D-Day Looms For Dell's Early Retirement Program

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Friday is the deadline for Dell employees to take advantage of a voluntary early retirement program that seeks to reduce Dell's headcount and sharpen its focus as the Round Rock, Texas-based company rejiggers itself from a hardware maker to an end-to-end technology provider.

Earlier this month, Dell notified a portion of its global workforce of 110,000 employees about the "voluntary separation program" that the company's spokesman David Frink said would attempt to "improve Dell's cost structure and free up capital to make the investments in growth areas that matter to our customers the most."

Frink said the deadline for employees to agree to the separation program is Dec. 20. He declined to say how many jobs Dell was seeking to cut and whether layoffs will follow if too few employees take advantage of the buyout. "Eligible" employees that choose to leave their jobs will receive an undisclosed monetary package based on length of employment.

[Related: Dell's Private: Now Comes The Hard Part]

One Dell employee, who did not want to be identified, said longtime Dell employees grappled with the decision long and hard to stay or go given that if they choose to stay and end up getting laid off, they end up with just unemployment rather than a significant severance package. "I'm taking a chance and staying," the employee said.

Several Dell employees told CRN that they did not receive any "voluntary separation program" information. One former Dell employee, that left the company recently, told CRN that Dell was targeting long-tenure employees within Dell's client PC side of its business.

"Within Dell, the writing was on the wall. Once Dell went private, we knew there would be real pressure to make hard business decisions that would impact older segments of Dell's business such as client PCs. I suspect PC-related sales, support, engineering and R&D would be disproportionately impacted," said the former employee, who did not want to be identified.

Since Dell won its bruising $24.9 billion battle to go private, critics have speculated that Dell would have to take money off the balance sheet to pay back investors such as Silver Lake via layoffs or selling parts of its business.

In October, CEO Michael Dell told CRN at the Best of Breed conference, in Tampa, Fla., hosted by CRN publisher The Channel Company, that Dell had few cash pressures as a private company. "The capital structure we have is better. It is more flexible and allows us to invest more in channel partners, R&D and growth now that we don't have this short-term pressure," Dell told CRN.

Michael Dell didn't share the same optimism on his PC business. "I think one of the biggest challenges for Dell and other companies is asking ourselves 'what happens to the PC space?'" Dell told CRN in October. "We are assuming that that business will contract. We have very modest assumptions for that business. Dell will be a consolidator and look to gain share. But PC is not our primary objective."

The former Dell employee speculated that the early retirement packages may be tied to Dell's plan to work collaboratively with its channel partners on new sales starting Feb. 1. "If they are going to cut some of the sales force, it makes sense for the channel to augment that reduction in staff."

Dell's official statement on the action is:

"Dell has announced an optional, global and voluntary separation program for eligible team members who choose to leave the company in exchange for the offer of a separation package to support their transition. We would note that we’ve taken steps to optimize our business, streamline operations and improve efficiency over the past few years. And we have been consistent in saying that a critical element of our strategy has been, and always will be, about improving our cost structure and freeing up capital to make the investments in growth areas that matter to our customers.

Like any prudent company, we’ll continue to evaluate and implement opportunities to enhance our operational effectiveness on an ongoing basis."

This is the first "voluntary separation program" Dell has offered its employees in five years, Frink said. Frink declined to say how many employees took advantage of past early retirement programs and whether those programs were followed by layoffs.


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