June 29, 2006 5:27 am

Dell reorganises struggling Americas unit

Dell, the world’s largest PC maker, has reorganised its struggling Americas division in a bid to inject fresh momentum into sales and customer service at its biggest business unit.

Management changes at the division follow several quarters of worse-than-expected results as the company grapples with slower sales growth and the erosion of its cost advantage over competitors such as Hewlett-Packard, Acer and Lenovo.

Kevin Rollins, chief executive, told the Financial Times that the move was designed to allow Dell to be “much more focused on growth and meeting customer needs”, particularly in the US, where the company’s consumer PC business has suffered recently in customer service rankings.

The changes, which were made several weeks ago but not announced publicly by the company, put Dell veteran Ro Parra in charge of the group’s consumer and small business arms.

Joe Marengi, a former Novell executive with nine years at Dell, has assumed control of the company’s US corporate business group. Mr Parra and Mr Marengi were previously the co-heads of Dell’s entire Americas business.

Lawrence Pentland, a third Dell executive, has been put in charge of the operations in Latin America and Canada.

Dell’s Americas business accounted for about 64 per cent of the $56bn the company made in revenues last year.

The reassignments mark the latest round of a shake-up aimed at putting sales growth and customer service back on track.

In March, Dick Hunter, the operations guru who has run Dell’s manufacturing operations for the past five years, moved to customer service and joined the company’s executive committee. Dell has pledged to invest $100m in customer service this year. Mr Hunter has been leading an effort to revamp the company’s call centres.

“We have a very high sense of urgency,” said Mr Rollins. “But that’s a normal Dell trait. When we learn we have a problem, everyone gets on board and gets after it.”

Mr Rollins repeated earlier warnings that margins were likely to suffer as Dell tried to grab market share in an environment of falling prices. However, he said Dell was poised to gather momentum at the expense of less-profitable rivals. “We see the market going into a new consolidation phase. We’re seeing a number of competitors who are on fairly shaky profitability ground flying a bit closer to the ground.”

Dell’s shares have fallen sharply in the past 12 months amid its struggle against an erosion of its traditional strong lead in the PC business following a revival at HP, its chief US rival. Although Dell remains at the top of the worldwide PC market, HP has seen sales and profitability rise significantly in the wake of a $1.9bn restructuring pushed through by Mark Hurd after he assumed the role of chief executive at the world’s second-biggest PC maker last year.

A drop in average selling prices for desktops and laptops coupled with the rise of low-cost competition from Asia, has begun to eat away at Dell’s traditional cost advantage, forcing it to look for new ways to set itself apart from the competition.

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