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Dell giving students a lesson in layoffs

The company rescinds job offers and internships extended to graduate students on the eve of further layoffs expected at the company.

Dell has rescinded job offers and internships extended to graduate students on the eve of further layoffs expected at the company.

The Round Rock, Texas-based computer maker has rescinded roughly half of the outstanding full-time job offers and summer internships extended to MBA students as part of an effort to cut costs, according to sources close the to company. A company representative confirmed the offers were revoked but said the number was relatively small.

The representative added that, to his knowledge, Dell is not revoking job offers extended to undergraduates, but that's because almost no offers have been made this year.

"We've scaled back on nearly all hiring," the representative said. College students, however, have contacted and said that their job offers have been revoked.

Dell's lesson in corporate budget-watching is one becoming familiar to university graduates this year. With revenue plummeting, corporations are drastically curtailing recruiting and in some instances encouraging those who hold job offers to stay home. Intel, for instance, is telling some of its new hires that they can keep their signing bonus and two months' worth of salary if they decline a previously extended job offer.

A little over a year ago, the hiring environment was starkly different. Then, even middling students found themselves hotly recruited. Not only were salaries going up, companies were handing out substantial signing bonuses and even novel fringe benefits, such as free maid service.

High-tech giants are also shrinking their existing employee rosters. Analysts and sources close to Dell say the computer maker will cut 3,000 or more jobs later this month. The cuts will take place mostly in the United States and Europe, according to sources.

In February, Dell let go approximately 1,700 employees in the first mass layoff in company history. At the time, the company said it didn't anticipate further cutbacks.

Although the company has declined to comment on further reductions, executives have seemed more open to the idea since then. When asked about additional layoffs earlier this week, Tom Meredith, senior vice president of business development at Dell, declined to comment on specifics but said the company always keeps its options open.

Right before the February reductions, analysts and sources close to Dell expected the company to lay off up to 5,000 employees. The anticipated upcoming layoffs are therefore seen as a second phase of an ongoing process.

Hard times in the hardware business are fueling the austerity measures. PC sales and prices have slumped dramatically since the end of last year. Dell has fought this trend by slashing prices. While the strategy has cut profit margins, the company has clearly gained market share. In the first quarter, Dell became the largest PC company in the world for the first time.

"We will continue to be the aggressor on lowering costs," Meredith said during a presentation at the J.P. Morgan H&Q conference in San Francisco earlier this week.

"It became incredibly clear (in the fourth quarter) that there was something fundamentally different at the macro level and that demand was weakening," he said. "In the aftermath of the fourth quarter, we decided that we had to trade margin dollars for market share."

Dell eliminated approximately 40 percent of positions for MBA hires and 60 percent of positions for summer internships, according to sources close to the company. In certain cases, the students had already accepted their job offers earlier in the year. Dell declined to provide an exact number of people affected but said it was relatively small.

Like Intel, Dell is also compensating students whose job offers were rescinded, the spokesman said.

At both companies, the cuts appear to be fairly targeted. Graduate students in chip design are unlikely to receive offers to stay home, said a spokesman. Instead, the letters are going to those with more generic skills. In Dell's case, offers were rescinded on the basis of which group the graduate was joining.