May 14, 2001 2:20 PM PDT

Dell clears out of Silicon Valley

Dell is rounding up its Silicon Valley storage operations and corralling the unit at its headquarters in Round Rock, Texas.

As part of previously announced layoffs, the No. 1 PC maker has shut its only Silicon Valley office and laid off about 50 employees that had been based there, CNET News.com has learned.

The PC maker announced that it will cut 3,000 to 4,000 jobs over the next two quarters.

The souring PC market is hurting the bottom line at the once high-flying Dell, but the company is determined to be the last one standing in the current price war with competitors such as Compaq Computer and Hewlett-Packard.

The consolidation of Dell's storage efforts is just another of the aggressive cost-cutting measures senior vice president Tom Meredith promised at the Merrill Lynch technology conference earlier this month.

"We will be ruthless about how we adjust our cost structure going forward," Meredith said.

CNET News.com learned last week that Meredith will be leaving Dell by the end of August.

The San Jose, Calif., office was part of Dell's first and only acquisition in 1999, when the PC maker bought storage company ConvergeNet Technologies for about $340 million dollars in stock.

Dell spokesman Jim Mazzola said the Silicon Valley office would be shut down.

"We acquired ConvergeNet over two years ago for its engineering talent and technology, and they've contributed to our storage systems group," Mazzola said. "We're just closing this office as part of our continuing cost-cutting measures."

Chief Executive Michael Dell is not a big fan of acquisitions. He said in a speech last March: "You get a lot of bad stuff when you acquire other companies, and I'm not sure we need it. The best approach for us is to acquire our competitors' customers one at a time."

Dell's impression of acquisitions may also be influenced by the poor return from the ConvergeNet deal.

"Products did not come out on time, and the technology was not as mature as they (Dell) had previously thought," said Lehman Brothers analyst Dan Niles.

Of the closing of the Silicon Valley office, Niles said it was a move he had expected. He added that it made sense to close such a small office as the belt-tightening continues at Dell.

Staff writer Michael Kanellos contributed to this report.

 

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