Editing Dell (section)

=== Key events ===
[[File:DELL AIXM X51v.jpg|thumb|Dell Axim X51v, shown with the Japanese Wikipedia main page open]]
In 2005, while earnings and sales continued to rise, sales growth slowed considerably, and the company stock lost 25% of its value that year.<ref name="BW0206">Bloomberg-Businessweek [https://web.archive.org/web/20071028132635/http://www.businessweek.com/technology/content/feb2006/tc20060223_710372.htm?chan=search Its Dell vs the Dell way], February 2006. Visited: April 10, 2012</ref> By June 2006, the stock traded around US$25 which was 40% down from July 2005—the high-water mark of the company in the post-dotcom era.<ref name="nytimes2006">{{cite news|last=Darlin |first=Damon |url=https://www.nytimes.com/2006/06/15/technology/15dell.html |title=Falling Short of A+ |work=The New York Times |date=June 15, 2006 |access-date=October 30, 2012}}</ref><ref>{{cite web|url=http://news.cnet.com/Dell-revamps-product-group%2C-adds-executives/2100-11746_3-6143163.html |title=Dell revamps product group, adds executives |website=CNET |date=December 12, 2006 |access-date=October 30, 2012}}</ref> By June 2021, the stock had reached an all-time high of over US$100 per share, reflecting the company's successful transition to a technology service provider that helps customers navigate digital transformation.<ref name="Yahoo Finance">{{Cite web |title=Dell Technologies Inc. (DELL) Stock Price, News, Quote & History - Yahoo Finance |url=https://finance.yahoo.com/quote/DELL/ |archive-url=https://web.archive.org/web/20250428220516/https://finance.yahoo.com/quote/DELL/ |archive-date=April 28, 2025 |access-date=2025-05-18 |website=Yahoo Finance |language=en-US |url-status=live }}</ref>

The slowing sales growth has been attributed to the maturing PC market, which constituted 66% of Dell's sales, and analysts suggested that Dell needed to make inroads into non-PC business segments such as storage, services, and servers. Dell's price advantage was tied to its ultra-lean manufacturing for desktop PCs,<ref name="autogenerated1">{{cite web|url=http://news.cnet.com/2100-1014_3-6155185.html |title=Michael Dell back as CEO; Rollins resigns – CNET News |website=CNET |date=January 31, 2007 |access-date=October 30, 2012}}</ref> but this became less important as savings became harder to find inside the company's supply chain, and as competitors such as Hewlett-Packard and [[Acer Inc.|Acer]] made their PC manufacturing operations more efficient to match Dell, weakening Dell's traditional price differentiation.<ref name="news.cnet.com">{{cite web |last=Haff |first=Gordon |date=March 29, 2010 |title=The real Dell 2.0 &#124; The Pervasive Data Center – CNET News |url=https://www.cnet.com/tech/tech-industry/the-real-dell-2-0/ |access-date=January 9, 2014 |website=CNET}}</ref> Throughout the entire PC industry, declines in prices along with commensurate increases in performance meant that Dell had fewer opportunities to upsell to their customers. As a result, the company was selling a greater proportion of inexpensive PCs than before, which eroded profit margins.<ref name="ZDA"/> The laptop segment had become the fastest-growing of the PC market, but Dell produced low-cost notebooks in China like other PC manufacturers which eliminated Dell's manufacturing cost advantages, plus Dell's reliance on Internet sales meant that it missed out on growing notebook sales in big box stores.<ref name="nytimes2006"/> ''CNET'' has suggested that Dell was getting trapped in the increasing commoditization of high volume low margin computers, which prevented it from offering more exciting devices that consumers demanded.<ref name="autogenerated1"/>

