January 31, 2007 2:06 PM PST

Michael Dell back as CEO; Rollins resigns

Michael Dell back as CEO; Rollins resigns Dell announced Wednesday that Kevin Rollins has resigned as chief executive officer, and company founder Michael Dell has retaken the helm of the PC company.

"This is not a short-term assignment," said Bob Pearson, a Dell spokesman. Dell, who founded the PC company in 1984, will retain his duties as chairman of the board of directors.

Rollins has also stepped down from the board of directors. In addition to announcing Rollins' departure, the company said that it now expects its fourth-quarter results to be below analyst expectations for both revenue and earnings per share.

The board of directors was involved in Rollins' decision to resign from the company, Pearson said. But he did not elaborate on whether Rollins was asked to resign by the board.

Rollins' departure comes after a terrible year for the company, during which it lost its lead in PC market share to Hewlett-Packard and an investigation by the SEC for possible accounting improprieties began. Several executives have left the company in recent months, including CFO Jim Schneider, who was slated to leave the company at the end of January.

"Kevin has been a great business partner and friend," Dell said in a press release. "He has made significant contributions to our business over the past 10 years. I wish him much success in the future."

Pearson would not comment on whether Rollins' departure was tied to the investigations into the company's accounting procedures. Dell is currently under investigation by the SEC over accounting issues that the company has said could result in significant restatements to its earnings before the 2006 fiscal year. The company has not specified the exact nature of the accounting issues, but has said they involve revenue recognition, and they do not appear to be associated with the stock-options backdating practice that has ensnared hundreds of companies over the past year.

What's gone right
and wrong for Dell


perspective Following the resignation of Dell CEO Kevin Rollins, News.com asked the editors at CNET.com, who have spent years reviewing Dell's products, to give their take on the company and its products.

From a merchandise perspective, Dell seemed to be a victim of its own success over the past couple of years. Its high-volume, low-margin approach helped turn desktops and laptops into commodities, and the company has since struggled to break out of this "race to the bottom" and develop more exciting offerings that would connect with consumers.

Dell's foray into flat-panel TVs seemed promising at first. But without a retail presence or a strong consumer electronics brand, Dell couldn't compete with the likes of Sony, Sharp and Panasonic. And at the opposite extreme, bargain-basement brands such as Vizio and Westinghouse eliminated any price advantage Dell might have offered. Similarly, Dell's MP3 players, the DJ and Pocket DJ, made seemingly little headway in an iPod-dominated market and gradually disappeared.

Dell has had better luck developing higher-end desktops and laptops under its XPS brand. With the XPS 700 series, an ultra gaming desktop that can easily top $5,000 depending on the configuration, Dell demonstrated that it can deliver performance that rivals boutique gaming rigs at a lower price. The latest version, the Dell XPS 710 H2C, earned an "Editors' Choice" rating thanks in part to an innovative, fanless cooling system that is very quiet. The acquisition last year of Alienware, which continues to operate as a separate brand, underscored Dell's commitment to this high-end market.

The company also took some gambles with laptops. The XPS M1710, a high-end desktop replacement designed for gaming with a built-in Blu-ray drive has been impressive. The XPS M2010 hybrid, an experimental 20-pound behemoth, may have had little impact on the bottom line, but it did illustrate that Dell could break out of the box; the unique machine was featured on tech blogs everywhere.

Dell's budget and mainstream systems have been less noteworthy. The company was arguably too slow to incorporate AMD processors, and by the time it finally did so in August 2006, Intel had already regained its footing.

Though Dell offers Media Center PC configurations with optional TV tuner cards, the company has shown little interest in "living room PCs." Nor has it developed an all-in-one (a la the iMac) or even a true small-form-factor PC.

The XPS 210 (previously known as the Dimension 5100C) is little more than a small tower and pales in terms of design. Similarly, Dell has not shown much interest to date in low-volume tablet PCs or tiny Ultra Mobile PCs.

If Microsoft Vista had hit during the fourth quarter of 2006, strong buzz and holiday sales could have gone a long way toward helping Dell make its numbers. But the fact remains that company has yet to find a product in any category that will generate buzz.

--CNET.com editors

Rollins took over the CEO reins in 2004 after several years spent as president and chief operating officer, during which he was characterized as a co-leader of the company with Dell. Rollins was brought into Dell in 1996 from management consulting firm Bain & Co. as an experienced business veteran tasked with helping Dell grow the company he founded in his dorm room.

