Round Rock-based tech giant Dell Technologies said Monday that it will lay off 6,650 workers, or about 5% of its global workforce, as the company prepares for an expected economic downturn.

As of last year, Dell had 133,000 total employees, according to filings with the U.S. Securities and Exchange Commission. The company has said it has about 13,000 employees in the Austin metro area.

The company did not immediately provide details as to where the cuts would happen, or how many of the job losses would be in Central Texas, but did say it would affect teams around the globe. If the 5% figure were applied to the local workforce, that would equate to about 650 Central Texas workers.

In a statement, the company said external hiring has been paused since June and spending has been reduced to "navigate a challenging global environment."

"Dell continuously assesses our business to ensure we’re set up to deliver the best innovation, value and service to our customers and partners. This is especially important as economic uncertainty has continued," the company said. "We have further opportunity to drive efficiency through department reorganizations, which has resulted in a reduction of team members across the globe. This is a difficult decision that was not made lightly, and we’ll support those impacted as they transition to their next opportunity."

Dell Technologies' stock price dropped after the layoffs were announced. It was down about 3% in Monday afternoon trading.

In a memo to employees, Jeff Clarke, Dell Technologies' co-chief operating officer, said the cuts were made in an effort to “stay ahead of downturn impacts.” He said the company has already made some cutbacks, such as allowing less business travel, freezing external hiring and reducing spending, but he said more needs to be done.

“Unfortunately, with changes like this, some members of our team will be leaving the company,” Clarke said. “There is no tougher decision, but one we had to make for our long-term health and success.”

Clarke also said the company would make changes to streamline its global sales teams, integrate support services and shift engineering priorities on its Infrastructure Support Group team, which is focused on hardware such as servers, storage and some Apex products. He said teams would soon hear from their leaders about any changes that affect their work.

"In the coming days and weeks you'll see a series of changes — some resets — across the organization to better structure us for the future, to better collaborate, reduce complexity, increase speed and to accelerate innovation," Clarke said. "They'll help us focus on purpose-driven work and to be in the best position to make the greatest difference for customers, Dell Technologies and each other."

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'Some very uncertain waters ahead'

Patrick Moorhead, a technology industry analyst and founder of Austin-based consulting firm Moor Insights and Strategy, said Dell Technologies clearly expects some rough days in the near future.

"Dell runs a very tight ship, so the company must see some very uncertain waters ahead," Moorhead said. "It's clear the goal is cost cutting as it appears it is consolidating some groups. The skill is to keep Wall Street happy short term, not cut investments for future growth."

The Round Rock-based company, which was famously founded in 1984 by Michael Dell in a University of Texas dorm room, has grown into one of the world's largest technology companies and is one of the largest private employers in the Austin metro area.

Dell has been experiencing a boom in recent years amid the pandemic, as people and companies bought products such as personal computers for virtual learning and working from home. But demand for such products has probably slowed ahead of a potential recession.

A January report by International Data Corp., an industry research firm, showed in the fourth quarter that global shipments of PCs were down 28.1% from the previous year. Dell saw a 37.2% drop year over year, higher than rivals including Lenovo and HP, which saw 28.5% and 29% drops, respectively.

Roger Kay, a technology industry analyst with Endpoint Technology Associates, said the layoffs signal a move toward austerity for Dell.

"This is the latest brick to fall, but it's not a big surprise," Kay said. "Dell has always been very financially run. If they look at their projections and they see the revenue is not coming in, they'll just align the costs immediately to keep the ship right."

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'Whole industry is feeling it'

Dell's job cuts are part of a wider trend of layoffs and cost-cutting in the technology industry. Tech giants have laid off thousands of employees. That includes companies with a significant Austin presence, such as Meta, Google and Amazon. Industry analysts have said the cuts come amid an increasingly hazy economic environment, but they follow a time of big spending and growth over the past several years.

Kay said the PC industry at large has been dealing with a series of shocks in recent years, making it hard to predict the seasonality of sales. For example, supply chain issues meant that parts were hard to acquire for a while, but now many companies and suppliers are seeing a surplus.

"The whole industry is feeling it," Kay said.

Dell could cut more costs to preserve its margins if revenue continues to decline, Kay said.

"They're taking this step. If it continues to be grim, they probably will trim more because they really look at the company as a financial problem," Kay said. "If they're having a fixed cost issue that's causing them to be unprofitable, they'll just start swapping fixed costs."

This article originally appeared on Austin American-Statesman: Dell announces 6,650 layoffs, or 5% of its global workforce