DELL
Description
Dell wants its name to ring from the desktop to the data center. One of the world's top suppliers of PCs, the company offers a broad range of technology products for the consumer, education, enterprise, and government sectors. In addition to a full line of desktop and notebook PCs, Dell offers network servers, data storage systems, printers, Ethernet switches, and peripherals, such as displays and projectors. It also markets third-party software and hardware. The company's growing services unit provides infrastructure consulting, systems integration, asset recovery, financing, support, and training.
In 2009 Dell acquired Perot Systems for about $3.9 billion in cash. The transaction allows the company to deliver a broader range of IT services, particularly to clients in the US. Dell will be able to sell more computers to Perot clients through the combination. The company made its move one year after PC archrival Hewlett-Packard acquired the much larger Electronic Data Systems (EDS), the outsourcing services pioneer founded by Ross Perot Sr., who established EDS in 1962 and Perot Systems in 1988. The deals indicate the growing importance of the IT services industry to computer manufacturers, as IBM Global Services and EDS (now called HP Enterprise Services) are among the leading providers of technical services in the world. Dell formed a new organization, Dell Services, with the purchase of Perot Systems.
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 have served it well through PC price wars and IT spending recessions. Though direct sales remain the core of Dell's business, a broader strategy has emerged since the company's founding father returned to the helm in 2007.
Faced with slowing sales rates in the domestic PC market, Michael Dell oversaw an aggressive campaign to reposition the company for growth. Most significantly, Dell shifted its sales approach. After years of watching competitors attempt to emulate its success with the direct-sale model, Dell expanded its channel sales. Prior to 2007, Dell had practically no retail presence. Since then, the company has partnered with stores such as Best Buy and Wal-Mart, as well as with systems integrators, resellers, and distributors worldwide.
The company is looking to international revenue from developing markets such as Brazil, China, India, and Russia to supplant weak sales in the US. Dell generates nearly half of its revenues outside the US. The company also looked overseas to find operational cost-saving opportunities. Based in Singapore, Dell's Asia/Pacific segment includes manufacturing and distribution units in China, India, and Malaysia. The company made major investments in its call center and development units in India. Closer to home, the company closed its Austin, Texas-based desktop PC manufacturing facility in 2008. It also shuttered customer care centers in Canada.
Generating about 60% of its sales from desktop and notebook PCs, Dell faces intense competition in the consolidating market it shares with Hewlett-Packard, Acer, and Lenovo. The company built its fortune with the "Wintel" platform (Microsoft's Windows operating systems, Intel microprocessors) as its foundation, and while that combination remains its bread and butter, Dell also offers chips from AMD and a version of Linux as options on some of its PCs. The company's PC sales are following an industry trend that favors mobile computers; Dell's notebook line, its largest revenue generator, accounted for almost a third of its sales in fiscal 2009. The company also made additional efforts to spur sales with high-end devices. Dell's gaming and multimedia PC offerings include its XPS and Alienware lines. It debuted a luxury laptop called Adamo in 2009.
Far from limited to PCs, the company also provides servers, storage devices, and networking equipment. As with its PCs, Dell's servers are primarily Wintel devices, but it supports versions of Linux from both Red Hat and Novell on select servers, as well as Sun Microsystems' Solaris operating system. Dell's storage line includes its PowerVault systems and devices from EMC that it resells. In 2008 Dell acquired storage systems provider EqualLogic for $1.4 billion. The purchase expanded Dell's offerings for small and midsized businesses. Its PowerConnect Ethernet switches are also aimed at the SMB market.
In 2009 Dell launched a portfolio of 14 new products -- including servers, workstations, storage systems, and third-party IT management software -- aimed at lowering costs in corporate data centers. The integrated product line competes with the comprehensive offerings of its chief rivals in the enterprise market, HP and IBM. Also that year the company made its long-rumored entry into the smartphone market, debuting a wireless handset called the Mini 3, which is based on the Android mobile device software created by Google. Dell will distribute the phone through China Mobile, which has more than 500 million subscribers, and Claro, a unit of América Móvil that serves more than 42 million customers in Brazil. The Android software is being utilized by a number of smartphone manufacturers, including HTC, LG Electronics, Motorola, and Samsung Electronics.
