Dell Inc. in 2008: Can It Overtake Hewlett-Packard as the Worldwide Leader in Personal Computers?

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COMPANY BACKGROUND

Dell traces its origins to 1984, when Michael Dell created PCs Limited while a student at the University of Texas at Austin. The dorm-room headquartered company sold IBM PC-compatible computers built from stock components. 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. In 1985, the company produced the first computer of its own design, the "Turbo PC", which sold for $795. PCs Limited advertised its systems in national computer magazines for sale directly to consumers and custom assembled each ordered unit according to a selection of options. The company grossed more than $73 million in its first year of operation. The company changed its name to "Dell Computer Corporation" in 1988 and began expanding globally. In June 1988, Dell's market capitalization grew by $30 million to $80 million from its June 22 initial public offering of 3.5 million shares at $8.50 a share. In 1992, Fortune magazine included Dell Computer Corporation in its list of the world's 500 largest companies, making Michael Dell the youngest CEO of a Fortune 500 company ever. 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. In 2003, the company was rebranded as simply "Dell Inc." to recognize the company's expansion beyond computers. From 2004 to 2007, Michael Dell stepped aside as CEO, while long-time Dell employee Kevin Rollins took the helm. 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. Lackluster performance, however, in its lower-end computer business prompted Michael Dell to take on the role of CEO again. The founder announced a change campaign called "Dell 2.0," reducing headcount and diversifying the company's product offerings. The company acquired EqualLogic on January 28, 2008 to gain a foothold in the iSCSI storage market. Because Dell already had an efficient manufacturing process, integrating EqualLogic's products into the company drove manufacturing prices down.

ACTIVITY OF THE COMPANY

The main activities of Dell include developing, selling and supporting computers and related products and services. The company started with PCs and by 2003, Dell's sell-direct and build-to-order business model and strategy had provided the company with the most efficient procurement, manufacturing, and distribution capabilities in the global PC industry and given Dell a substantial cost and profit margin advantage over rival vendors. Since the late 1990s, Dell had also been driving for industry leadership in servers. A shift in server technology, coupled with growing cost-consciousness on the part of server users, produced a radical shift away from more costly, proprietary, Unix-based servers to low-cost x86 machines that were based on standardized components and technology. With those the company seized on the opportunity to go after the market for low- and mid-range x86 servers. In addition, Dell was making market inroads in other product categories. For example it sales data storage devices, data-routing switches and others. Starting in 2003, Dell began marketing Dell-branded printers and printer cartridges. Also Dell began selling flat-screen LCD TVs and retail-store systems, including electronic cash registers, specialized software, services, and peripherals required to link retail-store checkout lanes to corporate information systems. Dell's MP3 player, the Dell DJ, was number two behind the Apple iPod. Since the late 1990s, Dell had been marketing CD and DVD drives, printers, scanners, modems, monitors,...
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