MARTHA CRUZ

June 1, 2007

Dell to Cut 10% of Its Work Force

Layoffs Are First Since '01

And Follow Cost Review;

Preliminary Net Is Flat

By CHRISTOPHER LAWTON

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June 1, 2007; Page A3

Moving to turn around ailing Dell Inc., founder and Chief Executive

Michael Dell announced layoffs at the company for the first time

since 2001.

The Round Rock, Texas, personal-computer company yesterday said it would lay off 10% of its

work force, or about 8,800 people, over the next year. The cuts came as a part of a cost review and

were announced with fiscal first-quarter earnings. Under the results, which were preliminary, Dell

posted flat net income and 2.8% revenue growth from a year earlier.

The layoffs, which Wall Street had been calling for, are part of Mr. Dell's

strategy to fix the company, whose sales have been beaten by rival

Hewlett-Packard Co. over the past year. Since being reinstated as CEO in

January, Mr. Dell has reshaped Dell's management team and signed a deal

to sell desktops in Wal-Mart Stores Inc., among other things, in order to

turn the company around.

Dell didn't say how much it would save from the layoffs or which

divisions would be affected, though Sanford C. Bernstein & Co. estimated

the cuts could set $600 million in savings.

The computer maker, continuing a trend of the past few quarters, didn't

hold a conference call to discuss its earnings. "While reductions in head

count 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," Mr. Dell said.

Net income for the fiscal first quarter, ended May 4, was $759 million, or 34 cents a share,

compared with $762 million, or 33 cents a share, a year earlier. The latest result included a $46

million charge, or two cents a share, related to the costs associated with the investigation.

Revenue was $14.6 billion. Last year, Dell reported sales of $14.2 billion. Dell's operating margin,

a measure of profitability, was 6.5%, down from 6.7% a year earlier.

The company, which is known for selling PCs directly via the telephone or Internet, attributed its

results to lower component prices and better average selling prices for its products. Dell's server

Dell to Cut 10% of Its Work Force - WSJ.com Page 1 of 3

http://online.wsj.com/article_print/SB118053803563918606.html 01/06/2007

revenue grew by 19%, while its storage revenue grew by 13% and mobility-products revenue

grew 7%. Still, sales for its desktop business, the company's largest, declined 6%.

News of the layoffs and Dell's results sent the shares up

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