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Posted on: Friday, March 5, 2004

Dell plans to shed CEO title in July

By Mike Musgrove
Washington Post

KEVIN ROLLINS

Michael Dell, founder of the Texas computer company that bears his name, announced yesterday that he will step down as chief executive, making him the latest top corporate executive to shed a key title.

Kevin Rollins, 50, the company's president and chief operating officer, will replace Dell as CEO at the company's annual shareholders meeting in July.

Dell, 39, who started the company from his college dorm room two decades ago and now is one of the world's richest men, will retain the title of chairman. He also will remain "deeply involved in the company's day-to-day business" according to a company statement.

Rollins, who joined Dell in 1996, is well known to investors, having taken on more of the duties of running the company. Analysts said yesterday's upgrade in title marks a natural evolution for Rollins and the company.

Roger Kay, an analyst at the research firm IDC, said Rollins is seen as the more strategic thinker, while Dell has always been known as a hands-on manager.

"This is really just a continuation of a transition that has been under way for a long time," he said.

Though it was once common for key executives in the tech sector to wear two hats — chief executive and chairman — many companies, such as Microsoft Corp., now are dividing the jobs between two executives.

Watchdog groups have said that separating the jobs is critical for maintaining healthy corporate governance, but even some of the watchdogs saw the move at Dell as a simple housekeeping matter, as one put it.

"Normally, when you talk about splitting the chairman and CEO positions, it is to provide additional independent oversight," said Nell Minow, editor of Corporate Library, an independent research firm specializing in corporate governance. "That is clearly not the case here. They are just trying to make the job descriptions fit the title."

The Dell transition appears to be a tranquil transfer of power, especially compared with Walt Disney Co., where angry shareholders pushed the board on Wednesday to strip chief executive Michael D. Eisner of his chairman's title.

Dell's revenues totaled $41.4 billion last year. The company competes with Hewlett-Packard Co. for the title of the world's No. 1 computer maker.

Where all other computer makers sell some products through retailers, Dell sells all of its products directly to consumers over the Internet.

Though most of Dell's revenues come from corporate customers, it has been diving deeper into the consumer electronics marketplace, with new lines of digital music players and liquid crystal display televisions.

Rollins joined Dell in April 1996 as senior vice president of strategy, after doing work for the company as a management consultant with Bain & Co.

Rob Enderle, principal analyst in the San Jose-based Enderle Group, said that, in the history of the tech industry, the reduction of a founder's role at a company is often negative because it marks the point where the emphasis shifts to quarterly earnings reports over long-term strategy.

"It is rare that the change has a positive impact," Enderle said. "Typically, the best-case scenario is that there won't be any impact at all."

Others argued that Dell's relinquishment of the chief executive title is a logical extension of the company's business model, which is regularly praised for its efficiency.

"I think that it's a credit to Dell that he's built an organization to the level that people aren't freaking out," said Paul Saffo, a director at the Silicon Valley research organization Institute for the Future.

"If he was hit tomorrow by a truck, people would be very sad, but the company would continue steadily on its course," Saffo said.