Dell to lay off 10 percent of workforce
Michael Dell starts getting tough.
By Ben Ames, IDG News Service | Published: 08:00, 01 June 2007
Dell is to lay off 10 percent of its 88,100 workers, in an attempt to improve profits. The company is also completing an investigation of accounting fraud.
Dell will make the layoffs over the next 12 months and will include workers from a spread of geographic regions and job functions. While layoffs are difficult, "we know these actions are critical to our ability to deliver unprecedented value to our customers now and in the future," said company CEO Michael Dell.
The company also announced it made US$759 million in profit for the first quarter of its 2008 fiscal year, down slightly from the $762 million it earned for the same quarter last year.
Dell reported revenue of $14.6 billion and earnings of $0.34 per share, both well above Wall Street expectations of $13.95 billion in revenue and $0.26 earnings per share, according to analysts polled by Thomson Financial.
Despite its success in beating the financial forecast, Dell also said it had spent $46 million in the last quarter on expenses for the investigation into accounting and financial reporting. Dell began an internal study of its books because of questions raised in 2006 by the US Securities and Exchange Commission (SEC). Dell blamed that situation for its decision to file only preliminary results Thursday, marking the fourth consecutive statement that the company has not filed an audited, official earnings account.
The layoffs are the latest in a series of swift changes Michael Dell has made since he returned to day-to-day management of the company in January, replacing former CEO Kevin Rollins. Dell faced the immediate challenges of the SEC investigation, a lawsuit by angry investors, slumping profits and a slide in market share that led Dell to fall behind HP. into second place among the world's largest PC vendors.
He has responded by replacing much of the senior management team with executives from other companies, eliminating salary bonuses, and agreeing to customer demand for notebooks and desktops with the Linux OS instead of Windows. On 24 May, he even announced a plan to start selling Dell PCs in Wal-Mart retail stores, breaking with the famous direct sales model that once allowed the company to grow so fast.
Despite those moves, the layoffs show that Dell is finding it tougher to rein in the troubled company than he anticipated, one industry expert said.
"This is not the same company he left a few years ago. It's got bigger personnel, more vendors, more suppliers, and more dependence on China than when he left," said Rick Doherty, an analyst with The Envisioneering Group. "He's not just getting back in the driver's seat and winning the Indy 500, but realising that market conditions have changed."
