Friday, March 5, 2004

Founder stepping down as CEO of Dell

The Associated Press

DALLAS - Michael Dell is stepping aside as chief executive of the computer company he started in his college dorm room 20 years ago and built into a powerhouse whose low-cost, direct-selling model revolutionized the industry.

Dell, 39 and a multibillionaire, will be replaced by president and chief operating officer Kevin Rollins in July, Dell Inc. said Thursday. However, Michael Dell will remain involved in day-to-day business as chairman.

Rollins was seen as Dell's right-hand man as the company grew to become the world's leading seller of personal computers. The two men work side by side in offices separated by a sliding glass door that is left open.

The timing, however, caught analysts off guard. Dell, who became one of the richest men in America as his company grew, had given no strong signals that he would step away from the CEO's duties.

The board of directors, meeting in New York, named the 51-year-old Rollins CEO effective at the annual shareholders meeting July 16. Rollins also will be nominated at the July meeting to replace a retired company executive on the board.

The company cast the change as cementing the roles the two men have played recently: Dell concentrating on new technology and ways to meet customers' demands, and Rollins focusing on strategy and operations.

Dell shares were unchanged in trading Thursday on the Nasdaq Stock Market.

Dell Inc., based in Round Rock, Texas, jousts with Hewlett-Packard Co. for the title of world's top seller of PCs. Dell earned $2.65 billion on sales of $41.44 billion last year. Last month, the company reported that fourth-quarter earnings rose 24 percent from a year earlier, and Dell and Rollins gave an upbeat assessment of first-quarter sales.

The company has ground out one successful quarter after another, usually surpassing Wall Street's expectations even during the technology bust.

Along the way, the company has expanded from its core PC business to include servers, handheld devices, printers and technology services.

Dell has earned a reputation for squeezing suppliers to hold down costs. The chief characteristic that has made Dell different, however, has been its direct-selling model, cutting out the middle step of retail stores.

The company was generally seen as responsible - and even took some credit - for PC price wars of the last few years that decimated profits at many of Dell's rivals.

"They are alone when it comes to being able to generate profits in the PC industry. They have no equal," said Marty Shagrin, an analyst with Victory Capital Management. He said Dell has set much higher targets for operating profit margins than competitors - and met them.

In a story that has taken on near-mythic status in business circles, Dell, with a $1,000 bankroll, started selling computers as a 19-year-old student at the University of Texas in Austin. He dropped out of school in 1984 to concentrate on the business.

Today, the stock market values Dell Inc. at about $85 billion; Dell himself owns about $10 billion worth. He and his wife run the Michael and Susan Dell Foundation, which funds programs for children.

Rollins joined Dell in 1996 from the management-consulting firm Bain & Co.

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