Dell: Job cuts to continue due to margins under pressure

Dell Technologies Inc. will further cut jobs this year in a bid to keep costs in check amid concerns that demand hasn't snapped back and AI-optimised server sales aren't as lucrative as other products.

Dell said a freeze on outside hiring, job restructuring and other moves will result in a "continued reduction in our overall headcount" in the fiscal year ending in February 2025.

It concentrates its efforts on extending the business of selling high-powered servers for artificial intelligence work. Investors have been thrilled by this new spigot of growth, sending the shares up 39 per cent this year through Tuesday's close, and landing the company a promotion to the S&P 500 Index later this month.

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Still, there's growing unease about how profitable the gear sold by Dell and rivals such as Super Micro Computer Inc. and Hewlett Packard Enterprise Co. will prove to be, since the servers require pricey computer chips from the likes of Nvidia Corp. In the last quarter, Dell said a higher mix of AI servers hurt margins, though the company did report improved profit versus the prior period.

The company’s better-known business, the sale of personal computers, has not picked up as much as expected after a two-year slump. Dell reported $12.4 billion in fiscal second-quarter revenue on Aug. 30, down 4 per cent from the same period a year earlier and slightly missing estimates. Sales of business PCs were little changed, while revenue from consumer-oriented PCs declined 22 per cent 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 would not comment beyond the filing.

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