Dell 1998 Annual Report Download - page 3

offers its customers a full range of computer systems, including desktop
computer systems, notebook computers, workstations and network server and
storage products, as well as an extended selection of peripheral hardware and
computing software. The Company's "direct model" offers in-person relationships
with corporate and institutional customers, as well as telephone and Internet
purchasing; build-to-order computer systems; telephone and on-line technical
support and next-day, on-site product service. The Company sells its products
and services to large corporate, government, medical and education customers,
small-to-medium businesses and individuals.
The Company is a Delaware corporation that was incorporated in October 1987,
succeeding to the business of a predecessor Texas corporation that was
originally incorporated in May 1984. Based in Round Rock, Texas, the Company
conducts operations worldwide through wholly owned subsidiaries. See "Item
1 -- Business -- Geographic Areas of Operations." Unless otherwise specified,
references herein to the "Company" are references to the Company and its
consolidated subsidiaries. The Company operates in one principal industry
segment.
The Company's common stock, par value $.01 per share, is listed on The Nasdaq
National Market under the symbol "DELL." See "Item 5 -- Market for Registrant's
Common Equity and Related Stockholder Matters -- Market Information."
BUSINESS STRATEGY
The Company's business strategy is based on its direct business model. The
Company's business model seeks to deliver a superior customer experience through
direct, comprehensive customer relationships, cooperative research and
development with technology partners, computer systems custom-built to customer
specifications and service and support programs tailored to customer needs. The
Company believes that the direct model provides it with several distinct
competitive advantages. The direct model eliminates the need to support an
extensive network of wholesale and retail dealers, thereby avoiding dealer
mark-ups; avoids the higher inventory costs associated with the wholesale/retail
channel and the competition for retail shelf space; and reduces the high risk of
obsolescence associated with products in a rapidly changing technological
market. In addition, the direct model allows the Company to maintain, monitor
and update a customer database that can be used to shape future product
offerings and post-sale service and support programs. This direct approach,
combined with the Company's efficient procurement, manufacturing and
distribution processes, allows the Company to bring relevant technology to its
customers faster and more competitively priced than many of its competitors.
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Comprehensive Customer Relationships
The Company develops and utilizes direct customer relationships to understand
end-users' needs and to deliver high quality computer products and services
tailored to meet those needs. For large corporate and institutional customers,
the Company works with the customer prior to the sale to plan a strategy to meet
that customer's current and future technology needs. After the sale, the Company
continues the direct relationship by establishing account teams, consisting of
sales, customer service and technical personnel, dedicated to the Company's
large corporate and institutional customers. The Company also establishes direct
relationships with small-to-medium businesses and individuals, through account
representatives, telephone sales representatives or Internet contact. These
direct customer relationships provide the Company with a constant flow of
information about its customer's plans and requirements and enable the Company
to weigh its customer's needs against emerging technologies.
Cooperative Research and Development
The Company has successfully developed cooperative, working relationships with
many of the world's most advanced technology companies. Working with these
companies, the Company's engineers manage quality, integrate technologies and
design and manage system architecture. This cooperative approach allows the
Company to determine the best method and timing for delivering new technologies
to the market. The Company's goal is to quickly and efficiently deliver the
latest relevant technology to its customers.
Custom-Built Computers
The direct model is based on the principal that delivering custom-built
computers is the best business model for providing solutions that are truly
relevant to end-user needs. This concept, together with the Company's flexible,
build-to-order manufacturing process, enables the Company to achieve faster
inventory turnover and reduced inventory levels and allows the Company to
rapidly incorporate new technologies and components into its product offerings.
Custom-Tailored Service and Support Programs
In the same way that the Company's computer products are built-to-order, service
and support programs are designed to fit specific customer requirements. The
Company offers a broad range of service and support programs through its own
technical personnel and its direct management of specialized service suppliers.
These services range from telephone and Internet support to on-site