WEBVTT - Dude, You Got a Dell 0:00:04.120 --> 0:00:07.160 Get in touch with technology with tech Stuff from how 0:00:07.200 --> 0:00:13.800 stuff works dot com. Hey there, and welcome to tech Stuff. 0:00:13.840 --> 0:00:16.599 I'm your host, Jonathan Strickland. I'm an executive producer at 0:00:16.600 --> 0:00:20.479 how Stuff Works and I love all things tech. And 0:00:20.840 --> 0:00:25.279 recently tech news sites reported that Dell Computers was preparing 0:00:25.320 --> 0:00:30.200 to go public again, because once upon a time it 0:00:30.320 --> 0:00:33.760 was a publicly traded company and then it changed back 0:00:33.800 --> 0:00:38.120 into a privately held corporation, and in July two eighteen, 0:00:38.440 --> 0:00:40.920 it announced it was getting ready to go public again 0:00:40.960 --> 0:00:42.600 by the end of the year. And this bit of 0:00:42.640 --> 0:00:46.600 news prompted me to record these episodes about Dell Computers, 0:00:46.960 --> 0:00:49.680 where the company came from, how its path has led 0:00:49.760 --> 0:00:52.600 up to going public for a second time, and all 0:00:52.600 --> 0:00:55.600 the trials and tribulations along the way. So today we're 0:00:55.640 --> 0:00:58.800 going to start to explore the Dell story, and I 0:00:58.840 --> 0:01:01.880 could not resist using the dude, you got a Dell tagline. 0:01:02.080 --> 0:01:06.000 More on that in the second episode, but let's start 0:01:06.040 --> 0:01:10.520 at the very beginning. So on February nineteen sixty five, 0:01:11.080 --> 0:01:14.880 Michael Dell was born in Houston, Texas. His dad was 0:01:14.959 --> 0:01:18.480 an orthodontist and his mother was a stockbroker, and his 0:01:18.560 --> 0:01:22.039 parents wanted him to consider a job in medicine, but 0:01:22.600 --> 0:01:25.920 Michael would end up pursuing a very different career. And 0:01:25.959 --> 0:01:29.160 for one thing, Michael grew up just as personal computers 0:01:29.160 --> 0:01:33.399 were really becoming a big deal. Apple Computer was founded 0:01:33.440 --> 0:01:36.680 in nineteen seventy six when Michael was eleven years old, 0:01:36.959 --> 0:01:39.520 So that was something going on in the background while 0:01:39.600 --> 0:01:43.160 he was a kid. And meanwhile, he was learning a 0:01:43.200 --> 0:01:48.360 lot about business and finance, primarily from his mother, and 0:01:48.520 --> 0:01:52.120 he got to work early on. He thought it was interesting, 0:01:52.120 --> 0:01:54.400 this idea of making money, and he turned out to 0:01:54.440 --> 0:01:58.080 be really, really good at it, even as a little kid. Uh. 0:01:58.080 --> 0:02:00.800 He became a dishwasher for a Chinese restaurant when he 0:02:00.800 --> 0:02:03.800 was just twelve years old, and he used the money 0:02:03.800 --> 0:02:08.000 he earned to support a hobby he had. He had 0:02:08.000 --> 0:02:10.360 a hobby that had nothing to do with computers. It 0:02:10.520 --> 0:02:15.600 was being a philatelist. What the heck is a philatalist. 0:02:15.960 --> 0:02:19.320 It's a stamp collector. Technically, it's someone who studies stamps, 0:02:19.320 --> 0:02:22.480 but a lot of people use the terms interchangeably. Let's 0:02:22.520 --> 0:02:25.760 just call him a stamp collector. So he was collecting 0:02:25.840 --> 0:02:30.080 stamps and he started having an exchange. He would do 0:02:30.200 --> 0:02:34.519 exchanges and sell stamps and buy other stamps, and eventually 0:02:34.600 --> 0:02:36.720 he was able to make two thousand dollars, which is 0:02:36.760 --> 0:02:39.320 a huge amount of money for a little kid. And 0:02:39.400 --> 0:02:43.639 as a teenager he spent summers selling subscriptions for the 0:02:43.680 --> 0:02:47.800 Houston Post. He ditched the standard procedure, which was making 0:02:47.880 --> 0:02:50.400 cold calls, you know, just essentially going down the phone 0:02:50.400 --> 0:02:54.120 book and trying to call people at random. Um. He 0:02:54.200 --> 0:02:56.480 decided that wasn't very effective, so he created a new 0:02:56.520 --> 0:03:00.560 marketing strategy and it was really effective. He ended making 0:03:00.760 --> 0:03:04.760 eighteen thousand dollars in a year. So his first car 0:03:04.840 --> 0:03:07.919 that he bought was a BMW. He lives a different 0:03:07.960 --> 0:03:10.760 life than I do. He also bought an Apple to 0:03:10.919 --> 0:03:13.240 computer when he was fifteen, and he took it apart 0:03:13.280 --> 0:03:15.800 to see how it worked. He put it back together again. 