April 27 (Bloomberg) -- Dell Inc. founder Michael Dell, whose direct-to-consumer sales strategy created one of the world's top personal-computer makers, said new thinking is required as his company struggles to spark growth.

``The direct model has been a revolution, but is not a religion,'' Dell wrote in an e-mail to employees yesterday. ``We will simplify our business model and go beyond it to give our customers what they need.''

The message signals Dell may be reconsidering its strategy after Hewlett-Packard Co., which sells PCs through retailers, trounced Dell in the market for a third straight quarter. The e- mail was at least Dell's second to employees since he reclaimed the chief executive officer title in January after ousting protege Kevin Rollins.

While he tweaks the business model, Dell, 42, is also handling a government probe into the company's accounting. Round Rock, Texas-based Dell said last month it found evidence of misconduct and errors as part of a U.S. Securities and Exchange Commission review that escalated into a formal investigation in November.

Shares of Dell rose 32 cents to $25.23 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock has fallen 2.7 percent in the past 12 months, compared with a 27 percent gain at Palo Alto, California-based Hewlett-Packard.

`Profound Changes'

``This is one of the most exciting periods in our history, but it requires all of us to stand together as one Dell to make profound changes and take well thought-out risks,'' said Dell in the e-mail. ``We will simplify our organization to make it easier to hear customers.''

Dell spokesman Bob Pearson confirmed the contents of the e-mail.

Dell's sales of PCs, which account for most of its revenue, declined after U.S. consumers complained of poor customer service and spurned its notebook designs. Dell lost the PC market lead last year after capturing the top spot in 2003.

Its first-quarter U.S. shipments fell 14.4 percent, according to research firm IDC. Unlike Hewlett-Packard, Dell doesn't sell its PCs through stores. That means shoppers don't get a chance to touch and feel its machines before buying.

``We have always felt that Dell would need to move beyond its direct model to address consumer and international markets,'' said Shaw Wu, an analyst at American Technology Research in San Francisco. He rates the shares ``neutral'' and doesn't own them. ``The big question is how much incremental costs are incurred?''

New Hires

In the past three months, Michael Dell has expanded his team of top managers, tapping Motorola Inc.'s Ron Garriques to lead a new consumer unit and Mark Jarvis, formerly of Oracle Corp., to serve as the company's first-ever chief marketing officer. At least five longtime executives have left since December, including Rollins and Chief Financial Officer James Schneider.

Dell's plans to revive the business include devising new approaches to manufacturing and distribution. That may help the company regain the price advantage it once held over rivals such as Hewlett-Packard, which copied Dell's earlier innovations to offer lower-priced systems.

``These won't merely be exercises in cost cutting,'' Dell said in the memo. ``We plan to eliminate overlaps in organization and activities.''

Dell also is reaching out to customers. In February the company created a Web site called IdeaStorm to solicit ideas for products and services. Based on the feedback, Dell has decided to offer the Linux operating system on its machines.

The company also is continuing to sell PCs with Microsoft Corp.'s older XP software after some buyers said they didn't want machines loaded with the new Vista operating system.

To contact the reporter on this story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net

Last Updated: April 27, 2007 20:00 EDT