Despite plans of expanding into other global regions and product segments, Dell was heavily dependent on US corporate PC market, as desktop PCs sold to both commercial and corporate customers accounted for 32 percent of its revenue, 85 percent of its revenue comes from businesses, and 64 percent of its revenue comes from North and South America, according to its 2006 third-quarter results. US shipments of desktop PCs were shrinking, and the corporate PC market, which purchases PCs in upgrade cycles, had largely decided to take a break from buying new systems. The last cycle started around 2002, three or so years after companies started buying PCs ahead of the perceived [[Year 2000 problem|Y2K]] problems, and corporate clients were not expected to upgrade again until extensive testing of Microsoft's [[Windows Vista]] (expected in early 2007), putting the next upgrade cycle around 2008.<ref name="ReferenceA">{{cite web|url=http://news.cnet.com/Dell-revamps-product-group%2C-adds-executives/2100-11746_3-6143163.html |title=Dell revamps product group, adds executives – CNET News |website=CNET |date=December 12, 2006 |access-date=January 9, 2014}}</ref><ref name="ReferenceB">{{cite web|url=http://news.cnet.com/Dells-dog-days-of-summer/2100-1014_3-6097185.html |title=Dell's dog days of summer – CNET News |website=CNET |access-date=January 9, 2014}}</ref> Heavily dependent on PCs, Dell had to slash prices to boost sales volumes, while demanding deep cuts from suppliers.<ref name="CNNMoney-dilemma" />

Dell had long stuck by its direct sales model. Consumers had become the main drivers of PC sales in recent years,<ref name="ReferenceB"/> yet there had a decline in consumers purchasing PCs through the Web or on the phone, as increasing numbers were visiting consumer electronics retail stores to try out the devices first. Dell's rivals in the PC industry, HP, Gateway and [[Acer Inc.|Acer]], had a long retail presence and so were well poised to take advantage of the consumer shift.<ref name="director1">{{cite web|url=http://director.co.uk/MAGAZINE/2009/4%20April/Michael_Dell_62_9.html |title=Michael Dell &#124; Dell |publisher=Director.co.uk |author=Woodward, David |url-status=dead |archive-url=https://web.archive.org/web/20140815101949/http://director.co.uk/MAGAZINE/2009/4%20April/Michael_Dell_62_9.html |archive-date=August 15, 2014}}</ref> The lack of a retail presence stymied Dell's attempts to offer consumer electronics such as flat-panel TVs and MP3 players.<ref name="autogenerated1"/> Dell responded by experimenting with mall kiosks, plus quasi-retail stores in Texas and New York.<ref name="ReferenceA"/>

Dell had a reputation as a company that relied upon supply chain efficiencies to sell established technologies at low prices, instead of being an innovator.<ref name="CNNMoney-dilemma" /><ref name="director1"/><ref>Michael Dell had a risk-averse management style and he openly mocked rivals that spent on [[Research and development|R&D]] and acquisitions, though by the late 2000s this may have contributed to Dell missing market shifts like mobile phones and tablet computers.[https://web.archive.org/web/20130124121741/http://www.businessweek.com/articles/2013-01-24/boeings-787-dreamliner-and-the-decline-of-innovation#p2]</ref> By the mid-2000s many analysts were looking to innovating companies as the next source of growth in the technology sector. Dell's low spending on R&D relative to its revenue (compared to [[IBM]], [[Hewlett-Packard]], and [[Apple Inc.]])&mdash;which worked well in the commoditized PC market—prevented it from making inroads into more lucrative segments, such as MP3 players and later mobile devices.<ref name="BW0206"/> Increasing spending on R&D would have cut into the operating margins that the company emphasized.<ref name="bw1103"/> Dell had done well with a horizontal organization that focused on PCs when the computing industry moved to horizontal mix-and-match layers in the 1980s, but by the mid-2000 the industry shifted to vertically integrated stacks to deliver an end-to-end IT product, and Dell lagged far behind competitors like Hewlett-Packard and Oracle.<ref name="news.cnet.com"/>

Dell's reputation for poor customer service, which was exacerbated as it moved call centers offshore and as its growth outstripped its technical support infrastructure, came under increasing scrutiny on the Web. The original Dell model was known for high customer satisfaction when PCs sold for thousands of dollars but by the 2000s, the company could not justify that level of service when computers in the same line-up sold for hundreds of dollars.{{citation needed|date=December 2021}} Rollins responded by shifting Dick Hunter from the head of manufacturing to head of customer service. Hunter, who noted that Dell's DNA of cost-cutting "got in the way," aimed to reduce call transfer times and have call center representatives resolve inquiries in one call. By 2006, Dell had spent $100 million in just a few months to improve on this and rolled out ''DellConnect'' to answer customer inquiries more quickly. In July 2006, the company started its Direct2Dell blog, and then in February 2007, Michael Dell launched IdeaStorm.com, asking customers for advice including selling Linux computers and reducing the promotional "bloatware" on PCs. These initiatives did manage to cut the negative blog posts from 49% to 22%, as well as reduce the "Dell Hell" prominent on Internet search engines.<ref name="nytimes2006"/><ref>{{cite web|url=http://www.businessweek.com/printer/articles/294370-dell-learns-to-listen?type=old_article |archive-url=https://web.archive.org/web/20150924150128/http://www.businessweek.com/printer/articles/294370-dell-learns-to-listen?type=old_article |url-status=dead |archive-date=September 24, 2015 |title=Dell Learns to Listen |work=Bloomberg BusinessWeek |date=October 17, 2007 |access-date=January 9, 2014}}</ref>

