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Dell Plans Sales Layoffs To Hone AI Focus

• By Gladys Rama
• August 07, 2024

Dell is preparing for a major reorganization that includes creating a new AI sales unit and potentially laying off thousands of personnel.

The cuts will mostly affect Dell's go-to-market sales teams, a Dell spokesperson confirmed to Bloomberg, which reported on the layoffs on Monday.

Dell has not indicated how many jobs will be impacted, but sources within the company told Business Insider that the cuts are projected to lower its headcount from the current 120,000 (per its latest SEC filing) to less than 100,000, a reduction of at least 16 percent.

This is the second consecutive year of major layoffs at Dell. Since 2023, according to SEC filings, the company has shed about 13,000 employees, with about half of those layoffs occurring last February.

News of impending Dell layoffs comes just days after another IT bellwether, Intel, announced a planned headcount reduction of at least 15 percent.

Dell briefly described the layoffs to employees in an internal memo attributed to sales executives Bill Scannell and John Byrne. "[W]e are getting leaner," they wrote in the memo, which was published in full on Tuesday by Business Insider. "We're streamlining layers of management and reprioritizing where we invest."

Where Dell plans to invest is, unsurprisingly, AI. Per the memo, the company is creating a new AI Select Sales team that will focus on "AI pursuits for select accounts in close collaboration with the product, marketing and services teams."

That's in addition to the existing Al Solutions Sales team, which focuses on enablement and "broad AI opportunities."

Dell has staked much of its future performance on enterprise demand for generative AI. In May, the company launched Dell AI Factory, a comprehensive platform aimed at helping organizations fast-track their AI adoption.

It has also increased its investments in AI-optimized servers and other infrastructure. In its Q1 FY25 earnings, Dell cited these investments as a contributing factor to its declining margins, which fell by 2.5 percentage points for the period. For FY25 overall, Dell projects a 1.5 percentage point decline in gross margins.

However, Dell believes the payoff will be worthwhile. "We've seen an expansion in the number of enterprise customers buying AI solutions which remains a significant opportunity for us given we are in the early stages of AI adoption," it said in its earnings call.

"In closing, we are optimistic about FY25 and beyond with a number of tailwinds including AI and the coming IT hardware refresh cycle, and no one in the industry is better positioned than Dell."