A direct link to Rollins' biography had been scrapped from Dell's Web site but the information could still be found Wednesday afternoon immediately following the announcement. Dell's stock rose 4 percent in after-hours trading. Trading was briefly halted from 4:45 p.m. EST to 4:50 p.m. EST.

Dell had stood by Rollins throughout 2006, when some financial analysts were looking for someone to blame for the company's struggles, but the pressure appears to have become too great, analysts said.

"It's surprising. Rollins had the confidence of (Michael) Dell, but when you look at the numbers you can see why" Dell has retaken the helm, said Richard Shim, an analyst at IDC. "They have been suffering from a corporate market slump, and the usual bag of tricks--leveraging the supply chain and their economies of scale--haven't worked."

Dell was an unstoppable force in the PC industry from 1997 through 2004 and consistently gained market share from its competitors--even during slumps in the industry. At the time, Rollins was so confident about Dell's future that he set lofty goals for yearly revenue, promising to take in $60 billion in annual revenue by this year and $80 billion in revenue by the end of the decade.

Consumer complaints about customer service, however, began to gather in 2004. For years, Dell managed to convince consumers that it had the lowest-priced PCs on the market. But its price advantage was tied heavily to its ultra-efficient manufacturing process for desktop PCs. That advantage became less important as the market began to shift in favor of notebooks. At the same time, complaints about Dell's service grew as the company began to shift its support technicians to overseas locations.

Companies such as Hewlett-Packard and Acer regrouped as well. They took steps to become more efficient, following Dell's lead, and also took advantage of an uptick in retail PC purchases.

In 2006, Dell actually started growing slower than the market, the first time that has happened since the company started back in the mid-1980s. HP overtook Dell as the largest PC manufacturer midway through 2006. Dell fell short of that $60 billion target during its 2006 fiscal year, with $55.9 billion in revenue, and the $80 billion target seems to have vanished.

The decline of PC prices, with the commensurate increases in performance, have also played havoc with Dell's business model, noted Charles Smulders, an analyst at Gartner. Dell for years maintained a strategy of upselling customers, getting them to upgrade processors or memory. Now, Dell is selling cheaper PCs. That has eroded revenue growth and put pressure on margins.

"Now, even low-end PCs are able to deliver the performance customers need," he said. "The Achilles' heel has been the precipitous fall of average selling prices in the last few years."

Another problem for Dell has been its place in the consumer market. Consumers account for only 15 percent of Dell's revenue, a figure that's been consistent for several years despite Dell's foray into TVs and other consumer devices. The problem, said Shim, is that consumers want to touch and see what they will buy first, and that means going to retail stores. Dell prefers to sell directly over the Web or by the phone.

The situation was not helped by a massive battery recall in August 2006, which was the largest recall in the history of the consumer electronics industry at the time. Sony, whose battery technology was the basis of the problem, has accepted blame for the recall. But it was a flaming Dell notebook that first appeared in a video widely circulated on the Internet, and Dell was the first of many PC companies to announce a recall.

Dell also failed to capture the imagination of consumers with its products, which were viewed as dull at best and ugly at worst, said Samir Bhavnani, an analyst with Current Analysis. "Rollins was excellent at supply chain and logistics but did not seem to understand the importance of industrial design," he said.

Customer service was another big problem Dell has had, said John Spooner, at Technology Business Research. "They tried to grow the business too quickly and it outstripped the infrastructure they put into place."

Rollins announced plans to invest $150 million in customer service improvements this year, but the company admits it waited too long to sense the growing dissatisfaction with its products and customer service.

Another market trend that Dell was late to recognize under Rollins' tenure was the growing demand for Advanced Micro Devices' processors. Dell clung steadfast to its exclusive support for Intel's processors despite dozens of independent benchmarks showing that AMD's Opteron server processor clearly outperformed Intel's Xeon processor over the last few years. Intel was also late to release a dual-core Xeon processor, while AMD had a dual-core Opteron in the market for months, a competitive imbalance exploited by HP's server group.

Many in the PC and server industry believe this fealty was due to pricing guarantees made by Intel for Dell's exclusive support. But the competitive pressure became too strong to ignore, and last year Rollins reversed course and announced plans to release desktops, notebooks and servers based on AMD's chips despite saying for years that he had no interest in doing so.

