Michael Dell Replaces Rollins as CEO
In the biggest executive shake-up yet after a string of disappointing earnings, eroding market share and an ongoing federal accounting probe, Michael Dell has returned to his role as chief executive officer of Dell Inc. -- the company he created in his college dorm room nearly 25 years ago.
Dell's return at the helm of one of the world's largest computer manufacturers is effective immediately and comes after a nearly four-year hiatus during which he had now-departed CEO Kevin Rollins deal with day-to-day operations.
But despite a plan to fix the company's mounting problems, the changes apparently weren't happening fast enough for Wall Street, which cheered Rollins' resignation.
Investors sent shares up 39 cents, or 1.6 percent, to $24.61 in midday trading Thursday on the Nasdaq Stock Market.
Roger Kay of Endpoint Technologies Associates Inc. echoed the comments of many analysts who said Rollins had to go, even if the problems weren't directly his fault.
"I think Kevin had used up all of his lives basically," Kay said. "The Street had been calling for his head for a while now. It's fairly mean-spirited of them, but that's how they do things."
Just what Michael Dell's more direct leadership means for the company, however, remains uncertain.
Dell said his focus will be to build momentum with "Dell 2.0," an internal strategy meant to increase competitiveness through improved customer service.
In prepared remarks, Dell said he believes the company still has tremendous potential.
"There is nothing more important to us than our customers. All of our efforts will be geared toward providing them with the best customer experience," he said.
Dell's direct sales model, which allows business and consumers to buy equipment directly from the company, turned it into a leading computer manufacturer and a Wall Street juggernaut with one successful earnings announcement after another.
But in recent years, the company has been stung by a market glut of low-cost, low-profit PCs and weaker-than-anticipated sales of its pricier, more lucrative desktops and notebooks.
Just last year, Dell lost its No. 1 position in the industry to rival Hewlett-Packard Co., according to recent reports from IDC and Gartner Inc. The shift left HP with 17 percent to 18 percent of the worldwide market in the fourth quarter, to Dell's 14 percent to 15 percent.
The Round Rock-based company's recent problems extend beyond customer service.
In August, Dell recalled 4.1 million potentially flammable notebook batteries made by Sony Corp., and after consistently posting earnings gains since its inception in 1984, also saw its profit drop.
The company on Wednesday forecast fourth-quarter profit and sales below analysts' consensus estimates of 32 cents per share on sales of $15.30 billion.
The company's accounting practices remain under federal scrutiny, and the U.S. attorney for the Southern District of New York has subpoenaed documents related to Dell's financial reporting from 2002 to the present.
As a result, Dell's earnings statements from the second and third quarters have yet to be filed with the Securities and Exchange Commission. Last week, Dell said it would supply Nasdaq with the reports, along with any restated financial documents, by March 14.
Analysts said having Dell back in the top spot could reinvigorate the faltering computer maker.
"Nobody knows the company better than Michael Dell," said John Witt at Fitch Ratings. "He has done a great job in building this company."
Dell, 41, will continue to serve as chairman. Rollins, who also resigned as a member of the board, joined Dell in 1996 and had a variety of roles before becoming CEO, including chief operating officer, vice chairman and president of Dell Americas. Before Dell, he was vice president and partner of Bain & Co. management consultants.
"Kevin has been a great business partner and friend," Dell said in a statement. "He has made significant contributions to our business over the past 10 years. I wish him much success in the future."
Dell's return caps a series of executive changes.
In recent months, Dell has lured executives from General Motors Corp., HP, Amazon.com and Wells Fargo & Co. Last month, it hired former American Airlines chief Don Carty as vice chairman and chief financial officer and added a former executive from Plano-based Electronic Data Systems Corp. to run its global services division.
"It just goes to show us that on Wall Street, a CEO matters more to investors than does the bad news," Annex Research analyst Bob Djurdjevic said.