Dell to lay off 10 percent of workforce
Dell released preliminary earnings Thursday showing positive signs in its servers unit, but announced it would lay off 10 percent of its workforce over the coming year.
Net income for the quarter ended May 4 totaled $759 million, or 34 cents per share, a slight dip from the same quarter last year, which came in at $762 million and 33 cents per share. The numbers still surpassed Wall Street's expectations of 26 cents per share.
Gross margins grew to $2.8 billion, up from $2.4 billion a year ago, and operating income was down slightly to $947 million from $949 million, which Dell attributed to higher average selling prices and a better mix of products and services. Revenue for the first quarter of Dell's fiscal year was $14.6 billion.
With a current worldwide workforce of 88,000, approximately 8,800 employees will be let go over the next year as Dell tries to trim costs. The staff reductions will "vary across regions, segments and functions," according to Dell spokesman David Frank.
A bright spot was Dell's server segment, which topped all of the company's businesses with 19 percent growth from a year ago. Notebook revenues were up 7 percent and desktops declined 6 percent.
Dell has been attempting to turn itself around in the last year after losing its lead as the world's largest PC maker to Hewlett-Packard in 2006. It's seen heavy turnover in leadership, including the return of founder Michael Dell as chief executive, replacing Kevin Rollins.
The company's traditional direct sales model will also be tweaked slightly to compete better with HP and others. Last week, the PC maker announced that it will sell two of its desktop models at Wal-Mart.
Dell is also in the middle of an SEC investigation into its accounting practices. In its earnings announcement, Dell said it has incurred $46 million in costs related to the federal probe. The investigation is ongoing, preventing the company from filing anything more than preliminary reports for the previous three fiscal quarters. For the same reason, Dell has declined to hold the traditional earnings call with analysts and the media.
Erica Ogg is a CNET News reporter who covers Apple, HP, Dell, and other PC makers, as well as the consumer electronics industry. She's also one of the hosts of CNET News' Daily Podcast. In her non-work life, she's a history geek, a loyal Dodgers fan, and a mac-and-cheese connoisseur. E-mail Erica. 
FYI
Dell machines really stink quality wise these days. I bought one of their XPS machine almost a year ago and I'll never get another Dell. I compare it to one I bought years ago and it's just junk, junk, junk
looks like the company's model is unsustainable.
Beleaguered though they may be, I'm sure that selling products in
Wal-Mart will give them a much-needed sales boost. Not.
Oh yeah. 60% of AAPL.
Next time Michael Dell gives you advice, DO THE OPPOSITE.
Guaranteed success!
I just replaced the absolute last Dell piece of garbage I owned, a Dell Inspiron. It was the computing version of an Alfa Romeo Milano: destined to spend more time in the shop than running.
the workforce that doesn't add value. But as a long-time Dell
customer, I truly hope they don't cut a major artery in the
process.
Two areas they CANNOT touch, without risk of losing our
business:
1) Enterprise technical support. If our "gold support" calls go to
India as they did a few years back, we'll switch right over to a
different provider. That was disasterous. I personally wasted
DAYS on a critical project because the script-reading robots they
hired refused to use logic when encountering my problem*
2) Professional Services. This is where our money has been best
spent, lately. I've always been skeptical of PS offerings, but our
Dell-EMC SAN project has been nothing but a pleasure. If they
get cut, they'll lose out on lots of future revenue, as we seek
alternate solutions.
Anyway, Dell's doing fine by us. So long as these moves don't
affect the services we depend upon, we'll continue to keep them
in mind as we take on new projects or revamp our infrastructure.
Charles
*4 identical blade servers delivered. Performed the same steps
on all 4. One of them continues to fail, citing a RAID controller
error. As we always had in the past, I asked the phone jockey to
just send a RAID controller mezz card and we'll swap it out (4
hour warranty purchased). Moron on the phone refuses to move
forward until I reinstall Windows (they were shipped with Red
Hat Linux). This continued for hours and through numerous
attempts to work with this group. I finally gave up and called
our account exec. Told him the entire order was going back and
we'd switch to IBM or HP or anyone else. I finally got shipped a
RAID mezz card, and their on-site guy arrived to replace it to
100% remedy. Thankfully, Dell reversed this offshoring move
and we regained decent support after that.
This ranks up there with GM closing its most productive plants.
What are they thinking?!? Probably that they can tweak their earnings a little bit more.
I'm in MBA School and one of the major problems American Businesses think that they have is the engagement of the American employee. It seems that they show little or none loyalty to the company and act with a "what's in it for me?" attitude. Wonder if there any correlation between.....
Does anyone remember Robert Townsend who shook up Avis in the 60s? In his book "Up the Organization", the good and bad start at the top. Old, but basics don't really change. Maybe Michael Dell should read it.
Or, to save him time, I will suggest a few cost-cutting measures: no more stock options, no performance bonus for management based on negative results, a 25% reduction in salary for all bozos.
If that doesn't trim costs enough, sack a bozo or three. Either that, or transfer them to the production line, "to encourage the others." Of course, Townsend only did it for a week but it was a good lesson in what the business is all about.
And Mistuh MBA, you probably never heard the old U.S. Navy phrase: "Loyalty, up and down." When you're a CEO, the company is in deep ordure, and you're earning 500X the average employe wage, maybe you should ask yourself why the grunts don't give a damn?
The bottom line is that you cannot have it both ways. On one side preach the benefits of open economies to the rest of the world, and on the other retreat back into a shell of protectionism as soon as the going gets rough.
You have choices! You can always purchase your equipment from some other company, and then discover that they too have manufacturing and services outside North America.
Get used it my friend, this is only the beginning.
- Husband just laid off
- by selio2 January 30, 2008 7:46 PM PST
- My husband got laid off this morning. For the last 2 months, Dell has been telling every single freaking worker that their job is "safe and not going anywhere" , they gave us their word! They said that opening at Wal-Mart and Best Buy would HELP not HURT the employees!!! They gave us NO notice or even hints about our jobs being taken away. This morning at 7 am, they got 600+ employees on the call and after waiting 45 minutes, got on and said: "As of today, all Kiosks are closed and you're terminated effect tomorrow morning. You will not have insurance after tomorrow. Thank you for your support and hard work. Have a good day." THAT IS ALL!!!! A 5 minute talk to FIRE the Dell people. WE HAVE FAMILIES, WE HAVE BILLS!!! What are people supposed to do when the economy is already messed up and you fire us with no warning! Dell just fired over 600 PEOPLE!!!! Do not support the scum! They should have respected their employees enough to at least give notice!! I am SHOCKED at their utter disregard for the employees who have worked so hard for them!!
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- Join the Club
- by mtgallagher1 February 27, 2008 12:08 PM PST
- Yes it is true. Dell does not have a heart nor a Soul as their hiring motto said a year ago.
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(19 Comments)They are a farce of company and are all about money for their executives.