Dell to lay off 10 percent of workforce

Along with preliminary earnings release, the company announces it will lay off 10 percent of workers to trim costs.

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 with analysts and the media.

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About the author

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.

 

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