Shakeup At The Top: Dell Pins Hopes On Founder

Michael Dell, Chairman & CEO, Dell
Michael Dell, Chairman & CEO, Dell

Dell announced that Michael Dell will assume the duties of chief executive officer, following the resignation of Kevin Rollins.

Dell, who started the company in his garage in 1984, will maintain his role as chairman. He has served as the company's chairman since its founding and served as CEO until 2004.

Dell also said in a release that it expects to report fourth-quarter results below Thomson Financial consensus estimates, but did not provide further details. The Thomson forecast for Dell's fourth-quarter earnings stood at 32 cents a share after U.S. markets closed Wednesday.

"We believe the company has suffered from a variety of recent execution missteps and negative publicity," said S&P Equity Research analyst Richard Stice. "We believe the management change will help to rectify these matters."

However, the analyst advised investors to remain on the sidelines since the company's "underlying business continues to struggle." He maintained a "hold" rating on the stock.

"I think this is positive," Paul Meeks of NMH Advisors said on CNBC's "Closing Bell" shortly after the move was announced. He added, however, that Dell will "have to articulate a plan pretty quickly."

Dell's return as chief executive of the company he founded ends a decade-long partnership and unusual shared leadership structure between Dell and Rollins. The shake-up also puts the founder squarely back into the limelight as pressure grows for him to innovate his way back to the top of the heap in personal computers.

"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," Samuel Nunn, presiding director of Dell's board, said in a prepared statement.

The company has made several management changes in recent months as it attempts to take back market share lost to a rejuvenated Hewlett-Packard .

The founder, whose 10% stake in Dell is worth about $5.5 billion, pioneered a "build to order" model in the personal computer industry, and it eventually becoming No. 1.

Tough Year

But Dell lost that title last year to HP in a tough year for the company. Dell last year recalled batteries made by Sony in the biggest-ever consumer electronics recall. It has also had complaints of poor after-sales service.

In December, Dell named former American Airlines chief Donald Carty as chief financial officer, replacing James Schneider, who left as Dell faced probes into its finances.

Dell's PC shipments in the U.S. market, which make up more than half its unit volumes, fell nearly 17% year-on-year in the fourth quarter, according to market researcher IDC. Dell's worldwide share of the personal computer market narrowed to 14.7% in the fourth quarter from 17.5% a year earlier.

Rollins had become CEO after years as president and chief operating officer, having joined Dell in 1996 from Bain & Co. management consultants.

Dell Shares Rise

Shares of Dell rose almost 5% in after-hours trading. The stock has fallen in the past few months amid flagging PC sales and an investigation by the Securities and Exchange Commission regarding revenue recognition policies.

Kevin Rollins, Former CEO, Dell
Kevin Rollins, Former CEO, Dell

"Dell has tremendous opportunities ahead of it," Dell said in a statement. "I am enthusiastic about Dell 2.0, which includes our plan to provide the best customer experience, build a strong global services business and ensure our products deliver the best long-term customer value."

Rollins resigned, effective immediately, from his position as CEO and as a member of the board of directors.

"Kevin has been a great business partner and friend," said Dell. "He has made significant contributions to our business over the past 10 years. I wish him much success in the future."

Related video from our archive:

Former Dell CEO Kevin Rollins and new Dell CEO Michael Dell respond to a question about Rollins' future with the company. Originally recorded 12 September 2006 from a Dell product launch in New York City: