Financial Analysis of Dell Company Research Paper
Dell Company is one of the leading American privately owned companies which develops and sells computers and other electronics. Currently, Dell Company is one of the leading sellers of computer and other related electronics across the globe. This paper wills asses the expected future financial health of Dell Company.
Reports show that, Dell Company has come up with five main goals to move the company up into the unexploited territory in the global market. In order to maintain strategic positions, Dell plans to implement these goals effectively in the near future. One of the main goals put forward by the company is engagement of managed service providers. In this respect, a number of critics have been spreading doubt, uncertainty and fear about the company success in the global market. To overcome this challenge Dell Company has become open minded and ideas of all stake holders are welcomed by the top management (Brigham & Ehrhardt, 2011).
Secondly, Dell Company is planning to bring in its critics to contribute towards its success. In this respect, Dell has created a platform on its website whereby critics post their criticism and in the response the company answers these questions or comments effectively. In addition to this, Dell Company plans to exploit to create a good rapport with its customers by exploiting new niches that have not been exploited by other companies. The fourth goal which the company plans to implement is the introduction of Independent software whereby it will include ISV’s into Dell storage and its servers. Lastly, Dell plans to stop using HP servers and adopt new servers that are relatively fast.
According to the founder of the company, Michael Dell, the physical assets of the company can only be replaced with the intellectual assets; hence, the company uses competitive technology when designing its products. In this respect, the company has adopted a just-in-time inventory system whereby the company works on a 6 day inventory and this has enabled the company to act swiftly. By implementing this policy Dell will definitely increase the flow of cash in the company.
In addition to that, Dell has developed a JIT inventory system where the company’s website, www.dell.com is used by Dell customers in making orders for Dell products. As a matter of fact, Dell website is used by the company in revolutionizing its sales across the globe. This is quite evident in the way Dell is delivering its computers and other electronics to its clients on time once they make the order.
Furthermore, Dell is partnering with a new technological program that enables the company to provide necessary tools as well as training its clients on how to use the new program in the computer. Among the program components that Dell Company is utilizing include: certifications of dell expertise and resources, customized testing and toolkits, Dell Solution Centers and benchmarking on Dell enterprise architecture (Investor relations, 2014).
When it comes to financial regulatory and operating characteristics Dell Company has developed a number of management appliances with the aim of saving the company’s money and time. The company has developed device discovery and inventory capabilities tools which have helped in configuration of the companies’ software. In addition to this, the configuration and the policy management adopted by Dell helps the company to reduce the risks experienced as a result of software configuration.
Thirdly, reporting and dashboards technology adopted by Dell increases effectiveness of the audit compliance of the company by providing visible network activities. On the other hand, audit tracking has been adopted by Dell Company and this helps in tracking IT activities of the company by going through all the configuration settings of Dell Company.
When it comes to the financial gains, its profits rose to about 9% in its 3rd year when the company officially started the business. On the contrary, the revenues earned by the company for the remaining years have been at minimum for decades and as a result of this the company has become cautious of its activities. According to Brian Gladden, Chief financial officer of Dell Company, he insisted that the company has put in place some of the strategies and they are working with the company’s retailers towards increasing its sales in order for the revenues of the company to increase. In summary, the financial results of dell in the second quarter of 2014 fiscal year were as follows (Hill.et.al,2010)
(In million) FY14 FY13 changes
Revenue $14,514 $14,483 0%
Operating income $272 $901 70%
Net income $204 $732 72%
EPS $0.12 $0.42 71%
Operating Income $602 $1,123 46%
Net income $433 4875 51%
EPS $0.25 $0.50 50%
As a result of these disparities Dell Company has shifted its gears towards achieving higher-margin sales in the near future. According to the recent reports given by the company, PCs sells has drastically dropped at 6% thus this has greatly affected Dell operations. In addition to that, dell experienced a drop of the demand of its computers and other electronics by various customers and governments in Western Europe. Statistics shows that the sales in Western Europe have dropped at a rate of 2% in 2013 October. Generally, the whole revenue for Dell Company for 2014 fiscal quarter stood at $15.4 billion which is just the same for the last quarter of 2013 fiscal year
Indeed each year new technology is realized across the globe hence Dell company has developed a blueprint or buyout giving detailed strategies on how the companies plans to increase its sales in the near future to conform to be able to meet its goals in this ever competitive market. One of the main strategies developed by Dell is about its dividend, in this respect Dell company plans to pay its dividends at the end of the third quarter of every fiscal year. By dong so, Dell shareholders will be able to benefit greatly from its profits thus more and more investors will be attracted into the company.
