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PC Makers. Presented by: Doey Au-Yeung Pierrick Chamois Liang Min Huy Le. Overview. Industry Analysis Company Analysis HP Apple Dell. What is a PC. Multipurpose computer system Assembled from standardized components Components perform identical functions

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Pc makers l.jpg

PC Makers

Presented by:

Doey Au-Yeung

Pierrick Chamois

Liang Min

Huy Le


Overview l.jpg
Overview

  • Industry Analysis

  • Company Analysis

    • HP

    • Apple

    • Dell


What is a pc l.jpg
What is a PC

  • Multipurpose computer system

  • Assembled from standardized components

    • Components perform identical functions

      • Minimal compatibility issues

      • >90% use Intel based CPUs

      • Hard drives, graphics cards function similarly

    • Easy to assemble

  • All PCs consists of a similar set of components


A modern pc l.jpg
A Modern PC

  • Display

  • Motherboard

  • CPU (Microprocessor)

  • Primary storage (RAM)

  • Expansion cards

  • Power supply

  • Optical disc drive

  • Secondary storage (Hard disk)

  • Mouse

  • Keyboard


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Industry Development

  • 1975: Industry start

    • First viable PC: MITS Altair 8800

    • Functional, affordable and widely accepted

    • Not really first PC, but commonly regarded as start of industry


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Industry Development

  • 1981: IBM PC

    • Late entry

      • Time constraints

      • Third party hardware and software components

        • Only ROM BIOS proprietary

        • Reverse engineering

      • Easy to mimic (clone)

        • Clones would perform functions of the original

        • Lower cost

    • PC Makers began as clone makers

      • Compaq first 100% compatible clone


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Industry Development

  • Mid 1980s:

    • IBM PC and clones dominant

    • Standardization of platform

      • One common hardware and software base

      • Software: Microsoft

  • Early 1990s:

    • IBM and Co held 84% of market by 1990

    • Non clones forced out of market

      • Commodore, Atari, Tandy

      • Apple sole survivor


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Industry Development

  • Late 1990s:

    • Dotcom mania: small real effect on PC industry

      • Mostly networking equipment manufacturers (Cisco, Nortel)

    • Y2k: increased PC spending due to compatibility fears

  • 2000 to present:

    • Steady decline in PC prices

    • Component life cycle critical

      • Decline in PC prices mainly due to decline in component prices

      • PC industry homogeneous from day one


Key success factors l.jpg
Key Success Factors

  • R&D

  • Branding

    • Apple: iPod - 46.3% market share

  • Competitive cost structure

    • Dell – direct sales model

  • Product differentiation

    • Ancillary services: one stop shopping

      • Software and hardware sales, not simply PC sales

      • Technology solutions

    • After sales service

    • Extensive product lines

  • Global expansion

    • Growth outside of North American market



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Worldwide PC Market by Region (2004 vs. 2005)

Source: Gartner Dataquest (January 2006)



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Worldwide PC Market by Player (2004 vs. 2005)

Source: Gartner Dataquest (January 2006)


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EMEA PC Market by Player (2004 vs. 2005)

Source: Gartner Dataquest (January 2006)


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IXCO

  • NASDAQ Computer Index

  • Movement between IXCO, NASDAQ Composite and AMEX Computer Technology Index (XCI) almost identical

  • Movement between IXCO, S&P 500, and DJIA similar





Business models l.jpg
Business Models

  • Direct Sales

  • Traditional Retail

  • White Box


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Business Models

  • Direct Sales

    • Sell directly via phone or internet

    • JIT Inventory system

    • Advantage: Lower cost structure

      • Reduced inventory → lower storage and financing costs

      • Increased product quality → products use non “stale” components

      • Ability to customize → increased customer satisfaction

      • Less middlemen → lower prices thus increasing sales

      • Reduced overhead → no brick and mortar retail outlets to maintain

    • Disadvantage: customers cannot preview product


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Business Models

  • Traditional Retail

    • Sell via retail distribution chain

    • Big Box stores

    • Main methodology used

    • Advantage: Customers preview product prior to purchase

      • Increased efficiency: economies of scale realized from mass producing one product

    • Disadvantage: inventory issues – either shortage or excess

      • More middlemen → lower margins

      • Increased overhead → if it operates own brand stores


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Business Models

  • White box

    • Niche markets

    • Local computer reseller

      • Localized, more personal service

      • Sells PCs, hardware, software, and services

    • “nonbranded” – local retailer brand

    • BTO (build-to-order)

