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Subject: Michael Dell's Derring-Do; At 27, Entrepreneur Heads Fastest-Growing Fortune
Date: Fri, 20 Nov 92 04:42:00 EST
Message-ID: <5.1992Nov20.044200@AmeriCast.com>

Michael Dell's Derring-Do; At 27, Entrepreneur Heads Fastest-
Growing Fortune 500 Firm<By Daniel Southerland<Washington Post
Staff Writer<AUSTIN, Tex.= At 27, Michael Dell, who started by
selling computer components out of his college dormitory room,
already ranks as the youngest CEO to bring his company into the
exclusive Fortune 500 Club of the largest American corporations.
Now he can claim another honor. His Dell Computer Corp., which
helped pioneer the selling of IBM personal computer "clones" by
telephone and mail order, is the fastest-growing Fortune 500 com-
pany. Despite a vicious, nationwide price war,  the company is
not only surviving, but thriving. Yesterday, it announced a
record rise in sales of 149 percent for the quarter that ended
Nov. 1 - the third straight quarterly increase of more than 100
percent over the same quarter the previous year.

 Earnings were 72 cents a share, compared with 35 cents for the
same quarter in 1991.

 Dell, a $2 billion company that has already exported its tech-
niques successfully into Europe, now is looking for Asian con-
quests. In an interview last week, Michael Dell said that his
company plans a bolder move into Japan, the second-largest per-
sonal computer market in the world.

 Foreign executives consider the Japanese consumer market among
the most difficult to penetrate. But Dell says he sees an opening
there for his company's mail-order marketing approach. As he
describes it, Japan's PC customers are frustrated by an ineffi-
cient distribution system, a large number of price markups and a
lack of follow-up support for customers.

 "There's a lot to suggest that Dell ... could do pretty well in
Japan," said the youthful chief executive. "It looks like we're
going to have a big business there." Dell founded his company in
1984 to build and sell International Business Machines Corp.
clones - machines that copy the IBM PC and use the same, or simi-
lar, components. He took advantage of IBM's decision to make the
basic technology of its models available to other manufacturers.

 According to some analysts, IBM came to regret it. In recent
years, smaller, more agile upstart companies such as Dell began
grabbing a growing share of the market by producing higher quali-
ty computers, reducing costs, cutting prices and selling through
new outlets, such as computer superstores and by mail order.

 Huge, bureaucratic IBM has had difficulty fighting back. Dell
now has about 4 percent of the U.S. PC market.

 Dell, who sometimes speaks in the quiet, reflective manner of a
person twice his age, said that his approach to management is to
delegate authority and to "turn loose talented people who can be
relied upon to do what they're supposed to do."

 Dell's success has depended on more than low costs. The company
has led the competition in its efforts to eliminate middlemen and
sell computers directly by way of advertising and toll-free
numbers.

 An unprecedented price war launched by Apple Computer Inc. early
last year and intensified by Houston-based Compaq Computer Corp.
this year aggravated IBM's problems and has driven some small
personal computer firms to the point of bankruptcy. But Dell has
gained market share both from IBM and smaller clone companies.

 Michael Dell predicts a further narrowing of the field. "We're
probably the smallest PC company that will survive this shak-
eout," he said.

 Dell said that IBM has huge assets and thousands of employees
who are deployed "to do things which are effectively not neces-
sary today."

 "One of the problems the industry faces is that the people don't
change nearly as fast as the technology," he said.  Few young
pioneers of the personal computer industry have survived as
leaders of their companies beyond their thirties, because their
business skills failed to match their technical prowess. Michael
Dell, like Bill Gates, chairman of Microsoft Corp. in Seattle,
may become one of the exceptions.

 "The difference between Michael and most of the others is that
he rose not by being a techno-wizard but by combining technical
knowledge with marketing know-how at a time when the industry was
ripe for it," said Doug Kass, principal analyst of the Viewpoint
Group in Aptos, Calif.

 But Kass sounded a word of warning concerning Dell in Japan.

 "I think they'll have to overcome some prejudice in Japan
against mail order, which is looked on as a second-class method
of distribution and as not trustworthy," Kass said. "I think they
can grab some market share in Japan, but I don't think it will be
very quick." Compaq started selling in Japan earlier this year,
and according to a senior Japanese electronics executive, the
company has been making headway with its low-price strategy.
"Many personal computer suppliers are worried," said Takashi Ki-
taoka, president of Mitsubishi Electric Co.

 In the United States, the price wars last year cost the job of
Compaq's co-founder, Joseph "Rod" Canion. Canion was ousted as
president after the company sustained heavy losses. Like Dell,
Canion had steered his nine-year-old company from humble begin-
nings, scribbling designs for a mass-market computer on the back
of paper place mats, along with two other engineers.

 But Michael Dell has avoided Canion's fate. He said that instead
of cutting back, he's hiring some 50 new workers a week to keep
up with the demand for his company's PCs.

02:06 11-20C9999-----

Copyright 1992, The Washington Post.  This story is from the
Washington Post's Capitol Edition On-Line and is not to be ar-
chived or redistributed.

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