February 23, 1965 • Houston, Texas
Chairman of Dell, Inc.
In 1984, as a first-year college student in Austin, Texas, Michael Dell borrowed $1,000 from his parents to start a computer accessories business. He began by selling kits to help customers upgrade their personal computers, establishing a business model his company, Dell, Inc., still follows today: sell directly to consumers, eliminating the middle step of a retail store or a distributor, and hold on to far more of the profits. In just two decades, Dell's company grew to massive proportions, with more than 47,000 employees and annual revenues of more than $40 billion. Dell himself was squarely at the top of Forbes magazine's list of the ten wealthiest Americans under the age of forty. He has been praised as a visionary and an innovator, but he has also earned admiration for being a stable, consistent leader. In an industry that changes rapidly, in terms of both technology and personnel, Dell has stood out from his peers by remaining at the helm of his company from its struggling early days to its current status as a major player in the global field of information technology (IT).
Michael Saul Dell was born in 1965 in Houston, Texas. While he displayed intelligence and ingenuity from an early age, he had little interest in school. At the age of eight, he sent away for information on taking a high school equivalency exam, which, if he passed, would make him a high school graduate without having to endure the remaining years of school. His parents insisted he stay in the classroom, and Dell invested his considerable creative energy in after-school ventures. When he was twelve years old, he operated a mail-order trading business for stamps and baseball cards, earning $2,000. At the age of fourteen, Dell got his first computer, an Apple II and soon realized that he had a knack for taking computers apart and putting them back together. While in high school, Dell took a job delivering newspapers for the Houston Post. His aggressive selling strategies—which included obtaining mailing lists of newly married people, offering them free trial subscriptions, and then following up with phone calls—resulted in earnings of $18,000. Not one to hold on to his spoils, Dell spent the money on a new BMW.
"What people have never understood is that we're not like other companies."
In 1983, when Dell entered his freshman year at the University of Texas at Austin, his parents hoped he would become a doctor, but Dell's skills lay elsewhere. In examining the personal computer, or PC, industry, he noticed an opportunity to sell PCs for less, as he explained to Richard Murphy of Success magazine: "I saw that you'd buy a PC for about $3,000, and inside that PC was about $600 worth of parts. IBM would buy most of these parts from other companies, assemble them, and sell the computer to a dealer for $2,000. Then the dealer, who knew very little about selling or supporting computers, would sell it for $3,000, which was even more outrageous." Dell realized that he could assemble computer parts, skip the step of selling to a dealer, and go directly to the consumer. That way the consumer could buy the product for less, and Dell held on to every penny of the profits. Dell thus combined his knowledge of computers with his well-developed business sense and began his own business, assembling upgrade kits for personal computers.
In a 1999 article in Fortune, Dell recalled operating his new business out of his University of Texas dorm room on the twenty-seventh floor: "People would ride up to the 27th floor with their computers. I'd put in some memory or a disk drive, they'd pay me, and I'd send them on their way." His earnings soon reached about $25,000 a month. By the summer of 1984, after one year at the university, Dell had decided that he needed to focus all of his time on his business, and he dropped out of college. His company, then called PCs Unlimited, began building PCs, starting with parts from such established computer companies as IBM and Compaq and adding elements to make the products unique. Dell continued to sell directly to consumers, a strategy that paid off in vast sums: by the end of 1984, his company had earned $6 million. Dell was off and running, leading his company to enormous growth year after year.
By early 1985, at the age of twenty, Dell had thirty employees working for him. During the summer of that year, the company began producing the Turbo PC, its first computer made entirely from scratch, rather than a customized version of another company's machine. In 1987 Dell changed the name of the company from PCs Unlimited to Dell Computer Corporation. At that time he began a program offered by no one else in the industry: rather than having customers bring broken-down computers to a store for repair, Dell Computer would pay house calls to service its customers' PCs. In Success magazine, Dell pointed out that this offer came out of necessity rather than an ingenious plan to outperform competitors: "That was a pretty important plus because we didn't have any stores," he recalled. During 1988 Dell began offering the public the opportunity to buy stock in his company. Just four years after the company had begun, sales reached $159 million. Dell found success in his personal life at that time, too; he married Susan Lieberman in October of 1989. Residing in Austin's hill country, the couple has four children.
For many people, it is nearly impossible to imagine life without computers, yet it was not long ago that computers were a rare item, seen perhaps by the average citizen only on television. Mainframe computers of the 1950s took up entire rooms; minicomputers were the size of refrigerators; and microcomputers, which eventually became known as personal computers (PCs), could fit on a desktop. Today, many varieties of wireless computers can be held in the palm of a hand.
In the early 1970s, consumer demand for home and business computers began to develop. About that time, Ed Roberts, owner Micro Instrumentation Telemetry Systems (MITS), worked with engineers to develop the MITS Altair 8800. This computer was sold as a kit for $400; it had to be assembled by the consumer, who also had to write the software. In spite of these hurdles, MITS was flooded with orders for the Altair in 1975. Soon after the Altair hit the market, two young programmers approached Roberts to inform him of an existing software program that could be adapted to work on the Altair. These programmers, Paul Allen and Bill Gates, then a first-year student at Harvard University, created a version of the program, called BASIC, for the Altair. Later, MITS went out of business, and Gates and Allen founded Microsoft, the global software giant.
