Back in 1989, when "cloud" was an innocent term describing gauzy pleasures in the sky, Michael Dell was Inc.'s first entrepreneur of the year.
Dell Computer--which he started with $1,000 at age 19 in 1984--went from zero to $69.5 million in three years. The company logged $258 million in sales in 1988. That same year the company completed its IPO, raising $30 million.
For all that's changed since then, the rocket ride of Dell's first five years remains a lofty standard most founders would be elated to achieve. Inc.'s 1989 profile of the 24-year-old Dell searched for the secret sauce to his early success. How'd the kid do it? What was his magic? Here were some answers:
- "Michael can assimilate in an hour what might take you or me a semester," Sid Ferrales, the then-VP of HR, told Inc. "He's a good listener."
- "He has a remarkable faculty," then-COO E. Lee Walker said, "for getting to the nub of a problem quickly. He's a big believer in the collegial approach, but as a participant in that he's quicker than most to get to the heart of the issue."
Walker also said: "He has so clear a vision of where he is headed that he can rise above the background noise and avoid the pitfalls that typically take entrepreneurs down."
That line has an increasingly compelling resonance, in light of Dell's recently announced $67-billion acquisition of storage provider EMC. The deal stands to be "the biggest-ever takeover in the technology industry," according to the New York Times.
Is Bigger Better?
To hear Dell speak today is to hear an entrepreneur still very much like the 24-year-old Ferrales and Walker described. At the 2014 Inc. 5000 conference, an interviewer asked Dell if his company had "missed the boat" on the mobile revolution. Dell's answer was a compelling no. He acknowledged that mobile was a massive space. But he said it was still just a small, consumer-centric portion of the $3.5-trillion IT industry. And Dell, he said, was focused on the "80-plus percent" chunk of that $3.5-trillion space: businesses. Small- and medium-sized businesses in particular.
"You don't have to be in every space," he concluded. "[Mobile has] been a tumultuous space. The leader of that space has changed every three years." He listed Nokia, Motorola, and BlackBerry. Then he said: "I guess all those guys missed it too."
In hindsight, his remarks served as a prelude to an acquisition like this: A historically large bet on a business-to-business space. The deal is bold not only for its size and category, but also for its trend-bucking creation of a massive, one-stop services company. The deal, notes the New York Times, "would mean making Dell even bigger at a time when companies of all stripes believe smaller is better. Many huge tech companies have announced plans to break themselves into their components, each devoted to a particular part of the market."
In an appearance on CNBC, both Dell himself and EMC CEO Joe Tucci said their customers preferred a one-stop-shop business model:
Dell praised the combined company's capabilities "to help customers" create "results and outcomes and success" as they transition their legacy environments to a new age. Tucci was on the same page: "We have the assets between us now, and the heft, to make sure that we can help customers with their digital transformation, help them with their cloud computing needs both on- and off-premise, help them with their infrastructure needs," he said.
Many analysts agree. "Dell and EMC would be a tech behemoth," Daniel Ives, an analyst at FBR Research, told the Wall Street Journal late last week. "It would change the landscape of enterprise computing."
Where Are the Must-Buy Products?
Those who are less optimistic about the deal cite the changing nature of the data-storage industry. Wired went so far as to label six legendary tech companies--including Dell and EMC--as "the walking dead." Cade Metz writes:
Oh, sure, they'll shuffle along for some time. They’ll sell some stuff. They'll make some money. They’ll command some headlines. They may even do some new things. But as tech giants, they're dead.
The reason? As "solidly profitable" as EMC is, cloud-storage services run by Dropbox, Amazon, Microsoft, Google, and others has reduced the demand for products and services from entities like EMC, notes the Boston Globe.
In other words, even if Dell is at the helm of a Dell-EMC behemoth, it's an open question if that behemoth is offering must-buy products and services to businesses. Sure, the new, larger Dell may have plenty of solutions that COOs are looking for. But that's a different value proposition than an offering no high-tech company can live without. A significant product or service is not the same thing as a platform.
In this regard, the newer, larger Dell bears an interesting resemblance to the Dell of the founder's youth. And for all of his astonishing success, this resemblance--not creating an enduring platform--is also part of Dell's otherwise stellar entrepreneurial legacy. "When we've gone over lists of really impactful CEOs he's generally on that list," says Michael A. Cusumano, professor at the MIT Sloan School of Management. "But I don't put him in the same category as Gates or Jobs."
The reason? "He hasn't created a platform that really has broad and lasting value," says Cusumano, co-author with David B. Yoffie of Harvard Business School of Strategy Rules, which compares the strategic approaches of Gates, Jobs, and Intel's Andy Grove. "Clearly he's made billions. He did see early on that computers would become ubiquitous. But it was essentially a product business that other companies were eventually able to copy or duplicate."
Regardless of how the acquisition of EMC turns out, nothing can change the fact that the once-upstart company is still making waves after 31 years in business. So is its legendary founder. More than 25 years ago, his COO remarked that Dell has always had a clear vision of where he's headed.
That observation has proved prophetic, no matter what happens from here on out.