The Great Leaders Series: Michael Dell, Founder of Dell Computer
BY Kasey Wehrum
Michael Dell founded one of the world's most well-known computer companies from his college dorm room.
In his commencement address to the University of Texas at Austin's 2003 graduating class, Michael Dell urged the assembled students to take a look at the world around them and "then build a vision of how it could all be better and work like hell to make it happen. " Two things stand out about that speech. The first, and most obvious, is the irony of Dell, who dropped out of UT after only a year to pursue his eponymous computer company, being chosen as the distinguished speaker. But look further and you realize that Dell quite succinctly articulated the business model that helped him transform an industry and build a company that topped $61 billion in sales this year alone.
The son of an orthodontist and a stockbroker, Dell spent much of his Houston childhood hanging out in computer stores. At age 15, he famously broke down a brand new Apple II computer and rebuilt it, just to see if he could. His contribution to the computer world, however, was born not from his technical background, but from his ability to see that what needed improvement was not just the computers themselves, but the way in which they were sold.
In 1984 at the age of 19, Dell launched his computer company, first named PC's Unlimited, from his freshman dorm room. With $1,000 in start-up capital and the novel idea of selling custom-built computers directly to customers, Dell quickly seized on the formula that would form the basis of his company. As he explained during an interview with Inc. in 1990, "Let's say that you buy a computer from a retail store and you pay $4,000. The retailer sends $2,500 of that back to the manufacturer and keeps $1,500. The question I asked myself was, what was the retailer doing to earn his $1,500? Was he adding $1,500 worth of value to that machine for me, a knowledgeable computer buyer? The answer was no."
So Dell dropped out of school and with a loan from his family, set out to pursue the rechristened Dell Computer full time. By 1985, the company had produced the first computer of its own design, the Turbo PC. Within three years, Dell went from zero to $69.5 million in sales. By Year Four in 1988, Dell went public through an IPO that raised $30 million. By the tender age of 24, Dell was named Inc.'s inaugural Entrepreneur of the Year.
Since that time, Dell has seen his fair share of turbulence. Among the more notable missteps in Dell's history: the company's recall of four million laptop batteries after a series of reports of those batteries catching fire; and stiff competition from Gateway in the mid-1990's. However, Dell's successes far outweigh its setbacks. The company's entry into the printers and servers market was seen as a huge gamble. It has been a notable win for Dell. As the entrepreneur explained in his commencement speech, "You will learn from your mistakes and the mistakes of others, for there is very little learning in success."
In 2004, Dell stepped down as CEO of Dell but remained chairman of the board. The company's lackluster performance led to him to return as Dell's CEO in January of 2007. Despite the tough economy, Dell continues to thrive. In the first quarter of 2009, Dell shipped 3.9 million PC's in the U.S., and 8.7 million PC's worldwide. On average, Dell ships 140,000 systems per day—that's more than one every second.
When not running his company, Dell has focused much of his philanthropic efforts on improving the lives of children living in urban poverty through health and education programs. Through the Michael & Susan Dell Foundation, he has committed more than $530 million to nonprofits assisting children throughout the U.S. and India.
Twenty-five years have since passed since Dell started his company by sifting through stacks of computer parts, but he is no less involved today in running the business than he was back in 1984. Some might see that as a fault, but doing things his own way has managed to work out pretty good for Dell so far. As he told his University of Texas audience, "The first thing you should do is throw away that store-bought map and begin to draw your own."
Staff editor KASEY WEHRUM has written for Inc. magazine on subjects ranging from the businesses behind professional bull riding to gadget inventor and father of the infomercial, Ron Popeil. His work has appeared in the New York Times, Worth, Budget Travel, and on MSNBC.com. He lives in Brooklyn.