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December 31, 2008, 4:05 pm

The Dell Shakeup: Everyone Becomes a = Consultant; Few=20 Seem Impressed With Latest Re-org

Posted by Tiernan Ray

Today closes a chapter in the Dell (DELL)=20 recovery story: Founder and CEO Michael Dell hired Mike Cannon, = formerly=20 chief executive of contract electronics manufacturer Solectron = (sold to=20 Flextronics (FLEX)=20 last year), in February of 2007 to fill a new post of President of = Global=20 Operations. Today, Cannon=20 is departing, with Dell shares trading at $10.20, less than = half what=20 they were on Valentine=E2=80=99s Day, 2007, when Cannon=E2=80=99s = appointment was=20 announced.

More than anything, the shake-up promises to leave Dell with = lots of=20 consultants:

Cannon=E2=80=99s to be replaced by Jeff Clarke, who has been = head of business=20 client products, but Cannon will remain on as a consultant. At the = same=20 time, the company=E2=80=99s head of marketing, Mark Jarvis, is = leaving, to be=20 replaced by Erin Nelson, who has been running marketing for Dell = in=20 Europe. Jarvis is to also remain on retainer.

Cannon=E2=80=99s departure is part of a reorganization of its = commercial PC=20 operations (those that cater to business versus consumers) = announced by=20 Dell, with the company shifting from a division that was based = around=20 geographic regions, to a new structure built upon three customer=20 categories: large enterprise, public sector, and small and medium=20 businesses.

R.W. Baird analyst Jayson Noland, who has a = =E2=80=9CNeutral=E2=80=9D=20 rating on shares of Dell, is concerned about what Cannon=E2=80=99s = departure means=20 for Dell=E2=80=99s cost-cutting initiatives: =E2=80=9CWe believe = Cannon was charged with=20 the bulk of the $3 billion cost savings initiative outlined at = Dell=E2=80=99s=20 April analyst day,=E2=80=9D he writes in a report today. = =E2=80=9CTherefore, we view=20 Cannon=E2=80=99s departure as a near-term red flag given that = gross margin=20 improvements are key to improving operating leverage at = Dell.=E2=80=9D Noland=20 observes that Dell today reiterated its $3 billion cost savings = goal.

Noland says the restructuring of commercial PCs is a good move, = that it=20 will help Dell service large corporate customers.

Others argue the product is lacking. Bloomberg=20 quotes Roger Kay, president of researcher Endpoint Technologies = Associates=20 Inc. in Wayland, Massachusetts, as saying, =E2=80=9CThis = restructuring is in=20 response to mediocre results [=E2=80=A6] It is not enough. They do = need to work on=20 their product portfolio and their supply chain and = distribution.=E2=80=9D

Dow Jones Newswires quotes a Barclays = Capital=20 Equity Research note, which argues that =E2=80=9CGiven = Cannon was leading=20 the cost effort, we believe investors need more specifics from the = company=20 around where the savings are coming from, how much could fall to = the=20 bottom line, and what metrics we can use to measure the = company=E2=80=99s=20 success.=E2=80=9D

Permalink | Trackback URL:=20 = http://blogs.barrons.com/techtraderdaily/2008/12/31/dell-shakeup-closing-= a-chapter-on-dells-struggle-to-come-back/trackback/=20
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Comments

Report offensive comments to techtraderdaily@barrons.com

He can=E2=80=99t execute. Tell his cozy board to remove him. = None of his=20 employees support Michael, he=E2=80=99s lost our respect. No one I = know supports=20 him or his team.

Comment = by Fire Michadl Dell. - December 31, 2008 at 4:35 pm

With nothing different in the pipeline, Dell will make that = sad,=20 painful decline to irrelevance. Gateway anyone?

Comment = by TimboM - December 31,=20 2008 at 5:25 pm

When a company is bereft of true customer value-creating = innovation -=20 and Dell=E2=80=99s one trick was postponed manufacturing for = distribution - they=20 do one round of restructuring after another. They still have a few = thousand employees to fire so thqt they can keep squeezing out = earning,=20 but what then? Meanhile they spend almost as much on R&D as = Apple with=20 nothing to show for it. What a mess. What were those famous words = for=20 Apple, Michael?Perhaps that is the best solution.

Comment = by One more thing - December 31, 2008 at 5:34 pm

Too bad that their cozy little relationship with Intel = can=E2=80=99t be resumed=20 in it=E2=80=99s full glory! Then they could increase their bottom = line by several=20 hundred million without even trying!! All they=E2=80=99d have to = do is stop=20 selling AMD CPUs, but then, of course, their server customers = would just=20 go somewhere else, along with all their $$$=E2=80=A6.

Comment = by drcpu - December 31,=20 2008 at 6:48 pm

Dell can=E2=80=99t be saved till all middle management is gone. = You don=E2=80=99t need=20 layers of people repackaging status, as well as lying. We were not = allowed=20 to fix the problems we found, as this would impact schedules, = mangement=E2=80=99s=20 bonuses are tied to schedules.

Comment = by XDell - December 31,=20 2008 at 9:47 pm

If true that Dell spends as much on R&D as Apple then = something is=20 clearly wrong. Time to cut R&D and lay off lots of those = folks. I=20 don=E2=80=99t see anything special coming out of dells = products.

Comment = by John - January 1,=20 2009 at 1:35 am

This marks another major milestone in the long history of dirty = politics played by Jeff Clarke as he relentlessly moves up the = Dell ranks=20 at all costs. The only way Michael can save the company is to fire = anyone=20 who has been with the company before 2000. These fat cats have too = much to=20 lose by changing the status quo. Michael should start off at the = top and=20 fumigate the place if there is to be any hope at = all=E2=80=A6

Comment = by Savage - January 1,=20 2009 at 3:31 am

Whatever happened to this company. Years ago they could do = nothing=20 wrong. Maybe they should go back to 1984.

Comment = by Alvin Arsewipe - January 1, 2009 at 7:47 am

Bought a laptop - 5 total failures so far - remotely deleted = the=20 conflicting software witin weeks of purchase - then - replaced = screen -=20 replaced motherboard - replaced screen again - replaced graphics = card.=20 Still in 1st year - quality??? Any questions???

Comment = by Dave - January 1,=20 2009 at 11:19 am

Post a Comment

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