Sales slowdown forces Dell to cut costs

Amid sluggish sales, build-to-order PC-maker Dell Computer on Thursday missed earnings estimates by a penny and said it will eliminate 1,700 jobs--4% of its workforce.

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By  Rob Corder Published  February 16, 2001

Amid sluggish sales, build-to-order PC-maker Dell Computer on Thursday missed earnings estimates by a penny and said it will eliminate 1,700 jobs--4% of its workforce.

Net income for the fourth quarter, ended Feb. 2, was up 16%, to $508 million, or 18 cents per share, compared with net income of $436 million, or 16 cents a share, a year ago. The consensus earnings estimate among Wall Street analysts surveyed by First Call was 19 cents, revised from 25 cents last month after Dell issued a warning. Revenue grew 28% year over year, to $8.7 billion.

Dell blames the earnings miss on weak PC sales. For fiscal 2000, Dell's revenue increased 26%, to $31.9 billion, compared with fiscal 1999, while net income grew 24%, to $2.3 billion. These numbers don't include a one-time $105 million charge that Dell says it will take to cover costs related to firings and facility consolidation.

Dell says most job cuts will occur in administration, marketing, and product support in its central Texas operations. Some observers say they're not surprised by the move. Says Brooks Gray, a Technology Business Research analyst, "The computer market is slowing down and selling prices are falling, so they had to do something."

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