Computer
Manufacturing Industry
Dell Inc. vs. Hewlett-Packard Company
Ben Mechak, Mark Wilson, and Bobby Petrone
Table of Contents
Part I………………………………………………………………………..2
Part II…………………………………………………………………….....8
Part III……………………………………………………………………..10
Part IV…………………………………………………………………….16
Sources……………………………………………………………………24
1
Part 1: Describe Two Publicly Traded Business Rivals
1.
In 2010 computer manufactures experienced lower revenue as retail prices fell. Due to intense
competition and more productive manufacturing methods, the price per unit dropped. As computers
become more common in the workplace the number of people who own computers will rise, but revenue
will continue to be low due to the competitive nature of the industry (ibisworld.com, 2010). Two
companies in particular are in a very intense rivalry as both of these companies added together make up
53.5% of the market share. Hewlett-Packard (H.P.) and Dell Inc. have been battling to maintain its large
market share for the last decade. The two companies that will be examined will be H.P. and Dell.
Dell Inc. is a technology company, which offers a broad range of products categories including mobility
products, desktop PCs, software, and peripherals, servers, and networking, and storage (ibisworld.com).
Dell Inc. was founded by Michael Dell on November 4, 1984. Michael Dell started Dell Inc. in his dorm
room while attending the University of Texas. He builds PC-compatible computers built from stock
components, which would provide the most effective computing solutions to meet customer needs. In
1988 Dell started to expand globally, in June 1988 the company’s market capitalization grew from $ 30
million to $80 million from its initial public offering of 3.5 million shares of stock. 1989 was the release
of Dell’s first true cash cow; the 316 LT laptop computer was revolutionary in the computer industry
giving people a reliable portable computer. 1993 was another big year for Dell Inc. with the introduction
of the OptiPlex computers. These computers launched them in to the top 5 computer manufactures in the
world. In 2002 Dell became a fortune 500 company, while Michael Dell became the youngest CEO of a
Fortune 500 company. Dell primarily sold Personal computers and servers up until 2002; Dell Inc.
diversified their products and started in to the T.V. hand held, digital/audio players and printers markets.
From the years of 2004-2009 Dell acquired several companies that would bring in application
development, system integration, and strategic consulting services though operations in the U.S. and 10
2
other countries (dell.com). Currently Dell Inc. controls 26.3% of the computer manufacturing industry
and has just acquired key IP in storage systems management, cloud computing and software.
Hewlett-Packard Company is a global provider of products, technologies, software, solutions and services
to individual consumers and small- and -medium- sized businesses and large enterprises. Hewlett-Packard
Company, also known as HP, was founded in 1939 by Bill Hewlett and Dave Packard in Packard home
garage. The company’s first initial capital investment was $538; ad in August 1946 HP went public.
While HP was not initially a computer manufacturing company they started off making a precision audio
oscillator. From the 1940s until the 1990s the company concentrated on making electronic test
equipment. They were able to make large profits because their produces were more sensitive, accurate,
and precise compared to their competitors. IT wasn’t until the 1970s HP got in to the computer industry
starting off their HP 300 business computing server. Also in the 1970s HP was identified by Wired
Magazine as the producer of the world’s first mass-produced personal computer. In the 1990’s HP
expanded their product line that originally target Universities, research, and business users to reach
consumers. The 2000’s sparked a big change in HP with the acquisition of Compaq. After this merger HP
became a major player in the lap top market. Currently HP owns 27.3% of the computer manufacturing
industry (hp.com).
2. Employment Outlook
Dell’s employment outlook is very strong. Over the last 7 years Dell has created 7,000 new jobs. Even
though most of these jobs were created in foreign countries, Dell created 1,000 jobs in the U.S. If you are
looking to work for Dell there is a high chance that you may end up overseas. Of Dells nearly 46,000
workers 23,000 are stations in other countries. When asked why Dell is doing this Mike Maher (A Dell
spokes person) says “We’re going to put out employees where our fastest growth and opportunities for
growth are” (Park, 2009). Dell will most likely keep widening due to the very competitive nature of the
3
industry. In order to stay competitive they must outsource their business to keep operation cost low.