0:03:16.240 --> 0:03:18.320 He would later buy an IBM PC and do the 0:03:18.400 --> 0:03:21.480 same to that, and he saw that IBM already had 0:03:21.520 --> 0:03:24.520 a big leg up when it came to computers in 0:03:24.560 --> 0:03:27.840 the business world. It was a very much entrenched company. 0:03:28.040 --> 0:03:30.760 In nineteen eighty three, upon the urging of his parents, 0:03:30.960 --> 0:03:34.280 Michael Dell enrolled in the University of Texas with the 0:03:34.320 --> 0:03:38.280 goal of being a premed student. So His whole thing 0:03:38.400 --> 0:03:40.720 was his following what his parents had told him to 0:03:40.720 --> 0:03:43.480 do go into premed He hadn't really determined what he 0:03:43.560 --> 0:03:46.160 was exactly going to specialize in. This was his freshman 0:03:46.240 --> 0:03:50.320 year in college, and in the meantime he kept turning 0:03:50.320 --> 0:03:54.320 his mind to entrepreneurial pursuits. He still had this love 0:03:54.520 --> 0:03:57.600 of business and ways of making money, and at first 0:03:57.600 --> 0:04:01.040 he began to assemble and sell upgrade AID kits for 0:04:01.120 --> 0:04:05.480 personal computers. So this was not about building a new 0:04:05.520 --> 0:04:08.960 machine from scratch, but rather getting the components together that 0:04:09.120 --> 0:04:12.000 could turn a standard PC into a more powerful machine 0:04:12.040 --> 0:04:16.320 with more features, So stuff like more memory, expansion cards, 0:04:16.360 --> 0:04:19.240 that kind of stuff to turn your basic computer into 0:04:19.279 --> 0:04:21.560 a higher performing machine. And he found out a lot 0:04:21.560 --> 0:04:25.080 of people wanted a personal computer, but many didn't want 0:04:25.120 --> 0:04:29.200 to spend the higher prices for a higher performing machine 0:04:29.279 --> 0:04:32.719 from the major companies, and those were selling their machines 0:04:32.720 --> 0:04:35.880 to retailers, right they were selling computers to retailers that 0:04:35.920 --> 0:04:38.719 then would mark up the machines even more, and so 0:04:38.800 --> 0:04:41.760 by the time your average consumer would go into a 0:04:41.839 --> 0:04:45.320 store to buy a computer, it would be very very expensive, 0:04:45.400 --> 0:04:48.120 especially if you wanted something like an IBM computer. They 0:04:48.560 --> 0:04:52.880 were selling their computers at a premium of like above cost, 0:04:53.839 --> 0:04:58.280 So none of the major companies were selling directly to consumers, 0:04:58.760 --> 0:05:01.560 and Michael Delfin, you doubt. Hey, what if I were 0:05:01.600 --> 0:05:03.479 able to do that? What if I were able to 0:05:03.520 --> 0:05:09.000 sell computers straight to customers and bypass all the retailers, 0:05:09.040 --> 0:05:12.080 cut out the middlemen. If I bought all the components 0:05:12.120 --> 0:05:16.440 myself and then built computers for people to their specifications, 0:05:16.480 --> 0:05:18.720 I could sell them for a much lower price and 0:05:18.760 --> 0:05:21.640 get make a healthy profit as long as I could 0:05:21.640 --> 0:05:25.120 buy the components at cost. If I could find a 0:05:25.200 --> 0:05:28.800 source for that. Now, uh, he knew that this was 0:05:28.839 --> 0:05:32.479 going to be a potentially lucrative business. He also knew 0:05:32.520 --> 0:05:35.320 that a lot of people wanted a computer, but they 0:05:35.360 --> 0:05:39.480 weren't really confident in their ability to assemble a machine themselves, 0:05:39.480 --> 0:05:43.360 so they lacked the knowledge or the confidence to put 0:05:43.400 --> 0:05:45.680 together a computer. So this is where he could slip in. 0:05:46.120 --> 0:05:49.360 He wasn't quite ready to jump into that world just yet, 0:05:49.440 --> 0:05:52.920 so he continued his focus on upgrade kits to turn 0:05:52.960 --> 0:05:56.359 basic computers into high performing machines. But he already knew 0:05:56.880 --> 0:05:59.760 where he