In an effort to save money, Dell intends to sell many of its factories–perhaps even all–within the next 18 months.
Once a critical component of Dell’s highly profitable business model, the factories now squeeze margins. Outsourcing production has become a much better way to manufacture computers–laptops in particular–which are growing at a much greater rate than desktop computers.
WSJ: The plan is the latest sign of changes in the global PC business, and the increasing pressure on Dell to improve its profitability. The Round Rock, Texas, company last week reported disappointing quarterly profit that helped send shares down more than 18%, and has been trying to reduce expenses since early last year. Dell, which led the industry in lean manufacturing approaches and build-to-order PC manufacturing, now finds itself lagging rivals in wringing the most savings by outsourcing operations to production partners.
Any factory sales are contingent on Dell finding buyers. The most likely candidates are big contract manufacturers — most of which are based in Asia — that may hope to get a bigger piece of Dell’s business. A company that purchases a Dell factory would likely be contracted to continue making computers there for Dell, said one person with knowledge of the talks.
Dell’s factories were originally tailored for a PC market that was driven by corporate customers ordering large volumes of desktop PCs. But over the past three years, growth has shifted to laptops sold to consumers at retail stores. Dell has lagged behind competitors in coming up with a streamlined system to build portable PCs.
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