Dell Inc.

Description
Whether you spend most of your time in a cubicle or on a couch, chances are good that there's a Dell in front of you. The world's #1 direct-sale computer vendor provides a broad range of computer and entertainment products for the consumer and enterprise markets. In addition to a full line of desktop and notebook PCs, Dell offers network servers, workstations, storage systems, printers, handheld computers, LCD and plasma televisions, projectors, and Ethernet switches. The company also markets third-party software and peripherals. Dell's growing services unit provides systems integration, support, and training.

Entrepreneurial wunderkind Michael Dell pioneered the direct-sales model for computers and took the company from his dorm room to the top of the PC heap by keeping it focused on a simple formula: Eliminate the middleman and sell for less. Dell's built-to-order boxes allow for lower inventories, lower costs, and higher profit margins -- elements that leave Dell well armed for the PC price wars and IT spending recessions. In 2006 the company announced plans to open retail locations in Dallas and New York. Dell -- which already operates numerous informational kiosks in malls and airports -- remains committed to its direct sale model, and the stores will only carry display models.

Dell has built its fortune with the industry-standard Wintel platform (Microsoft Windows operating system and Intel microprocessor) as its foundation. Intel has traditionally enjoyed an exclusive relationship with the company, but in 2006 Dell announced plans to use chips from AMD in some of its high-end servers. It also added search giant Google to its list of server customers.

Dell faces intense competition from Hewlett-Packard, whose market share increased dramatically following its acquisition of perennial PC leader Compaq. Dell generates about 80% of its sales from desktop and notebook PCs. The company diversified its PC offerings in 2005 with the launch of XPS, a line of high-end desktop and notebook PCs for gamers and others willing to pay premium prices for top performance. The following year Dell acquired high-performance PC specialist Alienware, which operates as a standalone subsidiary with independent branding and operations. Dell's PC profile took a hit in August 2006, when the company announced that it would recall more than 4 million notebook computer batteries with cells manufactured by Sony.

Far from limited to PCs, the company is also a leading provider of server computers and storage devices for enterprises. Dell augmented its storage line when it reached an agreement with market leader EMC to resell that company's enterprise systems. Furthering its push beyond PCs, Dell has introduced a handheld computer, a line of Ethernet switches, and consumer electronics such as LCD televisions. It originally partnered with Lexmark to develop a line of Dell-branded printers, and it has formed additional partnerships to quickly grow its printing line.

On the services front, Dell has mirrored its straightforward approach to hardware sales, embracing a fixed-price model for offerings such as data migration and storage systems implementation. The company is also looking to international revenue to supplant sales in the PC-saturated US market. Dell's operations in the Asia/Pacific region are based in Singapore, and include manufacturing units in China and Malaysia. Early in 2006 the company announced an aggressive growth plan for its Indian operations that will affect its existing call center and development units and possibly include the creation of a new manufacturing center.

Founder and chairman Dell owns about 9% of the company.

Microsoft

Description
Microsoft's ambitions are anything but small. The world's #1 software company provides a variety of products and services, including its Windows operating systems and Office software suite. The company has expanded into markets such as video game consoles, interactive television, and Internet access. With its core markets maturing, Microsoft is targeting services for growth, looking to transform its software applications into Web-based services for enterprises and consumers. Microsoft has reached settlements to end a slew of antitrust investigations and lawsuits, including agreeing to uniformly license its operating systems and allowing manufacturers to include competing software with Windows.

Late in 2005 the company announced a reorganization designed to streamline its decision-making and speed up execution across its divisions. Its units include Microsoft Platform Products and Services (Windows Client Group, Server and Tools Group, MSN), Microsoft Business (Information Worker Group, Microsoft Business Solutions), and Entertainment and Devices (Home and Entertainment Group, Mobile and Embedded Devices Group).

While desktop applications and platforms remain the cornerstone of its operations, Microsoft has inexorably expanded its product lines, which include video game consoles, enterprise software, computer peripherals, software development tools, and Internet access services. In 2006 the company launched its Zune brand of digital entertainment products and services. The first Zune product, a 30GB digital media player, will compete directly against Apple Computer's iPod.

Microsoft has also reached major settlement agreements with Netscape (paying the company about $750 million); Sun Microsystems ($1.6 billion in addition to royalty payments on certain technologies); Novell ($536 million to settle a suit tied to Novell's NetWare software; Gateway ($150 million); IBM ($775 million and extending $75 million in credit towards Microsoft software deployment); RealNetworks ($761 million in cash and promotions); and Daum Communications ($30 million in cash, advertising, and other terms).

Despite the litigation that has plagued it in recent years, the company has continued to forge ahead in its strategy to extend its core software products into Web-based services for businesses and consumers. By transforming itself from a traditional software provider to a broader technology services and media company, Microsoft hopes to position its operating systems, software, and services as a de facto standard for accessing, communicating, and doing business over the Internet. The company also operates in the Web search space, directly challenging incumbents such as Yahoo! and Google. It has also partnered with mobile devices makers such as Hewlett-Packard and Motorola to develop handheld computers and mobile phones that utilize Microsoft Windows Mobile and Windows Media software.

Microsoft has used selective acquisitions (including the purchases of Navision and Great Plains Software) to expand its enterprise software offerings, which include applications for customer relationship management and accounting. Along with rival enterprise software providers such as SAP and PeopleSoft, Microsoft is increasingly targeting small and midsized businesses. In 2005 it acquired collaboration software maker Groove Networks (founded by Lotus Notes developer Ray Ozzie), anti-virus security provider Sybari Software, email security developer FrontBridge Technologies, and identity management software provider Alacris. Microsoft also bought file synchronization specialist FolderShare, and media-streams.com, a developer of VoIP technology.

Early in 2006 Microsoft acquired Apptimum, a developer of software used to transfer data between computers, and Onfolio, an Internet content collection and organization technology provider.

In November 2006 the company announced a partnership deal with long-time rival (and Linux proponent) Novell to more closely integrate Novell's open-source Linux software platform with Microsoft's Windows operating system. The agreement included Microsoft paying Novell $240 million up front in subscription fees, as well as an additional $108 million for use of patents; Novell will pay Microsoft at least $40 million over five years for use of Microsoft's patents, based on a percentage of revenue from Novell's open-source products. Microsoft also agreed not to sign a similar agreement with any other Linux distributor for three years

Chairman Bill Gates owns about 10% of Microsoft; CEO Steve Ballmer owns nearly 4%. Gates stepped down from his role as chief software architect in June 2006 to concentrate on his charitable work through the Bill & Melinda Gates Foundation.