wanted to go and to expand into a 0:06:00.040 --> 0:06:04.159 humbling actual computers in the future. So while he was 0:06:04.200 --> 0:06:06.719 a freshman in college, he began to set up a 0:06:06.720 --> 0:06:09.360 business in which he would upgrade computers for other people, 0:06:09.520 --> 0:06:12.880 mostly friends and associates. But then word got out and 0:06:12.920 --> 0:06:15.880 he started to get other people asking him to do 0:06:15.920 --> 0:06:18.360 this sort of thing. He got advice and guidance from 0:06:18.400 --> 0:06:22.360 a guy named George Kozmetski, who had co founded Teleedne 0:06:22.400 --> 0:06:25.560 Incorporated and was then acting as dean of the University 0:06:25.600 --> 0:06:29.840 of Texas College of Business Administration. Dell would end up 0:06:29.880 --> 0:06:32.560 taking a thousand dollars out of his savings or from 0:06:32.600 --> 0:06:35.159 his family, depending upon the version of the story you 0:06:35.200 --> 0:06:38.120 come across, because I've seen both, and he used that 0:06:38.160 --> 0:06:41.080 to fund a new startup business and he called it 0:06:41.200 --> 0:06:46.719 PCs Limited. And this started in January. This is the 0:06:46.839 --> 0:06:51.680 date to which Dell traces its history that PCs Limited 0:06:51.839 --> 0:06:55.760 was the company that would become Dell Computers or Dell 0:06:55.839 --> 0:07:02.000 Technologies these days. Dell ended up upgrading those computers they 0:07:02.040 --> 0:07:04.200 knew for the people at the University of Texas, and 0:07:04.240 --> 0:07:07.640 then he differentiated himself from the various computer stores by 0:07:07.680 --> 0:07:11.520 emphasizing low prices and personal customer service. So if someone 0:07:11.640 --> 0:07:14.360 had a problem with something, they could call him and 0:07:14.360 --> 0:07:17.520 he would walk them through and fix the issue. Uh. 0:07:17.560 --> 0:07:20.000 Soon the word got around about this Dell guy and 0:07:20.040 --> 0:07:22.360 the computers that he could help build, and he started 0:07:22.400 --> 0:07:25.360 getting more orders and making more money. He began to 0:07:25.440 --> 0:07:27.680 hire a few employees to help with the work. He 0:07:27.720 --> 0:07:30.200 was actually getting more orders than he could fill personally, 0:07:30.920 --> 0:07:34.600 and soon he was making about twenty five thousand dollars 0:07:34.840 --> 0:07:38.280 per month. At that rate, it seems silly to stay 0:07:38.320 --> 0:07:40.760 in college and get a medical degree. He was already 0:07:40.960 --> 0:07:44.520 on his way to a very successful career, so Michael 0:07:44.560 --> 0:07:47.360 Dell dropped out of college to focus on his business 0:07:47.480 --> 0:07:49.800 at the age of nineteen. At the end of nineteen 0:07:49.880 --> 0:07:54.160 eighty four, after just one year in business and focusing 0:07:54.200 --> 0:07:58.440 pretty much exclusively on selling and installing upgrade kits, not 0:07:58.600 --> 0:08:03.800 full computers, PCs Limited had made about six million dollars 0:08:03.800 --> 0:08:08.400 in sales. Six million dollars in its first year as 0:08:08.440 --> 0:08:12.920 a college dropout, not bad, according to the company's own timeline. 0:08:12.960 --> 0:08:17.960 The following year, PCs Limited would produce its first computer, 0:08:18.320 --> 0:08:21.720 building it completely from the ground up, but assembled from 0:08:21.720 --> 0:08:27.600 purchased components, so they weren't manufacturing the various parts of 0:08:27.640 --> 0:08:32.960 the computer. They were sourcing them from other UH manufacturers, 0:08:33.000 --> 0:08:35.360 so it was not an upgrade kit, it was an 0:08:35.360 --> 0:08:38.320 actual computer, and Dell was able to benefit from a 0:08:38.360 --> 0:08:41.280 few choices that IBM had made when it introduced its 0:08:41.320 --> 0:08:45.360 personal computer strategy back in one. I covered this in 0:08:45.440 --> 0:08:48.880 recent episodes, but i'll just give a quick overview. IBM 0:08:48.960 --> 0:08:51.320 chose to go with a non proprietary approach with the 0:08:51.360 --> 0:08:55.480 personal computer, and that set its strategy apart from Apple Computers, 0:08:55.480 --> 0:08:58.320 which was very much in