Dell Inc., formerly Dell Computer Corporation, is an American technology company that develops, sells, repairs, and supports personal computers (PCs), servers, data storage devices, network switches, software, computer peripherals including printers and webcams among other products and services. Dell is based in Round Rock, Texas.
Founded by Michael Dell in 1984, Dell started making IBM clone computers and pioneered selling cut-price PCs directly to customers, managing its supply chain and electronic commerce. The company rose rapidly during the 1990s and in 2001 became the largest global PC vendor for the first time. Dell was a pure hardware vendor until 2009 when it acquired Perot Systems. It then entered the market for IT services. The company has expanded storage and networking systems. In the late 2000s, it began expanding from offering computers only to delivering a range of technology for enterprise customers.
Dell is a subsidiary of Dell Technologies, a publicly traded company, as well as a component of the NASDAQ-100 and S&P 500. The company is ranked 31st on the Fortune 500 list in 2022, up from 76th in 2021. It is also the sixth-largest company in Texas by total revenue, according to Fortune magazine. Dell is the second-largest non-oil company in Texas. it is the world's third-largest personal computer vendor by unit sales, after Lenovo and HP. In 2015, Dell acquired the enterprise technology firm EMC Corporation, together becoming divisions of Dell Technologies. Dell began marketing data storage, information security, virtualization, analytics, and cloud computing products under the brand Dell EMC until around 2020.
History
Founding and start-up
Michael Dell founded the company in 1984 as PC's Limited. At the time, Dell was a student at the University of Texas at Austin and operated the business from his off-campus dormitory room at the Dobie Center. The aim was to sell IBM PC compatible computers built from stock components. He believed that by selling personal computer systems directly to customers, their needs could be better understood, and thus his company could succeed by providing the most effective computing services. After getting about $1,000 in expansion-capital from his family, Dell dropped out of college upon completion of his freshman year in order to focus full-time on his fledgling business. As of April 2021, Dell's net worth was estimated to be over $50 billion.
In 1985 PC's Limited launched its first computer — the Turbo PC — priced at US$795 (). It featured an Intel 8088-compatible processor with a maximum speed of 8 MHz. At that time, PC's Limited was considered one of many white box vendors, though by 1986 Hughes Aircraft was evaluating its products for corporate use after an executive's positive experience with a personal purchase. Systems were marketed through national computer magazines, selling directly to consumers while custom-assembling each unit based on a range of options. This approach allowed offering competitive prices compared to retail brands, coupled with the convenience of pre-assembled units, making them one of the early success stories of this business model. The company grossed over $73 million in its first year of operation.
In 1987 the company was renamed Dell Computer Corporation and began expanding globally. The new name was intended to better reflected its presence in the business market, and also resolved issues with the use of the word "Limited" in a company name in the United Kingdom. The company set up its first international operations in Britain, and eleven more followed within the next four years. On June 22, 1988, the company went public on NASDAQ under the ticker symbol DELL. Their IPO of $8.50 a share raised $30 million, leaving the company valued at $85 million (equivalent to $ million in ). In 1989, the company launched its first laptop product, the Dell 316LT.
Growth in the 1990s and early 2000s
In 1990, Dell Computer 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 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 at that time.
Senior vice president Joel Kocher told The Wall Street Journal in 1993 "this isn't a technology business anymore". His view, that PCs were commodities, was reportedly widely held by others in the company. They thought that Dell differentiated itself from others—like fellow Texas company and archrival Compaq—with its distribution expertise and "database engine" of customers that, Kocher said, could sell anything including non-technology products: "We're more like Mary Kay Cosmetics than we are like General Motors".
In 1993, to complement its own direct sales channel, Dell planned to sell PCs at big-box retail outlets such as Wal-Mart, which would have brought in an additional $125 million () in annual revenue. Bain consultant Kevin Rollins persuaded Michael Dell to pull out of these deals, believing they would be money losers in the long run. Margins at retail were thin at best and Dell left the reseller channel in 1994. Rollins would soon join Dell full-time and eventually become the company president and CEO.
By the early 1990s the laptop computer market was both more profitable and faster-growing than the overall personal computer market. After discontinuing its unsuccessful existing products in 1993, and hiring John Medica—who had led development of the very successful Apple PowerBook—the company in 1994 introduced the Dell Latitude laptop line.
