Dell Says Job Cuts Will Continue With Margins Under Pressure

(Bloomberg) -- Dell Technologies Inc. will continue to reduce its workforce this year, trying to control costs amid concerns that demand for PCs hasn’t rebounded and sales of servers optimized for artificial intelligence aren’t as profitable as other products.

Dell said a limitation on outside hiring, job reorganizations and other actions will produce “continued reduction in our overall headcount” in the fiscal year ending in February 2025. 

The company is focused on expanding the business of selling high-powered servers for artificial intelligence work. This new spigot of growth has excited investors — the stock has gained 39% this year through Tuesday’s close and will join the S&P 500 Index later this month.

Still, there is increasing concern about the profitability of the equipment sold by Dell and peers such as Super Micro Computer Inc. and Hewlett Packard Enterprise Co. because the servers need expensive computer chips made by companies like Nvidia Corp. In the most recent quarter, Dell said that a higher mix of AI servers hurt margins, but reported improved profit compared with the previous period.

The company’s better-known business, the sale of personal computers, hasn’t picked up as much as anticipated after a two-year slump. Dell on Aug. 30 reported $12.4 billion in fiscal second-quarter revenue, down 4% from the same period a year earlier and slightly missing estimates. Sales of business PCs was little changed while revenue from consumer-oriented PCs declined 22% from a year earlier.

“We remain committed to disciplined cost management in coordination with our ongoing business transformation initiatives and will continue to take certain measures to reduce costs,” Dell said Tuesday in a regulatory filing.

The company declined to comment beyond the filing.

In June, Dell cut jobs primarily in sales without disclosing how many workers would be affected. The company took a $328 million charge for severance expenses in the quarter. Dell said in February that it had about 120,000 full-time workers globally.

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