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Business & Technology

CEO aims to revamp Dell with new products, new markets

March 30th, 2007 8:21 pm by JONATHAN B. COX



DURHAM, N.C. - Wall Street had expected change at Dell since its founder, Michael Dell, took back the helm of the struggling computer manufacturer in January.


The billionaire chief executive has shaken up the senior ranks. And this past week, during a speech at Duke University, Dell hinted that more aggressive - and far-reaching - shifts are coming.


"We're in the midst of a transformation of our company," Dell told students at Duke's Fuqua School of Business. "There's a sense of urgency that's very high.


"We're really taking a fresh look at the whole business," Dell said. "A lot of things are going right, but this is a chance to reinvent" parts of the business.


Analysts have predicted that job cuts are among the steps Dell is likely to take, a move of special interest in North Carolina. The company opened a factory in Winston-Salem in 2005, after winning about $280 million in tax breaks and other incentives. The plant employs about 1,100.


The company's rising work force, though, is vexing Dell. Expenses have outpaced revenue growth as the company faces stronger competition, especially from a revived Hewlett-Packard.


"Dell's obvious main weapons in its effort" to generate more profit from each product it sells "will be head-count reductions and moves to lower-cost geographies," Laura Conigliaro, a Goldman Sachs analyst, wrote in a research report this week.


She predicted that the company will use attrition and targeted reductions to trim its work force. By her estimate, Dell could reduce manufacturing rolls by 3,500 and marketing and other personnel by about 2,500 to get back on track.


Dell did not comment specifically on the possibility of job cuts during his talk at Duke on Tuesday, but he said the company is re-tuning its staff. "Our organization got a bit unwieldy, so we're really crisping up who's responsible for what," he told attendees.


Dell also said that he is trying to take a longer view of the business - that the company had undermined its position by getting "wrapped around an intense focus on the short term."


In addition to improving the cost structure, Dell intends to develop new products and push into new markets. The company only gets about 15 percent of its business from the consumer market: Dell wants to increase that.


He also wants more innovation. Dell said the company will focus more on product design, features and software to appeal to customers. The computer maker has been criticized by some in the industry for putting more attention on how its products are made than on the products themselves.


Indeed, Lenovo, which has its global headquarters in Morrisville, N.C., has tried to set itself apart from the likes of Dell by touting the design of its machines, including airbag technology to protect data. A more aggressive push by Dell to innovate could erode Lenovo's message in the marketplace.


Lenovo spokesman Ray Gorman dismissed that possibility. "As far as Lenovo innovation is concerned, the best is yet to come," he said.


Beyond products and costs, Dell could also explore changes in the way he sells computers.


Dell built the company by selling directly to businesses and consumers. He was able to make more money on each machine because he cut out the middleman, gaining a stronger relationship with buyers.


"Our direct business model is not a religion," he said. "It's a strategy - a strategy that has worked pretty well. ... But that's not to say we can't have other strategies."


The company could evaluate selling its products through retailers or find other ways to reach customers.


It won't, however, abandon the direct approach, he said: "I think this whole Internet thing is going to work out, and I'm going to keep betting on that."


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