Report: Dell Preparing To Cut Costs

Friday, February 9th 2001, 12:00 am
By: News On 6

NEW YORK (AP) — Dell Computer Corp. reportedly has told managers to prepare for significant expense cuts that could result in the first layoffs in the company's 16-year history.

The computer manufacturer is seeking to cut expenses between 8 percent and 10 percent, The Wall Street Journal reported Friday, citing people familiar with the directive.

Faced with sluggish growth in personal-computer sales and an overall slowdown in the U.S. economy, the Round Rock, Texas-based company has already initiated a hiring freeze, reduced its marketing budget and limited travel. The new round of cost-cutting measures would be in addition to these steps, the Journal reported.

Some employees believe the computer maker could be preparing to eliminate as many as 4,000 positions through a combination of outright job cuts and an annual performance review, beginning as early as next week, the Journal reported.

Dell denied late Thursday that it had plans to lay off workers or announce job cuts.

``We're not making an announcement,'' said spokesman Jim Mazzola. ``We would certainly announce or communicate to you if something like that were going to happen.''

Despite the company's denial, lower-level employees at the Round Rock-based company have been saying for weeks that they expected pink slips soon because of slumping sales.

Dell has about 39,500 employees, including workers at plants in Tennessee.

Dell is in a mandatory ``quiet period'' prior to its earnings release next Thursday.

Last month, the company warned a slowing economy and diminishing demand for personal computers and services would lower fourth-quarter earnings and revenue expectations.

Earnings for the three months ending Feb. 2 are expected to be between 18 cents and 19 cents per share, down from the 26 cents the company originally expected and down from the 25 cents estimated by analysts surveyed by First Call/Thomson Financial.

Revenue for the quarter will total $8.5 billion to $8.6 billion, 1 percent to 2 percent lower than expected, the company said.

The company has already begun cutting costs.

Earlier this week, Dell announced it was shutting down its 4-month-old online marketplace, where Dell and other companies sold their products over the Internet to other businesses.

The company also has cut back on temporary workers, including those hired for the holidays.

Shares of Dell finished regular trading Thursday down 44 cents at $26.06 on the New York Stock Exchange.