Like many of the leading proprietors of multi-million-dollar computer companies, Michael Dell launched his career into the stratosphere at a very early age. He founded the Dell Computer Corporation with $1,000 (£714) in 1984, at the tender age of 19, and remains the computer industry's longest-tenured chief executive officer. Dell has grown rapidly and recently, at the ripe age of 33, Mr Dell witnessed his Texas-based company generate revenues of $11 billion for the last four quarters. The company now ranks as the fifth-largest PC systems vendor in the world, and the second largest in the US.
Embracing a very simple direct sales approach to PC delivery, Dell prides itself on cutting out the "middle man" by using flexible manufacturing and inventory management techniques to shave costs. The net effect has been to win significant market share by rewriting the rules of PC distribution.
Dell has quickly achieved its market leader status in an arena previously dominated by big-players and characterised by low margins. The competition did not reckon on direct buyers accounting for nearly a third of the PC business. Now Mr Dell expects his company to aim for an 8 to 10 per cent share of the $250 billion (£183 billion) PC industry by 2000.
The recent decision by Seagate to close down its Clonmel manufacturing facility, shedding 1,400 jobs, illustrates the cyclical nature of the computer industry. Seagate was a market leader in the disk drive industry but it responded poorly to aggressive competition resulting in over-capacity in the market.
Dell has also had its dark days - in 1993 it recorded a $65 million loss following a price war, sparked by Compaq, its arch-rival. This was where Mr Dell learned the downside to rapid growth and, after a management reshuffle, the company ethos began to centre on fine-tuning and speeding up the assembly and manufacture processes. The company is currently growing at about four times the industry rate. In the last two years, Dell's revenues have soared largely thanks to its adoption of the Internet as a sales tool. The Web site (http:// www.dell.com) allows potential customers to electronically configure, price and buy PC systems online, saving corporate purchasers about $150 a machine.
Dell's costs are also significantly reduced, as it does not order components or assemble computers until an order has been booked. Analysts estimate that Dell has between a 7 and 10 per cent profit advantage on components alone.
The most commonly quoted figure for on-line daily sales is $3 million-a-day, but with growth often cited at 20 per cent a month, Dell has probably exceeded this figure by now. Mr Dell immediately identified the Internet as a natural extension to his direct sales model.
"The Internet was tailor-made for Dell," he says. "If Dell continues to grow at its current rate, and our competitors also continue to grow at their current rates, we will be number one worldwide by the year 2000."
Today, Dell receives approximately 50,000 calls per day, with direct sales operations in 32 countries and customers in more than 160 countries. The company employs nearly 15,000 people worldwide, with approximately one half of its revenues derived from large commercial accounts.
Now Dell is expanding its range of products into servers and workstations, and introducing a range of Internet-based ordering and service options for larger accounts. These include adding online ordering capability to its premier Web pages scheme for large business customers, customised for individual business needs.
Mr Dell is also pushing suppliers to follow his company's lead, and insists that they maintain stocks within 15 minutes of its factories in Texas, Malaysia and Limerick.
Analysts suggest this growth has led to overheating on Dell's order books as they begin to outstrip manufacturing capacity. The natural response to this is the global expansion of operations to handle such growth, hence the expansion in Ireland to service the European market, in particular the Internet and telesales division in Bray, Co Wicklow.
As long as Dell continues to manufacture solely to order, and protects itself from the costly error of flooding the PC market, it should manage to avoid the fate of companies like Seagate and AST.
