Dell looking to sell factories to increase profitability

It looks like Dell is taking a rather drastic step to attempt to cut some of the costs that have been dragging it down in recent years, with The Wall Street Journal now reporting that the company plans to sell "most -- and possibly all -- of its factories" within the next 18 months -- if it can find some buyers, that is. As the paper notes, the factories were originally built to serve a PC market driven by corporate customers ordering large volumes of desktop PCs, but they've fast become a drag on the company as growth has shifted towards laptops sold at retail stores. While nothing is anywhere near official yet, the Journal pegs big contract manufacturers angling for a bigger piece of Dell's business as the most likely buyers, although there's a number of obstacles that could block such a sale, particularly when it comes to Dell's factories in the US. Dell is also said to be considering simply closing down some of the factories, and instead rely on those aforementioned contract manufacturers to build its PCs. Hit up the link below for the full saga and backstory.

[Via Blogrunner, image courtesy J.P.R Sdn Bhd]

[Steve @ Sep 5th 2008 6:18PM]

They should just shut Dell down and give the money back to the shareholders.

[snowenloe @ Sep 5th 2008 6:20PM]

hahahahahaha
i still laugh every time i remember dell saying that :)

[UnixSystemsEngineer @ Sep 5th 2008 8:51PM]

... I came here to make a similar comment ("so then will they give the proceeds to the shareholders"), but I see I was beat to it by a quicker wit.

[snowenloe @ Sep 5th 2008 6:20PM]

apple's sales are hurting them quite a bit

[BigD145 @ Sep 5th 2008 6:20PM]

Taking production exclusively to China, eh Dell?

[snowenloe @ Sep 5th 2008 6:21PM]

i see that as a bad idea... seeing as how china could nationalize all businesses there anytime, scary.

[tom @ Sep 5th 2008 6:44PM]

Lenovo have one single factory in the North American, one in Europe. All the rest in India and China. Cheap labor, Cheap material, Cheap factory spending, Low Taxation, bare to none Environmental standard.

It is not in Chinese CCP government's best interest to nationalize a business. Government officials will lose their opportunity to collect their "protection money"

[Jubei @ Sep 5th 2008 6:25PM]

Perhaps someone needs to ask Mr. Dell what Apple should do today.

[Kent @ Sep 5th 2008 6:59PM]

Well, unless they plan to ship you a bag of components, I doubt they can even pretend to function. Offshoring would add many days to the turn-around time, and any savings in labor would be offset by needing to fly rather than float the computers to the US.
They could build them in Mexico, I suppose.

Regardless, after the tech support fiasco, if Dell wants to offshore more elements of their business, their name rhymes with where they can go.

[tekdemon @ Sep 5th 2008 8:39PM]

Tech support fiasco? I can only assume you didn't actually try to get tech support in the days before outsourccing...because I can assure you that tech support sucked even before it was outsourced...I'm talking about spending 3 hours on hold with Compaq only to have the retards disconnect the call when finally forwarding you to level 2 support.
Tech customer service has always sucked pretty badly, I'm actually pretty confident that hold times actually dropped a lot after being outsourced. Back when they had to pay US call center workers they basically didn't hire any so you always had a multi-hour wait.

[BobTurbo @ Sep 5th 2008 9:35PM]

I thought Compaq was HP?

[paja @ Sep 5th 2008 7:02PM]

The beginning of the end.

[Serial 8-Ball Mouse @ Sep 6th 2008 2:05AM]

...you're serious...?

[Neil @ Sep 5th 2008 7:18PM]

DUDE! ... You're getting a Dell Factory

[Matt @ Sep 5th 2008 8:06PM]

hahahahahaha that made me laugh

[JohnTitor @ Sep 5th 2008 7:51PM]

surprise to me
Dell isn't really doing as poor a job as it was a couple years ago
they've simplified their range and focused on a nice new set of notebooks
their new trend of XPS laptops are pretty cool

[YHWHMystic @ Sep 5th 2008 8:13PM]

The sad part is, I'd rather have a Dell assembled off-shore than in the U.S...

