dell s mission statement by tdelight

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									                                     Dell – 2005
                         Forest David: Francis Marion University


A.   Case Abstract

              This is a comprehensive strategic management case that includes the company’s
     financial statements, organization chart, competitor information, and industry trends.
     Sufficient internal and external data are provided to enable students to evaluate current
     strategies and recommend a three-year strategic plan for the company.
              Dell is a diversified information-technology firm that sells computer products and
     services directly to customers worldwide. Recognized by Fortune magazine as America's
     most admired company and No. 3 globally, Dell designs, builds and delivers innovative,
     tailored systems that provide customers with exceptional value. Dell’s 2005 revenues
     were close to $55 billion and the company had 55,200 employees at year end. The
     company phone is 512-338-4400 and its Web site is http://www.dell.com.
              Headquartered in Round Rock, Texas, Dell offers enterprise systems, which
     include servers, storage, workstations, and networking products; client systems, such as
     notebook and desktop computer systems; printing and imaging systems; and software and
     peripherals, including titles, monitors, plasma and LCD televisions, MP3 players,
     handhelds, and notebook accessories. The company also offers various services,
     including information technology management services; professional services in
     technology consulting, application development, solutions integration, and infrastructure
     design; deployment services; support services; and training and certification services. In
     addition, it offers a range of financing alternatives, asset management services, and other
     customer financial services for its business and consumer customers in the United States.
              Dell faces large, fierce competitors such as Hewlett-Packard, Google, Apple
     Computer, and IBM. Dell’s customers include large corporate, government, healthcare,
     and education accounts, as well as small-to-medium businesses and individual customers.
     Dell is unique among rivals in that it markets and sells its products and services directly
     to its customers. The company was founded by Michael S. Dell in 1984 and he is still the
     firm’s CEO today.


B.   Vision Statement (actual)

     It’s the way we do business. It’s the way we interact with the community. It’s the way
     we interpret the world around us—our customers’ needs, the future of technology, and
     the global business climate. Whatever changes the future may bring, our vision—Dell
     Vision—will be our guiding force.




                                             15
     (proposed)

     To become the world’s largest and most admired consumer electronics firm specializing
     in computer products and services.


C.   Mission Statement (actual)

     Dell’s mission is to be the most successful Computer Company in the world at delivering
     the best customer experience in markets we serve. In doing so, Dell will meet customer
     expectations of:

     Highest quality
     Leading technology
     Competitive pricing
     Individual and company accountability
     Best-in-class service and support
     Flexible customization capability
     Superior corporate citizenship
     Financial stability

     (proposed)

     Dell’s mission is to be the most innovative consumer electronics products company (2) in
     the world (3), reaching out to businesses, institutional organizations, and individual
     customers (1). Dell strives to produce the most technologically advanced (4) products to
     make life and work easier and more enjoyable. Dell’s uniqueness centers around its
     tailoring of products and services for individual customers (7). Dell employees (9)
     respect all laws, values, and cultures wherever the firm does business (6). As America’s
     most admired firm, Dell strives to profitably grow (5) in all markets while contributing
     positively in every community we call home (8).

     1.   Customer
     2.   Products or services
     3.   Markets
     4.   Technology
     5.   Concern for survival, profitability, growth
     6.   Philosophy
     7.   Self-concept
     8.   Concern for public image
     9.   Concern for employees




                                               16
D.      External Audit

        Opportunities

        1. Demand for personal computers continues to grow.
        2. Many customers switching from desktops to notebooks.
        3. Microsoft desires to partner with Dell.
        4. Consumer electronics is a profitable business.
        5. Higher consumer spending in the US.
        6. Incorporated managed and professional services.
        7. Global enterprise systems.
        8. Training and certification program.
        9. Financial services offered.
        10. Growth in the color printer market.

