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Dell to terminate bonuses, cull managers
"We have great people... but we also have a new enemy: bureaucracy"

By Steven Musil

Published: Monday 05 February 2007

Days after returning to the helm of the computer maker he founded, Michael Dell told employees in a memo the company would eliminate bonuses and reduce management to cut costs.

Dell, who returned to the company as chief executive officer last week after the resignation of Kevin Rollins, said in the email that he planned to stay with the company "for the next several years". He also announced the company would not hire a chief operating officer.

He wrote: "We had great efforts but not great results. This is disappointing and it is unacceptable."

The announcements come after a terrible year for the computer maker, during which it lost its lead in PC market share to HP and an investigation by the Securities and Exchange Committee (SEC) for possible accounting improprieties began. Several executives have left the company in recent months, including CFO Jim Schneider, who was slated to leave at the end of January.

Dell is currently under investigation by the SEC over accounting issues that the company has said could result in significant restatements to its profits before the 2006 fiscal year. The company has not specified the exact nature of the accounting issues but has said they involve revenue recognition, and they do not appear to be associated with the stock-options backdating practice that has ensnared hundreds of tech companies over the past year.

The memo was first reported by the Austin American-Statesman, which posted a copy of the email on its website. A Dell spokesman confirmed the email for the Associated Press.

Dell wrote that the bonus plan would be replaced by "limited discretionary awards" which would be available to all but senior management. He also announced a shortening of the stock-vesting period and an adjustment of the annual bonus plan set "against realistic targets".

In its executive ranks, the number of top managers who report to Dell would be streamlined from more than 20 to 12. "We have great people... but we also have a new enemy: bureaucracy, which costs us money and slows us down," he wrote

In related news, Dell shareholders filed an expanded securities-related lawsuit against Dell late last week, adding Intel as a defendant over the chipmaker's controversial marketing rebate programme. The suit alleges the computer giant failed to make required disclosures to the SEC and investors about the "existence, impact and uncertainty of Intel rebates".

Steven Musil writes for CNET News.com