    • Other services provided

      • Networking

      • Installation

    • Reduced after sales service



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Issues

  • Change in competitive focus:

    • Speed and capacity not as important

    • Useful features

  • Lengthening replacement cycle period

    • Increasingly powerful PCs delay practical obsolescence

  • Second hand machine market (small but growing)

    • Estimated to reach 110 million units by 2009

  • Mobile computing


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Issues

  • Consumer appliances

    • Easy to use, performs specific functions

  • Outsourcing of:

    • Production

    • After sales service

    • Decreased quality

  • Seasonal nature

    • Stronger in second half of year

      • Summer: Back to School

      • Winter: Christmas


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Issues

  • Environmental Issues

    • Hazardous substances (HS)

      • Heavy metals (lead, mercury, cadmium, chromium)

    • Recent legislation

      • European Union introduced directive to reduce usage

      • Alberta introduced recycling levy on electronic equipment (Feb 1, 2005)

      • California considering bill to completely eliminate HS


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Recent Developments

  • Apple

    • iPod nano and shuffle

      • Expansion into flash-based markets

    • Switch to Intel CPUs

  • New HP CEO

    • New strategy: technology solutions

  • Dell acquires Alienware

    • High-end gaming market



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Snapshot (as of 03-25-06)

Source: Nasdaq.com

HP Analysis as of March 2006


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Agenda

  • Presentation of the Company

  • Business Analysis

  • Financial Analysis

  • Stock Analysis

  • Recommendation

HP Analysis as of March 2006


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The Company1

1Source: HP website

  • #1 globally in the inkjet, all-in-one and single function printers, mono and color laser printers, large-format printing, scanners, print servers and ink and laser supplies

  • #1 globally in x86, Windows®, Linux and UNIX servers

  • #1 in total disk and storage systems

  • #2 globally in notebook PCs, Pocket PCs, workstations and blade servers

  • Awarded Outstanding Customer Service for Consumers

  • #1 position in server brand loyalty for ProLiant servers

HP Analysis as of March 2006


Background l.jpg
Background

  • 1939: Bill Hewlett and David Packard founded the company

    • First product: the resistance-capacitance audio oscillator

    • First Client: Walt Disney Studio

  • 1947: HP is incorporated

  • 1957: The company goes public ($16 per share)

  • 1961: The company is listed on the NYSE

  • 1962: HP appears in the Fortune 500

  • 1989: HP is listed on Tokyo stock Exchange

  • 1997: HP becomes one of the 30 stocks that comprise the DJIA

  • 1998: Compaq acquires DEC

  • 2001: HP and Compaq announce their merger (effective in May 2002)

HP Analysis as of March 2006


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The CEO

  • Mark HURD (2005) – is chief executive officer and president of HP and also a member of the company's board of directors.

  • Hurd previously spent 25 years at NCR Corp., culminating in his two-year tenure as chief executive officer and president.

  • Hurd was named president of NCR in 2001 and was given additional responsibilities as chief operating officer in 2002. Prior to that, he spent three years as head of the company's Teradata data-warehousing division. Earlier, he held a variety of general management, operations, and sales and marketing roles. Hurd began his career at NCR as a field salesman in 1980.

  • Hurd is a member of the Technology CEO Council, a coalition of chairmen and chief executive officers of IT companies, which develops and advocates public policy positions on technology and trade issues.

  • He earned a bachelor's degree in business administration in 1979 from Baylor University.

HP Analysis as of March 2006


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Executive Team: A Mix between insiders and outsiders

  • Ann O. BASKINS (1982) - Senior Vice President, General Counsel and Secretary (1999)

  • Gilles BOUCHARD (1989) - Executive Vice President, Global Operations (2001)

  • Todd Bradley - Executive Vice President, Personal Systems Group

  • Vyomesh (VJ) Joshi (1980) - Executive Vice President, Imaging and Printing Group (1999)

  • Ann Livermore (1982) - Executive Vice President, Technology Solutions Group (1995)

  • Cathy Lyons - Executive Vice President and Chief Marketing Officer

  • Randall (Randy) D. Mott - Executive Vice President and Chief Information Officer

  • Marcela Perez de Alonso (2004) - Executive Vice President, Human Resources (2004)

