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Thursday, 15 February, 2001, 22:32 GMT
Dell misses profit forecast
Workers in Dell factory
Dell says it making fewer PCs, which means lower profits and fewer workers
Thursday was a bad day for both employees and stockholders of Dell Computer.

Earlier in the day, the No. 2 computer maker said it intends to lay off 4% of its workforce because of an industry-wide slowdown in personal-computer (PC) demand.

Road sign outside Dell factory showing narrow road ahead
The road ahead is narrow for Dell

Fewer PCs mean fewer profits and that showed up in Dell's financial statements for the last three months of 2000, which missed analyst expectations by a penny a share.

In final three months of the year, Dell made $508 million, or 18 cents a share. While the figure failed to meet Wall Street's predictions of 19 cents a share, it still represented an improvement over the previous year, when the company earned, $436 million, or 16 cents a share.

Waiting for the bell

Dell released its latest quarterly results after the end of trading day in New York.

Earlier in the day, shares of Nasdaq-listed Dell advanced 9%, or $2.06, to $25 on the heels of the news about the job cuts, which were announced midday.

It is a grim irony on Wall Street that investors cheer lay offs as way to perk up a company's sagging bottom line. When workers go, profits rise -- or so the reasoning goes.

However, investors generally react negatively to less-than-expected profits. This year has been an exception. Many investors believe much of the negative news about profits have been "built in" to a company's share price.

Job losses mount

The announced job cuts at Dell are the first ever in the firm's 16-year history. About 1,700 people, or 4% of the computer-giant's workforce, will lose their jobs.

Rumours of the layoffs had been circulating for weeks, ever since January when the company issued a profit warning.

At the time, the company said a slowdown in demand growth for PCs and services, as well as a general economic slowdown, would hurt its earnings and revenues during the last three months of 2000.

Previous cutbacks

Analysts who had predicted that Dell would have earned 25 cents per share were shocked by the company's own prediction of 18 or 19 cents.

Ahead of the profit warning, Dell had already introduced a hiring freeze, reduced its marketing budget and limited travel expenses.

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See also:

15 Feb 01 | Business
Death of the PC?
22 Jan 01 | Business
Dell warns on profits
08 Dec 00 | Business
Behind the profit warnings
04 Jan 01 | Business
PC sales fall in US
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