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One Word for Michael Dell

Computer maker turns to The Graduate for guidance: "There's a great future in plastics."
Michael Dell
What he does, where he comes from, and where he's going. Read More
Running a Saudi Arabian company that turns petroleum into plastic pellets may seem far afield from overseeing the finances of a personal computer company, but as Dell Computer founder Michael Dell knows, there are important similarities.

Gladden
Brian Gladden
That's why Dell today hired Brian T. Gladden, chief executive of Sabic Innovative Plastics, as his new finance chief as he tries to shave $3 billion a year in costs off his ailing personal computer maker.

Plastics are a key component in laptops and other PC's, so it's likely that some of Gladden's former customers will now become his suppliers. And both plastics and PCs are global businesses dominated by the economics of global supply chains.

"It's an interesting transition, certainly, from an upstream raw-materials business to a consumer-product technology and electronics business, but some of the fundamentals are very much the same," said Howard Rappaport, global business director for plastics at the consulting firm Chemical Market Associates. "There certainly is some overlap there that bodes well for running the business at Dell."

Part of the overlap comes in controlling spiraling costs, particularly as oil prices stay above $120 a barrel. A typical laptop may contain $50 to $150 worth of metal and plastics; one-half to two-thirds of that amount will come from plastics, according to iSuppli, a technology research firm in El Segundo, California.

More important, however, is how the plastic is used. Savvy workmanship with plastics can help a PC company create an impression that its device is more than a bundle of commodity parts. Andrew Rassweiler, an iSuppli analyst, calls this the Apple effect.

Dell's decision to hire a plastics executive may be "a recognition of how the aesthetics of the enclosures and packaging for an otherwise commoditized product" will drive sales, Rassweiler said.

In his former job at a division of Saudi Basic Industries Corp., Gladden oversaw one of the most profitable companies in the chemicals and plastics business, said Rappaport, who consults for the company and others in the industry.

"When you look at the Sabic business model around the world, the emphasis on low-cost, diverse, and lean manufacturing operations is similar in both entities," Rappaport said.

Gladden will be "familiar with the pace and requirements of Dell's business," Dell spokesman David Frink said. The computer maker, he said, sought a C.F.O. with experience at a multinational public company, a background in finance, and a firm grounding in technology, and he found those traits in Gladden, he said.

In 20 years at General Electric, Gladden served as chief financial officer of G.E. Plastics and general manager of the division's resins business. He moved to Sabic when G.E. sold its plastics division to the Saudi company in 2007 for $11.6 billion. He has a bachelor's degree from Millersville University in Pennsylvania.

Gladden will become Dell's third chief finance officer since the end of 2006. That's when Donald Carty, the former head of American Airlines, was tapped to steer the company through an accounting investigation, replacing James Schneider.

Carty, who also came from an unrelated industry, didn't have what it took to be a permanent finance chief, said Shaw Wu, an analyst with American Technology Research.

"We didn't think he was really the right guy from the beginning," Wu said. "I'm sure he has a lot of experience and wisdom, but, in our opinion, he was more of an interim C.F.O."

When he takes over next month, Gladden will be asked to make good on Carty's promise to cut costs by $3 billion by 2011. "We have instituted a maniacal focus and discipline around all costs," Carty said on a conference call with financial analysts last month, according to a transcript.

Gladden should know a thing or two about managing costs, since petroleum is the key feedstock for plastics. Because of its position as a Saudi company, Sabic has ready access to cheap petroleum, giving it one of the lowest cost positions in its industry—a hallmark of Dell's early successes.

He should also be familiar with the PC industry's interest in emerging markets. Sabic has a large presence in Asia, and is well positioned in China, Rappaport said.

Dell lost its position as the world's largest PC maker to Hewlett-Packard two years ago. It's shedding thousands of staff and partnering with lower-cost manufacturers to keep expenses down, while developing more appealing laptops for the consumer market.

Gladden was not available for an interview, Frink, the Dell spokesman, said.

 



 

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