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Michael Dell

The 39-year-old computer mogul on stepping down as CEO of the company he founded, why he doesn’t play footsie with the press (hey!), and the product line he should have launched years ago.

By May 2004Comments

Did you ever imagine the day would come, or come this quickly, when you wouldn’t be CEO of the company you founded?

When you start a company, you get all the jobs. You’re the chief operating officer, you’re the president, you’re the CEO, you’re the chairman. I’ve been gradually giving up my titles. But, you know, [chief operating officer and soon-to-be-CEO] Kevin Rollins and I have run the company together now for a long time, and we’ll continue to run it, so it’s not really much of a change in terms of my day-to-day activities.

If there’s no material difference to how you’re going to live your life, then why give up the title?

It’s a recognition of Kevin’s achievements and what he’s bringing to the company. We want to make sure he’s well known and well regarded out there. But while it raises his star, it doesn’t lower mine. It’s good for the company and it’s good for Kevin, but it doesn’t hurt me.

No one would blame you, after as many years as you’ve put in, starting at an early age, for wanting to slow down.

[Laughs] No, I’m not retiring. I’m continuing to work on a full-time basis. I’m not in any way reducing my commitment to the company. That’s not what this is about.

Looking back over the twenty years since you started Dell, has the experience of being a CEO changed dramatically?

Not only in terms of all the people being paraded in front of the cameras with raincoats over their handcuffs—I’ve never had that experience, fortunately.

—but in a larger sense. Is running a major company different than it used to be?

We’re so used to change on a massive scale that the change you’re talking about might be more subtle. If I think back to what it was like for us ten years ago, we were a much smaller company. The change we see in our own business is actually greater than the change externally.

Give me an example of a change that we might not be able to see from the outside but that on the inside is momentous.

Yesterday we had a town hall meeting for our small-business group, which sells to small businesses in the United States. We were congratulating them on the wonderful things they did last year. And I was pointing out to them that if their group was a company all by itself, it would be, like, number 250 on the Fortune 500 list, and it would be the same size as all of Dell about six or seven years ago—the whole company. So we’ve got a lot of areas in which the magnitude of change is pretty big.

Is there a point at which you can have too much growth?

There have certainly been times when we’ve moved too fast. In the early nineties we experienced a bit of that. You know that’s happening because you see the infrastructure falling apart and people aren’t developing as quickly, or maybe financial results are coming apart. On the other hand, we never stopped growing. The dollar amount of growth we’ll experience this year is greater than that of any year in the history of the company. Our growth this year is about the same size the whole company was in 1997. You couldn’t have had that happen unless you’d built the kind of engine and framework I’m talking about.

You’d think that after twenty years the people who are in the same business as you are would have caught on to your secret and come close to catching up to you.

We’re sort of unusual in that the technology industry is famous for companies that are product-focused, but what you find at Dell is that we’re customer-focused. We develop products—products are important—but we think a lot more about what the customer needs. And, of course, because we own our own distribution and customer relationships, we’re a mix of a manufacturer and a retailer. There are certain retailers, Wal-Mart being the most prominent, who’ve sort of figured out how to grow at pretty impossible rates over a long period of time. There don’t appear to be tremendous limits to that if you expand geographically, as they have. So, with an $800 billion market and a 5 percent market share, we see enormous opportunities for growth.

When you grow market share, do you go after someone else’s piece, or do you go after new people—people who are not using anybody’s products at all—and turn them into customers?

The way we think about it is, How can we deliver value to customers? Any number of things can happen when you do that. It could be that you attract a lot more customers to buying some product or service than used to buy it. It could also be that you attract only the customers who were buying it, but they were buying it from somebody else. The real focus is, Is it a big market, a growing market? Is it a market where customer relationships can play a role? Is it adjacent to what we already sell? For example, if you’re selling computers, well, how about printers? I mean, printers are attached to computers, and you can’t print unless you have a computer, so that’s a pretty logical one. In fact, we’re sitting around right this minute going, “We should have done that, like, ten years ago.“

It’s nice to know that even you are still learning.

We make mistakes all the time.

What’s a big mistake you’ve made in the past twenty years—one you think back on and say, “Boy, I can’t believe we did that”?

