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.