Michael Dell



Born: February 23, 1965
Houston, Texas
Founder, Dell Computer Corporation

Michael Dell. Reproduced by permission of AP/Wide World Photos.
Michael Dell.
Reproduced by permission of AP/Wide World Photos.

As a teenager, Michael Dell hit upon a new way to sell and manufacture computers. He turned this idea into a working business and started his own company before he even made it to college. For several years, he won national attention because of the great success he enjoyed at such a young age. Over time, however, people began to see that Dell was more than just a "wonder boy," he was a pioneer in the fast-paced world of technology. By 1992, Dell was the youngest chief executive officer (CEO) ever to lead a company in the Fortune 500, a listing of the top U.S. corporations. By 1999, he was the fifth-richest person in the United States.

"We dive headfirst into change. Part of that is because it's all we've ever known, but it's also because today, it's a must.… To thrive on change, you must understand how to give in to it, flow with it, and derive strength from it. There's no other way."

Selling Stamps, Newspapers, and Computers

Michael Dell was born on February 23, 1965, in Houston, Texas. His father Alexander was an orthodontist and his mother Lorraine was a stockbroker. Dell's parents hoped he would follow his father and study medicine. From an early age, however, Dell had an interest in business. Eager to speed up his education, Dell sent for information that would prepare him for a test that would give him his high school diploma. He was eight years old at the time.

Dell did stay in school, but spent a good deal of his time looking for ways to earn money. At age twelve, he started a business that sold stamps by mail to collectors. He earned $2,000. In high school, Dell sold subscriptions for a local newspaper. He figured that people just married or who had just bought new homes in Houston would be likely customers. So, Dell hired friends to help him check courthouse records for newly married couples, and he scanned the listings of new home purchases. By selling to those two specific groups, Dell made $18,000 in one year. His income amazed his history teacher—she made less that year than Dell did.

Dell was interested in computers, and he soon realized that selling them was a gold mine. The parts inside a typical IBM PC only cost about $700. Retailers bought the machines for $2,000 and sold them for $3,000. Dell figured that someone could make money building their own computers and selling them directly to customers, at a much lower price than the retailers charged. Dell began buying machines, adding new parts, and selling them locally. He continued this business in 1983, when he began taking classes in Austin at the University of Texas.

According to an 1991 article in Forbes, young Michael Dell once said his goal was to "make more money than any other kid in school." By the time he was seventeen years old, he had earned enough money to pay cash for a BMW automobile.

From College to Corporation

At his first apartment in Austin, Dell's business did not sit well with his roommates. They dumped his computer parts against the door and told him to move out. In November 1983, Dell's parents learned about his computer business and that he was skipping classes. His father asked what he wanted to do with his life. Dell's reply, as he recounts in Direct from Dell was: "I want to compete with IBM!" To satisfy his parents, Dell tried to quit the computer business; he lasted only a few weeks. "I knew in my heart," Dell later wrote, "that I was onto a fabulous business opportunity that I could not let pass me by."

Dell officially launched his own computer company, PC's Limited. A few months later, he incorporated as Dell Computer Corporation, investing the $1,000 minimum required by Texas law. Before the end of 1984, he hired a local engineer to build a computer for him, instead of reselling upgraded IBM machines. At the end of the fiscal (financial) year of 1986, sales of Dell-produced machines hit $34 million.

As a new company, DCC had to win customers with more than low prices. To overcome the reluctance to buy a computer by mail, Dell offered a 30-day money-back guarantee. He also made sure the company used the best parts available. And he encouraged his engineers to build faster machines than IBM or other competitors. As Dell computers won more attention from PC magazines, sales continued to rise.

Despite their early success, Dell and his company were not perfect. The company bought more chips than it needed right before prices for these computer "brains" fell. "For the first time," Dell says in Direct from Dell, "I started thinking I might be in over my head." Still, the young CEO survived the crisis and learned from his mistakes. He told Forbes in 1991, "I'm guilty of doing too much, and I'm guilty of not seeing mistakes coming. What I'm not guilty of is making the same mistake twice." During the early 1990s, Dell hired several experienced executives to run his company's day-to-day operations, freeing him to focus on long-term strategy.

During one tough stretch at the company, Dell workers attended a rally wearing army fatigues—a sign of their determination to keep fighting. Dell joked with his employees, telling them his daughter's first words were "Daddy, kill Compaq. Daddy, kill IBM."

