History Of Dell

Dorm room Stories

Michael Dell first built and sold personal computers from his dorm room at the
University of Texas in 1984 at the age of 19. He founded Dell Computer
Corporation, dba PC's Limited, in 1984 while a student at the University of Texas at
Austin. Operating from Michael Dell's off-campus dormitory room at Dobie Center,
the startup aimed to sell IBM PC-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, after getting about $1,000 in expansion-capital from his family.
Four years later, shares of Dell stock were sold for $8.50, and the IPO raised $30
million.

The Company

In 1985, the company produced the first computer of its own design, the Turbo PC,
which sold for $795.[ Dell appeared in PC's Limited advertisements in national
magazines, asking readers to "give us a chance to show you what [its products] can
do". Selling directly to consumers custom-assembled computers according to a
selection of options, the company grossed more than $73 million in its first year of
operation. In 1986, Michael Dell brought in Lee Walker, a 51-year-old venture
capitalist, as president and chief operating officer, to serve as mentor and to
implement Dell's ideas for growing the company.

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

Moving Beyond PCs.

Originally, Dell did not emphasize the consumer market, due to the higher costs and
unacceptably low profit margins in selling to individuals and households; this
changed when the companys Internet site took off in 1996 and 1997. While the
industrys 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.
Beating the competition
From 1997 to 2004, Dell enjoyed steady growth and it gained market share from
competitors even during industry slumps. 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. Dell surpassed Compaq to become
the largest PC manufacturer in 1999. Operating costs made up only 10% of Dell's
$35 billion in revenue in 2002, compared with 21% of revenue at Hewlett-Packard,
25% at Gateway, and 46% at Cisco.[27] In 2002, when Compaq merged with Hewlett
Packard (the fourth-place PC maker), the newly combined Hewlett Packard took the
top spot but struggled and Dell soon regained its lead. Dell grew the fastest in the
early 2000s.

Going Online

In 1996, Dell began selling computers through its website. The company attained
and maintained the number 1 rating in PC reliability and customer service/technical
support, according to Consumer Reports, year after year, during the mid-to-late 90s
through 2001 right before Windows XP was released.

In the mid-1990s, Dell expanded beyond desktop computers and laptops by selling
servers, starting with low-end servers. The major three providers of servers at the
time were IBM, Hewlett Packard, and Compaq, many of which were based on
proprietary technology, such as IBM's Power4 microprocessors or various
proprietary versions of the UNIX operating system. Dell's new PowerEdge servers
did not require a major investment in proprietary technologies, as they ran Microsoft
Windows NT on Intel chips, and could be built more cheaply than its
competitors Consequently, Dell's enterprise revenues, almost nonexistent in 1994,
accounted for 13% of the company's total intake by 1998. Three years later, Dell
passed Compaq as the top provider of Intel-based servers, with 31% of the market.
Dell's first acquisition occurred in 1999 with the purchase of converge Net
Technologies for $332 million, after Dell had failed to develop an enterprise storage
system in-house; Converge Nets elegant but complex technology did not fit in with
Dell's commodity-producer business model, forcing Dell to write down the entire
value of the acquisition.

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 Rollins attempt to lessen the company's heavy dependency on
PCs, which Rollins wanted to fix by acquiring EMC Corporation.

In 2003, the company was rebranded as simply "Dell Inc." to recognize the
company's expansion beyond computers. In 2004, Michael Dell resigned as CEO
while retaining the position of Chairman, handing the CEO title to Kevin Rollins, who
had been President and COO since 2001. Despite no longer holding the CEO title,
Dell essentially acted as a de facto co-CEO with Rollins.

Under Rollins, Dell began to loosen its ties to Microsoft and Intel, the two companies
responsible for Dell's dominance in the PC business. During that time, Dell
acquired Alienware, which introduced several new items to Dell products,
including AMD microprocessors. To prevent cross-market products, Dell continues to
run Alienware as a separate entity, but still a wholly owned subsidiary.

Disappointments
In 2005, while earnings and sales continued to rise, sales growth slowed
considerably, and the company stock lost 25% of its value that year. By June 2006,
the stock traded around $25 USD which was 40% down from July 2005the 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 businesses 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.[37] 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 (a lucrative strategy of encouraging
buyers to upgrade the processor or memory). 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.

Dell had long stuck by its direct sales model. Consumers had become the main
drivers of PC sales in recent years, yet there had a decline in consumers purchasing
PCs through the Web or on the phone, as increasing numbers were visiting
consumer electronics retail stores to try out the devices first. Dell's rivals in the PC
industry, HP, Gateway and Acer, had a long retail presence and so were well poised
to take advantage of the consumer shift.] The lack of a retail presence stymied
Dell's attempts to offer consumer electronics such as flat-panel TVs and MP3
players. Dell responded by experimenting with mall kiosks, plus quasi-retail stores
in Texas and New York.

