In 1984, IBM was the undisputed king of personal computers in the USA,
with everyone scrambling to catch up to or clone their PC.
But there was one nineteen-year-old guy who started a business out of his dorm room,
capitalizing on the success of IBM while trying a more direct business model.
A few years later, his company was worth $30 million,
and by 1999, they were the number one PC manufacturer in the world.
What happened?
This is LGR Tech Tales, where we take a look
at noteworthy stories of technological inspiration, failure, and everything in between.
This episode tells the tale of Dell,
and how they went from a dorm room project to ruling to the personal computer landscape.
Michael Dell was born in 1965 in Houston, Texas,
and was fascinated by technology and business from a young age.
From buying his first calculator at age 7 and taking apart Apple II computers as a teen,
to selling newspapers subscriptions in high school,
earning $1800 one year by making targeted cold calls
by analyzing demographics found in local marriage and mortgage applications.
Michael started attending the University of Texas at Austin as a pre-med student,
but his sense for business was still thriving.
He'd already been running a small business selling PC upgrades, and he continued to do so out of his dorm,
Room 2713 in Dobie Hall.
This was 1984, and at the time if you wanted a new computer,
you'd typically have to go to a retail store and choose from whatever models of computer they offered.
And if you wanted to customize it with a new hard drive or more RAM,
You would do so after you'd already bought the thing.
Mr. Dell saw this as a business opportunity.
So, he would buy cheap PCs, upgrade them,
and then sell them directly to consumers at 10-15% lower cost
by cutting out the middleman at retail entirely.
By spring of his freshman year, he was bringing in $80,000 a month
and decided to quit school and incorporate his company under the name "PC's Limited."
They weren't the only business to sell directly to end users at the time,
but they were the first such company to place all the pieces together
in exactly the right way for maximum profits and growth.
One key aspect was their "Just In Time" supply system,
where they only purchased parts as they needed them
instead of keeping warehouses of unsold inventory at all times.
They were also one of the first computer companies to rely almost entirely on telephone ordering,
as well as offering the first toll-free technical support line for customers in 1986.
It wasn't long before PC's Limited expanded from a regional level to a national level,
advertising in newspapers and magazines around the country.
During this time, they also started building computers of their own design,
instead of only upgrading existing machines or using generic cases.
The first one was the PC's Limited Turbo PC, an IBM PC/AT compatible machine
that not only cost a third of the price of IBM's, but outperformed its competitors as well.
Reviewers raved, business was booming,
and the company expanded rapidly in 1988,
culminating in a $30 million initial public stock offering
and a name change to "Dell Computer Corporation."
The next few years saw Dell expanding internationally,
with manufacturing in partnerships in Europe, Australia, South America, Asia, and beyond.
What's interesting is that up to this point, Dell never truly targeted the home computer user.
Their focus was on businesses, schools, and government agencies,
as well as computer enthusiasts who already knew exactly what they wanted in a PC.
In the US, they only held 1% of the home computer market,
with companies like Compaq and Packard Bell completely dominating the space.
Of course, those companies all sold computers in stores,
and Dell decided to follow suit in 1993,
taking a risk by leaving behind their tried-and-true direct sales method.
And they started selling their computers in big box retail chains like Wal-Mart and Sam's Club.
It turns out, this was a huge mistake.
Compaq was simply the most well-known and respected brand of the time,
and Packard Bell hugely undercut even Dell in terms of pricing.
They left the reseller space in 1994, and again began focusing on businesses.
But something happened in the mid-90s that absolutely changed the way Dell could operate,
while still keeping their direct sales model intact.
This was the Internet, the World Wide Web,
and the rise of the website and ordering things online.
This was exactly what Dell needed to crack the home marketplace,
and in 1996 they started selling computers directly to customers online through Dell.com.
With Dell's lower costs and pioneering online order system,
they became a leader in customized personal computers ordered through the Internet.
In fact, they were so successful that by the time 1999 rolled around,
they'd surpassed Compaq, Packard Bell, Gateway,
and everyone else to become the number one manufacturer of PCs.
Not only that, but thanks to a huge marketing campaign,
Dell became somewhat of a symbol of coolness
thanks to the "Dude, You're Getting a Dell!" advertisements of the early 2000s.
"Dude, you're gettin' a Dell!"
"Easy to buy, easy to own, easy as Dell."
But it wasn't long before that sweeping success peaked.
Around 2002, the PC market was changing, and sales were slowing down everywhere.
So, Dell went back to their business relationships and investing in the server and storage markets.
Then, in 2004, Michael Dell stepped down as CEO
and started doing a bunch of rich person stuff -
things like starting the Michael & Susan Dell Foundation,
investing in medical centers and research institutes,
and other philanthropic odds-and-ends.
And then the recession of 2008 hit the company pretty hard,
and it just so happened to be at the same time that mobile devices were really taking off.
From MP3 players to smartphones to tablet computing,
Dell missed out on pretty much all of it, choosing not to risk money on R&D and innovation.
And sure, they eventually sold their own mobile devices,
but they were largely made by other companies and weren't very memorable.
Combine this with the increasingly poor customer service
and shoddy product quality resulting in bad press at the time,
and Dell just sort of coasted in neutral for a while.
Along the way, though, they snatched up a bunch of companies
like Alienware, Perot Systems, and Wyse Technology,
and thus continued to stay profitable but with relatively little growth other than acquisitions.
Finally, in 2013, Michael Dell reentered the picture
and through out a leveraged buyout ended up buying the entire company back,
removing them from the stock exchange and making Dell a private company once again.
Now, where exactly they're going from here isn't set in stone,
but it seems that they're quite content to be an IT solutions company nowadays,
as well as selling whatever niche devices they choose.
They've long been surpassed in PC sales by the likes of HP and Lenovo,
but Dell still makes their own PCs,
which is more than can be said for most of its rivals from back in the day.
Some only think of Dell as a company that made boring PCs,
but they can also be seen as an inspirational success story,
where one guy can take a good idea to the point of record-setting prosperity.
Either way, Dell has earned its spot in computer history.
And if you enjoyed this episode of Tech Tales, then why not check out some of my previous ones,
as well as those that are arriving in the future as I can get around to making them.
There are also new videos every Monday and Friday regardless here on LGR,
so subscribing is beneficial if you would like to be notified when those are around.
You can also do the Twitter and Facebook and Patreon things if you would like to support the show further
and just talk about old computers and stuff.
And as always, thank you very much for watching.