The ink was barely dry on Dell’s acquisition of EMC, the largest technology deal ever, valued at $67 billion when it was announced in October last year – and already the layoff rumors are oozing from the woodwork.
“People familiar with the company’s plans” told Bloomberg that Dell will cut 2,000 to 3,000 jobs.
Dell spokesman Dave Farmer refused to comment specifically on the report on Thursday but said instead, as sort of a confirmation: “As is common with deals of this size, there will be some overlaps we will need to manage and where some employee reduction will occur.”
On Wednesday, the day the deal closed, CEO Michael Dell gave some clues in an interview: “There are some overlapping functions and that sort of thing – that’s not the primary feature of this, but there is some of that.”
These “overlaps” or “overlapping functions” are terms in corporate speak for real people, and these real people are mostly working in the US, according to the report: supply chain, marketing, and general and administrative positions.
Dell is trying to find some efficiencies and synergies to save about $1.7 billion in the first 18 months after the deal closes, so starting from Wednesday. They’re not dilly-dallying around cutting costs and laying off people.
Combined they have about 140,000 employees. So the trimming might have a long ways to go, especially if the cloud and the Internet of Things are not as fun as imagined. But that doesn’t mean that the headcount will come down – they’re bringing in foreign workers, mostly from India.
Between 2014 and 2016, Dell applied for 2,039 H-1B visas and 256 Green Cards. EMC applied for 2,347 H-1B visas and 453 Green Cards, for a total of 5,095 applications.
These are just applications. Not all of them will be certified, and of those that are certified, not all beneficiaries will be hired. But the data for 2016 isn’t complete yet either.
It’s the hot thing to do for tech companies: laying off existing workers in the US, and bringing it foreign workers on H-1B visas. The Senate has been looking into some of the abuses. In February, Senator Richard Blumenthal (D-Conn.) sent US Attorney General Loretta Lynch a letter requesting a Justice Department investigation. But the tech lobby will likely get the Senate back on track soon.
But Dell needs to save some money, one way or the other. Dell’s corporate credit rating is at the upper end of junk. It’s loaded to the gills with debt, stemming from when it was taken private. Now the EMC deal has piled new debt on the company, including $20 billion of bonds it sold in May, followed by a $5-billion leveraged loan.
It needed this pile of cash to pay EMC shareholders $24.05 per share. They also got a “tracking stock” linked notionally to EMC’s interest in VMware, but in reality they get no real ownership of anything. Tracking stocks were hot during the dotcom bubble, with disastrous results for investors.
The combined company is also trying to boost sales, which they’ve been trying to do individually for years. All old tech companies, including IBM and Microsoft are trying to boost sales, and particularly those in the withering PC ecosystem are having the hardest time. They need to find a new niche for growth, and so they’re all piling into the “cloud” and the adjacent “Internet of Things” that links even the fridge to the cloud. But this is precisely where Amazon, Microsoft, Facebook, Apple, and Google dominate.
This is the situation Dell and EMC are in. Both have a large part of their products scattered around the PC ecosystem, Dell with servers and PCs, and EMC with storage devices. A match made in heaven. And so they’re going to innovate their way out of it! As Michael Dell said in the interview:
“We’ve got the ability to innovate at scale and invest – not for next quarter, but we have the agility and speed of a startup, but the scale and reach of the largest company in the industry.”
Alas, Dell became successful by building the same boxes everyone else was building, but it was building them on order, marketing and selling them directly, and getting customers to pay before their computers were even assembled, which was a new approach to supply chain management and working-capital financing in the 1980s: For the first time in history, accounts receivable were a negative amount, and working capital was funded entirely by customers, free of charge. Credit cards made that possible.
That was Dell’s big invention. It gave it a huge cost advantage, until everyone started doing it. But it wasn’t technological innovation. EMC is a different animal. But now it’s under Dell’s control, and they’re carrying a lot of debt, and cost cutting is going to be the big strategy going forward.
Mergers & Acquisitions often just lead to more shut-downs, write-offs, and layoffs. But somebody is making a killing. Read… “Tech” Paid $5 Billion in Fees to Wall Street in 2016, and Look What it Got for it
“But that doesn’t mean that the headcount will come down – they’re bringing in foreign workers, mostly from India.”
As opposed to shipping the company over there.
They’ll likely be replacing ALL the American workers with foreign ones in the near future.
Who do these traitors think are going to be able to purchase their products?
I suppose it’ll be all the invaders, as they are the ones that will still have jobs.
This is another disgusting story of the recolonization of our country.
Actually what is going to happen is these corporations will fail. The people they are importing are from a culture that is incapable of innovation, original thought, being assertive, thinking for themselves, I could go on. They are basically flesh robots. That kills corporations. So, they are cutting their own throats. That will leave a market vacuum for companies that understand that rebellious and obstinate thinkers are what drives innovation. Those that refuse to follow the herd are what drives the world. We are simply going through a period of a culling of those that value a quick buck over quality. It will be painful for all of us and it will come full circle. We will eventually come back to a period of quality.
India…where they have over a billion people? Holy cow. They kill our guys off in wars and then bring them over .
I’m so sick of these Indian bobbleheads. They’re becoming even more of a nuisance than illegal immigrants. These bastards have invaded Plano, TX already and are working to compete with the illegals on who can win the most territory in Texas. Every one of them needs to be eradicated. At least the Mexicans sometimes hide their head in shame. These friggin’ Indians, however, have zero patience, come in the place like they are in charge and you should be bowing to them for everything and that you should be taking care of them literally RIGHT AWAY or they will make a scene right there in front of you and even play the race card on you if they don’t get their way. And once they get what they want, they literally bobble their head and say, “Ok, what was I asking for again?” It’s insanity.
These people can’t even sit down and literally wait two minutes for their food. They have to be standing and staring at you (I’m not exaggerating) until they get their food and when you call out someone’s number right after taking their order, they say it’s there’s when it’s not even their number. They do this EVERYDAY at my workplace and my employees and co-workers are so fed up with them. They’re completely stupid and useless and these are the people that are replacing us. GOD HELP US ALL!!!