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Dell CEO Michael Dell  (Source: mspmentor.net)
Dell will contract with PC builders in Asia after selling its own factories

Michael Dell and his namesake computer firm blazed new trails in PC distribution early on by selling direct to customers, rather than selling through retail. This system allowed Dell to reap more profit that competitors at the time.

As the computer industry changed, Dell's once strong sales method began to flounder and eventually Dell had to go to retail channels to increase its market share. While selling through retail outlets helped Dell crawl out of the hole its direct sales methods were digging -- it wasn't enough.

Dell has announced that it is trying to sell its computer building factories around the world in an attempt to cut its manufacturing costs. The Wall Street Journal reports that Dell hopes to sell its factories in the next 18 months. Dell could also close other factories, as it already did in Texas.

The announcement that Dell wants to sell its factories comes on the heels of disappointing quarterly profits leading to a sharp drop in Dell's stock price. Dell reported an increase in quarterly sales, but quarterly profits dropped. The drop in profits in the face of increased sales is linked to stiff competition on price in the computer industry -- particularly in Europe.

The Wall Street Journal reports that the most likely buyers of Dell factories would be the large contract PC builders in Asia. The sales of factories by Dell would require the company to use contract builders for its PCs, most likely from the buyers of its factories.

Dell could see problems in selling its factories -- particularly ones in the U.S. -- where labor costs are much higher than factories abroad in general. Another potential issue for the sale of Dell factories according to the Wall Street Journal is that some of its factories -- like the one in North Carolina --received state and local incentives to the tune of several million dollars that require Dell to meet specific criteria by 2015.

The sale of Dell computer plants is yet another move to reduce Dell's operating expenses by $3 billion over the next three years as stated by Dell CEO, Michael Dell.

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God forbid
By FITCamaro on 9/5/2008 12:19:30 PM , Rating: 5
Their profits not rise. Whatever happened to companies being loyal to employees. As long as you're making a profit and are able to reinvest in your business to improve it, you should be happy.




RE: God forbid
By Staples on 9/5/2008 12:23:12 PM , Rating: 5
Dell has had a complex since it became number 2. They will do everything they can to regain that position. Screwing employees is just one of them.


RE: God forbid
By Radnor on 9/5/2008 12:39:51 PM , Rating: 3
I see that. Oh well. They all following the same path. Acer, never had a fab, or a call center or whatever. Everything is outsourced.

Might be the way the business is rolling. Anyway, im glad i built my own. Ill keep doing it.


RE: God forbid
By polaris2k4 on 9/5/2008 12:43:34 PM , Rating: 3
But a company also have a responsibility to its' shareholders and creating as much value in the company by reducing costs is just part of that.

You can't keep expensive operations running when there are cheaper alternatives. A company cannot be happy by "just getting by". In the long run that just undermines the whole company by letting competitors who eat you up. By then it won't just be the people in the factories that you closed thats out of a job, its your whole organization.


RE: God forbid
By kelmon on 9/6/2008 5:37:24 AM , Rating: 1
Quite correct. Unless all other companies take the same position, Dell would be putting itself at a disadvantage relative to other companies that are striving to improve profits and therefore delivering value to their shareholders. Unhappy shareholders can not only eject the current board from their positions but also take their money some place else where it will earn a higher rate of return.

I can agree that this is somewhat damning of society that we value money over welfare but it is the way things are. Dell needs to drive down costs if it wants to compete in the market. I hate to mention the "A" word but despite much lower sales Apple manages to generate a much greater overall profit than Dell. This is the sort of thing that Dell's shareholders are going to look at. This is another reason why, frankly, market share really isn't that important.


RE: God forbid
By justwanttobeheard on 9/7/2008 9:34:54 AM , Rating: 2
Hang on....then how is Jerry Yang still at the head of Yahoo? I suppose, there is one exception to every rule (being worth 3 billion does not hurt I suppose)


RE: God forbid
By kelmon on 9/7/2008 2:10:24 PM , Rating: 2
Indeed, I think there is a lot of people asking themselves that question. That said, with the share price in free-fall, it is perhaps possible that shareholders recognise that Yahoo! is a lame duck and that it wouldn't matter how was at the helm. Regardless, it is clear that Yahoo! shareholders are taking their money elsewhere and I don't think anyone would blame them.


RE: God forbid
By masher2 (blog) on 9/5/2008 2:19:40 PM , Rating: 3
> "Whatever happened to companies being loyal to employees"

They're generally a lot more loyal than employees are to their employer. If any worker ever turned down a better deal, it was only because they were too lazy to move.

The last time my corporation had to lay people off, they not only received three months notice, they received a layoff package that equated to half a year's salary. But when anyone quits, they're out the door right away, sometimes without even their two weeks notice.

As for scoffing at attention to profits, a company that is losing money is destroying wealth, assets, and resources. More so than any other factor, fiduciary responsibility to seek higher profits has made the US the strongest, wealthiest nation on Earth. God forbid it ever change.