Secondly, in 2013 Dell Company unveiled its $300 million strategic innovation venture fund. This strategic plan unveiled by the management of the company will definitely increase the funding that the company will get thus increasing innovations made by Dell employees. As a matter of fact, this strategic innovation venture unveiled by the company shows Dell commitment towards venturing into new areas of technology. This in one way or another shows that the company is indeed moving in the right direction when it comes to technological innovation that is currently witnessed across the globe year in year out. To this effect, Dell will be able to invest in the recent technologies such as lussier wrote security, mobility, big data, next-generation data, and cloud computing which recent in our present day technological advancement
The recent financial reports shows that, Dell company which had been the powerhouse for PC is on the verge of getting liquated mainly because it is running on losses. For instance, a 72% drop was recently realized in the net income of all the PCs sold by Dell Company. This indicates that, Dell is facing a lot of financial crisis and this has pushed the management into a round table whereby they have identified some of the strategies which will increase Dell’s profitability in future.
One of the strategies put across by Dells management is creation of customized computing solutions. To achieve this, the company plans to increase its funds which will be used by for doing market research and innovation of new PC and tablets which its sales are witnessing a lot of declines. By doing so, Dell will be able to come up with new tablets and PCs which will attract attention of its clients thus this will automatically increase sales of these products which will mean a definite increase in the companies’ profits.
When it comes to Dell competitiveness in the global market, the management recently launched new startup competition as a way of increasing its sales. In Western Europe where Dell has been experiencing a decline of its sales a new startup entrepreneur’s competition has been officially launched by the company. In this competition, two entrepreneurs in UK will be provided wit free office, networking opportunities, mentorship, and technology solutions and the two will participate in a dell competition on the sales of the company sales. The two entrepreneurs will participate in this competition and the winning entrepreneur will be the first Dell resident at Dell’s Blackwell campus. In addition to that, the winner will be provided with networking technology and finance by the company and he or she will be expected to promote Dell company sales by running and operating the business started to him or her by Dell Company.
Dell company has also developed a new strategic of increasing the storage spaces for its devices as a way of increasing its performance in the global market. Basically, when it comes to storage space of its devices Dell has developed a compellent all-flash solution which connects all servers and storage lines of its devices. This all flash developed by Dell designers allows transfer and optimization of data in Dell devices. This new complement enhancements developed by the company has created additional data backup thus increasing Dell’s ability to compete with other companies manufacturing electronic devices which are similar to those of Dell company (Freeman, 2010).
With the ever increasing technological advancement Dell Company has come up with future external financial needs to enable the company to run its activities successfully. One of the strategies put across by Dell Company is financing options whereby the company plans to offer customer and project financing. To finance all its project dell plans to utilize its accumulated finance or financing arms through the use of some of the money the money of the companies’ investors.
Another indicator of future external financial needs for the company is the use of customers’ finances. Dell plans to consolidate funds from smart customers who wish to boost activities of the company by lending their money to the company. It is quite evident that if Dell will allow its customers to finance this company in future then Dell will definitely realize a much higher financial support in the future.
In addition to that, Dell is planning to outsource its external finances from the federal government. The company has put in place several strategies that will help her to effectively seek finance from the government. As a matter of fact if Dell will outsource its future finances from its customers and other well wishers then it will be able to procure additional ICT solutions which will increase the companies’ returns.
Dell executives have come up with strategies for outsourcing future financial needs to be used in running activities of the company. As a matter of fact, the company is creating capabilities which will increase future external financial needs. To achieve this, Dell is providing formal training to its employees and its clients. This training is designed to equip employees and the customers of Dell Company with enough skills and to understand the need of investing in the companies shares. This creates a lot of confidence in the company by employees and its customers and as a result of this they will be willing to loan the company in future when the company will be in need of any finances.
On the side of the government, Dell being a privately owned company provides a lot of funds to the government in terms of taxes that it pays in order for it to run the business. In addition to that, the company creates employment opportunities thus reducing government wage bill in terms of the salaries that it is suppose to pay to its employees. By doing so, Dell has created a good reputation in the eyes of the government and without any doubt the government will definitely fund Dell Company in future when the company is faced with any financial shortage.
