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History of Dell Computers

The story of Dell computers is a classic story of how a little boy took on a titan in business and ended up becoming a titan, the kind of story that Americans love to tell. Like many stories in the computer industry, it all started with a humble beginning.

Michael Dell was not a total story of rags to wealth. He was not a poor man. He was the son of an orthodontist and stockbroker, and showed an entrepreneurial tendency from the age of 9, when he earned $ 2,000 selling collectible stamps. As a teenager, he earned $18,000 selling newspaper subscriptions to an untapped market he himself found. Crucially, at age 15, he was showing interest in computers. His parents wanted him to become a doctor. The history of Dell computers started in a dormitory

The PC's Limited Turbo PC was roughly the same size and shape as the IBM PC, but it cost about 1/3 of that amount. It launched the history of Dell computers, effectively ending Michael Dell's parents' dreams of becoming a doctor.

The history of Dell computers begins at the University of Texas at Austin in 1984. As a newcomer to the biology course, Dell had the idea to start selling updates for IBM PCs. Dell knew how to upgrade a regular IBM PC to the equivalent of a more expensive PC / XT by adding a hard drive or memory. People took his computers to his dorm on the 27th floor, where he installed updates on his computers, and they paid for it.

Dell's business soon overcame that dorm on the 27th floor and he was living off campus. From there, he started buying unsold IBM PCs from larger vendors, upgrading them by adding memory and hard drives and reselling them at a profit. This practice, known as the gray market, was common in the 1980s, but it was difficult to guarantee the supply of the machines. Dell noted that a $ 3,000 IBM PC contained about $ 600 in parts, which took him to the next stage of his enterprise. He started building his own IBM-compatible PCs from standard parts available on the market, including a Taiwan-made 8088 motherboard. What he did was similar to an enthusiast building a PC with standard parts, but on a larger scale.

PC's Limited and the direct order model

His company, PCs Limited, initially sold computers over the phone using a bespoke model. A customer would call for an order and then PC's Limited would assemble and ship it. PC's Limited's first product, which it simply called the Turbo PC, sold for $795 in its original configuration. It was faster than an IBM PC and cost 1/3 of the price.

On spring break, PC's Limited was selling $80,000 in PCs every month. In July, Dell showed his parents a financial statement showing a profit of more than $200,000 and convinced his parents to let him drop out of college. Michael Dell would not be becoming a doctor. He dropped out of college to focus on selling PCs full-time and soon his company had 30 employees.

PC's Limited has thrived for years on the direct order model. The idea was to take orders by phone or mail and not build the PC until someone placed the order. This allowed them to control inventory and keep overheads low. It also avoided the problems that IBM had with oversupply that Dell exploited when it launched its business.

In 1988, PC's Limited changed its name to Dell Computer Corporation, taking the name of its founder and going public, raising $ 30 million in its IPO and reaching a market capitalization of $ 85 million. In 1992, it was a Fortune 500 company, making Michael Dell, 27, the youngest Fortune 500 CEO of all time, marking a pivotal moment in the history of Dell computers. And it was Dell that successfully challenged IT patents on the microprocessor, which goes back to some early 1970s cooperation with Intel.

Dell began taking online orders over the Internet in 1996, in a move that seemed controversial at the time. But you could order pizza over the Internet in 1996, so why not a computer? It took Dell six months to sell $1 million worth of computers online.

Taking his place among the titans

In 1999, Dell overtook IBM in PC sales. Then, in 2001, Dell overtook Compaq's fall to lead the industry. PC sales for the first time. It held # 1 for most of the decade, occasionally switching places with # 2 HP. The upstart founded by a young university student had surpassed its two biggest competitors, Compaq and IBM. Compaq sold everything to HP a year later, and IBM left the PC business in 2003. By carefully controlling its supply chain, Dell had waged a sustained price war that pushed it to the top of the industry. It is still one of the most popular computer brands today.

As the company grew, it took supply chain control to an extreme, not even ordering parts until it had a customer. Dell would have its suppliers maintain deposits close to their factories to support the model. It was relentless, but the agreement allowed everyone involved to make a profit.

Dell wasn't the first company to sell computers directly, nor was it always the biggest, but it managed its supply chain better than rivals like Gateway 2000, so Dell could beat them in price. Dell has experimented with selling computers at retail over the years, but has always sold most of its machines by direct order.