Dell computer ceo

In 1984, a 17-year-old freshman dropped out of college to build a startup biz -- and turned PC retail upside down. Seventeen years later he's still surprising us.

Nothing about Michael Dell so much as whispers tough. Soft-spoken and affable, he comes across as more Mr. Nice Guy than ruler of the cutthroat PC hawking business. But don't let that boy-next-door grin fool you, the 36-year-old CEO of Dell Computers can do ruthless.

If a track record of edging out competition and racking up annual sales increases as high as 80 percent doesn't prove the point, just look at the bloodletting his latest strategy--a full out price war announced in January--has inflicted on rivals in the sluggish PC market. Pressing its advantage as the lowest-cost vendor, Dell opted to take a margin hit to build market share. The move successfully catapulted the Round Rock, TX-based company past Compaq to snag the No. 1 slot in worldwide PC sales--but the aftermath has been gruesome.

Compaq, IBM, Gateway, and Hewlett-Packard among others have since had to grapple with a lose-lose dilemma: concede market share to Dell or lower prices at the expense of already-flagging profitability. Even Dell hasn't come out of its own onslaught unscathed. The company recently announced plans to lay off 4,700-plus employees and posted flat first quarter earnings, causing critics to question the share-grabbing move. "A lot of people are scratching their heads, saying they don't know why Dell is doing what they're doing," says Roger Kay, director of PC hardware at research firm International Data Corp (IDC). "Starting a price war hurts everyone else, but it doesn't help them much. They can't hope to come out a monopoly."

But Dell may have just enough clout to narrow the field. "There's a musical chairs game going on and one of the chairs has Michael Dell's name on it," says Charles Neff, a senior managing director at Bear Stearns. "Dell has the best balance sheet and the best cost position in an industry about to go through a consolidation period. Why give your competitors oxygen if you don't need to?"

Clearly, driving troubled Gateway out of PC sales or into the arms of a buyer is one potential coup. Prompting IBM to pull out of the desktop PC business would be an even bigger win for Dell's CEO, whose nice guy reputation off the field doesn't preclude a zest for playing hardball on it. "Michael is a very competitive guy," says former Dell vice chairman Mort Topfer, who has worked with Dell since 1994 and now serves as counselor to the CEO. "Personally he's very warm and approachable, but those are two separate things. The drive for market share gains and competitive pricing is Michael-driven, not driven by other people."

"Because he's so soft-spoken, you might think he hasn't got a lot of competitive juice, but he has a very competitive instinct," adds Kevin Rollins, Dell's co-president and COO. "When we win, it's high fives and excitement all around."

But perhaps more telling is Dell's reaction when the company falters. The success side of the Dell story is well known. In a twist on the quintessential entrepreneurial success tale, Michael Dell morphed a good idea into a start-up venture while the rest of the freshman class at the University of Texas was sleeping late and doing the frat party circuit. He quit school and built Dell into a $32 billion business by relentlessly pursuing a direct sales model with supply chain efficiencies (see sidebar, page 34). As Intel Chairman Andy Grove notes, "Michael Dell is one of only a few people who have seen through the evolution of their company--from a dorm room start up to a multi-billion dollar enterprise. Michael presided over that process every step of the way, showing a dynamic range of management capabilities that is exceedingly rare."

Nestled among the usual suspects--essential capabilities like financial acumen, market savvy, strategic vision, and raw intelligence--are a few hallmark Dell traits rarely found in the ranks of founder CEOs. And it's these that have enabled his company to skirt--or climb out of--the same pitfalls that continue to plague its adversaries.

"A lot of entrepreneurs are megalomaniacs; they think they can do everything themselves," says Rollins. "Michael doesn't have an ego that's exploding all the time. He was willing to admit that he didn't know how to do certain things and found people who could." Rollins, a former Bain & Co. partner, would know; he's one of Dell's experienced finds. Together he and co-President and co-COO James Vanderslice, recently recruited from IBM as a replacement for soon-to-retire Mart Topfer, share the CEO office with Dell. Dell entrusts the two to oversee the company's day-to-day operations--freeing him to focus on strategic direction.

"I don't know of anyone else who has built a multibillion dollar company who has done that," says Rollins. "Gates kind of did, but the rest either lost the company or didn't do so well. He's hung in there because of that capability."

Ironically, that ability to call in experienced corporate talent, coupled with Dell's own lack of corporate experience, has imbued his company with a unique competence--the ability to fail well. When the company hit its first roadblock (a net income decline in 1993 of more than $100 million), Dell called Bain for counsel, prompting a flight to Austin by then-consultant Kevin Rollins. "Michael said, 'I want you to tell me what's wrong with my company, and fix it at the same time,' " recounts Rollins. "I told him that we generally diagnose the problems first, then afterward figure out a solution and then go and implement it. He said, 'No, do those concurrently.' So we did, and that started Dell Time, where a quarter is a year in most people's lives."

Another wrong move--Dell's foray into retail stores via chains like Staples and CompUSA--was deep-sixed with similar expediency. "We were losing a ton of money and our P&Ls showed that one of the places was our retail business," says Rollins. "Our analysis said that not only was the business itself bad, but even if we did everything else right it would still be bad."

There was a slight hitch. At the time, retail accounted for a hefty 10 percent of the company's sales and it was the fastest-growing new arena in the computer space. Abandoning it would hurt. But, as evidenced by today's price war, Dell understands short-term pain for long-term gain. "Most companies would have pussyfooted around and said, okay, let's get out over the next two years," Rollins says. "We presented the analysis to the executive team and in 10 minutes they said, we are getting out and we are getting out tomorrow. The market looked at that and thought we were nuts. But it worked out just fine."

Redefining time and rules--along with PC distribution systems--has become a Dell trademark. "Michael has never been at a company other than Dell so he doesn't know corporate politics and bureaucracy," points out Rollins, who credits that same corporate innocence in part for the open-door policy that's become an integral part of the company's culture. "He doesn't think anything of talking to the most junior person or the most senior person and listening to everyone's opinion. So there's a very open culture here where anybody can send e-mails to anybody on the executive team anytime they want."

In fact, Dell makes a point of making himself accessible, holding Town Hall meetings with employees during the frequent plant and office visits he makes around the world, as well as monthly "brown bag" lunches with groups of employees randomly selected by human resources. In the face of the company's recent rash of layoffs--its first ever--and its current stock price--languishing at $25.90 from a 52-week high of $54.67--those forums have taken on greater import.

"Any time you have rapid change, whether it's positive or negative or in between," says Dell, "people just want to know what's going on. What are we doing? Why are we doing it? And what are we going to do next?"

Good question. Topping the current agenda is a move to leverage Dell's strength in PC sales into the server, storage system, and Internet services businesses. While critics suggest Dell neglected these higher margin sectors and is now playing catch up, the company counters that it's merely been biding its time. "The company's latest articulation of its model is that they bring operational excellence to a business just as it's commoditizing," says Roger Kay. "Their skill comes when there is an industry standard that they can knock off and deliver better than anyone else. They come in not necessarily late but not first, grow faster than the early entrants, and eventually take over."