HP’s job outlook is not as good as Dell’s. Due to the global economic down turn HP was forced to
reduce cost within the company. To reduce cost, HP cut over 1,300 jobs in the UK since 2010, and over
6,000 jobs since 2008. As some of the charts show HP has come to a flat constant rate in several financial
conditions. In order to be able to compete in this very intense industry HP had to reduce cost, forcing
thousands out of a job (Fildes, 2010).
Figure 1
HP vs Dell Return on Equity 2006-2010
100
R
E
T
U
R
N
O
N
E
Q
U
I
T
Y
91.42
90
80.3
80
70
60
HP
61.82
DELL
50
46.88
40
30.5
30
20
10
0
16.64
19.25
21.51
18.62
9.92
2006
2007
2008
Year
2009
2010
Return on equity reveals how much profit a company earned in comparison to the total amount of
shareholder equity found on the balance sheet. As the graph depicts, HP has a higher ROE then Dell.
This is due to the fact that HP is more capable of generation cash internally. Even though Dell has a
lower ROE then HP, Dell still has a relatively high ROE. The average in the past decade was 10-15%. In
4
the past 5 years Dell has maintained it ROE at, or higher than the nations average (about.com).
Figure 2
HP vs. Dell Stock Price 2006-2010
50
P
R
I
C
E
I
N
$
45
44.94
44.3
44
40
38.65
35
30
25
31.94
25.68
DELL
26.62
HP
20.76
20
15
14.85
10.75
10
5
0
2006
2007
2008
YEAR
2009
2010
A company’s stock price is dependent on the business fundamentals, company and world events, human
psychology, and much more. As we can see from the graph, HP’s stock price is much higher than Dells.
This is due to the fact that HP offers more products to consumers; also they have had a higher market
share the last several years which affects stock price. When looking at Dell’s recent stock prices, we see
that they have taken a large hit in the last few years. This is due to the current economic status, and the
introduction of substitutes for Dells computers. The introduction of new smart phones, tablets, and
advances in lap top technology, Dell has had a hard time keeping up until the year 2010
(howthemarketworks.com)
5
Figure 3
HP vs Dell Total assets 2006-2010 (in $millions)
T 140000
O
T 120000
A
L 100000
A
S 80000
S
E 60000
T
S 40000
$
20000
124506
113331
81981
23109
HP
114799
88699
25635
DELL
27561
33652
26500
0
2006
2007
2008
YEAR
2009
2010
Total assets is defined as the sum of current and long-term assets owned by a person, company, or other
entity. As we can see in this graph HP has a considerable more amount of total assets then Dell does.
This is because HP has been in business longer then Dell, and they have acquired more assets. Also HP
has more assets because of the diverse products they offer. With more products they must own more
machines to produce their projects. Looking at Dell’s line we can see that they have increased their total
assets in the last 5 years. This is due to the many acquisitions they have recently been involved with and
also due Dell expanding their products to cover a more diverse market share (ibisworld.com).
6
Figure 4
HP vs DELL inventory turnover (ratio) 2006-2010
i
n
v
e
n
t
o
r
y
t
u
r
n
o
v
e
r
6
5.653
DELL
5.085
5
4.684
4
3.598
3.574
1.422
1.481
3
HP
2
1
0.977
0.983
1.134
0
2006
2007
2008
YEAR
2009
2010
Inventory turnover rate shows how many times the company’s inventory is sold and replaced over a
period of time. The formula to find inventory turnover is sales/inventory. Low turnover implies poor sales
and therefore excess inventory. A high ratio implies either strong sales or ineffective buying. As we see in
Dell’s inventory ratios in the past 5 years they have declined sharply. This is due to a slowing sales rate
due to market factors and buyer power within the industry. Looking at HP’s line we see they have a low
turnover rate and this is due to an excess of products (ibisworld.com).
7
Figure 5
HP vs DELL market share 2006-2010
P
E
R
C
E
N
T
M
A
R
K
E
T
S
H
A
R
E
30
25
20
24
23.8
25.3
27.3
26.3
20.6
HP
17.8
15
15.6
15.1
DELL
14.2
10
5
0
2006
2007
2008
2009
2010
YEAR
As the graph shows HP has been a consistent dominate force in the computer industry until the year 2010.
In 2010 Dell made a sharp increase in market share due to the affordable prices of their products. As Dell
continues to increase its market share the more profit they can see coming towards them (ibisworld.com)
PART II: OPPORTUNITY
1.
