Dell Inc. (NASDAQ: DELL SEHK: 4331), an American computer-hardware company based in Round Rock, Texas, develops, manufactures, sells and supports personal computers, servers, data storage devices, network switches, personal digital assistants (PDAs), software, televisions, computer peripherals and other technology-related products. As of 2006, Dell employed more than 78,700 people worldwide. Formerly holding a substantial lead in sales of PCs and of servers[citation needed], the company recently slipped behind Hewlett-Packard (HP) in these markets.
In 2006, Fortune magazine ranked Dell as the 25th-largest company in the Fortune 500 list, 8th on its annual Top 20 list of the most-admired companies in the United States. A 2006 publication identified Dell as one of 38 high-performance companies in the S&P 500, which consistently out-performed the market over the previous 15 years.
History
Origins and evolution
While a student at the University of Texas at Austin in 1984, Michael Dell founded the company as PC's Limited with just $1000[2]. Operating from Michael Dell's off-campus dorm room at Dobie Center [6], the startup aimed to sell IBM-compatible computers built from stock components. Michael Dell started trading in the belief that by selling personal computer systems directly to customers, PC's 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.
In 1985, the company produced the first computer of its own design (the "Turbo PC"), which contained an Intel 8088-compatible processor running at a speed of 8 MHz. PC's 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, PC's Limited became one of the first to succeed with it. The company grossed more than $73 million in its first year.
In 1989, PC's Limited 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 in 1987, the company set up its first operations in the United Kingdom; eleven more international operations followed within the next four years. In June 1988, Dell's market capitalization grew by $30 million to $80 million from its initial public offering of 3.5 million shares at $8.50 a share. The company changed its name to "Dell Computer Corporation" in 1988.
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.
In 1996, Dell began selling computers via its web site.
In 1999, Dell overtook Compaq to become the largest seller of personal computers in the United States of America with $25 billion in revenue reported in January 2000.
In 2002, Dell attempted to expand by tapping into the multimedia and home-entertainment markets with the introduction of televisions, handhelds, and 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 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 B. Rollins, who had held a number of executive posts at Dell, was appointed the new CEO.
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 Fortune magazine. In November 2005 BusinessWeek magazine 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. Dell acknowledged that faulty capacitors on the motherboards of the Optiplex GX270 and GX280 had already cost the company $300 million. The CEO, Kevin Rollins, attributed the bad performance partially to Dell's focus on low-end PCs.
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.
On January 31, 2007, Kevin B. Rollins, CEO of the company since 2004, resigned abruptly as both CEO and as a director, and Michael Dell returned 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.
In February 2007, Dell became the subject of formal investigations by the US SEC and the US Attorney General for the Southern District of New York. The company has not formally filed financial reports for either the third or fourth fiscal quarter of 2006, and several class action lawsuits in the wake of its recent financial performance. The company's lack of formal financial disclosure would normally subject the company to de-listing from the NASDAQ, but the exchange has granted Dell a waiver, allowing the stock to trade normally.
On 1 March, 2007, the company issued a preliminary quarterly earnings report which showed gross sales of $14.4 billion, down 5% year-over-year, and net income of $687 million (30 cents per share), down 33%. Net earnings would have declined even more if not for the effects of eliminated employee bonuses, which accounted for six cents per share. NASDAQ extended the company's deadline for filing financials to May 4.
Dell and AMD
On August 17, 2006, a Dell press-release stated that starting in September 2006, Dell Dimension desktop computers would have AMD processors and that later in the year Dell would release a two-socket, multi-processor server using AMD Opteron processors, moving away from using Dell's traditional Intel processors.
CNet's News.com on August 17, 2006 cited Dell's CEO Kevin Rollins as attributing the move to AMD processors to cost-advantage and to AMD technology. AMD's senior VP in commercial business, Marty Seyer, stated: "Dell's wider embrace of AMD processor-based offerings is a win for Dell, for the industry and most importantly for Dell customers."
On October 23, 2006, Dell announced two new AMD-based servers — the PowerEdge 6950 and the PowerEdge SC1435 — marking its entry into the AMD-based server market.
On November 1, 2006, Dell's website began offering notebooks with AMD processors (the Inspiron 1501 with a 15.4" display) with the choice of a single-core MK-36 processor, dual-core Turion X2 chips or Mobile Sempron.
Dell and desktop Linux
First attempt in 2000
In 1998, Ralph Nader asked Dell (and 5 other major OEMs) to offer alternate operating systems to Microsoft Windows, specifically including Linux, for which "there is clearly a growing interest" Dell started offering Linux notebook systems which "cost no more than their Windows 98 counterparts" in 2000, and soon expanded, with Dell becoming "the first major manufacturer to offer Linux across its full product line"But by early 2001 Dell had "disbanded its Linux business unit".
The reason(s) for such a quick reversal remain the subject of debate. Court documents accused Microsoft of coercing OEMs to drop Linux:
Microsoft executive Joachim Kempin described his plan of retaliation and coercion to shut down competition from Linux: "I am thinking of hitting the OEM harder than in the past with anti-Linux actions" and will "further try to restrict source code deliveries where possible and be less gracious when interpreting agreements — again without being obvious about it," continuing "this will be a delicate dance"[15]
While in a 2003 interview Michael Dell denied that Microsoft pressured Dell Inc. into doing an about-face with regard to desktop Linux, citing a lack of sales: "unfortunately the desktop Linux market didn't develop in volume. It's more of a server opportunity" but adding: "We continue to offer Linux on the desktop and there is nothing else to say." However, a 2004 report noted that Dell no longer offered preinstalled desktop Linux:
So what does it mean "factory installed Linux"? If you want Dell to install Linux for you, first add on $119. But here is the annoying part. They won't send you a computer with Linux pre-installed. They sell you the computer and the boxes of software on the side, and then they make an appointment to send you someone who comes to your house or business and installs it there.
