Saturday, July 12, 2014
Inquirer Daily News

Column: Dell Looking for Apple-Like Turn

NEW YORK - Michael Dell offered up some harsh advice a decade ago on how to fix struggling Apple Computer, words that now provide an ironic sting for the newly minted CEO of his own slumping company.

"What would I do? I'd shut it down and give the money back to the shareholders," he said at a technology conference in the fall of 1997.

Of course, Apple's investors and CEO Steve Jobs have gotten the last laugh. Back then, Jobs had just returned to lead the company he had founded, beginning what would become an exceptional transformation. Dell Inc., on the other hand, has watched its business go the other way, and Mr. Dell has been recalled to the helm to get it back on track.

When founders give up operational control of companies, they often leave on a positive note. They've watched their baby flourish, and it then becomes time for someone with fresh ideas or skills to lead the next wave of growth.

But when those same founders retake the helm, warning bells often ring. Their return to the executive suite generally means the company has hit a serious rough patch and is desperate for help.

Founders can offer things outsiders cannot. They know the business, so there isn't a big learning curve. It also signals a sense of urgency to get things fixed fast since they typically have large financial stakes in the company.

All those factors surely played into the reinstatement of Mr. Dell, who founded the personal computer company in his dorm room in 1984. He has served as board chairman since he stepped down as CEO in 2004.

His successor _ and now predecessor _ Kevin Rollins had a tough run. Under his tenure, the Round Rock, Texas-based company faced a string of disappointing earnings, while its market share slipped _ it lost its No. 1 position in the PC industry to rival Hewlett-Packard Co. last year.

Dell also faces an ongoing federal accounting probe and was just named in a class-action lawsuit that alleges its profits were inflated by secret payments of about $1 billion a year from chip maker Intel Corp.

Since topping $50 a share at the height of the dot-com boom, its stock hasn't rallied as high since and today trades below $24 apiece.

Clearly, Mr. Dell is trying to assert his control right out of the gate. In an e-mail sent to employees after taking over last week, he said he was quashing bonuses for 2006 and reducing the number of managers to help cut costs. He also noted that Dell would push faster product development and expand into new businesses to drive revenue growth.

"We have a tough couple of quarters ahead," Mr. Dell wrote. "We didn't get here overnight and we won't fix things overnight either."

Investors initially cheered Mr. Dell's return, but that enthusiasm has waned in recent days despite some support from Wall Street analysts. Among those lauding the shake-up and upgrading the stock was Credit Suisse analyst Rob Semple, who said Dell "is in the need of a strategic visionary to assess the current direction of the business."

"Mr. Dell obviously fits the bill, and only time will tell if he has the magic touch again. From the looks of it, everything is on the table at Dell right now," Semple said in a note to clients.

Mr. Dell may well be the right person for the job at this moment. His entrepreneurial spirit and willingness to embrace risk made Dell into a computer giant, and those traits may just be what is needed to revive Dell today.

Comparing Mr. Dell's return to Apple's Jobs comeback is hard to resist. Jobs co-founded the Cupertino, Calif., company in 1976, and oversaw the development of the revolutionary Macintosh computer in 1984. But Jobs left Apple in 1985 after losing a boardroom power struggle.

In late 1996, he returned as an adviser, and when the CEO was ousted months later amid big losses, sagging sales and a sliding stock price, Jobs took on an expanded role. Soon after, he became interim CEO, and never left.

By the fall of 1998, Apple reported its first profitable fiscal year since 1995. Its turnaround had begun. Jobs led Apple's production of the iMac, a popular PC not just for its technology but also for its innovative, colorful look. It also has had great success with its iPod portable music player and its iTunes digital music software. Its name change to Apple Inc. in January this year reflects its increasing focus on consumer electronics

Jobs' magic touch certainly hasn't been lost on shareholders, who have watched Apple's stock go from below $4 a share in 1997 to around $86 a share today.

Such returns have made investors loyal to Jobs _ almost to a fault. That has been most evident in recent months as they have been willing to brush off legal questions regarding stock-options irregularities at the company, including a federal probe looking into the timing of option grants to Jobs.

With Apple on the upswing, and Dell certainly not, maybe it is time for Jobs to return the favor and give Mr. Dell some advice. Chances are it won't be something he would want to hear.

___

Rachel Beck is the national business columnist for The Associated Press. Write to her at rbeck(at)ap.org

RACHEL BECK The Associated Press
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