        Threats

        1. Consolidation in the PC industry (i.e., Lenove Group Ltd. of China purchase PC
           division of IBM in May 2005).
        2. Higher oil prices could crimp consumers’ spending.
        3. Commercial demand fails to accelerate.
        4. Competitors are strong.
        5. Slow growth in the PC market.
        6. Component price fluctuation
        7. Price for computing power has decreased.
        8. Computer market has broadened.
        9. Currency fluctuations in the international markets.

CPM – Competitive Profile Matrix

                                   Apple                        HP                   Dell
Critical Success     Weight   Rating   Weighted        Rating        Weighted   Rating    Weighted
Factors                                  Score                        Score                Score
Market Share          0.10      2         0.20           3             0.30       4         0.40
Price                 0.10      2         0.20           3             0.30       4         0.40
Financial Position    0.15      3         0.45           4             0.60       3         0.45
Product Quality       0.15      4         0.60           3             0.45       3         0.45
Consumer Loyalty      0.15      4         0.60           2             0.30       3         0.45
Advertising           0.04      4         0.16           2             0.08       3         0.12
Management            0.06      4         0.24           3             0.18       3         0.18
Global Expansion      0.06      2         0.12           2             0.12       3         0.18
Innovation            0.14      4         0.56           2             0.28       2         0.28
Web Development       0.05      3         0.15           2             0.10       3         0.15
Total                 1.00               3.28                         2.71                  3.06




                                                  17
External Factor Evaluation (EFE) Matrix


Key External Factors                                        Weight   Rating       Weighted Score
Opportunities
Demand for personal computers continues to grow.            0.100      3               0.300
Many customers switching from desktops to                   0.050      4               0.200
notebooks
Microsoft desires to partner with Dell.                     0.100      4               0.400
Consumer electronics is a profitable business.              0.050      2               0.100
Higher consumer spending in the US.                         0.025      2               0.050
Incorporated managed and professional services.             0.025      2               0.050
Global enterprise systems.                                  0.050      3               0.150
Training and certification program.                         0.025      2               0.050
Financial services offered.                                 0.025      3               0.075
Growth in the color printer market.                         0.025      2               0.050
Threats
Consolidation in the PC industry (i.e., Lenove Group
Ltd. of China purchase PC division of IBM in May            0.050      3               0.150
2005).
Higher oil prices could crimp consumers’ spending.          0.050      3               0.150
Commercial demand fails to accelerate.                      0.025      2               0.050
Competitors are strong.                                     0.150      3               0.450
Slow growth in the PC market.                               0.100      2               0.200
Component price fluctuation                                 0.025      4               0.100
Price for computing power has decreased.                    0.025      3               0.075
Computer market has broadened.                              0.050      3               0.150
Currency fluctuations in the international markets.         0.050      2               0.100
Total                                                       1.00                       2.85



E.      Internal Audit

        Strengths

        1.  Built-to-order personal computers sold directly to customers.
        2.  Direct sales via mail, phone orders, and the Internet.
        3.  Built-to-order personal computers eliminates markups of resellers.
        4.  Built-to-order personal computers greatly reduce the costs and risks associated with
            carrying large stocks of parts, components, and finished goods.
        5. Dell is the current PC industry leader.
        6. Dell has regional and manufacturing plants globally.
        7. Dell is a well-known brand name.
        8. Dell’s direct-to-consumer strategy has given the company a substantial cost and profit
            margin over its rivals.
        9. Dell has a good relationship with the company’s large corporate and government
            customers and continues to focus on these sales and service relationships.
        10. Dell holds 29.1 percent of the total market for personal computer sales in the
            Americas, putting Dell ahead of its competitors.



                                                       18
       11. Dell’s built-to-order manufacturing process results in rapid inventory turnover and
           reduced inventory levels.
       12. To ensure defect-free products, testing is performed by Dell along the process and on
           the final computer product.
       13. Dell has a wide range of customers including large corporations, government
           agencies, healthcare, educational institutes, small business, and individuals.
       14. Dell is ranked # 1 by Technology Business because of its Intel-based server
           satisfaction for 27 of the past 29 quarters.
       15. Dell divides its sales and marketing force among the various customer groups in order
           to meet each groups specific needs.
       16. Dell advertises its products on the Internet, TV, and by mailing a broad range of
           marketing publications.

