By Christopher Mims
If you hear Dell and think of the supplier of the PC at your office desk, you're out of touch.
Michael Dell is pulling off one of the most surprising transformations in the history of tech at the company that bears his name, all without changing his approach to business.
He is now the world's 13th-wealthiest person -- neck and neck with Nvidia founder Jensen Huang. He is also the second-longest serving chief executive of any big U.S. company, after Warren Buffett -- if you elide a three-year break from 2004 to 2007, when he was the chairman of Dell's board. He remains the youngest CEO of a company to enter the Fortune 500 -- a record even Mark Zuckerberg couldn't break. He is, somehow, not yet 60 years old.
His company has transitioned from a nostalgic mid-90s PC maker to a globe-straddling AI-supercomputer builder that operates in 180 countries. While selling PCs and peripherals still accounts for about half of the company's revenue, the real business of Dell is infrastructure -- the digital kind.
The transition of Dell, the company, mirrors the evolution of Dell, the person. He was once a boyish entrepreneur in thick-framed glasses who started his upgraded-PC company in a college dorm room. He is now a gravelly voiced, contacts-wearing CEO who not only bested corporate raider Carl Icahn in a brutal fight to buy his own company from shareholders in 2013, but also tripled his ownership, so that he now owns about half of the company.
"Michael once said he'll care about Dell even when he's dead -- and I believe him," says Marc Benioff, CEO of cloud enterprise-software company Salesforce and a friend of Dell's. "He may seem like a nice guy, but underneath is the spirit of a WWE wrestler."
In a recent in-person chat with him, I found Dell to be affable but firm. His tendency to deflect hard questions with a smile was especially evident when I asked whether he'd like to comment on the fall of Intel, a key partner -- answer: no -- or whether he's as excited as many of his peers about the potential for a business-friendly regulatory environment under President Trump. "I try to stay out of politics, to be honest," he says.
What Dell really wants to talk about is computers. Not PCs, per se -- Dell is an infrastructure company now, he emphasizes often -- but machines vastly more powerful. These include racks of servers -- such as the company's PowerEdge lineup, powered by Nvidia's latest chips -- for companies that want to train their own AIs.
Building these souped-up machines is a continuation of his early days working out of his dorm room at the University of Texas at Austin. The world has changed, but Michael Dell is still doing more or less the same thing, only with better components and 120,000 employees.
The dorm-room operation wasn't his initial foray into the world of business. The son of an orthodontist father and a stockbroker mother, Dell's first job was as a dishwasher in a Chinese restaurant at age 12. He began investing his money in stocks and precious metals at 13. By 16, he was selling subscriptions to the Houston Post, and instead of cold-calling potential customers he enlisted friends to go to municipal records offices in over a dozen nearby counties. They compiled addresses for newly married couples and people who had recently moved -- and Dell made $18,000 in one year.
Dell's parents wanted him to be a doctor, and he started studying pre-med at the University of Texas in 1983. From room 2713 of the school's Dobie Center residential building, he started an informal business upgrading personal computers. His parents found out -- and ordered him to stop. Like many rebellious teenagers before and since, he didn't listen.
In January 1984, he registered his company as PC's Limited. By May, he had relocated it to a business center in North Austin. He hired several employees, and after earning nearly $200,000 in his first year of business, Dell dropped out of school -- with his parents' blessing.
Four years later, he took Dell public. Four years after that, in 1992, the company joined the Fortune 500. By 1999, Dell had posted the best return to shareholders of any large company over the past three, five and 10 year periods.
"We started out as a company upgrading IBM personal computers, and then we started designing our own computers, and since then we've evolved to become the largest IT infrastructure company in the world," he says.
Much of Dell's story since he pivoted his company from a PC maker to an IT infrastructure company has been about making bets that were contrary to prevailing thinking. The most notable was taking his company private in 2013 and piling on huge amounts of debt, which he used to buy makers of hardware and software for the cloud, such as EMC and VMware. At the time, analysts rained down a steady drumbeat of dire predictions on his chances of success -- only to be proven wrong five years later, when Dell was relisted on the stock market.
All the changes Dell made to his company during that period -- the $67 billion acquisition of storage maker EMC in 2016 was at the time the largest tech deal in history -- have resulted in a company possessing all the bits required to build the most powerful systems that go into data centers -- and which are perfectly suited to training and running AI.
Dell, still based just outside of Austin, doesn't design or manufacture microchips. It sources them from Intel, Qualcomm, Nvidia and others. And while it writes some of its own software, for the most part the company is a sort of Switzerland in terms of its neutrality toward what runs atop its hardware.
The company specializes in everything sandwiched in between those two ends of the technology stack -- between chips and software. It turns out that in the age of AI, there's a tremendous demand for racks of servers and huge arrays of storage.
Each rack of servers is a stack of computers about the size of a bookshelf. These racks are crammed together inside the vast data centers where the internet actually resides, and the most power-hungry ones, for training AI, can consume as much power as 100 average American homes. They generate so much excess heat that they have to be liquid-cooled. Each one costs hundreds of thousands of dollars -- Dell won't say exactly how much.
In the past two years, his company has sold storage arrays capable of holding a total of 120,000 petabytes, says Dell. For perspective, OpenAI's latest chatbot, GPT-4o, was trained on about a petabyte of data, which represents all the text on the open internet, the transcripts of over a million hours of YouTube videos, plus countless images.
In that same period, Dell went from having 30 to 40 customers buying AI servers from the company to more than 2,000. "And it will probably be 4,000 in another couple of quarters," he adds.
Revenue in Dell's server business grew 58% last quarter, and 80% the quarter before, mostly because the world just can't stop producing more data at an ever-faster rate. All those short-form videos, social-media posts, hours of streaming entertainment, cloud-gaming services, and fire hoses of consumer-tracking data have to go somewhere, after all. That has translated to an insatiable demand for storage, and computers to process it -- and record revenue for Dell.
Tentpole AI projects are also boosting Dell's bottom line, as when the company was called on to provide much of the hardware inside Colossus, the new AI supercomputer built by Elon Musk's AI company, in Memphis, Tenn. "It's an amazing engineering feat," says Dell. "He placed incredible demands on us, and many others."
Dell has been inside that data center, with its endless rows of blinking, humming server racks holding 100,000 Nvidia chips. When I asked him what it looked like, he deadpanned, "It looks like a Dell commercial."
Growth of this magnitude for a company as long in the tooth as Dell leads naturally to the question of whether it's sustainable. AI companies are now racing each other to build out ever more powerful clusters of computers to train next-generation AIs, and cloud hyperscalers are smashing all records for capital expenditures on more data centers.
But there are many questions about whether sufficient demand from end users for AI will manifest in a way that can justify the historic investment taking place. The challenge looming for Dell is what happens if the reality of AI proves to be less than what we've all been promised.
Dell says he thinks we're just at the start of what will be hockey-stick growth for adoption of AI. But, he adds, "I also believe that any technology that is sufficiently game-changing, by definition there are going to be some excesses -- and some mistakes that are made."
Whether or not those mistakes are isolated, or the entire tech industry is systematically overestimating future returns from for AI in ways that could lead to a bust, is the question on which the future of Dell turns.
Write to Christopher Mims at christopher.mims@wsj.com
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December 13, 2024 21:00 ET (02:00 GMT)
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