Dell Looking To Sell Some Factories?

The Wall Street Journal

Dell has approached contract manufacturers with offers to sell the plants, according to the newspaper. Dell reportedly would like to sell the plants within 18 months and then contract with the buyers to produce Dell's PCs.

A Dell spokesman said the company would not comment on the possibility of selling its warehouses, adding only, "I can tell you we are designing a world-class supply chain that will position Dell for long-term success."

The Journal report comes a week after Dell reported a 17 percent decline in net income, blaming tighter corporate spending in the U.S. Earnings fell to $616 million, or 31 cents per share, compared with earnings of $746 million, or 33 cents per share, in the year-ago quarter.

The sale of its factories would be a milestone change in Dell's business model, which has built a legacy of strong manufacturing skills for its build-to-order direct PC business. But even that model has changed over the last year as the company has sought to recruit thousands of solution provider partners to resell its products and services as well as sell its PCs through retailers such as Best Buy and Costco.

Most PC and server makers hire contract manufacturers to build at least some of their machines, particularly in Asia. For Dell, machines are often partially built overseas and shipped to the U.S. where they are finished, depending on a buyer's configuration.

In the U.S., Dell has a unique model for handling some of its components. The parts sit in pallets on trucks outside the company's warehouses until a part is needed for an order, said Bob Venero, CEO of FutureTech, a Holbrook, N.Y.-based solution provider who has toured Dell's headquarters. Dell does not take ownership of the components in the trucks until an order is secured, and the part then comes off the truck, Venero said.

"It was impressive. The inventory is not on their financials. And when it comes off the truck, it goes out the next day. We went to three distributors to create something similar with them. It's taken my inventory turns way down," Venero told Everything Channel earlier this year.

Dell owns factories in Texas, Tennessee, North Carolina, Florida, Ireland, India, China, Brazil, Malaysia and Poland, according to the Journal. It's unclear which warehouses the company may look to sell.

Shares of Dell were trading at $20.63 Friday morning, up 27 cents, or 1.3 percent.