Dell 1999 Annual Report Download - page 3

computers, workstations, network servers and storage products, as well as an extended selection of peripheral hardware, computing
software and related services. Additionally, the Company offers an array of services to support its customers' online initiatives. The
Company's direct model offers in-person relationships with corporate and institutional customers, as well as telephone and Internet
purchasing, built-to-order computer systems, telephone and online technical support and onsite product service. The Company sells its
products and services to large corporate, government, healthcare 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 principally
in one 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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The Internet
The Company is committed to refining and extending the advantages of its direct model approach by moving even greater volumes of
product sales, service and support to the Internet. The Internet, perhaps the purest and most efficient form of the direct model,
provides greater convenience and efficiency to customers and, in turn, to the Company. The Company receives in excess of
2.6 million visits per week to www.dell.com, where it maintains more than 80 country-specific sites. Company sales generated through
the Internet reached nearly 50% of revenue and averaged $40 million per day by the end of fiscal year 2000. Through, www.dell.com,
customers and potential customers can access a wide range of information about the Company's product offerings, can configure and
purchase systems online and can access volumes of support and technical information.
The Company also develops custom Internet sites, called Premier PagesTM, for various corporate and institutional customers, allowing
these customers to simplify and accelerate procurement and support processes. Through these custom sites, the Company offers the
customer paperless purchase orders, approved product configurations, global pricing, real-time order tracking, purchasing history and
account team information. The Company currently provides more than 40,000 Premier Pages worldwide. The Company also provides
an online virtual account executive for its small business customers. And, for all domestic customers, the Company provides a spare-
parts ordering system, and a virtual help desk featuring natural-language search capabilities and direct access to technical support data.
In fiscal year 2000, the Company expanded its Internet presence with the launch of www.gigabuys.com. This, combined with the
DellWare® program has created an online source for more than 30,000 competitively-priced computer-related products, including
software and peripherals.
The Company recently announced a series of initiatives designed to leverage the Company's successful use of the Internet by
providing customers the servers, storage, and services required to build, expand and enhance their own Internet infrastructure
capabilities. These initiatives include the bundling of marketing, sales, services, support, and financing for Internet customers through
the Service Provider DirectTM program; Dell Expert ServicesTM consulting services and web hosting; the PowerAppTM line of web
server appliances; and strategic investments in Internet infrastructure companies by Dell Ventures.
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.