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February 1, 2007 4:00 AM PST
Turnaround time for Michael Dell
Last modified: February 1, 2007 10:35 AM PST
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news analysis The latest Dell executive to leave as a result of Michael Dell's housecleaning was the man perhaps second-most responsible for the company's once-remarkable success.
Kevin Rollins came into Dell in 1996 as the operations and business expert ready to help a 31-year-old Michael Dell make his direct-mail company grow. Together, the two built a PC powerhouse that changed the industry and made billions of dollars for shareholders. Dell played the technology visionary, Rollins made sure the factories kept humming, and the company found new ways to grow.
But their meteoric rise to the top of the tech industry slowed dramatically in 2006, Rollins' second year as Dell's CEO. He paid the price Wednesday for Dell's slipups in 2006, resigning as CEO and stepping down from the company's board of directors.
So what happened? Dell appears to have fallen prey to a common problem for those on top: quite simply, the world changed, and Dell did not change quickly enough.
"The usual bag of tricks--leveraging the supply chain and their economies of scale--hasn't worked," Richard Shim, an analyst with IDC, said after Dell announced the departure of Rollins.
Dell has lost both its market share lead and most-favored hardware company status on Wall Street to Hewlett-Packard. In trying to regain market share, Dell may have spent too much time bottom-feeding on the low end of the PC market, eroding the operating margins that were once the envy of the entire PC industry.
analyst, IDC
And perhaps most ominously, the company is under investigation by the Securities and Exchange Commission for accounting irregularities that occurred on Rollins' watch.
But there are problems at the PC maker that even Michael Dell won't be able to fix overnight. Dell thrived during both the dot-com boom and resulting bust, when competitors like Hewlett-Packard and Gateway foundered. During the boom, it rode the wave of corporate PC purchases. After the bust, it established itself as the low-cost leader in a market where people were just looking for PCs: nothing fancy, just a PC that will get the job done.
With additional gains in servers and storage sales, Rollins began talking about ambitious revenue goals of $60 billion by the end of 2006 and $80 billion by 2008 or 2009.
But those goals depended on Dell expanding into other markets. Rollins knew the PC market was maturing, and so the company devoted almost all of a three-day analyst meeting in April 2005 trying to convince analysts and the media that Dell was no longer a PC company; that it was on the cusp of becoming a broad IT powerhouse. The message was that even if the PC market slows, Dell has the ability to continue growing at leaps and bounds.
Fast-forward to 2006, when the company that perfected nimble PC production looked decidedly flat-footed when reacting to changes in the market:
• The corporate PC market slows, as businesses stop a three-year post-Y2K binge on PCs and wait to see how Microsoft's Windows Vista will fit into their application environments.• Consumers grow increasingly tired of boring PCs and shoddy customer service, and start flocking to retail stores to search for new PCs that have style and panache.
• Advanced Micro Devices carves out a significant chunk of market share at Intel's expense and establishes itself as a credible player with both businesses and consumers.
• Notebooks threaten to overtake desktops in mature economies like the U.S., and hold a solid majority in retail stores by the end of the year.
See more CNET content tagged:
Kevin Rollins,
Richard Shim,
AMD,
market share,
PC company
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Michael Dell was always driving behind the wheel. First and
foremost its his company, Rollins was a babysitter at best.
So theres a big hoopla article now that hes suddenly taking back
the CEO position.
Where's the story?
Or--it could be that he WASN'T!
Memo to Dell: stop buying crappy components. Stop shafting us. We can very easily take our money elsewhere. It will be a LONG time before I ever even look at a Dell.
You suck, Dell.
Now I have a DEll. First Dell mixed my order up with another person and was not going to send the upgrade for office. Then I had problems with cold boot; evidently others had the same problem. For 3-years though extended warranty the problem was not fixed by Dell. Guess what on a recent update of the computer, Norton find a registry problem and fixed the problem. Evidently Dell left the Audit Mode in Windows turned on; this was supposed to be turned off prior to shipment. In spite of logs sent, copies of the register the service people did not discover what Norton found.
Selling the first computer to someone is easy, Building a loyal following that will buy additional computers is harder.
I know that us people at home only buy them one at a time, but we deserve help too. I would bet that now there are as many computers at home as at work.
Dell has never replied, to E-Mails that I sent recently to tell them what the real problemis.
Many people do not want a mini-tower form factor PC in their living room or bedroom. They want something small and quiet that they can put in a bookshelf. The lack of form factor diversity shows a lack of imagination on Dell's part. Also, in this day of instant gratification, Dell's 5-10 day turaround seems an anachronism. You can drive to a CompUSA or Circuit City and have a new PC in an hour. You can even order online and go pick it up at the store in 15 minutes. What could be simpler.
who nicely refused to deal with my machine because it was from the US. The PC now sits in my basement with a large screwdriver through it's heart. My resolve, never another Dell!
Behaviour by compamies of that kind will in time make itself felt to be sure, plus the mouth to mouth word. Thank you kindly for listening to me griepe:) Best regards, Hans H Mueller