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Sat, Jun 02, 2007 - Page 10 News List

Dell announces layoffs after slight earnings drop


Dell Inc said on Thursday that earnings fell slightly in preliminary first-quarter results and that it planned to lay off more than 8,000 employees over the next year as part of an ongoing restructuring.

Dell said it earned US$759 million, or US$0.34 per share, in the three months that ended on May 4.

That compared with US$762 million, or US$0.33 per share, in the year-ago period.

First-quarter sales rose nearly 1 percent from the year ago period to US$14.6 billion.

Analysts, on average, expected earnings of US$0.26 per share on sales US$13.95 billion, according to a poll by Thomson Financial.

Dell shares climbed more than 5 percent after the results were released.

In what has become a trend in recent quarters, Dell released the financial results as a news release and did not offer any follow-up conference calls with analysts and reporters.

The company did not provide year-ago figures in its report.

Texas-based Dell's earnings statements from the second, third and fourth quarters also remain preliminary and have yet to be filed with the US Securities and Exchange Commission because of an ongoing federal accounting probe that found numerous errors, evidence of misconduct and financial control deficiencies.

Thursday's report included a charge of US$46 million, or US$0.02 per share, for costs related to the investigation.

Thomas Luce III, chairman of the Dell's internal audit committee, conceded that the investigation was taking more time than expected.

Without offering a timetable, Dell spokesman David Frink said the investigation was in its final phase.

The layoffs, which represent 10 percent of Dell's global work force of 88,100 full time and part-time employees, come as Dell struggles to regain market share after Hewlett-Packard Co ousted it from the top spot in worldwide computer shipments last year.

In the first quarter, HP kept its lead over Dell with about 4 percent more shipments, according to tech research firms IDC and Gartner Inc.

As part of an ongoing turnaround effort led by Michael Dell, the company has undergone an executive shake up and numerous other changes to improve customer service and reclaim market share.

The company said it was reviewing costs across the board and that the job cuts would vary across geographic regions and customer segments to "reflect business considerations as well as local legal requirements."

"While reductions in head count are always difficult for a company to undertake, we know these actions are critical to our ability to deliver unprecedented value to our customers now and allso in the future," Dell said in a statement.

Dell did not offer specific guidance but said the second quarter could be tougher due to a seasonal slowdown for the company and continued expenses related to the investigations.

Earlier last month, Dell broke from its long-standing direct-to-customer business model with a plan to begin selling computers through Wal-Mart Stores Inc, the world's largest retailer, beginning June 10.

Dell also recently began selling consumer systems pre-loaded with a version of Linux, an alternative to Microsoft Corp's operating systems.

Dell shares rose US$0.69, or 2.6 percent, to US$26.91 on Thursday, then climbed US$1.73 to US$28.64 in extended trading after the results were released.

The shares have traded in a 52-week range of US$18.95 to US$27.89.

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