So, Michael Dell must now implement the new strategy the company has been calling "Dell 2.0" alone. When it comes to selling higher-end gear such as servers--one major expansion beyond Dell's original PC business--the company needs to provide more innovative products, better support and better services, said Gabriel Consulting Group analyst Dan Olds.

A change in the head man, however, may not work miracles, said Stephen Baker of NPD Techworld. The company has emphasized for years that Rollins and Dell work in tandem with each other, and Michael Dell was often seen more as the one with his eye on the consumer business. The change is likely mostly a way to placate investors.

"It just shows you how powerful Wall Street is," Baker said. "They wanted him out."

CNET News.com's Stephen Shankland contributed to this report.

CONTINUED: A downward spiral…
Page 1 | 2

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27 comments

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Add your comment
Job 1:
Hire someone who speaks English in your customer service department.
Posted by vm019302 (85 comments )
Reply Link Flag
More like...
...hire only those who speak English. Dell support was a major part of their ascent and descent in the market. Customers didn't care about "touching" the product as long as it was shipped on time and well supported. The fall can be directly traced to lousy, incompetent, outsourced service. However, I would bet they will stubbornly try to ignore that fact. After all, ignoring the customer is what it's all about these days.
Posted by ogman (150 comments )
Link Flag
Exactly!
Make "Dude, your getting a Dell!" <i>mean something</i> besides a requirement to learn sanskrit.
Posted by Hardrada (359 comments )
Link Flag
You, want me to tell Dell how to make more billions?
Sure, why not?

First, with MS Vista on the scene, make sure all Vista-related issues are answered and those answers are easily and quickly accessed by site visitors.

Second, make it a smooth and easy process to find and order a computer. 'Up Selling' is to be expected, but sometimes in the past, it's been so damned tedious, and confusing, to consumate an order.

Third, as has been mentioned by another writer, staff up Customer Service and Tech Support with adept speakers of English - American English and UK English. Have in place qualified Spanish-speaking service people.

Fourth, when showing product, provide sufficient photos so as to replicate what the customer would experience if they were actually at the Dell factory picking out their computer. Lots of large, detailed photos showing all components, from all angles. Do what car dealers do when they sell on Ebay - photos, photos, photos.

Fifth, keep the free shipping. For myself, that's a deal closer. Keep the in-home warranties. Keep the free upgrades. Keep up the e-mail promotion campaigns.

Sixth, unleash Michael Dell and have him go public to present the latest and greatest Dell products. It works for Gates and Jobs, and it will work - again - for Dell.
Posted by donald17 (7 comments )
Reply Link Flag
Bravo!
Very well put. It seems the bigger a company gets the more they seem to forget the basics that makes a customer want to do business and repeat business with them in the first place. The only good change Dell made in the past year was to do away with mail in rebates and take the discount right off the top.
Posted by direct225 (13 comments )
Link Flag
Mr Dell
Bravo! Bravismio! It's time to get it right!
Posted by kaintuck (3 comments )
Link Flag
Bravo
Bravo! Bravismio! It's time to get it right!
Posted by kaintuck (3 comments )
Link Flag
Michael Dell back as CEO, Rollins resigns
Bravo! Bravismio! It's time to get it right!
Posted by kaintuck (3 comments )
Link Flag
BIG DEAL!!
Dell was still running the company during Rollins tenure anyway.

Changes nothing.
Posted by ServedUp (413 comments )
Reply Link Flag
They've gotten way too expensive...
When I bought a Dell several years ago it was a really good deal for what I wanted. Then 2 months ago I priced a new one out and it was more expensive than most of the computers on the market (ie, Sony, HP, and even Apple). Between the cost and the support being farmed out it's just not a good buy.
Posted by Understarsidream (873 comments )
Reply Link Flag
I'm not sure
but what definitely loses my business is the extortionate shipping costs.

Even if HP, Gateway or whomever sell there product at $100 more, it still works out less expensive for me, because of my location - Alaska. The last time I bought from them it took nearly an hour to convince them that the UPS ground truck outside my door actually existed (they don't deliver to AK my arse).

So I won't buy from Dell because the shipping makes them too expensive.

I can go to Best Buy, CompUSA or even an independant computer store and buy for less than Dell sells new.

They do have some really good refurbished PC deals, but again, by the time you add the shipping I'm saving less than 10% on a used PC.