       Weaknesses

       1. Dell has only two manufacturing plants and one regional office in the United States.
       2. Dell computers cannot be purchased in retail stores.
       3. Dell has over 40 locations globally yet Dell is not the #1 supplier in Asia Pacific,
          European, Middle East, or African segments.
       4. Dell rebrands printers purchased from Lexmark, which is a major production cost for
          Dell.
       5. Dell is too reliant on foreign suppliers, because of this a disruption of fuel supply
          could make the price of shipping go up.
       6. Dell is so large now that it might not be able to grow at the same pace.

Financial Ratio Analysis (January 2006)

  Growth Rates %                            Dell           Industry         SP-500
  Sales (Qtr vs year ago qtr)              11.30             18.00           14.20
  Net Income (YTD vs YTD)                   7.70             78.90           16.30
  Net Income (Qtr vs year ago qtr)        (28.40)            17.40           17.00
  Sales (5-Year Annual Avg.)               11.94              5.00           4.93
  Net Income (5-Year Annual Avg.)          13.76              NA             10.40
  Dividends (5-Year Annual Avg.)            NA                NA             4.27
  Price Ratios
  Current P/E Ratio                        23.2               31.6           18.8
  P/E Ratio 5-Year High                    71.1               NA             64.8
  P/E Ratio 5-Year Low                     19.3               NA             17.4
  Price/Sales Ratio                        1.30               1.88           1.48
  Price/Book Value                         14.61             10.57           2.83
  Price/Cash Flow Ratio                    19.60             26.80           12.40
  Profit Margins
  Gross Margin                              18.7             20.2            47.2
  Pre-Tax Margin                            8.3               8.5            11.9
  Net Profit Margin                         6.0               6.2             8.0
  5-Yr Gross Margin (5-Year Avg.)           19.1             20.3            47.3
  5-Yr Pre-Tax Margin (5-Year Avg.)         8.5               5.8             9.4
  5-Yr Net Profit Margin (5-Year Avg.)      6.0               3.8             5.8
  Financial Condition
  Debt/Equity Ratio                         0.10             0.06            1.06


                                              19
   Current Ratio                                          1.2                  1.5                  1.4
   Quick Ratio                                            0.9                  1.2                  0.9
   Interest Coverage                                      NA                  NA                    3.5
   Leverage Ratio                                         4.7                  2.9                  5.7
   Book Value/Share                                       2.05                3.50                 13.26
   Investment Returns %
   Return On Equity                                       66.9                34.6                 15.3
   Return On Assets                                       14.1                12.0                  2.7
   Return On Capital                                      60.6                32.6                  7.4
   Return On Equity (5-Year Avg.)                         40.4                17.0                 11.9
   Return On Assets (5-Year Avg.)                         13.3                 7.1                  2.0
   Return On Capital (5-Year Avg.)                        37.0                15.7                  5.6
   Management Efficiency
   Income/Employee                                       58,000              63,000              29,000
   Revenue/Employee                                      982,000              1 Mil              367,000
   Receivable Turnover                                    12.0                12.2                 7.7
   Inventory Turnover                                     88.4                66.8                 7.8
   Asset Turnover                                          2.5                 2.1                 0.4
    Adapted from www.cnbc.com

          Date         Avg. P/E               Price/Sales           Price/Book        Net Profit Margin (%)
         01/05          31.20                    2.11                  16.00                    6.2
         01/04          29.60                    2.06                  13.59                    6.4
         01/03          33.20                    1.74                  12.62                    6.0
         01/02          51.40                    2.29                  15.27                    4.0
         01/01          45.20                    2.13                  12.09                    7.0
    Adapted from www.cnbc.com

