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New Dell Finance Chief To Draw on Board, Auditing Experience

cnbc.com
Wednesday, 20 Dec 2006 | 2:46 PM ET

Dell's naming of former American Airlines chief Don Carty to its top financial post may have raised some eyebrows. But as a long-time Dell board member and head of its auditing committee, Carty is well-suited for the job, reports CNBC's Phil Lebeau.

Carty, who left the airline three years ago when American's parent, AMR, was struggling to remain solvent, returned to the executive ranks Tuesday as Dell's vice chairman and chief financial officer.

"He understands what is going on there and he has a background that is highly respected on Wall Street," reports CNBC's Phil Lebeau. "It is not uncommon when companies are replacing a CFO, at least in the short term, to put the head of the audit committee in charge."

Dell Names New CFO
Dell has chosen former American Airlines chief Don Carty to join it's executive ranks. CNBC's Phil LeBeau and Michelle Caruso-Cabrera have the details.


Carty has been a member of the Round Rock, Texas-based computer company's board of directors since 1992 and has chaired the audit committee for much of that time. He will assume his new duties Jan. 1.

"Don has had a long association with the company and we are delighted that he is joining our senior leadership team," Michael Dell, company founder and chairman of the board of directors, said in a statement.

Chief Executive Officer Kevin Rollins said the 60-year-old Carty is an ideal choice to lead "Dell 2.0," a turnaround plan announced several months ago to boost sales and improve customer service in the face of stiff competition from Hewlett-Packard and others.

Rough Year for Company

From two delays in earnings reports to an unprecedented recall of faulty batteries, Dell has had a rough year. The company is trying to respond, luring five executives from General Motors, HP, Amazon.com and Wells Fargo in recent months. Last week Dell added a former executive from Plano, Texas-based Electronic Data Systems to run its global services division.

"In terms of Dell trying to establish itself as a responsible corporate citizen and also a company that's on the mend and doing the right thing, tracking a very senior guy like Carty and bringing him in as chief financial officer could send some assurances to Wall Street," said analyst Roger Kay, founder of the technology market research firm Endpoint Technologies Associates in Wayland, Mass.

But Carty comes with some baggage. From 1998 to 2003, he was the controversial chairman of the board and chief executive officer of AMR. He resigned after losing the confidence of workers.

The terrorist attacks of Sept. 11, 2001, triggered a downward spiral to near-bankruptcy for AMR. By spring 2003, the company had lost more than $6 billion in about two years and was running low on cash, and Carty said he needed $1.8 billion in annual concessions from employees or the carrier would file for bankruptcy protection.

Workers grudgingly went along--at least until they found out the company had secretly approved bonuses and pension perks for Carty and other senior executives. The resulting firestorm cost Carty his job.

Carty was replaced by a company financial wizard, Gerard Arpey, whose first act was a late-night meeting with union leaders to salvage the labor concessions and keep American out of bankruptcy. The airline has been on a steady climb since.

Some investors are questioning whether Carty, an airline executive with a controversial past, is the best person for the job, CNBC's Lebeau reports.

"His job is to steer Dell through a couple of investigations, remove questions about third-quarter earnings when they are finally delivered...and he needs to some restore confidnece with investors," Lebeau reports. "It's not as though they are brining him in as CEO to come up with a grand vision for the company."

Bill Fearnley, with FTN Midwest Securities, told CNBC that the investors he spoke with "are concerned about Del'ls operations, Dell's financial performance and can we get the investigations behind them."

Transition Plans

At Dell, Carty succeeds James M. Schneider, the senior vice president and CFO. Schneider will remain through the end of the fiscal year to assist Carty's transition. Schneider recently agreed to become executive chairman of the board of Frontier Bancshares.

Thomas W. Luce III, a member of the board of directors, will assume Carty's duties as chairman of the board's audit committee.

Dell acknowledged last month that the Securities and Exchange Commission had launched a formal investigation into unspecified accounting issues. Dell beat Wall Street estimates in a delayed third-quarter report, but the SEC probe could change those numbers.

Kay said the pending SEC probe could have played a role in the latest executive change at Dell.

"The way Dell portrayed it was that Carty was stepping up as a CFO, but really the flip side was that Jim Schneider was stepping down," Kay said. "Somebody had to answer for the fact that Dell's books were out of order."

Carty has served as a director for several public companies and has a high civic profile. He is board chairman of Big Brothers Big Sisters of America and a member of the board of trustees at Southern Methodist University and the executive board of SMU's Cox School of Business. He's also a board member of the Dallas Center for the Performing Arts Foundation.

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