And surely if they can offer the State of Alaska the won an exclusive vendor contract with the State, which is sort of illegal but there you go) with its 15,000 employees a better deal than local businesses (including Gateway which had a +10% in state advantage due to their Anchorage store), surely they can find a local shipping point for consumers.
Posted by ajbright (447 comments )
Link Flag
dell reversal of fortunes!
why is it that customers know why Dell sales are down and the Dell execs are in the dark? I bought an HP desktop. good price ,value,hardware, and
better tech service. not sorry, either. I am also a touchy-feely person. I like to see what I am about to buy.I admire Apple stores. perhaps Dell should offer less variations to lessen price and
confussion. it might also improve reliability.
Dell has much to learn from Toyota. it's PRODUCT,
PRODUCT,PRODUCT!
Posted by mtoc (58 comments )
Reply Link Flag
RE: Dell should offer less variations to lessen price and confussion.
Wrong! The opportunity to "build the computer the way you want it" has <i>always</i> been a Dell strong-point. (It's one of the reasons I bought my laptop from them in '03.)

Whether or not the MSM wants to acknowledge its overriding importance, lousy customer support--as epitomized by shipping technical calls to Indian call centers, and dropping in-progress calls that may already be hours-long, forcing the caller to start over from Square One--is what has put Dell in this pickle. You just can't treat your customers like crap, and expect them to come back for more, or expect them <i>not</i> to tell their friend to stay away from Dell.
Posted by Hardrada (359 comments )
Link Flag
Great News
I believe that this a great step in the right direction. And I mean no disrespect towards Kevin Rollins. But thinking back to the ninties and into the few years of the 2000's Dell was the king of pc's. Now they are being surpassed by both HP and Apple. Both Apple and HP are companies I have respect for. But I have always liked Dell, I believe their products have fallen a little under what many of us are used to when it comes to Dell. And this period of decadence began shortly after Michael Dell stepped down. Now the cofounder is back and I'm excited to see that hopefully Dell will once again become the company we all remembered it to be.
Posted by StargateFan (122 comments )
Reply Link Flag
Its product and support
I'm a highly dissatisfied dell user, bought my notebook 2 yrs back , had hard drive replaced twice, display once, dvd burner once, and finally the whole motherboard in first year of use. average wait time at customer support was 30 minutes only to get to speak to someone who did not know what speedstep on p4m was. after year of struggling and loosing my data twice i went for hp, never had a problem. I would not mind if my notebook is ugly looking as far as it doesn't breakdown.
Posted by topgunb2 (394 comments )
Reply Link Flag
Try Innovating for a change.
I've bought at least 4 Dell machines over the years. I'm finished with them. My latest purchase is a Macbook. Why? Innovation. To be fair, I've never owned a Dell notebook but I'm willing to bit it suffers the same problems found in it's competitors. Apple has the Magsafe power connector. Hardly rocket science, but no longer are the solder joints on the power jack a stress point. I've had a Sony and Toshiba laptop die. I was a Mac bigot before switching to windows in the early 90's I'm back.

Dell has been sucking at the breasts of Microsoft, the Linux community and the myriad Asian-sweatshop-commodity hardware outfits that supply them. They are noting but the Walmart of the computer industry. Crappy quality products at not all that great prices.
Posted by felgercarbnaysay (49 comments )
Reply Link Flag
Right on!
Right on, felgercarbnaysay! I also switched to Apple and it's been
fantastic. Dell makes horrible, unimaginative products and now,
their results show it.

Can Michael Dell change that? I doubt it.
Posted by nmehta0 (9 comments )
Link Flag
Are they not made from the same place?
Taiwan and the same manufacturers?
Posted by pjianwei (206 comments )
Link Flag
DELL Warrenty
I purchased my DELL 8300 in 2004 at which time I purchased the $ year warrenty I checked Dell Support sight and it shows my warrenty EXPIRED. By my math I still have 2 more Years I guess they use another type of math. Tred to get it corrected but no luck. LEAVE DELL ALONE...
Posted by msg-e8 (1 comment )
Reply Link Flag
Dell can jump ahead, if they get it.
I was also a Mac user in early 90's, a Windows user since, and now a Mac user again. Good experiences with Apple products and seeing their incredible rate of improvement (iPods, OS X, Macs, ...) did it for me. I never expected to go back.

Dell needs to give their customers good experiences again, and start doing new things with their hardware. Notebooks could be improved in a lot of great ways by a company like Dell. 3D LCDs are available, that would get consumers (and my!) attention.

