Dell cuts jobs amid growing economic uncertainties

Reflecting a wider industry trend, Dell has revealed workforce reductions, attributing this decision to the ongoing macroeconomic environment that continues to affect demand across the sector.

In its latest filing, the company said it continued executing cost management measures, “including limiting external hiring, employee reorganizations, and other actions” to align its investments with strategic priorities and customer needs.

These actions resulted in a reduction in overall headcount. As of February 2, 2024, the employee count stood at approximately 120,000, declining from the 133,000 recorded in February 2023.

This workforce adjustment is part of a wider wave of layoffs within the technology sector. In 2024 alone, 168 tech companies have collectively laid off 42,324 employees. Notably, significant layoffs have occurred at leading firms, including Cisco, Microsoft, and Google.

Significantly, this comes after Dell’s recent announcement of a stringent return-to-office policy. The company has stated that employees who prefer to work entirely from home will not be considered for promotions or role changes.

Medium to long-term strategy

Analysts point out that while several tech companies are reducing their workforce, Dell is one of the few who has recorded weak financial performance. Fourth quarter revenue was down 11 percent year on year.

“There are primarily two points to consider here,” said Pareekh Jain, CEO of EIIRTrend & Pareekh Consulting. “First, Dell’s financial results reflect a slowdown in PC demand, leading them to adjust their cost structure. During the pandemic time, many companies inflated their cost structures in anticipation of growth and demand that didn’t materialize. The second point is that while we’re seeing significant layoffs across Silicon Valley and IT companies worldwide, most still report good results, unlike Dell.”

In other words, this may not just be a reaction to the current results or economic concerns but a preparation for the impact of generative AI in the future.

“Companies like Dell, Google, Amazon, Cisco, and SAP are on the forefront of embracing generative AI, and they’re trimming their workforce with the medium to long-term in mind,” Jain added. “The consensus seems to be that the workforce of tomorrow will be smaller than today’s, due to the efficiencies introduced by generative AI. Thus, these companies are seizing the opportunity to streamline their workforce now.”

Optimistic of AI demand

In the filing, Dell highlighted that despite a general sense of caution among enterprise and large corporate clients, its Infrastructure Solutions Group (ISG) has seen a boost in demand driven by the growing interest in AI-optimized solutions.

This trend reflects the broader influence of advancements in artificial intelligence on customer spending patterns as organizations increasingly seek to integrate AI into their operations.

Trendforce forecasts that starting in 2024, the demand for AI development and software services will significantly increase, alongside the growth of edge computing AI servers using mid-range GPUs and FPGAs. This sector is expected to see an annual growth rate exceeding 20 percent from 2023 to 2026.

“We expect ISG net revenue to grow, driven by our AI-optimized servers, improving demand for our traditional servers, and a recovery in demand for our storage offerings,” Dell said in the filing. “We expect CSG net revenue growth for the full fiscal year, driven in part by the anticipated PC refresh cycle in the latter part of Fiscal 2025.”