Dell to slash up to 4,000 jobs
The cuts, which the company said will primarily affect employees in Texas, were widely anticipated as PC sales have decimated the bottom lines of most computer manufacturers.
Dell has combated the slowdown by cutting prices--a strategy that has allowed the company to gain market share but forced the company to reduce costs.
Along with announcing layoffs, Dell said it will meet previous guidance of $8 billion in revenue and per-share earnings of 17 cents for its first fiscal quarter, which just ended.
In addition, the company will require most employees to take unpaid time off in the second quarter, similar to moves already made by Hewlett-Packard and Sun Microystems.
"Reductions will occur at all organizational levels. Affected employees are eligible for competitive severance packages and extensive career counseling and outplacement assistance," the company said in a statement.
The layoffs will be achieved through consolidating sales and marketing departments, eliminating management layers, and sharing internal support resources. Manufacturing facilities in some instances will also be consolidated, Dell said. In a similar reorganization, Compaq combined its corporate and consumer PC divisions.
Financially, Dell will take a $250 million to $350 million charge against earnings in the second quarter to pay for the consolidation.
Dell shares gained 70 cents, or 3 percent, to $25.91 in after-hours trading on the Island ECN following the announcement.
In February, Dell eliminated about 1,700 jobs. At the time, the company said it did not anticipate further layoffs.
Last week, Dell also rescinded job offers to MBA students and some college students. Tom Meredith, senior vice president of business development at Dell, also said that the company was "keeping its options" open with regard to layoffs.
The rest of the PC industry will likely soon begin to feel Dell's pain. The company is already producing PCs for less than its major competitors, according to most analysts. If it can get by with fewer employees, the lower cost will likely be passed onto the consumer, forcing competitors to drop prices and cut costs.
In the past week, Compaq and Dell have engaged in a war of words over which company can go lower and survive. Compaq CEO Michael Capellas said his company will be as aggressive in price-cutting as Dell.
Dell's Meredith, meanwhile, has pointed out that Compaq gets 50 percent of its revenue from PCs but comparatively little profit. Last quarter, Compaq's PC division lost money.
"How aggressive can they be before they start hemmoraging losses?" he asked.