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5/23/2006
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Dell CFO Admits Service Blunders, Vows Rebound

Dell CFO Jim Schneider said the company needs to cut costs, but not lay people off.

Dell CFO Jim Schneider on Tuesday admitted the PC giant’s zealous cost-cutting led to missteps in its services and said the company is rejiggering its workforce to help restore its reputation.

Speaking at the UBS Enterprise Technology and Services Conference in New York, Schneider also told investors that the Round Rock, Texas-based company plans no layoffs as it strives to slash $3 billion out of its cost structure. His comments came less than a week after Dell reported quarterly earnings that disappointed Wall Street.

"We need to cut a lot of costs, because we're not going to be laying people off," Schneider said. "So you're not talking about making some restructuring and taking costs out that way. We've done that before. The company is starting to get itself re-energized around some of these activities."

A key problem for Dell was that it had sought less expensive ways to deliver customer service and support, which resulted in missteps that led to customer outrage, Schneider said. At the same time, competitors did a better job of cutting their costs, which put extra pressure on Dell, he noted.

"Customer experience ... I don't think we purposely eroded it," Schneider said. "Along the way, we had some stumbles. We didn't become the easiest [company to get service from], and if you're only a few bucks cheaper, it doesn't matter as much. We want to be more clearly the leader."

Dell announced last week that it plans to spend $100 million to improve its service capability and has already hired 2,000 people to make improvements. Schneider also said Tuesday that Dell has redeployed some employees as part of the effort.

"We've actually taken some of the best and brightest out of our manufacturing side of the business and moved a number of these people into our tech-support area to run that globally," Schneider said.

He also reiterated earlier remarks from Dell executives, who said the company aims to lower its profit margin, cut pricing and regain lost market share in some areas. Schneider, though, stopped short of saying how deep cuts would be and where they would be made.

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