John Paczkowski

Recent Posts by John Paczkowski

Course, You Could Just Shut the Company Down and Give the Money Back to the Shareholders

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What would I do? I’d shut it down and give the money back to the shareholders.”

Michael Dell on what he would do if he were CEO of Apple (AAPL), circa 1997

When Dell (DELL) missed Wall Street’s profit expectations last week, the company’s leadership spoke little about its plans to improve profitability, saying only that there is “much more work to do.” Well, turns out that “much more work to do” is actually a euphemism for “we still have to sell off our factories to contract manufacturers.” Faced with falling margins, Dell is hoping to cut costs by selling sell most–if not all–of its plants within the next 18 months. Why? From The Wall Street Journal:

Dell’s plants are still regarded as efficient at churning out desktop PCs. But within the industry, company-owned factories aren’t considered the least expensive way to produce laptops, which have been the main driver of growth lately and are complex and labor-intensive to assemble. Rivals such as Hewlett-Packard Co. years ago shifted to contract manufacturers–H-P builds less than half of its PCs in facilities it owns.”

Interesting. So Dell’s factories, while “efficient,” are expensive. Or rather, they’re more expensive to run than those run by foreign contract manufacturers whose operations are laser-focused on finding “efficiencies in manufacturing,” i.e., employee wages.

I guess if you’ve already outsourced your tech support to India, you might as well outsource your manufacturing to China, right?