  • Shane Robison (Ex-Compaq) - Executive Vice President and Chief Strategy and Technology Officer

  • Robert P. Wayman (1969) - Executive Vice President and Chief Financial Officer (1984)

HP Analysis as of March 2006


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Business analysis

  • Outlook

    • 7 different business segments

    • High level of competition

    • Cost reduction issue

    • Sales Channels issue

HP Analysis as of March 2006


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Business Segments

  • Enterprise Storage and Servers (ESS)

  • HP Services (HPS)

  • Software

  • The Personal System Group (PSG)

  • The Imaging and Printing Group (IPG)

  • HP Financial Services (HPFS)

  • Corporate Investment

Technology

Solution

Group

(TSG)

HP Analysis as of March 2006


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Segments Description: TSG

  • Mission: to coordinate the Enterprise offerings across organizations to allow customers to manage and transform their business and IT environments

  • Consists of:

    • ESS

    • HPS: provides a portfolio of multi-vendor IT services, including technology services, consulting and integration and managed services.

    • Software: provide management software solutions

HP Analysis as of March 2006


Segments description psg l.jpg
Segments Description: PSG

  • Mission: to provide commercial PCs, consumer PCs, workstations, handheld computing devices, digital entertainment systems, calculators and other related accessories, software and services for the commercial and consumer markets

  • Compaqwas acquired to strengthen this segment and compete against Dell

Source: Wall Street Journal

HP Analysis as of March 2006


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Segments Description: IPG

  • Mission: to provide imaging and printing systems for printer hardware, printing supplies and scanning devices, providing solutions across customer segments for individual consumers to small and medium businesses to large enterprises

HP Analysis as of March 2006


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Segments Description: HPFS

  • Mission: to support and enhance HP’s global product and service solutions, providing a broad range of value-added financial life cycle management services

HP Analysis as of March 2006


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Segments Description: Corporate Investments

  • This segment is managed by the Office of Strategy and Technology and includes HP labs and certain business incubation projects.

  • Revenue is attributable to the sale of certain network infrastructure products and to the licensing of HP Technologies to third parties

HP Analysis as of March 2006


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Business Segments: figures

HP Analysis as of March 2006


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Business Segments Trends

Evolution of Revenue per Segment Over a Three Year Period in m$

Relative Evolution of Revenues per Segment in %

HP Analysis as of March 2006


Segment revenue trends l.jpg
Segment Revenue Trends

HP Analysis as of March 2006


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Segment Revenue Trends (Cont’d)

HP Analysis as of March 2006


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Segment Operating Profit Trends

HP Analysis as of March 2006


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Competitors

  • ESS: IBM, EMC, DELL

  • HPS: IBM (Global Services), Accenture

  • Software: BMC, Computer Associate Int. Inc., IBM Trivoli

  • PSG: Dell, Toshiba, Apple, Lenovo, Gateway, Fujitsu

  • IPG: Lexmark Int., Xerox, Epson, Canon USA, Dell

  • HPFS: IBM (Global financing), financial institutions

    => HP is leader or among the leaders in each segment, the harsh competition is therefore a key issue for the firm

HP Analysis as of March 2006


Compaq acquisition hp s answer to the dell threat l.jpg
Compaq Acquisition: HP’s answer to the Dell Threat

  • Dell has literally eaten the market shares of HP, Compaq and IBM

    • IBM sold its computer business to Lenovo

    • HP acquired Compaq

HP Analysis as of March 2006


Compaq acquisition l.jpg
Compaq Acquisition

  • Description: HP buys Compaq with a $24,17b deal that was effective in May 2002 (in an exchange of 0.6325 shares of HP common stock for each outstanding share of Compaq common stock)

  • Objective:C. Fiorina, CEO who led the acquisition, wanted to reinforce the distribution channels of HP, counter the Dell upsurge that forced IBM to quit the market and give HP some scale effects to cut the costs in PSG and HPS

  • Consequences

    • HP is selling worldwide and enjoy an impressive sales force

    • In three years HP financials are strong despite the importance of the merger

    • But the marriage is painful and the integration leads to several restructuring plans, layoffs and to a complex organization not efficient enough for the market standards (expected scope effects – between IPG and PSG – and scale effects – cost synergies in PSG and HPS – didn’t occur)

