Dell Fires CEO Rollins, Founder Takes the Reins Back

Published: February 7, 2007

by Timothy Prickett Morgan

It has been an exciting couple of days for Dell, the company and the man. Kevin Rollins, Dell's chief executive officer for the past few years and a key Dell executive for the past decade, was on hand for the big Windows Vista roll out in New York. And it was the second to the last thing he did. The last thing he did was return to Texas, pack up his desk and leave.

Last Wednesday, after the market closed, Michael Dell, the company's founder and chairman, reclaimed the CEO position at the company that bears his name and remained chairman of the board, too, after ousting Rollins. The trigger seems to have been the warning that Dell had to put out that it would miss fourth quarter projections prevailing on Wall Street--something that has happened with increasing frequency. Last summer, the Securities and Exchange Commission launched an investigation into revenue recognition practices at the company, possibly relating to warranties.

After taking swipes at its competitors in the PC and server arena for years and making much of its direct sales model, Dell's growth and profits have languished while others with those old-fashioned channels have seen a resurgence. HP is gaining share in PCs, and Sun is seeing its server business grow again as it enters the X64 market; IBM and HP have held or gained share in servers, too.

Annoyingly, lawyer William Lerach, the king of the class action lawsuit, last week launched a suit on behalf of investors that claims Dell has improperly accounted for rebates given to it by Intel--rebates that added up to $1 billion in some years. The speculation has been that such rebates amount to nothing more than payola, and that is one reason why rival X64 chip maker Advanced Micro Devices last year launched its own antitrust lawsuit against Intel. Dell, of course, relinquished after getting its head handed to it by other server rivals and last fall said it would adopt AMD's chips--a move that was timed to coincide with yet another quarterly miss to try to give the company a positive spin on some bad news.

In a statement last week, Dell didn't really say much. "Dell has tremendous opportunities ahead of it. 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."

I don't know about you, but I am kinda sick of everything having a release number to show the significance and magnitude of change--particularly when it is probably not true. If Dell launches a reseller channel, or buys a giant services company, that qualifies as Dell 2.0. Otherwise, this is more like a Dell 1.5 upgrade that got rolled back to Dell 1.4 because it had some bugs in it.

What Dell seems to be facing, according to his own memo to employees, is bureaucracy and a desire to make at least some of its machinery in the home U.S. market. Dell's competitors have shifted a lot of their manufacturing to Asia, and it is hard to believe that Dell will not do the same. In the meantime, Dell has cut the number of direct reports to him from 20 to 12 to help streamline decision making and has put a freeze on bonuses for 2006 because the company has performed so poorly. A memo from Dell to the company's employees that was leaked to the Austin American Statesman indicated that Dell planned to stay on as CEO for a few years, and that all options were on the table, including layoffs. The company is also looking to hire a chief marketing officer--the first time it has had such a job.

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