The computer manufacturing industry is a highly competitive, yet lucrative industry consisting of
three main products. The industry is broken down into the manufacturing of servers, desktops and
portables, with portables holding the largest segment at 48% and desktops being next at 35.1%
(Thormahlen 13). For the sake of this report, the main focus will be on the desktop segment. “Desktops
8
refer to traditional tower-case PCs, which are usually paired with separate monitors and keyboard”
(Thormahlen 13). There are many external drivers associated with the demand for and success of the
desktop manufacturing industry. Some of these key drivers include the domestic price of personal
computers, levels of consumer sentiment and corporate profit.
Beginning with the changes in domestic prices, “computer manufacturers experience lower
revenue as retail computer prices fall. These declining prices are largely the result of more productive
manufacturing methods and competition from abroad” (Thormahlen 5). Even though these falling prices
are a potential threat to the desktop segment, the computer manufacturing industry has been aware of this
threat for well over a decade. As reported in an article from The Washington Times dating back to 1997,
“The prices are falling, and they’re falling big time. And more price cuts are coming. The competition in
the portable end of the market is intense and will only get hotter as time goes by” (Kellner 1). Not only is
the desktop segment affected by falling prices from international competition, but it is also becoming
much less preferred to portable computers. Consumer sentiment is also a key factor of opportunity in the
computer manufacturing industry. “When consumers are particularly confident, they are more likely to
purchase durable goods like computers. This driver is expected to increase during 2011, and is a potential
opportunity for the industry” (Thormahlen 5). Corporate profit is also very important when evaluating the
potential for success or failure in the computer manufacturing industry. “Companies need to replace their
computers periodically because of the rapid rate of technological change in this industry, but their
purchase timing can be significantly affected by the level of corporate profit. When companies are losing
money or otherwise struggling to survive, they tend to delay making investments in their computing
infrastructure” (Thormahlen 5). The computer industry has several drivers determining industry
opportunity, but most are drastically affected by the economical situation. Specifically to desktop
computers, the biggest threat to opportunity lies in the advancements of the portable computer segment
and other rapid technological changes occurring in today’s market such as tablets and smart phones.
9
2.
The computer manufacturing industry is one of the most prevalent global industries in today’s
market. Computer manufacturers mostly conduct business in North America, Western Europe, Japan and
other Asia/Pacific countries while also participating in other markets throughout the rest of the world
(S&P). Hewlett-Packard Company, with the largest market share in the computer manufacturing industry
of 27.3% (Thormahlen 3), recorded $12,864 million in net desktop revenues for 2009 and $15,478 million
for 2010 (10K HP 154). This can be compared to the second largest company, Dell, based on a market
share of 26.3% (Thormahlen 3), which recorded $12,947 million in net desktop revenues for 2009 and
$14,685 million for 2010 (10K Dell 108). Clearly, these two computer-manufacturing companies
dominate the industry in desktop sales and compete very tightly year after year. On a more geographical
scale, “Broadly speaking, the 2005-07 period was one of strong unit growth for the PC industry, with the
Asia/Pacific (excluding Japan) and rest of world regions leading the charge, often with growth rates
exceeding 20%. The industry’s slowdown during 2008-09 hurt growth in every region. From 2010
through 2014, the pattern of the Asia/Pacific region leading growth will return” (S&P). Based on units of
PC shipments, the Asia/Pacific region currently (2011) has the largest amount of demand at 130,989 units
(thousands) with a market share of 32.3% (S&P). In the Asia/Pacific region, the year-to-year % change
was 13.9 from 2008-2009, 31.8 for 2009-2010 and 19.7 from 2010-2011. Forecasts for % growth in units
shipped to Asia/Pacific are 17.0 for 2012, 16.5 for 2013 and 16.3 for 2014 (S&P). Even though growth
rates of desktop shipments are supposed to slow throughout the next few years, the computer
manufacturers themselves are still on a technological road to success.
Part III: Industry Analysis
1. The computer manufacturing industry is moderately competitive.
Rivalry
10
Rivalry in the computer manufacturing industry is high and increasing. Due to an increase in foreign
competition computer manufactures have to cut down on their retail prices in order to stay
competitive. As production cost decrease the amount of competition in the industry will rise
according to Ibisworld.com. Also the fact that two companies in the industry make up over 50% of
the market; there is very intense price completion between companies. For example, a HP desk-top all
included computer cost $599.99, and Dell offers an Inspiring 2305 all in one computer similar to the
HP computer for the same price of $599.99(dell.com and HP.com). As we can see they sell similar
products for similar prices making the rivalry very high with in the computer manufacturing industry.
