If hi-tech is shot to hell, then has anyone told Michael Dell?

While other computer manufacturers retreat, Dell has advanced. Stephen Pritchard discovers how

Michael Dell has no plans to retire. The founder of the computer maker that bears his name thinks he has a good few years left in him. But then, at 37, he is at an age when most executives are eyeing the chief executive's chair rather than sitting in it.

In just over 18 years, Mr Dell has built up a market leader in the computer industry with a turnover of more than $32bn (£20bn) a year. As others have scaled back operations, merged with rivals or left the market altogether, Dell has moved itself to the top.

It is the second-largest manufacturer of servers, after Hewlett-Packard (HP), and holds the worldwide and US number one slot for total PC sales, according to Gartner Dataquest, a research group.

Dell has done this despite – or because of – its lack of a dealer network. The company sells direct to its customers, through press adverts, flyers and the internet; about half its sales are now online. And, in a world where companies are turning their backs on manufacturing in favour of outsourcing, Dell stands out for making its own computers.

The company is as well known for the way it does business as for its computers. The "Dell model" has become a textbook case study of efficient manufac- turing and of the benefits of dealing direct with customers. This is not just a question of cutting out the middle man. For Mr Dell, it is how his company makes money where many of its rivals do not.

Dell is most closely associated with its desktop computers, but it now has a stronger market position in servers, and it has moved into storage, networking and services at a time when rivals are cutting back on ranges or moving out of non-core businesses. "Our cost structure is less than half that of our competitors, which has allowed us to grow faster than any of them," says Mr Dell. "If we enter a new market and do not drive prices down, we have failed. But we will not sacrifice performance, quality or service."

Rivals must worry when Dell takes them on, but Mr Dell shies away from talking directly about his competitors. "A number of others are claiming that they have caught up with us, but the words and pictures don't match," he says. "We know what our customers are going to buy because they tell us. It is a simple advantage that gives savings to our customers."

This is in keeping with a chief executive whose manner is unassuming, despite the millions of computer boxes around the world that carry his name.

In an industry known for flamboyance and bruising and bruised egos, Mr Dell comes across as a straightforward businessman. He travels with a minimalist entourage compared with other hi-tech chief executives. He considers questions carefully before answering, rather than turning to a stock response. And curiously, for a man who wields so much power in the computer industry, he appears cautious, even conservative, about the technology he sells.

Dell has been accused of being a "fast follower" rather than an innovator in the computer industry, relying on companies and suppliers such as Microsoft and Intel to drive innovation.

But Mr Dell disputes the suggestion that his company is not innovative. He points to the first colour laptops, the first large-screen laptops and the first computers with integrated wireless networking. Competitors often spend their research and development dollars on re-inventing electronic wheels, he says.

"We don't replicate the innovations of our suppliers, so we have five times the return on R&D of other companies within the computer industry. A lot of computer industry R&D is really intended to prevent the customer from switching to someone else," he says. "When they are not sure of the demand, how many of them are successful? We produce what our customers want, in volume."

Dell's approach is perhaps best illustrated by its launch of a personal digital assistant at the US technology trade show, Comdex, later this month. Companies such as HP, Compaq and Sony have produced handheld computers for years. Some, such as IBM and Apple, have entered the market and left.

Dell's launch of a PDA now must mean that Mr Dell believes the market is large enough, and mature enough, for them to sell in volume and at a profit. But it is likely that Dell will position the new PDA beside printers, networking hardware and other peripherals in its catalogues. "I don't see the PDA as a rival to a PC. They are almost exclusively companions to PCs today. Think about viewing a website or a file. The PDA enthusiasts will tell you you can do all that, but the screen size is too small. You have a subset of uses and applications that are nice to carry around but that do not replace the PC."

Mr Dell is even less sure about the Tablet PC, the latest innovation driven by Microsoft, which will launch next week in the UK. A Tablet PC, carried in one hand, can read notes handwritten on a touch-sensitive screen, but commentators who have seen early versions have expressed concerns about weight, battery life and the handwriting systems. "There are some challenges and we will have to see if they can be worked out," says Mr Dell. "We are doing a pilot with Tablet PCs to understand where the real demand is. But we are not jumping into the market yet."

Instead, Mr Dell's focus is on expanding his company's position in the enterprise market, dominated by groups such as IBM, HP and Sun which offer generous margins that Dell is eager to attack. Mr Dell describes his company's performance, with turnover up 22 per cent in the last quarter, merely as "growing nicely in a tough market". Clearly he is determined to see more of corporations' spending on computers come his way.