Business • Michael Dell

From boy wonder to grown-up CEO, he’s changed personal computing forever.

DESPITE THE GRAY FLANNEL SUITS they wear as camouflage, the greatest businessmen are boys at heart. They approach their work with the same absorption, chutzpah, and steely love of competition that Michael Jordan brings to basketball, because they know that, above all, business is a game. It’s simply a matter of squashing the competition. Computermaker Michael Dell has proved himself to be a great businessman, and he’s having a really good time making his rivals squirm. “I can’t imagine many jobs that would be more fun than this,” says Dell. “I mean, I don’t really think of it as working. I think if you left the computer industry after having been in it for a long time, you’d be incredibly bored and your brain would atrophy.”

For years press stories have hailed Dell as some kind of passing phenomenon, a boy-wonder computer geek who began selling computers from his UT dorm room and was destined to stumble in the brutally fast world of microelectronics. Instead, Dell has become the longest-tenured CEO of a major computer company. While he has yet to shake the whiz kid image, he has proved that he has the stamina and the flexibility to remain at the top of the country’s most competitive business, even through bumpy times. Now that sales of computers over the Internet are barreling skywardan arena in which he and his company are at a clear advantageDell Computer Corporation is siphoning all kinds of business from its competitors. Last year profits rose to $518 million, nearly double that of the year before, and the company surpassed several others to become the world’s fourth-largest computer retailer in terms of market share. Going by liquidity, profitability, and growth rate, Dell Computer already beats every other manufacturer in the business. No wonder Michael Dell’s rivals are suddenly copying his moves.

He’s doing all right personally too. Dell owns 16 percent of his company, putting his worth somewhere between $3 billion and $4 billion. According to Forbes, he’s one of the one hundred richest people on the planet. Today, at 32, Dell works out of an airy, modern building in Round Rock constructed of blond wood and glass and appointed with black leather chairs. Wearing a starched white shirt, a red tie, and business suit, he looks more like a Wall Street banker than a computer nerd. His dark, curly hair is cut short, and he has an easy manner, the kind acquired after years in the public spotlight. Dell is happy to talk about his business, but he doesn’t feel like talking about himself. “I don’t have any desire to expose a great deal about my personal life. There’s an overfascination with certain things that don’t necessarily have to do with whether a company is succeeding. And ways of characterizing things in convenient buckets that make people feel good because it sounds like it ought to be true.”

It’s public knowledge that Dell grew up in Houston but has lived in Austin for the past thirteen years. People there love to speculate about the mansion he’s building in the hills overlooking Lake Austin, though he doesn’t like to talk about it much either. “The house is a place where we live,” says Dell. “It’s a sort of private place. If you drive by the house, you’ll notice that it’s placed in such a way that it’s not particularly easy to see, and quite frankly, that was somewhat intentional.” Despite his reticence, Dell has lately become more of a public figure, after he and his wife, Susan, donated $1 million to the Austin Children’s Museum. “It’s something we’ve been doing for a while,” he notes of his charitable contributions, “although the size and magnitude have probably increased as our capacity for giving has increased.”

At the ridiculously young age of nineteen, Dell came up with an idea that is still reverberating throughout the computer industry. “If you go back to 1984, you had computer dealers who were scattered all over the United States,” he recalls. “Almost every street corner had its own computer dealer. They had very high markups, very low service, and they had inventory everywhere.” And while the dealers were selling brand names like IBM, the parts inside the machines were being manufactured by companies like Intel, Samsung, and Western Digital. Dell, who had tinkered with personal computers the way some teenagers tinker with cars, realized that he could buy the same parts from the same suppliers, assemble the computers himself, and then sell them directly to customers for significantly less than the dealers were charging. In essence, he saw that it was possible to merge the roles of computermaker and computer dealer into one entity. And make a fortune. Today this idea is known throughout the computer industry as the direct model of selling.

It’s a pretty simple concept,” says Dell. “There are two key principles. The first one is if you eliminate the reseller’s markup, you’re going to save the customer money. And if you flow inventory more quickly than your competitors in a business where inventory devalues rapidly, you create profound advantages.” While typical manufacturers build large numbers of machines based on forecasts of what customers will demand from dealers, Dell’s company builds every computer as it is ordered. He also requires suppliers to bring him parts as he needs them rather than buying them in bulk. Unlike most of his rivals, Dell rarely gets stuck with unwanted, leftover computers or useless, expensive parts. He runs an unusually nimble company, better than most at negotiating the lethal turns of the computer industry.

After he put the direct model into practice, Dell discovered another crucial advantage. “You actually get to have a relationship with the customer. You have the opportunity to listen, and that means you can learn. You’re in constant contact with the customer, so you can tailor what you’re doing to the customer’s exact needs. And, it turns out, companies prefer a direct relationship to an indirect relationship.” The fact that companiesbig companies, Fortune

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