Dell had a reputation as a company that relied upon supply chain efficiencies to sell
established technologies at low prices, instead of being an innovator. By the mid-
2000s many analysts were looking to innovating companies as the next source of
growth in the technology sector. Dell's low spending on R&D relative to its revenue
(compared to IBM, Hewlett Packard, and Apple Inc.)which worked well in the
commoditized PC marketprevented it from making inroads into more lucrative
segments, such as MP3 players and later mobile devices. Increasing spending on
R&D would have cut into the operating margins that the company emphasized. Dell
had done well with a horizontal organization that focused on PCs when the
computing industry moved to horizontal mix-and-match layers in the 1980s, but by
the mid-2000 the industry shifted to vertically integrated stacks to deliver complete
IT solutions and Dell lagged far behind competitors like Hewlett Packard and Oracle.

Dell's reputation for poor customer service, since 2002, which was exacerbated as it
moved call centers offshore and as its growth outstripped its technical support
infrastructure, came under increasing scrutiny on the Web. The original Dell model
was known for high customer satisfaction when PCs sold for thousands but by the
2000s, the company could not justify that level of service when computers in the
same lineup sold for hundreds. Rollins responded by shifting Dick Hunter from head
of manufacturing to head of customer service. Hunter, who noted that Dell's DNA of
cost-cutting "got in the way," aimed to reduce call transfer times and have call
center representatives resolve inquiries in one call. By 2006, Dell had spent $100
million in just a few months to improve on this, and rolled out Dell Connect to
answer customer inquiries more quickly. In July 2006, the company started its
Direct2Dell blog, and then in February 2007, Michael Dell launched IdeaStorm.com,
asking customers for advice including selling Linux computers and reducing the
promotional "bloat ware" on PCs. These initiatives did manage to cut the negative
blog posts from 49% to 22%, as well as reduce the "Dell Hell" prominent on Internet
search engines.

2006 marked the first year that Dell's growth was slower than the PC industry as a
whole. By the fourth quarter of 2006, Dell lost its title of the largest PC
manufacturer to rival Hewlett Packard whose Personal Systems Group was
invigorated thanks to a restructuring initiated by their CEO Mark Hurd.

After four out of five quarterly earnings reports were below expectations, Rollins
resigned as President and CEO on January 31, 2007 and founder Michael Dell
assumed the role of CEO again.

Dell 2.0 and downsizing

Dell announced a change campaign called "Dell 2.0," reducing the number of
employees and diversifying the company's products. While chairman of the board
after relinquishing his CEO position, Michael Dell still had significant input in the
company during Rollins' years as CEO. With the return of Michael Dell as CEO, the
company saw immediate changes in operations, the exodus of many senior vice-
presidents and new personnel brought in from outside the company. Michael Dell
announced a number of initiatives and plans (part of the "Dell 2.0" initiative) to
improve the company's financial performance. These include elimination of 2006
bonuses for employees with some discretionary awards, reduction in the number of
managers reporting directly to Michael Dell from 20 to 12, and reduction of
"bureaucracy". Jim Schneider retired as CFO and was replaced by Donald Carty, as
the company came under an SEC probe for its accounting practices.

On April 23, 2008, Dell announced the closure of one of its biggest Canadian call-
centers in Ottawa, Ontario, reducing staff by approximately 1,100 employees, with
500 of those redundancies effective on the spot, and with the official closure of the
center scheduled for the summer. The call-center had opened in 2006 after the City
of Ottawa won a bid to host it. Less than a year later, Dell planned to double its
workforce to nearly 3,000 workers and add a new building. These plans were
reversed, due to a high Canadian dollar that made the Ottawa staff relatively
expensive, and also as part of Dell's turnaround, which involved moving these call-
center jobs offshore to cut costs The Company had also announced the shutdown of
its Edmonton, Alberta office, losing 900 jobs. In total, Dell announced the ending of
about 8,800 jobs in 20072008 10% of its workforce.

In the shrinking PC industry, Dell continued to lose market share, as it dropped

below Lenovo in 2011 to fall to number three in the world. Dell and fellow American
contemporary Hewlett Packard came under pressure from Asian PC
manufacturers Lenovo, Asus, and Acer, all of which had lower production costs and
willing to accept lower profit margins. In addition, while the Asian PC vendors had
been improving their quality and design, for instance Lenovo's ThinkPad series was
winning corporate customers away from Dell's laptops, Dell's customer service and
reputation had been slipping. Dell remained the second-most profitable PC vendor,
as it took 13% of operating profits in the PC industry during Q4 2012, behind Apple
Inc.'s Macintosh that took 45%t, 7% at Hewlett Packard, 6% at Lenovo and Asus,
and 1% for Acer.