Furthermore stakeholders and shareholders provide the company with future external financial needs. To achieve this, the company emphasizes the need of these employees buying shares of the company. In this respect, in case of any financial need by the company in the near future then it will request its employees and other stake holders who have invested in the stocks of the company to loan the company. Without any doubt, stakeholders will be willing to loan the company some money as external finances to be used in meeting some of the emergencies that the companies needs to address.
In its viability 3-5 year plan, Dell company plans to blend its technological innovation in order for her to mafucture computers and other related devices with amazing features that will attract a lot of sales hence putting Dell in the leading position. One of the strategies in this 3-5 year plan is to design global product strategy which is in line with the changing technology in this respect Dell plans to come up with computers and other electronic devices whose features ware amazing. This will increase its strategic partner, price, and the positioning of its products in the global market. As a result of this Dell will definitely make a lot of profits and it will be one of the best manufacturing and selling company across the globe.
Secondly, under this plan Dell hopes to develop new products which will meet global market standards. In this respect, the company has mapped its potential market across the globe as well as its competitors in the global market. To this effect, Dell Company will develop new product which will meet its targeted customers in the market.
Moreover Dell plans to work closely with the regional sales teams located in various locations all over the world. The company has developed good communication network through its website and this will be used in monitoring sales of its products in all regions across the globe. Some of this regional sales team is in America, Europe, Africa and other parts of the globe
When it comes to the three year plan Dell will develop quarterly and annual revenue plans. This quarterly and annual revenue plan will be used by the company in determining directions and sale tactics that Dell will adopt towards achieving goals of every fiscal year. In addition to that the 3 year plan will help the company to monitor its sales in order to determine whether the company is making significant losses or whether it is running a lot of losses.
Another significant strategy for Dell in the 3-5 year plan is that the company will work with partners from the 3rd party. The management of Dell has also emphasized that the company intends to work with product marketers, public relations personnel operation engineers, software and hardware engineers. By working with all these partners of 21th century the company projects that it will develop first class products which will enable the company to out beat most of its competitors who manufacture products such as computers, tablets, PCs among others which Dell Company has specialized in.
Lastly, under the 3-5 year plan Dell Company has come up with a roadmap that will enable the company to closely work with its potential clients who intends to buy some of these products manufactured by Dell (Investor relations, 2014). In this respect, Dell aims at ensuring that its customers are fully trained in order for them to understand how the new technology developed by the company works. In addition to this, the company will work hand in hand with specialized engineers for the company to design computer and other devices which are original as well as to validate the workability of this products and concepts related to the new designs employed when coming up with this new product
For the past few years, stress testing in the company has been playing important role when it comes to development of effective contingency plans for the company as well as in understanding some of the potential risks that the company has been facing as well as the future projected risks Dell might face in the global market. For the case of Dell company new software has been largely used by the top management of the company in testing the stresses that the company is facing. In addition to this, stress testing in this company is used by the top management in determining the impact of introducing new software among other things to its devices. The stress testing tools are majorly used in analyzing the reaction of the entire public when the company introduces a slight change of technology in its products
For the last few decades, Dell financial ability has been stagnating however; the management has come up with new financial plans which are geared towards driving the company to a higher level. For example, the company anticipates hiring additional qualified personnel to market companies’ products. Furthermore, Dell plans to be more aggressive in some of the countries which are witnessing an increasing economic growth. By doing this the company will increase its sales. Lastly, the top management of the company has a lot of investment plans on PCs and tablets (Ireland & Hitt, 1999).It is quite evident that currently people are increasingly buying tablets and PCs thus Dell is focusing in these two products.
Brigham, E. F., & Ehrhardt, M. C. (2011). Financial management : theory and practice. Mason: South-Western Cengage Learning.
Freeman, R. E. (2010). Strategic management: A stakeholder approach. Cambridge University Press.
Hill, C. W. L., & Jones, G. R. (2010). Strategic management theory: An integrated approach. Boston, MA: Houghton Mifflin.
Investor relations. (2014, April 12). Retrieved April 12, 2014, from Dell: http://www.dell.com/learn/us/en/uscorp1/about-dell-investor?c=us&l=en&s=corp&cs=uscorp1
Ireland, R. D., & Hitt, M. A. (1999). Achieving and maintaining strategic competitiveness in the 21st century: The role of strategic leadership. The Academy of Management Executive, 13(1), 43-57.