Dell Technologies Inc. has announced cutting 6,650 jobs due to decreased demand for personal computers. The company joins several other tech firms that have announced mass layoffs amid the current economic downturn.
Dell announced that it would reduce its global workforce by about 5%, affecting one-third of its US-based employees. The company cited market conditions that have “continued to erode with an uncertain future” as the reason for the layoffs. The memo from Co-Chief Operating Officer Jeff Clarke stated that the reduction was necessary to ensure Dell’s long-term success.
Lean and Slim Organization
Dell’s stock price declined more than the overall tech market on Monday, dropping 3.3% at 1 p.m. with a 0.7% decrease in the Nasdaq 100 index.
Dell, one of the world’s leading PC makers, has seen a dramatic drop in demand amid the pandemic-era PC boom. According to industry analyst IDC, preliminary data show Dell’s computer shipments dropped 37% in the fourth quarter of 2022 compared with the same period in 2021.
Dell has announced department reorganizations and job reductions in response to the decline. These measures are designed to help the company drive efficiency and cost savings. Previous cost-cutting measures, such as a pause on hiring and limits on travel, are no longer enough. A company spokesperson said that the job reductions and reorganizations are viewed as an opportunity to increase efficiency.
The news of Dell’s plan to reduce its staff by up to 15% indicates that the company expects a delayed PC rebound in 2023 and further sales erosion in its client solutions group. According to Bloomberg Intelligence analyst Woo Jin Ho, the move could cut annual expenses by up to $1 billion, helping to retain margin and limiting the impact on earnings.
The layoffs in the tech sector have been devastating, especially for companies like Dell and HP Inc. that rely heavily on the PC market. HP Inc. announced in November that it would be cutting up to 6,000 jobs, and Dell is now following suit by reducing its workforce by up to 2,000 people.
Steep Cuts by Tech Majors
The tech industry announced 2022 about 97,171 job cuts, which was up 649% compared with the previous year. This is largely due to two of the biggest tech companies, Cisco Systems Inc. and International Business Machines Corp., announcing that they would eliminate about 4,000 workers. The job cuts show a significant increase in layoffs in the tech sector compared to the previous year.
After the reduction, Dell’s headcount in Round Rock, Texas, will be its lowest in at least six years. According to a filing, Dell spun out its stake in VMware in November 2021, which had 37,500 workers after the spinoff.
Dell recently announced job cuts to reduce costs and improve its financial performance. The company reported a 6% sales decline that ended on October 28, and its revenue forecast for the current quarter fell short of analysts’ estimates. It is expected that Dell will provide more information on the financial impact of the job cuts when it reports its fiscal fourth-quarter results on March 2.