HP Analysis as of March 2006


Current challenges l.jpg
Current Challenges

  • Complex IT organization with a matrix-based infrastructure

    • Opacity in the accountancy

    • Slow decision-making

  • Cost competition

    • Retirement program

    • Workforce reduction

    • Dissolution of CSG

      => HP needs to be more competitive

HP Analysis as of March 2006


New trends l.jpg
New Trends

  • Next generation data center architecture: emergence of a 24*7 automated, lights-out data center. An environment that will need to be highly secure, highly automated and remotely accessed and managed

  • Always on mobile computing: convergence of voice and data services, people will be more mobile and the bandwidth will increase. Driving this revolution requires advanced devices, but also infrastructure, services and solid go-to-market partnerships

  • Ubiquitous printing and imaging: color-use is increasing, multifunction printer and copier markets are converging… HP is investing worldwide in this sector

  • Go-to-market model: HP tries to improve its ability to cross sell, up sell and drive solution sales

HP Analysis as of March 2006


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Risk Factors That Can Affect The Financials

  • Harsh competition

    • Competitive pricing of products needs low costs

    • Threat of substitutes is high

  • Sensitivity of the sales to customer requirements: HP is short-sighted and must develop, manufacture and market products on uncertain markets

    • Need to know the new technological trends

    • Quality issue with new products

  • Managing the technology transitions is cumbersome

    • Short product life cycles

    • Difficulty to have the good timing of product and services

HP Analysis as of March 2006


Risk factors that can affect the financials cont d l.jpg
Risk Factors That Can Affect The Financials (Cont’d)

  • IP issue

    • R&D is the core business of HP

    • The firm is global and weather difficulties to protect its Intellectual Rights in some regions

  • Product distribution management

    • Potential conflict btw direct and indirect sales channels

  • Sales cycle makes the planning and inventory management difficult

    • High depreciation rate of inventories

HP Analysis as of March 2006


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HP Strategy

  • Restructuring Plans

    • 15,300 employees left or are expected to leave within 2007

    • As of October 31, 2005, the total cost was $5.74bn

  • R&D

    • $3.5bn

    • HP patent portfolio includes over 30,000 patents

  • Global Firm

    • Over than 60% of the net revenue in fiscal 2005 came from outside the US

HP Analysis as of March 2006


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HP Financials Analysis

  • Statements of Operations

  • Balance Sheet

  • Statements of Cash Flows

  • Standard Ratios

HP Analysis as of March 2006




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Major Captions

  • Cash & Cash Equivalent

    • HP is a “Cash Cow” (cf. CF statements)

    • Jobs Act October, 2004: $7.5b repatriated in the US

    • Strong Cash Position to cover the significant cash outlays expected in fiscal 2006 associated with the restructuring actions and company bonus payments

  • Goodwill

    • No impairment of Goodwill existed as of August 1, 2005 or August 2, 2004

    • The substantial amount of Goodwill is due to Compaq Acquisition as of May 2, 2002

  • Debt

    • Excluding the debt associated with the leasing business there is virtually no operational debt. Conservative structure due to the risky core business of HP (R&D)

HP Analysis as of March 2006




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HP Stock Analysis

Source: Yahoo!Finance

  • Dividend Policy

    • Dividends are paid quarterly and were $0.32 per common share in each of fiscal 2005, 2004 and 2003

HP Analysis as of March 2006


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Stock Trends Over Time

1 year period

5 year period

40 year period

HP Analysis as of March 2006


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HP Vs Dell & IBM

HP Analysis as of March 2006


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Multiple Analysis

HP and Dell carry an insignificant amount of debt and therefore we can consider their ratios to be unleveraged (and therefore comparable)

HP Analysis as of March 2006


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Upgrades and Downgrades History

HP Analysis as of March 2006


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Recommendation: Weak BUY

  • Why

    • The Company is recovering from the Compaq Acquisition

    • New Management Team, Restructuring Plans, Costs Cutting Strategy that simplifies the business…

    • Conservative Financial structure that provides good dividends: cash reserves, no debt.

  • BUT

    • 2005 has not come up to the market expectations

    • The core Businesses (IPG and PSG) are growing because of the weakness of the dollar. HP is still struggling to keeps its leadership

    • The ROE is still low and volatile

    • The Company still fights to change its image of “old HP”

HP Analysis as of March 2006



History l.jpg

January 3,1977 incorporated by Steven Wozniak and Steven Jobs.

1984, introduction of Macintosh computer series

1985, Steven Job left Apple

1990, contracted with Microsoft on licensing MS Windows I OP system.

