Dell to Cut More Jobs in Cost-Cutting ‘Mission’

Dell Inc plans to cut more jobs than the 8,800 it had targeted as it seeks to reduce expenses by at least $3 billion annually by 2011, Chief Executive Michael Dell said on Thursday.

Dell, the world’s second-largest personal computer maker after Hewlett-Packard Co, will “go past” the job-cutting goal it first announced in May 2007, the CEO said at the company’s first analyst meeting since 2005, held near its headquarters in Round Rock, Texas.

“We are not satisfied with the current state of affairs and are on a mission to fix it,” said Dell, 43. “Every area of the company is being pursued” for cost cuts.

Dell, who founded the company in 1984 and is also its chairman, did not say how many more jobs may be cut.

A spokesman declined to elaborate on the CEO’s comments. The company said on Monday it planned to close its desktop PC manufacturing plant in Austin, Texas, and eliminate about 900 jobs there.

Dell announced the $3 billion cost-reduction target earlier this week, and costs have been the main focus at the analyst meeting after operating expenses at Dell swelled in recent years.

Selling and administrative expenses surged 27 percent in Dell’s fiscal 2008, partly because of higher compensation and costs for a lengthy audit of the company’s accounting.

“Dell is on a journey of restructuring,” said Global Equities Research analyst Trip Chowdhry, who attended the Round Rock event. “They need to figure out how to use those assets profitably in a hyper-competitive environment. I don’t think they have the answers for this.”

The company has said it plans to invest in a number of growth initiatives, including selling computers in stores, pursuing small and medium-sized businesses, selling more laptop computers and growing in emerging markets.

Dell last year broke from its 23-year direct-only sales model and started selling PCs at Wal-Mart Stores Inc and Best Buy Co, among other chains. Dell computers are now available in more than 10,000 store outlets worldwide.

Dell shares fell 10 cents, or 0.5 percent, to $20.05 at mid-afternoon on Nasdaq.

Ron Garriques, head of Dell’s consumer business, said his unit has a ways to go to be as profitable as its competitors.

“We’re going to need another year to get ourselves to the point in desktop and laptop where we are as cost-effective as everyone else,” said Garriques, the former head of Motorola Inc’s handset business whom Michael Dell hired last year to help turn around the consumer business.

Garriques’ hiring fueled speculation that Dell might enter the mobile phone business. Alex Gruzen, senior vice president of Dell’s consumer product group, told analysts on Thursday in response to a question about Dell’s possible phone plans that “there’s nothing to comment on at this point.”

“At the end of the day, we are about connecting customers, whether it’s at their business or their home,” Gruzen said. But he added that the company’s PC-based relationships with wireless carriers had “created enormous opportunities” and that Dell now has “room to be a bit more experimental” with consumer products.

Michael Dell said the company will end the current year with lower operating expenses than in the previous year. He said job cuts are continuing in the current quarter after 5,500 positions were eliminated in the second half of 2007, for a net reduction so far of 3,200 jobs when counting positions added through acquisitions.

The CEO also told analysts Dell planned no major acquisitions but will focus on smaller purchases that complement existing businesses.

“I wouldn’t hold your breath for a big acquisition,” the CEO said.

“There are a number of network-effect acquisitions, where we can acquire a product line or a key methodology or a key group of skills that we can leverage across our entire network. Our acquisitions will be that kind of thing,” he said.

Dell last year made about nine acquisitions for a total of about $2.2 billion.

Chief Financial Officer Donald Carty said the company expects to repurchase at least $1 billion of company stock in the current quarter and will tap capital markets for debt financing. Dell bought back about $4 billion of its stock in its fiscal fourth quarter.

News Around the Web