Buyers
Buyers have a moderate threat to profitability in the computer manufacturing industry. Because there
is little differentiation between the computer companies buyers can choose between more then on
similar product. If one were to purchase a new computer they have several different options and
because of that they will have a low switch cost rate. Also because people do not buy computers are
a regular basis it gives the buyer power on how much they want to spend and what kind of computer
they want. Also we find that customers can be loyal to a brand of computers, and are likely to keep
up with new technology with higher loyalty to the brand. This is why it is a moderate threat to
profitability rather than a low. While switch coast are low brand loyalty is high (ibisword.com).
Threats of Entry
Aside from the fact that four computer manufacturers hold 77% of the industry revenue, barriers to
entry in this industry are low and are expected to remain steady. However, on an industrial scale,
computer manufacturing exhibits modest barriers to entry. The ease of entry makes this industry
exceptionally price-competitive (IBIS World.) An entrants’ ability to compete may rely on timely
supply of products from a limited number of suppliers, who tend to have supply shortages rather than
surpluses. It is also tough for entrants to keep down production costs due to their lack in bargaining
11
power. With the noble reputations of the larger companies in the industry, it is often hard for newer
companies to develop supplier contracts (S&P.) However, consumers are relatively open to
purchasing unknown brands, because of the high component standards required in computer
manufacturing. Overall, the threat of entry is low for the computer manufacturing industry.
Suppliers
Supply chains within the computer manufacturing industry are highly complex and involve many
international business relationships. With virtually every manufacturer assembling computers from
imported parts such as semiconductors and chips, the cost changes of these components have the
strongest effect on whether a company can keep up with competition (S&P.) The largest companies in
the computer manufacturing industry operate on a global scale and employ facilities in many different
countries (IBIS World.) This movement towards globalization creates high levels of international
competition and creates a strong downward pressure on computer prices (IBIS World.) The ability for
computer manufacturing companies to quickly adopt new technologies from chip suppliers also plays
a key role in the companies’ competitive position. On a larger scale, corporate clients of the computer
manufacturing industry tend to favor suppliers that can also handle all of their IT needs, including
personal computers, servers, IT support and implementation (IBIS World.) Overall, the magnitude of
suppliers for entering the industry is moderate.
Substitutes
Substitutes are a moderate threat in the computer manufacturing industry (S&P.) Buyers have many
options to choose from including smartphones, ipads, and palm pilots. Of these, smartphones are the
biggest threats to computers. According to David Lagesse, the smartphone will replace the computer
in the next couple of years. The different available apps allow users to customize their smartphones
to meet their needs and demands. For instance, smartphones allow users to check their finances, send
emails, view videos, review documents, post facebook updates, listen to music, make purchases, use
12
coupons, get directions, and much more (Lagesse.) Along with these apps, Smartphones will also be
able to run multiple operating systems and be priced as standard headsets, which means many more
individuals will be able to purchase smartphones (Lagesse.)
2. Final Analysis
From the research, we have determined that the computer manufacturing industry lands in the
industries with 2-3 low level threats. This means, that the computer manufacturing industry has
an expected profitability of business average on all Key Success Factors will be about equal to the
cost of capital.
Of the different forces, rivalry has the highest threat level. As explained in the Key Success
Factor section, companies must have strong economies of scale, in order to combat this level of
competition. Economies of scale reduces a company’s costs without decreasing the features
(which supports high average prices.) If a competitor reduces their average prices, the company
can use the lower production costs to give the customers a lower price on their product, thus
defending against the rivalry and providing customers with a lower price without reducing the
product’s features.
3. A key success factor is any skill a company must be strong at, in order to defend against the high
threats of the industry and be successful. Four key success factors that any company in the
computer manufacturing industry must be strong at are inventory turnover ratio, economies of
scale, effective advertising and branding, and business capital spending. Industry turnover ratio is
the ratio that shows the number of times a company’s inventory is sold and replaced over a period
of time. Economies of scale is the ability of a company to efficiently produce products, in order
to maintain low costs and provide customers with low prices, without reducing the features of a
13
product. Effective advertising and branding is the ability of a company to successfully
differentiate themselves from competitors in a highly price sensitive industry. Business capital
spending is the ability of a company to spend money on repairing or replacing equipment that is
depreciating or losing value that must be used in the everyday business processes of the company.