1994-1996, Apple fell into financial stress

1997 Steven Job back the company, the company started to recover

Apple’s original logo

History


Current business l.jpg
Current Business Jobs.

  • PC: The Apple is the only company in computer industry that is capable of designing and developing entire PC system including microprocessor and operation system.

  • Diversification: The Apple is world leading manufacturer and marketer of digital music players

  • Digital Hub: The Apple believes that computer system is the integration of all advanced digital devices including MP3 players, PDAs, cellular phones, digital camcorders, digital cameras, CD/DVD players, and other electronic consumerdevices


Current business70 l.jpg

Key Customer Groups: Jobs.

Education

Creative Professionals

Students

Government Agencies

Distribution

Apple Sales Consultant program

Online Sales

Retail Store

Reporting Segments

American ( North and South American)

Europe( Europe, Africa and Middle East)

Japan

Other ( Asia-Pacific except Japan)

Manufacturing

Company owned manufacturing facility in Cork, Ireland.

External vendors in Fremont, California, Fullerton, California, Taiwan, Korea, China, and the Czech Republic

Assembling line in China

Current Business


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“I'm looking for a fixer-upper with a solid foundation. Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

----Steven P. Jobs


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Executive Team Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • Steven P. Jobs

  • Co-founder of Apple Computer, Inc.

  • Occupation: Chief Executive Officer (1997); Chairman, Board of Directors ( 1976-1986)

  • Others Activities:

    • Co-founder of NeXT Software, Inc.

    • Chairman and CEO of NeXT (1985-1997)

    • Chairman and CEO of Pixar Animation Studios (1986-2006)

    • Board Member of Walt Disney Company (2006)

  • Key Skill: Vision


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Executive Team Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • Peter Oppenheimer: Chief Financial Officer, Executive Vice President( since 2004)

  • Timothy D Cook: Executive Vice President, Worldwide Sales and Operations (since 1998)

  • Nancy R. Heinen: Senior Vice President, General Counsel and secretary (since 1997)

  • Ronald B. Johnson: Senior Vice President , Retailing

  • Jonathan Rubinstein: Senior Vice President, iPod Dividsion (since 1997)

  • Philip W. Schiller: Senior Vice President, Worldwide Product Marketing( since 1997)

  • Bertrand Serlet: Senior Vice President, Software Engineering( since 2003

  • Sina Tamaddo: Senior Vice President, Applications( since 1997)

  • Dr. Avadis Tevanian: Chief Software Technology Officer (since 1997)


Executive compensation l.jpg
Executive compensation Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”


Product lines l.jpg
Product Lines Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”


Sales by products l.jpg
Sales by Products Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”


Unit sales l.jpg
Unit Sales Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

Sales by Products

  • Net sales per unit = Total net sales of a product/ Total unit-sales of a product

  • Measures average price

  • iPod: increase sales by large discount


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Sales by products Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”


Sales by products79 l.jpg
Sales by Products Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • Total net sales increased by 68% in fiscal year 2005

  • Sales of iPod increased of 248% compare to that of 2004

    • Demand was driven by the introduction of iPod Nano

    • Demand of iPod subjects to internal conflict among different iPod products

    • iPod price decreased by 32% in 2005

  • Net Sales of Macintosh system increased by 27%

    • Sales were stimulated by the introduction of Power G5 microprocessor and Mac mini series of desktop

    • Professional notebook( PowerBook series ) still have strong demand on the market

    • Low sales on low price Mac

  • Expansion of Retail segment contributes to overall sales increase.


Geographic segment l.jpg
Geographic segment Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”


Segment sales l.jpg
Segment Sales Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • American segment sales raised about 64% in fiscal year 2005

    • American segment represent approximately 47%-49% of total sales of the company.

    • 11% of sales growth can attribute to growth of professional notebook

    • 30% of growth can attribute to the introduction of new Mac systems (G5 based Mac) and iPod

  • Japan’s net sales went up by 36%

    • iPod, G5 and Mac mini contribute to the sales increase in Japan.

