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Dell to cut more jobs in cost-cutting ‘mission’

Retail

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, CEO 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 near company headquarters in Round Rock, Texas, at the company’s first analyst meeting since 2005. “We are not satisfied with the current state of affairs and are on a mission to fix it,” said Dell. “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 on Monday said 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% in Dell’s fiscal 2008, partly because of higher compensation and costs for a lengthy audit of the company’s accounting. 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 were down less than 1% at $19.79 in noon trading on Nasdaq.

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, for a net reduction so far of 3,200 jobs when counting positions added through acquisitions. The CEO also told analysts the company 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 billion.

CFO 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 Q4. (Reuters)

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