Dell Considers More Extensive Cost Cuts

SAN FRANCISCO -- Dell(DELL) is asking its workers to consider taking a short vacation -- an unpaid one.

Founder and CEO Michael Dell sent a memo to all employees on Monday informing them that the PC maker needs to cut costs.

Dell told staff that the company is considering a variety of ways to pare expenses, including a hiring freeze, voluntary buyouts, reducing the number of contract employees, and a five-day furlough, according to a report in the Austin American Statesman.

The memo said the company is also considering more layoffs, if necessary, the report said.

Dell recently completed a previous restructuring plan that eliminated 10% of its head count, as the company sought to reduce its operating expenses.

But that plan was devised and implemented before the financial crisis reached a bleaker phase in mid-September. Since then, various tech companies involved in the PC and server market have warned of weakening demand among both consumes and corporate technology buyers.

Intel(INTC), the world's No. 1 maker of PC microprocessors, recently provided a less-than-seasonal sales forecast for the fourth quarter. The low end of Intel's forecast entails a sequential decline in sales during the fourth quarter, something the chipmaker hasn't experienced since 1984 (excluding a nominal decline in 2000).

Last month, Sun Microsystems(JAVA) reported a $1.7 billion loss as corporate buyers of the high-end servers and storage systems cut back on orders.

Dell warned in September that it was seeing softening in technology spending among customers in the U.S., Western Europe and parts of Asia. The company is due to report its quarterly earnings on Nov. 20.

A Dell spokesperson told the Austin American Statesman that the goal of the new program is to find creative ways to cut costs.

"We're looking to use voluntary cost reduction options whenever possible so fewer involuntary actions would be necessary," Dell spokesperson David Frink said.

Shares of Dell were up 1.5%, or 19 cents, at $12.80 in recent trading Tuesday.

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