[diode3diode @ Sep 5th 2008 8:13PM]

I guess Dell knows who's going to be President next year.

[RD. @ Sep 5th 2008 8:14PM]

I thought vertical integration was the way to go. How are they supposed to make more money by sharing the profits with a manufacturer? Is the only solution to move the factory to a 3rd world country or sell? That's unfortunate.

[Nick @ Sep 5th 2008 8:19PM]

Dunno, I think Dell has done an splendid job, 4 towers ranging from 1998- 2003, all still work like new, and a few laptops, one which happens to be the new mini i bought from them, their tech support seems fine, and i've never had a hardware issue.

Heh, just must be bad luck for some people? Basically all our comps at school are also Dell, and they all run seamlessly.

It all depends really on whoever wants to think of Dell as a bad/good company.

Thumbs up for Dell, but a bit taken aback on the fact they wanna sell their factories here.

Cheers,
Nick

[UnixSystemsEngineer @ Sep 5th 2008 8:54PM]

I haven't heard too many horror stories about Dell's hardware, it's the consumer-level support that blows chunks -- not that other computer makers are all that much better. People can't expect endless hours of top-flight technical support when buying a $399 computer, after all.

Virtually everyone I knew in college that had a Dell laptop had some kind of hardware failure, but, again, a hardware failure in a laptop after 4 years is probably more common than not.

[Korrupzion @ Sep 5th 2008 10:14PM]

Who cares! I only want my nvidia 8600GT fixed

[Chris @ Sep 5th 2008 10:07PM]

I'd love to call Dell and say Hey can you throw in a factory with my mini 9, I'll buy the extended warenty.

[svetoslav.dankov @ Sep 6th 2008 12:18AM]

Are you insane? Why would Apple be hurting their sales? Because they are more affordable? Don't be stupid - not everyone has $2000 to spend on a handicapped laptop that can cut a cake. Dell has their market share which in no way overlaps with Apple - budget laptops/pcs.

[Greg @ Sep 6th 2008 1:46AM]

As an employee at a contract manufacturer (in the USA) I say great!

[Kelmon @ Sep 6th 2008 4:50AM]

@svetoslav.dankov

The thing is, Dell has the higher sales figures but they are far less profitable than Apple (about half as profitable in the last quarter, if I recall, and that gap is only getting bigger). This is what Dell is trying to address since it is clearly not in their interest to have shareholders "switching" to the likes of Apple. Dell needs to drive down costs in order to boost profitability. And, yes, Apple is quite clearly hurting them. Any sale of a Mac is a lost higher profit margin sale product sale to Dell, and they need to be shifting the likes of XPS units in order to boost their overall profitability. It's not like Dell doesn't produce competing products to Apple, as any discussion about the high price of Macs will surely testify.

Before calling people insane, you might want to have a look at the companies' finances first.

[FireStorm @ Sep 6th 2008 7:42AM]

Last time I checked Apple outsourced everything out to contract manufacturers.

I think this is the right move for Dell, the world has changed and they recognize that the old Dell model with a highly efficient supply chain and build to order are no longer as compelling as a highly efficient Sales, Marketing organization which has a closely integrated contract manufacturer who's entire focus is on manufacturing and sourcing. This is truly adding value in the supply chain.

This will ensure Dell regains it's competitive advantage.

[Steven @ Sep 6th 2008 9:19AM]

This post means nothing. Does anyone even look at the financials of a company anymore? Dell is one of the few companies still building anything in the United States. Yes I'm sure they will have to move some manufacturing overseas, but in reality I see them just closing desktop plants, as very few desktops are even being bought anymore compared to laptops. This statement isn't about the consumer market as this blog entry states either, Dell only realizes roughly 6% of its $60B annual revenue from Consumer Sales. Not exactly enough revenue or margin to justify major changes.

[ncmach1 @ Sep 6th 2008 11:23AM]

Gawd, thats a photoshopped sign.