Dell to Cut Thousands of Jobs
WILLOW BAY, CNN ANCHOR: Gas prices head higher, and summer hasn't even begun. This is MONEYLINE for May 7, 2001. Americans are paying more to gas up than ever before. Will it be another blow to consumer confidence? What, if anything, can Washington do to help? Downsizing, direct from Dell. The PC maker is laying off thousands more. Just months ago, she was honored as corporate America's second- most powerful woman. Now Debby Hopkins is out of her job as Lucent's CFO. And a story we broke here on MONEYLINE becomes official: Apple Computer going retail.</s>ANNOUNCER: This is MONEYLINE. Reporting tonight from New York, Willow Bay.</s>BAY: Hello, everyone, and welcome to MONEYLINE. We begin tonight with bombshell news for thousands of workers at Dell Computer. The Texas PC giant, struggling with slumping sales, said after the bell it would slash thousands of additional workers, as many as 4,000, over the next two quarters. Checking the late reaction, Dell shares up 64 cents in after-hours trading, still down more than 50 percent from its 52-week high. Peter Viles reports.</s>PETER VILES, CNN CORRESPONDENT (voice-over): Just four days after an executive reportedly vowed Dell would be -- quote -- "ruthless" in managing costs, the company announced a second round of deep job cuts. In a press release after the closing bell, Dell said it will cut 3,000 to 4,000 jobs over the next two quarters. The cuts will come primarily in central Texas, and warned it will require most salaried workers to take unpaid time off this spring. Wall Street had been expecting a second round of cuts, particularly after Dell confirmed in late April it had slashed prices by 20 percent on some desktop models.</s>BRUCE UPBIN, "FORBES": My heart goes out to the people at Dell who are losing their jobs, but I think it's just going to be even more painful for Compaq and Gateway, because Dell's clearly doing this so that they can cut prices aggressively.</s>VILES: Dell in February announced 1,700 job cuts, also mainly in Texas. The two waves of layoffs could add up to 5,700 jobs: That's 26 percent of Dell's work force in the United States.</s>ROBERT WALBERG, BRIEFING.COM: You're probably going to see additional announcements of jobs cuts from other PC makers like Compaq and Hewlett Packard going forward. So I think this is an indication that we're still seeing the industry slowing down. It hasn't bottom quite yet.</s>VILES: In announcing the job cuts, Dell said it will meet previous first-quarter former guidance of 8 billion dollars in revenue. That's a drop of 8 percent from fourth-quarter revenue, but it means Dell is outperforming its rivals; Gateway, which suffered a 14.4 percent revenue drop; and Compaq, which saw revenues slip 20 percent. And Dell shares have been quietly rallying. Since bottoming at 16 and change in December, Dell shares have gained 55 percent.</s>VILES: So one message from these layoffs is that Dell is bracing for an all-out price war. And analysts say that price war could last all the way into the holiday selling season 7 months from now.</s>BAY: So, Pete, these job cuts qualify as ruthless?</s>VILES: Certainly ruthless in the computer industry. Dell has always been known as being aggressive in containing cost, but it hadn't come to job cuts until this year.</s>BAY: Pete, thanks. In addition to growing layoffs, another threat to American consumers stems from the surge in gas prices. Millions of Americans face sticker shock at the pump as retail gasoline is rising along with the temperature. Lisa Leiter has the story from the city paying the steepest price of all: Chicago.</s>LISA LEITER, CNN CORRESPONDENT (voice-over): A gallon of gas has never cost this much. The average retail price over the past two weeks spiked more than 8 cents to $1.76 a gallon, an all-time high not adjusted for inflation. And here in Chicago, a gallon of regular gas is well above the national average, costing more than $2.</s>UNIDENTIFIED MALE: If it gets any higher I'm going to sell this truck.</s>LEITER: No doubt SUV owners are the hardest hit. It cost this man $80 to fill up his Chevy suburban.</s>UNIDENTIFIED MALE: I don't have a choice. I need a large vehicle for work.</s>LEITER: Prices are so high because it costs more to produce the cleaner-burning gas required in the summer months. Also, refineries are having trouble catching up with demand. They got a late start with summer gasoline production because they spent all winter making enough heating oil to avoid a shortage.</s>PHIL FLYNN, ALARON: The big problem is, is that we still have a refinery capacity problem in this country.