Dell Cuts Costs And Staff

Dell has begun laying off employees in an effort to reduce costs at a time when global PC sales have plummeted due to a sour worldwide economy.

The news, announced this week, comes two weeks after the company announced dismal fourth quarter earnings.

According to the Associated Press, cuts were being made at the Dell plant in North Carolina, which opened in 2005. The PC-maker had once planned to create some 1,500 local jobs at the location; it was unclear how many of jobs there would be lost.

The layoffs follow Dell’s 26 Feb earnings announcement that revenue dropped 16 percent in the fourth quarter, to $13.4 billion (£9.7bn). The company left the possibility of layoffs open at the time by announcing a cost-reduction goal from $3 billion to $4 billion by fiscal 2011.

Dell executives had also mentioned that the company still had $9 billion (£6.5bn) in its coffers.

However, despite the cash on hand, the company has undergone belt-tightening with regard to employees over the past year – a fact commented upon during the March 11 announcement of layoffs.

“Today’s actions are consistent with the streamlining that has been underway in our business for more than a year as part of our ongoing initiative to remain competitive by enhancing our efficiency and underlying cost structure,” Jess Blackburn, a spokesperson for Dell, said in an email.

While not commenting on the exact number of staff reductions, or in what areas of Dell, Blackburn added that, “We are sensitive that the reduction is significant for affected and other employees, and are working to minimize consequences. Affected employees will be offered competitive severance packages, including career counseling and outplacement services.”

In March 2008, Dell announced that its goal of saving money would be reached by reducing its global payroll by 8,800 employees.

Analysts see Dell’s cost-cutting moves as part of the company’s master plan to strengthen its position and future potential.

“We believe that, despite its focus on profitability and its move toward the high-end of the market, where it can bundle its servers with software and services, Dell still has an eye toward growth,” John Spooner, an analyst with TBR, said in a Feb. 26 research note. “We expect it will utilize its cost-reductions to once again drive high levels of unit shipment growth and gain market share as soon as is viable.”

However, Spooner added, “Dell’s large amount of in-house manufacturing, its exposure to the enterprise market and its lack of an indirect channel presence relative to competitors such as Hewlett-Packard are all working against it.”