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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 reviewed every election cycle. CEO compensation is negotiated by the prospective CEO and the board, but doesn't become contract unless approved by popular vote of the shareholders.

The top level management of publicly traded companies is a shining example of the very best democratic processes can offer.


So wait...
By Spivonious on 9/5/2008 12:37:12 PM , Rating: 2
Their tech support is in India, and they build the machines in China...so remind me again why this is a U.S. company?




RE: So wait...
By JoshuaBuss on 9/5/2008 12:41:38 PM , Rating: 5
because it's like every other US company?

</only slight sarcasm>


RE: So wait...
By sprockkets on 9/5/2008 6:24:34 PM , Rating: 2
yeah, and people wonder how a $350 netbook came into existence, or why no one here in the states can be in the business of making computers, since none can make them cheaper than the Big OEMs. Worse yet, most now won't even pay to have their computers fixed cause it will simply be cheaper to get a new one.

Thanks China, for screwing everyone! Wait, no, we all did, cause we love cheap crap!

Soon the only people working for Dell will be the CEO and shareholders. The rest of their workers, save for a few, will be overseas.

Well, at least my music player, a Cowon D2, was made by a Korean company in Korea. Apple and the ipod? Proud to be designed by Califorians and Made in China by Foxconn. Same goes for Netgear. Proud to be designed in California.

Don't get me wrong, they do make good stuff if you want them to. But I find it a bit sad that companies like Hunter and Levi's, both very old US companies, can no longer make a buck without shutting down their US factories.


RE: So wait...
By Penti on 9/6/2008 9:23:18 PM , Rating: 2
Well they source from the Taiwanese ODMs who designed there products in the first place, it just happens that those firms are major employers and investors in China.

They do a better job then the EMS companies in the western world so why would any body use those? The computer companies where never hardware or more accurately manufacturing companies to begin with, what has changed is just that the ODMs own brands has grown stronger.

And talking about selling of factories is just the final assembly plants, they for the most time doesn't manufacture parts at all.

The OEMs assemble PC desktops all around the world, however they doesn't sell in higher numbers then notebooks now and notebooks are pretty much always assembled in connection to the manufacturing plant itself.

I mean Dell has 88k employees why wouldn't they take the help from Foxconn which employs 0.7 million people world wide and has manufacturing facilities (assembly plants) in places like Mexico, Czech republic, Hungary and not only in Taiwan, China and Asia. Why wouldn't Apple which got like 20k employees use Quanta, Asustek and Foxconn which basically design there products in the first place.

I think the Californian IT-companies does great, after all there is none American or European ODM firms to go too.

It's the same with the fabless semiconductor companies, they go to foundries such as TSMC in Taiwan because they do a great job. I think IBMs foundry in East Fishkill is great, but they just don't cut it for many customers. And most companies just can't build there own semiconductor production facilities. Same goes to the PC builders, the Taiwanese ODMs got thousands of engineers and hundreds of thousands of workers. The PC builders has to focus on what they are good at, selling systems, support and services basically. And it's the same in Asia, the small guys making electronics has been killed by the big ODMs. Because of the low profits they can make per unit. The California companies still provide value to the world of IT and that's why they will continue to exist.

The world of clothes is a bit different though, they didn't really move to third world countries to get better products and higher volumes. The textile companies just stopped investing when they got in to problems basically, they where the companies that never dealt with the bad working environment on the workplaces at least here in Sweden. They basically just move there problems to other countries. I don't really think that's the case with electronics. Korea, Japan, Malaysia, Singapore and Taiwan grew successful on such business. And that's why those taiwanese and korean firms even can invest in former eastern european countries. I hardly think we will see textile manufacturers beginning to invest in Europe.


RE: So wait...
By 67STANG on 9/5/2008 1:09:52 PM , Rating: 2
Actually, their Tech support is now in the U.S. (after a ton of complaints from people thinking they had mistakenly called their local 7-11). Unfortunately, Microsoft's tech support is now coming from India.

