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Dell outlines turnaround plans for employees

Executives are ready to start talking--internally, at least--about what they need to do to get the company back on track.

Michael Dell's got his new executive team fully in place, and they intend to turn things around by shoring up the core businesses and reaching customers in new ways.

The Wall Street Journal (subcription required) reported Friday on a memo sent to Dell employees Wednesday informing them of the results of a recent executive meeting of the minds. A Dell spokesman confirmed the memo was genuine.

Among other things, the memo vows that Dell is going to improve efficiency and look at new distribution strategies, which could involve the company altering its fundamental direct model.

"The Direct Model has been a revolution, but is not a religion," Dell wrote in the memo, which is available on the Journal's Web site. Analysts have been warning Dell that it needed to embrace alternative distribution strategies in places like China, where shoppers frequent large PC malls, and even in mature markets where retail PC growth has exploded over the past several years. But even though Dell has experimented with its own retail stores--that still don't carry inventory--it has held steadfast to the direct-sales model that made the company a darling of the industry for decades.

Last summer, that was still the party line. "The direct model remains our not-so-secret weapon," Chief Executive Officer Kevin Rollins told shareholders at a July 2006 shareholder meeting. But a lot has changed since then, as Dell relinquished its lead in the PC market, suffered through customer relations debacles, and brought in a host of new executives. Rollins, of course, no longer works at the company.

Things have started to change, but the memo makes it clear that there's much work still to be done. Dell notes that the company has to once again become a manufacturing leader, probably referring to the need to overhaul a manufacturing strategy that was built to crank out desktops. New Inspiron consumer laptops will be coming this summer with color choices and support for mobile broadband networks, which PC companies generally use to mean cellular data networks. It also refers to the need to "streamline our management structure," meaning a few more folks will probably have to go.

And there's still the matter of that pesky accounting investigation that might force Dell to restate its earnings from 2006 and earlier, and has also kept company executives silent for nearly six months. That was not mentioned in the memo.