Dell job cuts to continue

30 May 2008

Dell has said it is mid-way through a plan to shave 10pc of its workforce, with 7,000 jobs cut in the past year.

In its first quarterly results, the company said it recorded US$106m in expenses in relation to restructuring, including severance costs and facility closures.

Last month, Dell workers in Ireland were stunned by the news that 250 executive jobs were to be cut as part of compulsory redundancies at its Cherrywood operation in Dublin.

Around 50 of the jobs were to be cut from the company’s Limerick manufacturing operations.

The company has reported that overall some 7,000 jobs have been cut in the past year, including 3,700 in the first quarter.

Various acquisitions brought in an extra 2,700 employees to the company’s fold, which brought the overall net reduction to 5pc.

In total, chief executive Michael Dell is planning 10pc in total net reduction by year’s end.

In expressing its outlook for the quarter ahead, the company said it will continue to incur costs as it realigns its business, reducing headcount along the way.

“The company is seeing conservatism in IT spending in the US, particularly with its global and large customers, as well as public, small and medium business accounts. Dell expects the conservatism to continue through the summer, particularly as many of these customer segments are seasonally slower.

“Dell does not expect the significant component-cost reductions experienced during the first half of last year. In addition, the company also expects to have lower investment and other income driven by reduced investment balanced with lower interest rates and increased interest expense driven by a higher level of debt.

It said it expects performance to improve through sales of computers in emerging markets, as well as demand for notebook computers and servers.

“Against this backdrop, the company recently shared its goal to lower total cost and is targeting US$3bn in annualised savings by fiscal 2011,” the company stated.

For the first quarter of 2008, Dell reported a 9pc increase in revenues from US$14.7bn last year to US$16bn. Out of this, the company reported a profit of US$784m, up 4pc on last year.

Product shipments in the quarter increased 22pc, with servers growing three times the industry rate at 21pc. Storage revenue increased 15 pc and enhanced services revenue was up 13pc.

Notebook unit growth, termed a ‘Dell strategic priority’, rose sharply at 43pc and 1.2 times the industry growth rate. Consumer units grew at more than two times the industry rate and the company increased its global share by 1.2 points to 8.8pc during the quarter.

“We are executing on all points of our strategy to drive growth in every product category and in every part of the world,” Michael Dell explained.

“These results are early signs of our progress against our five strategic priorities. Through a continued focus, we expect to continue growing faster than the industry and increase our revenue, profitability and cash flow for greater shareholder value,” Dell said.

By John Kennedy