       Date       Book Value/ Share           Debt/Equity          ROE (%)       ROA (%)       Interest Coverage
       01/05            $2.61                    0.08                46.9          13.1               NA
       01/04            $2.46                    0.08                42.1          13.7              267.0
       01/03            $1.89                    0.10                43.5          13.7              179.1
       01/02            $1.80                    0.11                26.5           9.2               NA
       01/01            $2.16                    0.09                39.8          16.6               NA
    Adapted from www.cnbc.com

Net Worth Analysis (January 2006 in millions)
1. Stockholders’ Equity + Goodwill = $6,485 + 0                                                        $ 6,485
2. Net Income x 5 = $3,043 x 5=                                                                       $ 15,215
3. Share Price = $30.00/EPS(1.29) = 38.70 x Net Income $3,354 =                                      $ 129,800
4. Number of Shares Outstanding x Share Price = 2,354 x $30.00 =                                      $ 70,620
Method Average                                                                                        $55,530

Internal Factor Evaluation (IFE) Matrix


Key Internal Factors                                               Weight             Rating              Weighted Score
Strengths
Built-to-order personal computers sold directly to                 0.100                   4                  0.400
customers.
Direct sales via mail, phone orders, and the Internet.             0.050                   3                  0.150
Built-to-order personal computers eliminates                       0.025                   3                  0.075



                                                             20
markups of resellers.
Built-to-order personal computers greatly reduce the
costs and risks associated with carrying large stocks            0.050    3   0.150
of parts, components, and finished goods.
Dell is the current PC industry leader.                          0.100    4   0.400
Dell has regional and manufacturing plants globally.             0.050    4   0.200
Dell is a well-known brand name.                                 0.050    4   0.200
Dell’s direct-to-consumer strategy has given the
company a substantial cost and profit margin over its            0.050    3   0.150
rivals.
Dell has a good relationship with the company’s
large corporate and government customers and                     0.0250   3   0.075
continues to focus on these sales and service
relationships.
Dell holds 29.1% of the total market for personal
computer sales in the Americas, putting Dell ahead               0.050    3   0.150
of its competitors.
Dell’s built-to-order manufacturing process results in
rapid inventory turnover and reduced inventory                   0.050    3   0.150
levels.
To ensure defect-free products, testing is performed
by Dell along the process and on the final computer              0.050    3   0.150
product.
Dell has a wide range of customers including large
corporations, government agencies, healthcare,                   0.050    4   0.200
educational institutes, small business, and
individuals.
Dell is ranked # 1 by Technology Business because
of its Intel-based server satisfaction for 27 of the past        0.050    4   0.20
29 quarters.
Dell divides its sales and marketing force among the
various customer groups in order to meet each groups             0.025    3   0.075
specific needs.
Dell advertises its products on the Internet, TV, and            0.025    4   0.100
by mailing a broad range of marketing publications.
Weaknesses
Dell has only two manufacturing plants and one                   0.025    2   0.050
regional office in the United States.
Dell computers cannot be purchased in retail stores.             0.025    1   0.025
Dell has over 40 locations globally yet Dell is not the
#1 supplier in Asia Pacific, European, Middle East,              0.050    2   0.100
or African segments.
Dell rebrands printers purchased from Lexmark,                   0.025    1   0.025
which is a major production cost for Dell.
Dell is too reliant on foreign suppliers, because of
this a disruption of fuel supply could make the price            0.050    2   0.100
of shipping go up.
Dell is so large now that it might not be able to grow           0.025    1   0.025
at the same pace.
Total                                                             1.00        3.15