the proprietary realm. Right. So, 0:08:58.800 --> 0:09:03.160 IBM used essentially a standard off the shelf components to 0:09:03.280 --> 0:09:06.280 build its computer systems, and that meant that if you 0:09:06.360 --> 0:09:10.199 had the knowledge and the time and access to those components, 0:09:10.520 --> 0:09:13.760 you could build a machine that worked exactly the same 0:09:13.760 --> 0:09:17.240 way as an IBM machine. Essentially, you're you're using the 0:09:17.280 --> 0:09:21.960 same components or components of equivalent abilities to make a 0:09:21.960 --> 0:09:25.040 computer that processes information in exactly the same way as 0:09:25.080 --> 0:09:29.760 an IBM machine. Moreover, IBM had licensed a version of Basic, 0:09:30.120 --> 0:09:35.240 the programming language, from Microsoft, but IBM did not get 0:09:35.280 --> 0:09:39.560 an exclusive license, which meant anyone could license that operating 0:09:39.760 --> 0:09:42.679 or that programming language. I should say, not an operating system, 0:09:43.240 --> 0:09:46.640 so not only could you copy the hardware IBM was 0:09:46.720 --> 0:09:50.520 making by buying these components and then building your own machine, 0:09:51.000 --> 0:09:54.640 you could also run the same programming language, same version 0:09:55.040 --> 0:09:58.640 of the programming language Basic on your machine, which meant 0:09:58.679 --> 0:10:01.360 that any soft where that was built to run on 0:10:01.400 --> 0:10:04.600 IBM computers would also run on the machine you built, 0:10:04.880 --> 0:10:10.000 because it's essentially the same thing. Moreover, Dell was able 0:10:10.040 --> 0:10:15.679 to get in touch with various IBM IBM inventory managers 0:10:16.160 --> 0:10:19.760 and buy components directly from them because IBM had this 0:10:20.080 --> 0:10:24.520 quota system for all of its components, and frequently inventory 0:10:24.559 --> 0:10:27.480 managers found that their warehouses were getting filled with these 0:10:27.480 --> 0:10:30.360 different components that didn't have any place to go. They 0:10:30.360 --> 0:10:33.320 were just taking up space, so they could sell those 0:10:33.360 --> 0:10:38.280 two other UH entities, including Michael Dell. So he's buying 0:10:38.280 --> 0:10:41.040 the components for very low price, much lower than you 0:10:41.080 --> 0:10:43.760 would if you went to a retail store, because the 0:10:43.760 --> 0:10:45.559 retail store is going to mark it up quite a 0:10:45.600 --> 0:10:47.680 bit in order to make its profit. He was able 0:10:47.679 --> 0:10:50.080 to buy them for a low cost and then combine 0:10:50.120 --> 0:10:53.200 them together to build these computers, and that was how 0:10:53.200 --> 0:10:56.800 he was able to sell computers that could run IBM software, 0:10:56.800 --> 0:10:59.120 but at a fraction of the price that it would 0:10:59.200 --> 0:11:00.880 cost you if you want to go out and buy 0:11:00.920 --> 0:11:05.160 an actual IBM computer. Uh this was the era of 0:11:05.200 --> 0:11:08.079 the IBM clone. That's why we called it those things. 0:11:08.559 --> 0:11:12.000 Uh So IBM was entrenched in the business world, as 0:11:12.040 --> 0:11:14.400 I said earlier, which meant that there was a ton 0:11:14.440 --> 0:11:17.839 of software already being made for IBM computers because you 0:11:17.960 --> 0:11:23.040 already had an enormous potential customer base out there. If 0:11:23.080 --> 0:11:25.520 you wanted to make software for business, you wanted to 0:11:25.559 --> 0:11:28.440 do it for IBM computers because that's that was the 0:11:28.480 --> 0:11:30.920 majority of the type of computer that was out there 0:11:31.000 --> 0:11:34.560 in the business world. So by building a computer that 0:11:34.559 --> 0:11:36.480 could also run that but at a fraction of the cost, 0:11:36.640 --> 0:11:39.920 Michael Dell was starting to get orders from everybody because 0:11:40.679 --> 0:11:43.559 everyone wanted to have a machine that could run IBM software, 0:11:43.840 --> 0:11:46.560 but not everyone wanted to spend the premium price you 0:11:46.600 --> 0:11:48.720 needed to get that sort of machine. And when I 0:11:48.760 --> 0:11:53.839 say everyone, I don't just mean