The Dell Story: How Michael Dell turned $1000 into Billions

Team Udayavani, May 2, 2022, 1:43 PM IST

Credit: SIMON DAWSON—BLOOMBERG VIA GETTY IMAGES

Today, the name Dell is synonymous with computers, especially personal computers. Only a few might know that Dell Inc., which derives its name from its founder Michael Dell, was started in a college dormitory. It’s fascinating how the company started with $1,000 from a college dorm and made its founder a billionaire.

Let’s begin with 1983, a time when Michael Dell was a freshman at the University of Texas pre-med program. His Jewish parents wanted him to be a doctor and he had enrolled in the pre-med program to please them. However, he did not lose his childhood passion for business and electronics.

A 19-year-old Dell combined his fascination and passion, to launch “PC’s Limited” with an initial capital of $1,000.

Michael Dell had capitalized on the fact that Apple’s Macintosh, released also in 1984, offered a pricy integrated PC.  He used this to his advantage and started providing low-priced devices by going direct-to-consumer (order over the phone) and offering made-to-order options which kept inventories low.

And the idea clicked. Working from his dorm room, Dell had sold $80,000 worth of computers by the second half of his freshman year.

This initial success propelled Dell to pursue a higher goal. He dropped out of the University of Texas, registered the business, hired several employees, and earned a profit of nearly $200,000 in the first year of business.

Year after year the company grew leaps and bounds. It went public in 1988, rebranded as “Dell Technologies.” Due to the meteoric rise, Michael Dell, aged just 27, became the youngest CEO of a company ranked in Fortune magazine’s list of the top 500 corporations in 1992.

The company later forayed into other business verticals. In 1996, Dell started selling computers over the Web, the same year his company launched its first servers it soon reported about $1 million in sales per day from dell.com. In the first quarter of 2001, Dell reached a world market share of 12.8 percent, surpassing Compaq to become the world’s largest PC maker.

Achieving more in life than most can hope for, Dell retired in 2004. But decided to return in 2007 just as a new technological upheaval was on the rise. In the following years, a host of “smart” devices — smartphones, laptops, Chromebook, tablets — ate into the share commanded by PCs.

Dell Inc’s most difficult trial was yet to come. From 2007 to 2012, Dell Inc. spent $14B on acquisitions to jumpstart its business amidst a saturated PC market (PC sales peaked in 2011), writes Trung Phan. Nothing worked: Dell Inc. stock lagged the NASDAQ for years. A change was needed. And a plan came out of Michael Dell’s family office, he says.

A decision was made to take Dell Inc private. In February 2013, Michael Dell tried taking the company private at $24.4 billion (a 40% premium). Ace investor Carl Icahn felt the offer was too low (pre-offer, Dell shares were trading 1/3rd of 5-yr highs) and fought the deal.  Dell finally won out in October 2013 and the deal was sealed at $25 billion.

After the deal, Dell decided to bet on the future and acquired EMC which had a stake in VMWare for $67 billion, making it the largest tech acquisition at the time. After complicated negotiations, the deal was completed in 2016.

The private turnaround has made Dell a fortune. Before going private in 2013, Michael Dell owned 16% of a PC maker. Now he owns about 52% of Dell Technologies (a $100 billion revenue IT infrastructure business with a stake of $19 billion) and 43% of VMWare (a $12 billion revenue cloud business at a stake of $21 billion).

To put it into perspective, Dell’s investment has grown from $4B to $40B in just 9 years, an impressive 10-fold growth. Forbes estimated Michael Dell’s net worth at $53.6 billion as of April 2022.

This is how Michael Dell’s vision of how technology should be designed, manufactured and sold forever changed the IT industry.

(This article is based on Tweets by @TrungTPhan)