Dell Looks to Save Dollars Through Additional Cost Savings Measures

Dell, the world’s second largest producer of desktops and notebooks, is looking to cut costs by asking employees to take an unpaid vacation and by reducing the number of outside firms the company uses for various projects.

In an internal blog posting Nov. 3, CEO Michael Dell told employees that the company wants to save additional dollars in the fourth quarter of 2008 as the problems with the global economy continue and the demand for Dell’s desktops, notebooks, servers and other IT equipment slows down.

Earlier this year, Dell announced a broad cost-cutting plan that will eventually save the company $3 billion during the next three years. When Michael Dell announced that plan in March, it involved cutting 8,800 jobs from the company’s global operations.

This latest cost-cutting measure involves asking employees to take a voluntary, nonpaid vacation of one to five days and also severance packages for those workers who qualify. The other cuts involve reducing the number of outside consulting firms and contractors Dell uses, as well as a global hiring freeze.

In an e-mail, a Dell spokesperson did not offer specifics on how many workers the company wants to eliminate with the voluntary buyout. At the end of the second quarter of 2008, Dell had 79,300 employees worldwidee. The company plans to announce its third-quarter financial earnings on Nov. 20.

“The proposed actions are voluntary,” Jess Blackburn, a Dell spokesperson, wrote in an e-mail to eWEEK. “We’re not speculating on the level of participation we anticipate.”

During the past year, Dell has been upfront about its concerns about the ongoing financial crisis in the United States and the impact that has had on IT spending, especially when it comes to hardware purchases. In addition to the United States, Michael Dell has expressed concerns about the company’s business in Asia and Europe.

“When Dell announced [second-quarter] financial results on Aug. 28, 2008, it reported continued conservatism in IT spending in the U.S., which had extended into Western Europe and several countries in Asia. The company is seeing further softening in global end-user demand in the current quarter,” according to a statement Dell released on Sept. 16.

Since Michael Dell returned to the CEO position in 2006, he has looked to reinvigorate his namesake company as it faces increasing pressure not only from Hewlett-Packard but from a number of other PC vendors, such as Acer, which has seen its sales of notebooks skyrocket in the last two years.

When Michael Dell announced the company’s cost-savings plan earlier this year, he also said the company would focus on five key areas as it looks to increase it market share: the global consumer market, enterprise businesses, notebooks, small and midsize businesses, and the emerging market.