Dell Technology will continue to lay off employees this year to try to control costs due to concerns that the recovery in PC demand is falling short of expectations, and sales profits of servers optimized for artificial intelligence are falling short of other products.
The Zhitong Finance App learned that Dell Technology (DELL.US) will continue to lay off employees this year to try to control costs due to concerns that the recovery in demand for personal computers falls short of expectations and that sales profits of servers optimized for artificial intelligence are not as good as other products. Dell said restrictions on external recruitment, job restructuring, and other actions will “continue to reduce the total number” in the fiscal year ending February 2025.
The company is working to expand the sales business of high-performance servers for artificial intelligence work. Investors are excited about this new growth. By Tuesday's close, the stock had risen 39% this year and will be added to the S&P 500 later this month.
However, since servers require expensive computer chips made by companies such as NVDA.US (NVDA.US), people are increasingly concerned about the profitability of equipment sales by companies such as Dell and Ultra Micro Computer (SMCI.US) and HP (HPQ.US). In the most recent quarter, Dell said that the increase in the proportion of artificial intelligence servers hurt profit margins, but that quarter's profit data improved compared to the previous quarter.
The company's better known PC sales business did not recover as expected after two years of sluggishness. On August 30, Dell announced revenue of 12.4 billion US dollars for the second fiscal quarter, down 4% from the same period last year, slightly lower than expected. Sales of commercial PCs remained almost unchanged, while revenue from consumer PCs fell 22% year over year.
Dell said in a regulatory filing on Tuesday: “We remain committed to strict cost management in line with our ongoing business transformation plans and will continue to take certain steps to reduce costs.” The company declined to comment outside of the file.
In June of this year, Dell made layoffs, mainly in the sales department, but did not say how many employees would be affected. The company recorded $0.328 billion in severance payments during the quarter. Dell said in February this year that the company has around 0.12 million full-time employees worldwide.