4. The inventory turnover ratio is calculated by taking Revenue and dividing by the Average
Inventory. Dell’s ratio is 52.59 (61,494,000,000/1,176,000,000) and Hewlett-Packard’s ratio is
20.01 (126,033,000,000/6,297,000,000). Economies of scale is calculated by taking Total Costs
and dividing it by Revenue. Dell’s Economy of Scale is 1.27 (49,128,000,000/38,599,000,000)
and Hewlett-Packard’s Economy of Scale is .74 (92,753,000,000/124,503,000,000). Effective
advertising and branding can be calculated by taking Total Advertising and dividing by Revenue.
Dell’s ratio is .01 (730,000,000/61,494,000,000) and Hewlett-Packard’s ratio is .01
(1,000,000,000/126,033,000,000). Business capital spending can be calculated taking Capital
Spending and dividing it by Depreciation. Dell’s Business Capital Spending is 13.31
(12,912,000,000/970,000,000) and Hewlett-Packard’s Business Capital Spending is 11.56
(55,707,000,000/4,820,000,000).
5. Companies must have strong economies of scale, in order to implement effective cost controls
(IBIS World.) With strong economies of scale, companies can compete in industries that
compete on price, such as the computer manufacturing industry, according to Dell and HewlettPackard’s 10K forms. By having ineffective cost controls, companies can lose market share,
customers, and potential customers, thus, economies of scale is a key success factor in the
computer manufacturing industry.
The inventory turnover ratio is extremely important in the computer manufacturing industry. In
order to compete in this highly competitive market, manufacturers must have a high inventory
14
turnover ratio. According to Dell’s 10K, Dell faces ongoing product and price competition in all
areas of the business, as well as the rapid changes in technological advances. Product life cycles
are also extremely short in the computer manufacturing industry, so companies must be able to
introduce new products quickly, according to Hewlett-Packard’s 10K form. High inventory
turnover ratios enable companies to be innovative and provide for advanced products. By being
innovative, companies can differentiate themselves from competitors and provide customers with
the most current and desired products. With such a high level of competition, it is extremely
important that companies provide updated products for their customers, in order to survive the
industry.
15
Part IV: Strength Assessment
1.
Key Success Factor and
Calculation
Inventory Turnover Ratio
=(Revenue)/(Average
Inventory)
Higher is Stronger
Economies of Scale
=(Total Costs)/(Total
Assets)
Lower is Stronger
Effective Advertising and
Branding
=(Total Advertising
Costs)/(Revenue)
Lower is Stronger
Business Capital
Spending
=(Capital
Spending)/(Depreciation)
Dell Inc.
Hewlett-Packard
=(61,494,000,000)/(1,176,000,000)
= 52.29
=(126,033,000,000)/(6,297,000,000)
= 20.01
5
1
=(49,128,000,000)/(38,599,000,000) =(92,753,000,000)/(124,503,000,000)
= 1.27
= .74
1
5
=(730,000,000)/(61,494,000,000)
= .01
=(1,000,000,000)/(126,033,000,000)
= .01
3
3
=(12,912,000,000)/(970,000,000)
= 13.31
=(55,707,000,000)/(4,820,000,000)
= 11.56
5
1
Higher is Stronger
Inventory Turnover Ratio: The inventory turnover ratio is extremely important in the computer
manufacturing industry. In order to compete in this highly competitive market, manufacturers must have
a high inventory turnover ratio. According to Dell’s 10K, Dell faces ongoing product and price
competition in all areas of the business, as well as the rapid changes in technological advances. Product
life cycles are also extremely short in the computer manufacturing industry, so companies must be able to
16
introduce new products quickly, according to Hewlett-Packard’s 10K form. High inventory turnover
ratios enable companies to be innovative and provide for advanced products. By being innovative,
companies can differentiate themselves from competitors and provide customers with the most current
and desired products. With such a high level of competition, it is extremely important that companies
provide updated products for their customers, in order to survive the industry.
Inventory turnover ratio is calculated by taking the Revenue and dividing it by the Average Inventory.
