September 5th, 2008
End of an era: Dell may dump its factories
Dell is reportedly trying to dump its manufacturing facilities across the globe in a turnabout that indicates it has no discernable edge in making PCs anymore.
According to the Wall Street Journal:
Dell has approached contract computer manufacturers with offers to sell the plants. One person briefed on the plan said he expects the company to sell most — and possibly all — of its factories “within the next 18 months.” Other factories could close, this person said. Dell would enter into agreements with the contract manufacturers to produce its PCs.
For a company that once used its supply chain as a weapon the move is stunning. It also shows how other companies–notably HP–emulated Dell’s model and squashed it. The message: There’s no future in selling direct and customizing custom PCs on the fly. And certainly Dell has hit the efficiency wall.
Today, Dell is a company with falling profit margins and high labor costs. The rub: It’s unclear whether contract equipment manufacturers would want to buy Dell’s manufacturing hubs. Do contract manufacturers really want to take on Dell’s capacity? It’s possible that Dell may have to do more dramatic layoffs to dress these factories up for a sale. Dell has facilities in Austin, Texas; Winston Salem, NC; Nashville, Tenn.; and additional factories in Ireland, Poland, China, Malaysia and India.
Dell’s move to outsource could give it an initial boost, but the bet going forward would be that the PC giant can navigate the retail sales channel well–something that’s not proven yet. HP, Apple and others rely heavily on contract manufacturers so it’s not like Dell can’t do it. But the move is the end of an era.
Also see: Dell’s Mini packs Ubuntu, XP; Vodafone to sell it
- Michael Dell: Telcos may subsidize netbooks to sell 3G
- Dell: Turnaround interuptus as share grab hurts net, margins
- Dell and Salesforce.com: So cozy they could merge (someday)
Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
| 09/05/08
