Dell, 3Com Will Lay Off

Sara Evans and Mario Vazquez CBS/AP

Dell Computer announced Monday it is cutting up to 4,000 more jobs in the next two quarters, as 3Com slashed is workforce by nearly a third.

Both companies had already announced job cuts earlier this year and blamed slowing demand for the need to make additional payroll reductions.

In February, Dell said it would eliminate about 1,700 jobs due to weakness in the technology sector. 3Com axed 1,200 workers that same month.

Dell, a Texas-based computer maker, said it's continuing aggressive management of operating expenses in the midst of soft overall demand for computer systems and services.

Dell also said results for its fiscal first quarter, which ended Friday, will meet previous guidance of $8 billion dollars in revenue and 17 cents in per-share earnings.

3Com announced that there will be an across-the-board reduction in force of approximately 3,000 people, including both full-time staff employees and the alternative force. The company currently has about 10,000 workers. After the layoffs about 7,000 will remain.

The cuts will occur over the next few quarters.

"This announcement is a necessary step in our plan to restore profitability," said Bruce Claflin, 3Com chief executive officer.

"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. Despite this slowdown, it is our intention to return to profitability as quickly as possible while positioning the company for profitable growth."

The company is also working to reduce discretionary spending, lowering product costs and to make more effective use of plant, property and equipment.

3Com has not turned a profit since it spun off its Palm handheld computing unit last year.

The two companies' announcements are part of an employment picture that still reflects uncertainty and weakness. Last week, a federal government report Friday showing a spike in unemployment during the month of April alarmed analysts and renewed worries of a recession, reports CBS News Business Correspondent Anthony Mason.

The Labor Department reported that the nation's unemployment rate shot up to 4.5 percent in April, the highest level in two-and-a-half years, and said businesses slashed their payrolls by 223,000 jobs.


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The unemployment rate jumped 0.2 percent over the March 4.3 rate, the second monthly increase in a row. April's rate was the highest since October 1998, when unemployment also stood at 4.5 percent.
Payrolls registered their second consecutive monthly loss and the worst monthly numbers since the recesion in February of 1991. In March, payrolls fell by 53,000, according to revised figures, a smaller reduction than the government previously reported.

Economists stress that the unemployment rate is still low, but worry that continuing layoffs could convince consumers to stop spending. Consumer spending accounts for two-thirds of economic growth, and a significant dip could spell real trouble for the economy.

The Federal Reserve, which has cut interest rates four times this year, meets next week and is expected to consider yet another rate cut based on the latest employment numbers.


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  • CBSNews.com staff CBSNews.com staff

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