Dell announced intentions to reduce headcount by 5% as a result of economic tumult, marking the latest of several companies in the technology sector to dismiss a significant portion of its workforce.
Dell Vice Chairman Jeff Clarke wrote in a memo to staff members on Monday that the company, which previously paused external hiring and limited travel expenditures, would downsize to improve cost structures and reduce organizational complexity.
“Unfortunately, with changes like this, some members of our team will be leaving the company. There is no tougher decision, but one we had to make for our long-term health and success,” the executive wrote. “Remember, we’ve navigated economic downturns before and we’ve emerged stronger. We’ll prevail as we always do, for our customers, partners and each other. We’ll be more competitive, more focused and find a new level of operational performance.”
The 5% reduction will correspond to approximately 6,700 employees losing their jobs, according to an annual report and current report filed with the Securities and Exchange Commission.
Shares for Dell had fallen 3.3% as of early Monday afternoon; the company’s stock has declined 30.8% over the past year, underperforming both the S&P 500 Index and the technology-heavy NASDAQ Composite, which have respectively fallen 8.1% and 14.7% over the same period.
The layoffs follow the actions of several other leading technology companies. Microsoft, Google, and Amazon revealed their intentions to decrease payrolls by more than 40,000 workers over the past few weeks. More than 66,000 workers have been dismissed from prominent technology firms in the first month of 2023, according to a report from Crunchbase, even after companies in the sector dismissed some 140,000 positions last year. The most recent figures do not appear to account for the layoffs at Dell.
The dismissals occur after multiple prominent investors exhorted technology executives to downsize to remain profitable through current economic uncertainty. Many firms had increased hires after the lockdown-induced recession in response to high consumer demand.
Meta, for instance, drew criticism for a recent decline in profitability spurned by poor cost discipline; the social media behemoth reported a 1% decline in revenues for the past year and a 23% increase in expenditures over the same period. Altimeter Capital Management CEO Brad Gerstner recently noted in a letter to Meta CEO Mark Zuckerberg that the company’s headcount has more than tripled from 25,000 employees to 85,000 employees over the past four years.
Meta CTO Andrew Bosworth admitted in a blog post that the firm’s culture has gradually shifted away from profit maximization. He recounted that Zuckerberg once rejected suggestions that the company support various nonprofits out of a concern that the initiatives would distract from their overall mission; Meta now devotes considerable resources toward sustainability and community support efforts. “Resources and time were so tight that you could feel the weight of all the things you weren’t working on,” Bosworth wrote.
The technology sector layoffs come as the broader economy witnesses a sharp decline in unemployment. The job market has nevertheless languished under historically low labor force participation: there are currently two open positions for every one unemployed individual, according to data from the Bureau of Labor Statistics, prompting companies to raise wages and pass increased operating costs onto consumers.