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Dell reconsiders strategy as PC shipments slump

Dell Inc founder Michael Dell, whose direct-to-consumer sales strategy created one of the world's top PC makers, said new thinking is required as his company struggles to spark growth.

"The direct model has been a revolution, but is not a religion," Dell wrote in an e-mail to employees on Thursday. "We will simplify our business model and go beyond it to give our customers what they need."

The message signals Dell may be reconsidering its strategy after Hewlett-Packard Co, which sells PCs through retailers, trounced Dell in the market for a third straight quarter. The e-mail was at least Dell's second to employees since he reclaimed the chief executive officer title in January after ousting protege Kevin Rollins.

While he tweaks the business model, Dell, 42, is also handling a government probe into the company's accounting. Round Rock, Texas-based Dell said last month it found evidence of misconduct and errors as part of a US Securities and Exchange Commission review that escalated into a formal investigation in November.

Shares of Dell rose US$0.32 to close on Friday at US$25.23 in NASDAQ Stock Market trading. The stock has fallen 2.7 percent in the past 12 months, compared with a 27 percent gain at Palo Alto, California-based Hewlett-Packard.

"This is one of the most exciting periods in our history, but it requires all of us to stand together as one Dell to make profound changes and take well thought-out risks," said Dell in the e-mail. "We will simplify our organization to make it easier to hear customers."

Dell's sales of PCs, which account for most of its revenue, declined after US consumers complained of poor customer service and spurned its notebook designs.

Dell lost the PC market lead last year after capturing the top spot in 2003. Its first quarter US shipments fell 14.4 percent, according to research firm IDC.

In the past three months, Michael Dell has expanded his team of top managers, tapping Motorola Inc's Ron Garriques to lead a new consumer unit and Mark Jarvis, formerly of Oracle Corp, to serve as the company's first-ever chief marketing officer.

At least five longtime executives have left since December, including Rollins and former chief financial officer James Schneider.

Dell's plans to revive the business include devising new approaches to manufacturing and distribution. That may help the company regain the price advantage it once held over rivals such as Hewlett-Packard, which copied Dell's earlier innovations to offer lower-priced systems.

"These won't merely be exercises in cost cutting," Dell said in the memo.

"We plan to eliminate overlaps in organization and activities," he said.
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