7,000 U.S. tech jobs may be cut
Dell Computer Corp., the world's largest PC manufacturer, said it will cut 3,000 to 4,000 jobs while beleaguered network equipment maker 3Com Corp said separately it will lay off 3,000 people as the two companies struggle with weak demand for computer systems and services.
Dell, based in the Austin, Texas, suburb of Round Rock, said the job cuts would occur over the next six months, and mostly would be in Central Texas. The announcement comes on top of 1,700 layoffs that Dell announced in February and completed last month.
"Obviously, this means the business isn't getting better," said Daniel Niles, an analyst for Lehman Brothers. "They see it's going to be a rough couple of quarters, and they've got to get their cost structure in order."
The latest reduction at 3Com comes less than three months after the company laid off 1,200 full-time and contract workers. In all, the company has shed more than 40 percent of its work force this year in an effort to save $1 billion annually.
"This announcement is a necessary step in our plan to restore profitability," said a statement by 3Com chief executive officer Bruce Claflin. "Our cost efforts are more important than ever, given the softness we have seen in demand, both in past quarters as well as the current quarter."
Layoffs were once unheard of at Dell, as double-digit gains in PC sales made it a stock market phenomenon in the late 1990s. The company expanded its work force rapidly until late last year, but then PC sales flattened and haven't recovered.
"If the market drops off sharply and unexpectedly, you find yourself with something of an overhang in employment, and you have to adjust," said Dell spokesman T.R. Reid.
In the technology sectors, it's getting harder to find a company executive who will predict when the slump will end. Niles, the Lehman Brothers analyst, said consumer confidence will erode further as corporate layoffs grow.
Shares of Dell were up 7 cents to close at $25.91. They gained an additional 75 cents to finish at $26.66 in extended trading. Meanwhile 3Com closed down 38 cents to $6.52 a share.