Should Michael Dell fire himself?

He's the wrong man to lead the company he founded.

By Jonathan Berr May 23, 2012 12:38PM

Image: CEO (© Photodisc/Getty Images)When Michael Dell returned in 2007 to run the company he founded in his University of Texas dorm room more than two decades earlier, Wall Street hailed the return of the prodigal CEO.


One of the few voices of skepticism was that of Wharton professor Peter Cappelli.

 

"The people who have founded organizations and have the entrepreneurial zeal and the ideas and such often aren't the people who can take the organization to the next phase," Cappelli told Knowledge@Wharton, a site run by the University of Pennsylvania's business school. "Sometimes you need more administrative skills, more management skills. Sometimes leadership and zeal isn't enough," he added.

 

Cappelli hit the nail on the head. As anyone who has followed Dell (DELL) the company in recent years has seen, Dell the man has turned out to be the wrong man to the lead his namesake company. This past quarter has been no different, with the company once again disappointing Wall Street.

 

Net income for the three months ended May 12 plunged to $635 million, or 36 cents a share, from $945 million, or 49 cents a share, a year earlier. Earnings were 43 cents a share, excluding one-time items, lagging the 46-cent average estimate of Wall Street analysts. Revenue slumped 4% to $14.4 billion, missing the $14.9 billion consensus forecast.

 

Revenue at the third-largest personal computer maker is expected to rise 2% to 4% to $14.7 billion to $15 billion, well below the $15.4 billion Wall Street had expected.

Dell the man had plenty of excuses for Dell the company.

 

"In my own interactions with larger customers, we are seeing a delay and pause in spending activity," he told analysts Tuesday on a conference call, adding that "corporations are still adopting Windows 7" as Microsoft (MSFT) prepares to roll out Windows 8. (Microsoft owns and publishes Top Stocks, an MSN Money site.)

 

Unfortunately, PCs, the product that made Dell billions, are becoming increasingly commoditized. Business customers, who are supposed to be a focus of Dell, are spending their money with the company's rivals, such as Hewlett-Packard (HPQ).

 

In the earnings release, Dell the CEO said, "We're committed to continuing our strategy to re-shape Dell's business as an end-to-end IT provider."

 

His management team even blamed the company's sales force for focusing on individual products rather than on bundling services together, and it's reorganizing the department along those lines. Once again, Dell is a day late and dollar short. IBM (IBM), for one, has probably operated along those lines for more than a decade. The fact that Dell was operating in this manner is Michael Dell's fault alone.

 

If Dell the man really cares about Dell the company, he should step aside and hand the reins over to someone else. It worked for Ford -- and could work for him.

 

Jonathan Berr has no positions in the stocks listed here. Follow him on Twitter@jdberr.

 

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