The kid and the computer coup
BUCKING the eccentric-boy-genius stereotype that dogs many youth success stories, Michael Dell smiles and manages to be graceful when explaining to yet another reporter how dropping out of college and building a $159 million company go so naturally together. ``I'm just a 23-year-old kid,'' says Mr. Dell, whose glasses help him look maybe a year older than he is. ``You know, there are a lot of people out there who know more about manufacturing and finance, marketing and engineering, and all the various aspects of our business than I do.''
Armed with this rather mature attitude, Dell has managed in the past few years to surround himself with extremely competent, if necessarily older, businessmen. They have helped him build on the unique business idea he pioneered - selling customized personal computers over the telephone. His booming success has turned heads.
``He's been very successful with the approach he's taken,'' says William Lempisis, a computer industry analyst with Dataquest, a San Jose, Calif., research firm. ``A lot of people look at his age. I think his real strength is that he knows what he doesn't know - and is willing to go out and get knowledgeable people to help.''
Dell is corporate chairman and chief executive officer of Dell Computer Corporation. He interviews all new hires for higher-level management positions and has handpicked a small cadre of research-and-development people. But the day-to-day management is left to his professionals. There is no room for any youthful ego trips.
``At least half of my ideas on any given day are nonsense, and that's why I have very talented people to help me sort out which are the good ideas and the bad ideas,'' Dell says. His company treasurer is a former executive from Standard Oil of Ohio. His senior vice-president of marketing worked 16 years for International Business Machines, and the company president is a venture capitalist who has guided a number of fledgling companies.
But the key to the company's success is clearly Dell himself - the idea man in the middle.
``Usually within any bad idea there is a corollary good idea that comes out of it if you think about it,'' Dell says. ``If you take all the ideas and get them together with a bunch of smart guys, you can come up with some really neat things.''
Growing up in Houston, Dell got one of his first hot entrepreneurial ideas at age 12, when he began a mail-order stamp trading company. He published his own list of stamps and auctioned them off. In a matter of months he had made $2,000.
When he was 16, Dell purchased an Apple II personal computer. He first had friends help him compile a list of newlywed households obtained by culling marriage licenses from city records. He then sent computer-generated letters offering free trial subscriptions to the Houston Post. Selling newspapers the automated way brought Dell $18,000 in two years.
While the prototypical whiz kid starts a computer company in the garage, Dell's entrepreneurial streak became a hot business his freshman year in college. He launched a computer-part distribution company from his dorm room at the University of Texas in Austin, advertising in national computer magazines.
Orders began rolling in and by January 1984, Dell was filling $30,000 of computer parts per month. By the end of the school year he was shipping $80,000 worth per month.
Later that year, Dell decided to begin assembling personal computers from the off-the-shelf parts that he was already selling by the crateload. He displayed his home-built ``clones'' of IBM personal computers at local computer shows and found people eager to buy them. A year later, he was selling nearly 1,000 computers a month at $795 each. Dell decided not to go back to school. He was too busy running his business, making money, and having the time of his life.
But one of his main problems was convincing older businesspeople he was for real. On the age issue Dell is adamant. Businesspeople should be gauged ``by their ability to accomplish a task, as opposed to their age, or race or color or religion, or any other thing.''
``He definitely does not fit the traditional `whiz kid' mold,'' says Jonathan Rotenberg, president of the Boston Computer Society, the nation's largest computer-user group. ``Dell is almost the antithesis of the eccentric, high-strung variety of young entrepreneur. He is straightforward, down to earth, conveying a confidence and stability.''
In March, Dell was recognized by the Association of Collegiate Entrepreneurs as the nation's top young entrepreneur of 1987. His original investment of $1,000 has resulted in a company that last year earned $9.4 million on sales of $159 million.
Dell's strategy, similar to that of other makers of IBM computer ``clones,'' has been to sell to those who feel Big Blue's products are too expensive.
But the key to success has been service, which Dell says can usually be accomplished over the phone. If troubleshooting by phone doesn't work, he has an on-site service contract with Honeywell Bull.
Another advantage is that the company makes a computer only after it is ordered, cutting down on inventory costs. It also makes the computer to order - just the way the customer wants.
``He has a brilliant idea that is very much in tune with the national trend toward mail-order and customized manufacturing,'' Mr. Rotenberg says. ``The challenge is that if you've got something very good, somebody may come along and challenge you.''
To stay competitive and gain credibility, Dell has decided it is not enough to be a clonemaker. So the company has gained a reputation for being first with innovations on the IBM theme. Earlier this month, tiny Dell announced a new line of compatibles that, according to industry benchmarks, do appear to be the fastest available.
Dell recently pulled off another major coup by being the first company to announce it had developed a line of computers compatible with the new IBM personal computer line.
Riding a bow wave of media attention for such accomplishments, Dell still says the company's biggest challenge will be to sell directly to big companies in order to grow to the billion-dollar level company executives say they are shooting for.
Last June, the company opened a new sales and final assembly operation in England, and it plans others, possibly in West Germany or Canada.
With his smarts and calm guidance, it seems Dell's success has the momentum necessary for continued strong growth. But Rotenberg cautions that even a clever strategy, such as Dell's, is based on opportunism that could turn around quickly.
``I always wonder about these companies built on being parasites on the IBM organization,'' Rotenberg says. ``It's a dangerous strategy, because, when the elephant starts dancing, the mice have to be very careful.''
Dell believes, however, that no matter which way the winds of competition blow, the company can survive and prosper as long as he and his people keep popping hot ideas.
``An open mind, creativity, and an ability to make inductive leaps ... is critical, along with a wild imagination,'' Dell says. ``I think about all kinds of crazy things all the time. If you can't imagine something that has never been done before, you probably can't do it.''