</s>LEITER: Low capacity means even higher prices as the peak-demand summer driving season approaches. But not all analysts see gas prices reaching $3 a gallon, as many have predicted.</s>MICHAEL ROTHMAN, MERRIL LYNCH: The prospects of seeing another dollar increase in gasoline prices would really probably have to stem from major refinery catastrophes and a dramatic loss of capacity.</s>LEITER: And already there are some signs prices may actually drop, an unexpected jump in gasoline stockpiles and imports. (on camera): Record gas prices have put an even bigger spotlight on consumers, whose confidence is already damaged from rising layoffs. The question is whether consumers will pull back on spending overall if they're paying more to fill up at the pumps. Lisa Leiter, CNN Financial news, Chicago.</s>BAY: This rise in gas prices has raised eyebrows at the White House. For the latest we got to senior White House correspondent, John King -- John?</s>JOHN KING, CNN CORRESPONDENT: Raised eyebrows, Willow, but this administration saying there's not much a president or any politicians can do: no magic wand, no quick fixes. The administration saying it is concerned about rising gas prices because, in the view of the White House Press Secretary Ari Fleischer, they are tantamount to a tax increase on the American people. But this president, once again, saying today as he said as a candidate for president, that he would not be in favor of a temporary cut in the federal gas tax. And we asked a question about -- what about the moral authority of a president? Should this president stand up and say -- urge Americans to go online less, to conserve electricity, or stop driving those big gas guzzling sport utility vehicles? Here's the White House response.</s>ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: The president believes that it's an American way of life, and that it should be the goal of policy-makers to protect the American way of life. The American way of life is a blessed one, and we have a bounty of resources in this country. What we need to do is make certain that we're able to get those resources in an efficient way -- in a way that also emphasizes protecting the environment and conservation -- into the hands of consumers so they can make the choices that they want to make as they live their lives day-to-day.</s>KING: So the administration believing no short-term solution to rising gas prices. There will be a political debate about this for sure, many people saying the president should do more. The White House view is that this president will spend his time and his political capital talking about long-time solutions. The administration's plan quite controversial due out next week -- Willow?</s>BAY: So John, is the president absolutely, positively ruling out a cut in the gas tax?</s>KING: A little wiggle room added to the White House today, and here's why, Willow. CNN is told that administration officials know much of their plan will be a tough sell on Capitol Hill. Just like the tax cut plan was changed to win over some votes, they don't rule out that perhaps to get the energy plan through Capitol Hill they might have to agree, say, to a one-year suspension of, say, four or five cents of the federal gasoline tax. If that is the price it takes to get the rest of the president's energy plan through, the White House would be open to that.</s>BAY: OK, John, thank you. And we should point out that John King will be talking to Vice President Dick Cheney tomorrow, and we look forward to bringing you that interview. As policy makers and consumers focus on the rising cost of energy, investors are keeping their eyes on the industry wheelers and dealers. Today, refining giant Valero energy, offering $4 billion in cash and stock, plus $2 billion in debt for rival Ultramar Diamond Shamrock. The combined company will be second only to ExxonMobil in refining capacity. And Williams company is paying $2.5 billion in cash and stock, or about $73 a share, for Barrett Resources. That trumps a hostile bid from Royal Dutch Shell. And Shell says it will not raise its $60- dollar a share offer. Barrett is relatively small, but its highly coveted stockpile of reserves will vault Williams into the top 10 U.S. natural gas companies. Williams fell nearly 2 1/2 on the news, Barrett jumped almost 3, and Valero lost about 2 3/4. Ultramar gained nearly 8. But overall it was a go-nowhere session on Wall Street. Up next we'll look at why. Why stocks failed to build on Friday's big gains. We'll go live to the big board and we'll go to the Nasdaq. Plus, the CFO shuffle at Lucent, a big blow to one of corporate America's most powerful women, Debbie Hopkins. And the treasury secretary says the Bush tax plan is a boon to small business. But is the White House using fuzzy math?