Dell Computers Evaluating Dell Inc Term Paper

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Dell Computers

Evaluating Dell Inc. As a Prospective Employer

Company Overview

Dell Inc. specializes in the sale of computer systems directly to their customers. Their Standard Industrial Classification (SIC) code is 3571: electronic computers. Companies within the manufacturing portion of this code have an SIC code from 3571-3579. This code allows them to manufacture and sell their systems directly to their consumers. When one compares their SIC classification to their actual business as listed in their 10-K, they are close. Dell states that it sells systems directly to customers. However, it does not indicate whether it manufactures them or purchases them from another manufacturer. This is not stated in the company description. However, in the Shareholder Letter it is found that many of the systems that it sells are produced by remote partners (Shareholder Letter, p. 1). It is important for the company to use the correct SIC code.

According to the letter to shareholders, Dell has achieved record growth over the past several years. It continues to reach new sales levels and break records. The CEO and Chairman of the Board are optimistic that this growth will continue into the future. They attribute their exceptional growth to an approach that focuses on the customer. Dell will continue to expand its holdings on a global basis, particularly in the Asian pacific. Dell expects to double its business in China and other emerging nations (Shareholder Letter, p. 1).

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Customer experience is the pillar of Dell's strategic plan. Their ability to deliver what the customer wants when they want it is one of the key factors that has led to Dell's growth in the past and that will contribute to its continued growth in the future (Shareholder Letter, p. 4). However, Dells' philosophy means that it is never satisfied and will continue to strive for continuous improvement in the systems that they provide and in meeting customer expectations. Dell has an active recycling program that encourages customers to recycle old computers (Shareholder Letter, p. 5). They reuse the material recovered in their manufacturing processes. Dell's philosophy is centered on customer desires, and this includes attention to social responsibility.

Term Paper on Dell Computers Evaluating Dell Inc. As a Assignment

Dell's marketing strategy remains consistent in each of their global enterprises. it's philosophy and overall business strategy is customer driven. Dell collaborates with other providers on a global basis. It selects partners based on compatibility with company philosophy and attention to the same quality that Dell customers expect (Shareholder Letter, p. 15). Dell manufactures 1/3 of its computers sold in the U.S. The rest are produced by Dell's many partners. Dells' leading selling point is their customer service centers that offer support to Dell's entire client base.

Dell systems are the backbone of many major global corporations including DuPont and FedEx. Dell specializes in consumer systems including desktops and laptops. It also provides large business solutions such as server and large capacity storage systems (Shareholder Letter, p. 17). Their systems are known for ruggedness and durability.

Business Strategy

The forefront of Dell's business strategy is its direct customer model that includes a highly efficient manufacturing system. It focuses on supply chain management and organization. Dell feels that the most effective path to the customer is a direct relationship (Annual Report, p. 1). This model allows them to eliminate the intermediaries and retail dealers. Dell customers have the privilege of dealing directly with the manufacturer. This allows them to maintain lower prices than their competitors (Annual Report, p. 1).

Dell has the opportunity to custom build units for their clients with a fast turnaround. Dell is directly accountable to its customers, rather than going through levels of the retail chain (Annual Report, p. 2). This business model allows Dell to deliver the models that customers want at a price that is competitive. When they get a Dell, they know that they can count on excellent customer service. This business strategy gives Dell its competitive advantage.

Notes to Financial Statements

Accounting practices differ among various corporate entities. It is the job of the accountant to make certain that the information is presented in such as way that it most accurately represents the company. Accounting practices must comply with the Generally Accepted Accounting Practices (GAAP). However, there is more than one way to represent this information. The "notes" section of the financial statement provides the reader a clue as to how the information was prepared and presented. This will help the reader to make a more accurate assessment of the financial information within the report.

Dell's Note1 explains the length and timing of the fiscal year, principles of consolidation, use of estimates and how investments are translated into cash equivalents (Annual Report, p. 41). This section of the statement explains how tangible assets are valued and how investment instruments are considered in the financial statements. Because Dell operates in many nations outside of the U.S., it must also explain how it accounts for fluctuations in foreign currency (Annual Report, p. 42). The reader must understand these items so that can compare them and make an informed decision. If these statements were not included then the information presented may appear to be misleading.

Basic Balance

Understanding the balance sheet gives the investor a snapshot of the company's overall health. The balance sheet alone does not tell the entire story, but is can provide a basic understanding of the overall picture. The balance statement summarizes the receivables and assets that the company owns against the liabilities and debt that it has. Assets include receivables, inventory at hand, tangible assets such as the plant and equipment, as well as any monies received as a part of short or long-term investments. Liabilities include operating expenses, taxes owed, shares outstanding, and capital needed for projects.

Dell's most significant asset is their cash and cash equivalents (Annual Report, p. 37). Their least significant are long-term receivables from financing. These ratios reflect the nature of Dell's business. They offer many financing solutions to their customers and therefore receive considerable income from financing activities. These types are reflected as cash and cash equivalents if they are three months or less (Annual Report, p. 41). Receivables from long-term financing stem from long-term financing of major system to large corporations and from leasing property and other assets.

Dells' long-term financial responsibilities include the lease of property and equipment including manufacturing facilities and office space. It retains certain commitments and agreements with suppliers. Dell has a number of commitments that may be at risk at any particular time. In order to limit risks, Dell maintains diversified offerings. Dell has an active plan for monitoring investments so that it can mitigate any risks that may arise. In some cases, Dell maintains a contract with a single supplier if it feels that it is advantageous and that the quality is superior (Annual Report, p. 56). However, for most supplies, it retains alternative sources in case one supplier cannot meet the demand. The most important aspect of this information is that it lets the reader know that the company has made allowances for supplier failure and that it practices good risk management.

Dell does have a category for "other assets." These assets were not defined within the notes of the financial statements. Their amounts were insignificant and the nature of these assets is not known. Dell's statement does contain a section entitled "other non-current liabilities" but no mention is made of these assets in the notes or narrative.

Debt Ratios

The debt ration and debt to equity ration are two of the most important indicators that can be calculated from the balance sheet. The debt ration tells the reader how much the company relies on debt to finance their assets. A high debt to equity ratio is can indicate potential volatility. However, if the debt is used to increase revenues, then the company may generate more revenues than it would have without the additional financing. Interpretation of the debt to equity ratio is highly dependent upon how the financing was used to generate revenues.

Debt Ratio

23215 =.72

23109 =.82

Debt to Equity Ratio

6485 = 2.58

4129 = 4.60

These numbers tell us that Dell has been using a considerable amount of financing in its growth. This is reasonable considering its overseas expansions. However, in this case, they are experiencing considerable growth from their ventures and continue to add new sources of income to their portfolio through these financing options.

Income Statement and Statement of Shareholder's Equity

Dell divides its business segments according to global regions. It includes data from the U.S., Asia, Europe, and South America. They also divide their segmentation into a number of products within those countries, such as desktop PCs, mobility, software and peripherals, servers and networking, enhanced services, and storage (Annual Report, p. 59). Dividing their business into various segments gives them an overall picture of what products are the most successful and where to spend more effort in the future.

According to the annual report, Dell's most important segment is their desktop PCs. This… [END OF PREVIEW] . . . READ MORE

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