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Dell may be looking to sell its PC-making factories in an effort to shift to changes in the market for PCs, reports say. Dell's desktop computer factories are not considered the most cost-effective means for laptop manufacturing. But Dell's plans to sell the factories may be scuttled by the factories' locations in high labor cost markets and existing agreements with local governments.
(Reuters) - Dell Inc is trying to sell computer factories around the world in efforts to cut cost and improve profitability, the Wall Street Journal said.
In recent months, Dell has approached contract computer manufacturers with offers to sell the plants, the paper said, citing people familiar with the matter.
One person briefed on the plan told the Journal that he expects Dell to sell most, possibly all, of its factories "within the next 18 months".
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The most likely buyers of Dell's factories will be big contract manufacturers, most of which are based in Asia, the paper said.
Dell's factories were originally tailored for a PC market that was driven by corporate customers ordering large volumes of desktop PCs.
But over the past three years, growth has shifted to laptops sold to consumers at retail stores. Round Rock, Texas-based Dell has lagged behind competitors in coming up with a streamlined system to build portable PCs.
Dell could face several obstacles in selling its plants. Contract manufacturers may be hesitant to buy factories in places with high labor costs, like the United States, a person with knowledge of the talks told the Journal.
And some facilities could be encumbered by agreements with local governments. Dell's North Carolina plant, for example, received several million dollars of state and local tax incentives that are contingent on the factory meeting certain employment and local-investment goals by 2015.
Though Dell's plants are still regarded as efficient at churning out desktop PCs, within the industry, company-owned factories aren't considered the least expensive way to produce laptops.
Contract manufacturers can generally produce computers for less money because their entire operations are narrowly focused on finding efficiencies in manufacturing, as opposed to large firms like Dell, which must balance marketing and other considerations.
No one was available at Dell for immediate comment.
(Reporting by Sweta Singh in Bangalore; Editing by Sharon Lindores)
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