There are several that I’ve talked about in the past. We entered the retail channel—I want to make sure I draw the distinction between going into the retail channel and selling to consumers—

You’re talking about opening stores.

That was a bad idea. It was a distraction. It was confusing to our people.

But you had the sense to pull the plug on it.

Yeah, it didn’t last long. We don’t really have any mistakes that went on for a long time.

What about misperceptions about the company or you personally? I mean times when you hear or read something and think, “God, people just don’t get us.”

There are quite a few, but they don’t really bother me. In fact, I think misunderstandings and misperceptions greatly work to our advantage.

How come?

Well, if everyone understood exactly what we were doing, then they would go do it themselves or they’d come up with a strategy to prevent it. In fact, if you look at the history of our company, you can say that there’s been a repeated phenomenon where people have underestimated or have not understood what we were doing and the result was that we were able to launch into new markets and gain a lot of success very, very quickly. I can cite ten examples of that.

Cite one.

Servers. When we entered the server market in the mid-nineties, Compaq had a big lead. Even the financial analysts questioned whether it made sense. I think there’s value to this kind of skepticism. Some people say it’s a bad idea, some say it’s a good idea. Fine. If everybody thinks, “Oh, you’re gonna succeed at that too,” then our expectations go through the roof. So we entered the server market, and our market share went from zero to 35 percent and we now lead the market in the U.S. for servers. The market’s grown tremendously, and we’ve changed the competitive dynamic in a positive way.

Cite another.

International expansion. In 1987 I started going to new countries, opening new markets. I probably did thirty different country launches. In ’87 we opened the U.K. I was 22 years old, and there we were in the U.K., launching our business. “Well, you know, this won’t work here. This is a different country. You need to go back to America.” That didn’t really bother us. The phone was ringing off the hook. “Sorry, I can’t talk to you about how this isn’t going to work. I have to sell all these computers.” So we go to Germany, we go to France, we go to Sweden—same exact thing. We go to Japan—same exact thing. We go to China: “Oh, well, it worked in Japan, it worked in Canada, it worked in France, it worked in Mexico, but it won’t work in China.” Well, it worked in China. Every country, the same thing. Now we’ve got people saying, “Oh, printers, that’s not going to work.” Bull.

What about the media? You haven’t been an aggressive courter of reporters, and the company hasn’t been obsessed with getting good press. I wonder if the media’s perception of Dell the company or Dell the man has been different from what it should have been? And do you care?

I don’t care as much as I used to. I think part of the issue is that we’re kind of a moving target: If you say, “Okay, I understand Dell. This is what Dell is doing,” it might be right, but a year or two later we’re doing a whole bunch of different things. So there’s this lag factor. Also, if you take a look at our marketing materials, you’d think we were a company that only sells to consumers. You wouldn’t know that we design, build, and manufacture products and that the vast majority of our revenue comes from businesses and governments and institutions. Things aren’t always what they appear. “Oh, I didn’t know you had servers.” And we’re number one in servers.

What about you? You strike me as a private person at a time when the CEO of a big company is thought of as a celebrity on the order of a rock star. How do you view your obligation to your public?

I don’t want to have the press come over to my house for dinner; that’s not real high on my list. I’m happy to explain what we’re doing as a business and how it offers value to customers, but I’ve got a family: one wife, two dogs, four kids. You get some people who say, “I really want to know all the things you do when you’re not working.” Well, I really don’t want to tell you those things. Go away. Leave me alone. I don’t care if some other CEO wants to do it. That doesn’t compel me to do it.

Are you surprised that people are curious about you?

I don’t know whether I’m surprised. I just don’t have any desire to fulfill their curiosities. I would think most people in the world wouldn’t want that either. There are some people who like to talk about themselves and all the things they’re doing: “Let me show you my home and let me show you all my possessions.” Not me.

Okay, on to the company’s role in the community. Dell has had a very big, very active presence in Austin and in Texas. Is that a corporate philosophy or has it just happened that way?

We found early on that when our people volunteer, when they get to be a part of their community, it excites them. And when we contribute to things that people are volunteering on, you get great synergy. [My wife] Susan and I think we have a responsibility to the community that comes with having succeeded, with having had the opportunities we’ve had. We want to make Austin a better city. Also, we want to attract the best and brightest here, and we want to retain them, and so it’s absolutely important.

