Dell to slash its workforce
Facing plummeting demand for PCs, the firm is cutting about 6,650 jobs, or about 5% of its employees.
Dell Technologies is eliminating about 6,650 jobs as it faces plummeting demand for personal computers, becoming the latest technology company to announce major workforce cuts.
The reduction amounts to about 5% of Dell’s global workforce, the company said in a regulatory filing early Monday. Dell is experiencing market conditions that “continue to erode with an uncertain future,” coChief Operating Officer Jeff Clarke wrote in a memo viewed by Bloomberg.
Dell shares dropped 3% by the market’s close Monday compared with a 1% decline in the tech-heavy Nasdaq 100 index.
After a pandemic-era PC boom, Dell and other hardware makers have seen demand crater. Industry analyst IDC said preliminary data show that personal computer shipments dropped sharply in the fourth quarter of 2022. Among major companies, Dell saw the largest decline — 37% compared with the same period in 2021, according to IDC. Dell generates about 55% of its revenue from PCs.
Clarke told workers that previous cost-cutting measures, including a pause on hiring and limits on travel, are no longer enough. The department reorganizations, along with the job reductions, are viewed as an opportunity to drive efficiency, according to a company spokesperson.
The move “affirms our expectation of a delayed PC rebound in 2023 and suggests further sales erosion in the company’s client solutions group, especially in 2H,” Woo Jin Ho, senior analyst at Bloomberg Intelligence, said in a note.
“Though we calculate the move could cut annual expenses by $700 million-$1 billion, helping to preserve margin and limiting the dent to EPS, Dell still faces limited visibility in PC demand.”
Layoffs have hammered the tech sector in recent months. HP, similarly exposed to the PC market, announced in November a reduction of as many as 6,000 workers. Cisco Systems and IBM each said it would eliminate about 4,000 workers. The tech sector announced 97,171 job cuts in 2022, up 649% compared with the previous year, according to consulting firm Challenger, Gray & Christmas.
After the reduction, the head count for Round Rock, Texas-based Dell will be its lowest in at least six years — about 39,000 fewer employees than in January 2020, before the company spun out its stake in VMware. Only about one-third of the company’s employees are U.S.based, according to a March 2022 filing.
Dell reported a 6% sales decline in the period that ended Oct. 28 and gave a revenue forecast for the current quarter that fell short of analysts’ estimates, saying that customers were reducing their purchases of information technology. The company is expected to provide further information on the financial effects of the job cuts when it reports fiscal fourth-quarter results March 2.
“We’ve navigated economic downturns before and we’ve emerged stronger,” Clarke wrote in his note to employees. “We will be ready when the market rebounds.”