Michael Dell Named CEO of Year
July 19, 2001 -- A few years ago, Dell Computer's sales and stocks were soaring, but since the nation's economy began slowing last year, so too has the company.
The personal-computer maker has touched off a brutalprice-cutting war, it has eliminated more than 5,000 jobs, and itsstock price tumbled 66 percent last year.
So it came as a surprise to founder Michael Dell when he learnedthat fellow chief executives had chosen him as Chief Executivemagazine's CEO of the Year. The award will be presented tonight in New York.
Challenging Year
"It probably would have been easier to give me the award whenour business was doubling in size every year and our stock went uphundreds of percent per year," Dell said in an interviewWednesday. "But it's probably even more meaningful to get it inwhat is a challenging year for the whole industry and for the wholeeconomy."
John Brandt, editor of Chief Executive, said short-termfinancial performance isn't necessarily the biggest factor inwinning the CEO of the Year award. Finalists are nominated by themagazine's CEO readers, then a panel of judges made up of corporateleaders and the previous year's honoree selects a winner.
"This really takes a look at the CEO's ability to be a leader,to innovate and figure out new ways to create value," Brandt said."Judges seem to take a particular note of an individual'scharacter, and we have a winner this year in Michael Dell who Ithink embodies all those things."
Youngest Winner
Dell, 36, is the youngest executive to win the award, which hasalso been given to Intel's Andy Grove and Microsoft's Bill Gates.
Dell had a $1,000 bankroll when he started the company in hisdormitory room at the University of Texas at Austin. He dropped outof school to focus on the business.
The Round Rock-based company grew by selling directly tocustomers, at prices below those of rivals who sold their PCs instores. In the last four quarters, annual revenue reached $32.6billion, but slowing growth led to the first large-scale layoffs inthe company's history this spring.
Dell said the company didn't anticipate the short downturn inthe economy and the tech sector.
"It has taught us some lessons," Dell said. "The correctionhas been pretty rapid, and you know that's something that's sort ofa challenge to manage. We probably should have seen at least someof the excess as pure excess and dealt with it kind ofdifferently."
Looking at the Bright Side
Dell remains optimistic, preferring to talk about the company'sposition atop the PC-making industry. The company continues to gainmarket share, with first-quarter shipments up more than four timesthe industry rate.
"Essentially all of our competitors have gone into a loss,where Dell has maintained pretty reasonable profitability -certainly not what it was during the sort of peak up-cycle, butwe're still nicely profitable," Dell said.
Apple Computer Inc. on Tuesday posted a 70 percent drop inthird-quarter profits. Compaq Computer Corp. revealed last week itsrevenues would fall 7 percent short of predictions for the secondquarter and it plans to lay off 8,500 during the year.
Gateway Inc. saw its stock — and top executives — tumble. Sharesplunged from $72 in 2000 to below $16.
Michael Dell made most of its fortune selling PCs directly tocustomers, and said he envisions applying the direct business modelto other areas.
"Certainly servers and storage have been a huge part of ourgrowth and that continues. I think you'll see us going to thenetworking area with the same business model. You see us take thisinto new geographies," he said.
On Wednesday, the company announced it was expanding itsnetworking business by selling network switches to small and mediumbusinesses beginning in September. Switches send information from aserver or desktop directly to another computer as opposed to theentire network.