SAN FRANCISCO: Michael Dell replaced Kevin Rollins as CEO of Dell Inc. on January 31 as the No. 2 PC maker struggles with missteps in the U.S. consumer market and market share losses to Hewlett-Packard Co.
The company warned this quarter’s results would fall below analyst estimates, in the latest sign of the challenge it faces from HP and tough pricing competition in a cutthroat industry.
In one of the best-known technology start-up tales, Dell started the company in 1984 in his university dorm room with $1,000, and made it a PC powerhouse. But results have been uneven since Rollins took over in July 2004, analysts said.
News of Dell’s return lifted the stock by nearly 5 %, in hopes he would reinvigorate the company. Yet Dell gave no specific plan for how to mold it into what he calls ” Dell 2.0,” and he and Rollins have long said they ran Dell together.
“He has to bring in new blood,” Endpoint Technologies Associates analyst Roger Kay said of Dell, who remains chairman of the company. “They need to bring in new people who are creative, energetic, who can bring spice to the company.”
Analysts blamed Rollins for Dell’s slowing growth, Kay added. Wall Street “has been calling for his head for a long time,” he said of Rollins, 54, who also left Dell’s board.
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.
NOT “A GOOD THING”
But Dell lost that title last year to HP in a tough year for the company. Dell last year recalled batteries made by Sony Corp. 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.
“It’s tough for me to sit here and say that’s a good thing,” Pacific Crest Securities analyst Brent Bracelin said of the Rollins departure on top of the recent CFO resignation.
Dell’s PC shipments in the US 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, IDC said.
Rollins had become CEO after years as president and chief operating officer, having joined Dell in 1996 from Bain & Co. management consultants.