                                                            21
F.   SWOT Matrix
                   Strengths                               Weaknesses
                   1. Built-to-order personal              1. Dell has only two manufacturing
                        computers sold directly to            plants and one regional office in
                        customers.                            the United States.
                   2. Direct sales via mail, phone         2. Dell computers cannot be
                        orders, and the Internet.             purchased in retail stores.
                   3. Built-to-order personal              3. Dell has over 40 locations
                        computers eliminates markups          globally yet Dell is not the #1
                        of resellers.                         supplier in Asia Pacific,
                   4. Built-to-order personal                 European, Middle East, or
                        computers greatly reduce the          African segments.
                        costs and risks associated with    4. Dell rebrands printers purchased
                        carrying large stocks of parts,       from Lexmark, which is a major
                        components, and finished              production cost for Dell.
                        goods.                             5. Dell is too reliant on foreign
                   5. Dell is the current PC industry         suppliers, because of this a
                        leader.                               disruption of fuel supply could
                   6. Dell has regional and                   make the price of shipping go up.
                        manufacturing plants globally.     6. Dell is so large now that it might
                   7. Dell is a well-known brand              not be able to grow at the same
                        name.                                 pace.
                   8. Dell’s direct to consumer
                        strategy has given the company
                        a substantial cost and profit
                        margin over its rivals.
                   9. Dell has a good relationship
                        with the company’s large
                        corporate and government
                        customers and continues to
                        focus on these sales and service
                        relationships.
                   10. Dell holds 29.1% of the total
                        market for personal computer
                        sales in the Americas putting
                        Dell ahead of its competitors.
                   11. Dell’s built-to-order
                        manufacturing process results
                        in rapid inventory turnover and
                        reduced inventory levels.
                   12. To ensure defect-free products,
                        testing is performed by Dell
                        along the process and on the
                        final computer product.
                   13. Dell has a wide range of
                        customers including large
                        corporations, government
                        agencies, healthcare,
                        educational institutes, small
                        business, and individuals.
                   14. Dell is ranked # 1 by
                        Technology Business because
                        of its Intel-based server
                        satisfaction for 27 of the past



                                    22
                                         29 quarters.
                                     15. Dell divides its sales and
                                         marketing force among the
                                         various customer groups in
                                         order to meet each groups
                                         specific needs.
                                     16. Dell advertises its products on
                                         the Internet, TV, and by
                                         mailing a broad range of
                                         marketing publications.
Opportunities                       S-O Strategies                         W-O Strategies
1. Demand for personal computers    1. Further expand into the personal    1. Build more manufacturing firms
    continues to grow.                   computer market (S1, S5, O1,         and retail offices in the United
2. Growth from desktops to               O2, O4).                             States (W1, W3, O5).
    notebooks.                      2. Ensure computers are                2. Continue to expand the color
3. Partnership with Microsoft.           compatible with most                 printer market (W4, O10).
4. Expansion of product portfolio        technological updates (S14, O1,
    and consumer electronics.            O4).
5. Higher consumer spending in
    the US.
6. Incorporated managed and
    professional services.
7. Global enterprise systems.
8. Training and certification
    program.
9. Financial services offered.
10. Growth in the color printer
    market.
Threats                             S-T Strategies                      W-T Strategies
1. Consolidation in the PC          1. Offer discounts on products for 1. Hedge threats from US
    industry (i.e., Lenove Group        commercial consumers (S9, T4).    companies by increasing
    Ltd. of China purchase PC       2. Increase mail-in rebates to        marketing efforts into Asia and
    division of IBM in May 2005).       minimize the threat from          Europe, (T1,W3).
2. Higher oil prices could crimp        competitors (S15, T3, T5).
    consumers’ spending.
3. Competitive landscape.
4. Commercial demand fails to
    accelerate.
5. Threat from competitors.
6. Slow growth in the PC market.
7. Component price fluctuation
8. Price for computing power has
    decreased.
9. Computer market has
    broadened.
10. Competitors in the commercial
    market have increased.
11. Currency fluctuations in the
    international markets.




