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Originally published Thursday, February 1, 2007 at 12:00 AM

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Dell CEO ousted, founder takes over

Dell Chairman and founder Michael Dell reclaimed the position of chief executive officer, ousting Kevin Rollins after he lost the lead in...

Bloomberg News

Dell Chairman and founder Michael Dell reclaimed the position of chief executive officer, ousting Kevin Rollins after he lost the lead in personal computers and failed to revive earnings growth.

The shares rose 4.3 percent after the company said Rollins, 54, resigned effective immediately. The decision to replace him was made earlier this week, said spokesman Bob Pearson, declining to be more specific.

The PC maker said results will miss analysts' estimates for the third time in the past four quarters. Dell already replaced his finance chief and takes over as the company struggles to regain its position as the world's largest PC maker from Hewlett- Packard and faces a government probe into its accounting.

"It's a pretty big surprise," said Robert Lutts, president of Cabot Money Management in Salem, Massachusetts. "They are going through some growing pains. Him coming back in might reinvigorate the company."

Shares of Dell rose $1.04 to $25.26 in extended trading. They slipped 7 cents to $24.22 Wednesday and have declined 17 percent in the past year.

Dell, 41, handed the CEO title to Rollins in 2004 after building the company from his college dorm room with $1,000. He defended Rollins' leadership in recent months as the company's woes mounted, saying in September that the two ran Dell together.

"We've always been a company able to respond to challenges and opportunities," Dell said in prepared video remarks from the company's headquarters Wednesday. "I'm very excited to be CEO again. I feel the same kind of energy and drive I did when we started the company in 1984."

The company said in August that the U.S. Securities and Exchange Commission had been reviewing its revenue recognition and other financial reporting for a year. That review was elevated into a formal investigation in November. The U.S. Justice Department is also probing the company's accounting.

Last year, Dell missed profit forecasts for two straight quarters, reported its slowest sales growth in four years, announced the recall of 4.1 million notebook batteries and said it planned to invest $150 million to improve customer service.

In September, Rollins and Dell, after canceling an annual meeting for financial analysts, announced Dell 2.0, their plan to examine all aspects of the business and make whatever changes necessary to boost sales and profit.

"Dell 2.0 is a chance for our company to reinvent itself," Dell said. "We have enormous assets in this company. Some of them have been hidden fairly recently — our challenge is to bring them out."

Dell didn't provide any figures for fourth-quarter profit or sales. Analysts on average anticipated a profit of 33 cents a share on sales of $15.5 billion, according to estimates in a Bloomberg survey.

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Rollins joined Dell in April 1996 after working with the company as a consultant with Bain.

"What changes to the strategy Michael makes is more important than him being completely in charge," said Nirav Parikh, an analyst with TCW Group, which has been reducing its holdings in Dell share since last year. "The first thing to address is profitable growth."

Bloomberg News reporters Dina Bass in Seattle, and Ian King and Rochelle Garner in San Francisco, contributed to this report.

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