By: Michael Noer
Michael Dell, 46 University of Texas Dropped out May, 1984 Dell, Inc.
Michael Dell never was patient with formal schooling. The preface to his 1999 autobiography, Direct from Dell, opens with the line “When I was in third grade, I sent away for a high school diploma.” More famously – and more successfully — in 1984, at the end of his freshman year as a pre-med student at the University of Texas at Austin he dropped out of college to concentrate on selling personal computers under the name of PC’s Limited. He was 19 years old.
“I just saw tremendous opportunity,” Dell says. “At the University of Texas, it was very easy to take a semester off and then come back, if you wanted to. The combination of those two things told me it was time to drop-out. My parents weren’t really supportive. But then the business began growing very, very quickly.”
In fact, PC’s Limited, which the world knows today as Dell, Inc., experienced hyper-growth on a nearly unprecedented scale, expanding at 80%, compounded during the first eight years of business and then at 60% annually during the next six. To put that in more concrete terms, by July of 1987, when Michael Dell was 22 years old, his company had already sold more than $160 million worth of computing equipment and – unlike most hyper-growth start-ups of more recent vintage – it had been profitable every single quarter since inception.
Not that there weren’t some scary moments. During the middle of the second full year of operation, Dell received a letter from the Federal Communications Commission asking if PC’s Limited had received FCC-clearance to sell its computers. It was a near-death experience.
“I didn’t really know what the FCC was at the time. I mean I’d never learned about the FCC in high school,” Dell recalls. “But when you make an electronic device like a computer, you have to get certain approvals from the FCC before you can sell it. So essentially we had to completely stop selling computers. And in the time it would take us to get FCC approval, the entire company could have run out of money and I’m thinking this could be ‘Goodbye! Go back to college. It’s all finished.’ ”
Scrambling, Dell hired a lawyer who had previously been the head of the FCC. He was able to resolve the situation in a matter of just three or four weeks.
“Basically, he went to the FCC and said, ‘Look. It’s a bunch of kids. They are trying to do the right thing. They didn’t know about this and here’s what they are doing to get it fixed.’ ”
Just a couple of years later, Dell, a company that would become world-famous for its inventory and supply-chain management, got caught with its pants down when it ended up buying far too many 256-kilobyte memory chips – right when 1-megabyte memory chips, with four times the capacity, were becoming the standard. Forced to deeply discount their inventory Dell ended up posting a profit of just one penny a share during the depth of the crisis.
But perhaps the biggest challenge for Dell was the need to have masses of great people, folks who could adapt to a company that was essentially doubling in size every 14 months or so.
“When you are a small company that is basically unknown, you have no capital, and you’re young, you sort of end up having mercenaries come to work for you.” says Dell. “Because the risk/reward is totally off the charts. Your initial thinking may be let’s wait. Let’s find the right person. Let’s not make any compromises. Well, how long are you going to wait? And what if you can’t attract them? It’s complex. I looked for really smart people. I wanted to hire people that could learn and were adaptable and were looking to join a company, not a job.”
Currently Dell employees 103,000 people worldwide and has annual revenues in excess of $60 billion. Michael Dell is one of the few who have been able to scale with the growth of the company. He has been CEO for all but three of its 27 years of existence and is the 15th richest man in America, with a personal fortune of $14 billion. Nonetheless, his appetite for growth remains undiminished.
“When I look at my industry I don’t see our competitors as much as I see a $2.7 trillion industry. And I look at that landscape and say Dell is a $60 billion company. A little, tiny $60 billion company within this $2.7 trillion industry. There are just tremendous opportunities for us to grow and expand.”