RE: God forbid
By gramboh on 9/6/2008 5:39:13 PM , Rating: 2
Bang on masher and the other posters. FITCamaro, you are always posting typical right wing rantings on DailyTech, but then when it comes to an issue like this, you whine about one of the core underpinnings of a free market. Hypocrite.


RE: God forbid
By Penti on 9/6/2008 9:29:03 PM , Rating: 2
Basically people did work them selfs to death in the developed world just a few years ago before all those places with bad working environment shut down, if that's not loyalty to the employer I don't know what is. The employees where promised investments on the work environment which they never got, they just ended up exporting the problems.


RE: God forbid
By Springfield45 on 9/7/2008 12:30:47 AM , Rating: 2
Right on, masher2.
I wish more people had a basic understanding of business and economics.


RE: God forbid
By codeThug on 9/5/2008 2:38:27 PM , Rating: 2
quote:
Whatever happened to companies being loyal to employees.

Where have you been the past 3 decades?


RE: God forbid
By Spuke on 9/5/2008 3:30:41 PM , Rating: 2
quote:
Where have you been the past 3 decades?
Definitely not working at your company. Not all of us work at Top 10 Best Companies to Work For. Lots of us work for crappy places. And, yes, I'm exercising my right to leave as soon as possible. But I won't f&%k over my co-workers nor my managers by bailing without at least a two week notice (something my company sure as hell wouldn't do for me).


RE: God forbid
By flydian on 9/5/2008 9:40:54 PM , Rating: 2
Sadly, I've been in similar places over the past 10 years. Every one of them has laid people off at some point while I was there (twice I was included). In EVERY case, the employees were given less than 8 hours notice. Basically, they show up for work one day, have a little meeting, and are told "By the way, we're cutting back, and today is your last day."

I would guess it's because they don't want some crazy person to plot revenge or whatever. But still...Notice? Severance? BUAHAHA! IF the company offered insurance, they would get that option to continue it (by law), that was the only severance I ever saw. Heck, one place even cut people with 100+ hours of unused vacation time that the company refused to pay.

Yea, the American company cares about the worker all right. As long as they keep their heads down and and their mouths shut.


RE: God forbid
By TSS on 9/5/2008 6:53:11 PM , Rating: 1
company's are controlled by stockholders who want *more* money. no amount, just *more*. and the prices of stocks is set at the stockmarket.

in the news i've seen various company's pass by of which the stock went down, not because they didn't make a profit, not because they didn't exceed their profits of last year, not because the profit they did make was criminally high, but because the profit they made wasn't as high as the analysts predicted.

don't worry though. this is a normal process of kapitalism. the richest get richer the poorest get poorer untill there's a revolution/finanical event that resets the whole thing. thats why the fall of the dollar had everybody so freaked out, if it had dropped more it woulda triggered the reset.


RE: God forbid
By Spuke on 9/5/2008 7:02:51 PM , Rating: 2
quote:
why the fall of the dollar had everybody so freaked out, if it had dropped more it woulda triggered the reset.
I guess you were out smoking on that day in history class. The dollar falling is nothing new. It's happened numerous times. Wall Street types ALWAYS freak out when money is lost. That's what they do.


RE: God forbid
By MamiyaOtaru on 9/7/2008 3:15:27 AM , Rating: 2
too much Fight Club?


RE: God forbid
By lagomorpha on 9/6/2008 2:13:22 AM , Rating: 2
"Whatever happened to companies being loyal to employees. As long as you're making a profit and are able to reinvest in your business to improve it, you should be happy."

See Dodge v. Ford Motor Company:
http://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_C...
"The Court held that a business corporation is organized primarily for the profit of the stockholders, as opposed to the community or its employees. The discretion of the directors is to be exercised in the choice of means to attain that end, and does not extend to the reduction of profits or the nondistribution of profits among stockholders in order to benefit the public, making the profits of the stockholders incidental thereto."

If it cuts into profits then loyalty to employees is illegal.


RE: God forbid
By 1prophet on 9/6/2008 2:39:30 PM , Rating: 2
Except when it comes to the CEO and their buddies on the board, as long as they get theirs, screw the stockholders, customers, and employees, they run the company into the ground and still get the golden parachute and whatever other bonuses and perks they worked out in some backroom.


RE: God forbid
By gramboh on 9/6/2008 5:45:01 PM , Rating: 3
That would be a breach of fiduciary duty or a fraud which would put said officers/directors at risk of lawsuits for negligence. Sure, top execs make an insane amount of money, even in bad performance years, but their roles do carry a lot of responsibility and risk.


RE: God forbid
By iNGEN on 9/7/2008 11:48:38 AM , Rating: 2
quote:
Except when it comes to the CEO and their buddies on the board, as long as they get theirs, screw the stockholders


There's no back room, 1prophet. In the overwhelming majority of publicly traded companies board member compensation is determined by popular vote of shareholders and review