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To: tonyt who wrote (89585)	2/9/2001 10:17:27 AM
From: tonyt	Read Replies (1) \| Respond to of 97611

Dell Prepares for Deep Expense Cuts, May Trim Staff Amid PC Slowdown By GARY MCWILLIAMS Staff Reporter of THE WALL STREET JOURNAL Dell Computer Corp., after slashing prices amid slowing growth in the personal-computer market, is gearing up for deep expense cuts that could include the first layoffs in its 16-year history. The Round Rock, Texas, computer company recently told managers to prepare for expense cuts of 8% to 10%, according to people familiar with the directive. The cuts would be on top of a series of moves intended to counter an industry slowdown. Dell already has frozen most hiring, barred travel unrelated to sales calls, and cut some marketing programs. A spokesman for Dell said he wasn't aware of any broad reductions. Last month, while warning that his company wouldn't meet Wall Street analysts' earnings forecasts for the fourth quarter ended Feb. 2, Dell Chief Executive Michael S. Dell said the company would cut costs to improve profit margins. Mr. Dell said, "Our businesses will make [expense] adjustments as they see necessary to be sure we remain competitive." At 4 p.m. in Nasdaq Stock Market trading Thursday, Dell was down 44 cents at $26.06, but is much higher than the 52-week low of $16.25 set Dec. 21. Some employees believe the computer maker could be preparing to eliminate as many as 4,000 positions through a combination of outright job cuts and an annual performance review, beginning as early as next week. Every year, Dell's 36,000 full-time employees are ranked on a scale of 1 to 5 and each February, the company typically dismisses or places on probation any employee ranked in the bottom fifth. Amid the softest PC market in recent history, Dell has launched a price war in an attempt to pressure weaker rivals and grab market share. PC shipments last year rose just 9.2%, as home-computer sales slumped late in the year, according to market researcher International Data Corp. Dell, which records about $32 billion in annual revenue, is expected to report fourth-quarter results Thursday. In January, Dell projected a profit of 18 cents to 19 cents a diluted share, well below 25 cents a share expected by Wall Street analysts, though revenue is expected to rise 26% to $8.6 billion. This from a company that had been used to annual revenue gains of 50% a year up until fiscal 1999. Dell also warned that the price cutting would pare gross profit margins, or profits after manufacturing costs, by three percentage points from a year ago. Analysts believe fears of a recession are prompting U.S. companies to cut their computer budgets, putting new pressure on PC sales this year. David Bailey, an analyst at brokerage house Gerard Klauer Mattison, said new cuts at Dell would indicate that PC demand continues to sag. Many computer makers have signaled that they don't see demand perking up until the second half of the year, at the earliest. "I think this is not going to be viewed as trimming the fat, but as preparing for slower growth," Mr. Bailey said. Late last year, Dell advised its managers to scrutinize all costs, even asking them to return unneeded company-issued pagers. Dell also closed an online procurement business called Dell Marketplace. The business was launched in September and designed to allow Dell customers to buy and sell using Dell's electronic-commerce capabilities. Thursday, Spherion Corp., a Fort Lauderdale, Fla., staffing concern that supplies Dell with factory workers, said in a conference call that a large Austin customer, which analysts believe is Dell, has reduced its staffing needs by more than 1,200 employees a week. A Spherion spokeswoman declined to comment. Write to Gary McWilliams at gary.mcwilliams@wsj.com