The savings for Dell is probably 2-fold now. As nearly all ( if not all ) PC components are made in Asia, they are saving a bundle on importing the components.


RE: So wait...
By Chadder007 on 9/5/2008 1:46:39 PM , Rating: 3
So when gas goes up even higher....they will have to move the assembly plants back to the U.S. because shipping from China will start costing too much.
Brilliant.


RE: So wait...
By arazok on 9/5/2008 2:22:15 PM , Rating: 3
quote:
So when gas goes up even higher


The trend is down.


RE: So wait...
By headbox on 9/5/08, Rating: 0
RE: So wait...
By chick0n on 9/5/08, Rating: -1
RE: So wait...
By The0ne on 9/5/2008 2:46:42 PM , Rating: 3
Not entirely. You will get service from India once in a while. It's not hard to tell with the background chit chats :) I limited my purchases from Dell solely because of the horrible services I've received in the past 2 years alone. There were some great CS's but the majority of them just either didn't understand the situation or just did deliver on their promise. Getting charge for 3 laptop is not a fun thing to have to do...or pay up.


RE: So wait...
By zonkie on 9/5/2008 6:05:14 PM , Rating: 2
After 10 calls and as many hours the last week I can confirm tech support is in India. You get US tech support only if you pay $99 a year for Your Tech Team.


RE: So wait...
By ImSpartacus on 9/6/2008 12:03:05 AM , Rating: 2
No. I have gotten both. If you call at the correct US working hours and require XPS help then you can get an American (I got a nice 20ish old guy that obviously gamed and built PC's).

But their normal service (and sometimes the XPS service) is over seas and totally pitiful (I fixed my own damn bios problem while she wanted to replace my goddamn harddrives).


RE: So wait...
By Sazar on 9/5/2008 5:36:37 PM , Rating: 2
The HQ is in Round Rock, Texas where tens of thousands of people are located (Round Rock and Austin). There is also a manufacturing plant in Texas and in NC and one other US location.

The company is a global company and as such has centers all over the world for support/manufacturing.


How Dell can increase profit.
By brickd007 on 9/5/2008 12:08:20 PM , Rating: 2
Bring back the Dell Dude




RE: How Dell can increase profit.
By amanojaku on 9/5/2008 12:10:08 PM , Rating: 2
He's too busy smoking mota, dude.


RE: How Dell can increase profit.
By Staples on 9/5/2008 12:20:09 PM , Rating: 3
Dude!!!!

It's a Dell.


RE: How Dell can increase profit.
By amanojaku on 9/5/2008 12:21:56 PM , Rating: 5
That's what he told the cops. :-D


RE: How Dell can increase profit.
By daftrok on 9/5/2008 12:29:55 PM , Rating: 2
By Polynikes on 9/5/2008 3:08:33 PM , Rating: 2
Pentium 3? Wow, I forgot how old those ads were.


Punish them
By JimCouch on 9/5/2008 3:54:18 PM , Rating: 2
I say we punish them for bailing out on the USA. Stop buy their products and preasure your representitive to take benefits away from corporations that take jobs away from the USA and favor or grant benefits to those that create jobs here.

We the people do have the power. Vote and raise hell.




RE: Punish them
By 9nails on 9/5/2008 11:54:54 PM , Rating: 2
Already there buddy! I've had to upgrade a many Dell PC's in my time and have seen odd power supplies, systems with no hard drive expansion, and limited RAM slots. IMHO if Dell had a quality computer, these systems would have been upgradable. I've built whitebox PC's hundreds cheaper and with better components than Dell.

I tried to purchase my first Dell notebook for my sister-in-law way back. She ordered on-line, but then had to call customer support to pay. The first credit card declined over-the-limit because she didn't anticipate the expensive shipping costs, but customer support never called her back to inform her. She called them back a few days later to check the status to learn this. She split the costs over two cards with customer support on the phone. They ended up charging just one card, and it declined again. A day later she went to Best Buy and came home with a Toshiba with higher spec's and lower cost.