Dell has been attempting to offset its declining PC business, which still accounted
for half of its revenue and generates steady cash flow, by expanding into the
enterprise market with servers, networking, software, and services. It avoided many
of the acquisition write-downs and management turnover that plagued its chief
rival Hewlett Packard. Dell also managed some success in taking advantage of its
high-touch direct sales heritage to establish close relationships and design solutions
for clients. Despite spending $13 billion on acquisitions to diversify its portfolio
beyond hardware, the company was unable to convince the market that it could
thrive or made the transformation in the post-PC world, as it suffered continued
declines in revenue and share price. Dell's market share in the corporate segment
was previously a "moat" against rivals but this has no longer been the case as sales
and profits have fallen precipitously.

The Buyout

Dell announced on February 5, 2013 that it had struck a $24.4 billion leveraged
buyout deal that would have delisted its shares from the NASDAQ and Hong Kong
Stock Exchange and taken it private. Reuters reported that Michael Dell and Silver
Lake Partners, aided by a $2 billion loan from Microsoft, would acquire the public
shares at $13.65 apiece.[79] The $24.4 billion buyout was projected to be the largest
leveraged buyout backed by private equity since the 2007 financial crisis.[80] It is
also the largest technology buyout ever, surpassing the 2006 buyout of Free scale
Semiconductor for $17.5 billion

The founder of Dell, Michael Dell, said of the February offer "I believe this
transaction will open an exciting new chapter for Dell, our customers and team
members". Dell rival Lenovo reacted to the buyout, saying "the financial actions of
some of our traditional competitors will not substantially change our outlook".

In March 2013, the Blackstone Group and Carl Icahn expressed interest in
purchasing Dell. In April 2013, Blackstone withdrew their offer, citing deteriorating
business. Other private equity firms such as KKR & Co. and TPG Capital declined to
submit alternative bids for Dell, citing the uncertain market for personal computers
and competitive pressures, so the "wide-open bidding war" never
materialized. Analysts said that the biggest challenge facing Silver Lake would be to
find an exit strategy to profit from its investment, which would be when the
company would hold an IPO to go public again, and one warned But even if you can
get a $25bn enterprise value for Dell, it will take years to get out. [

In May 2013, Dell joined his board in voting for his offer. The following August he
reached a deal with the special committee on the board for $13.88 (a raised price of
$13.75 plus a special dividend of 13 cents per share), as well as a change to the
voting rules. The $13.88 cash offer (plus a $.08 per share dividend for the third
fiscal quarter) was accepted on September 12 ] and closed on October 30, 2013,
ending Dell's 25-year run as a publicly traded company.

After the buyout the newly private Dell offered a Voluntary Separation Programme
that they expected to reduce their workforce by up to 7%. The reception to the
program so exceeded the expectations that it was speculated that Dell might be
forced to hire new staff to make up for the losses.

Post 2016 & Beyond

On October 12, 2015, Dell announced its intent to acquire the enterprise software
and storage company EMC Corporation. At $67 billion, it has been labeled the
"highest-valued tech acquisition in history". The acquisition was finalized September
7, 2016

The announcement came two years after Dell Inc. returned to private ownership,
claiming that it faced bleak prospects and would need several years out of the
public eye to rebuild its business. Its thought that the company's value has roughly
doubled since then. EMC was being pressured by Elliott Management, a hedge fund
holding 2.2% of EMC's stock, to reorganize their unusual "Federation" structure, in
which EMC's divisions were effectively being run as independent companies. Elliott
argued this structure deeply undervalued EMC's core "EMC II" data storage
business, and that increasing competition between EMC II and VMware products was
confusing the market and hindering both companies. The Wall Street
Journal estimated that in 2014 Dell had revenue of $27.3 billion from personal
computers and $8.9bn from servers, while EMC had $16.5bn from EMC II, $1bn
from RSA Security, $6bn from VMware, and $230 million from Pivotal Software. EMC
owns around 80% of the stock of VMware. The proposed acquisition will maintain
VMware as a separate company, held via a new tracking stock, while the other parts
of EMC will be rolled into Dell. Once the acquisition closes Dell will again publish
quarterly financial results, having ceased these on going private in 2013.

On September 7, 2016, Dell Inc. completed its $60 billion deal to acquire EMC Corp.,
the largest technology merger in history. The new company, Dell Technologies,
employs about 140,000 people globally and will maintain operations in Hopkinton,
Mass., where EMC was located. With $74 billion in revenue, Dell Technologies is the
worlds largest privately controlled tech company.