09/12/2021

071 – PC direct selling – 1984

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Our business is about technology, yes. But its also about operations and customer relationships. 
Michael Dell

PCs and other IT equipment were fast becoming commodities and this inspired a new generation of businesses.

Patricia Gallup and Jack Ferguson set up PC Connection in July 1982 to sell computer technology by using direct marketing techniques.

Gateway 2000 was founded by Ted Waitt and Mike Hammond in September 1985 to do the same thing, but with spots on – they used spotted boxes and other cow imagery to highlight their rural Iowa base.

Michael Dell was a child entrepreneur who came across computers at Radio Shack and bought an Apple II.  Throughout high school he sold Houston Post newspaper subscriptions making $18k in a year.

Studying medicine at the University of Texas, he began to assemble PC-compatible computers from off-the-shelf components and to sell these on the campus.

1984 – He called his business PCs Limited and acquired a vendor licence in order to bid for State of Texas requirements.  Given his lack of overheads and flexible approach to production, he scored well.

1985 – armed with $300k from his family, he launched the Turbo PC retailing for $795.  He acquired components against orders and only assembled for immediate delivery; this kept him lean and mean.

He advertised in national computer magazines offering to custom assemble the Turbo PC within certain parameters.  PCs Limited turned over $73m that year and soon went international!

1986 – Still keeping close to his market, Dell introduced the first toll-free technical support line – something the rest of the industry soon had to follow.

1988 – Renamed the Dell Computer Corporation, the company had its IPO selling 3.5million shares at $8.50 which valued it at $80m.  By 1992 Dell was the youngest CEO of a Fortune 500 company.

I996 – the operation added servers and sold through its own website – dell.com.  At the time many were skeptical about the willingness of buyers to buy something so technical online but through this vehicle he was soon achieving $1m a day in sales.  By 2000 daily online sales were $18m.

2001 – Dell had become the world’s largest PC maker as it surpassed Compaq to take a 12.8% share; Compaq was #1 from 1994 to 2000 but in 2001 had just 12.1% of the market, HP 7.3% and IBM 6.2%.

2003 – the product range expanded into televisions, printers and digital audio players and the name changed to Dell Inc.

2004 – Dell stepped aside to become chairman; at the time the operation was valued at $20bn and a year later was ranked fifth richest in the USA.

2007– the company slipped to being the second largest PC maker and Michael Dell stepped in to reassume the helm.  He presided over the introduction of the Inspiron 8000 which at the time was the most powerful laptop.  He was there as the Dell range espoused Linux and other OSs.

2011 – Dell was the third largest PC maker with over $50bn in sales and 100,000+ employees.  Dell himself was valued at $14bn.  He and his wife Susan have a foundation that has given over $500m to those actively helping urban communities in the USA and India. 

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