DELL: OVERCOMING ROADBLOCKS TO
You don’t get a big result if you don’t challenge people with big goals.
- Kevin Rollins, president and CEO, Dell1
In spring 2005, Dell, Inc. (“Dell”), the world’s largest personal computer (PC) maker, announced a new goal: to reach US$80 billion in annual sales by 2009. The goal was fairly ambitious for Dell, which at the time had revenues of about US$49 billion.2 In an effort to meet its goals, Dell had woven together a broad set of PC products and services, pushed new products aggressively, and strengthened its marketing efforts globally. Dell planned to use its direct sales business model to continue growing its PC business in emerging markets, while also expanding in new product markets for printers, flat TVs and other consumer electronics products. While analysts generally applauded Dell’s efforts to diversify and move away from being a
PC company, they also feared that Dell could miss its high-flying sales goal. This was because Dell’s financial performance was still heavily dependent on the PC business.3 At the heart of the PC industry’s troubles was a steep drop in prices and sluggish revenue growth.
On August 11th 2005, Dell saw a 7% slump in stock price after it announced its second quarter revenue of US$13.4 billion. The revenue figure fell short of the market estimate of US$13.7 billion. It was not the kind of surprise investors had come to expect. For years, Dell had been recognised as one of the most outstanding companies in the technology market—famous for high earnings and surging stock prices. It had consistently outpaced its major competitors,
Hewlett Packard Company (HP) and International Business Machines Corporation (IBM), on revenue and earnings growth [see Exhibits 1A to 1C].
Breen, B., “Living in Dell Time”, Fast Company, November 2004.
As per Dell’s income statement for the fiscal year ended January 31st 2005.
About 79% of Dell’s sales in