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 user 2007-06-04 at 10:45:00 am Views: 42
  • #18339

    Dell Announces Lower Profit, Job Cuts
    (June07) – Dell  Inc. beat Wall Street predictions in its first-quarter
    earnings report but said it would eliminate 10 percent of its work
    force over the next year as part of a broad plan to trim costs and
    become more competitive with rivals.The computer maker said it earned
    $759 million, or 34 cents per share, in the three months ended May 4,
    down slightly from $762 million, or 33 cents per share, in the year-ago
    period. Sales rose nearly 1 percent to $14.6 billion.The results beat
    analysts’ predicted earnings of 26 cents per share on sales $13.95
    billion, according to a poll by Thomson Financial.Investors also seemed
    pleased, as shares rose $1.58, or 5.9 percent, to $28.49 in extended
    trading. Before the preliminary report was released Thursday afternoon,
    Dell shares gained 69 cents to $26.91. The stock has traded in a
    52-week range of $18.95 to $27.89.Since returning in January to lead
    the company he founded, Michael Dell  has overseen a shake up of his
    top executive ranks and made numerous other changes to improve customer
    service and reclaim market share.

    In the earnings release, the
    company said it was reviewing costs across the board and that the job
    cuts – equal to more than 8,000 of Dell’s more than 81,000 full- and
    part-time employees – would vary across geographic regions and customer
    segments to “reflect business considerations as well as local legal
    requirements.”"While reductions in head count 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,” Michael
    Dell said in a statement.Barry Jaruzelski, management consultant at
    Booz Allen Hamilton, was among the analysts who said it appeared
    Michael Dell was finally making a fresh stamp with by taking some bold
    steps to fix problems.Round Rock-based Dell has continued to struggle
    to regain market share after Hewlett-Packard  Co. ousted it from the
    top spot in worldwide computer shipments last year. In the first
    quarter, HP kept its lead over Dell with about 4 percent more
    shipments, according to tech research firms IDC and Gartner Inc.Besides
    layoffs, Dell earlier in May broke from its long-standing
    direct-to-customer business model with a plan to sell computers through
    Wal-Mart Stores  Inc., the world’s largest retailer, beginning June 10.
    And Dell also recently began selling consumer PCs pre-loaded with a
    version of Linux, an alternative to Microsoft  Corp.’s Windows
    operating systems.”He’s clearly not waiting around to do things,”
    Jaruzelski said. “He’s certainly not being timid about moves he’s

    A company of Dell’s size is bound to shed jobs in order
    to cut costs, but the savings from any layoffs likely won’t improve the
    company’s finances until next year at the earliest, added Philip
    Durell, senior analyst at The Motley Fool.”I don’t think the Dell model
    is broken, it just needs some tweaking,” Durell said. “Dell is still
    Dell and that’s not going to change.”Dell issued the financial results
    as a news release and didn’t offer any follow-up conference calls with
    analysts or reporters. The company didn’t provide year-ago figures in
    its report either.The company’s earnings statements from the second,
    third and fourth quarters also remain preliminary and have yet to be
    filed with the Securities and Exchange Commission because of an ongoing
    federal accounting probe that found numerous errors, evidence of
    misconduct and financial control deficiencies.Thursday’s report
    included a charge of $46 million, or 2 cents per share, for costs
    related to the investigation. Dell didn’t offer specific guidance but
    said the second quarter could be tougher due to a seasonal slowdown for
    the company and continued expenses related to the investigations.

    Dell also hasn’t filed its annual report for the fiscal year ended Feb. 2.
    W. Luce III, chairman of the Dell’s internal audit committee, conceded
    that the investigation was taking longer than expected.”Although this
    process has taken us longer than we would have liked,” Luce explained,
    “it is important to commit the time and resources required to ensure a
    thorough and comprehensive review and resolution of all identified
    issues and the implementation of appropriate remedial measures.”Without
    offering a timetable, Dell spokesman David Frink said the probe was in
    its final phases.Durell said he was convinced that if Dell had some
    major financial restatements to make, they would have been announced by
    now.”Nobody these days wants to go ahead with any of these restatements
    without going through everything with a very fine-toothed comb,” he