Dell slashes costs by $3bn

Dell slashes costs by $3bn

Vendor closes desktop plant in Austin, Texas

Dell is to close its Austin, Texas desktop manufacturing plant, laying off 900 workers as part of a three-year plan to reduce expenses by $3bn annually.

Lynn Tyson, vice president of investor relations at Dell, said that the decision to close the plant was also driven by a "massive shift in customer preference for notebooks" over the past three years.

Dell's laptop sales grew 37 per cent in fiscal 2007, compared with just 10 per cent for desktop sales.

The majority of the $3bn savings will come from sweeping reductions in product costs, including design, manufacturing, logistics, materials and operating expenses, the company said in a statement.

"This does not happen overnight. We believe it will take three years to achieve annualised savings of $3bn," said Tyson on the Dell Shares investor blog.

"This means that, before you adjust for growth, we believe our costs at the end of fiscal 2011 will be $3bn lower than at the end of fiscal 2008."

Dell reaffirmed plans to reduce its headcount by 8,800, around 10 per cent of its total workforce. The company has cut 3,200 jobs in the past nine months.

The world's second-largest vendor of PCs and notebooks is also considering " ownership alternatives" for its Dell Financial Services arm which extends credit to customers.