THERESE POLETTI'S TECH TALES: Can Founders Like Dell, = Yang Save Their Companies?

SAN FRANCISCO (Dow Jones) -- Can founders = of large=20 companies swoop in to the rescue when their ships have gone = adrift? The=20 high-tech world has seen two such examples in the past year, and = the jury=20 is still out on both.

The momentum so far seems to be with Michael = Dell, who=20 last month celebrated the first year of his return to the chief=20 executive's chair of the company he founded in a college dormitory = at age=20 19. While Dell (DELL) has remained in second place to a = rejuvenated=20 Hewlett-Packard Co. in PCs, = he has=20 managed to clean house, focus the company on new growth areas such = as=20 storage virtualization and engineered a big push into retail, once = a=20 shocker for the company which prides itself on its build-to-order, = low-cost manufacturing model.

By contrast, Jerry Yang seems to have = sputtered in the=20 eight months since he was named CEO of Yahoo (YHOO), which he also = established as a=20 college student with buddy David Filo.

Investors seem to agree, in a manner of speaking. While Dell's = shares=20 are down about 13% since Dell's return b in late January=20 2007, Yahoo = shares had=20 slid more than 30% since Yang's comeback before a surprise = takeover offer=20 by Microsoft ( MSFT) = pumped up=20 the stock earlier this month.

Both founders came back to day-to-day operating roles from = loftier=20 positions in the troubled companies. Round Rock,=20 Texas-based Dell had experienced a tumultuous = two=20 years. The computer maker, which pioneered selling PCs directly to = businesses and consumers at a lower cost than retailers, was = getting=20 hammered by a restructured H-P (HPQ) and its accounting was a = mess,=20 fueling an SEC investigation.

Yang had watched his company go from a must-visit Web = destination that=20 could command high dollars for advertising to an also-ran in the = space, as=20 search giant Google = (GOOG)=20 outflanked Yahoo by = figuring=20 out how to place online ads more effectively in front of their = desired=20 audiences -- thereby swiping about two-thirds of the search ad = market.=20

To be fair, Yang's return in June as chief executive is = different=20 because Yang never really ran Yahoo, while Dell was chief executive of his company until = 2004.

"He is a very unique personality in the industry," = Roger=20 Kay, president of Endpoint Technologies Associates, said = of Dell.=20 "Even though he is a founder, he adapted to a big-company = environment=20 better than most founders."

When Yang, now 39, and Filo founded Yahoo in 1994, they both took the = titles of=20 "Chief Yahoo." Even today, both seem better suited to sitting = behind their=20 computers or hosting meetings with their top engineers than = plotting a=20 major strategy to help the company better confront rival = Google in the ad serving Internet = search space.=20

Dell was someone who has remained close to the company's = operations,=20 though he also readily delegated responsibilities as the company = grew into=20 a behemoth in the personal computer industry, using state-of-the = art=20 manufacturing tactics and hiring executives who could fill in the = blanks=20 with skills he was lacking. Perhaps it also helped that Dell the = company=20 had a clear, singular vision of where it was heading, with a = business=20 model that worked for many years.

One test Dell has encountered in his return is the serious = competition=20 now posed by H-P, as well as a PC market that has changed, where = consumers=20 have become the dominant buyers of new tech trends, while = corporations,=20 once Dell's biggest bread and butter customers, have taken a back = seat and=20 are spending less and trying to hold onto their PCs longer.

To combat this trend, Dell has had to improve its notebook = offerings,=20 becoming the preferred systems for consumers, and move into the = retail=20 chain, selling systems in the big computer stores such as = Best Buy=20 Co. Inc. (BBY), Staples = Inc.(SPLS) and Wal-Mart Stores = Inc. (WMT) According to data from NPD = Group, Dell's=20 unit share of the U.S. retail computer market increased 1 %, 3% = and 5% in=20 November, December, and January, respectively.

"Early success in retail validated by NPD retail sell-through = in=20 January, give us confidence that new retail partners could add = $1=20 billion next year to our worst-case revenue forecast of=20 $63.5 billion," wrote Brent Bracelin of Pacific = Crest=20 Securities. Dell appears to have gained its share at the expense = of the=20 Asian giants, Acer Inc. and Lenovo Group Ltd.(LNVGY), = more than=20 H-P, he added.

Yahoo, on the = other hand,=20 has had a bigger challenge. It has morphed from its origins as a = quirky=20 upstart founded by two Stanford University students aimed at = organizing=20 the increasing chaos on the Internet, to a search giant, a content = provider, and a portal/Web site where many consumers get email and = read=20 their first news in the morning. But Google has trounced it in search-based = advertising.

Yahoo, too, has = been making=20 acquisitions, such as email and collaboration software Zimbra and = online=20 advertising network Blue Lithium. But some also question=20 Yahoo's ongoing = investments in=20 Panama, a technology aimed at boosting search = results, and other search technologies, at the expense of other = businesses=20 such as display ads.

In the case of Yang, the clock appears to be ticking anyway, as = Microsoft has plenty = of money=20 to woo Yahoo's = shareholders.=20 Yahoo investors will = likely be=20 able to cash out with some healthy returns, and Yang's large = ownership=20 stake (worth nearly $1.5 billion at current market = prices)=20 should give him plenty of cash to try his hand at something else. =

For Dell, the jury is still out. Time will tell if Dell's moves = will=20 pay off and rejuvenate the business. And a healthy amount of = skepticism=20 exists. In a report earlier this month, Cowen & Co. technology = analyst=20 Arnie Berman dismissed the characterizations of Dell's return as a = "revolutionary change," given that he had remained heavily = involved in=20 management and the new CEO role did not even require him to move = his desk.=20

"A year after the departure of Kevin Rollins, = Dell=20 remains a contract manufacturing aggregator whose investments in=20 developing a strong consumer brand and a retail channel will = likely weigh=20 on both (return on equity) and stock price for the foreseeable = future,"=20 Berman wrote.

One proof point to how Dell's return is faring will come in the = company's fiscal fourth quarter earnings Thursday. But in terms of = strategy, Dell seems to have a clearer focus.

  (END) Dow Jones Newswires
  02-28-08 0047ET
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