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Going into 2000, Dell Computer was the U.S. leader in PC sales, with nearly a 17 percent market share, about 1 percentage point ahead of second-place Compaq. Gateway was third with 8.9 percent, followed by Hewlett-Packard with 8.8 percent and IBM with 7.2 percent. Dell overtook Compaq as the U.S. sales leader in the third quarter of 1999, and it had moved ahead of IBM into second place during 1998 (see Exhibit 1). Worldwide, Dell Computer ranked second in market share (10.5 percent) behind Compaq (14.0 percent). IBM ranked third worldwide, with an 8.2 percent share, but this share was eroding. Since 1996, Dell had been gaining market share quickly in all of the world’s markets, growing at a rate more than triple the 18 percent average annual increase in global PC sales. Even though Asia’s economic woes in 1997–98 and part of 1999 dampened the market for PCs, Dell’s PC sales across Asia in 1999 were up a strong 87 percent. Dell was also enjoying strong sales growth in Europe.
Dell’s sales at its Web site (www.dell.com) surpassed $35 million a day in early 2000, up from $5 million daily in early 1998 and $15 million daily in early 1999. In its fiscal year ending January 31, 2000, Dell Computer posted revenues of $25.3 billion, up from $3.4 billion in the year ending January 29, 1995—a compound average growth rate of 49.4 percent. Over the same time period, profits were up from $140 million to $1.67 billion—a 64.1 percent compound average growth rate. Since its initial public offering of common stock in June 1988 at $8.50 per share, the company had seen its stock price split seven times and increase 45,000 percent. Dell Computer was one of the top 10 best-performing stocks on the NYSE and the NASDAQ during the 1990s. In recent years, Dell’s annual return on invested capital had exceeded 175 percent.
Dell’s principal products included desktop PCs, notebook computers, workstations, servers, and storage devices. It also marketed a number of products made by other manufacturers, including CD-ROM drives, modems, monitors, networking hardware, memory cards, speakers, and printers. The company received nearly 3 million visits weekly at its Web site, where it maintained 50 country-specific sites. It was a world leader in migrating its business relationships with both customers and suppliers to the Internet. In 1998 the company expanded its Internet presence with the launch of www.gigabuys.com, an online source for more than 30,000 competitively priced computer-related products. Sales of desktop PCs accounted for about 65 percent of Dell’s total systems revenue; sales of notebook computers generated 20–25 percent of revenues, and servers and workstations accounted for 10–15 percent of revenues. Dell products were sold in more than 170 countries. In early 2000, the company had 33,200 employees in 34 countries, up from 16,000 at year-end 1997; approximately one-third of Dell’s employees were located in countries outside the United States, and this percentage was growing.
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