I bought a Dell notebook for my kids from the factory refurbished Dell outlet. I thought that I was getting a sweet deal, what I ended up with was a laptop that needed to be opened up again and have the internal wireless card reseated and the antenna plugged in.

My last (and final) dealing with Dell was just recently trying to purchase a buy-one get one half-off deal. I ordered on-line on the weekend and wanted to use my Dell charge account from my order above, but couldn't find my account number. My wife called their customer support, spoke with a lady from India, and got no where. This lady was useless, blamed the problem on some other department and wanted to misdirect us at every step. She eventually blind transferred us to a closed department! When we called back, we asked her for a supervisor, and she hung up on us.


RE: Punish them
By akosixiv on 9/6/2008 7:13:17 PM , Rating: 2
You do that and when they place their manufacturing and services back into the U.S. we end up paying for 3x more the price.

Labor here cost's what at least 15 dollars a month. For a semi-skilled individual. Thats 15 dollars a day for a university graduate with experience in india. The companies even get a tax break when they place a large business like that there.

I don't think that your idea would work just as is. The way corporations and labor costs are setup. Something has to give way. Either you want it cheap or you want it to be in the U.S.


RE: Punish them
By akosixiv on 9/6/2008 7:14:24 PM , Rating: 2
sorry.. that's 15 dollars and hour. for the US.

we really need an edit button.


...proof is in the pudding,
By Hafgrim on 9/5/08, Rating: 0
RE: ...proof is in the pudding,
By Parhel on 9/5/2008 1:22:26 PM , Rating: 4
OK, I just read the article you linked to and I don't see what the fuss is about. Any nVidia motherboard would behave the same way. Yes, it looks like Dell made some claims that weren't true. But I'd bet those claims came straight from nVidia and if you dug through the promotional material you I'd bet that you would find very similar statements made on many other products.

It reminds me of my experience with the nVidia firewall on my old Asus A8N-SLI, which would blue screen XP unless it was disabled in the BIOS and the nForce drivers were uninstalled.

This guy's minor gripe about a niche product is hardly evidence of a company who is "never coming back." If anything, this illustrates why so many of us enthusiasts build our own boxes. If you want to buy 1,000 PCs for the office, however, Dell does a decent job.


I remember when HP kinda did this.
By prenox on 9/5/2008 1:18:58 PM , Rating: 2
HP outsourced their pc manufactoring to Foxconn like this and quality dropped from 100%. They don't care much about quality because its not their name on the machine. This will probably hurt Dell more than keeping them. Of course if they only employ temps to build already it probably won't make much of a difference.




By intogamer on 9/6/2008 7:17:35 AM , Rating: 2
Foxconn assembles Apple products also.


Dell has factories?
By tcunning on 9/5/2008 4:45:28 PM , Rating: 2
Seriously, I didn't know they actually made (i.e. screwed together) anything themselves anymore. I haven't seen anything with a "Made in USA" label coming out of Dell in many a year, so I doubt this will have much effect on US workers.




RE: Dell has factories?
By Penti on 9/6/2008 9:41:46 PM , Rating: 2
Stuff like Dells monitors are assembled in China, Malaysia and Czech republic. They probably do assemble most desktop systems in the US though. Not sure if they clue on a made in US sticker on there notebooks as I don't even live there.


By USWorkerLosesAgain on 9/6/2008 6:22:03 AM , Rating: 2
The higher costs to America is supporting corporations like Dell...that don't employ American Workers here. High costs of labor in America? Sorry Dell, we did away with Slavery years ago but, Asia still has it going strong there! Your profits will be through the roof but, I'm not buying one of your Asian-made pieces of crap. I support the American Worker and if ALL the PCs end up being made outside the country well, I won't be using the PC anymore! PC's have become the new "ankle bracelet" for tracking the individual American anyway....

