Dell Memo Hints at Layoffs, Acquisitions

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Michael Dell is considering layoffs and acquisitions at Dell Inc., according to a corporate memo that was leaked to the press on Saturday.

Dell could even change the direct sales model that moved his company from a Texas startup in 1984 to the world's largest PC vendor in 2006, according to the memo that Dell sent to his 78,000 employees on April 25.

"The direct model has been a revolution, but is not a religion," Dell wrote. In an effort to improve the company's results, Dell has already made broad changes in management, returning to his position as CEO in February and hiring a new slate of managers, many from outside the company.

Now the new leaders are ready to act, with a plan "to make profound changes and take well thought-out risks."

Dell has endured a sales slide in recent quarters that has allowed rival Hewlett-Packard Co. to take over the top spot in PC sales, according to market researchers. The company has also failed to file several recent earnings reports with regulators as it continues to struggle with an accounting investigation by the U.S. Securities and Exchange Commission. To stop the bleeding, the company must trim costs and find new areas for business growth, the memo said.

"We plan to eliminate overlaps in our [global operations] organization and activities," Dell said. "We also need to improve sales productivity. These won't be merely exercises in cost-cutting."

A Dell spokeswoman confirmed the text of the memo but declined to elaborate on the comments.

Analysts applauded Dell's new plan, saying its strict terms are what the company needs.

"Dell is in the early stages of major transformation of its business built around customer centricity, innovation and services. I would expect the realignment of resources around those three goals to include the exit and entrance of employees," said Charles Smulders, managing vice president for client computing at Gartner Inc.

In addition to making business costs more competitive, Michael Dell also described several steps in a long-term plan to build new products for the world's fastest-growing markets and regions. The company is reaching for emerging markets of Brazil, Russia, India and China in an effort to sell PCs to the world's "next billion consumers." To gain a foothold in those new markets, Dell has opened factories in Brazil and India.

Many of those steps are in line with the company's "Dell 2.0" strategy, a plan launched by former CEO Kevin Rollins in September to improve its industrial design, expand its IT services, and boost sales in developing countries by building factories there.

The new memo also describes Dell's plan to offer corporate customers a set of products that will "radically simplify IT."

"We know our competitors drive complexity and needless cost into customers' environments," Dell said. "We intend to break this cycle. We will build different kinds of services and offer key technologies that will help customers escape this complexity trap."

To reach that goal, Dell may have to acquire some new technologies or even companies, the memo hinted. "We won't hesitate to use our company's assets to build or buy the capabilities and technologies we need to deliver on our initiatives," Michael Dell said.

However, one industry analyst was skeptical that Dell's note would actually lead to serious change at the company, saying it was merely a "cheerleader memo," designed to be leaked to the press in order to soothe nervous investors.

"This gives Dell time -- time to see who the memo makes nervous, time to see who reaches out to him with ideas and tactics to actually help Michael deliver on his vision," said Richard Doherty, research director at The Envisioneering Group. "It is a shake-up-the-box approach to management, see who scurries and see who has good ideas."

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