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Dell to Lay Off 10 Percent of Workforce
http://www.pcmag.com/article2/0,1895,2140070,00.asp
SAN FRANCISCO, May 31 (Reuters) - Dell Inc. unveiled on Thursday
quarterly earnings and revenue that topped analysts' expectations and
plans to cut about 10 percent of its work force, sending its shares up 6
percent.
The after-hours stock price topped a 12-month high set in November.
Apart from the results and job cuts, investors were also encouraged as
the No. 2 personal computer maker said customers bought more-expensive
systems and component prices fell in the quarter, helping profit margins.
"The results are way better than expected," said American Technology
Research analyst Shaw Wu, who rates Dell shares as neutral. "They are
surprisingly strong in the U.S. enterprise market given that the
environment is somewhat mixed."
Recent reports by market research firms Gartner and IDC had indicated
Dell's personal computer sales would be worse, he added.
The job cuts, which would translate into about 8,800 of its 82,800
permanent employees and 5,300 temporary staff, would take place over the
next year, and Dell said the cuts would vary across regions, customer
segments and functions.
Fiscal first-quarter net income fell to $759 million, or 34 cents per
share, from $762 million, or 33 cents per share, reported a year
earlier. Dell said the first-quarter and year-ago quarter's figures were
subject to restatement as regulators have been investigating its
accounting practices for almost two years.
Revenue rose to $14.6 billion from $14.2 billion reported a year
earlier. The results beat the average forecasts of analysts polled by
Reuters Estimates, who had expected earnings of 26 cents per share and
revenue of $13.9 billion.
Earnings and revenue at Dell had been shrinking as rival Hewlett-Packard
Co. extended its PC market-share lead by selling more laptops and
printers in stores and expanding overseas, taking the title of market
leader from Dell.
Founder Michael Dell, 42, retook the CEO job in January after sales
growth slumped and the company's past accounting came under scrutiny by
federal regulators and prosecutors.
The company said last week it would break from its 23-year-old practice
of selling directly to customers via the Internet or phone and would
sell low-priced PCs at Wal-Mart Stores Inc. in North America beginning
June 10.
Dell said on Thursday no determination had been made whether
restatements of prior results would be required because of the
accounting reviews. Thomas Luce III, chairman of the Dell board
committee auditing the company's accounting, said the review was "taking
us longer than we would have liked."
Dell stock rose to $28.58 from a close of $26.91 on Nasdaq, where they
had gained 2.6 percent in regular-session trading.
For its second fiscal quarter, Dell expects operating profit margins to
be "under pressure" compared to the first quarter as the period
typically has slower sales and Dell sees higher costs from both
operations and the investigations.
Full-year results may be hurt by "transformational actions, changing
competitive dynamics, a more aggressive pricing environment" and higher
second-half component costs, it said.
ACCOUNTING CONCERNS
Dell said in March an internal audit found evidence of misconduct,
accounting errors and deficiencies in its financial controls. The
investigations have kept Dell from filing results with the Securities
and Exchange Commission for last year's second and third fiscal quarters
as well as its annual report.
Dell disclosed last August that the SEC had been pursuing an informal
inquiry of its accounting for a year. The SEC review became formal in
November, and the Justice Department joined the probe.
Dell benefited in the first quarter from PC component price cuts that
also helped rivals including Apple Inc. and HP. Prices have fallen
sharply for components such as memory chips, hard-disk drives and
flat-screen display monitors, analysts and company executives have said.
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