In about 1973 Xerox developed the Alto, a computer featuring a mouse and a point-and-click graphical user interface (GUI). The company never marketed this computer to the public, however, as Xerox management could not envision how consumers would use it. Computers that featured a GUI, including Apple's Lisa and Macintosh models, did not become widespread for another ten years. In 1975 Steve Wozniak and Steve Jobs, two computer hobbyists, began working together to build their own PC using inexpensive parts. The following year they founded Apple Computers and released the Apple I. In 1977 Apple Computers released the Apple II, considered by many to be the first true personal computer. This PC, which sold for just under $1,300, featured color graphics and a disk drive. Apple's primary competitor was Commodore, which released the Commodore PET in early 1977. The PET had features similar to Apple II but was sold for half the price. Commodore also created the Commodore 64, which featured a good deal of memory and color graphics and used inexpensive floppy disks for storing files. The Commodore 64 became the best-selling PC of all time.
Computers were catching on with a small segment of the population, but it was not until the invention of spreadsheet software in 1979 that many businesses saw the benefits of using PCs. With the development of VisiCalc, a program invented by Dan Bricklin and Bob Frankston, businesses calculating their finances could use computer software to perform in a few minutes tasks that had previously taken hours. When a user changed one number in a column, the software automatically calculated the change to every other number on the sheet, changes that otherwise had to be done by hand. During that same year, Wordstar, a groundbreaking word-processing software, was released and became immediately successful. With Wordstar and similar software, users could create, edit, save, and print documents using their computers.
With the release of the IBM PC—the computer credited with popularizing the phrase "personal computer"—in August of 1981, the PC came to be seen as a vital business tool and a machine that could be useful to general consumers as well. The IBM PC was designed with an open architecture, meaning that similar computers built by other companies could use IBM software. Microsoft, first with the development of MS-DOS and later with Windows, became the primary developer of operating systems—the programs that run every other program on a computer—for IBM-type PCs. While Apple had popularized computers with graphical user interfaces, Microsoft became a major GUI player with the release of its first Windows operating system in 1985. Developments in the personal computer since that time have been less dramatic than in the early years, focusing primarily on increasing memory, speed, and portability, decreasing the machine's size, and improving the quality of the GUI.
Dell Computer grew at an astronomical rate, and with that growth came problems. During 1993 the industry as a whole was suffering a slowdown, with consumers buying fewer PCs. Dell Computer was suffering from numerous management problems. The company scrapped plans for a new laptop computer when it realized the product was outmatched by its competitors. An attempt to sell Dell computers through retail outlets like Best Buy and Wal-Mart had failed. Recognizing that his company needed to be overhauled, Dell brought in several new high-level managers with years of experience in high-tech industries. Many of the day-to-day responsibilities were delegated to these trusted executives, leaving Dell to concentrate on the company's overall vision and strategy. The reorganization helped the company regain its footing, a triumph marked by the hugely successful release of a new laptop computer, the Latitude XP.
Many business analysts have suggested that one of Dell's secrets to success has been his ability to remain focused on his winning business model: sell directly to consumers, keep prices low and quality high, and offer solid technological support to customers. Within thirty-six hours of a customer ordering a PC by phone or through the company's Web site, a custom-built Dell computer is shipped. To keep its costs down, the company maintains an extremely low inventory of computer parts, at any given time housing only enough components to fulfill a few days' worth of orders. This strategy not only reduces the need for warehouse space but also ensures that, in the rapidly changing computer industry, Dell always has in stock the newest parts its suppliers offer. Michael Dell has been able to maintain his company's steady growth rate by selling not just to individual consumers but also to large corporations, educational institutions, and government agencies. The company has expanded its line of products in recent years to include network servers (powerful machines that run computer networks), storage systems, handheld computers, and printers—an expansion signified by its 2003 name change from Dell Computer to Dell, Inc. Dell has extended its customer base throughout the world, most notably into Asia, capturing 7 percent of the PC market in China by 2004.
During the summer of 2004, Dell, who had been chairman and chief executive officer, or CEO, of his company, relinquished the CEO position, passing that title on to Kevin Rollins, his former president and chief operating officer. In a 2004 interview with Fortune magazine, Dell and Rollins stated that the change in their job titles did not signal any major shift in the way the company would be run. Dell declared: "We run the business together, and we're going to continue." Since its beginnings in 1984, the company has set a rapid pace for growth; it took Dell just twenty years to surpass industry leader Hewlett-Packard to hold the largest share of the computer-making market. A 2001 article in The Economist summed up Dell's accomplishment, stating, "There is hardly a more admired boss than Mr. Dell, the man who turned the commodity business of PC making into a goldmine by doing things differently."
Calonius, Erik. "Their Wildest Dreams." Fortune (August 16, 1999): p. 142.
Kirkpatrick, David. "Dell and Robbins: The $41 Billion Buddy Act." Fortune (April 19, 2004): p. 84.
Murphy, Richard. "Michael Dell." Success (January 1999): p. 50.
"A Revolution of One." The Economist (April 14, 2001): p. 10.
"Dell Inc." Hoover's Online. http://www.hoovers.com/dell/—ID__13193—/free-co-factsheet.xhtml (accessed on June 26, 2004).
"Executive Biographies: Michael S. Dell." Dell. http://www1.us.dell.com/content/topics/global.aspx/corp/biographies/en/michael_dell?c=us&l=;en&s=corp (accessed on June 26, 2004).