                                                     23
G.       SPACE Matrix


                                                        FS
                      Conservative                                                     Aggressive
                                                        6

                                                        5

                                                        4

                                                        3

                                                        2

                                                        1


  CA                                                                                                         IS
       -6        -5         -4        -3   -2    -1              1        2        3        4        5   6
                                                       -1

                                                       -2

                                                       -3

                                                       -4

                                                       -5

                                                       -6
                       Defensive                                                       Competitive
                                                        ES


Financial Strength (FS)                                Environmental Stability (ES)
Return on Investment                             6     Rate of Inflation                                      -1
Leverage                                         3     Technological Changes                                  -5
Liquidity                                        4     Price Elasticity of Demand                             -3
Working Capital                                  5     Competitive Pressure                                   -4
Cash Flow                                        6     Barriers to Entry into Market                          -4

Financial Strength (FS) Average                 4.8    Environmental Stability (ES) Average                  -3.4




Competitive Advantage (CA)                             Industry Strength (IS)
Market Share                                     -1    Growth Potential                                       4
Product Quality                                  -2    Financial Stability                                    5
Customer Loyalty                                 -2    Ease of Entry into Market                              3
Technological Know-how                           -3    Resource Utilization                                   5
Control over Suppliers and Distributors          -2    Profit Potential                                       5

Competitive Advantage (CA) Average              -2.0   Industry Strength (IS) Average                        4.4


y-axis = FS + ES = 4.8 + (-3.4) = 1.4
x-axis = CA + IS = -2.0 + (+4.4) = 2.4




                                                       24
H.        Grand Strategy Matrix


                                     Rapid Market Growth


                      Quadrant II                          Quadrant I




   Weak                                                                    Strong
 Competitive                                                             Competitive
  Position                                                                Position




                      Quadrant III                         Quadrant IV


                                     Slow Market Growth




     1.   Market development
     2.   Market penetration
     3.   Product development
     4.   Forward integration
     5.   Backward integration
     6.   Horizontal integration
     7.   Related diversification




                                             25
I.     The Internal-External (IE) Matrix
                                               The IFE Total Weighted Score

                                   Strong                    Average               Weak
                                  3.0 to 4.0                2.0 to 2.99          1.0 to 1.99
               High                   I                           II                 III
               3.0 to 3.99
                                 Americas



                                                        Europe



               Medium                IV                           V                  VI
The EFE Total 2.0 to 2.99
Weighted Score

                                    Dell




               Low                   VII                         VIII                IX
               1.0 to 1.99

                                    Asia-Pacific




Hold and Maintain

Region                 Revenues (1-28-05)                   Profit (operating)
Americas                   $32,940M                             $2,978M
Europe                     $10,787M                               $818M
Asia-Pacific                $5,478M                               $458M
Total                      $49,205M                             $4,254M




                                                   26
J.       QSPM
Strategic Alternatives
                                                                           Build another     Expand marketing
                                                                          manufacturing      efforts in Asia and
Key Internal Factors                                             Weight   plant in the US.          Europe
Strengths                                                                  AS         TAS        AS         TAS
Built-to-order personal computers sold directly to                0.100     ---        ---       ---         ---
customers.
Direct sales via mail, phone orders, and the Internet.            0.050    ---        ---       ---         ---
Built-to-order personal computers eliminates markups              0.025    ---        ---       ---         ---
of resellers.
Built-to-order personal computers greatly reduce the
costs and risks associated with carrying large stocks of          0.050    ---        ---       ---         ---
parts, components, and finished goods.
Dell is the current PC industry leader.                           0.100    3.0       0.300      2.0       0.200
Dell has regional and manufacturing plants globally.              0.050    1.0       0.050      4.0       0.200
Dell is a well-known brand name.                                  0.050    4.0       0.200      3.0       0.150
Dell’s direct-to-consumer strategy has given the
company a substantial cost and profit margin over its             0.050    ---        ---       ---         ---
rivals.
Dell has a good relationship with the company’s large
corporate and government customers and continues to               0.025    1.0       0.025      2.0       0.050
focus on these sales and service relationships.
Dell holds 29.1% of the total market for personal
computer sales in the Americas, putting Dell ahead of             0.050    3.0       0.150      2.0       0.100
its competitors.
Dell’s built-to-order manufacturing process results in            0.050    ---        ---       ---         ---
rapid inventory turnover and reduced inventory levels.
To ensure defect free products, testing is performed by
Dell along the process and on the final computer                  0.050    ---        ---       ---         ---
product.
Dell has a wide range of customers including large
corporations, government agencies, healthcare,                    0.050    4.0       0.200      3.0       0.150
educational institutes, small business, and individuals.
Dell is ranked # 1 by Technology Business because of
its Intel-based server satisfaction for 27 of the past 29         0.050    ---        ---       ---         ---
quarters.
Dell divides its sales and marketing force among the
various customer groups in order to meet each groups              0.025    ---        ---       ---         ---
specific needs.
Dell advertises its products on the Internet, TV, and by          0.025    ---        ---       ---         ---
mailing a broad range of marketing publications.
Weaknesses
Dell has only two manufacturing plants and one                    0.025    4.0       0.050      2.0       0.050
regional office in the United States.
Dell computers cannot be purchased in retail stores.              0.025    ---        ---       ---         ---
Dell has over 40 locations globally yet Dell is not the
#1 supplier in Asia Pacific, European, Middle East, or            0.050    1.0       0.050      4.0       0.200
African segments.
Dell rebrands printers purchased from Lexmark, which              0.025    ---        ---       ---         ---
is a major production cost for Dell.




