Michael Dell Back in Charge as Rollins Departs Dell

Two and a half years after handing the chief executive title to his handpicked successor, Kevin Rollins, Michael Dell is again running the company he founded, Dell.

Dell struggled under Rollins’s tenure, recently losing its number-one PC vendor ranking to a resurgent Hewlett-Packard and weathering a formal investigation by the U.S. Securities and Exchange Commission into the company’s accounting practices.

Rollins has resigned his position as CEO and member of the company’s board of directors, Dell said in a statement Wednesday.

The company’s board had decided that “there is no better person in the world to run Dell at this time than the man who created the Direct Model and who has built this company over the last 23 years,” the statement said. Dell also remains chairman of the board.

Dell warned Wednesday that the company’s most recent financial results would fall below analyst expectations. The company is due to announce its fiscal 2007 fourth-quarter earnings on March 1.

Rollins joined Dell in 1996 from management consulting firm Bain & Co. Prior to assuming the role of CEO in July 2004, he had served as Dell’s president, chief operations officer and vice chairman.

He had literally worked out of the same office as Dell, in a co-management arrangement described as “two-in-a-box,” before assuming the CEO title. Despite the close tutelage, and the fact that Dell had remained chairman of the board, the company lost ground over the past year.

Ultimately, Rollins’s departure does not come as a surprise, said Charles King, principal analyst at Pund-IT. “The company has had some tough quarters, and Mr. Rollins has been under the gun,” King said.

During the third quarter of 2006, HP snatched Dell’s ranking as top worldwide PC vendor, a position Dell had held since the end of 2003, according to research company Gartner.

Another low point came in August, when Dell was forced to recall 4.2 million defective laptop batteries because of a fire hazard.

But Dell’s real problems centered on two areas: HP’s rebound and Dell’s inability to gain ground in new markets outside the United States, said Martin Reynolds, a vice president and research fellow with Gartner.

“They haven’t really managed to crack the overseas market,” he said. “What’s happened is their core market of U.S. enterprise has slowed down—that’s become single-digit growth—and HP, which has become a lot smarter, has been taking back some of the share they should have never lost in the first place.”

In many countries outside the United States, customers are reluctant to order a PC over the Internet and wait for it to show up at their door, Reynolds said. “When you get to somewhere like China, direct just doesn’t work,” he said.

Reynolds believes that Dell’s return to the CEO position may be a short-term measure as the company looks for a new leader who can solve the company’s international distribution problems.

He said executives with international retail experience, or perhaps someone from United Parcel Service of America or FedEx, would be possible candidates. “They can go pick from a lot of really strong people. I place odds on someone coming from outside of the computer industry,” Reynolds said. “This is explicitly a problem of distribution channel and paths to market, so there’s not really a technology or an operational problem.”

-Robert McMillan, IDG News Service (San Francisco Bureau)

(Robert Mullins, also of the IDG News Service, contributed to this story.)

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