Michael Dell

Michael S. Dell is the founder, CEO, and chairman of Dell Computer Corp., the largest personal computer (PC) vendor in the world and also the leading commercial seller of PCs via the Internet. Dell has served his firm—which boasted sales in excess of $32 billion and employed more than 38,000 individuals in early 2001—as CEO since its inception in 1984. His stint is the lengthiest of any CEO at a leading American computer firm. While PCs, half of which are sold on the Internet, account for roughly 55 percent of sales, Dell has worked to move his firm into the more lucrative Internet-based server and storage markets since the late 1990s. He retains a 12-percent stake in the company.

While a student at the University of Texas, Dell began selling IBM compatible computers from his dorm room. He bought parts at wholesale prices, constructed the machines on his own, and sold them to bargain PC shoppers. The success of his venture prompted Dell to quit school in April of 1984 and establish his own business, Dell Computer Corp., with $1,000 in capital. Dell advertised his low-cost custom built PCs in computer magazines, targeting savvy PCs users. Customers were able to call an 800 number to places orders, and Dell shipped completed PCs directly to customers. What set Dell's firm apart from competitors was his practice of direct selling. The elimination of middlemen allowed Dell to price his computers well below market prices.

To facilitate his firm's rapid growth, Dell hired investment banking executive E. Lee Walker as president in 1986. The following year, he launched an expansion of manufacturing facilities and developed a national customer support center. Dell also began offering on-site services for Dell products. International expansion was initiated by the creation of an office in the United Kingdom. The firm also published a catalog for the first time and expanded its sales force. In 1988 Dell completed a reorganization that was designed to facilitate improved customer service. New PC launches included 100, 200, and 310 models. That year, Dell took his company public, offering 3.5 million shares at $8.50 each. Dell's firm also began offering leasing options to customers and furthered international expansion by establishing units in Canada and West Germany. In 1989, Dell became one of the first firms to license the UNIX trademark from AT&T Corp. The firm also began selling several new Epson dot matrix printer models and opened a unit in France. Record sales were marred by a 64-percent plunge in earnings, which Dell blamed on higher costs and an inventory glut.

Early in the 1990s, Dell intensified international expansion, overseeing the establishment of various operations in Ireland, Italy, Sweden, Poland, the Czech Republic, Belgium, Finland, Spain, Norway, Luxembourg, the Netherlands, and Mexico. Dell was the first personal computer manufacturer to offer applications software installation as a free standard service option. Copycat competitor Gateway 2000 usurped Dell as the top direct seller of PCs in the U.S. in 1992. To express his determination to reduce expenses at his firm, Dell reduced his pay by five percent.

Sales exceeded $2 billion in the mid-1990s. By then, Dell had grown into the world's sixth-largest desktop PC maker and seventh-largest notebook PC maker. The firm's success was due in large part to its ability to use the Internet to take and fill customers orders quickly and inexpensively. According to a May 2001 BusinessWeek Online article, "Michael Dell was e-business before e-business was cool. During the boom in technology spending, he used the Internet to reach out to customers and sell $50 million worth of computers a day." Dell's business model, which allowed for easy tracking of customer purchases, also allowed the firm to keep inventory at a minimum.

Wanting to reduce his company's reliance on PCs—which were being discounted by many rivals—Dell pushed his firm into the server market in 1996. Within two years, servers accounted for 16 percent of the company's $12 billion revenue, and within three years, Dell was second only to Compaq Computer Corp. in U.S. server sales. In 1999, when competitors began cutting PC prices further, Dell responded with its first PC under $1,000. That year, Business Week listed Dell among its top 25 managers for the third consecutive year. Stock grew roughly 140 percent, a rate it had maintained for the past four years.

As the PC market slowed in 2000, Dell began working to reposition his firm as a provider of Internet technology, focusing on servers and storage systems similar to those offered by Sun Microsystems Inc. The firm also began offering various Internet services such as Web hosting and wireless access to the Internet. Sales growth slowed nearly 10 percent to 38.5 percent, and stock prices began to falter, prompting Dell to reduce his bonus by 36 percent. Despite these troubles, Dell dethroned Compaq Computer as the leader in PC sales in April of 2001. That year, Chief Executive magazine named Dell CEO of the Year, adding to his list of previous awards, which included PC magazine's Man of the Year and Inc. magazine's Entrepreneur of the Year.