home users like people 0:11:53.880 --> 0:11:58.280 like myself. I mean companies like small businesses, medium sized businesses, 0:11:58.840 --> 0:12:02.319 businesses that wanted to invest in computer systems, but not 0:12:02.440 --> 0:12:05.760 necessarily at the cost that it would require if they 0:12:05.800 --> 0:12:08.520 went all in with a company like IBM. This was 0:12:08.559 --> 0:12:12.400 suddenly a much more affordable option, so Michael Dell was 0:12:12.440 --> 0:12:16.439 getting crazy numbers of orders. The first full computer produced 0:12:16.480 --> 0:12:20.440 by Dell's company was called the Turbo PC and it 0:12:20.520 --> 0:12:24.960 had an eight mega hurts Intel eight eight eight processor, 0:12:25.559 --> 0:12:28.520 had a five and a quarter inch disk drive, and 0:12:28.559 --> 0:12:32.080 it had ten hole megabytes of hard drive space. That's 0:12:32.120 --> 0:12:37.160 according to the Dell company timeline. However, I should say 0:12:37.200 --> 0:12:41.240 that I actually found examples of this computer. There's one 0:12:41.280 --> 0:12:44.760 that's listed under the National Museum of American Histories website. 0:12:44.800 --> 0:12:49.120 They have the PCs limited Turbo PC listed there UH, 0:12:49.160 --> 0:12:52.679 and it has similar stats. It has the Intel eight processor, 0:12:53.000 --> 0:12:56.280 but it only has a hard drive of three six kilobytes. 0:12:56.360 --> 0:13:01.440 That's far less than the ten megabytes UH jested by Dell. 0:13:01.679 --> 0:13:05.080 So I don't know where that disconnect is unless Michael 0:13:05.160 --> 0:13:09.199 Dell was offering configurable computers, which is probably true. A 0:13:09.320 --> 0:13:12.360 lot of Dell's money early on was made by up 0:13:12.440 --> 0:13:15.839 selling a customer. So you would offer to build a 0:13:16.200 --> 0:13:19.000 basic computer for a certain amount and then say, oh, 0:13:19.080 --> 0:13:20.520 you know, if you spend a little bit more, we 0:13:20.600 --> 0:13:23.240 can actually add this much more memory, this much more 0:13:23.640 --> 0:13:28.200 hard drive space, another drive, maybe a printer or whatever 0:13:28.280 --> 0:13:31.400 it might be. Because again he was able to sell 0:13:31.520 --> 0:13:34.240 these for much lower than you would find in a 0:13:34.320 --> 0:13:38.720 retail establishment. He would often be able to upsell because 0:13:38.760 --> 0:13:42.439 people were they wanted a computer with those abilities, but 0:13:42.559 --> 0:13:45.200 not have to pay the full price. It also had 0:13:45.240 --> 0:13:49.599 six of RAM at a local area network port, so 0:13:49.760 --> 0:13:52.840 you could actually network this with other computers with direct 0:13:52.920 --> 0:13:56.800 connections there was no real Internet connectivity at that point, 0:13:57.240 --> 0:13:59.679 and also had eight expansion slots so you could put 0:14:00.000 --> 0:14:04.240 ancition cards in the machine. Uh, there are conflicting records 0:14:04.280 --> 0:14:06.839 of what exactly was the first computer, but you get 0:14:06.880 --> 0:14:09.440 two first in one episode this way, so that's a bonus, right. 0:14:09.840 --> 0:14:12.959 The price for the original Turbo PC computer was seven 0:14:13.120 --> 0:14:16.480 hundred nine dollars. Now, if you wanted to buy an 0:14:16.520 --> 0:14:20.520 IBM PC that had a similar configuration, similar features, you 0:14:20.560 --> 0:14:25.160 would be spending closer to undred to twenty five hundred dollars. 0:14:25.640 --> 0:14:28.040 So it's no wonder the Dell computers were selling so well. 0:14:28.840 --> 0:14:31.160 I'll have a lot more to say about the early 0:14:31.320 --> 0:14:34.680 days of Dell computers, but first let's take a quick 0:14:34.720 --> 0:14:45.280 break to thank our sponsor. I mentioned earlier that Michael 0:14:45.320 --> 0:14:48.240 Dell helped set his company apart through customer service, and 0:14:48.360 --> 0:14:50.120 one of the ways he did that was by offering 0:14:50.200 --> 0:14:53.000 up the option for customers to order a computer over 0:14:53.080 --> 0:14:56.680 the phone. He placed ads in computer magazines and was 0:14:56.760 --> 0:15:00.400 directly marketing to his customer base, so you would buy 0:15:00.520 --> 0:15:03.600 direct from Michael Dell. You wouldn't have to go again 0:15:03.720 --> 0:15:07.840 to a store for this. They could also choose customized components, 0:15:08.240 --> 0:15:10.640 so Dell's team would then assemble the computer based off 0:15:10.680 --> 0:15:13.960 the customers preferences. And because Dell was buying components from 0:15:14.000 --> 0:15:17.080 manufacturers directly, he was able to sell those computers as 0:15:17.120 --> 0:15:19.920 a significant discount compared to other machines in the market. 