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CEO Dell: We're losing our religion

That's us in a corner

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Dell today leaked a memo to the press, hoping to prove that it's serious about making a strong comeback.

CEO Michael Dell penned the memo that went out first to employees and then shortly thereafter to the Wall Street Journal, once Dell's PR team gave the all clear. The e-mail made ample use of broad statements and rhetoric to rally troops around the Dell 2.0 concept, which has a revitalized Dell trying new things like being nice to consumers to get back in the hardware game. In particular, Dell will work to make its management, manufacturing, supply chain and customer service more efficient, CEO Dell said in the memo.

Most reporters covering the leaky letter focused on two sentences.

"The direct model has been a revolution, but is not a religion," Dell wrote in the e-mail. "We will continue to improve our business model, and go beyond it, to give our customers what they need."

But Dell already used the "direct model is not a religion" shtick in a March speech to Duke University MBAs.

"I think first of all we have to state that our direct business model is not a religion," Dell told the students. "It's a strategy, a strategy that works pretty well, has worked well in a number of countries, a number of customers. But that's not to say that we can't have other strategies as well to sell our products, so we have a great distributor business throughout the Middle East and in a number of countries in Africa that's thriving."

[Has it really come to plugging sales in Africa? - Ed]

Poking fun at the 180 twist in direct model rhetoric proves easy. Every executive, including founder Michael, has turned to the "direct model" as an answer for Dell's successes and the answer for how it will fix failures.

"The direct thing is a religion," said (cough) former CEO Kevin Rollins, in an interview. "That's what we do, that's the basis. We have a better cost structure than any of our competitors, we can offer better customer support, so no. We'll experiment with things from time to time, but the core of the model is going to be direct."

And, er, there was that pesky interview with UCSD where the questioner asked Michael Dell if there was "any company religion?".

"Go direct to suppliers," Dell responded.

We've beat up Dell plenty over dishing the "direct model" line as a response to any question and thank the heavens that the company has finally decided to modify its marketing.

Beyond the direct stuff, Dell promised to craft a more efficient company.

"We need to streamline our management structure to speed decisions and remove bureaucracy," he wrote in the memo. "We're making improvements in pricing, product development and fulfillment, and customer experience."

Again, however, this is old news.

Back in February, Dell sent a much more detailed memo to employees - one not meant for the press.

In that missive, Dell wrote,

Last year, we worked really hard and there were many sacrifices. Thanks!

We had great efforts, but not great results. This is disappointing and it is unacceptable.

The result is that there will be no bonus this year. I know this is a big deal for you and your teams. We're going to fix that so that our efforts translate into great results and success for our teams.

Later, he added the following:

Long-term, we will be the technology leader known for strong operating performance, a great experience for our customers and a great place to work!

We will have clear priorities and a focused strategy.

We will grow Small and Medium Business (both with business and public customers) and expand Services.

We will continue to build the enterprise Server/Storage business. In Services, we will build, partner and buy.

Product Group will shorten design cycles, increase speed and innovation/design that create real differentiated value for our customers. We will transition to a light touch ODM (original design manufacturer) model.

We're going to introduce new brands and products with a focus on Consumer and Small Business. We will ensure quality, stability and predictability for our larger customers.

And then Dell kept right on going:

To summarize, we will differentiate with CE (customer experience); deliver value, but go beyond this with our unique understanding of customers; move to Solutions and Services; use database marketing and targeting for smaller customers; leverage our unique supply chain; regain our cost position; and build some new sources of sustainable profit including using intellectual property to differentiate.

It's all part of Dell 2.0.

You won't find that in the Wall Street Journal.

While these aren't meant as anything more than cheer leading notes to staff, the leaked e-mails lack any concrete plan of action. Okay, Dell may well be able to remove some bureaucracy from its upper ranks. But can the company really find much fat to cut from its vaunted manufacturing machine? Can Dell really acquire its way into the services game? And what on Earth will Dell's famished R&D team craft to compete against the multi-billion dollar R&D animals at IBM, HP and Sun Microsystems?

Price has always been Dell's weapon, and we just found a much, much cheaper PC at HP. . . ®

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