Dell's Extreme Makeover

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Key Hire: Ed Boyd, Chief Consumer Designer. The former Nike executive was recruited to jazz up Dell's computers Brent Humphreys/Redux

Key Hire: Brian Gladden, Chief Financial Officer. The General Electric veteran is bringing GE techniques to Dell Matthew Mahon

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The main beneficiaries have been the consumer, government, and small and medium-size business units, which in the past often received less attention as Dell focused on large corporations. "[It's] a different dynamic than [Dell] is used to," says Gladden.

In the small and midsize business group, led by Steve Felice, salespeople have been given incentives to offer a broad range of solutions, instead of just hardware. It seems to be working. Mark Konik, vice-president for technology at the marketing and ad shop GA Communications in Georgia, says Dell's regional sales manager showed up at his door six hours after he made an inquiry. Though the deal was only for $1 million, Dell offered to help integrate the company's Macs into the package and volunteered to talk to software providers VMware (VMW) and Microsoft (MSFT) about including their products in the purchase. "The speed and competence Dell brought to the table in such a short period of time was really quite different," says Konik.

Garriques' consumer group has been making some dramatic changes. In October, to coincide with the launch of Microsoft's Windows 7 operating system, Dell will begin selling the world's thinnest notebook, at 0.39-inches thick. The Adamo XPS has a heat-sensing strip on the lip that, when swiped with a finger, glows white and automatically opens the aluminum lid. Garriques says the $2,000 computer will serve as a statement about Dell. "This isn't going to be a high-volume product for us, but it's going to be a product that says, 'Wow! Dell did that. What else does Dell have?' " he says.

With Garriques and the other division heads taking more control over operations, Michael Dell has been freed up to explore new opportunities. Over the summer, he had dinner at the Four Seasons in Washington's Georgetown neighborhood with James W. Breyer, a Dell board member and founding partner of the venture capital firm Accel Partners. Over steaks and red wine, Dell talked about prospects in mobile phones and other products. He then pulled out a half-dozen smartphone prototypes. "The way he laid it out, his thinking, led me to believe that in many ways the journey at Dell is just in the first or second inning," Breyer says. The company is expected to introduce its first smartphones early next year.

Dell is beginning to show improvement in its financial results. In its most recent earnings report, the company handily beat Wall Street's expectations. Dell shares have doubled since their low in February, to $16, as hopes mount that the company will benefit from a surge in PC purchases tied to Windows 7.

But Michael Dell is clearly looking for more than incremental improvements. He wants his namesake company to be the kind of force it was in the past, when it drove IBM out of the PC business and humbled industry giants like HP. "He's thinking, 'I'm going to make this company what it should be again," says Alex Mandl, a longtime Dell board member.

Rivals contend that Dell has waited too long to take the initiative. In an industry undergoing rapid consolidation, companies that haven't already positioned themselves to withstand the cyclical nature of technology will have a hard time thriving over the long term. That means Dell itself may be forced to merge with another company or become takeover bait. "Being a fast follower doesn't work in an industry that is moving faster every day," says Shane Robison, chief technology officer at HP.

Dell is more reflective than usual these days. During the interview in his conference room, he acknowledges he stuck with the one innovative idea of selling computers directly for too long. "Mea culpa," he says. But he says talk that he and his company aren't moving fast enough now is nonsense. "We're going to be stronger, faster, and more hyper than we've ever been," he says. "If you don't believe, then just sit back and watch."

Edwards is a correspondent in BusinessWeek's Silicon Valley bureau.

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