Rollins’ fate sealed by Dell’s falling margins

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“There is no person who deserves more recognition for Dell’s accomplishments than Kevin Rollins,” said Michael Dell, announcing his appointment as chief executive in July 2004.

“Kevin’s new CEO title is as much about recognising what he’s already done as it is about our confidence in his many future contributions.”

That confidence in his contributions over the past two-and-a-half years ran out on Wednesday when the company announced his resignation and departure after a 14-year association with Dell.

It began in 1993 at the age of 40 when he was hired as a Bain & Co management consultant to help the company through a sticky patch. He joined as a senior vice president in 1996 and rose to become president and chief operating officer in 2001.

“He was, with Michael, the intellectual leader of Dell from 1996,” said a former Dell executive yesterday, who did not wish to be named.

But Mr Rollins lacked the charisma of the Dell founder, who liked to walk the floor and sit in on product meetings.

“There’s a certain stiffness there,” said the executive of Mr Rollins. “He never really connected with people. He was a minds guy, not a hearts guy.”

Part of his style may be attributed to his strict upbringing in Utah as a practising Mormon and education at Brigham Young University. He told US News & World Report magazine on his appointment as CEO that he had brought a strong set of ethics standards to Dell.

“We believe there is right and wrong, and we believe that people perform better when they know that there’s one strike and you’re out,” he said.

He tried to show a more human side with some impromptu recitals to employees showing off his skills as a violinist, but at the end of his tenure as COO a survey suggested half of Dell’s employees were disenchanted with the company and that they would leave if offered a comparable job elsewhere.

He can take credit for Dell’s relentless progress to become the world’s biggest PC maker. He set up incredibly efficient assembly plants around the world and perfected the just-in-time inventory system that allowed Dell’s low-cost direct-selling model to carry all before it.

But he became a victim of changing trends as consumers began to show a preference for seeing computer products in stores before they bought them.

Dell also began to lose market share and saw its margins plummet as competitors imitated its supply chain innovations and lowered their prices. He expanded the company’s product line into printers and consumer electronics, but neither have managed to lift Dell’s growth.

A major battery recall last year, missed sales and earnings numbers and a Securities and Exchange Commission investigation into its accounts have compounded the negative sentiment towards the company.

“Dell, the company, has been thrashing. It focused too aggressively on cost-cutting, often the path of a professional manager, and sacrificed customer loyalty,” said Rob Enderle, an analyst with Enderle Consulting, in a blog note yesterday.

Mr Rollins must also take responsibility for consumer dissatisfaction with the quality of service and the perceived lack of inspiring design in Dell’s products.

The former Dell executive criticised the focus on quarterly numbers and the exclusion of anything that did not contribute to them.

“That style isn’t very supportive of innovation,” he said.

“Dell was like a racehorse, and Rollins was like the jockey - he flogged it hard every quarter, and eventually you can’t beat the horse any more.”

A fourth quarter that saw HP extend the lead it had taken over Dell as the number-one PC maker, combined with earnings and revenues that the company admitted yesterday would again fall short of expectations, became the self-imposed measurements that sealed his fate.

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