(FORTUNE Magazine) – IT MAY BE HARD to believe, but Bill Gates isn't the only prodigy in computerdom enjoying an astounding summer. On August 17, Michael Dell, who pioneered the direct marketing of computers 12 years ago in his University of Texas dorm room, announced that Dell Computer had scored record sales and earnings for the quarter ended July 31. Sales hit $1.2 billion for that period, up 52% from the same three months last year. Profits of $65 million, up 128%, were helped by a 44% surge in sales to corporations and the government, the high-margin customers that account for three-quarters of Dell's business. The results exceeded expectations; shares of Dell stock rose $1.25 to reach $74.25 that day.

What a far cry from two years ago, when Dell Computer's stock price plummeted from $49 in January 1993 all the way to $16 by July. The company seemed to be unraveling. A widely publicized spat with a Kidder Peabody analyst who questioned the company's currency trading and its accounting practices had embarrassed Dell. The chief financial officer had resigned, leaving a management void. Worst of all, Dell had scrapped all its new lines of notebook computers because of poor production planning. This meant sitting on the sidelines of the fastest-growing segment of the PC market for more than 12 months. Says Michael Dell: "I felt a gradual panicking. There was a period when every piece of news I heard got worse and worse and worse." At one point that summer, as he and new chief financial officer Tom Meredith rushed through Heathrow Airport to catch a plane to Ireland, Meredith told Dell he saw a silver lining in the notebook disaster--it had revealed that the company's information systems and management had not kept pace with its rapid growth. Dell stopped short. "Tom," he said, "you have a warped sense of humor."

LIKE THE KID in junior high who comes back from summer vacation a foot taller than the rest of the class, Dell Computer's rapid rise had left it a gangly, dysfunctional mess. Sales had shot up from $546 million in fiscal 1991 to $2 billion in 1993 (the company's fiscal year ends in January). Growth had been pursued to the exclusion of all else, but no one knew how the numbers really added up. Says Dell: "One of the things that is confusing and almost intoxicating when you are growing a business is that you really have little way of determining what the problems are. You had different parts of the company believing they were making their plan, but when you rolled up the results of the company, you had a big problem. It was symptomatic of not understanding the relationship between costs and revenues and profits within the different lines of the business." Translation: The company couldn't track profits and losses by product type, which is a little like running a business using an abacus instead of, well, a computer.

What Dell did as he saw the wheels begin to fly off his nine-year-old juggernaut was seek older, outside help--of the managerial kind. From companies like Motorola, Hewlett-Packard, and Apple Computer, Dell assembled a team of experienced executives. The key recruit: vice chairman Mort Topfer, 58, who headed Motorola's land mobile products division before leaving for Dell in June 1994. The youngest of the company's new senior managers is ten years older than the CEO, who last February celebrated his 30th birthday.

Growing too fast has pushed countless young entrepreneurs over the edge. So it's no small achievement that, despite his tender years, Michael Dell is now the CEO with the longest tenure of anyone running a major PC manufacturer. Others around when Dell started in 1984--including Apple's Steve Jobs (see Information Technology), Compaq's Rod Canion, and Digital's Ken Olsen--are long gone. The stock market, now that things seem back on track, apparently enjoys having him around; Dell Computer had the highest total return to investors on the Fortune 500 in 1994, posting an 81.2% return. Besides its delight over the record numbers on sales and profits, Wall Street values the company's new financial stability: After seven quarters of negative cash flow that culminated in July 1993, when the company found itself with only $20 million in cash, Dell Computer has posted nine consecutive quarters of positive cash flow.

Still, Dell's place in the increasingly competitive PC industry is by no means guaranteed. The company has made a pair of controversial strategic decisions that run counter to prevailing industry trends. First, instead of initiating price wars in the pursuit of greater unit sales, it has chosen to focus on high-margin customers. Second, the company has opted to rely exclusively on direct marketing rather than retail, thus slighting the sizzling-hot home market. Some observers wonder whether Dell, which now sells just 4.6% of the PCs bought in the U.S., down from 5.6% in the second quarter of 1993, will be anything more than a niche player in the industry.

Michael Dell thinks those observers are missing the point. The trials of 1993, he says, made it easier for him to accept Meredith's recommendation "to change the orientation of the company away from growth, growth, growth to liquidity, profitability, and growth, which has become a real mantra for the company."

Viewed in that light, then, the company is achieving its goal: San Jose research firm Dataquest reports that the average end user's price for a Dell PC is $2,600, vs. $2,250 for a Compaq and $1,800 for a Packard Bell. Dell gets those prices by selling mostly to the government and large corporations, which buy higher-end systems. Since direct-marketer Dell builds to order, its inventory turns about 15 times a year, as opposed to four to seven turns for manufacturers that sell through resellers and retailers. In an industry where component costs drop 15% or more annually, this translates into a gross margin advantage of 1.8% to 3.3%, says CS First Boston analyst J. William Gurley.

But when compared with Compaq, which enjoys both solid margins and a 12.6% share, or with Hewlett-Packard, whose share, already 4.8%, is growing fast as it pushes into the consumer market, Dell's small slice of the market does seem reason for concern. To really move up in the ranks, Dell would have to go after homebuyers, who tend to purchase their computers from retail stores ranging from Wal-Mart to CompUSA.

