Dell asks workers to take unpaid vacation

SAN FRANCISCO Tue Nov 4, 2008 5:23pm EST

Shoppers walk past a Dell booth at the COMEX information technology and consumers technology exhibition in Singapore in this August 28, 2008 file photo. REUTERS/Tim Chong

Shoppers walk past a Dell booth at the COMEX information technology and consumers technology exhibition in Singapore in this August 28, 2008 file photo.

Credit: Reuters/Tim Chong

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SAN FRANCISCO (Reuters) - Computer maker Dell Inc has asked employees to consider taking up to five days of unpaid vacation as it struggles to cut costs in the face of weak global demand.

The No. 2 computer maker, which is near the end of a program of 8,900 job cuts, is also offering voluntary severance packages and has instituted a global hiring freeze.

Chief Executive Michael Dell announced the moves in an email to employees on Monday. On Tuesday he said he expects further consolidation in the technology industry, and encouraged companies to ride out financial turbulence by focusing on hard returns, rethinking businesses and investing.

"Being stunned into inaction is exactly the wrong thing to do right now," he told a conference in San Francisco, adding that the company is investing in so-called cloud computing to deliver services over the Web.

At the same time, Dell aims to cut operating expenses in its fourth quarter, said company spokesman Jess Blackburn.

"The intent is to better position Dell for long-term competitiveness," said Blackburn.

"We are asking employees on a voluntary basis to consider taking off (up to) five days ... as unpaid time off as a flexible way to reduce costs for the company." Employees are being asked to take the time off in the next three months.

Dell wrapped up its third quarter on October 31. Its fourth quarter began Monday and ends on January 30, 2009.

Dell, the world's second-biggest computer maker behind Hewlett-Packard Co, has seen soft global demand for personal computers because of the economic downturn. The company reported a steep dip in second-quarter profit in August and said it would sharpen its focus on increasing market share in emerging markets such as India.

The Austin, Texas-based company said in August it cut 8,500 jobs out of a planned 8,900 headcount reduction to adjust its business for sluggish global demand.

Dell announced earlier this year it plans to reach annual savings of $3 billion in three years.

Michael Dell in San Francisco argued that the future of the technology industry is in cloud computing, generally seen as services and programs that are delivered over a network, rather than fixed on local computer hardware.

Speaking at Salesforce.com Inc's developers conference, Dell said he expects 80 percent of Fortune 1000 companies to be using cloud services within the next few years.

He said Dell is creating a cloud of its own around IT services, and he predicted the company's efforts will ultimately help bring IT service costs down.

Dell shares closed up 32 cents, or 2.5 percent, at $12.93 on Nasdaq.

(Reporting by Jennifer Martinez; Editing by Nichola Groom, Richard Chang)

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