Course, You Could Just Shut the Company Down and Give the Money Back to the Shareholders
by John Paczkowski
Posted on September 5, 2008 at 10:07 AM PT
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?
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Comments
Dell produces nothing but flavorless boxes which look exactly like the other flavorless boxes. What’s the hook?
Just proves that selling to enterprises allows a company to become really lazy, and it doesn’t exactly promote continuous improvement of the user experience. Apple and Google are doing it exactly the opposite way. By making products that are fresh, relevant, and pleasing to individual customers, the enterprises will come knocking.
Perhaps Dell and Microsoft need to take a long walk on the beach together to see what’s next.
Posted by Tim Moser at September 5th, 2008 at 10:44 amZimbra …
Dell machines are partially built in a plant in Asia and then shipped to one of Dell’s own plants for completion. Dell has plants in Texas, Tennessee, North Carolina, Florida, Ireland, India, China, Brazil and Malaysia , which you mentioned.
Posted by John Paczkowski at September 5th, 2008 at 3:29 pmAccording to an article in ValleyWag, “Thanks to rising fuel prices and wage inflation in China, it’s actually more expensive to manufacture and ship electronics across the Pacific for the American market than it would be to produce them domestically, according to a report from The McKinsey Quarterly.”
Great timing Dell. Why is it that in a couple of years I suspect that you’re going to wish you’d kept those factories?
Posted by Michael Long at September 5th, 2008 at 3:35 pmIt would be nice just once to see a company that could make a profit, satisfy its stock holders and keep their interests completely in America. I’m afraid that if this trend continues we will be the victims of our own greed.
I truly believe with these elections for President that yes, change is in the air but, also we are on the threshold of a new surge of pride in the “United” States of America.
Those who have sold out to foreign interests as the oil industry has, will probably face a similar demise that looms in their near future as the world changes because of the emergence of the new foreign companies as they gain wealth and power in the world market.
Posted by Bill Collier at September 6th, 2008 at 5:19 pmPut Pride back in America for our children’s future.
activeinspiration@wordpress.com
They have to make computers cheaper. Without manufacturing jobs, and fewer students going to engineering schools, and government cuts in R&D, and everything else going on in this economy, we don’t have time to say “Dude, you’re getting a Dell.” We’re going to be too busy saying, “You want fries with that?”
Posted by Eric Welch at September 8th, 2008 at 10:16 am