Personal computer maker Dell Inc. (DELL) said Thursday that it will reduce about 1,900 employees in its Limerick facility in Ireland, as the company plans to move the facility's European production operations to its Polish facility over the next year. The shift is part of a $3 billion cost-reduction initiative the company announced last year, which is expected to be completed by 2011.
The Round Rock, Texas-based company said the migration of the manufacturing of its computer systems for customers in Europe, the Middle East and Africa, or EMEA, to Poland and third-party manufacturing partners will be completed in a phased transition during 2009.
The employee cut will be over the next 12 months, and the initial reduction of employees will occur in April, with the full transition expected to be completed by January 2010. The company noted that the affected workers will be provided competitive severance package and career outplacement assistance as they transition from the company.
Meanwhile, Mary Coughlan, Minister for Enterprise, Trade and Employment, Ireland, reportedly said that she is deeply disappointed by Dell's decision to shed jobs in Limerick and move its manufacturing base to Poland. She said the government would seek to help laid-off workers in every possible way, and the Government and IDA Ireland would continue to engage with the company with a view to attracting other investments from Dell.
Dell, the world's second largest PC maker, reportedly is Ireland's second-largest employer, and its biggest exporter. There is major worry regarding thousands more ancillary jobs dependent on business from Dell, as each Dell job underpins another four to five jobs in Ireland.
"We will treat affected employees with dignity and respect and offer them every practical support through this extended transition period to minimize the impact on them. We appreciate the support from the Irish government and the people of Limerick over these many years," Sean Corkery, vice president of operations, EMEA, said.
Dell reportedly has around 3000 employees in the Limerick facility. The company said the remaining employees in the facility will continue to coordinate EMEA manufacturing, logistics and supply chain activities though various functions including product development, engineering, procurement and logistics. Dell's Global Innovation Solutions Center and EMEA Command Center will remain in Limerick.
Meanwhile, Cherrywood, Dublin operations, with around 1,300 employees, will be unaffected by the cut, and will continue its significant sales, marketing and support activities.
Dell has around 82,700 employees in its worldwide operations. In order to simplify its structure, eliminate redundancies, and better align operating expenses with the current business environment and strategic growth opportunities, Dell had announced in May last year that it would reduce headcount by about 10% over the next 12 months. In 2007, Dell had culled 7,000 jobs.
While announcing the third quarter results in mid-November, the company had forecasted that IT end-user demand would continue to be challenging. "The company will continue to focus on improving competitiveness, lowering costs and improving its mix of products and services to optimize liquidity, profitability and growth. The company will continue to incur costs as it realigns its business to improve competitiveness, reduce headcount in certain areas and invest in infrastructure, growth opportunities and acquisitions."
On December 31, 2008, Dell said that it would organize its businesses globally around three major customer segments, large enterprise, public sector, and small and medium businesses, and also reshuffled its senior management team.
The company, founded in 1984 by Michael Dell during his college days, has been going through a turbulent period since August 2006, when it first disclosed an internal accounting investigation and issued a massive recall of notebook batteries due to potential fire hazards. In the third quarter of the same year, the company lost its No. 1 position to arch-rival Hewlett-Packard Co. (HPQ). Disappointing financial results led to the ouster of the then chief executive Kevin Rollins in January 2007, paving the way for the return of Michael Dell to the role to turn around the company's fortunes.
In late December 2008, Michael Dell, Chairman and Chief Executive Officer, noted that in the past two years the company has significantly improved competitiveness, reengineered supply chain, broadened product portfolio and introduced Dell to more people in more places.
For its recently concluded third quarter, Dell posted a 5% year-over-year decline in profit on 3% lower revenue. However, the quarterly earnings per share increased 9% from last year, and Dell had said its "earnings improved solidly as a result of disciplined cost management and an improved mix of products and services in a challenging demand environment".
In the third quarter, Dell's EMEA commercial business had a 5% decline in revenue while shipments were essentially flat with last year. The company recorded a 62% sequential increase in operating income in the region, driven primarily by lower operating expenses and an improved mix of products and services.
In a research note published on November 21, brokerage Friedman, Billings, Ramsey had downgraded Dell shares to Market Perform from Outperform and reduced its price target to $15 from $20.
DELL closed Wednesday's regular trading session at $11.15, up $0.10, on a volume of 30.5 million shares. In the past 52 weeks, shares have been trading in a broad range of $8.72 - $26.04.
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