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A recent article in the Wall Street Journal on Dell Inc. (NASDAQ:DELL) talked about investors wanting to see a rebuilding plan from the ailing computer giant. The company has had a tough run of it lately and has seen shares decline 24% in the last three months and nearly 40% for the last twelve months – yet another earnings miss for the first quarter didn’t help matters one bit either. So, I started thinking, how does a company go from being such a loved stalwart on Wall Street to getting calls to start rebuilding?

It certainly is not one single thing, and the easy-to-spot PC cycle certainly has a lot to do with it; Dell saw its shares do a similar do-si-do back in the big dot com bust and the recovery that followed. As we watch Intel Corp (NASDAQ:INTC) shares take a similar slide, it’s not hard to pick out that we’re seeing general PC hardships here.

The leadership of Kevin Rollins may also be another factor at play; since he took over in July of ’04 Dell shares have lost 31% of their value. Of course Michael Dell is still the Chairman of his namesake company, but sometimes the new culture and focus that comes with a top leadership change can have a major impact. Dell started the company with just $1,000 and built it up to the multi-billion dollar company that it is today, while Rollins came up through the more “traditional” business route of getting his MBA and working with a management consulting firm (in his case it was Bain). I’m not supporting or knocking one or the other, but I would bet the two worlds see things through a fairly different lens.

One might also point to the competition that Dell is seeing in the marketplace. Sure, there has always been competition in the PC market, but as the Dell model of selling direct to the consumer, using standard non-proprietary parts, and using their “just-in-time” [JIT] sourcing to get the parts, loses its newness and novelty, a great many of their competitors are starting to use it as well. And, in some cases, use it better. Companies like Hewlett-Packard (NYSE:HPQ), re-energized under new CEO Mark Hurd, and Lenovo Group Ltd (OTCPK:LNVGY), which now owns IBM’s PC unit, are going right at Dell and getting just as aggressive on price as Dell. Unfortunately for Dell, being the low price provider means that customer loyalty is only as good as how low you can go.

Further trouble for Dell comes from the fact that the computing landscape is simply changing. The focus of computing is no longer on the desktop - though people still need the capability to do word processing and spreadsheet editing on their desktop, most of the new and exciting happenings are out on the web. Companies like Google (NASDAQ:GOOG), Yahoo Inc. (NASDAQ:YHOO) and even Microsoft (NASDAQ:MSFT) are portals for users connecting to the web, not only offering them search engines to find whatever it is their hearts desire, but news, stock quotes, movie times, gossip, social networking, classifieds and, since Google’s acquisition of Writely, online word processing capability to boot.

Further, companies like MySpace (a News Corporation (NASDAQ:NWS) subsidiary), Bebo, Friendster, Facebook, Digg, YouTube, Technorati, Bloglines, and a whole host of other “Web 2.0” sites are pulling in eyeballs on a scale that would make the average ’99 vintage VC investor drool all over his Herringbone pants.

And with the advent of the Microsoft Xbox 360, which is packed with three processors running at 3.2GHz each, a 500MHz ATI graphics processor, over a gigabyte of RAM, a detachable 20GB hard drive, wireless game controllers, Ethernet and Wi-Fi connectivity, ability to rip and stream media, and support for any number of media file types (for the non-technically inclined, suffice it to say the Xbox is like bringing a tank to a knife fight), the need for the blazing fast PC to run hard-core games just isn’t there the way it used to be. Sure, when your choices were playing the new third-person shooter on a fully equipped PC or some game system still using cartridges, PCs were huge for gaming; but this just isn’t the case anymore.

To some extent, the PC is going the way of the tube television or the landline telephone – people are still going to have them in some room of their house, because they feel obligated if for no other reason, but it’s just not something that they’re going to be looking to upgrade until it starts saying things like “checksum” and “parity” and giving the good ‘ol “blue screen of death.”

I’d be downright wrong if I didn’t point out that Dell plays in a lot of the other, hotter markets such as PDAs, digital music players, LCD and plasma TVs, and servers and storage systems. The problem is that they simply aren’t leaders in these categories, Research in Motion (RIMM) and Palm Inc (PALM) are entrenched in the handheld computing industry, Apple Computer Inc (NASDAQ:AAPL) with its omni-present iPod is a runaway winner in digital music players, Sharp Corp (OTCPK:SHCAY) has a strong position in LCD TVs (note it’s TVs – Dell ships a lot of LCD PC displays, but it’s not getting them a whole lot of extra revenue) and companies like Rackable Systems (OTCPK:RACK), Hewlett-Packard, IBM (NYSE:IBM) and Network Appliance Inc. (NASDAQ:NTAP) are giving them a hard time in servers and storage.

Obviously Dell won’t disappear, but the question here is whether the stock is a good investment over the near or even the long term. The PC market just isn’t what it once was and until something really shakes up the industry (like the plasma and LCD screens did for TVs), it’s not going to offer a great source of growth for Dell. I don’t know if Dell needs a full 12-step recovery program, but for CEO Rollins, who has been reticent to admit that Dell needs a new plan, I want to just throw out there that the first step to recovery is admitting that you have a problem.