Dell Memo

Basic overview of Dell

Headquartered in Austin, Texas, Dell is the number 1 PC Company in the world in terms of total sales. In addition to offering a full line of desktops and notebooks designed for consumers, Dell offers network servers, workstations and storage systems. The company also sells handheld computers and it markets third-party software and peripherals. Dell’s growing services unit provides systems integration, support and training.

Direct Sales Business Model

Back in 1984, Michael Dell started a computer company with $1000 and a cool new idea: to sell PCs directly to consumers, bypassing retail stores and system integrators and offering limited customer support but dramatically lower prices.

This approach, called the direct business model, allowed Dell to customize each system to the unique needs of each customer while providing them with a competitive price, high quality, leading edge technology and personalized customer support.

This model provides direct contact to its customers, which allows it to tailor support offering to fit the demands of each customer in a quick, and timely manner.

The direct business model has radically changed the way in which companies in the computer industry view the ways in which they do business. This model is the key concept behind Dell’s success.

The world’s largest PC manufacturer, Dell has grown from $6 million annual revenue to over $40 billion in only sixteen years. It’s the largest online computer retailer, selling an average of $30 million a day. I have attached a tab with financial data to demonstrate how Dell’s high return to shareholders has been the result of a focused effort over the time to balance growth with profitability and liquidity.

Annual Financial Highlights

(in millions, except per-share data) FY05 FY04 FY03 FY02 FY01

Net revenue $49,205 $41,444 $35,404 $31,168 $31,888

Operating income $4,254 $3,544 $2,844 $2,271 $2,768

Net income $3,323 $2,645 $2,122 $1,780 $2,310

Earnings per share $1.29 $1.01 $0.80 $0.65 $0.84

Closing stock price $41.06 $33.44 $23.86 $26.80 $25.19

In addition to focus on its shareholders, Dell thinks about its employees.

The distinct company’s values, The Soul of Dell, acknowledge the company’s responsibilities to its employees, communities, global suppliers and their employees.

-Dell employees make a difference everyday for Dell customers and in Dell’s communities. By giving generously in the communities in which they live and work through commitments of time, expertise and money, Dell’s employees are connected directly to the community.

-Dell values the diversity of its workforce. Its approach to diversity is defined by a recognition of both similarities and differences, inclusiveness, respect and a company culture that allows each individual to contribute to his or her fullest potential.

-Dell, with its partners and suppliers, embraces high standards of ethical behavior and treat its employees fairly and with dignity and respect in accordance with all applicable laws and regulations.

-Dell builds its products with respect and sensitivity toward the environment.

In the same time, its dominance in the PC industry made Dell a target for every major competitor in the industry. Recent merger of HP and Compaq made HP the major competitor leaving Dell outnumbered in terms of assets, employees