Dell Technologies Inc. is eliminating about 6,650 roles as it faces plummeting demand for personal computers, becoming the latest technology company to announce thousands of job 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,” Co-Chief Operating Officer Jeff Clarke wrote in memo viewed by Bloomberg. About one-third of Dell’s employees are US-based, according to a March 2022 filing.
Dell shares dropped 3.3% at 1 p.m. Monday in New York compared with a 0.7% decline in the tech-heavy Nasdaq 100 index.
After a pandemic-era PC boom, Dell and other hardware makers have seen cratering demand. Industry analyst IDC said preliminary data show 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 said.
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, including many of Dell’s peers and competitors. HP Inc., similarly exposed to the PC market, announced in November a reduction of as many as 6,000 workers. Cisco Systems Inc. and International Business Machines Corp. each said they 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 Inc.
After the reduction, the headcount for Round Rock, Texas-based Dell will be its lowest in at least six years — about 39,000 fewer employees than in January 2020. Dell in November 2021 spun out its stake in VMware, which had about 37,500 workers after the spinoff, according to a filing.
Dell reported a 6% sales decline in the period ended Oct. 28 and gave a revenue forecast for the current quarter that fell short of analysts’ estimates, saying customers were reducing their purchases of information technology. The company is expected to provide further information on the financial impact of the job cuts when it reports fiscal fourth-quarter results on 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.” –BLOOMBERG