                                                            27
Dell is too reliant on foreign suppliers, because of this a
disruption of fuel supply could make the price of                  0.050     3.0       0.150      1.0       0.050
shipping go up.
Dell is so large now that it might not be able to grow at          0.025     1.0       0.025      2.0       0.050
the same pace.
SUBTOTAL                                                           1.00                1.20                 1.20

                                                                             Build another     Expand marketing
                                                                            manufacturing      efforts in Asia and
Key External Factors                                               Weight   plant in the US.          Europe
Opportunities                                                                AS         TAS       AS        TAS
Demand for personal computers continues to grow.                    0.100    2.0       0.200      4.0       0.400
Many consumers switching from desktops to notebooks.                0.050    ---         ---      ---         ---
Microsoft desires to partner with Dell.                             0.100    ---         ---      ---         ---
Consumer electronics is a profitable business.                      0.050   3.00       0.150      1.0       0.050
Higher consumer spending in the US.                                 0.025   3.00       0.075      1.0       0.025
Incorporated managed and professional services.                     0.025    ---         ---      ---         ---
Global enterprise systems.                                          0.050    2.0       0.100      4.0       0.200
Training and certification program.                                 0.025    ---         ---      ---         ---
Financial services offered.                                         0.025    ---         ---      ---         ---
Growth in the color printer market.                                 0.025    ---         ---      ---         ---
Threats
Consolidation in the PC industry (i.e., Lenove Group Ltd.           0.050   2.0       0.100      4.0       0.200
of China purchase PC division of IBM in May 2005).
Higher oil prices could crimp consumers’ spending.                  0.050   ---         ---      ---         ---
Commercial demand fails to accelerate.                              0.025   ---         ---      ---         ---
Competitors are strong.                                             0.150   2.0       0.300      3.0       0.450
Slow growth in the PC market.                                       0.100   ---         ---      ---         ---
Component price fluctuation                                         0.025   ---         ---      ---         ---
Price for computing power has decreased.                            0.025   ---         ---      ---         ---
Computer market has broadened.                                      0.050   ---         ---      ---         ---
Currency fluctuations in the international markets.                 0.050   1.0       0.050      3.0       0.150
SUBTOTAL                                                             1.00              0.98                 1.48
SUM TOTAL ATTRACTIVENESS SCORE                                                         2.18                 2.68



K.       Recommendations

                 Add two new manufacturing plants in the United States totaling $250M each.
                 Expand into Europe and Asia building new manufacturing plants and retail stores
                  at a cost of $5B
                 Continue research and development in the color printer market for $50M