Problem is, Dell abandoned retail last year, after a feeble four-year foray. Says CFO Meredith: "In March 1994, we were espousing the virtues of retail. In August, we go back to Wall Street and say, 'Guys, just kidding. We were losing our shirts.' " Caught between Compaq's strong brand name and Packard Bell's cutthroat pricing, Dell never built a following in stores. The company plans to rejoin the battle for the homebuyer in 12 to 18 months, but without reentering retail. Instead, it proposes to sell PCs via direct marketing to sophisticated second-time buyers, a market that will have grown considerably by then. Skeptics claim the strategy has an obvious flaw. Says Dataquest analyst Janet Cole Berlind: "Dell has a challenge selling to the consumer market. Most consumers shopping for computers aren't going to buy something they can't touch."

Even so, Dell's decision to concentrate on what his company does best--assemble computers that are ordered via phone and fax and through a direct-sales force--is aimed at the end user who wants a fully customized PC. Dell had consumers in mind when he originally conceived the idea of letting them order IBM PCs with the special features they wanted. But now his company appeals to businesses because it can so easily preconfigure each computer to their precise requirements, something a Compaq or IBM can't do. For a large oil company, for instance, Dell preloads its machines with proprietary software that tracks sales at the company's gas stations across the country. Dell even takes care of such tedious minutiae as pasting inventory tags onto each machine so that computers can be delivered promptly to the end user's desk.

It still seems startling that it was a 19-year-old who stumbled upon the possibilities of customizing PCs, but Michael Dell has always been precocious. At age 12, Dell, the child of an orthodontist and a Paine Webber stock broker, devised a stamp auction that netted him $1,000. During his last year in high school he made $18,000 selling papers for the now defunct Houston Post and bought his first BMW--cash down. Obviously Dell was no simple delivery boy. He had figured out that the most likely newspaper subscribers were newlyweds or families who had just moved. So he tracked down sources like the city marriage license bureau and put together a targeted mailing list on his first computer, an Apple IIe.

Little did his Houston neighbors know that this foray into direct marketing was a sign of much bigger things to come. As a freshman at the University of Texas at Austin in 1983, Dell noticed that retail salesmen of computers often knew less about the PCs they were hawking than their customers did. He figured he could offer better service over the phone--as well as better prices, by selling dealers' excess inventory by mail. Over spring break the following year, Dell told his parents he wanted to quit school. In what is certainly one of the more extraordinary father-son conversations of its kind, his father, Alexander, asked him what he wanted to do. "Compete with IBM," Dell replied. He never did earn his degree in biology, but he was on his way to building a fortune that today is worth $615 million in Dell stock alone.

Granted, what goes up can--and has--come down; today's fortune was worth a mere $175 million back in 1993. But if you're wondering whether the resurrection he has enjoyed since those dark days has changed Michael Dell, you'd do better than to ask him. Dell is comfortable talking about any subject but himself. "I don't spend a lot of time dwelling on my personal growth," he says. "I only look in the mirror every couple of days, and I look the same. You'll have to ask someone else if I've changed."

Archcompetitor Ted Waitt, the 32-year-old CEO of direct-marketer Gateway 2000, says he has. "Michael talks to me now. He didn't a few years ago. It's more of a friendly rivalry today." Waitt's feelings may now be tempered by the fact that his company has used lower prices and a snappy ad campaign to pull ahead of Dell. (It holds a 5% share of the total U.S. PC market.) But it is also true that Dell has become more politic than he once was. A few years back he rallied the troops, some of whom had dressed up in battle fatigues, by telling them that his daughter's first words were: "Mommy ellipse Daddy ellipse Daddy, kill Compaq. Daddy, kill IBM. Daddy, kill Gateway." Those days are long gone.

THE BEST EVIDENCE that Michael Dell has matured is his ability to share power with the team of elders he's brought in. He is crafting a unique relationship with Motorola veteran Mort Topfer. The avuncular vice chairman would look absurd leading some kind of mock army drill. Instead of developing battle cries, Topfer is pushing the company to a new focus on such sober terms as "process" and "discipline."

Topfer's managerial skills complement those of his boss. Dell has an instinctive feel for technology and marketing, while Topfer is an operations guy with a penchant for detail. What's more, Dell has delegated an enormous amount of responsibility to Topfer, whom he often describes as his "co-CEO."

Topfer has wielded power from the start. Within weeks of his arrival, he reoriented the company's business plan for the second half of 1994. He has since instituted multiyear planning. While Dell Computer already had a total quality management program in place, Topfer brought a Motorola-like intensity to the effort. One key target: the company's ability to share information internally. The 1993 laptop debacle, for example, was exacerbated by marketing types who were slow in delivering sales forecasts to manufacturing. The company wound up taking a $39 million charge in the second quarter that year. Now financial information such as sales, profits, and inventory is available five to ten days after the close of a fiscal quarter, vs. the 30 days it took in 1993. At Motorola, the norm is two to three days.