There was also criticism that Dell used faulty components for its PCs, particularly the 11.8 million OptiPlex desktop computers sold to businesses and governments from May 2003 to July 2005 that suffered from [[Capacitor plague|faulty capacitors]].<ref>{{cite news| url=https://www.nytimes.com/2010/06/29/technology/29dell.html | work=The New York Times | first=Ashlee | last=Vance | author-link=Ashlee Vance | title=In Suit Over Faulty Computers, Window to Dell's Fall | date=June 28, 2010}}</ref> A battery recall in August 2006, as a result of a Dell laptop catching fire, caused much negative attention for the company though later, [[Sony]] was found responsible for the manufacturing of the batteries, however a Sony spokesman said the problem concerned the combination of the battery with a charger, which was specific to Dell.<ref>{{Cite news|date=August 15, 2006|title=Dell to recall 4.1 million batteries made by Sony - Technology - International Herald Tribune|language=en-US|work=The New York Times|url=https://www.nytimes.com/2006/08/15/technology/15iht-dell.2487518.html|access-date=August 6, 2021|issn=0362-4331}}</ref>

2006 marked the first year that Dell's growth was slower than the PC industry as a whole. By the fourth quarter of 2006, Dell lost its title of the largest PC manufacturer to Hewlett Packard whose Personal Systems Group was invigorated thanks to a restructuring initiated by their CEO [[Mark Hurd]].<ref name="BW0206"/><ref>CRN.COM: [http://www.crn.com/news/components-peripherals/197002312/rollins-dells-outstanding-executive-is-now-out-of-a-job.htm;jsessionid=DKITbSt2WFcQT1hL4UqHMg**.ecappj02 Rollins now out of job] {{Webarchive|url=https://web.archive.org/web/20200802201642/https://www.crn.com/news/components-peripherals/197002312/rollins-dells-outstanding-executive-is-now-out-of-a-job.htm;jsessionid=DKITbSt2WFcQT1hL4UqHMg**.ecappj02 |date=August 2, 2020 }}</ref><ref>{{cite news| url=https://money.cnn.com/2006/02/10/markets/spotlight/spotlight_dell/index.htm | publisher=CNN | first1=Amanda | last1=Cantrell | title=All's not well with Dell | date=February 10, 2006}}</ref>

