*NEWS*DELL PLANS FURTHER JOB CUTS

[Anonymous]

Dell plans further job cuts
Dell
yesterday said it was seeking to strip out more than $3 billion of
costs over the next four years in a move that will see the computer
giant cut 8,800 jobs.
The company is seeking to
boost its profit margins after it was overtaken by its larger
competitor Hewlett-Packard in 2007.Speaking at a presentation to
analysts yesterday, Michael Dell, the founder of the firm, said that
the cost-cutting measure would also include reform of its logistics
network and outsourcing more of its manufacturing operations.A
spokesman for the company sought to downplay fears that the programme
signalled evidence that the group was experiencing a sharp slowdown in
new business as the US faces a recession. He said that while the
company had already indicated that it was “seeing some hesitancy among
companies and how they are choosing to spend their IT dollars”, Dell
had first discussed cost-cutting measures as early as last May

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Dell
is struggling to compete with Hewlett-Packard which is able to take
more risks in the market and subsidise more of its products because of
its very profitable printers business.One industry insider, who
declined to be named, said: “HP can afford to use the profits from the
printers operations to subsidise the rest of the company. It allows
them to take more risk with designing innovative products.”He added:
“The real problem is that product prices just keep going down. You can
buy a Dell laptop now for less than $500. It is a brutal business and
unless you are the market leader you really don’t have any competitive
advantage. The likes of HP and Dell only really make money on the first
three months, maybe six, of a new product. It’s a permanent treadmill
and Dell has lost quite a bit of momentum.”The spokesman for Dell said
that the company had already made a number of redundancies with 5,500
jobs cut out of the 8,000 reduction. He refused to be drawn on what
portion of those job cuts would be made in the US, insisting that the
reduction programme was “global”.Dell has manufacturing facilities in
Texas, North Carolina, Tennessee, and in Malaysia, Penang, China and
Poland. It has already said that it is closing a manufacturing
operation in Austin, Texas which will result in the loss of about 900
jobs.

Mike Cannon, Dell’s president for global operations, said
that the company historically relied too heavily on its own businesses
to design and make computers. Competitors such as HP, which unseated
Dell as the largest personal-computer maker two years ago, typically
use a more diversified supply chain.He said: “Instead of having one
supply chain approach for Dell, we are going to have multiple supply
chains.”Dell rivals such as Hewlett-Packard, IBM and Sun Microsystems
have long-standing relationships with outside manufacturing partners,
which often offer customers bundles of computer hardware, software and
services. Dell, however, has been a relative outsider.Shares in Dell
fell by as much as 2 per cent in early trading in New York, before
paring the fall to be almost unchanged at $19.83. The stock has tumbled
from just over $30 at the end of last year.Unemployment is rising at an
alarming rate in the US with just under 5 per cent of the workforce out
of a job. It is expected , by some Wall Street analysts to rise to 6
per cent – a rate perceived by many as a sign of an automatic recession
– by the end of the year.

[Author]

April 21, 2008 at 12:56 PM