Dell and Gateway Analysis.docVIP

Gateway Inc. vs. Dell Inc. Executive summary Gateway and Dell started out with very similar backgrounds and business models. While both companies suffered from the dotcom bust in late 2000 and early 2001, Dell quickly recovered and rose again to dominance whereas Gateway struggled for many years until its eventual acquisition by Acer in 2007. Examination of the company records and SEC annual report filings suggests that these different outcomes were largely due to differences in operating efficiency and ultimately, to superior strategic planning by Dell management. Overview of the company histories Gateway Inc. (originally Gateway 2000) and Dell Inc. (originally Dell Computer Corporation) went into business in 1985 and 1984 respectively. They both had very similar business models that started as direct sales of made-to-order computers for knowledgeable customers, first by mail-order, and then over the telephone. Both companies became eCommerce companies, that is they used the “internet and world wide web to transact business” (Laudon and Traver, 2010) when they both used the internet in 1996 to sell directly to customers. By the year 2000, Dell and Gateway were the #1 and #2 direct marketer and manufacturer of Personal Computers (PCs). (Kerin and Peterson, 2004). Both companies experienced solid growth through the late 80s and early 90s, which increased dramatically during the dotcom bubble and reached high points in 2000 with annual net earnings of $238M for Gateway and $2,177M for Dell. The dotcom bust in late 2000 and early 2001 hit both companies hard, however, though not equally so. Dells annual net earnings fell to $1,246M in 2001, while Gateways plummeted to a staggering $1,031M loss. (All earnings numbers reported come from the company’s respective Annual Form 10-K Report filed with the U.S. Securities and Exchange Commission / SEC). Dell recovered fairly rapidly, returning to their pre-bust level earnings by 2002 and peaking in 2005 with record ne