Originally, Dell did not emphasize the consumer market, due to the higher costs and low profit margins in selling to individuals and households; this changed when the company's Internet site took off in 1996 and 1997. While the industry's average selling price to individuals was going down, Dell's was going up, as second- and third-time computer buyers who wanted powerful computers with multiple features and did not need much technical support were choosing Dell. Dell found an opportunity among PC-savvy individuals who liked the convenience of buying direct, customizing their PC to their means, and having it delivered in days. In early 1997, Dell created an internal sales and marketing group dedicated to serving the home market and introduced a product line designed especially for individual users.
+Dell's growth in the 1990sYearRevenue (mill. US$)No. of employees19905462,05019918892,97019922,0134,65019932,8735,98019943,4756,40019955,2968,40019967,75910,350199712,32716,000199818,24324,400199925,25636,500
From 1997 to 2004, Dell steadily grew and it gained market share from competitors even during industry slumps, with its fastest growth occurring in the early 2000s. During the same period, rival PC vendors such as Compaq, Gateway, IBM, Packard Bell, and AST Research struggled and eventually left the market or were bought out.ZDNET Asia: Michael Dell back as CEO February 1, 2007. Visited: April 10, 2012 Dell surpassed Compaq to become the largest PC manufacturer in 1999.Rivkin, Jan W., and Porter, Michael E. Matching Dell, Harvard Business School Case 9-799-158, June 6, 1999. Operating costs made up only 10 percent of Dell's $35 billion in revenue in 2002 (), compared with 21 percent of revenue at Hewlett-Packard, 25 percent at Gateway, and 46 percent at Cisco. In 2002, when Compaq merged with Hewlett-Packard (the fourth-place PC maker), the newly combined Hewlett-Packard took the top spot for a time but struggled and Dell soon regained its lead.
In 2002, Dell expanded its product line to include televisions, handhelds, digital audio players, and printers. Chairman and CEO Michael Dell had repeatedly blocked President and COO Kevin Rollins's attempt to lessen the company's heavy dependency on PCs, which Rollins wanted to fix by acquiring EMC Corporation; a move that would eventually occur over 12 years later.
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 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 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. Despite no longer holding the CEO title, Dell essentially acted as a de facto co-CEO with Rollins.
Under Rollins, Dell purchased the computer hardware manufacturer Alienware in 2006. Dell Inc.'s plan anticipated Alienware continuing to operate independently under its existing management. Alienware expected to benefit from Dell's efficient manufacturing system.
Struggles in mid-2000s
In 2005, while earnings and sales continued to rise, sales growth slowed considerably, and the company stock lost 25% of its value that year.Bloomberg-Businessweek Its Dell vs the Dell way, February 2006. Visited: April 10, 2012 By June 2006, the stock traded around US$25 which was 40% down from July 2005—the high-water mark of the company in the post-dotcom era.
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 business segments such as storage, services, and servers. Dell's price advantage was tied to its ultra-lean manufacturing for desktop PCs, but this became less important as savings became harder to find inside the company's supply chain, and as competitors such as Hewlett-Packard and Acer made their PC manufacturing operations more efficient to match Dell, weakening Dell's traditional price differentiation. Throughout the entire PC industry, declines in prices along with commensurate increases in performance meant that Dell had fewer opportunities to upsell to their customers. As a result, the company was selling a greater proportion of inexpensive PCs than before, which eroded profit margins. The laptop segment had become the fastest-growing of the PC market, but Dell produced low-cost notebooks in China like other PC manufacturers which eliminated Dell's manufacturing cost advantages, plus Dell's reliance on Internet sales meant that it missed out on growing notebook sales in big box stores. CNET has suggested that Dell was getting trapped in the increasing commoditization of high volume low margin computers, which prevented it from offering more exciting devices that consumers demanded.
Despite plans of expanding into other global regions and product segments, Dell was heavily dependent on US corporate PC market, as desktop PCs sold to both commercial and corporate customers accounted for 32 percent of its revenue, 85 percent of its revenue comes from businesses, and 64 percent of its revenue comes from North and South America, according to its 2006 third-quarter results. US shipments of desktop PCs were shrinking, and the corporate PC market, which purchases PCs in upgrade cycles, had largely decided to take a break from buying new systems. The last cycle started around 2002, three or so years after companies started buying PCs ahead of the perceived Y2K problems, and corporate clients were not expected to upgrade again until extensive testing of Microsoft's Windows Vista (expected in early 2007), putting the next upgrade cycle around 2008. Heavily dependent on PCs, Dell had to slash prices to boost sales volumes, while demanding deep cuts from suppliers.