COMPUTER

DELL
Company History & Background

Dell Computer Corporation was founded in 1984 by Michael Dell while a freshman at the University of Texas. Michael was an early computer hobbyist who found that the computer store salespeople knew very little about the products they were selling. He began buying computer components and assembling them into complete, high-end PCs, which he then sold to friends and classmates. The little dorm-based business grew at a rapid rate, and he determined that a large opportunity existed. He began running ads in computer magazines under the PCs Limited brand, and within a year had sold over $20 million.

Michael’s next brilliant move was to offer a one year, on-site service policy with every system, along with a 30 day money-back guarantee. This effectively removed key barriers to purchase, and in fact enabled better service than other customers could get from PC retailers.

In 1985, Michael hired Lee Walker as President and COO, and assembled a high powered Board of Directors, including Admiral Bobby Inman (Executive Director of the CIA), and Tracor founder George Kozmetsky. Lee provided guidance and direction for the young company, and drove its expansion into international markets, starting with Great Britain. (Dell’s current highest market share is in the UK, at over 12%).

In 1987, with revenues of $169 million, the company made a determined push to move away from "clone" status. This push was comprised of three parts: 1)Changing its name from PCs Limited to Dell Computer Corporation. 2)A key initiative to develop strategic alliances, and 3)The hiring of Glenn Henry, an IBM fellow, to drive development of unique and high performance products.

The name change coincided with hiring a new ad agency. Both these moves started the process of creating an aggressive, but professional image and position for the company. Dell went on the attack against Compaq, and its dealers, saying they charged too much for PCs and didn’t give good service. This campaign was one of the most memorable and successful in business-to-business marketing history, and forced a dramatic legal response from Compaq, and ultimately, the removal of Compaq’s CEO and founder, Rod Canion.
Dell recognized that to achieve a leadership position in the industry, they needed to have the same access to new technology that IBM and Compaq did. The company began carefully courting Intel, who until this effort ignored, and was even disdainful of, Dell. Dell’s message was that due to the direct sales method, Dell could both obtain real-time customer feedback and requirements, and, could launch Intel’s newest technologies faster than IBM and Compaq. These were key benefits to Intel, and the relationship quickly became a key weapon for Dell. Even today, Dell is perhaps Intel’s staunchest ally and the least likely company to use a competing processor in its systems.
Dell also realized that truly innovative products could not be snapped together from off-the-shelf parts, and began making plans to increase R&D efforts. The hiring of Glenn Henry, the developer of the RS 6000 chip, and the IBM System 34, dramatically increased Dell’s R&D profile and capability, and further cemented the relationships with Microsoft and Intel.
In 1990, Lee Walker resigned and the executive staff reorganized with Joel Kocher heading US sales and marketing, Andrew Harris heading international, and Glenn Henry running operations, all reporting to Michael.

It was at this time that computer superstores, epitomized by CompUSA, became a major factor in the distribution of PCs. These huge stores, some over 100,000 sq. ft., instantly changed the PC landscape. Their selection, low prices, and service hurt the traditional PC reseller. In keeping with Dell’s anti-reseller bias, and in the spirit of "my enemy’s enemy is my friend", Dell created a line of products (Dimension) to be sold through CompUSA. This was Dell’s first, and only, departure from the direct model. While the experiment was initially successful in terms of sales, Dell withdrew from the superstores within 2 years, due to conflicts of strategy, low margins, and difficulty working with CompUSA, although the Dimension product line lives on today as Dell’s highest performance systems sold directly to small businesses, home offices and technically savvy consumers..

Also in the early 90s, Dell renewed its focus on Gateway 2000, who was growing as fast as Dell, and was threatening to exceed Dell’s US revenue. (In fact, in 1993, Gateway was larger than Dell USA). Dell introduced a line of product, the Precision, that was less expensive and targeted at the Gateway customer.

In 1993, Tom Meredith was brought in as CFO, and in 1994 Morton Topfer was brought in from Motorola. Under their stewardship Dell has accelerated every aspect of its operation, achieving breakthrough results in revenue and earnings growth, stock appreciation, inventory turns, product launches and awards, quality, and new business development.

Dell Product