Dell Preps for Long Haul

For better or worse, Dell, its customers, and partners will have Michael Dell kicking around for a few more years.

Dell made it clear that he is not an interim CEO in a letter to Dell employees last week -- a letter that made its way into The Austin American-Statesman and around the Internet. In the note, Dell outlined a Grinch-like recovery plan that eliminates bonuses this year while limiting spending and bureaucracy inside the company. Dell also calls for his company to become a technology leader.

We are not doing a COO or CEO search. I plan to be CEO for the next several years,” wrote Dell, who returned to the post when the board fired Kevin Rollins last week. (See EMC Loses Ally in Rollins.)

In exhorting his team to fight the “new enemy: bureaucracy,” Dell wrote: “I am asking each of you to look across your organizations and eliminate redundancies, think about what is best for Dell, and provide the clarity and focus of leadership that we need.”

He also outlined a few staffing changes, but said the product groups will remain largely unchanged. As for storage, it appears status quo. “We will continue to build the Server/Storage business,” Dell wrote, in the only mention of storage. He also vowed to grow SMB-related businesses, a segment Dell has targeted for a storage push in recent months. (See Dell, Microsoft Push Storage.)Dell did not mention the Securities and Exchange Commission investigation into Dell’s accounting practices, nor did he mention that the company did not file an earnings report after its two previous quarters. (See Dark Days at Dell.) Dell instead concentrated on the company’s slide in revenue growth over the past year.

When Dell fired Rollins last Wednesday, it also announced its revenue and earnings last quarter failed to meet analysts’ expectations.

Dell thinks that the turnaround will take time with “a tough couple of quarters ahead.”

“We had great efforts, but not great results,” he wrote. “This is disappointing and it is unacceptable.”

While Dell’s return has generally received favorable reactions from analysts who follow the company, at least one questioned whether the company can become a technology leader while cutting costs.“We do not see how Dell can lead in technology or customer experience while reducing [operating expenses] from levels that are already almost a third lower, as a percentage of revenue, than those of key competitors HP and Apple,” Clay Sumner of Friedman, Billings, Ramsey & Co. wrote in a research note.

Investors are also skeptical. Dell’s stock price, which closed at $24.55 last Wednesday when Rollins was fired, was at $23.57 at noon ET today.

— Dave Raffo, News Editor, Byte and Switch