"I still have ONE powerful Right...the Right not to Buy products that don't support American Workers!" I suggest that every American think about the "treasonous acts" they are party to, when they buy foreign products!

Oh, and Comcast can stick their "Power Boost" and data discrimination policies up their Communistic butts! MOST of the highest volume data hogs are not Bittorrents users...it's the Porn Industry! But, the Porn Industry has made the Internet Dell, Comcast,etc., the Corporations that they are today! It certainly wasn't the viewing of "Corporate Mission Statements" that pushed Internet speed requirements and (billion dollar technology investments) to fiber optics levels of performance! Guys wanted to be able to see high quality video of beautiful, naked women and women wanted to see guys hung like horses!

DELL can go to HELL!




By akosixiv on 9/6/2008 7:16:14 PM , Rating: 2
you'd have to give up more than just your computer. Most things are now made outside of the U.S.


Or... they could just not suck
By Comdrpopnfresh on 9/5/2008 2:00:13 PM , Rating: 1
There is such a disparity in dell's pricing it is crazy. Sometimes if you start with a lower or higher model in a lineup, and customize it alongside another higher/lower model, you can end at the same hardware configuration, but a difference in price.
They don't offer anything cutting edge, and charge absurd prices for the smallest updates- like 4 gigs of ram up from 1 costing hundreds of dollars, even above the cost of the hardware alone.
I don't get why they 'have' to do this. They make profit on every part they put into the computer, the computers themselves, and any tech support they sell. The only thing this move does is increase profits for US execs, and cut jobs for US citizens.

I wasn't going to buy a dell before, frankly, because I find it pitiful to pay so much for a system a 10 year old could put together. I'm certainly as hell not going to get one now.
Good thing my folks still have an old red ryder in the attic- so I can have something to show my future kids that America used to actually make things, rather than come up with ideas to take advantage of growing international economies, and sell inferior products.




By intogamer on 9/6/2008 7:29:10 AM , Rating: 2
I agree. Majority of companies have crapful solutions for customers. Everything is dysfunction from payment solutions, customer service, distribution, assembly. Profits are found and made in an inefficient manner.

I'm not pro Apple, but take a look at them. Components are bought in bulk and assembled by contractors. There aren't a load of different configuration, it is kept very simplistic. Distribution is very efficient as pricing is fixed and everyone receives equal priority in processing. Whereas you'll need to fight tooth and nail to get something done. 1-Year warranty that is painless to get fixed and backed by an OS that 'just works' = people willing to pay the 35% margins


Dell needs to grow up
By mpjesse on 9/5/2008 4:04:41 PM , Rating: 2
Dell needs to quit acting like some 5th year computer start up. Selling off all its factories because quarterly profit dropped serves only one purpose: pacifying Wall Street. Let's take Wal-Mart for example. Though they've had a strong year (relatively speaking), they've had a few rocky years (in terms of revenue and profit growth). But did you see Wal-Mart closing stores, laying off workers, or doing anything else drastic? Of course not. Wal-Mart learned a long, long time ago that keeping Wall Street happy is impossible. If Dell wants to run with the big boys it needs to act like one and push the bully that is Wall Street down. Michael Dell seems hell bent on getting back the good graces of Wall Street; in doing so he may ostracize the fundementals of big business.

If I'm Michael Dell I say screw Wall Street and I keep my factories.




Dell acronym for..
By excrucio on 9/5/2008 11:25:06 PM , Rating: 2
Don't Expect Long Life

3 years of experience with computers working at a computer store, and seriously Dell are cheap and very affordable. But in the end it will break 2 weeks after warranty so you can spend an extra amount to fix it. Unless you know your shait.




Instead of losing more money. . .
By madoka on 9/6/2008 12:03:24 PM , Rating: 2
maybe he should take his own advice he gave to Apple and "shut it down and give the money back to the shareholders."