A Computer Fortune

By the late 1990s, Dell's shares in his company made him worth $16 billion. Employees and investors who had bought stock early on also became rich; in Texas, they were sometimes called Dellionaires. Dell appeared on the cover of national magazines and spoke often about his direct sales model, which had so successfully cut out the middleman and made DCC a world leader in computers. Dell, however, was reluctant to discuss his wife, their four children, and their private life. In 1995, the media wanted to talk about the 33,000square-foot home Dell was building outside Austin. He seemed bothered by the attention, telling Fortune, "Fame isn't everything it's cracked up to be."

Mort Topfer: Dell's Right-Hand Man

In 1994, when Michael Dell persuaded Mort Topfer to leave Motorola and come work for him, Topfer only planned to stay a few months. Topfer was fifty-seven, and he and his wife had just built a retirement home in Las Vegas, Nevada. Serving as vice chairman at Dell, however, proved a welcome challenge, and Topfer stayed in that position for five years. He helped Dell realize a prediction he made to PC Week soon after joining the company: "We are going to drive Dell to be the top 2 or 3, and maybe even No. 1 in the business."

Born in Brooklyn, New York, in 1936, Topfer earned a degree in physics from Brooklyn College, then took a job at RCA Laboratories, where he worked in both research and management. In 1971, he joined Motorola, where he eventually became president of the company's Land Mobile Products Sector. Dell and Topfer first met in January 1994, and the two men discussed their business philosophies for several months before Topfer came to Dell as vice chairman. In that role, Topfer handled the company's planning and manufacturing. Topfer and Dell worked together to split DCC's market into smaller segments, targeting specific products to meet each segment's unique needs.

Topfer also served as a mentor to Michael Dell, helping him cope with the demands of running a multibillion-dollar company. Even after Topfer stepped down as vice chairman in 1999, he remained one of Dell's closest advisers. He also stayed on the board of directors. In 2000, Topfer founded a new company with his sons Alan and Richard. Castletop Capital manages a $60 million fund to invest in small technology firms, mostly in Texas. Topfer is also active in civic affairs in his adopted hometown of Austin. He and his wife have given millions of dollars to local charities.

For a time, Dell was also questioned about his lack of charitable giving. In 1995, that changed when his company launched a foundation. Four years later, Dell and his wife Susan started their own foundation. The company's charitable giving focuses on children, particularly health and education. Dell's personal donations—numbering in the tens of millions of dollars—have gone to Texas libraries, theaters, and other organizations.

Observers say that Dell has matured since he began his company as a nineteen-year-old college student. Unlike some entrepreneurs, he has been able to manage the huge corporation that grew from simple roots. Part of his skill was hiring the right people. One Dell executive told Texas Monthly in 1999 that Dell has another important trait: "His willingness to listen is unbelievable. He detects insight, mines it, absorbs it all, and immediately puts it to use." Just like earlier great "self-made" business owners, Dell has inspired a new generation of Americans to follow their dream and take risks when they come across a new idea.

For More Information

Books

Dell, Michael, with Catherine Fredman. Direct from Dell: Strategies That Revolutionized an Industry. New York: HarperBusiness, 1999.

Periodicals

Angrist, Stanley. "Entrepreneur in Short Pants." Forbes (March 7, 1988): p. 84.

Calonius, Erik. "Their Wildest Dreams." Fortune (August 16,1999): p. 142.

Keefe, Bob. "Dell Aims to Dominate Consumer Market with New Focus." Forbes (December 26, 2001): p. B1.

Lary, Banning Kent. "An 'Instinct' for Computer Success." Nation's Business (April 1991): p. 46.

Lyons, Daniel. "Michael Dell's Second Act." Forbes (April 17, 2000): p. 208.

Magretta, Joan. "The Power of Virtual Integration." Harvard Business Review (March-April 1998): p. 72.

Morris, Betsy. "Can Michael Dell Escape the Box?" Fortune (October 16, 2000): p. 92.

Murphy, Richard. "Michael Dell." Success (January 1999): p. 50.

Poole, Claire. "The Kid Who Turned Computers into Commodities." Forbes (October 21, 1991): p. 148.

Rahul, Jacob. "The Resurrection of Michael Dell." Fortune (September 18, 1995): p. 117.

Richman, Tom. "The Entrepreneur of the Year." Inc. (January 1990): p. 43.

Serwer, Andy. "Dell Does Domination." Fortune (January 21, 2002): p. 70.

Silverthorne, Sean. "29 and Counting." PC Week (August 29,1994): p. Al.

Smith, Evan. "Entrepreneur of the Century." Texas Monthly (December 1999): p. 158.

Web Sites

Castletop Capital. [On-line] http://www.castletopcapital.com (accessed on August 15, 2002).

Dell Computer Corporation. [On-line] http://www.dell.com (accessed on August 15, 2002).



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