A day in the life of Michael Dell, founder and chairman of Dell Inc
Ambition still burns brightly for the original computer 'wunderkind'
Saturday 01 July 2006
Michael Dell's house is the stuff of Texas legend. Apparently the most expensive ever built in the state, it sits on 33,000 sq ft of hilltop outside Austin, boasting eight bedrooms, a conference room, indoor and outdoor pools, and a stunning view over Lake Austin. It is from this modern day castle that the computer industry wunderkind makes his morning journey down into Round Rock. The little town, just outside Austin, is the home of the PC maker he founded, aged 19, in his dorm room at the University of Texas.
Some 22 years later, still one of the youngest bosses of a Fortune 500 company, he is as engaged as ever in the company that bears his name - and just as fiercely defensive of the idea that turned it into the biggest computer manufacturer in the world. Dell's "direct model" is the idea that you can make more money by selling direct to your customers, taking orders over the phone or, these days, the internet, rather than relying on retailers or middle-men in the IT consulting business.
"Our business model gives us fresh input from our customers every day, telling us what they like and don't like," Mr Dell says.
It also means that, without the middle-men taking a cut, Dell's prices have been lower than its rivals, and it has grown its market share, seemingly inexorably. From a start assembling made-to-order PCs on Mr Dell's bedroom floor in 1984, the company had taken $6m in its first year. Now, passing orders into the company's 21st century super-automated factories around the world, it boasts annual sales of $58bn (£31bn).
But Dell's market share gains in the US have stalled - taking the company and Wall Street by surprise - and Mr Dell is under more pressure than at any point in more than a decade.
It is why Mr Dell's first task in any day is to check for queries and gripes from customers, to check how new products and services are working out. In fact, he will often be out visiting some of the big corporations that use thousands or tens of thousands of Dell machines throughout their organisation.
The task now is to get these customers to buy more from Dell, in particular more servers and more services.
They will, says Mr Dell. Since the arrival of broadband internet, a vast range of new internet services has sprung up. There are more large video and music files winging their way round the net thanks to Apple, Microsoft, Google, Yahoo! and others, while upstarts such as MySpace and YouTube are offering space on the web for users' own blogs and videos. These next-generation companies - they are nicknamed Web 2.0 companies in Silicon Valley - will need more IT hardware than ever before, says Mr Dell, not necessarily more powerful computers but just greater memory.
"What is happening in enterprise software is that customers are scaling out, not scaling up. All these Web 2.0 companies in the Valley are buying like crazy," he said. "So we believe Dell is a growth company and will continue to grow."
Still just 41 years old, Mr Dell is in no mind to do a Bill Gates and retire to spend more time with his family charity. He does, however, take time out to oversee the work of the Michael and Susan Dell Foundation, which he set up with his wife in 1999. With a $1bn-plus endowment, it focuses its efforts on projects that target money at children, through improved nutrition in the developing world, or education in the West. Most recently, Mr Dell signed off on a $50m grant for his alma mater, the University of Texas, which will be spent on a paediatric health research centre and on a "centre for the advancement of healthy living" which will work to combat childhood obesity.
Why have children as the focus of the foundation? "You think about all the potential and all the problems that could benefit from some kind of help ... it's a pretty massive list, so you've got to narrow it down a bit," Mr Dell said. "Being a parent of four children and seeing some children who are not so fortunate, it just seemed the right thing to focus on."
The decision by 75-year-old Warren Buffett to give the vast bulk of his $44bn fortune to the Gates Foundation is "inspired", Mr Dell said. "It is very fortunate for the world, when you think of all the things these guys could have done. They could have collected Fabergé eggs or something."
Mr Dell's own fortune is estimated at $18bn, making him the fourth richest man in the US, and he agrees that "people who succeed in one form or another do have a responsibility to help others". But he makes an interesting point: the entrepreneurs who make these massive fortunes have often already changed the world for the better.
Will Bill Gates one day be remembered more for his philanthropy than for the creation of Microsoft? "Don't forget Microsoft helped the economy become more productive, and helped improve the delivery of medicines and of education, and that has advanced society in meaningful ways."
Mr Dell gave up the title of chief executive in 2004, promoting Kevin Rollins, the long-standing chief operating officer and a close friend since he worked as a management consultant to the company. The pair chat all the time, discussing the latest product ideas and financial results. One subject of debate within the company is the extent to which it can roll out new servers, or even PCs, using chips made by Intel's deadly rival, Advanced Micro Devices (AMD). Dell was widely criticised for sticking with its exclusive relationship with Intel, long after rivals were using more energy-efficient and cheaper AMD technology.
Mr Dell smiles when asked about the decision, earlier this year, to finally start offering AMD chips and the effect that AMD's rise to prominence has had on chip prices. Intel has recently been stung into slashing prices. "When you have a duopoly rather than a monopoly, you have very different pricing. And that is good for consumers."
And then there are the financials. After two profits warnings, Dell has had to sharpen up its internal controls, working out why it did not spot that rival companies were poised to halt Dell's market share growth in the US.
Mr Dell bristles at the charge levelled at him by Wall Street, which says Dell had become complacent as rivals cut their prices to compete more effectively with the company. His pitch to the analysts and investors who call, though, will not reassure the hardened sceptics. He gives heart to fans, though, who think the stock market has overreacted.
"The markets will do what the markets will do. Anyone internally would laugh at the complacency charge - that's not accurate. We certainly know of areas where we can be executing better but, having said that, you have to step back and say Dell has quite a bit better financial results than its competitors in terms of its profit rate. We believe we understand what happened that caused that to occur and we have taken steps to address that, but I am not going into the dirty laundry."
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