With the numbers provided by IBIS World, according to the table, Dell has an inventory turnover ratio of
52.29, while Hewlett-Packard has an inventory turnover ratio of 20.01. A company wants a high
inventory turnover ratio, especially if it is in a highly competitive industry, where innovation is important.
Thus, Dell is much stronger in this area, than Hewlett-Packard.
Economies of Scale: Companies must have strong economies of scale, in order to implement effective
cost controls (IBIS World.) With strong economies of scale, companies can compete in industries that
compete on price, such as the computer manufacturing industry, according to Dell and Hewlett-Packard’s
10K forms. By having ineffective cost controls, companies can lose market share, customers, and
potential customers, thus, economies of scale is a key success factor in the computer manufacturing
industry.
Economies of scale is calculated by taking the Total Costs and dividing it by the Total Assets. With the
numbers being provided by IBIS World, according to the table, Dell has an economies of scale of 1.27,
while Hewlett-Packard’s economies of scale is .74. The lower the number, the stronger a company is at
economies of scale, thus, Hewlett-Packard has a stronger economies of scale than Dell.
Effective Advertising and Branding: Companies must be effective at advertising and branding, in order
to compete in a highly competitive industry. In the computer manufacturing industry, competition is
extremely price sensitive, so companies have to differentiate themselves from competitors, in order to
gain market share and survive in the industry (IBIS World.) Without effective advertising, companies
17
cannot compete or last in the computer manufacturing industry. According to IBIS World, effective
advertising also allows companies to achieve stronger growth. This is exactly what Dell is looking to do
with its’ new advertising efforts. Not only does advertising allow companies to survive and be successful
in the computer manufacturing industry, but it creates the branding that is necessary to succeed. “Dell’s
goal is nothing less than to turn the company into ‘the most loved brand in the PC industry’” (Worthen.)
Effective branding, such as this, differentiates the company from other competitors, which makes it more
possible for a company to survive the industry and competition.
Effective advertising is calculated by taking the Total Advertising Costs and dividing it by Revenue. A
company wants to spend less on advertising for every $1 of revenue, so the lower the ratio; the stronger
the company is at advertising. With the total advertising costs provided by Dell and Hewlett-Packard’s
10K forms and the revenue numbers provided by IBIS World, Dell has a ratio of .01, while HewlettPackard has a ratio of .01. With both ratios being the same, both companies are relatively equal in this
key success factor.
Business Capital Spending: Companies must spend their business capital effectively. Companies must
put money into replacing older equipment or repairing broken down equipment, in order to provide
customers with up-to-date, high quality products. A company with high capital spending has a higher
chance of being successful in the computer manufacturing industry because they can keep up with
customers’ changing demands and provide high quality, innovative products (S&P.)
Business capital spending ratio is calculated by taking the Total Capital Spending and dividing it by the
Depreciation incurred that year. The higher the ratio, the stronger the company is in spending business
capital because it means the company is spending more on replacing/repairing equipment than the
depreciation being incurred. With the numbers provided by IBIS World, Dell has a business capital
spending ratio of 13.31, while Hewlett-Packard has a business capital spending ratio of 11.56. Because
Dell has a higher business capital spending ratio, they are much stronger than Hewlett-Packard.
