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By | Ashlee Vance 31st May 2007 20:55

Dell cheers Q1 with workforce decimation

2.0 - 8,000 = more money

Dell will decimate its workforce over the next year, eliminating more than 8,000 jobs. The company released word of this restructuring as it dished out first quarter financial results that beat market expectations.

Reinstalled CEO Michael Dell vowed to make cuts during a recent interview, saying Dell's headcount has grown by 50 per cent in recent years, while revenue has grown just 15 per cent. "That's not a good idea," Dell said. So now the company plans to cleave 10 per cent of its staff in a bid to reduce costs and return Dell to its glory days status.

"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," CEO Dell said, in a statement today.

For the first quarter, Dell reported revenue of $14.6bn up from $14.2bn reported in the same period last year. Net income, however, dipped to $759m from $762m.

Despite the net income drop, the results appeared to please Wall Street, which expected lower revenue and net income totals. Shares of Dell were up 5 per cent in after-hours trading, at the time of this report, to $28.40.

(All of the financial results in this report are considered preliminary due to an ongoing investigations into Dell's accounting practices. Dell spent $46m during the quarter to deal with these investigations.)

Dell's first quarter was blessed by declining component costs and healthier high-end product sales, the company said. Notably, Dell's server revenue grew 19 per cent year-on-year to $1.6bn, while storage revenue rose 13 per cent to $500m. Dell also notched a 7 per cent rise in laptop sales to $4.0bn and a 6 per cent increase in software and peripherals sales to $2.3bn.

The desktop market remained very tough for Dell with revenue dropping 6 per cent to $4.9bn. Services revenue dropped as well to $1.3bn from $1.4bn in the same period last year.

Dell declined to provide a, er, numbers-based second quarter forecast. Instead, it warned investors to have patience as Dell 2.0 takes shape.

"While progress in the first quarter was encouraging, the company is focused on transformational efforts aimed at IT simplification that are designed to yield more robust and targeted customer solutions, superior customer experience, and expanded growth opportunities in the coming years," the company said. "These efforts may cause short-term fluctuations in operating performance, but the company believes they will produce a more optimal and sustainable balance of growth, profitability and liquidity in the long-term, driving sustainable returns for shareholders." ®

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