Joel Kocher was promoted to chairman and chief executive officer of Micron Electronics as part of the company's strategy for improving its direct sales model and surviving coming industry-wide consolidation.
Kocher, 42, became Micron?s president and chief operating officer in January after a brief yet colorful stint as president of Power Computing. He succeeds Joe Daltoso, 36, who will provide consulting services to the company for an indefinite period of time to ensure a smooth transition.
Before his stint at Power the president of marketing at leading direct vendor Dell Computer, Kocher used a press conference today to underline his belief in direct sales.
"I would not want to be the CEO of an indirect PC company today," he said. "The cards I wouldn't want to have on the table is a business model that is quickly becoming outdated and no longer works."
But for the "second-tier" Micron to succeed, the company has to improve its execution of the "fundamentals," namely inventory and sales and marketing, Kocher repeatedly said.
In his few months at Micron, Kocher has significantly revamped inventory management. Before Kocher came aboard, Micron had 39 days of PC inventory; presently, he has whittled this down to 10 days, about 3 days more than Dell.
"We believe inventory in the lynchpin of this business model," he said. "[Inventory] is like being in the fish business: the cost of components decline by the week, sometimes faster."
To regain profitability, Micron is trying to achieve 17 percent gross margins on its PCs. "That's impossible to sustain if you're not turning inventory at least 30 to 40 times a year," Kocher noted.
Simultaneously, Kocher said Micron is beefing up its sales staff to send more people into the field, and will launch a new brand image in August of this year.
Kocher endorsed former Intel CEO Andy Grove's belief in pivotal moments that change the ground rules of the computer industry, and argued that direct sales is one of those moments. The PC business will soon coalesce around the direct sales model, Kocher said, shifting away from the network of resellers known as the channel.
"One should conclude that we are at an 'inflection point.' We are at the shakeout that we've all been expecting for a decade now," he said. "The good news for Micron is that we happen to believe that in that shakeout, being direct is being in the right position."
To survive the coming consolidation, Micron will have to surpass several companies to leap into the top five of PC makers, Kocher said. "We're going to have to execute flawlessly in the next seven or eight quarters?to go from nine or ten to the top five in the next 24-month period."
But Micron could have a tough time digging itself out of its second-class status and third-place ranking behind direct-sales giants Dell and Gateway. "It's like they're on the platform and just jumped on the last car as it's leaving the station," said Roger Kay, an analyst at International Data Corporation.
Meanwhile, Daltoso gave no hint of being forced out after three years as a result of Micron's recently mediocre performances. "My personal goal was I wanted to do this job for three years," he said at the press conference. "In the last nine months, we got off track a little bit and put ourselves in a ditch. [But] Micron to my mind is out of the ditch--probably a little sooner than we expected--and that's going to allow me to enjoy a great summer here in Boise," he told the press conference. "Joel?s experience in the PC industry, and particularly his deep understanding of the direct model, has already proved vital to re-establishing Micron?s competitiveness. In a very short period of time as president and COO, he?s made a great impact on the company," said Daltoso said in a prepared statement.
The news follows on the heels of Micron Technology's Thursday purchase of the remaining memory manufacturing assets of Texas Instruments. Micron Electronics is a partially owned subsidiary of Micron Technology, which owns 64 percent of the company. Steve Appleton is the CEO of Micron Tech.