18
Data for Dell (from IBIS World)
Fiscal Year End Date
Jan 2011
USD
Million
Currency Units
INCOME STATEMENT
Operating Revenue
Adjustments to Revenue
Cost of Sales
Gross Operating Profit
R & D Expense
Selling, Gen. & Administrative Expense
EBITDA
Depreciation & Amortization
Operating Income After Depreciation
Interest Income
Other Income, Net
Special Income/Charges
EBIT
Interest Expense
Pre-Tax Income (EBT)
Income Taxes
Minority Interest
Net Income from Continuing Operations
Net Income from Discontinued Operations
Net Income from Total Operations
Extraordinary Income Losses
Income from Cum. Effect of Acctg. Change
Other Gains (Losses)
Total Net Income
Normalized Income
Net Income Available for Common
Preferred Dividends
Dividends Paid per Share (Currency Unit: Dollars)
BALANCE SHEET
Current Assets
Cash and Equivalent
Marketable Securities
Receivables
19
61494
0
49128
12366
661
7302
4403
970
3433
0
116
0
3549
199
3350
715
0
2635
0
2635
0
0
0
2635
2635
2635
0
0
13913
452
10136
Inventories
Other Current Assets
Total Current Assets
Non-Current Assets
Gross Fixed Assets
Accumulated Depreciation
Net Fixed Assets
Intangibles
Other Non-Current Assets
Total Non-Current Assets
Total Assets
Current Liabilities
Accounts Payable
Short Term Debt
Other Current Liabilities
Total Current Liabilities
Non-Current Liabilities
Long Term Debt
Deferred Income Taxes
Other Non-Current Liabilities
Minority Interest
Total Non-Current Liabilities
Total Liabilities
Stockholder's Equity
Preferred Stock Equity
Common Stock Equity
Common Par
Additional Paid in Capital
Cumulative Translation Adjustments
Retained Earnings
Treasury Stock
Other Equity Adjustments
Total Capitalization
Total Equity
Total Liabilities & Stock Equity
1301
3219
29021
4729
2776
1953
5860
1765
9578
38599
11293
851
7339
19483
5146
0
6204
0
11350
30833
0
7766
11797
0
0
24744
-28704
-71
12912
7766
38599
20
Data for Hewlett-Packard (from IBIS World)
Fiscal Year End Date
Oct 2010
Currency Units
USD Million
INCOME STATEMENT
Operating Revenue
126033
Adjustments to Revenue
0
Cost of Sales
92753
Gross Operating Profit
33280
R & D Expense
2959
Selling, Gen. & Administrative Expense
12585
17736
EBITDA
Depreciation & Amortization
4820
Operating Income After Depreciation
12916
Interest Income
0
Other Income, Net
-293
Special Income/Charges
-1144
11479
EBIT
Interest Expense
505
Pre-Tax Income (EBT)
10974
Income Taxes
2213
Minority Interest
0
Net Income from Continuing Operations
8761
Net Income from Discontinued Operations
0
8761
Net Income from Total Operations
Extraordinary Income Losses
0
Income from Cum. Effect of Acctg. Change
0
Other Gains (Losses)
0
8761
Total Net Income
Normalized Income
9905
Net Income Available for Common
8761
Preferred Dividends
0
Dividends Paid per Share (Currency Unit: Dollars) 0
BALANCE SHEET
Current Assets
Cash and Equivalent
10929
Marketable Securities
5
Receivables
27570
Inventories
6466
21
Other Current Assets
Total Current Assets
Non-Current Assets
Gross Fixed Assets
Accumulated Depreciation
Net Fixed Assets
Intangibles
Other Non-Current Assets
Total Non-Current Assets
Total Assets
Current Liabilities
Accounts Payable
Short Term Debt
Other Current Liabilities
Total Current Liabilities
Non-Current Liabilities
Long Term Debt
Deferred Income Taxes
Other Non-Current Liabilities
Minority Interest
Total Non-Current Liabilities
Total Liabilities
Stockholder's Equity
Preferred Stock Equity
Common Stock Equity
Common Par
Additional Paid in Capital
Cumulative Translation Adjustments
Retained Earnings
Treasury Stock
Other Equity Adjustments
Total Capitalization
Total Equity
Total Liabilities & Stock Equity
9214
54184
22927
11164
11763
46331
12225
70319
124503
14365
7046
27992
49403
15258
5239
13822
332
34651
84054
0
40449
22
11569
0
32695
0
-3837
55707
40449
124503
22
2.
Key Success Factor
Dell Inc. Strength
Rating
Hewlett-Packard
Strength Rating
5
Dell Calculation vs.
Hewlett-Packard
Calculation
52.29 vs 20.01
Inventory Turnover
Ratio
Economies of Scale
1
1.27 vs .74
5
Effective Advertising
and Branding
Business Capital
Spending
Avg. Rating
3
.01 vs .01
3
5
13.31 vs 11.56
1
3.5
1
2.5
3. From the above charts and calculations, Dell Inc. is the company that can create and sustain a
competitive advantage in the computer manufacturing industry. Dell is stronger in inventory
turnover ratio, competitive in effective advertising and branding, and stronger in effectively
spending business capital. Dell Inc. can create an even stronger advantage if they strengthen their
economies of scale, the only key success factor that is lower than their competitor, the HewlettPackard Company.
23
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26