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.