Dell Announces 4,000 More Layoffs in 2nd Reduction
Dell Computer Corp. plans to eliminate as many as 4,000 jobs, or 10% of its work force, as price cutting in the personal-computer market forces the company to reduce costs. The job reduction is the second this year by the biggest U.S. PC maker.
The cuts will take place in the next six months, mostly in central Texas, and primarily will affect managers, said spokesman Mike Maher. The Austin-based company will shrink its staff through a combination of firings and attrition.
Dell, which announced 1,700 firings in February, is racing to pare expenses to preserve profit as it slashes PC prices, a bid to gain market share as demand slows. Rival Compaq Computer Corp. said two weeks ago that it would make its own PCs cheaper to challenge Dell’s strategy, forcing Dell to respond with even bigger price reductions, analysts said.
Dell expects to take a pretax charge of $250 million to $350 million in its fiscal second quarter for the job reductions and consolidating some facilities.
Most U.S. salaried workers will be required to take five days of unpaid time off during the second quarter, and Dell is limiting hiring of new employees, Maher said.
Dell shares rose as high as $26.88 after the announcement. They gained 7 cents to close at $25.91 in regular trading on Nasdaq before the release. The stock has jumped 49% this year.
The company also said its results in its first quarter, ended Friday, will meet forecasts for $8 billion in sales and profit of 17 cents a share. Dell will report final first-quarter results May 17.
Houston-based Compaq last month increased its own job reduction by 2,000 employees, for a total of 7,000 firings announced this year.
No. 2 direct PC seller Gateway Inc., another Dell rival, also said it would become more competitive in pricing. In January, the San Diego company said it would fire more than 2,400 employees. The reduction was increased to 3,000.
Dell’s least-expensive PC, the Dimension L, starts at $679, according to the company’s Internet site. Gateway’s cheapest, the Essential, begins at $799, whereas the Compaq Presario 5000 series starts at $778, according to the companies’ Web sites. Dell and Gateway’s prices are the same as last week, and Compaq’s cheapest model is $50, or 6%, less expensive than it was a week ago.
Last week, Dell said its Dimension 8100 desktop PC running on Intel Corp.’s 1.7 gigahertz Pentium 4 processor--the fastest PC chip on the market--was selling starting at $1,349, a 20% decline from a week earlier, when the machine debuted.
Dell’s February firings were the first major job cuts since Michael Dell started the company in his University of Texas dormitory in 1984. Speculation about new job eliminations at Dell circulated on the Internet and in the Austin area for several weeks, as it did in February. Last week, analysts said they expected the company to eliminate more jobs. Dell employed 40,200 people worldwide before the February firings were announced.
