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Dell: Reinvented?

The company is planning to re-evaluate every aspect of its operation, says its CEO, Kevin Rollins. It plans to place a new emphasis on PC design, look for ways of trimming its already lean supply chain, reassess all of its suppliers and open stores to increase sales.

The company has already started implementing some of the changes - a strategy it's dubbing Dell 2.0. The changes are designed to keep the company up to date with evolving customer demands, said Rollins during a keynote address at Technology Day, a briefing for media and analysts.

The announcement came as Dell is facing tough criticism on a number of fronts - a battery recall, falling earnings and, most recently, an U.S. Securities and Exchange Commission (SEC) investigation which lead Dell to delay filing its Form 10-Q for the second quarter of 2006.

Dell has always lead in performance and cost, Rollins claimed, but now it wants to broaden its focus to include design and usability. Dell plans to hire a number of new designers to accomplish this.

"But we don't design products only to be cool," he said. Performance will remain a high priority, given that 80 per cent of Dell's customers are corporate, he said.

Dell is also planning to open up new manufacturing facilities in a number of areas around the world such as India, Brazil and Eastern Europe in order to be closer to emerging markets.

Dell will also place a greater emphasis on different industry verticals since they all have unique needs, Rollins said. "It's not a one-size-fits-all world."

The company, which became famous for selling computers online, has opened a full store in Dallas to gauge customer response. It already has a number of kiosks in large malls.

Asked, during a Q&A if the past year's performance meant it was a time for a change of guard at Dell, Rollins joked, "I disagree with that."

Michael Dell, the company's founder and chairman came to Rollins defence and said any speculation of Rollins being replaced was pointless and that its shareholders supported Dell's leaders.

"Kevin and I run our company together, so if you want to blame somebody, you can blame me too," he said.

Asked about the SEC investigation, Michael Dell would only comment that it's cooperating.

Mika Kitagawa, a principal analyst with Gartner in San Jose, Calif., said she doesn't think the investigation will hurt Dell's enterprise sales as details are still unclear at this point.

Dell's earnings dropped during the last quarter because Dell was a victim of its own success, she said.

"No PC vendor has achieved what (it) achieved." It would be impossible for any company to sustain this.

Also, Dell's primary markers -- the enterprise market and the mature market, which Gartner defines as North America and Europe -- are saturated and most of the sales are replacement sales. The replacement cycle peaked in 2004/2005 when users upgraded PCs purchased during Y2K, she said.

While emerging markets such as India and China are growing. Dell's online sales model hasn't been a great success there, as users often go into stores.

HP, on the other hand, is coming back from a bad year, she said.

Dell seemed disorganized during the media conference, she said. This is the company's first experience facing global challenges, and you "can see some confusion within the organization," Kitagawa said.

However, she doesn't foresee any major changes within Dell.

Kitagawa doesn't know how Dell can further streamline its supply chain operation since it's she thinks it's already achieved such high efficiency.

But Dell isn't excluding any part of the company from reevaluation, even though the demand- or pull-driven manufacturing process works quite well, said Dell during a Q&A with Canadian and Latin American media.

HP, however, has much room to improve, Kitagawa said.

Dell made the right decision when it recently announced it would start using Advanced Micro Devices (AMD) processors but the decision came about 12 to 18 months late, she said.

The AMD PCs would be primarily for the consumer market and that market was growing last year. As a result of its delay, Dell lost sales, she said.

Dell made several announcements, including the availability of new desktops that customers can order with AMD Athlon processors. Dell also announced that it would place an increased emphasis on building energy-efficient machines and that it would extend its five-year relationship with EMC through to 2011.
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