Dell Technologies’ August Layoffs Cost $364M In Severance Charges, SEC Filings Show
Dell has not disclosed the number of jobs it eliminated in the August employee layoffs - the company’s second round of layoffs this year. The company paid $367 million in severance and related expenses when it cut 6,650 jobs in February.
Dell Technologies has shelled out a total of $777 million this year to cover the severance and related costs of two rounds of layoffs, at least some of which has targeted the IT infrastructure leader’s sales force as the company has shifted its go-to-market strategy to rely more on the channel.
In a filing with the U.S. Securities and Exchange Commission Tuesday, Dell said that during its fiscal 2024 second quarter (ended Aug. 4), its severance charges were $364 million. It has not disclosed how many employees were let go in those cutbacks.
“Severance costs are primarily related to severance and benefits for employees terminated pursuant to cost savings initiatives. During the second quarter of Fiscal 2024, we recognized $364 million of severance expense related to workforce reduction activities,” the company wrote in the 10-Q filing. The company announced the Q2 results on Aug. 31.
In February, the company laid off 5 percent of its workforce, about 6,650 employees out of about 133,000, one of many large tech companies to resize their organizations in late 2022 and early 2023. For that round of layoffs the company said severance charges were $367 million in the fourth quarter (ended March 3) of fiscal 2023. The company spent an additional $46 million on severance costs in its fiscal 2024 first quarter (ended May 5, 2023), for a total of $777 million over the last three quarters.
On Wednesday a Dell Spokesperson again declined to disclose how many jobs were involved in the August layoffs. While the nine-figure severance expenses for each of the two rounds of layoffs were relatively close, the spokesperson said it would not be accurate to say the August reduction was similar to the five-percent of jobs eliminated earlier in the year.
“Some members of our sales team have left the company. We don’t make these decisions lightly, and we’ll support those impacted as they transition to their next opportunity,” the spokesperson said, reiterating what the company said in an Aug. 7 statement.
In that statement the company had added: “We’re always assessing our business to remain competitive and ensure we’re set up to deliver the best innovation, value and service to our customers and partners.”
Coinciding with the August layoffs, Dell announced a dramatic change in its go-to-market strategy for storage products, offering higher incentives for its direct sales reps who transact deals through channel partners. The move represents a tectonic shift in how the company that pioneered the direct-to-consumer PC model now goes to market in storage.
In an interview with CRN unveiling the new strategy, Dell President of Sales and Customer Operations Bill Scannell at the time called the shift the “biggest change ever” in Dell’s go-to-market model.
“This is massive. This is exciting. We’ve been working on this for a while because we want to make sure we get it right,” he said. “But we got it right and it’s supported by Michael Dell, [Dell Vice Chairman and COO] Jeff Clarke, all the way through the organization.”
Storage A Bright Spot In Latest Quarter
Storage was a relative bright spot in Dell’s financials last quarter. While revenue generated by the company’s Infrastructure Solutions Group was down 11 percent overall to $8.5 billion, storage sales were down only 3 percent to $4.2 billion. Demand for PowerFlex, Dell’s proprietary software-defined storage solution, has grown for eight consecutive quarters and in the second fiscal quarter demand more than doubled year over year, according to Clarke.
“The demand environment improved at a faster rate than we anticipated, particularly as we moved into June and July,” Clarke said. “Operationally, we executed well with expense controls, pricing discipline, and lower input costs. We sharpened our focus on pricing this quarter, and we were selective on deals particularly where shared benefits would have been temporary. While revenue was down year over year, a better demand environment and strong execution enabled extraordinary Q2 results.”