Topfer is also pushing Dell to take more advantage of global possibilities. Twenty years ago he helped Motorola open a plant in Penang, Malaysia. This year Dell will open its first Asian PC factory--in Penang.

BUT TO REALLY GET a sense of Dell's newfound maturity, you must look at his relationships with the other senior managers he's brought in over the past couple of years. Dell used to go through execs the way Liz Taylor once mowed through husbands. In the past two years, however, he has assembled an impressive crew and allowed these new hires great latitude in running their businesses.

Given Dell's desire to make the transition from a small, high-growth outfit to a big but nimble multibillion-dollar corporation, it's not surprising that the new management coterie is made up of refugees from bigger companies. From Apple Computer, for instance, Dell hired Eric Harslem, 49, who now heads up the company's product group. The most recent addition to the team is Richard Snyder, 50, formerly general manager of Hewlett-Packard's DeskJet printer division. Snyder, who joined the company in March, runs Dell's operations in North and South America. And then there's CFO Meredith, 45, who was treasurer of Sun Microsystems.

Meredith is the man primarily responsible for the company's new obsession with that mantra of "liquidity, profitability, and growth," which crops up again and again in conversations with Dell managers. Not long after Meredith arrived in November 1992, Michael Dell dubbed him "the alarmist" because of his refrain that the company was in trouble unless it focused on more than scorching growth. Then came the dark days of 1993. Dell now has another nickname for Meredith; he calls his CFO "the prophet."

Another outsider, Harslem's Apple compatriot John Medica, turned around the company's notebook division. Medica had led the development of the PowerBook, then the best-selling laptop in the history of the industry. When he arrived at Dell, in March 1993, he saw the blueprints for the next generation of laptops and blanched. He convinced Dell to scrap all the projects in development and let him design a whole new line.

The project took about a year. But in February 1994 the company successfully introduced its Latitude brand of laptops, which wound up winning rave reviews from the trade press: It was easy to use, its batteries lasted 50% longer than average, and its sleek line smacked of Apple's gift for design. Best of all, it was a hit with consumers: laptop sales now account for 15% of Dell revenues, up from 3% two years ago.

But the new management team has done more than simply rejigger product lines; it is also turning around the corporate culture. Richard Snyder, for instance, has a clear vision of what he intends to transfer from Hewlett-Packard to Dell: "I think the word is 'discipline.' It's very easy to have everything be urgent and important. But you can't be in that mode for long without burning out." His definition of discipline embraces such standard goals as meeting financial commitments all the way down the organization, but it also includes the kind of soft goals emphasized at H-P, such as respect for the individual. That shift just may make Dell a kinder, gentler place to work. Explains Snyder: "Younger companies don't have that kind of culture yet. We want to get the turnover rate down. You can't be very competitive if you keep losing people."

Dell veterans say that the metamorphosis Snyder wants to induce is indeed taking place. Theresa Garza, 34, who heads sales and marketing to the federal government, recalls that a few years ago she would see technicians with $20,000 worth of spare parts sitting on their desks. "We used to do things that were purely customer-driven," she says. "Everything was here and now and very reactive. Ninety percent of our business was done in emergency mode. There's been a total change in modus operandi."

The company is not the only thing that's changed. The boss is different too. He seems to have learned more than just management techniques from his elders. While Dell himself may not acknowledge the change, longtime employees say he exudes a quiet confidence that was lacking before.

Nevertheless, there's one lesson that the new team can't teach this 30-year-old--how to handle the demands of business celebrity, especially in Texas. On a late-night commuter flight from Dallas to Austin, Dell finds himself sitting in the aisle seat of the front row in first class. Every passenger boarding the plane must walk past him. One excitable businessman leans over and says, "I would pay $100 to have that seat next to you." Dell freezes, grimaces, and says nothing till the intruder finally continues down the aisle. It turns out the man has a bid in to supply the marble for the new house Dell is building in Austin. In the back of the plane, people buzz with stories about Dell.

His house is a most popular subject of discussion in Austin. The local paper, the American-Statesman, published a 2,200-word front-page story on his house on April 30. A few days later the paper published this "exchange" in a humor column: "Local business whiz Michael Dell is building, out in the hills, a 33,000-square-foot home on a 120-acre site. We're talking four levels, ten bedrooms, two pools, a running track, and, oh, a bunch of neat stuff. Can you even imagine living in a place that big? How could you ever use all that space? [Signed] Agog."

"Dear Agog: For one thing, if you wanted to go south for the winter, you'd only have to book a flight to the other end of the house."

Dell is not amused. Unlike Bill Gates, whose wife cooperated with the New York Times on a flattering piece about their 40,000-square-foot lakeside extravaganza, Dell does not want the press to know anything about his new home. The morning after the flight from Dallas, he ducks all questions about the mansion. First he tries a lame joke, smiling wanly as he tells a reporter, "Everyone needs a place to live." Then he strains credulity by saying that he really doesn't know how big the house is going to be. Finally he sighs and comes out with as intimate a remark as he's willing to give up. "Fame," says Michael Dell, "isn't everything it's cracked up to be."

He should know. But having taken a wrong turn down the road to obscurity, Dell also knows this: The alternative is worse.