Is the Current Economic Downturn the only Reason for Dell’s Trouble?

by Adrienne Haynes, Ofelia Valdez, and Matthew Korinek
Finance
Faculty advisor: Dr. Lei Wen

Dell, a major technology U.S. company, developed its fame by its direct-delivery business model. Once the No. 1 PC maker, Dell now lags behind Hewlett-Packard and Acer Inc. The current U.S. recession started in December 2007; at the same time, Dell’s stock price also declined from $30 in 2007 to $14 now, which was the lowest level since 1999. We will study the financial statements of Dell in past three years (2007-2009) to show if the financial difficulties the company experienced are closely related to the general macro-economy-related conditions or more firm-specific reasons. This research uses product and service analysis, corporate culture and corporate governance, as well as a SWOT analysis, to examine the fundamentals of company. The financial statement analysis is also used to review any red flags that may lead to the reasons behind the financial distress of Dell. This research also carefully examines if any past management missteps and decisions had any negative impact on Dell’s misfortune. The last but not the least, some potential short-term and long-term turn-around strategies are also recommended.