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

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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

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 Debt/Equity Ratio 0.10 0.06 1.06
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

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Built-to-order personal computers eliminates 0.025 3 0.075
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

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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

22
 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.
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, companies by increasing
Ltd. of China purchase PC T4). marketing efforts into Asia and
division of IBM in May 2005). 2. Increase mail-in rebates to Europe, (T1,W3).
2. Higher oil prices could crimp minimize the threat from
consumers’ spending. competitors (S15, T3, T5).
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

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 I nvestment 6 Rate of I nflation -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) I ndustry Strength (I S)

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 I ndustry Strength (I S) 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

28
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

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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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