Dell made headlines early and often in 2007, and not all of it was good news.
Though it started the year off with a bang when company founder Michael Dell returned as CEO, replacing Kevin Rollins in January, the company endured a nonstop roller-coaster ride as it underwent major transitions. Besides the return of the founder, CFO Jim Schneider was replaced, and a host of new faces were brought in to jump-start the company's consumer and services businesses.
Coming off a year in which it lost its crown as the world's largest PC maker, it continued to bleed market share to rival Hewlett-Packard, which could seem to do no wrong in the eyes of investors as it reeled off one successful quarter after another. Sensing a need to shake things up, Michael Dell told employees that the company's venerated direct-sales model "has been a revolution, but is not a religion."
Shortly thereafter, the company announced that a few models of desktop and notebook PCs would be for sale at Wal-Mart and Sam's Club stores. Throughout the year, Dell continued to roll out new consumer retail partners in the U.S. and around the world, including Staples, Japan's Bic Camera, and China's Gome. The company said to expect it would announce even more partners in the world's largest countries next year.
In the meantime, Dell battled supply-chain problems and finished up an internal investigation into the company's accounting practices. The company's audit found that the finance department was regularly fudging quarterly earnings numbers between 2003 and 2006 to hit Wall Street targets--a discovery that forced the company to restate three years' worth of earnings. A Securities and Exchange Commission investigation is still ongoing.
Two bright spots: the company's success in selling more servers and the warm reception that greeted its newfound emphasis on design.
Another early pioneer in the direct-sales model also made news this year. After floundering for several years, Gateway was gobbled up by the fast-rising Acer of Taiwan. It was an anticlimactic end for one of the '90s most successful PC companies, but a boon to Acer, which is vying with China's Lenovo for a larger piece of both the U.S. and world PC markets. Acer and Lenovo also squabbled over Packard Bell, though Acer emerged victorious. Beyond the fact that it added two companies to its ranks, though, Acer also grew organically, becoming the fastest-growing PC company of the last year.
Acer has found success chiefly because of gains in its notebook business. By year's end, it was poised to leapfrog Dell for the No. 2 spot behind HP in the worldwide notebook market. Notebooks, too, have been the PC of choice for new buyers, with desktops being replaced at a rapid rate this year. (But despite the decline in popularity of consumer desktops, both Dell and Gateway decided to follow in Apple's footsteps by releasing all-in-one desktops, with Dell's XPS One and Gateway's One.) And though mobility is key for most PC users, very few have embraced ultramobile PCs, despite the industry's best efforts.
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