Posted on 02/02/2007 7:50:48 AM PST by lowbuck
Back in September, following another profits warning, Michael Dell was asked about rumours that his chief executive, Kevin Rollins, was about to be sacked. "Feel free to speculate," he told analysts, "because everyone else will, but it's not going to happen."
Just a few months, and another profits warning, later, Mr Rollins is clearing his desk. Michael Dell is back in full control of the company he founded more than 20 years ago and sounding excited.
"It feels like 1984 and I'm starting over again," he said. "Only this time I have a little more capital."
In monetary terms maybe, but the computer maker's reputation could scarcely be lower. The past two years - those since Mr Rollins was given the chief executive's job - have seen the company reel from one crisis to another.
Dell, which could once do little wrong in the eyes of Wall Street, has been forced to issue a string of profits warnings as its sales have slumped. True, the market has been tough, but Dell's problems lie within its own doors.
Cost cutting at its customer service department severely damaged the company's reputation. The internet is littered with websites detailing customers' frustrations of wading through "Dell Hell" when something goes wrong. Even more crucially, at a time when other PC makers were learning from the success of Apple's design-led innovations, Dell's machines failed to stand out. Rollins, who once dismissed the ubiquitous iPod as a mere "fad", again displayed a lack of understanding about what his customers wanted. advertisement
The results showed up in the figures. In the last quarter of 2005, Dell was still the largest player in the consumer PC market with a 16.4pc market share. By contrast, Hewlett-Packard, the company's chief rival, was back in second.
Problems stitching HP together with Compaq following Carly Fiorina's ill-conceived merger of the two, ensured its market share was struggling to top 15pc. Fast forward just 12 months and the position had been reversed. A rejuvenated HP under new chief executive Mark Hurd commands 17.4pc of the market according to estimates by Gartner, having shipped almost 12m machines in the last three months of 2006. Dell's slice of the pie has decreased markedly, tumbling back to 13.9pc with shipments of just 9.4m.
Dell has missed other trends too. By concentrating on selling desktop computers to businesses, it has missed out on a shift which has seen more and more consumers looking to buy laptops and notebook PCs at mass retailers. But, if they were the most obvious failings, there were others that hit the stock hard. Last year the company was forced to recall almost 5m of its laptops after it emerged they were liable to catch fire.
A few months later, Dell revealed that its accounting practices were the subject of a formal investigation by the US Securities and Exchange Commission - a probe that continues. For Dell's board, and Mr Dell himself, who has steadfastly supported his junior, losing the number one slot to HP was the final straw. Earlier this week, directors made it clear they wouldn't countenance Mr Rollins' survival any longer.
Perhaps the only surprise is that it took so long to unseat him, but then Mr Rollins has long enjoyed the support of his mentor.
He joined Dell as a Bain consultant in 1996 and quickly won the support of management. He was so widely regarded that after being granted the chief executive's job, he and Mr Dell practically shared the same office. "Kevin and I run this business together, so if you want to blame somebody, you can blame me too," Mr Dell said recently.
However the market was keener to apportion blame to Mr Rollins alone, and the news that Mr Dell was to take back the chief executive's post, to add to his role as chairman, sent the company's shares higher. That in part was due to the management style of Mr Rollins, a classically-trained violinist who was viewed as a stern and aloof manager. Executives who disagreed with his approach were often forced out, while he was criticised for lacking a strategic vision.
Attempts to diversity into printers and consumer electronics were met with limited success while the core business continued to suffer thanks to a glut of low cost computers which have turned the market into a cut-throat place to operate.
Mr Rollins' departure is just the latest in a string of management changes that has seen Dell lure executives from General Motors, HP, Amazon and Wells Fargo. Last month, it hired former American Airlines chief Don Carty as vice chairman and chief financial officer and added Stephen Schuckenbrock from EDS to run its global services division.
Despite yesterday's increase in share price, Mr Dell's second honeymoon is likely to be of short duration unless he can soon tap back into what made Dell such a success when he founded the company in his college dorm room.
He said his priority would be improving customer service, but hinted he could be prepared to embrace wide-ranging changes.
He is expected to push the company further into the consulting business, where margins are higher, and could even alter the direct selling model he pioneered. Recently the company has opened two stores in shopping centres where orders are taken for later delivery.
Mr Dell suggested the experiment could be broadened. "That's where you'll see new ideas and some experiments," he said.
This tacit acknowledgement that Dell needs to change course completely was welcomed by analysts, but most said it would be a long road ahead.
Let's see if founder Michael Dell can return his baby to winner status. That would make for a good (second) business study at B school (of course the first is how he built it right the firfst time around).
"Dude, I'm getting a Dell"
"It feels like 1984 and I'm starting over again..."
So, this means he'll put DOS on all of their computers?
C:\
My Dell Laptop at home pretty much fell apart after a year. Four keys fell off...By the way, how do you fix that? I just went out and bought one at Sam's Club. Big screen, it's called AVARETEC...Sam's club has a guarantee that if anything goes wrong or FOR ANY REASON you want to return it within a year they will refund the entire price. Isn't that weird? It's my bedroom laptop, meaning I only use it to freep and email. It's on all the time (obviously!).
Good luck to Dell. They need it.
We have pretty much rid our shop of Dell boxes. Proprietary Sysytems Managemnt is crap, arrays fail like crazy and the good ol' made in the U.S.A. tech support is horrendous. There is no reason for me to have to give the same information to three different people after I gave it to some voice recognition piece of crap that never works.
Doing something quick would be nice as committing to Toshiba before long.
I've bought or had a hand in buying a number of Dells for myself and family members and have never had a problem.
Google "replace laptop key". I struggled with it for a long time until I did the search. It's real easy but there's a trick to it. The thing the key sits on sort of "scissors" up and then the little tabs fit into the key,
i thought the dell dude deserved his own sit-com... then he disappeared.
First on the agenda, all Dell computers will be sold with a "complementary" fire extinguisher.............
I bought a refurb Latitude C640 for my wife and loved it so much I bought another one (this one I'm typing on) for myself.
No problems after over a year of hard use. Only concern is that they run really hot, so hot you'll cook the family jewels if held on your lap without insulation! Don't do so great with Vista, either, but what the hey, who needs it?
he got busted for marijuana posession, and dell dropped him.
I am a strong supporter of Dell products. I am not a supporter of the MSM.
The customers wanted more advertising?
Because he got busted for pot!
Interesting. I'm currently on my third Dell desktop, and second Dell laptop. The laptop is just over a year old, and was used last year for a consulting job, while I used my 2002 desktop for personal use. The desktop hard drive crashed last summer, and I had to replace it, then in the fall, I had a system failure, and just opted to get a new Dell desktop. I was so pleased with the ability of the laptop to support a second monitor, I configured the new desktop to support dual monitors. However, I never got it to work the way I wanted, so I didn't use it as intended.
The other day I decided to call Dell support to see if I could get some help reconfiguring the video card. I ended up talking to a young lady, and after explaining my dilemma, she asked if I minded if she took control of my PC. I agreed, downloaded some software from Dell, entered the password the lady gave me, and sat back and watched the screen come alive with her remote actions. In less than five minutes, she had reconfigured everything, gave me control to test it, then bid me farewell. I asked her where she was working from, and she replied the Phillipines.
I have no reason to not continue buying from Dell.
I suspect that this might be a good time to buy Dell stock.
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