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... nd services a range of computer systems, including desktop, notebooks, and enterprise systems (includes servers and workstations). Dell also markets software, peripherals and service and support programs. Dell offers a wide range of pricing for all low and high-end market segments. Due to the decrease in PC prices, Dell has started focusing on other PC segments, especially the enterprise system segment.
Dell created partnerships with suppliers. This partnership allowed Dell to invoke just-in-time component inventories. Dells production build-to-order strategy allows them to keep no inventory on hand. Since they carry no inventory, Dell is able to upgrade components as new components were introduced to the market.
Information sharing allowed Dells suppliers to know when inventory levels were low. Selling directly to customers eliminated the time and costs associated with distributing through resellers. There are 2, 586, 748, 000 shares outstanding, with a market value 117, 050 ($ Mil). The number of shares held by institutions is 1, 250, 265, 000 (48. 33 %) of the stock. The company has not issued any preferred stock. a) Current Ratio: Dells Current Ratio is below industry average.
This is due to Dells new product ventures. Dell decided to invest in its enterprise systems R & D extensively. Dell needed new product lines that would help increase profits. b) Quick Ratio: Looking at the figures below, we see that Dells quick ratio is below the industry's average. Dells increase in short-term debt is causing them to be below the industry's average.
a) Debt Ratio: This shows that Dell has $. 54 in debt in 2000 for every $ 1 in assets. This means that Dell can cover its debt obligation with its assets if it needs to. Dell decreased its ratio from. 66 in 1999 to. 54 in 2000 further demonstrating that Dell has increased its assets in proportion to its debts. b) Debt to Equity Ratio: Dell's debt to equity ratio is lower than the industry, which means that Dell has less equity than other companies in the industry. One good reason for this ratio being so low is the additional debt that Dell is assuming in its enterprise systems R & D.
c) Assets to Equity: Once again the effects of Dells new enterprise systems and globalization are apparent. These new ventures are reducing Dells Assets to Equity ratio, but should increase it in the long run. d) Fixed Charge Coverage: Times interest earned measures the extent to which operating income can decline before the firm is unable to meet its annual interest costs. Only the industry's average was available. As an example, lets say that Dells 2000 figure was $ 5. 00 this would mean that Dell had $ 5. 00 in earnings for every $ 1 in interest expense. This shows that the firm can easily cover its interest expense obligations.
a) Accounts Receivable Turnover: Dell is doing much better than the industry in turning their receivables in 2000. Dell is able to collect its receivables faster due to its direct selling method. b) Inventory Turnover: Dells high turnover is mainly due to their direct selling technique. By only keeping the amount of inventory needed for daily manufacturing, Dell is able to triple the industry's average on its inventory turnover. a) Gross Profit Margin: Dell is experiencing a decrease in their GPM. Dells current and five-year GPM has been below the industry's average.
Dells GPM might appear poorer than the average, but due to their global expansion and their attempts to enter into new PC segments, Dell is pouring profits into its growth, which will payoff in the long-run verses the short. b) Net Profit Margin: This demonstrates that Dell is being outperformed by the industry. While the industry's after tax profits have increased over the last five ever year, Dells NPM appears to be decreasing. Since, Dell has normally done better than the industry, it would appear that their recent decline in NPM is due again to their new ventures into other segments in the PC industry. c) Return on Assets: Return on Assets shows how much return management has earned on all assets available to it, from all sources. Dell has earned $ 18. 35 for every $ 1 it has in assets.
Dells ROA has been above the industry's average over the last five year. Dells management is demonstrating that they are utilizing the firms assets more effectively. d) Earning Per Share: Dell earned $ 11. 27 in net profit for each share of common stock outstanding in 2000. This is a major decrease from their five-year average. Dell is below the industry's average because of their new ventures. e) Price-Earnings ratio: The relationship between the market price of a share of stock and the stocks current earnings per share is often quoted in terms of a price-earnings ratio or P/E ratio.
Dell is above the industry's average in 2000 and was more than double the average over the last five years, this trend demonstrates that investors belief in the company is strong. Dell should continue its R & D in servers. Dells brand name recognition and worldwide distribution network of computers will help propel its server segment, allowing Dell to achieve greater market penetration. Since most companies are investing large amounts of money into network development, Dell should turn its focus to network and web servers. By becoming one of the major players in this fastest growing PC segment, Dell will boost its name even more as the leader of innovation in the PC industry. Since Dell sells directly to their customers, they must continue to offer a variety of PC models, high and low end, to keep all consumer market segments happy.
The correlation between adverting and sells seems to be apparent. Dell must increase its advertisement allowance in order to combat its competitors. Introduce innovative marketing campaigns that appeal to lower income families. Make advertisements informational so as to relieve the intimidation felt by less experienced computer people. Since Dell has created a reputable name for themselves, they should consider opening Dell Centers. Like Gateway, Dell should open strategically located computer stores.
These stores would allow people, that do not buy computers direct, the opportunity to see Dells products, and have an expert there to assist them in their purchase. This would definitely help Dell increase their reputation and market share. Bibliography:
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