Technologizer

I Remember Dell, Back When It Was Dell

Once upon a time, Michael Dell's company was as good at what it did as any business on the planet

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Bloomberg

Antonia Tapia assembles a gaming PC at Dell's Round Rock, Texas, plant in 2007

First things first: I’m not going to make fun of Dell for its decision to go private in a $24.4 billion leveraged buyout. Mac fans certainly are in a mood to mock: when they think of Michael Dell, who founded the company in his dorm room in 1984, they remember the legendarily shortsighted business strategy he recommended for Apple when it was ailing in 1997: “I’d shut it down and give the money back to the shareholders.”

But the guy who said that and his partners — including Microsoft, which is loaning $2 billion to the cause — aren’t shutting Dell down. By going private, they’re giving themselves the opportunity to execute their turnaround strategy, which involves fewer PCs and more emphasis on business services, without having to make Wall Street happy on a quarter-by-quarter basis. It sounds sensible to me.

And yet, when I read about Dell’s desire to extricate itself from the PC business that made it big in the first place, I think back to the company’s golden age, when it used awesome efficiency to dominate the market for custom-configured computers. I visited its enormous manufacturing facility in Round Rock, Texas, twice — once at the end of the past century, once a few years into this one. It was a remarkable place, and if you’d told me that it would be rendered irrelevant within a few years, I’d never have believed you.

On one end of the plant stood a rather small storage area stocked with Intel processors, hard drives and other components. (Dell’s suppliers built warehouses near its facilities, but the company didn’t take possession of parts until the very last moment, right before it needed them to build PCs it had already sold.) A mighty network of conveyor belts ferried the parts past workers, each of whom performed a specific assembly task. Every single PC was built to order with the processor, RAM and hard drive a particular customer had chosen; it wasn’t mass production so much as mass customization.

And once a PC was ready to go, Dell got rid of it as quickly as possible. At the far end of the building, shipping companies pulled up their trucks and immediately drove away with the freshly assembled computers, taking them directly to their new owners.

It was a strikingly different and better operation than Compaq of the late 1990s, which I also visited. There, the PCs that workers were putting together sat around in vast numbers, and it wasn’t clear if anyone knew where they were going to go.

When I visited Dell back then, its executives were full of hubris. But you know what? They’d earned the right to be cocky. They’d figured out how to make excellent Windows computers and sell them at fair prices with a healthy profit margin — and for many years, they backed their machines with the best service and support in the industry. It made commodity manufacturing look like an exciting, admirable business.

But Dell stopped making desktop PCs in Round Rock in 2008. It also shuttered a North Carolina plant that Dell executives had told me was even more optimized than the Round Rock one. And it outsourced manufacturing to other companies outside the U.S., just like its competitors. It wasn’t that Dell stopped being good at what it did — it’s just that the process it perfected stopped mattering.

In recent years, Dell has tried its hand at MP3 players and smart phones and tablets and MacBook Air–like high-style computers, but its efforts haven’t gone anywhere. The stuff that it excelled at for so long don’t matter much in these categories: for now, at least, there’s no such thing as a custom-configured phone assembled in the U.S. And new gadgets aren’t commodities. They demand in-house engineering, software and services of a sort that the classic Dell PC never did.

In short, Dell was the right company for an era that no longer exists. Dell and the executives around him are presumably a tad humbler than they once were. But if I were a Dell competitor, I wouldn’t take pleasure in its setbacks. I’d regard them as a useful reminder that there are no such things as eternal verities in the technology business — only ideas that work well at one particular point in time.

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