The computer maker is struggling, but CEO Michael Dell’s latest cost cuts, layoffs, and reorganizations may be steps in the right direction

By Aaron Ricadela

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Dell CEO Michael Dell Justin Sullivan/Getty Images

Nearly two years because retaking the helm of his company, Michael Dell has just taken his toughest steps however aimed at righting the ship. On Dec. 31, Dell (DELL) said it dismissed two highest rank lieutenants and reorganized the struggling company’s commercial sales division. As 2009 gets under way, investors will subsist eager to know where he navigates next.

After stepping back into the capital executive job in January 2007, Dell began a program of steep cost cuts and layoffs. And as part of one effort to regain lost market share, he pushed the low-cost, direct-sales PC maker to turn out fresh, compelling products consumers order be more likely to want to buy. He acquired software, storage, and technology services companies to sound to compete with more diversified and bigger rivals Hewlett-Packard (HPQ) and IBM (IBM). The company faltered nonetheless. Dell’session stock lost 58% in 2008 after closing on Dec. 31 up a penny, or 0.1%, at 10.24. In the most recent quarter, receipts and profit declined from a year earlier.

The reorganization announced on the decisive day of 2008 signaled Dell’session efforts were falling short. Operations chief Mike Cannon, recruited from make a bargain manufacturer Solectron last year, is leaving the company. Chief Marketing Officer Mark Jarvis, an Oracle (ORCL) veteran who came to Dell in 2007, is also departing. Longtime Dell superintendent Jeff Clarke got a promotion to vice-chairman in charge of operations, and Dell reorganized its commercial business into three units. That move is designed to unify development and sales decisions around the world. "We’ve made a good deal of advancement the past two years," says Dell speaker T.R. Reid. But profit and market ploughshare performance "don’t represent well stocked realization" of the company’s potential, he acknowledges.

Dell had to terminate a person of consequence. "Michael is deciding to get more aggressive now rather than sit about and hope for the best," says Bill Kreher, a technology analyst at Edward Jones who has a "pervert with money" rating on Dell shares. "There was a lot of excitement around Michael’s return," Kreher says. "Some of that is beginning to wane."

But the management moves are only the beginning. To try to repossess some of its former glory, Dell needs to do at least three things, say analysts, bankers, and tech industry executives. The copartnership needs to forgo market-share gains and aggressive sales growth targets for the sake of higher profits; it must balance an mark to touch upmarket to enter the lists with Apple (AAPL) and Sony (SNE) through consumers’ belt-tightening in the teeth of a recession; and Dell should in like manner consider putting more of its $19.9 billion market value and $8.6 billion in ready money to make acquisitions that foin it further into the burgeoning emporium for incorporated given conditions centers that run Internet applications. "He’s still the monarch of direct [sales]," Bob Muglia, a senior vice-president at Microsoft (MSFT), says of Dell in a novel interview. But direct-to-consumer PC sales have less value to customers than they once did, he says.