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SAN FRANCISCO - Michael Dell replaced Kevin Rollins as CEO of Dell today as the No 2 PC maker struggles with missteps in the US 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 US$1000, ($1479) and made it a PC powerhouse. But results have been uneven since Mr Rollins took over in July 2004, analysts said.
News of Mr Dell's return lifted the stock by nearly 5 per cent, in hopes he would reinvigorate the company. Yet Mr Dell gave no specific plan for how to mold it into what he calls "Dell 2.0," and he and Mr 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 Mr Rollins for Dell's slowing growth, Mr Kay added. Wall Street "has been calling for his head for a long time", he said of Mr Rollins, 54, who also left Dell's board.
The founder, whose 10 per cent stake in Dell is worth about US$5.5 billion, pioneered a "build to order" model in the personal computer industry, and it eventually becoming No 1.
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 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 per cent 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 per cent in the fourth quarter from 17.5 per cent a year earlier, IDC said.
Mr Rollins had become CEO after years as president and chief operating officer, having joined Dell in 1996 from Bain & Co management consultants.
When Mr Rollins added the CEO title, founder Mr Dell said it was but an official acknowledgment of his role. The two even had offices built at the Round Rock, Texas, headquarters with a glass wall between them and a door that was always open.
It is not immediately clear what Mr Dell can do to help the company, analysts said. Eric Ross of ThinkEquity Partners said the profit warning was Dell's third financial miss in three quarters, noting that it faces continued market share loss and a tough pricing environment.
"Doubling down on their old strategy is probably not going to be the solution because they are so much bigger now," said Daniel Renouard, an analyst with Robert Baird & Co.
Reuters Estimates and First Call both said Wall Street, on average, expected earnings of 32 cents per share on revenue of US$15.3 billion. Dell did not give specific revenue and earnings expectations with its warning.
Analyst Kay said Dell's moves into flat-panel televisions and computer printers were not as profitable as had been expected. Many had expected Dell eventually would challenge HP for the title of world's largest maker of computer printers.
Shares of Dell jumped to US$25.35 in extended trade. In regular trade, the stock fell 7 cents to close at US$24.22. The stock has fallen some 17 per cent in the past year.
- REUTERS