumed his former role as CEO. 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. On February

26, 2007, Dell announced that it had commenced a program to sell and distribute a range of computers

with pre-installed Linux distributions as an alternative to Microsoft Windows. Dell indicated

that Novell's SUSE Linux would appear first. However, Dell on announced that its previousannouncement related to certifying the hardware as ready to work with Novell SUSE Linux and that it

(Dell) had no plans to sell systems pre-installed with Linux in the near future. Also, Dell announced that

it would begin shipping some desktops and laptops with Linux pre-installed, although it did not specify

which distribution of Linux or which hardware would lead. Dell officially announced that it would offer

one notebook and one desktop in the UK, France and Germany with Ubuntu "pre-installed". At Linux

World 2007 Dell announced plans to provide Desktop on selected models in China.
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Growth status in Dell

From 1997 to 2004, Dell enjoyed steady growth and it gained market share from competitors even

during industry slumps. In 1996, Dell began selling computers through its website, and in 2002, it

expanded its product line to include televisions, handhelds, digital audio players, and printers. Dell's

first acquisition occurred in 1999 with the purchase of ConvergeNet Technologies.

Dell surpassed Compaq to become the largest PC manufacturer in 1999. In 2002, when Compaq merged

with Hewlett Packard (the 4th place PC maker), the combined Hewlett Packard took the top spot but

struggled and Dell soon regained its lead. Also the company was rebranded as simply "Dell Inc." to

recognize the company's expansion beyond computers. In 2004, Michael Dell resigned as CEO while

retaining the title of Chairman, handing the CEO title to Kevin Rollins who was the President and COO.

Under Rollins, Dell began to loosen its ties to Microsoft and Intel, the two companies which were

responsible for Dell's dominance in the PC business. During that time, Dell acquired Alienware, which

introduced several new items to Dell products, including AMD microprocessors. To prevent cross-market

products, Dell continues to run Alienware as a separate entity, but still a wholly owned subsidiary.

Documents

History of Dell