The company's software and peripherals segment encompasses Dell-branded displays and printers, as well as third-party peripherals, consumer and enterprise software, digital cameras, printers, and televisions. Though not as acquisitive as some of its rivals, Dell made targeted purchases to grow its product line and service capabilities. In 2008 the company acquired MessageOne, a provider of managed email management and archiving services, for $155 million in cash. MessageOne, which was founded by Michael Dell's brother, Adam, was integrated into Dell's global service organization.
Michael Dell owns about 12% of the company.
TRUE RELIGION
Description
Who knew you could find religion just by throwing open the doors to your closet? True Religion Apparel designs and markets upscale denimwear. The company's apparel offerings -- including jeans, skirts, jackets, and tops -- are sold under the True Religion Brand Jeans label in about 50 countries spanning North and South America, Europe, Africa, and the Asia/Pacific region. It also markets swimwear, eyewear, footwear, and fragrances. True Religion Apparel peddles its products through upscale retailers such as Barneys New York, Bergdorf Goodman, Neiman Marcus, Nordstrom, Saks Fifth Avenue, and about 900 high-end US boutiques. The company also operates about 40 stores under the True Religion banner.
The pricey jeans maker has been considering going private to maintain its double-digit sales and earnings gains, as well as expand its store operations. It then would like to re-emerge by taking the company public again. The firm in 2007 hired Goldman Sachs to advise it on ways to boost shareholder value. True Religion also enlisted the expertise of InGroup Licensing to expand the brand into a lifestyle collection. In 2009 True Religion set a long-term goal of generating 5% of its revenue from its licensing efforts, which have accounted for less than 1% of sales.
To this end, True Religion in early 2009 added eyewear to its portfolio through a licensing agreement. The company partnered with Revolution Eyewear to make and distribute True Religion-branded sunglasses and other items to be sold in True Religion-branded stores, upscale department stores, and more than 3,000 specialty stores (such as Sunglass Hut). Beyond North America, the licensing agreement reaches Europe, Asia, Australia, and the Middle East. A licensing deal with Pash Industries, inked in 2007, gave True Religion its own branded outerwear and its foot in the door at many exclusive shops where Pash already sells. It also penned an agreement that year with Selective Fragrances to add scents for men and women to its products portfolio. True Religion's licensing moves have proven profitable, accounting for about a quarter of its own branded retail store sales.
True Religion intends to maintain its brand image by limiting distribution of its apparel to the more exclusive boutiques, specialty stores, and department stores, as well as its own brand stores. The jeanswear designer expects sales through its True Religion locations to grow substantially, and it plans to add about 25 stores to its network in 2009. Despite efforts to keep its name in high-end shopping hubs, True Religion is moving an increasing amount of its merchandise to off-price retailers and outlet malls. These discount retail channels have helped to boost sales as accounts with some boutique customers become past due because of tightening credit markets and declining consumer spending. In 2008 off-price retailers and outlet malls contributed to about 15% of the company's sales, compared to about 10% in 2007. The company is looking overseas for growth, as well. In 2008 True Religion opened its first international store in Japan. The company also enlisted Hong Kong-based Bright Unity International to distribute its apparel in Hong Kong, Macao, and China.
Branding its products as "Made in the USA," True Religion outsources all of its production to contract manufacturers around the world. Its men's and women's denimwear is sewn and finished by manufacturers in the US, its children's denim and fleece apparel are made in Mexico, and its knit shirts are made in the Far East. To complete production, some apparel is then sent to laundry and finishing centers around Los Angeles.
Columbia Wanger Asset Management holds about a 10% stake in the company.