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Financial Statement Analysis Project: Dell Inc.


















The computer industry is one that is always changing with the development of new technology and products. The companies that thrive in this industry are the ones that are able to develop new products, manufacture them effectively and provide them to their customers at competitive prices. Dell Inc was founded by Michael Dell in 1984, after Michael turned his college dorm room into a computer parts distribution center. Michael would buy computer parts at cost from IBM dealers and resell these them to newspapers and computer magazines at 10-15% below market value. He was able to purchase these products cheaply because the IBM dealers he was buying from were forced to buy in large quantities by IBM, which led to lots of extra merchandise. Instead of sitting on the excess inventory the IBM dealers would rather sell to Michael to break even. It wasn’t long before Michael was clearing $80,000 a year from his dorm room which gave him enough incentive to take the operation on full time. Michael would use the same strategy, which would become known in the industry as the direct sales method, to make Dell Inc an industry leader shortly after its creation.
Dell Inc. has established itself as an industry leader in the computer hardware industry by providing a broad range of products including desktop PCs, servers and networking products, storage, mobility products, software and peripherals and computer services. Dell is able to provide customers low prices because they have cut out the middle man of the industry, retail stores, which lowered their cost of goods sold and led to higher profit margins. Dell is also notorious in the industry for having high inventory turnover rates and very efficient production facilities. Dell doesn’t actually manufacture computer parts...