Dell to Slash Over 6K Jobs

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ITNPod25Jan2023
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Facts

  • Dell Technologies Inc. has announced its intention to cut roughly 6,650 employees — about 5% of its overall workforce — amid slumping demand for PCs. The news comes amid a wave of mass layoffs in the tech sector, with companies such as Amazon and Alphabet having announced jobs cuts in recent weeks.
  • The news was made public in a memo released on Monday, which saw Dell's Co-Chief Operating Officer Jeff Clarke state that attempts to cut costs by pausing hiring and limiting travel, among other measures, had been insufficient. Clarke also said that market conditions were continuing to 'erode,' creating 'an uncertain future.'
  • According to industry analysts from IDC, shipments of PCs decreased 28% globally, year-on-year in Q4 2022, while Dell's computer shipments declined 37% in the same period. As of early Monday, shares of Dell were down 3%.
  • A spokesperson on Monday told media that this kind of reorganization was: 'a regular course of business' and the announcement echoed similar lay-offs three years ago, after the pandemic struck.
  • IDC has predicted the market for PCs and tablets is set to drop by another 2.6% in 2023, following rapid growth from the rise of remote working during lockdown. Primary rival to Dell, HP Inc., has also announced plans to cut up to 6K jobs.
  • Dell is the largest US employer so far to reveal plans to reduce staff numbers, as many act in response to widespread inflation and rising interest rates.

Sources: Verge, Verge, CNBC, Bbc news, Reuters and Wall street journal.

Narratives

  • Pro-establishment narrative, as provided by Forbes. This movement towards mass redundancy in tech firms is not indicative of any significant market changes. The layoffs are sparking media attention on an inordinate scale, but the tech sector only accounts for roughly 3% of jobs. In addition, tech workers are relatively well educated, and evidence shows they rapidly find new work in comparison to the rest of the labor market.
  • Establishment-critical narrative, as provided by Washington Post. These layoffs spark cause for concern. The bounce in stock prices following most tech redundancies may make this move more popular among executives, even though not enough emphasis has been put on the potential impact on consumer spending of layoffs. Tech workers are mostly highly paid and the US economy is heavily dependent on the spending of the top fifth of earners. This ongoing strategy in the sector could easily cause the elite to slow spending.
  • Nerd narrative, as provided by Metaculus. There is a 50% chance that the annual US unemployment rate will be at least 6.09% in 2027, according to the Metaculus prediction community.

Predictions