Dell Plans to Cut 8,800 Jobs; Effect on Local Plant Unknown: First-Quarter Earnings Show Decline of

Jun 01, 09:51 AM

Current Headlines: By Richard Craver, Winston-Salem Journal, N.C.

Jun. 1--Dell Inc. said yesterday that it will cut 10 percent of its worldwide work force, or about 8,800 employees, over the next 12 months as it tries to balance supply with sluggish consumer and business demand.

The company said that "the reductions will vary across geographic regions, customer segments and functions, and will reflect business considerations, as well as local legal requirements."

Dell has 88,100 employees worldwide, including 1,100 at its desktop-computer assembly plant in southeastern Forsyth County that it opened in October 2005, spokesman David Frink said.

Frink said he could not comment on whether the job cuts would affect the local plant, but he said that the reduction would impact permanent and temporary employees.

Dell is required to have at least 1,500 employees by October 2010 to qualify for the full local and state incentive packages that are worth up to $305 million. It is scheduled to get its first installment payment later this year from Winston-Salem and Forsyth County.

"While reductions in headcount are always difficult for a company, we know these actions are critical to our ability to deliver unprecedented value to our customers now and in the future," said Michael Dell, the chairman and chief executive of Dell.

The company said that the cost-cutting affects "all processes and organizations, from product development and procurement through service and support delivery.''

"The goal is to simplify structure, eliminate redundancies and better align operating expenses with the current business environment and strategic growth opportunities," it said.

An analyst with Goldman Sachs wrote in April that Dell could eliminate up to 3,500 manufacturing positions and 2,500 other positions worldwide -- mainly through attrition -- in a bid to cut expenses.

"Any changes will not have any impact on the WS1 plant at all," Donna Oldham, a company spokeswoman, said in April. "When Michael was here (on March 27), he talked about the great job that the facility in North Carolina is doing. He re-emphasized the need for staying customer-focused for businesses and individuals and getting things right the first time.

"Michael was very clear that WS1 is needed in order for Dell to continue to be successful."

Dell's announcement came during its first-quarter earnings report, in which it reported a $3 million decline in net income to $759 million.

However, diluted earnings rose 1 cent to 34 cents, which beat by 8 cents the average forecast of analysts surveyed by Zacks Investment Research.

Dell released its earnings after the stock market closed yesterday. Its share price increased 69 cents to $26.91 during normal trading, and rose nearly another 2 percent in after-hours trading.

The turnaround bid comes as Dell's share price has languished in recent months. Dell has lost market share to Hewlett-Packard Co., and the Securities and Exchange Commission is investigating its accounting. Dell said it is not finished with an internal investigation into its accounting.

Dell is not the only computer company that has announced major job cuts this year.

IBM has eliminated about 3,700 jobs this year, including 140 at its operations in Research Triangle Park, according to the Raleigh News & Observer. IBM has 128,000 U.S. workers and 355,000 worldwide.

Frink said he could not comment on how Dell plans to make and assemble two Dimension desktop computers it will begin selling June 10 at more than 3,000 Wall-Mart stores in the United States, Canada and Puerto Rico. He said that Wal-Mart represents "just a first step" of a global retail strategy.

-- Richard Craver can be reached at 727-7376 or at rcraver@wsjournal.com.

-----

To see more of the Winston-Salem Journal, or to subscribe to the newspaper, go to http://www.journalnow.com/.

Copyright (c) 2007, Winston-Salem Journal, N.C.

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

NASDAQ-NMS:DELL, NYSE:GS, NYSE:HPQ, NYSE:IBM, NYSE:WMT,