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Dell shuttering own PC factories?

updated 11:20 am EDT, Fri September 5, 2008

Dell Shuttering Factories

Dell is looking to sell off many of its self-run factories in a bid to remain competitive in the home market, sources have allegedly told the Wall Street Journal. The company currently assembles many of its PCs itself in factories around the world but is now considering offloading many of these in favor of contracting outside firms to do all its work. Many of the old plants would still produce Dell notebooks as part of the deal, though it's unclear whether these companies would be free to make other products at the plants.

Motivation for the change would come from a fundamental shift in the PC business away from Dell's conventional focus on large batches of corporate orders guaranteed to turn a profit, such as for its work-oriented Latitude portables, and towards smaller retail and online purchases from home users adding notebooks to their lineups. Large contractor firms such as Foxconn and Quanta often have to bid more competitively for manufacturing rights and often have economies of scale by producing hardware for multiple firms, many of which often compete against each other.

Dell has already partly relied on outside firms for assembly but has often had these systems finished at its own buildings.

The PC vendor in particular has had to compete the most with HP, which dominates American retail computer sales through its ability to produce numerous low-end systems. Dell's efforts in retail began last year but have been limited to just a handful of its more successful models rather than the broad-based strategy of HP and others.

Apple is also believed to be impacting Dell's performance at retail. All of the company's Macs are assembled by outside firms and are also available at retail for its own stores or through third parties; the strategy exposes buyers to the company's entire lineup.

Dell hasn't commented on the newspaper's assertions but may face difficulty selling factories in the US and other well-established countries, where labor costs are high and manufacturing seldom focuses on computing products.



By Electronista Staff
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Comments

  1. climacs

    Junior Member

    Joined: Sep 2001

    +2

    time to

    liquidate and distribute the proceeds to shareholders.

    It's the only honest thing left for Dell to do.

  1. aristotles

    Grizzled Veteran

    Joined: Jul 2004

    +2

    Dell is Beleaguered

    I guess Mr. Dell did not think his words would come back to bite him in the a**.

  1. simdude

    Fresh-Faced Recruit

    Joined: Jun 2004

    +1

    ??

    So Dell doesn't innovate anything as it is, they just slap together other peoples components. Now, they want to outsource that? time to close up shop.

  1. Guest

    Fresh-Faced Recruit

    Joined: Nov 1999

    0

    Huh?

    What I don't understand is this:
    How will the company that buys these factories from Dell be able to make a profit if penny-pinching Dell can't do that?
    Dell wants to sell a computer with some profit and the cost of assembly of that computer is only cost for Dell.
    When the factory is sold, the other company must however do three things:
    Pay off the cost of the factory, make a profit for itself for e.g. expansion or research and last, but not least, be cheaper than Dell was to start with (otherwise there is no use to this).
    How is that possible?

    Pieter.

  1. hokie17

    Junior Member

    Joined: Jul 2007

    0

    Local effect

    As someone who has one of those plants in my hometown (Winston-Salem, NC), I hope it doesn't happen. The local plant employs about 1200 people that could find themselves out of work, not to mention the incentives packages the local/state gov't gave to Dell.

    And just FYI, I don't particularly like the practice of incentives.

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