Dell gets new CEO; company raises earnings guidance
Friday, July 16th 2004, 11:51 am
By: News On 6
AUSTIN, Texas (AP) _ Dell Inc. founder and chairman Michael Dell formally handed over the chief executive job to president Kevin Rollins on Friday as the computer giant raised its earnings guidance for the second quarter.
Dell, who started the company in 1984 while a student at the University of Texas, announced in March he was stepping down as CEO. The title was transferred to Rollins at the company's annual stockholders' meeting Friday.
Rollins also was elected to the board of directors.
As he prepared to relinquish the chief executive mantle, Dell gave an overview of the company and its growth in its first 20 years. He said Rollins has been at his side helping to run Dell the past seven years.
``While I've been getting most of the credit, there is no single person who deserves more recognition for Dell's great accomplishments than Kevin Rollins,'' he said. ``Kevin's new CEO title is as much about recognizing what he's already done as it is about our confidence in his many future contributions.''
As chairman, Dell said he would be ``fully engaged as ever'' and spend more time talking to customers and working on new product development.
In his first speech as CEO, Rollins laid out the company's strategy of focusing on growth in global markets, selling more products and services to businesses and boosting printer sales. Rollins said the company would continue to increase its share of technology markets and raise profits.
Before the meeting, the company announced it expects to earn 31 cents a share in the quarter ending July 30, an increase of 29 percent from a year ago and two cents per share better than initial guidance.
Analysts surveyed by Thomson First Call had expected earnings of 29 cents a share for the quarter.
Company officials said in a statement that higher operating profitability is expected to produce per-share earnings of 30 cents, with the balance of the guidance increase attributable to a further decline in the manufacturer's global tax rate.
The company said it still expects second-quarter revenue of $11.7 billion and a second-quarter tax rate of 24 percent. That brings the average rate for the first half of the year to 26 percent, which is consistent with current expectations for all of fiscal 2005, given continued strong growth in business outside the United States, the company said.
Dell reports second-quarter earnings Aug. 12.
In responding to a shareholder's question about outsourcing jobs to India and other countries, Rollins said Dell was adding jobs overseas at a faster pace because sales are growing more outside the United States.
``We are very dedicated to expanding jobs in the U.S., but we're also going to have to provide jobs to other parts of the world,'' Rollins said. ``When they raise their standard of living, what do they do? They want to buy computers, and who will be there to sell them? We will.''
Rollins noted that the company recently announced plans to open a call center in Oklahoma. He said there are no plans to increase the number of employees at its home base in Central Texas.
Another shareholder asked whether Dell, which has more than $11 billion in cash investments, would ever pay a dividend. She complained of waiting three years for the stock price to rise and suggested that paying a dividend might make Dell shares more attractive.
Chief financial officer Jim Schneider said Dell's large institutional shareholders prefer that the company buy back shares of stock _ a common strategy used to offset the creation of new shares through stock options.
Several shareholders criticized the company's use of options, saying they create a wider gulf between compensation paid to executives and regular workers. Company officials defended the options as a tool to hire and keep executives.
``I would not have come to this company if I was not granted stock options'' eight years ago, Schneider said.