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Dell Stepping Down as CEO

UPDATE: After twenty years at the helm of Dell Computer , Michael Dell is stepping aside to make room for Kevin Rollins as the new chief executive officer.

The announcement came during Dell's board of directors meeting, which is taking place in New York. The company said the board appointed Mr. Rollins CEO, which will be effective at the company's July 16 annual meeting of shareholders.

In a statement Thursday, Dell said he would remain as chairman of the board and "deeply involved in the company's day-to-day business."

Rollins, who currently serves as president and chief operating officer, will become president and chief executive officer. He will also be nominated for election to the Dell board at the annual meeting, the company said.

The news was not a surprise to some industry observers, such as IDC research analyst Roger Kay. "Michael is young may be ready to do something new," he told internetnews.com.

"He's been spending more time with his kids at his ranch in Hawaii. And why not? He's been doing the same thing for 20 years. Michael gets tremendous credit for what he has done with the company in that he is more of a technophile that started hawking computers from his dorm room. He has had the foresight to bring in experienced people when it is necessary. The shift to having Kevin run the company won't have that much impact from a business continuity standpoint. After a decade of service, Kevin needs to be rewarded."

Dell spokesperson T.R. Reid told internetnews.com that the changes are consistent with the roles that the two men have been playing for the past couple of years.

"Michael's thinking is that it is a title change instead of some structural shift in the company's business plan," Reid said. "We've had a two or three person in the CEO structure for many years and Mr. Rollins has been taking a very active role in the leadership of the company since December of 1997. This is no different than their roles were yesterday, or last week or six months ago."

Rollins has been groomed for the post. Before becoming president and COO in March 2001, he served as vice chairman of Dell, and prior to that, was president of Dell's Americas division. Before joining Dell in April 1996, Rollins served as vice president and partner of management consultancy Bain & Co., where he specialized in corporate strategy and management for high-tech and consumer-product firms. While with Bain, he developed strategies around the direct selling of computer systems and services, which came in very handy for his tenure at Dell.

Rollins is also expected to succeed Mort Topfer on Dell's board of directors. Topfer, a director since December 1999, has chosen not to stand for re-election. A former executive of the company, he retired from Dell in December 2001.

Rollins' new reign is not expected to shake up Dell's direction overnight. But Enderle Group president and market analyst Rob Enderle said the industry will be watching to see how the transfer of power shapes Dell in the next three to five years.

"It is part of a maturation of a company," Enderle told internetnews.com. "But in some cases when the founder steps out the new leader is more tactical than the founder because the founder is more connected to the long-term viability of the business, while the new leader focuses on quarter to quarter."

The most obvious examples, according to Enderle, are the outside executives that ran IBM and Gateway after their founders left.

When Thomas Watson Jr. left as CEO of IBM and John Opel took over in 1981, he was clearly focused on the bottom line, Enderle said.

"The same thing happened over at Gateway, which also hired an outside manager and took a marked direction change. By the time Ted Waitt stepped back [into the CEO role], he had lost touch with the company. There is the same concern with Microsoft. Ballmer and Gates are both founders of the company. If both were to leave, then Microsoft would slide."

With Dell, Enderle said Rollins' long-term mentoring is expected to keep Dell's short-term direction closer to what it already is.