0:15:20.280 --> 0:15:23.400 And he also established a policy for next day at 0:15:23.480 --> 0:15:26.640 home product assistance, and if you didn't like your computer, 0:15:26.760 --> 0:15:29.760 you could return it for a refund, risk free. The 0:15:29.840 --> 0:15:33.240 combination of his policies and the products helped propel Dell 0:15:33.360 --> 0:15:37.360 to greater success. In addition, Dell was operating his company 0:15:37.560 --> 0:15:41.600 almost like a boutique service. Rather than maintaining warehouses filled 0:15:41.640 --> 0:15:45.200 with unsold computers, Dell tried to keep just enough stock 0:15:45.280 --> 0:15:48.440 on hand to meet demand. That kept his inventory low, 0:15:48.760 --> 0:15:51.000 and that meant it kept his expenses low because he 0:15:51.040 --> 0:15:54.160 didn't have to rent out a warehouse to hold massive 0:15:54.200 --> 0:15:57.720 amounts of inventory. Dell followed the Turbo PC with a 0:15:57.840 --> 0:16:01.600 clone of the IBM PC A T. The A T 0:16:01.840 --> 0:16:05.200 was IBMS second generation personal computer. It had an Intel 0:16:05.320 --> 0:16:09.240 eight two eighty six microprocessor, the good old two eighty six. 0:16:09.800 --> 0:16:13.240 The IBM version would set you back four thousand dollars. 0:16:13.560 --> 0:16:17.120 Dell's version was priced at one thousand, nine five dollars, 0:16:17.200 --> 0:16:20.080 which technically meant it was less than half of IBMS 0:16:20.120 --> 0:16:23.560 price tag. By the end of nineteen eighty five, Dell 0:16:23.680 --> 0:16:28.080 had hit sales of nearly forty million dollars, so a 0:16:28.160 --> 0:16:30.600 big jump up from that six million dollars that had 0:16:30.640 --> 0:16:33.040 made the first year. Now, grant that's in sales, not 0:16:33.400 --> 0:16:36.480 in profit, right, you have to to figure out profit. 0:16:36.560 --> 0:16:40.000 You have to subtract your expenses from your sales. And 0:16:40.480 --> 0:16:42.840 because he was selling these a fairly low margin, it 0:16:42.960 --> 0:16:46.760 wasn't like he was making huge amounts of money per sale, 0:16:47.360 --> 0:16:51.040 you know, but still it was good business. In six 0:16:51.400 --> 0:16:54.600 Dell would release the fastest performing personal computer on the 0:16:54.640 --> 0:16:57.240 market at that time. It also featured a two eight 0:16:57.360 --> 0:17:01.480 six microprocessor, but this one was clocked sixteen Mega hurts 0:17:02.000 --> 0:17:05.080 and in the mid eighties that was considered wicked fast. 0:17:05.880 --> 0:17:08.520 In fact, PC magazine compared it to an F eight 0:17:08.560 --> 0:17:12.480 Team Jet, which might have been a touch hyperbolic in 0:17:12.600 --> 0:17:15.719 my opinion, but one sentence in the review said, quote 0:17:16.160 --> 0:17:19.240 after a few hours at sixteen mega hurts a lumbering 0:17:19.359 --> 0:17:22.040 IBM A t feels like a dusty relic from a 0:17:22.119 --> 0:17:25.600 computer museum. End quote. The review also said that the 0:17:25.680 --> 0:17:28.560 computer specs were so impressive that it might even go 0:17:28.720 --> 0:17:31.840 toe to toe with the upcoming next generation of computers, 0:17:32.000 --> 0:17:36.520 which would be running on the eight three eight six microprocessor, 0:17:36.920 --> 0:17:39.879 so that would be the next generation of Intel's processors 0:17:39.920 --> 0:17:43.080 to six to three eight six. Dell saw his company 0:17:43.160 --> 0:17:46.360 growing faster and faster, and he realized that he would 0:17:46.400 --> 0:17:49.760 need someone at the helm who was more experienced dealing 0:17:49.840 --> 0:17:53.360 with growing companies than he was, so he reached out 0:17:53.400 --> 0:17:57.280 to an investment banker named Edward lee Walker to come 0:17:57.359 --> 0:18:01.640 on board as the company president and the chief operating officer. Now, 0:18:02.359 --> 0:18:05.880 lee Walker had graduated from Texas A and M University 0:18:05.960 --> 0:18:09.159 in nineteen sixty three with a degree in physics, and 0:18:09.240 --> 0:18:13.360 he followed that up with postgraduate studies in nuclear physics. 