Dell has hired the CEO of electronics manufacturerSolectron to head up a new division overseeing worldwide operations, the company announced Wednesday, as it bolsters efforts to regain its supply chain efficiency and low-cost edge.
Michael Cannon will become the president of global operations later this month, assuming responsibility for all of the computer maker’s manufacturing, procurement and supply chain activities worldwide. Regional operations executives in the Americas, Europe, the Middle East, Africa, Asia Pacific and Japan will now report directly to Cannon.
A streamlined supply chain, lean manufacturing capabilities and successful direct sales model helped catapult Dell to the top of the PC industry starting in the late 1990s. Since then, however, Dell’s price advantage has eroded, and Hewlett-Packard recently reclaimed the title of top PC maker.
“As we continue to grow worldwide, it is important that we increase our ability, via the direct model, to manufacture close to our customer and fully integrate our supply chain into one global organization,” said founder and CEO Michael Dell. “This will allow us to drive for even greater excellence in quality, cycle time and delivered cost. We will innovate and adapt our supply chain model to help drive differentiated product design, manufacturing and distribution models.”
Investors gave a thumbs-up to Cannon, which sent Dell shares higher by 1.3 percent in morning trading Friday to US$24.20.
Work in Progress
Cannon brings 25 years of experience in manufacturing and the tech sector to the table, including a stint as CEO of disk drive maker Maxtor, which is now owned by Seagate. He also worked for IBM’s storage systems division and aircraft giant Boeing.
Cannon takes over operations at Dell during a critical time for the PC maker. Last month, Michael Dell signaled his displeasure with the company’s direction by reclaiming the CEO position and ousting top man Kevin Rollins, who had been with the firm since 2004.
Michael Dell’s return to the CEO spot coincided with a warning that Dell would miss both profit and sales targets for its current quarter.
In addition to its business challenges, Dell has faced a Securities and Exchange Commission (SEC) probe of its accounting practices, and has since announced measures aimed at boosting its bottom line.
For instance, Dell will not pay full bonuses to many of its top executives and will leave the chief operating officer position unfilled.
In a memo to employees sent after he returned as CEO, Michael Dell said the company “will not run away from a cost fight” with rivals, even though many PC makers now have operations based in lower-cost locations such as China. He also emphasized the need to improve customer service.
Ex-CEO Rollins had banked on a strategy known as “Dell 2.0,” which was to increase company earnings via sales of new consumer devices and tweaks to existing products, as well as a renewed focus on high-end server sales to corporations.
As recently as September, Michael Dell reportedly backed Rollins’ Dell 2.0 strategy. In the end, however, Dell’s board felt a change at the top was needed. A major strategic shift could be in the offing from Dell, such as using retailers to sell its PCs to consumers.
Missteps at a company such as Dell are amplified because of the razor-thin profit margins — as low as 2 percent to 4 percent — on many types of computer hardware, Gartner analyst Mark Margevicius told the E-Commerce Times.
“This shake-up underscores the difficulties involved with being a hardware manufacturer under current market conditions,” he claimed.
Dell benefited from its direct sales and best-in-class supply chain approach for a decade, Margevicius added, leveraging what it learned from making and selling PCs when it added new products such as printers and flat-screen displays.
“The market has become more challenging for Dell,” Margevicius said, with PC growth shifting to lower-priced markets where Dell’s model has not converted smoothly.
In the past three months, Dell has seen a new CFO, new CEO and now a new head of operations — practically a clean sweep of the upper echelon of management, Roger Kay, principal analyst with Endpoint Technologies Associates, told the E-Commerce Times.
“There is a perception that the company needed a jolt,” he said, “and new faces and new energy at the top can provide that.”