  • 38 new retail store were opened in 2005 and total number of retail store were 124 at September 2005


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Financial Statement Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • Consolidated Balance Sheet

  • Consolidated Statement of Operation

  • Consolidated Statement of Cash Flows


Financial summary l.jpg

Mar. 24, 2006 Market Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

Last Sale$ 59.96

Change Net / % 0.20 0.33%

Today’s High/Low Price :$ 60.94 /  $ 59.03

Share Volume:38,293,616

50 Day Ave. Daily Volume: 35,990,619

Previous Close: $ 60.1652

Wk High / low: $  86.40 / $ 33.11

Shares Outstanding: 848,612,000

Market Value: $ 50,882,775,520

P/E Ratio :32.24

Forward P/E (1yr) :22.92

Earning per Share :$ 1.86

Beta: 1.3

NSDAQ Official Open Price :

$ 60.27

Date of NASDAQ Official Open Price: Mar. 24, 2006

NASDAQ Official Close Price: $ 59.96

Date of NASDAQ Official Close Price: Mar. 24, 2006. 24, 2006

September,2005 (in million dollars)

Total Net Sales: $12,931

Total Net Income: $1,335

Total Asset: $11,551

Total Liability: $4,085

Source : www.nasdaq.com

Financial summary


Stock information l.jpg
Stock Information Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”


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Stock Information Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”


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Strength Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • Strong Functional skill

    • Untraditional Product Lines: iPod, PowerBook

    • Increasing R&D investment

    • Superior Financing Positions: high cash reserve

    • Marketing: high brand recognition

  • Human recourse

    • Steven Job and his NeXT team


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Challenging Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • Supplier power

    • Single or limited source of supply for key component

    • Intel became one of the microprocessor supplier

  • Uncertain Demand

    • US educational market

    • Overall demand for IT products is decreasing

    • Self Cannibalization of iPod products

  • Lawsuit

    • The company currently involves in 26 lawsuits in North American and Europe

    • Claims includes patent infringement, false advertising and unfair business practices

    • The financial effect is still unknown


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Recommendation Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

Sell


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Dell Inc. Stock Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

Dell, a Delaware corporation, was founded in 1984 by Michael Dell

Dividends

Dell has never declared or paid any cash dividends on shares of its common stock and currently does not anticipate paying any cash dividends in the immediate future.

http://quotes.nasdaq.com/asp/SummaryQuote.asp?symbol=DELL&selected=DELL


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1 Year Performance Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

Latest price (Mar 24, 2006 16:00 EST) $ 30.06, Volume 13,011,536


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Performance Since 1996 Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”


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History Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

1984: Michael Dell founds Dell Computer Corporation

1987: International expansion begins with opening of subsidiary in United Kingdom

1988: Dell conducts initial public offering of company stock (3.5 million shares at $8.5 each)

1993:Enters into Asia-Pacific region with subsidiaries in Australia and Japan

1996: Company begins major push into the server market

2000: Company sales via Internet reach $50 million per day

2001: For the first time, Dell ranks No. 1 in global market share

2004: Kevin Rollins becomes Dell's next chief executive officer. Michael Dell moves to Chairman of the Board

2005:Dell tops list of "America's Most Admired Companies" in Fortune Magazine. Opens third major U.S. manufacturing location in Winston- Salem, North Carolina


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Management Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”


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Management Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

Michael S. Dell

Chairman of the Board

Age:41

# of shares owned: 207,983,382

Kevin B. Rollins

President and CEO

Age: 53

# of Shares owned: 17,547


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Stock Ownership Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”


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Summary Compensation Table Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”


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Stock Options Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”


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Share Repurchase Program Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • Dell’s share repurchase program was announced on February 20, 1996; up to 1.5 billion shares of common stock at an aggregate cost not to exceed $30 billion are currently authorized to be purchased.

  • As of February 3, 2006, 123 million shares of common stock at an aggregate cost of $4.4 billion were available for future purchases under the share repurchase program.


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Business Strategy Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

Customers can purchase custom-built products and custom-tailored services.

  • Allows customers to customize products.

  • Strong sales representatives to deal with large businesses and government institutions.

    Dell is a low-cost leader.

    Direct-Sales Model:

  • Sells products both to consumers and corporate customers via the Internet and the telephone network.

  • Takes orders directly from customers.

  • Eliminates wholesale and retail dealers that add unnecessary time and cost.

  • Dell maintains a negative cash conversion cycle through use of this model.


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Business Strategy Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • Cash conversion cycle: The cash conversion cycle is the number of days between paying for raw materials and receiving the cash from the sale of the goods made from that raw material.

