Number one at being directBased in Round Rock, Texas, Dell Computer Corporation is the leading direct seller of computers in the world. In addition to personal computers the company sells servers, work stations, storage products, peripheral hardware, software and related computer services.
Rapid rise to the top
Michael Dell started the company in his University of Texas dorm room in 1984, and dropped out of school when he was making more than $80,000 a month. In 1992, annual sales at Dell were approaching the $1 billion mark. By 2002, revenues exceeded $31 billion. The explosive growth of the company has been mirrored in the growth of the company's stock, which has risen faster than that of Coca-Cola, Intel and Microsoft. As of late 2001, Michael Dell's stake in his company was worth about $8 billion, making him the richest man in Texas.
Dell's direct business model
Dells' business model is relatively simple. The company takes orders over the phone and through its web site and then assembles a computer specifically for each order. Making and shipping a PC usually takes Dell 36 hours, but it can assemble computers in its OptiPlex line in under five hours, and is working on an automatic installation system that will cut that time down to 20 minutes. Though many were skeptical when the company began selling computers online, by 2001 online sales accounted for 50 percent of the company's total sales. Dell prides itself on its customer service. Custom-building computers according to each order means Dell can respond rapidly to the changing needs of the marketplace. Dell was also the first PC maker to offer direct, toll-free technical phone support and next-day, on-site service.
Thinking outside the box
Dell started out making just desktop computers, but now manufactures a growing line of desktops, notebooks, workstations, servers and storage systems. Desktops and notebooks account for about three-fourths of the company's business. Almost two-thirds of the company's customers are large businesses and governments, but the company is increasingly targeting the small business and individual consumer market. In 1999, Dell opened www.gigabuys.com, its online electronics superstore, which sells everything from software to printers and digital cameras. The company has also launched new programs such as auction sites for used computers and accessories, and a division called Office by Dell, which sells office equipment ranging from chalkboards to leather chairs.
The future of Dell
The worldwide slump in the computer market in 2000 hit Dell hard, but not as hard as its rivals. In fact, by July 2001 Dell had increased its share of the PC market to 13 percent, up from 10 percent in 1999, and had surpassed Compaq as the number one PC maker. But the company did so at a cost: it had to slash prices and cut 5,000 jobs to stay in the black. Dell is expected to keep up the price wars even though PC revenues are expected to decline through 2002. Although it plans to grab a bigger piece of the PC market, it also will continue its expansion into higher-margin markets, like servers and storage.
