Tech Titan Dell Reports Staff Reduction, Continued Accounting Troubles

Jun 01, 05:00 AM

Current Headlines: By Michelle Kessler

Struggling computer giant Dell said Thursday that it would cut 10% of its staff and postpone its annual shareholders meeting because of accounting problems.

But Dell also reported higher-than-expected quarterly earnings, a sign things may be improving for the No.2 PC maker.

The flurry of news came on the day Dell would normally have reported its earnings and met Wall Street analysts. But for the third-consecutive quarter, Dell released a statement with preliminary figures. The reason: an accounting problem the Securities and Exchange Commission started investigating in 2005.

The early numbers were better than Wall Street analysts' average expectations. Revenue was $14.6 billion in the quarter ended May 4, up 3% from $14.2 billion a year ago.

Net income of $759 million, or 34 cents a share, fell from $762 million, or 33 cents a share, a year ago.

Dell said lower-priced parts and higher selling prices helped generate profits. But the company needs to do more, CEO Michael Dell said in a statement.

Dell plans to cut about 8,800 jobs in the next 12 months, although the company is already known for being lean. Dell did not provide details, but said the cuts will affect many departments and countries.

They're part of a turnaround plan Michael Dell launched after returning in January to the company he founded. He also announced plans to sell PCs in Wal-Mart stores, in addition to Dell's traditional Internet and catalog business. And he's taken steps to beef up customer service, which was troubled enough to spark a lawsuit by the New York attorney general this month.

But details of the company's long-running accounting saga remain unclear. The company has said only that it relates to "accruals, reserves and other balance sheet items." Dell's board said that it's too soon to know whether the company will restate earnings, despite saying earlier that it found evidence of accounting "misconduct."

As a result, Dell indefinitely postponed its annual shareholders meeting, scheduled for July 20.

Despite that, stockholders seemed pleased with Dell's report. Shares rose 5% to $28.36 in after-hours trading on the news, released after markets closed. (c) Copyright 2005 USA TODAY, a division of Gannett Co. Inc.