Dell Technologies has some massive changes ahead of it as the infrastructure and PC giant lays off 6,650 employees, or roughly 5 percent of its global 133,000 workforce.
“The steps we’ve taken to stay ahead of downturn impacts, which enabled several strong quarters in a row, are no longer enough,” said Jeff Clarke, vice chairman and co-COO of Dell Technologies, in a letter to employees Monday announcing the layoffs. “We now have to make additional decisions to prepare for the road ahead.”
In a message to all Dell employees titled “Preparing for the road ahead,” Clarke said Dell has been making major changes inside the company as growth declines rapidly in its bread-and-butter PC business. In third fiscal quarter 2023, which ended Oct. 28, 2022, Dell reported consumer PC sales plummeted nearly 30 percent year over year.
There are still many questions that remain regarding Dell’s massive layoff round such as where will the layoffs occur inside Dell? What structural changes are being made? And why didn’t founder, Chairman and CEO Michael Dell make his company’s layoff announcement?
Dell Layoffs
Before diving into those questions, it’s key to remember that Round Rock, Texas-based Dell Technologies is a market-share leader in storage, server and hyperconverged infrastructure with a long legacy of being a top PC player on a worldwide basis.
The company’s run rate is currently approximately $99 billion.
However, research firm IDC reported a 37 percent decline in Dell’s shipments in fourth-quarter 2022. Dell PC shipments dropped further than all of its competitors, such as Lenovo, HP Inc. and Apple, during the quarter, according to PC data from IDC. Overall, global shipments were down 28 percent in fourth-quarter 2022 compared with fourth-quarter 2021.
Dell is hardly the first technology company to conduct large IT layoffs. For example, Microsoft unveiled 10,000 layoffs, Google will cut 12,000 employees, and fellow PC competitor HP Inc. announced it will lay off up to 6,000 employees by 2025.
CRN breaks down the five most important things channel partners, investors and Dell employees need to know about Dell Technologies’ 6,650 layoffs.
Why Is Dell Eliminating 6,650 Employees?
Simply put: Dell is laying off 5 percent of its workforce due to a slow economy and uncertainty ahead with the ultimate goal of long-term success.
“What we know is market conditions continue to erode with an uncertain future. The steps we’ve taken to stay ahead of downturn impacts, which enabled several strong quarters in a row, are no longer enough. We now have to make additional decisions to prepare for the road ahead,” said Clarke.
In Dell’s recent third fiscal quarter of 2023, the company reported revenue of $24.7 billion, down 6 percent year over year. However, operating income grew 68 percent year over year to a record $1.8 billion.
“Unfortunately, with changes like this, some members of our team will be leaving the company,” he said. “There is no tougher decision, but one we had to make for our long-term health and success. … As we always do, we’ve continued assessing our business to ensure we’re set up to deliver the best innovation, value and service to our customers and partners.”
Dell’s Client Solutions Group, which includes PCs, generated $13.8 billion in the third fiscal quarter of 2023, down 17 percent year over year. Commercial revenue was down 13 percent year over year to $10.7 billion, while consumer revenue was $3 billion, down 29 percent year over year.
Lowest Employee Head Count Since Dell-EMC Merger
Dell currently has approximately 133,000 employees on a worldwide basis, meaning an employee reduction of 5 percent will put Dell’s head count at around 126,000 employees.
According to Dell filings with the U.S. Securities and Exchange Commission, following the 5 percent layoff round, Dell will have fewer employees than it has ever had since its blockbuster $67 billion acquisition of EMC in 2016.
In September 2016, Dell completed its massive purchase of storage market-share leader EMC. The combined company’s total employee head count was approximately 138,000 employees.
Dell hired thousands of people between 2017 and 2020. In 2020, Dell’s total head count reached over 165,000. However, Dell’s employee total shrank to about 133,000 by 2022.
“Please know we’ll support those impacted as they transition to their next opportunities,” said Clarke in his letter to employees Monday.
Michael Dell Has Not Commented On Layoffs
Interestingly, Michael Dell—who founded Dell in his college dorm room in the 1980s—did not write the layoff letter to employees. In fact, Michael Dell has not posted anything on social media as of Monday morning regarding the layoffs at the company he founded over 30 years ago.
Typically, what has occurred during these large IT layoffs that have taken place in 2022 and 2023 is the CEO writes the letter to employees.
For example, Microsoft CEO Satya Nadella wrote the letter to his employees announcing his company’s 10,000 layoffs, as did Google CEO Sundar Pichai, Salesforce co-CEO Marc Benioff and Amazon CEO Andy Jassy.
Michael Dell’s last post on LinkedIn came on Feb. 5, which touted Dell’s PowerStore storage systems. On Twitter, Dell’s last post came on Feb. 3, highlighting an upcoming Dell conference in May.
It will be interesting to see if Michael Dell comments Monday on the layoffs at the company he started from scratch. It’ll be even more interesting if he doesn’t.
Big Changes To Dell Sales, Services And ISG
There are some big changes ahead as Dell cuts 6,650 employees, according to Clarke.
In terms of its global sales organization, Dell is aligning its regional sales and and Dell Technologies Select (DTS) teams to provide consistency in how it works with customers and partners worldwide, collaborate and share best practices faster. “All of which help us grow,” said Clarke. “With the regional leads and DTS rolling up to one leader, our support teams will align to a similar structure and streamline their functions.”
Regarding Dell’s services business, the company will integrate its support services into its Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG) in order to tighten the feedback loop between customers, support and product teams. “It also aligns accountability for the cost of services closer to the control points in engineering and product design,” Clarke said. “All this adds up to our ability to develop more integrated solutions more quickly.”
Lastly, Clarke said ISG engineering will shift teams and resources to the priority offerings that will best serve its customers’ and partners’ needs.
Clarke said leaders Bill Scannell, president of global sales and customer operations, and Doug Schmitt, president of Dell Technologies Services, will share additional sales and services detail with their teams shortly.
Clarke: ‘I’ve Never Been More Confident In Our Future’
As Dell announced one of its largest layoff round in its long history, Clarke stated his bullishness about Dell’s future.
“Remember, we’ve navigated economic downturns before and we’ve emerged stronger. We’ll prevail as we always do, for our customers, partners and each other. We’ll be more competitive, more focused and find a new level of operational performance,” said Clarke. “We will be ready when the market rebounds.”
Clarke, who first joined Dell in 1987 and is seen as Michael Dell’s right-hand man, said the opportunities ahead for the company “are immense” due to its technology portfolio in a growing data-centric IT world.
“The amount of data continues to explode. Our innovation is powering progress across the globe. And our customers are turning to us as their trusted partner,” said Clarke. “I’ve never been more confident in our future and our team.”
Dell Technologies is set to report the financial results on March 2, 2023. The company expects to generate around $23.5 billion in total revenue.
