Dell business model ‘not a religion’

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Michael Dell, founder of the number two PC maker, on Friday admitted his company needed to go beyond the direct-sales model that has driven its success. Despite a pickup in computer sales worldwide, two recent studies show Dell continued to lose ground to Hewlett-Packard.

In a leaked internal memo, Mr Dell said the company was at “a defining moment in its history and in [its] relationships with customers.”

Mr Dell took over as chief executive in January, replacing Kevin Rollins. He has since been seeking to refocus and reorganise the company to restore its fortunes.

The leaked e-mail, sent on Wednesday, said Dell’s management team had met for most of last week to discuss the future.

He said their plans were to simplify IT for business and the consumer and to innovate beyond its traditional hardware business. They would also work to fix their core direct-selling business.

“The direct model has been a revolution, but is not a religion,” he said n the e-mail. “We will continue to improve our business model, and go beyond it, to give our customers what they need.”

He said the company was now looking again at its entire design process to improve its speed to market. Mike Cannon, head of global operations, was working to “take our supply chain and manufacturing to the next level of efficiency.”

Dell is set to open a new factory in Brazil in May and one in India in July in order to be closer to customers in those emerging markets.

Mr Dell said his company was also embarking on a “bold, long-term initiative to radically simplify IT for our commercial customers.”

Competitors were providing complexity and needless costs with “service divisions” that created a never-ending cycle of activity with unclear return on investment.

“We intend to break this cycle,” he said.

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