====SEC investigation====
In August 2005, Dell became the subject of an informal investigation by the United States [[U.S. Securities and Exchange Commission|SEC]].<ref>{{cite web|author=Ben Ames |url=http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9002535&source=rss_news50 |title=Dell reveals SEC investigation, says Q2 profit down 51% |publisher=Computerworld.com |access-date=December 4, 2012 |url-status=dead |archive-url=https://web.archive.org/web/20090116092753/http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9002535&source=rss_news50 |archive-date=January 16, 2009}}</ref> In 2006, the company disclosed that the US Attorney for the Southern District of New York had subpoenaed documents related to the company's financial reporting dating back to 2002.<ref>{{cite news|url=https://www.reuters.com/article/idUSN0115050220100401 |title=UPDATE 2-Dell says several former staff may face SEC action, Reuters Apr 1, 2010 |publisher=Reuters.com |date=April 1, 2010 |access-date=December 4, 2012 |first=Braden |last=Reddall}}</ref> The company delayed filing financial reports for the third and fourth fiscal quarter of 2006, and several class-action lawsuits were filed.<ref>[http://www.dallasnews.com/sharedcontent/APStories/stories/D8N1MLNO0.html Dallas Morning News {{!}} News for Dallas, Texas {{!}} Texas/Southwest] {{webarchive |url=https://web.archive.org/web/20081009111823/http://www.dallasnews.com/sharedcontent/APStories/stories/D8N1MLNO0.html |date=October 9, 2008}}</ref> Dell Inc's failure to file its quarterly earnings report could have subjected the company to de-listing from the [[Nasdaq]],<ref>{{cite web |last=Moltzen |first=Edward F. |url=http://www.crn.com/showArticle.jhtml?articleID=193004297 |archive-url=https://archive.today/20120629043729/http://www.crn.com/showArticle.jhtml?articleID=193004297 |url-status=dead |archive-date=June 29, 2012 |title=NASDAQ Sends Dell, Novell Delisting Notices - Hardware - IT Channel News by CRN and VARBusiness |publisher=Crn.com |access-date=December 4, 2012}}</ref> but the exchange granted Dell a waiver, allowing the stock to trade normally.<ref>{{cite web |url=http://www.crn.com/sections/breakingnews/dailyarchives.jhtml?articleId=196903036 |title=Dell Buys Time From Nasdaq On Delisting - Hardware - IT Channel News by CRN and VARBusiness |publisher=Crn.com |access-date=December 4, 2012 |archive-url=https://web.archive.org/web/20120905025934/http://www.crn.com/sections/breakingnews/dailyarchives.jhtml?articleId=196903036 |archive-date=September 5, 2012 |url-status=dead}}</ref> In August 2007, the company announced that it would restate its earnings for fiscal years 2003 through 2006 and the first quarter of 2007 after an internal audit found that certain employees had changed corporate account balances to meet quarterly financial targets.<ref>{{cite web |last1=Ames |first1=Ben |last2=McMillan |first2=Robert |url=http://www.computerworld.com/s/article/9031106/Dell_to_restate_results_after_finding_manipulation |title="Dell to restate results after finding manipulation," Computerword, August 16, 2007 |publisher=Computerworld.com |date=August 16, 2007 |access-date=December 4, 2012 |archive-date=October 8, 2012 |archive-url=https://web.archive.org/web/20121008193903/http://www.computerworld.com/s/article/9031106/Dell_to_restate_results_after_finding_manipulation |url-status=dead }}</ref> In July 2010, the SEC announced charges against several senior Dell executives, including Dell Chairman and CEO Michael Dell, former CEO Kevin Rollins, and former CFO James Schneider, "with failing to disclose material information to investors and using fraudulent accounting to make it falsely appear that the company was consistently meeting Wall Street earnings targets and reducing its operating expenses." Dell, inc. was fined $100 million, with Michael Dell personally fined $4 million.<ref>{{cite news |title=SEC Charges Dell and Senior Executives with Disclosure and Accounting Fraud |url=https://www.sec.gov/news/press/2010/2010-131.htm |access-date=November 22, 2021 |publisher=US Securities and Exchange Commission |date=July 22, 2010 |archive-url=https://web.archive.org/web/20230120144818/https://www.sec.gov/news/press/2010/2010-131.htm|url-status=dead|archive-date=20 January 2023|ref=SECrelease}}</ref>

====Michael Dell resumes CEO role====
After four out of five quarterly earnings reports were below expectations, Rollins resigned as president and CEO on January 31, 2007, and founder Michael Dell assumed the role of CEO again.<ref name="Dell-Inc-Feb-2007-8-K">{{cite web|url=http://pdf.secdatabase.com/2259/0000950134-07-002027.pdf |archive-url=https://web.archive.org/web/20130511020823/http://pdf.secdatabase.com/2259/0000950134-07-002027.pdf |archive-date=2013-05-11 |url-status=live |title=Dell Inc, Form 8-K, Current Report, Filing Date Feb 5, 2007 |publisher=secdatabase.com |access-date =March 8, 2013}}</ref>

On March 1, 2007, the company issued a preliminary quarterly earnings report showing gross sales of $14.4 billion, down 5% year-over-year, and net income of $687 million (30 cents per share), down 33%. Net earnings would have declined even more if not for the effects of eliminated employee bonuses, which accounted for six cents per share. NASDAQ extended the company's deadline for filing financials to May 4.<ref>{{cite web |author=Alexei Oreskovic |url=http://www.thestreet.com/_yahoo/newsanalysis/techhardware/10341935.html |archive-url=http://arquivo.pt/wayback/20091014061317/http://www.thestreet.com/_yahoo/newsanalysis/techhardware/10341935.html |url-status=dead |archive-date=October 14, 2009 |title=Dell's Dejection |publisher=TheStreet.com |date=March 2, 2007 |access-date=December 4, 2012}}</ref>