5 Things To Know About Dell Technologies' $416M Job-Cutting Program

Clearing The Runway For Growth

Dell Technologies is in the midst of a massive effort to eliminate overlapping positions and complete an aggressive cost-cutting program begun by EMC more than a year ago.

As of Feb. 3, the Round Rock, Texas, IT giant had put $416 million in reserve to pay severance benefits. A year ago, prior to Dell's $58 billion acquisition of EMC, the company held $26 million in reserve for the same purpose, according to a U.S. Securities and Exchange Commission filing.

While overlap in products and personnel hasn't been a major problem for the company, according to executives, creating the largest, privately held IT firm in the world can't be done without cutting some duplicate positions. The company is confident that its growth prospects will result in overall job growth over time.

The Cuts Target Overlapping Dell And EMC Positions

Before Dell's $58 billion acquisition of EMC, executives with both companies said the overlap between the server and PC powerhouse Dell and data storage giant EMC was minimal. But some overlap among the companies' more than 140,000 employees was inevitable. The company's cost-savings programs are on track, and those savings are being funneled back into the business, CFO Tom Sweet said during a recent conference call to discuss the company's fiscal 2017 results.

The $416M Total Includes Existing EMC Cost-Saving Measures

EMC in late 2015 kicked off an $850 million corporate cost-cutting program that included as much as $150 million for layoffs. Dell Technologies' U.S. Securities and Exchange Commission filing related to its fiscal 2017 results indicate that the company was roughly halfway through that effort and that the layoff program would be completed. EMC began the program while it was under pressure from activist investors to boost share value.

It's Likely That The Program Will Result In Thousands Of Cuts

While $416 million may seem like a large sum, the number of layoffs it covers probably isn't excessive considering Dell Technologies' size. If the average severance benefit is $25,000, for example, that covers some 14,000 employees, or about 10 percent of the Dell Technologies workforce. If the average benefit is greater, the number of layoffs would be fewer.

The Company Expects Revenue Increases To Result In Job Growth Over Time

Dell Technologies stressed that it isn't trying to cut its way to a better financial position. It expects savings that result from this round of job cuts will be far outweighed by revenue gains and the hiring those gains bring. The company reported revenue for its 2017 fiscal year ended Feb. 3 of $61.6 billion, a more than 21 percent increase year over year. The sales gains came across major business lines, including servers, networking, PCs and hyper-convergence products.

Dell Technologies Is Advertising More Than 3,000 Open Positions

Despite the cuts, there's no doubt Dell Technologies is in growth mode. Currently, the company is advertising more than 3,000 open positions worldwide on its jobs website from analysts in Hopkinton, Mass., to sales executives in Australia.