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DELL COMPUTER CORPORATION

DELL COMPUTER CORPORATION. Dell Computer Corporation, originally known as PC's Limited, an international computer firm headquartered in Austin, Texas, designs, manufactures, sells, and services IBM-compatible personal computers. By 1993 the company was listed among the Fortune 500, owned fourteen international subsidiaries, employed more than 4,800 workers, sold computer products in more than seventy countries, generated sales of over $2 billion dollars, and was the world's fourth-largest computer maker. The company was founded in 1984 by Michael S. Dell, then an eighteen-year-old freshman at the University of Texas at Austin, during the early stages of the personal-computer industry. Intrigued by computers during his teens, Dell turned a hobby of building customized computers into a company that pioneered the marketing and sale of personal computer systems by telephone.

Dell was born in West Houston and applied for a high school equivalency diploma at age eight. He ran a mail order stamp-trading business at age thirteen and sold subscriptions to the Houston Post by telephone at sixteen. Within a year he was named salesman of the month and was earning $18,000 annually for a direct-mail campaign he had devised that targeted newlyweds. He turned to electronics in his late teens, when he began building customized personal computers by purchasing and assembling computer components from various manufacturers. According to Dell, his research on component manufacturers convinced him he could launch a business that would save users money, provide better support services, and make a profit.

In 1984 he purchased an Austin business license and incorporated a company he called PC's Limited. In 1985 the company introduced an IBM-compatible PC clone called the Turbo. By selling computer components and kits by telephone and advertising in trade magazines, Dell built a clientele of businesses and experienced computer users. His familiarity with the marketing potential of telephone sales gave Dell a competitive advantage over larger rivals IBM and Compaq, who, like the vast majority of computer makers, sold their products through high-markup retail outlets. Customers ordered Dell Computer products from computer-literate salespeople who directly provided information to customers. By building computers only to order, the company lowered inventory costs. By the end of the company's first fiscal year, sales totaled $6 million. Following a low-price leader strategy, PC's Limited grew exponentially. In fiscal year 1986 the company reported $34 million in sales, employed 100 workers, and expanded to a new 3,000-square-foot facility. Dell left college after his freshman year to focus on his business. By the end of 1986 sales had grown to $69.5 million, and manufacturing operations were moved to an 83,000-square-foot building in North Austin. In 1987 the company took its founder's name and became Dell Computer Corporation. Dell next opened its first sales office in Great Britain, printed its first catalog, began selling application software, and established a support center to handle customer inquiries. The company further differentiated itself from IBM, Compaq, and other mail-order rivals by introducing next day on-site service free for a period after purchase through such third-party service companies as Honeywell Bull, along with unlimited telephone technical support and a money-back guarantee. In fiscal year 1989 sales rose to almost $258 million. In 1988 Dell Computer Corporation made an initial public offering of common stock and subsequently opened wholly-owned subsidiaries in Canada and West Germany. By late 1989 the company had 1,600 employees worldwide, had introduced its first 316LT laptop computer, and had opened a French subsidiary. In 1990 the company announced an agreement with Soft Warehouse, Incorporated (Comp USA), then the largest computer superstore chain in the United States, to sell Dell products. In 1991 expansion continued, as the firm opened a manufacturing plant in Limerick, Ireland. As competitors began to imitate its telephone-sales strategy, Dell changed its image from that of a low-price leader to one offering quality and extensive service by becoming the first PC manufacturer to offer free installation of applications software with the purchase of a computer. In 1992 Dell entered into a third-party maintenance agreement with BancTec Service Corporation and announced Critical Care, a new and even more rapid response system for customer service problems. Michael Dell dedicated the Michael S. Dell Computer Lab at the University of Texas at Austin, was appointed to the board of directors of the Foundation for the National Technology Medal, and was named Man of the Year by PC Magazine. In 1992 the company was named to the Fortune 500 list of the country's largest manufacturers.

Despite its strong growth and status, the Dell Corporation's success was not assured as of mid-1993. Though the company introduced three new computer lines, had begun to sell computers by direct sale in Japan, and revenues in that year were expected to rise to $3 billion, company growth had begun to hinder its ability to manage its operations. Miscalculations of the pace of change in the notebook-computer market forced Dell to discontinue its notebook line. Losses associated with writeoff of the notebook line and falling personal-computer prices due to industry competition caused a decrease in company profits despite an 80 percent increase in revenues. Despite these setbacks, Dell Computer predicted a return to profitability in the third quarter of 1993 after an internal reorganization had addressed problems related to rapid growth. The company planned to consolidate its European operations and update its notebook computer business.

BIBLIOGRAPHY: 

Business Week, March 22, 1993. Claire Poole, "The Kid Who Turned Computers into Commodities," Forbes, October 21, 1991. Al Reinert, "Revenge of the Nerd," Texas Monthly, September 1992. Vertical Files, Dolph Briscoe Center for American History, University of Texas at Austin (Michael Dell, Dell Computer Corporation).

Jon Kutner, Jr.

Citation

The following, adapted from the Chicago Manual of Style, 15th edition, is the preferred citation for this article.

Jon Kutner, Jr., "DELL COMPUTER CORPORATION," Handbook of Texas Online (http://www.tshaonline.org/handbook/online/articles/dndyy), accessed December 28, 2014. Uploaded on June 12, 2010. Published by the Texas State Historical Association.