Michael Dell takes reins as Rollins resigns
Published: 01 Feb 2007 08:50 GMT
Dell announced on 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 HP and an investigation by the SEC for possible accounting improprieties began. Several executives have left the company in recent months, including chief financial officer 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.
Rollins took over the chief executive reins in 2004 after several years spent as president and chief operating officer, during which he was characterised 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 website but the information could still be found on Wednesday afternoon immediately following the announcement. Dell's stock rose 4 percent in after-hours trading. Trading was briefly halted from 4:45pm EST to 4:50pm 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 to 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 $60bn in annual revenue by this year and $80bn 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 favour 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 HP 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 $60bn target during its 2006 fiscal year, with $55.9bn in revenue, and the $80bn 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…
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