With Michael Dell As CEO Again, Can Dell Regroup?

Kevin Rollins is out, and Michael Dell is back in as CEO of Dell (DELL). Having met and interviewed both men, I think that this was a necessary move. Kevin Rollins, while a capable executive, never inspired the same confidence that Michael did, both with customers and shareholders. Blackfriars noted back in September that Dell didn't have a chance to turn around until Michael returned. Now they have that chance.

That said, it's not going to be easy. Unlike Apple (AAPL), Dell has very little innovation or differentiation separating it from about three thousand other computer makers. As a result, Michael has his work cut out for him in turning around Dell. Here are three things we think he should do to make that happen:

1. Make the Dell brand stand for something. Over the last three years, the Dell brand has gone from standing for best value-for-price PCs to overpriced and low-quality products. Our suggestion: make Dell a corporate brand and make AlienWare the Dell consumer brand. Dell's can then be stable, long-lasting corporate platforms since that's what businesses want, while AlienWare computers can focus on pursuing consumer performance and style.
2. Jettison junk from the Dell product line. Dell has no meaningful business interest in plasma and LCD TVs, nor has it made as much as a dent in other markets like music players and video projectors. Low cost in all those markets is a given, but great marketing sets the leaders in those markets apart. If Dell is going to pull out of its funk, it needs to refocus on computers and do them well -- and that means getting rid of distractions that the company has no chance of leading the market in.

Move Dell notebook production back to the US. Dell pioneered customized manufacturing of computers -- but only for desktops. Most notebook computers regardless of brand are made by companies like Quanta and Foxconn in China, which poses some serious security challenges for some US governmental organizations. If Dell were to apply its supply chain and manufacturing logistics leadership to the US notebook computer business, organizations ranging from the US Army and Navy to the Department of Homeland Security would be issuing purchase orders like there was no tomorrow, simply because Dell would be the sole US laptop supplier. While this would only be the beginning of a turnaround, it would have huge business, marketing, and political value -- and that, more than technology, is what Dell needs most.

Disclosure: Blackfriars and I have no business relationships or positions with Dell.

Comments

[RichardatDELL]

This comment was posted on the original blog earlier today:

Thanks for the perspective on the CEO change here at Dell. As you note, we expect to go through a period where we make some difficult decisions, but the right choices for our company. Also, I want to thank you for the ideas you posted. As you can imagine, there are a lot of things on the table for consideration. Your input is appreciated.

At this point, I can tell you with Michael as CEO, he is energized and determined and so is the organization. We will show the world that when Dell is focused on building success, there is no one better at it than us. We have done that throughout our 23 year history and will do it again this time.

Dell's direct model and 1:1 relationships with customers should not be underestimated and we are going to show what this means. We are looking to lead the technology industry for the long-term; to be known as a successful company with strong operating and financial performance; and, our customers are going to rave about the Dell customer experience.

For some additional perspective you might want to check this out:
direct2dell.com/one2on.../ 5481.aspx