Richi Jennings

Dell's eponym-CEO returns (and DOS sub shock)

February 02, 2007 6:34 AM EST
Thanks for the free double memory. It's IT Blogwatch: in which Michael Dell comes back on his white charger to save us from Dell Hell. Not to mention proof that Germany used MS-DOS on its submarines...

Ken Mingis and Todd R. Weiss toast marshmallows over the fires
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Dell Inc. said late today that founder and Chairman Michael Dell is returning to the role of CEO, effective immediately. He replaces Kevin Rollins, who has resigned and is leaving the board. Dell will also continue as chairman of the company ... Michael Dell founded the company in 1984 and has served as the chairman of its board since its founding. He also served as CEO until 2004.
Eric Bangeman runs the numbers:
In addition to announcing the departure of Rollins, the company also said that its fourth quarter earnings would fall below analyst estimates of 32¢ per share on income of $15.3 billion ... Under Rollins' leadership, the company began its market share slide, which has resulted in its rival HP opening up a market share lead over the past two quarters. In April 2006, Dell's growth rate fell behind that of the market for the first time. For the last quarter of 2006, Dell's worldwide market share shrunk by 8.7 percent from the previous year, and its 3.5 percent growth paled in comparison to overall market growth of 9.5 percent.

Slow growth isn't Dell's only challenge. The company was forced to recall over 4 million notebook batteries due to reports of explosions and fires ... Even though the batteries were manufactured by Sony—who is also picking up the tab—the image in the minds of many consumers is of exploding Dell laptops rather than exploding Sony batteries.
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Will having Michael Dell behind the wheel again mean a reversal of fortunes for the PC maker? It's going to be a challenge, to say the least. Although Rollins has been driving the Dellmobile, Michael Dell has been a backseat driver ... Dell's biggest problem is that its competitors have figured out how to effectively compete against it in the low-price, commodity PC market.
Joseph Weisenthal digs the dirt:
The move really comes as no surprise to anyone who's been following the company in recent years, as it's obviously been heading in the wrong direction. During Rollins' time at the top, the company let its reputation for quality deteriorate, a problem that was exacerbated by poor customer service. This translated into lost sales ... The company also suffered because it failed to respond to changes in its industry. As laptop sales started to eclipse desktop sales, the computer started moving away from the commoditized boxes that Dell was so adept at selling. This is something that its rival HP seemed to understand a little better, as it focused more on the fashion element. Furthermore, because consumers pay more attention to the look and feel of laptops than they do desktops, the company's once-vaunted direct sales strategy started to be a problem, since it doesn't offer a chance to see the product before buying it.
Blackfriars' Carl Howe told you so:
Having met and interviewed both men, I think that this was a necessary move. Kevin Rollins, while a capable executive, never inspired the same confidence that Michael did, both with customers and shareholders ... Blackfriars noted back in September that Dell didn't have a chance to turn around until Michael returned. Now they have that chance.
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That said, it's not going to be easy. Unlike Apple, Dell has very little innovation or differentiation separating it from about three thousand other computer makers. As a result, Michael has his work cut out for him in turning around Dell. Here are three things we think he should do to make that happen:
  1. Make the Dell brand stand for something ...
  2. Jettison junk from the Dell product line ...
  3. Move Dell notebook production back to the US.
Alan Shimel blows dust off the pom-poms:
Not that I would presume to tell Michael Dell how to run Dell, but hey its my blog and I can say what I want ... I think the time has come when they have to be more than a PC company.  Yes they are selling a lot of printers, reselling storage and switches, but these are always sort of afterthoughts to PC and servers. In order to compete with HP, IBM and the like, they have to get serious about selling other hardware, software and most important, services.
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They should target Cisco. Here is a company with 70% or better of a huge hardware-software market. A company like Dell can make a dent in this. Dell should go after this market big time. Look at the latest numbers out of HP ProCurve, that is a market Dell could be in ... Dell has to do a better job of taking ISV's products and selling them on Dell boxes through the Dell channel. Also a few acquisitions would not hurt.
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Dell has one of the largest and best sales team in the world ... I have seen the Dell machine up close. At Interliant we were the OEM for Dell Host for a while. I can tell you that they can turn on the jets. Michael Dell is the person who makes that company go. Always has been and probably always will be. I remember seeing emails from him at 3am. Don't count him out.
KC Brown:
Just once I wish some large manufacturer somewhere would adopt the stance that HP used to have, back when Hewlett and Packard were running the show. Back before Queen Bitch of the Universe took over: Uncompromising quality.

Damn near everything they did was done right, and when it wasn't, they went to great lengths to fix it. Quality costs money, but you know what? I buy for the long term. I'd rather pay 2-3x up front for something that'll last a lifetime. I'll do that even for equipment that might be obsolete in 5 years because at least I'll know that it simply won't fail in those 5 years because it's built right.
Eric Savitz asks, "But can he do miracles?":
Michael [never] really left; he had remained the company’s chairman, and in that role did far more than simply run board meetings. Nonetheless, investors seem to think that pushing out Kevin Rollins and returning the company’s founder to the throne is a good step in trying to fix Dell’s various ailments, which include a tangled mess of regulatory investigations, weakening financial performance and sagging market share.

Let’s not forget, though, that the company also said that it will miss the Street’s estimates at both the top and bottom line for the fourth quarter ended January; if it was bad enough to get Rollins booted out of the company, it had to be pretty bad. So it’s not going to be a quick recovery for the company or the stock.
Buffer overflow:
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And finally... Did Germany use MS-DOS on their submarines?
Richi Jennings is an independent technology and marketing consultant, specializing in email, blogging, Linux, and computer security. A 20 year, cross-functional IT veteran, he is also an analyst at Ferris Research. Contact Richi at blogwatch@richi.co.uk.