Dell would lay off over 6,500 workers which are around 5% of its workforce as the company battles with a severe slowdown in PC sales after strong growth in the preceding two years.
Late last year, HP also said that it would eliminate between 4,000-6,000 positions by 2025. Life has come a full circle for PC companies and the industry which was crippled by supply since the onset of the COVID-19 pandemic, now finds itself saddled with too many unsold PCs.
The International Data Corporation’s (IDC) preliminary estimates show that global PC shipments fell 28.1% to 67.2 million units in Q4 2022. In absolute terms, it was the lowest level in four years. The performance might sound somewhat better when we consider that global smartphone shipments in the quarter fell to the lowest level since 2013.
Also, the annual PC shipments were 292.3 million units which are higher than the pre-pandemic levels. Ryan Reith, group vice president at IDC’s Worldwide Mobility and Consumer Device Trackers said, “Consecutive quarters of declines clearly paint a gloomy picture of the PC market, but this is really all about perception.”
He added, “2021 was near historic levels for PC shipments, so any comparison is going to be distorted. There’s no question when we look back at this time that the rise and fall of the PC market will be one for the record books, but plenty of opportunity still lies ahead.”
Global PC Sales Plummeted in 2022
Meanwhile, the IDC is not too bullish on the PC industry’s 2023 outlook and said that “demand remains a concern as most users have relatively new PCs and the global economy worsens.”
Reith however said that the market might recover in 2024 and there are “pockets of opportunity throughout the remainder of 2023.”
According to IDC’s estimates, Dell was the worst-performing PC company in the fourth quarter of 2022 as its shipments fell 37.1%. Apple was the best performer as its sales fell only about 2.1%.
Lenovo, which is the largest PC seller globally, saw its PC shipments plummet 28.5% in Q4, which is largely in line with the decline in the wider industry.
Looking at the full-year numbers, while total PC shipments fell 16.5%, Dell’s shipments fell 16.1%. Apple was the best performer based on full-year numbers also and its shipments actually increased by 2.5%.
In smartphones also, iPhone sales fell less that the broader industry. Apple is the largest holding for Warren Buffett-led Berkshire Hathaway. There is a guide on how to buy Apple stock.
Dell’s Workforce to Fall to Lowest in Years
After the layoffs, Dell’s workforce would fall to multi-year lows. Meanwhile, it is not only PC companies but ancillary companies like chipmakers that are grappling with the slowdown in gadget sales.
Nvidia’s gaming revenues have also tumbled as the growth rates that it saw during the early days of the pandemic have withered away. Nvidia sees autonomous driving and metaverse as its key long-term growth drivers.
Higher PC Inventory is Another Overhang for the Industry
In a memo seen by Bloomberg, Dell’s Co-Chief Operating Officer Jeff Clarke said, “We’ve navigated economic downturns before and we’ve emerged stronger.” He added, “We will be ready when the market rebounds.”
All said, there has been a wave of layoffs in the tech industry. Tech companies hired based on the assumption that the super-high growth rates of 2021 would sustain. However, that’s not been the case and companies are realizing that the hard way.
Talking specifically of the PC industry, the massive inventory overhang is another problem and is also taking a toll on the average selling prices and by its extension the margins.
Recession fears are also not helping matters as many consumers might postpone their buying decisions.
Meanwhile, markets have mostly appreciated the cost-cut initiatives of tech companies and Dell stock is also trading higher in US premarket price action today despite futures pointing to a weak opening for US stocks.
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