Michael Dell dismissed his handpicked successor on Wednesday and retook control of the computer giant he founded 23 years ago, hoping to reverse its slide into second place.
Mr. Dell, who is chairman, replaced Kevin Rollins as chief executive officer after reporting that quarterly results will again miss targets.
The shakeup, which will see Mr. Rollins leave the company and the board of directors immediately, reflects the seriousness of an unprecedented slump at Dell Inc. In recent months the company has lost the title of the world's No. 1 PC maker to Hewlett-Packard Co., watched its core business shrink, and has become embroiled in accounting problems that have caused the company to miss financial filing deadlines.
Until now, the two men worked side by side in Dell's Round Rock, Tex., headquarters, with adjacent offices and an open-door policy. Mr. Rollins, who is 13 years Mr. Dell's senior, acted as the smooth public voice of the company next to Mr. Dell's more introverted and analytical personality.
“Kevin has been a great business partner and friend,” Mr. Dell said in a news release. “He has made significant contributions to our business over the past ten years. I wish him much success in the future.”
Mr. Dell, 41, handed day-to-day control of the company he started in his dorm room with a $1,000 (U.S.) investment to Mr. Rollins in 2004.
Despite their close working relationship, Mr. Rollins, 54, was unable to turn events around at Dell after the company underestimated competitors, failed to see trends in market data, and let customer service slip.
Dell shares have tumbled about 20 per cent on the Nasdaq since 2005. In early after-hours trading last night they climbed 5 per cent to $25.26, even as the company said its fiscal fourth-quarter results will fall short of analysts' expectations.
Dell's recent problems include the recall of more than four million defective notebook batteries supplied by Sony Corp. and probes of its accounting practices by the U.S. Securities and Exchange Commission and the U.S. Attorney for the Southern District of New York. In addition, competitors such as HP have closed the pricing gap Dell enjoyed through its direct sales model by making their own operations more efficient.
As recently as September, Mr. Dell publicly defended his colleague as an “outstanding executive.” But rumours had circulated as far back as last summer that Mr. Dell would replace Mr. Rollins, whose ties with Dell go back to the early 1990s when, as a consultant with Bain & Co., he helped direct the company out of a slump.
One signal that changes were in the works came last month, when Dell announced that CFO James Schneider was being succeeded by Donald Carty, a former CEO of American Airlines parent AMR Corp. and the chairman of Toronto-based Porter Airlines Inc.
Analysts said that even with the cult-like status Mr. Dell enjoys as one of the world's most successful businessmen, he will have a tough time single-handedly turning operations around.
“Aside from [Apple Inc.'s CEO Steve] Jobs, there are few folks in the tech industry by themselves that can dramatically alter the course of a major technology company,” Mark Mowrey, a senior analyst at Al Frank Asset Management, told Dow Jones Newswires.
There are few levers for him to pull in the highly competitive PC manufacturing business, he said.
Dell did not say what sort of financial package Mr. Rollins would receive. He owned about $30.5-million of Dell shares at the time of his last disclosure filing in June.