                            Amount Needed Over Next 3 Years = $5.3 Billion




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L.   EPS/EBIT Analysis
     $ Amount Needed: $ 5,300M
     Stock Price: $30
     Tax Rate: 32%
     Interest Rate: 7%
     # Shares Outstanding: 2,354M

                           Common Stock Financing                                Debt Financing
                   Recession       Normal         Boom             Recession         Normal            Boom
     EBIT       $2,000,000,000 $4,000,000,000 $6,000,000,000    $2,000,000,000   $4,000,000,000   $6,000,000,000
     Interest          0              0              0            371,000,000      371,000,000      371,000,000
     EBT         2,000,000,000 4,000,000,000 6,000,000,000       1,629,000,000    3,629,000,000    5,629,000,000
     Taxes        640,000,000   1,280,000,000 1,920,000,000       521,280,000     1,161,280,000    1,801,280,000
     EAT         1,360,000,000 2,720,000,000 4,080,000,000       1,107,720,000    2,467,720,000    3,827,720,000
     # Shares    2,530,666,667 2,530,666,667 2,530,666,667       2,354,000,000    2,354,000,000    2,354,000,000
     EPS              0.54           1.07          1.61               0.47             1.05             1.63


                       70 Percent Stock - 30 Percent Debt              70 Percent Debt - 30 Percent Stock
                   Recession        Normal           Boom          Recession        Normal           Boom
     EBIT       $2,000,000,000 $4,000,000,000 $6,000,000,000    $2,000,000,000 $4,000,000,000 $6,000,000,000
     Interest     111,300,000     111,300,000     111,300,000     259,700,000     259,700,000     259,700,000
     EBT         1,888,700,000 3,888,700,000 5,888,700,000       1,740,300,000 3,740,300,000 5,740,300,000
     Taxes        604,384,000    1,244,384,000 1,884,384,000      556,896,000    1,196,896,000 1,836,896,000
     EAT         1,284,316,000 2,644,316,000 4,004,316,000       1,183,404,000 2,543,404,000 3,903,404,000
     # Shares    2,477,666,667 2,477,666,667 2,477,666,667       2,407,000,000 2,407,000,000 2,407,000,000
     EPS              0.52            1.07            1.62            0.49            1.06            1.62




M.   Epilogue

              On January 5, 2006, at the International Consumer Electronics Show in Las
     Vegas, CEO Michael Dell introduced several new products aimed at the high-end
     gaming, entertainment, and multimedia markets. The new Dell products include the XPS
     desktop and Inspiron notebook systems and a 30-inch LCD monitor. Mr. Dell also
     previewed a Dell XPS mobile concept based on a new industrial design and complete
     with a 20.1-inch display with high-definition TV. The new XPS product features
     integrated surround-sound audio, and a slim slot-load DVD player mean no compromise
     for enthusiasts or users performing demanding multimedia tasks.
              When it comes to gaming and home entertainment, Mr. Dell believes that the
     personal computer continues to reign as the consumer product of choice. In 2006, his
     firm will be the first to offer a desktop with certified NVIDIA® quad core graphics, one
     of the first notebooks with dual-core technology and the first 30-inch flat panel monitor
     list-priced less than $2,200.
              With the limited-edition XPS 600 Renegade(TM) offered new in 2006, Dell is the
     first firm to support two new NVIDIA GeForce® 7800 SLI graphics cards, which can
     link four graphics processors to speed up overall video performance or draw images with
     intense realism. The new desktop system also features Dell's first overclocked and


                                                 29
factory-set 4.26 GHz Intel® Extreme Edition dual-core processor. Overclocking is
designed to increase the processor speed beyond mainstream usage to deliver over-the-
top performance critical to extreme gamers. Dell's implementation of the processor is
supported by the expertise of specially trained XPS technicians.
        Dell continues to be one of the most admired firms in the world in terms of its
management, marketing, finance, and information technology performance – but H-P,
IBM, Apple, and even foreign firms have taken aim on Dell as the firm to focus upon.




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