Dell Technologies (NYSE:DELL) joined the tech layoff trend, saying it will cut 6,650 employees or roughly 5% of its workforce. The company blamed the move on weakness in the PC market.
DELL stock is down 28% over the last year but rose slightly overnight on the news. It opened Feb. 6 at $42.18 per share with a market capitalization of about $30 billion and has since fallen 3%.
Death of a Monopoly
Sales of desktop machines and laptops built with hardware from companies like Intel (NASDAQ:INTC) and Microsoft (NASDAQ:MSFT) Windows software peaked at the end of 2021. But they fell off a cliff in the fourth quarter of 2022.
Market researcher IDC reported Dell sales for the fourth quarter were 10.8 million units, 16.1% of the total market. That was down 37% from the Christmas quarter of 2021, when it sold 17.2 million machines and had an 18.4% market share. A significant portion of the collapse could be attributed to so-called Wintel machines, although Advanced Micro Devices (NASDAQ:AMD) sales were also hit. Apple (NASDAQ:AAPL) sales were down just 2%.
Dell management previously said it saw bad news coming, pausing hiring and limiting travel. But that proved inadequate, the company said. About 55% of Dell revenue comes from PC sales.
Dell is expected to report fourth-quarter numbers on March 2. For the third quarter ending in October, Dell reported net income of $245 million, or 33 cents per share, on revenue of $24.7 billion. Analysts have been expecting fourth-quarter earnings of $1.65 per share on revenue of $23.6 billion.
Dell tried to pivot toward the cloud, buying Israeli cloud orchestration company Cloudify in January for about $100 million. The company has also delivered new hardware aimed at cloud providers.
What Happens After Dell Layoffs?
You can see what is happening in the palm of your hand. Smartphones now routinely cost more than $1,000 while Dell desktops start at $500 to $700 and even new laptops cost just over $700. Dell layoffs show the company is in serious trouble.
On the date of publication, Dana Blankenhorn held long positions in AAPL, AMD, MSFT, and INTC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.