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DELL on Apple

Michael Dell has been quick in marrying his interests in computers and business. On his 15th birthday, he bought his first computer - an Apple II and immediately disassembled it to see if he can put it back together1. He then used his new computer to create a targeted mailing list of newlyweds and families who had just moved in. He had figured out that they are the most likely customers for his part-time work selling newspaper subscriptions2. When IBM introduced the IBM Personal Computer (PC) 5150 in 1981, Dell realized that the PC was going to be the choice for business in the future. Although the Apple II had lots of games, the PC had a more powerful processor. Moreover, it had software and programs for business usage3. Just a year after purchasing his first computer, Dell switched from Apple to IBM. In 1984, with a startup capital of $1,000, Dell founded the company PCs Limited on the idea of selling custom-built computers directly to endusers. Instead of going to retail stores to buy a mass produced computer, customers contact PCs Limited and order computers according to their

Direct from Dell: Strategies that Revolutionized an Industry, Michael S. Dell and Catherine Fredman, Collins Business Essentials, 2006, p. 6 2 Michael Dell Biography, Academy of Achievement, http://www.achievement.org/autodoc/page/del0bio1. Accessed February 13, 2012 3 Direct from Dell: Strategies that Revolutionized an Industry, Michael S. Dell and Catherine Fredman, Collins Business Essentials, 2006, p. 7
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Apple 2

requirements. PCs Limited assemble the computer and deliver it to the customer. The idea worked. PCs Limited soon became one of the fastest-growing companies in the industry. Cashing on the success, Dell changed the name to Dell Computer Corporation (DELL) and took the company public in 1988. It increased its market capitalization from $1,000 to $85 million4. By 1992, DELL joined the ranks of Fortune 500 with Michael Dell as the youngest CEO5. The advent of the internet provided another opportunity for growth at DELL. With many companies still skeptical about selling online, DELL pioneered online commerce with its direct-sale website dell.com. Two months after its June 1996 launch, the site generated on average a $1 million per day6. The combination of selling direct via phone and Internet pushed DELL's total shipment to 10 million PCs. By April of 1997, its revenues reached $8.7 billion dollars surpassing that of beleaguered industry pioneer Apple Computer. The success became the context when Dell was asked what he would do to fix Apple. Dell quickly replied, What would I do? Id shut it down and give the money back to the shareholders.7 Analysis of this case requires the collection of data and information from public sources. 1. What are factors affecting the success of DELL? The problems of Apple? 2. Describe DELLs supply chain. How different could it be from Apple? 3. Compute the ROA (Return on Assets) and Inventory Turns for DELL and Apple. What can you infer from these financial ratios?

The History of Dell, http://content.dell.com/us/en/corp/our-story-company-timeline.aspx. Accessed February 13, 2012 5 Ibid. 6 Direct from Dell: Strategies that Revolutionized an Industry, Michael S. Dell and Catherine Fredman, Collins Business Essentials, 2006, p. 215 7 Dell: Apple should close shop, Jai Singh, CNET News, October 6, 1997, http://news.cnet.com/21001001-203937.html. Accessed February 13, 2012
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