Michael Dell wasn't the only young entrepreneur to ride the computer boom of the late 1980s and early 1990s from rags to riches.
Dell spent his spare time buying up remaindered, outmoded PCs from local retailers, then upgrading and selling them from his dorm room. He was so successful, that one day his roommate piled his ever-growing inventory up against the door of their dorm room. Dell took this as a sign it was time to move his burgeoning business off campus. His parents were furious when he told them he wanted to drop out of college, so to appease them, Dell agreed to go back to school if the summer's sales proved disappointing. In his first month in business, Dell sold some $180,000 worth of PCs. He never returned for his sophomore year. While looking for ways to expand his fledgling start-up, Dell concluded computers would soon become a commodity, and with commodities, what matters most is price and delivery. Dell saw that the quickest way to achieve both goals was to cut out the middleman. He realized that he could buy components and assemble the whole PC himself more cheaply. Then he could sell each machine over the phone directly to customers at a 15 percent discount to established brands. This technique, which came to be known as "the direct model of selling," would revolutionize the industry and make Dell a multibillionaire in the process. The 19-year-old Dell dubbed his venture PCs Ltd., and the Austin-based company soon became one of the fastest-growing enterprises in the country. Rather than flooding the market with hundreds of thousands of "plain brown wrapper" computers, the company would focus on what it did best-creating customized machines to order. The strategy worked. During its first year in operation, PCs Limited pulled in more than $6 million in sales, and Dell quickly gained a reputation as a "boy wonder." To cash in on his growing fame, he changed the company's name to Dell Computer Corp. in 1987. Sales continued to soar, topping $159 million by the end of 1988. That same year, Dell made an initial public offering which raised $30 million, about $18 million of which went directly into Dell's pocket. For many start-up entrepreneurs, that would have been a pinnacle signalling it was time to move on to the next promising adventure. But in Dell's mind he was just getting started. He now set his sights on overtaking industry leader IBM, rallying his employees by telling them his newborn daughter's first words were "Daddy, kill IBM." The technique got a response, and Dell's sales leapt to more than $800 million by 1991. In 1992, Dell set a goal of passing the $1.5 billion mark by the end of the year. Always the overachiever, Dell met his goal and then some, as sales rocketed to $2 billion. But in the midst of this success, there were storm clouds gathering on the horizon. By mid-1993, Dell Computer Corp. seemed to be spiralling out of control. Stock prices had plummeted from $49 in January of 1993 to a mere $16 by July. Dell's CFO resigned, leaving a management void. And worst of all, Dell had scrapped all its new lines of notebook computers because of poor production and was forced to sit on the sidelines of the fastest-growing segment of the PC market for more than 12 months. Dell realized he needed to do something-and do it quickly. His solution was to seek out older, more experienced managers to help him regain control of his 9-year-old juggernaut. First he brought in Mort Topfer, a seasoned executive from Motorola, to handle day-to-day operations. Next he tapped the talents of Kevin Rollins, an organizational expert from Bain and Co., to run the American operations. Within 12 months the listing company was righted, and the following year profits climbed to $149 million. But even with this amazing turnaround, Dell knew his company's place in the increasingly competitive PC industry was in no way guaranteed. The company's new approach had sales topping $5.5 billion by the end of 1996. But Dell had yet another ace up his sleeve. In July 1996, Dell launched one of the first direct-sale computer Web sites, and in just two months, was averaging Internet sales in excess of $2 million a day (a number that would rise to $6 million a day by 1998). The combination of selling direct via phone and Internet pushed Dell's sales to $7.7 billion by February 1997. Dell grew at an incredible pace of more than 50 percent, achieving sales of $12.3 billion. By January 1999, Dell was outselling both IBM and Hewlett-Packard and was poised to overtake the number-one computer maker, archrival Compaq. While he has yet to completely silence his critics, Michael Dell has proven that he has the flexibility, the stamina and the vision to remain at the top of the country's most competitive business.