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Dell Confirms Layoffs; Says It Is Addressing ‘Cost Structure’

‘We’re addressing our cost structure to make sure we’re as competitive as we should be now and for future opportunities,’ says Dell Technologies in a statement regrading this week’s layoffs.

For the second time in less than two months, Dell Technologies is laying off an unspecified number of employees this week as the $92 billion infrastructure giant looks to cut costs with the coronavirus pandemic continuing to cause economic uncertainty.

During a quarterly all-hands meeting Monday, Dell’s Jeff Clarke told staff that the workforce reductions won’t be limited to any specific team or division within Dell, according to a Bloomberg report. The cutbacks come after Dell reported a 3 percent decline in sales to $22.73 billion for its second fiscal quarter, which ended July 31, while declining to provide guidance for the rest of the year.

Dell Technologies confirmed in a statement that there would be “some job loss or restructuring” but did not specify how many people were being let go or from which specific division or geography.

[Related: Michael Dell: ‘We Are Not Selling VMware’]

“We’re also evaluating our business to make sure we have the right number of team members in the right roles and in areas where customers need us most. And, we’re addressing our cost structure to make sure we’re as competitive as we should be now and for future opportunities,” said Dell in a statement. “While we do this type of organizational review regularly, and while it always results in some job loss or restructuring, we recognize that there is nothing routine about today’s environment.

“We updated our team today with this information so they understand the actions occurring this week,” Dell said. “Every decision we’ve made up to this point is to make sure we’re doing what’s best for the long-term health of our company and our team.”

Clarke, Dell’s chief operating officer and vice chairman, told analysts during a call on Aug. 27 that Dell Technologies Chairman and CEO Michael Dell sent a note to team members saying, “This is going to be a marathon and it’s going to be uneven and frustrating at times.”

Bob Venero, CEO of Holbrook, N.Y.-based Future Tech, a Dell EMC Titanium partner who is also a Dell stockholder, applauded Dell for being prudent and taking appropriate cost-cutting measures ahead of what is shaping up to be a decline in many enterprise customer IT budgets for 2021.

“Let’s be clear, these are very uncertain and tumultuous times,” said Venero. “An industry leader such as Dell has to be prudent and be able to look forward as to what is happening and be cautious and make adjustments. You need to be able to weather the future storm that is coming. There is no doubt there is a cliff ahead. You need to be smart about not falling over that cliff. You need to be smart and be pre-emptive in terms of the cliff.”

The layoffs mark the second time Dell, which has roughly 165,000 employees, has confirmed letting employees go within the past two months. In July, Dell confirmed to CRN that it was laying off an unspecified number of employees. However, the company said it wasn’t related to the COVID-19 pandemic. “Like all businesses right now, we’re taking a number of proactive steps to prepare for the uncertainties presented by COVID-19. We recently made some workforce reductions that reflect decisions made in early 2020 as part of regular evaluations of our business structure, and weren’t related to the pandemic,” said Dell in a statement in July.

Future Tech’s Venero said he sees the belt-tightening as a matter of the needs of the many outweighing the needs of the one.

“You are better off looking at the business units now so that the larger organization, partners and stockholders don’t suffer more,” he said. “This is prudent business strategy. This kind of streamlining and right-sizing is very, very important, especially with a company the size of Dell Technologies.”

Many enterprise companies scrambled to come up with cash to move quickly with IT expenditures to enable a mass remote work-at-home model and are now looking at tightening their IT belts for 2021, said Venero. Future Tech is seeing enterprise customers cut their 2021 IT budgets by 15 percent or more, said Venero. “We see a cliff that is coming with customers cutting their IT budgets,” he said. “With COVID-19 many customers had to spend money they didn’t have in the budget to keep operations going. That money has to come from somewhere. That means their IT spend is going to be impacted in 2021. We are seeing those budget cuts.”

Venero said he is not surprised by the customer IT budget belt-tightening. “These customers are looking at IT budget shortfalls for 2021,” he said.

Future Tech is providing more consumption as-a-service offers—including with Dell—in the wake of the budget shortfalls, said Venero. “That business is growing at an exponential rate for all our OEMs including Dell,” he said. “We expect that consumption business to at least triple next year.”

Dell recently signaled that it is in the process of rolling out as-a-service consumption-based models for its massive portfolio of PCs, servers, storage, networking, end-user computing and hyperconverged infrastructure offerings.

Future Tech is seeing record sales for Dell infrastructure offerings across the entire portfolio including VMware and Boomi and a marked increase in its Dell global business overseas. “We have seen a very strong uptick in the Dell business with COVID-19 because of the need for organizations to set up more remote workers,” Venero said. “Those customers needed more infrastructure.”

Future Tech itself took workforce reduction and cost-cutting measures to protect the company from the downturn in the wake of the global pandemic, said Venero. “We have taken precautions too and made adjustments,” he said. “We took those steps to prepare for the downturn that we know is coming. I applaud Michael Dell and the Dell Technologies team for having the foresight to prepare now versus waiting until it is too late. If you have to make cuts on the other side of the IT budget cliff, it is going to be worse. You just won’t be able to do it intelligently. At that point you would have to rush versus doing it smart and pragmatically. Dell is doing this the right way. They are going to look at each line of business, see what the future impact is and make adjustments.”

The call to action for partners is to look closely at cost structures for 2021, said Venero. “You need to look at your cost structure and make bets on things that are going to keep the lights on as well as long-term revenue streams,” he said. “You need to be able to pivot on the new normal around compute, productivity and remote workers. If you can pivot and adjust, you can survive.”

Just last month, VMware—which is majority-owned by Dell Technologies—confirmed to CRN that it was conducting its own round of layoffs. VMware did not specify the amount of employees being let go, but did confirm the staff reduction was part of “a regular workforce rebalancing” as the company realigns “resources and investments to opportunities at scale.”

In May, Dell confirmed to CRN that it was temporarily halting employee pay raises, contributions to 401 (k) retirement plans and hiring on a companywide basis to combat the financial turmoil caused by the coronavirus pandemic.

In a recent interview with CRN, Michael Dell said he was bullish about his company’s future heading into 2021.

“What you’re likely to see in 2021 is a rebound in some of the tech investments that might not have happened in the first part of this year,” Dell told CRN. “What we’re seeing broadly is organizations are looking at their capabilities and infrastructure and realizing that the digital future that they might have imagined three or five years from now is actually here today. There’s an acceleration going on. A lot of people are calling it ‘The Great Acceleration.’”

Michael Dell said this year has been one of economic difficulties and horrible tragedies stemming from COVID-19, but the world was able to continue functioning because of technology.

“It’s amazing how much was able to be continued because of technology, and organizations are realizing that. Next year, I think there will be some pretty strong economic rebounds as businesses and organizations are building back,” said Dell.

For Dell’s most recent second fiscal quarter 2021, the company generated $22.73 billion in revenue, down 3 percent year over year. Dell’s Infrastructure Solutions Group, which includes servers, storage and networking, fell 5 percent year over year to $8.2 billion. The company’s Client Solutions Group, which includes PCs and laptops, was also down 5 percent year over year at $11.2 billion.

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