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Dell Cuts 10% Of Workforce, Reports Fiscal Q1 Results

6/01/2007 09:49:00 AM Eastern

Round Rock, Texas – Dell will cut 10 percent of its workforce, around 8,800 employees, over the next 12 months, but on the plus side reported positive sales and earnings for its fiscal first quarter ended May 4.

In a statement Dell said it, “Initiated a comprehensive review of costs across all processes and organizations from product development and procurement through service and support delivery with the goal to simplify structure, eliminate redundancies and better align operating expenses with the current business environment and strategic growth opportunities.”

Chairman/CEO Michael Dell stated, “Our strategic intent is to simplify information technology for our customers by removing cost and complexity. No other company is as well positioned to unlock value for our customers — empowering them to implement simpler and smarter technology solutions. While reductions in headcount are always difficult for a company, we know these actions are critical to our ability to deliver unprecedented value to our customers now and in the future.”

The company reported revenue for the quarter of $14.6 billion and net income of $759 million. In the quarter, gross and operating income margins were positively affected by a favorable decline in component costs. In addition, a focus on more richly configured customer solutions and a better mix of products and services yielded significantly higher average selling prices and a better balance of profitability and revenue growth, the manufacturer said.

In the first quarter, server revenue led the enterprise with growth of 19 percent year on year to $1.6 billion. For Q1, Dell said it was again No. 1 in the United States in units shipped at 33.3 percent. Storage revenues were up 13 percent year on year to $500 million. Revenue from mobility products increased seven percent to $4 billion while desktop revenues of $4.9 billion were down six percent year on year. Enhanced services delivered $1.3 billion in revenues and software and peripherals revenue increased six percent year on year to $2.3 billion.

The computer maker said it took deliberate actions to concentrate on solutions sales, realign pricing and drive a better mix of products and services in the quarter. While these actions slowed overall unit growth, a 14 percent year-on-year improvement in average selling prices contributed to improved gross margins, revenue growth of three percent and operating margins of 6.5 percent.

As previously announced, the Audit Committee of the company’s board is conducting an independent investigation into certain accounting and financial reporting matters. As a part of the final phases of the investigation, the Audit Committee is in the process of reviewing each of the identified accounting errors and the proposed correcting adjustments. Upon completion of that review, the Audit Committee will evaluate the impact and nature of the errors to determine whether a restatement of any previously issued financial statements will be required, the company said.

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