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Current Analysis. Dell (DELL) shares fell 29% during his tenure.

Other problems included previous earnings misses. Dell last year lost the No. 1 PC spot to rival Hewlett-Packard, according to researcher Gartner. And the company announced a Securities and Exchange Commission investigation into its accounting.

Now, Dell's board has finally acknowledged that investors "lost confidence in the guy in charge," says PC analyst Richard Shim at researcher IDC.

The news, released after market close, sent Dell shares up 4% to $25.24 in after-hours trading. Dell's board is still considering what kind of exit compensation to give Rollins, if any, spokesman Bob Pearson said.

In a statement, Michael Dell called Rollins, a 10-year company veteran, "a great business partner and friend." The two were so close they once linked their offices with a sliding glass door.

But board member Samuel Nunn said "Michael's vision and leadership are critical" to Dell's long-term health. Many tech analysts agree. "Michael Dell is an innovator," Bhavnani says. "Kevin Rollins is an operations guy."

A turnaround won't be easy, Gartner PC analyst Martin Reynolds says. Growth in Dell's core market, U.S. businesses, has slowed. Sales are up among consumers and in other countries. But Dell is weaker in those areas because it sells mainly via catalog and the Web. Many shoppers want to touch a PC before buying, Reynolds says.

The rising popularity of laptops creates a similar problem, Reynolds says. And Dell's low-cost ways of building PCs have been copied by HP and others. That means it can no longer compete on price alone, he says. Reynolds predicts that Michael Dell will eventually cede the CEO spot to an outsider who can help revamp the business model.

The leadership switch doesn't necessarily mean immediate changes in operations, Shim says. Dell is hugely profitable, and that is not expected to change.

And Michael Dell has remained very active in the company since relinquishing the CEO post in 2004. Back then, he told USA TODAY that he couldn't see himself retiring from the company he founded in his college dorm room. "I do go to the beach, but I get bored," he said.

Michelle Kessler,
www.usatoday.com