PART 3
The expansion plan, according to colleagues, reflects his personality — relentlessly competitive, focused and disciplined. His self-confidence has never been in question, but he is not flamboyant or given to excess — at least not for someone worth nearly $10 billion. Mr. Dell, his wife, Susan, and their four young children live in a 22,000-square-foot modern house of glass, steel and limestone on a hill overlooking Austin, Tex.
But Mr. Dell rises early, drives himself to work and tries to get home in time read to the children at night. At Dell's headquarters in Round Rock, Tex., he has no reserved parking space and no door on his office. Over the years, he has sought the advice of mentors, including Morton L. Topfer, a 23-year-veteran of Motorola who joined Dell in 1994 and recently retired, and James T. Vanderslice, a 33-year veteran of I.B.M. who joined the company in 1999 and is vice chairman.
Today, Mr. Dell heads a senior management committee of two dozen people, mostly in their 40's, who have been with the company five years or more. "I don't want to understate the challenges we face, and overextending ourselves could be a formula for disaster," Mr. Dell said. "But I really don't think we're overextending ourselves."
Dell has suffered setbacks when it overreached. In 1993, for example, it took a big charge against earnings when it temporarily pulled out of notebook computers. Its notebooks were riddled with defects, with a tendency to expire amid a puff of smoke and the scent of fried semiconductor chips. But Dell recovered quickly, led by an executive recruited from Apple Computer who helped develop the early Powerbook lines.
Recently, Dell has switched course a few times in the market for data storage systems — advanced computers, often linked in networks, for storing and managing important corporate data. It tried developing systems in-house, reselling systems made by others, and in 1999 acquired a network storage specialist in Silicon Valley, ConvergeNet, for $340 million. (It has since folded.) In October, Dell signed a five-year partnership deal with EMC, a big maker of computer storage systems. Dell will resell EMC's mid-range Clarion storage systems, ranging up to $200,000 or so, and license some technology from Clarion. Sales from the partnership are rising quickly — 65 percent in the second quarter — though rivals scoff at this as a "P.O.N." figure, for percentage over nothing.
But the computer industry has learned over the last decade that underestimating Dell is a grave mistake. The company has almost single-handedly changed the terms of trade in the PC business. The efficiency of its direct-business model has set the standard that others strive to match. Analysts estimate that Dell's operating expenses, 10 percent of revenue, are about half those of most competitors.
Dell has brought a wave of intense competition, lower prices and consumer benefits to the PC market, as the Japanese did in automaking or Wal-Mart did in retailing.
Dell is known as a "fast follower" in the industry. "Dell doesn't pioneer markets; it milks them," said Martin Reynolds, an analyst at Gartner.
Still, Dell has bet its entire strategy on a single technology trend. Over time, Mr. Dell explained, all technology — whether in transportation, telecommunications or computing — moves toward low-cost standards. Then the winners in an industry are determined less by technology and more by factors like operating efficiency and closely catering to customer needs. That is the trend Dell has exploited in the PC business, and Mr. Dell says the rest of the computer industry is next. |