Outsource argument
By iNGEN on 9/7/2008 12:02:28 PM , Rating: 2
Disintegration makes perfect sense for up-chain processes that require some specialized skill, management expertise, protected IP, or capital resources a company just doesn't possess. None of which are true in this case. The capital is sunk, the yields are good, there's no competitive disadvantage in IP, and Dell has been effectively managing these factories for years.

Companies do it all the time, and it is always cited as a cost saving measure. Given the above, however, I can't figure out how a company can take a non-revenue generating activity, whose only continuing expenses are operating & maintenance costs, sell it to another company then purchase the output back from the buyer, who must reamortize the capital investment across output, expense conversion losses, add a profit margin, and expect the marginal cost of output to be lower.

I hope Dell has particular use targeted for the capital liberated by the divesture. From a pure operating cost standpoint, this strategy didn't work for GM, IBM, Chyrsler, or Motorola. What makes Michael Dell think Dell is so different?




An intoxicating kick
By barenuckledladdie on 9/7/2008 8:07:17 PM , Rating: 2
Dell’s decision to sell its factories is no different than the individual who leaves his job because it’s just not feeding his family. Don’t get lost in the whining and ranting. It’s not Michael Dell personally, but a corporation named Dell. Corporations, like individuals, exist to turn a profit.

I do think it showcases the extreme shortsightedness of American business. Immediately after its twenty year anniversary the company has been in a fiery downward spiral. It modified its direct model to include retail. That was a bit more public than when the company decided to outsource its laptops to contract manufacturing. Even prior to these changes the company decided to outsource its Return-To-Vendor operations. Then came the decision to shut down Parmer North Two facility. A few months later those same employees and the entire Dell company learned of the decision to sell all factories.

Dell’s labor cost challenges are not unique. What has hit Dell, and many other companies, is something Dell will continue to hang on the company long after it rids itself of its factories: debt. Although the company has always touted its fat bank account it maintained a pretty fat “loan” debt in the form of shareholders. Unlike conventional business loans the shareholder’s return on investment obligation owed by the corporation continues to grow (just like labor costs). How many times have we seen the big and the biggest crumble under the debacling effect of debt? Where was all the executive business savy and prowess when these things were unfolding before their eyes. Oh, I remember now. It went out the door with the ousted executives with wallets fattened by hundred million dollar severance packages. When a company could have bought back outstanding shares as soon as possible it became an intoxicating kick to operate a extremely profitable business with other people’s money. But, that ride comes to an end, eventually.




By foolsdontgetit on 9/8/2008 9:22:31 PM , Rating: 2
It does not surprise me Dell is on a path to sell its factories. LOOK if dollars, profit, and stockholders are more important than what defines America or invented there as an American Instituion, I wonder in time will the big industry herein The USA be yard sales? There seems to be a disconnect in the business world what is good for the company vs the value of keeping American Industry intact.

These big companies make deals that the average American has no knowledge. We as innocent Americans buy products and assume they are American brands. Walk through a typical electronic store and see great American Brands like RCA.
The myth is many socalled famous American brands are no more as they say just window dressing.

It was 1986 I remember this vividly GE the light bulb people decided to devour RCA. They GE did and in reality that was the start of America loosing its own brand and identity. RCA sold the electronics division to The French a company called Thompson Products. The music division was sold to The Germans. Yet the name RCA as an American instition was kept in tact. People continued to buy RCA thinking it was all American and it was not. The quality of the product went downhill and soon foreign companies were making more products than America.

What is even worse within the last 2 years RCA that was bought by the French turned and sold that company to of all people THE RED CHINESE interesting. So now RCA is stil got the same name sure won't see any Chinese letters to confuse buyers. The same can happen for Dell once the firesale takes place don't be surprised where all that company end up being owned. Did you know today IBM personal computer division is owned by The Red Chinese? duh!

It is sad no one cares about what is American and the fact in time we as a nation will go down the tubes due to pure greed!

Oh
foolsdontgetit




"Well, there may be a reason why they call them 'Mac' trucks! Windows machines will not be trucks." -- Microsoft CEO Steve Ballmer

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