0:18:13.600 --> 0:18:17.479 He actually received some grant funds from organizations like NASA 0:18:17.640 --> 0:18:20.720 and the National Science Foundation to pursue his postgraduate work. 0:18:21.240 --> 0:18:23.760 And he also got an MBA from Harvard in nineteen 0:18:23.840 --> 0:18:27.000 sixty seven. So this is a smart guy we're talking about. 0:18:27.359 --> 0:18:30.320 By nineteen eighty six, Walker was fifty one and he 0:18:30.440 --> 0:18:34.040 was a venture capitalist. He would invest in growing companies, 0:18:34.400 --> 0:18:36.560 and he agreed to come on board and began to 0:18:36.720 --> 0:18:40.720 mentor Michael Dell, teaching the young man how to create 0:18:40.880 --> 0:18:44.040 a workable business plan and how to manage a business 0:18:44.119 --> 0:18:48.160 that was experiencing rapid growth. Walker would remain present until 0:18:48.320 --> 0:18:51.880 nineteen ninety and he would retire due to health reasons. 0:18:52.400 --> 0:18:55.200 And I never saw anything more specific than that, and frankly, 0:18:55.280 --> 0:18:57.680 it's none of my business. Lee Walker would go on 0:18:57.840 --> 0:19:00.440 to teach courses in business management at the University of 0:19:00.520 --> 0:19:03.720 Texas at Austin, and he's also heavily involved in charitable 0:19:03.800 --> 0:19:09.760 and community investment organizations. Pretty cool. Back to Dell. In seven, 0:19:11.160 --> 0:19:15.720 the last full year the company would be called PCs Limited, 0:19:16.200 --> 0:19:20.480 the company recruited a new marketing division from Tandy Corporation. 0:19:21.000 --> 0:19:24.119 Tandy had started out as a leather goods company in 0:19:24.280 --> 0:19:28.199 Fort Worth, Texas, way back in nineteen thirteen. But then, 0:19:28.320 --> 0:19:31.879 through a series of acquisitions and diversified holdings, the company 0:19:31.920 --> 0:19:35.879 would eventually enter into the world of electronics. It's not 0:19:36.000 --> 0:19:38.000 the only leather company to have done this, which is 0:19:38.240 --> 0:19:41.879 the interesting thing. But uh, Tandy produced the t R S, 0:19:42.000 --> 0:19:45.359 a d personal computer some people would call it the 0:19:45.520 --> 0:19:49.680 Trash eighty computer and a debut in nineteen seventy seven. 0:19:49.960 --> 0:19:53.400 And so Tandy was one of the early computer companies 0:19:53.480 --> 0:19:57.280 out there that was competing in the birth of the 0:19:57.400 --> 0:20:02.520 home computer market. Tandy, Apple, the Commodore, those were like 0:20:02.600 --> 0:20:05.000 the big computers that were competing in the early days. 0:20:05.400 --> 0:20:07.920 Tandy was also the company that owned the Radio Shack 0:20:08.080 --> 0:20:11.080 chain of stores, and eventually the company would rename itself 0:20:11.160 --> 0:20:14.360 the Radio Shack Corporation. But let's go back to those 0:20:14.440 --> 0:20:18.320 marketing executives from Tandy who came on over to PCs Limited. 0:20:18.920 --> 0:20:21.320 They came over and they immediately began to lay the 0:20:21.359 --> 0:20:25.840 groundwork to get Dell computers into more businesses, into more corporations. 0:20:26.359 --> 0:20:29.960 The marketing executives began to hire a large corporate sales force, 0:20:30.440 --> 0:20:35.639 and they began to establish resellers or retail establishment relationships. 0:20:36.000 --> 0:20:39.399 So their efforts increased the profit margin for PCs Limited, 0:20:39.640 --> 0:20:42.520 but Michael didn't like what he was seeing. Michael Dell 0:20:42.600 --> 0:20:44.760 felt the department was trying to turn his company into 0:20:44.800 --> 0:20:49.040 the next IBM, and Dell felt that the marketing department 0:20:49.119 --> 0:20:52.800 did not understand his strategy of direct sales and marketing. 