  • Dell has a negative cash conversion cycle because it receives payment from customers before it has to pay suppliers.

http://en.wikipedia.org/wiki/Cash_conversion_cycle


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Cash conversion cycle Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • Direct business model allows Dell to minimizing inventory risk while collecting amounts due from customers before paying vendors. This enables the company to generate annual cash flows from operating activities that typically exceed net income.


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Dell Position Diagram Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

Target

Segments

Value

Proposition

How: Choices / Activity System / Value Chain

Close integration w/ suppliers

Customized

Corporate Customers

Build-to-Order

Design for Quick Configuration

Minimal Inventory

Large Outside Sales Force

Reliable

Transact directly with customers / Bypass Channel (i.e. Wholesalers and retailers)

No channel marketing / logistics costs

Dell.com

Low Price

No channel markup

Telephone

Minimal Pre-sales costs

Courtesy of Andrew von Nordenflycht


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Technology Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

Manufacturing

Distribution

Marketing

Service

Design

Development

Procurement

Assembly

Transport

Inventory

Retailing

Advertising

Parts

Labor

Value chain for Dell


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Dell Americas Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • Headquarters:Round Rock, Texas

  • Manufacturing facilities:Austin, Texas, Nashville, Tennessee, Winston-Salem, North Carolina, Eldorado do Sul, Brazil

  • Revenue (last four quarters): $36.4 billion

  • Q4 Y/Y revenue growth: 10 percent

  • Market position: No. 1 in United States*

  • Number of employees: 31,100

  • Regional offices in:

  •   Argentina

  •   Brazil

  •   Canada

  •   Chile

  •   Colombia

  •   El Salvador

  •   Mexico

  •   Panama

  •   Puerto Rico


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Dell Asia Pacific - Japan Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • Headquarters:Singapore

  • Manufacturing facilities:Penang, Malaysia; Xiamen, China

  • Revenue (last four quarters): $6.6 billion

  • Q4 Y/Y revenue growth: 21 percent

  •  Market position: No. 3 A/P*; No. 3 Japan*

  • Number of employees: A/P 19,400; Japan 1,100

  • Regional offices in:

      Australia, China, Hong Kong

    India, Indonesia, Japan

    Korea, Malaysia, Philippines

    Singapore, Taiwan, Thailand


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Dell Europe, Middle East and Africa Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • Headquarters:Bracknell, U.K.

  • Manufacturing facilities:Limerick, Ireland

  •  Revenue (last four quarters): $12.9 billion

  •  Q4 Y/Y revenue growth: 18 percent

  • Market position: No. 2 in Europe*

  • Number of employees: 13,600

  • Regional offices in: 

  •   Austria, Bahrain, Belgium, Czech Republic

  •   Denmark, Finland, France, Germany

  •   Greece, Hungary, Ireland, Israel, Italy

  •   Morocco, Netherlands, Norway, Poland

  •   Romania, Russia, Portugal, Scotland

  •   Slovakia, South Africa, Spain, Sweden

  •   Switzerland, Turkey, United Arab Emirates


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Revenues by Segment Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

Americas: Revenue declined from 69% in 04 to 67% and 65% in 05 & 06 respectively.

EMEA: Increased of 1% every year since 2004.

Asia-Pacific-Japan: Increased of 1% every year since 2004.


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product groups Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • Financial Services:

  • Dell Financial Services L.P. (“DFS”), a joint venture between Dell and CIT Group, Inc. (“CIT”).


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Risks Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • Loss of government contracts and big businesses

  • Reliance on suppliers

  • International competitions (i.e. Acer, and Japanese PC makers)


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Financial Statements Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • Balance Sheet

  • Income Statement

  • Cash Flow Statement


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Balance Sheet Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”


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Income Statement Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”


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Cash Flow Statement Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”


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SELECTED FINANCIAL DATA Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”

  • Selected Financial Data

  • Liquidity, Capital Commitments, and Contractual Cash Obligations

  • Contractual Cash Obligations

  • Investments


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SELECTED FINANCIAL DATA Am willing to tear down walls, build bridges, and light fires. I have great experience, lots of energy, a bit of that "vision thing" and I'm not afraid to start from the beginning. ”




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Investments Obligations



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Annual Financial Highlights Obligations

Full-year FY


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Key Statistics Obligations

http://finance.yahoo.com/q/ks?s=DELL


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Recommendation Obligations

Could buy now but better to wait until autumn then:

Buy

  • New Microsoft OS, Vista, soon to be released in early 2007.

  • Potential deal with AMD.

  • Potential deal with Google.


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