Or get Apple to license OS X.

There are a lot of ways they can jump ahead of the pack once they recognize that manufacturing efficiency and direct sales are not going to be enough any more.
Posted by Nevermark (39 comments )
Reply Link Flag
Toilet seat designs?
I am sure the main problem with Dell notebooks is TOILET SEAT design. HP DV6000 series is like a Pamela Anderson on top of toilet seat :) Which one would you choose? No one would hesitate :)
Posted by alenas (181 comments )
Reply Link Flag
test
hmm

-----
<a class="jive-link-external" href="http://mortgage.emigrantas.com" target="_newWindow">http://mortgage.emigrantas.com</a> - all info about mortgages
Posted by darix2005 (31 comments )
Reply Link Flag
IT ABOUT TIME MICHAEL DELL
GOT BACK IN THE DRIVER SEAT AND STAY THERE AND HE COULD GET BACK TO FIRST IF HE WOULD MAKE IT WHEN PEOPLE CALLS TO GET HELP MAKE SURE THEY SPEAK TO SOME ONE THAT THEY CAN UNDERSTAND AND MAKE SURE IT THE RIGHT COUNTRY FOR WHO EVER IS CALLING TO GET HELP PLUS THINK ABOUT MAKING TV'S WITH COMPUTERS IN I SURE WOULD WANT ONE PLUS I LIKE THE IDEA OF A TV WITH A COMPUTER BUILT IN IT
Posted by teakilla (9 comments )
Reply Link Flag
Hurrah - Perhaps support will now improve?
I have been a strong Dell supporter, but in the last couple of years it has been very noticeable that they were slipping up with their support.

Machines are always well built, but the support has not been good. Recent calls to support have ended up in India and I had one conversation with a lady in support who didn't understand what I meant when I asked about a "Tape Streamer" for a server?? On another occasion I requested a battery for a laptop and they sent the wrong one, I called them and said they had sent the wrong one, so they sent another one and again it was the wrong one, the third battery was the wrong one as well and I rang them and said that it wasn't the one I had identified for the model of laptop and the Indian tech said it was the correct battery to use, when I checked the volts and amps they were totally different to the old battery. I pointed out that using a battery with a different rating might lead to overheating and explosion (this was well before the Sony battery problems) and the tech assured me it was safe to put in as this battery replaced the one quoted on their web site. I plugged it in and stood well back, it didn't blow up but it made me very nervous and I got the distinct impression the techs in India had no real idea of the dangers? I am sure they do now!
Posted by GrahamSivill (11 comments )
Reply Link Flag
After writing this first response I was assisted by Ms. Swisher at a random Dell site I found online. She sent it directly to Mr. Michael Dell. I received an immediate response from Saran at Dell. He assisted me in checking the computer for diagnostic problems via the phone for approx the 5th time. However, when he realized he could not discover the problem this way he told me he was sending me a new hard drive to install. He never mentioned there would be a cost. I expressed my gratitude and the hard drive arrived. However, I then noted on my dell account I was charged $180.00. He never told me I was being charged for this. I should not be charged for this due to the fact that the computer never worked right to begin with. I have been a loyal customer for years. Currently we have 3 dell lap tops and I purchased recently two GPS systems and frequently order ink replacements for my dell printer. Does anyone know how I can reach Mr. Dell personally. This is terrible customer service and want to be treated like the loyal customer that I'm.

Thank you,

Jill
jillmichellern@yahoo.com


On Apr 6, 2009, at 4:47 AM, Jill wrote:

&gt; Contact Form results:
&gt;
&gt;
&gt; Subject: Dell
&gt;
&gt; I found this site when I googled How can I find the CEO of Dell.
&gt; I'm hoping you can help me. I purchased a Dell 1535 for my daughter. The computer has been freezing up since we purchased it. I have had her calling the company to resolve the problem and they have ran several diagnostic problems and claim there is nothing wrong with it. But it has done this since we opened the box.
&gt; So I called myself and was routed to several foreign countries. Where the accent is so thick making communication very difficult. I was hung up on several times. They will not let me speak to a US rep unless I pay the 180.00. I want my computer exchanged or a full return. I have never seen such poor customer service in my life. Are you able to assist me with this problem or give me direct access to someone that will?
&gt;
&gt; Sincerely,
&gt;
&gt; Jill
Posted by jillmichellern (1 comment )
Reply Link Flag
 

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