0:20:53.359 --> 0:20:56.240 So Michael also didn't care for the large advertising budget 0:20:56.320 --> 0:20:59.080 the team was requesting or how many sales people they 0:20:59.160 --> 0:21:02.680 wanted to bring on, and so they clashed many times, 0:21:03.320 --> 0:21:07.439 and by early nine most of those Tandy executives had 0:21:07.480 --> 0:21:10.200 already either left the company of their own free will 0:21:10.359 --> 0:21:13.160 or had been fired, so it didn't last very long. 0:21:13.600 --> 0:21:17.480 The last computer marketed under the PC's Limited name was 0:21:17.560 --> 0:21:20.840 a three eight six IBM clone clocked at sixteen mega 0:21:20.920 --> 0:21:23.920 hurts with a megabyte of RAM and a one point 0:21:24.000 --> 0:21:27.400 two megabyte floppy drive plus a forty megabyte hard drive, 0:21:27.760 --> 0:21:32.040 and it cost four thousand, seven hundred ninety nine dollars, 0:21:32.240 --> 0:21:36.280 a princely some, no doubt, but still about two thousand 0:21:36.359 --> 0:21:40.840 dollars cheaper than similar computers from other companies, So while 0:21:40.880 --> 0:21:43.960 it was still was really expensive, it was less expensive 0:21:44.040 --> 0:21:48.119 than the competing machines that had comparable features. Toward the 0:21:48.280 --> 0:21:51.399 end of nineteen eight seven, Dell opened its first international 0:21:51.480 --> 0:21:54.600 subsidiary in the UK, and it did not take long 0:21:54.680 --> 0:21:57.560 for the UK branch to start doing well. In one 0:21:57.680 --> 0:22:01.240 month in nine the office sold about four million dollars 0:22:01.320 --> 0:22:06.200 worth of computers, so did pretty well. Was a really 0:22:06.320 --> 0:22:09.040 big year for the company. Not only did most of 0:22:09.080 --> 0:22:11.760 those Tandy executives go by by that was the year 0:22:11.840 --> 0:22:14.760 that PCs Limited officially changed its name to the Dell 0:22:14.880 --> 0:22:19.040 Computer Corporation. The company opened its second subsidiary, this one 0:22:19.160 --> 0:22:23.000 in Canada, and Michael Dell's company transformed from a privately 0:22:23.080 --> 0:22:26.200 held corporation to a publicly traded one with an initial 0:22:26.320 --> 0:22:30.000 public offering. So Dell Computers had sold a hundred fifty 0:22:30.080 --> 0:22:33.840 nine million dollars worth of computers in nine seven, which 0:22:34.080 --> 0:22:36.760 helped propel its I p O to a success. The 0:22:36.800 --> 0:22:39.320 company sold about three and a half million shares at 0:22:39.400 --> 0:22:42.560 eight dollars fifty cents per share, and they raised around 0:22:42.640 --> 0:22:45.280 thirty million dollars and ended up with a valuation of 0:22:45.400 --> 0:22:48.520 eighty five million dollars for the company. They did hit 0:22:48.600 --> 0:22:51.760 a bit of a stumble with its planned IBM clone 0:22:51.840 --> 0:22:54.840 for the PS Slash two computer system, so the PS 0:22:54.880 --> 0:22:58.480 SLASH two was the third generation of IBM's personal computer hardware, 0:22:58.880 --> 0:23:01.720 and it was available range of options, including ones that 0:23:01.840 --> 0:23:05.200 took a more proprietary approach as opposed to using industry 0:23:05.240 --> 0:23:08.959 standard architecture. Dell Computers announced they would offer a PS 0:23:09.200 --> 0:23:13.200 slash two compatible machine not long after IBM system became 0:23:13.200 --> 0:23:17.160 available in nine seven, but delays in design and production 0:23:17.240 --> 0:23:20.520 that Dell did not have to didn't have that computer 0:23:20.600 --> 0:23:23.520 ready to go for several months, So there are lots 0:23:23.560 --> 0:23:25.840 and lots of delays. That actually was a pretty bad 0:23:25.880 --> 0:23:28.919 black eye for Dell early on. Uh. Dell would then 0:23:29.040 --> 0:23:31.560 end up luring away Glenn Henry, who had been a 0:23:31.600 --> 0:23:34.959 computer scientist over at IBM. Henry worked on product development 0:23:35.040 --> 0:23:37.840 for Dell, ended up tossing the design for the ps 0:23:37.880 --> 0:23:41.359 slash two clone and starting over entirely. He said, this 0:23:41.760 --> 0:23:44.639 is so far down the wrong path, we need to 0:23:45.280 --> 0:23:48.120