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Dell Splits Positions of CEO, Chairman

March 05, 2004|Joseph Menn | Times Staff Writer

Dell Inc. Chairman Michael Dell plans to cede the chief executive's job to longtime No. 2 Kevin Rollins after a 20-year run, the PC powerhouse said Thursday.

Dell, the company's 39-year-old founder and a billionaire, will focus on technology trends and customer service, while the 51-year-old Rollins will join the company's board and lead strategy and operations. The handoff, which was approved by Dell's directors, will occur at the company's annual meeting July 16.

The planned move doesn't portend any great changes at Dell. The company's shares closed Thursday at $33.13, unchanged in Nasdaq trading.

"This is about aligning titles with their existing roles, as opposed to Michael easing up in any fashion," said company spokesman T.R. Reid.

In the wake of corporate scandals at WorldCom Inc., Enron Corp. and elsewhere, shareholder activists have pushed boards to separate the jobs of chairman and chief executive to enhance CEO oversight. Several big technology companies have acceded, including Oracle Corp., where CEO Larry Ellison appointed retiring Chief Financial Officer Jeff Henley as chairman in January.

Dell's announcement came a day after Walt Disney Co. took the chairman's title from embattled CEO Michael Eisner. But Reid said the Dell shuffle wasn't in response to pressure for greater board oversight.

"This is unrelated," Reid said. "This recognizes ... the responsibilities that Kevin has already."

Some observers offered a different take.

"It is a corporate governance issue," said CIBC World Markets analyst Ali Irani.

No one predicted the makeover would lead to a major reordering of priorities at the Round Rock, Texas-based company. "Michael Dell and Kevin Rollins have been running this company for several years," said Robert Cihra, an analyst with Fulcrum Global Partners. "I don't expect anything to change."

As a Bain & Co. management consultant, Rollins studied Dell's business model of selling computers directly to customers. After joining the company as senior vice president in 1996, he pushed Dell to sell over the Internet to reduce costs further.

Rollins was named president and chief operating officer in 2001. Since then, he and Dell have worked together closely, even sending out frequent joint e-mails.

A serious classical violinist, Rollins is married and has three children, two of them adults.

Michael Dell started selling computers out of his University of Texas dorm room when he was 19 and dropped out of school to concentrate on the business in 1984. Free of the chief executive title for the first time in 20 years, Dell will be able "to step back and focus more on strategic vision," said Jim Lyon, who helps manage $400 million at Oakwood Capital Management, a Los Angeles firm that owns Dell shares.

The Dell model has proved remarkably resilient, allowing the company to climb the ranks of the Fortune 500 with consistent profitability. The company earned $2.65 billion on sales of $41.4 billion in its 2004 fiscal year, and is virtually tied with Hewlett-Packard Co. as the world's largest PC maker.

As the market has continued to evolve, however, fresh challenges are emerging from IBM Corp. and HP, which offer more than low prices.

"The value has shifted from low cost to bundles of hardware, software, services and implementation," Irani said. "It's a good time, perhaps, to see management shuffling at Dell."

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Associated Press and Bloomberg News were used in compiling this report.

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