Dell announces significant layoffs to pivot toward AI products and services
In a major restructuring move, Dell announced on Tuesday, August 6, that it will lay off approximately 10% of its workforce as part of a strategic shift towards AI products and services. While the exact number of affected employees has not been disclosed, estimates suggest around 12,500 individuals will face job cuts, with the majority of the impact on the company’s sales teams, including long-standing employees.
Restructuring for innovation
Dell confirmed the layoffs in an email to The Register, stating that the company is “becoming a leaner organization” through this reorganization. The restructuring involves merging teams and prioritizing investments to enhance innovation, value, and customer service. In an internal memo to employees, Bill Scannell, President of Global Sales and Customer Operations, and John Byrne, Global Channels President at Dell, discussed “streamlining layers of management.” They emphasized Dell’s ambition to outpace market growth by leveraging “the value of modern IT and AI” for client organizations.
Impact on employees
According to various reports, the layoffs will primarily affect managers and senior managers, some of whom have over two decades of experience at the company. One employee, speaking anonymously to Business Insider, said, “It was mostly managers, directors, and VPs. They also hit marketing and operations. They combined organizations and made the ratio higher for the managers. Now every manager has a minimum of 15 employees.”
Affected employees are expected to receive a severance package comprising two months’ wages, plus an additional week for each year of service, up to a maximum of 26 weeks. The severance package may also include potential partial bonus payouts. However, some long-term employees have expressed dissatisfaction over losing long-term incentives and stock options as part of this process.
Optimism despite layoffs
Despite multiple rounds of layoffs and backlash from ex-employees, Dell remains optimistic about its future, particularly with its new focus on AI. The company is hopeful that a new generation of AI-optimized PCs will drive upgrades and growth. “We aim to grow faster than the market by seamlessly meeting our customers and partners online, virtually or in person,” Scannell and Byrne wrote in their memo.