Friday, February 16, 2001

Layoffs are first in Dell's 16 years


Computer firm trims 1,700 jobs in Texas

By Connie Mabin
The Associated Press

        AUSTIN, Texas — Dell Computer Corp. cut 1,700 jobs Thursday in response to slowing sales, which have stalled profit growth at the nation's leading personal computer seller.

        The announcement came hours before the Round Rock-based company released its fourth quarter results, which were a penny short of expectations.

Dell
Dell
        The company said earnings for the quarter ended Feb. 2 were $434 million, or 16 cents a share, compared with $436 million, or 16 cents a share in the year-ago quarter.

        Excluding one-time charges from job cuts and company consolidation, Dell earned $508 million, or 18 cents a share. Analysts surveyed by First Call/Thomson Financial originally had pegged earnings at 25 cents a share before adjusting downward to 19 cents when the company warned of a shortfall last month.

        Revenue for the fourth quarter totaled $8.7 billion, 1 percent lower than first expected, but a 28 percent increase over the $6.8 billion in the fourth quarter of 2000.

        Faced with sluggish growth in personal computer sales and an overall slowdown in the U.S. economy, Dell had already cut prices, imposed a hiring freeze, reduced its marketing budget and limited travel expenses.

        The layoffs were the first announced job cuts in Dell's 16-year history. Dell has about 40,200 employees worldwide. The layoffs affect workers only at headquarters in Round Rock and nearby Austin, the company said.

[photo] At its headquarters in Round Rock, Texas, Dell announced Thursday its fourth-quarter results were short of expectations. The company cut 1,700 jobs.
(Associated Press photo)
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        “Continually adjusting our cost structure allows us to extend our leadership in a challenging environment,” chief executive Michael Dell said.

        It will take more than cost cutting for Dell to survive, analysts said.

        “They're way too dependent on the PC as their primary focus as a company,” Meta Group analyst Steve Kleynhans said. “You have to look and say there's more to this industry than just the desktop PC, and they seem to see it as an either-or.”

        Lower PC prices and the maturing market have pushed most of the industry to evolve into a so-called “post-PC era,” a world where the personal computer will no longer reign as the sole way to connect to the Internet.

        Gateway, Compaq, Sony, Intel and Microsoft all have debuted or have plans to release Internet appliances this year.

        But at Dell, where 93 percent of its $28.5 billion in revenue over the past four quarters came from computer sales, executives have been stubborn to look beyond the PC. The company has focused on growth abroad and opportunities in business services, Internet infrastructure, storage and server markets.

        “I think the peak growth rate is behind them. So I think the company is refocusing, and rightly so, on new things,” said Ashok Kumar, an analyst at U.S. Bancorp Piper Jaffray.

        For the full fiscal year, Dell posted $31.9 billion in revenue, up 26 percent from $25.3 billion in 2000.
       



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