Let me ask you about another involvement in the community. You recently attended a fundraiser for President Bush. Your picture was on the front page of the Austin American-Statesman with the president’s father. Was that a personal decision for you, or did you go in your role as CEO of the company?

It was certainly not in my role as CEO. Our company doesn’t take political positions or endorse candidates. But I might decide to support a candidate personally, and another executive might decide to support another candidate. That’s all fine.

Given how you said earlier that you don’t much want to be visible, what motivates you to be out there in this case?

I wouldn’t say it’s a massively well-thought-through concept for me. Basically, I believe Bush is the right guy for the job. It’s as simple as that.

So you must support his handling of the economy.

Well, we’re kind of in an interesting situation in the United States. If you look at all the economies in the world, outside of China’s, ours is growing the fastest. It’s growing faster than any economy in Europe. We have pretty low unemployment, certainly compared with the past twenty years—far lower than unemployment levels in Europe. But we tend to be a restless people: “The economy’s not doing well and unemployment’s high and we’re mad as hell and we’re not going to take it anymore, and, oh, by the way, we’re doing better than every other country in the world except for China.” It doesn’t really make a lot of sense.

What about the tech economy specifically? The bust of the early part of the nineties disproportionately affected Austin and Texas but seems to have hardly affected you, relatively speaking. What was the thing about your company that allowed it to stay afloat?

I think we recognized, earlier than some others, that the market was heading down. We were very proactive; we said, “Okay, what are we going to do to prevent a problem from occurring?” as opposed to “Let’s wait for a problem to occur and then we’ll fix it.” I remember that when we did that, a lot of people said, “Why are we doing this when we don’t have any problems?” And I’d say, “Well, we’re doing it so we don’t have any problems.” And, you know, we didn’t have any problems. We gained a great deal of market share during that period and grew quite tremendously.

Was your size an insulating factor?

It may seem that way, but the bigger you are, the harder you fall. A company of our size, had it not taken those kinds of actions, could have had a pretty bad problem. We’re responsible for a lot of people—people whose lives depend on this company—and so we think about those things pretty seriously.

You’re right that people’s lives and livelihoods are tied to Dell. Think of all the people who came to the company with nothing and, as a consequence of their hard work and your success, walked away with a lot.

That statement is absolutely correct, and just a side note, it comes on the eve of the Financial Accounting Standards Board possibly making a decision that would eliminate the very wonderful thing you’ve observed. There’s a lot of talk that the FASB is now going to require companies to expense stock options. We’ve already had to make some changes in anticipation of this. A lot of the people you see around Austin who’ve benefited from the success of the company did so because they got stock options. If you look at our stock options, you’ll find that 90 percent go to nonexecutive officers. If this FASB rule changes, it will become expensive to continue to grant them in such large numbers. The unfortunate consequence of this is that many people who would have otherwise had this fantastic opportunity may not. It’s actually not so much of a problem for Dell, because we’re a big company; we can take care of our people and reward them. It’s a much bigger problem for the $1 billion company that wants to get to $20 billion or $40 billion. They won’t be able to attract good people, and it will prevent other small companies from being started, which I think is ultimately bad for the economy.

Is this the legacy that you want to have as a CEO, that you not only helped build a company but also enriched the lives of the people who work for you?

Certainly you’d love for that to be part of what people say. But I think there are some bigger things. If you look at the cost of technology, for instance, we’ve fundamentally altered the price that people pay for computers around the world in a pretty big way, and the ramifications of that are quite significant in terms of education and hospitals. Look at the economy of the past twenty years and what’s happened to economic growth. There’s no question that an underlying factor in that has been technology. We certainly can’t take all the credit for that, but we played a big role in driving prices down, making computers more affordable, that sort of thing.

Last question: What’s left for you to do? At 39 you’re still relatively young, though you’re old in CEO years.That sounds like dog years or horse years. What mountains are left for you to climb?

You sound like Barbara Walters: “Weawy, thew aw stiw mowntains . . .” There’s plenty for me to do. This company is still a very young company, and it has enormous opportunities to grow.

I mean you personally. Anything out there as a personal goal?

I’ve got some really big goals, but if I tell you, they’ll be construed as a financial forecast.

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