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Dell to sell all manufacturing plants

Dell Inc is seeking to sell all of its manufacturing plants worldwide and has approached contract computer manufacturers, the Wall Street Journal reported yesterday, citing people familiar with the matter.

The proposed factory sales, intended to slash costs, mark a significant shift from Dell’s long-standing strategy of making its own products, the Journal said. Instead, Dell plans to have contract manufacturers make all its computers, the paper reported.

Dell, the world’s No. 2 maker of personal computers, is seeking to raise profitability after reporting earnings that missed analysts’ estimates as it cut prices to take market share from industry leader Hewlett-Packard Co. Selling its production sites to focus on sales and marketing may aid efforts by the Round Rock, Texas-based company to expand its product range.

“As the company moves away from its direct sales business model, it needs to offer a wider range of products and respond more quickly to market demand,” said Wang Wanli (王萬里), a technology analyst at HSBC Holdings Plc in Taipei. “Outsourcing production to third-party manufacturers will help them become more flexible.”

Dell would ensure that any contract manufacturer who purchased a factory would agree to make hardware for the company, the Journal report said.

Dell may sell all of its plants within 18 months, the Journal said.

Dell last week reported fiscal second-quarter profit fell 17 percent to US$616 million, missing analysts’ estimates, as profit margins shrank after price cuts.

Last month, Dell introduced new notebooks with longer battery life aimed at business users. The company also started selling a slimmer laptop weighing 1kg after Hewlett-Packard offered a similar model in June.

Dell, which last year abandoned selling PCs only via telephone and the Internet, has forged agreements to sell its computers through retailers including Wal-Mart Stores Inc in the US, Gome Electrical Appliance Holdings Ltd in China, Carrefour SA in Europe, Bic Camera Inc in Japan and the Croma chain of electronics stores of India’s Tata group.

The company increased PC shipments 21 percent in the quarter ended June 30, compared with Hewlett-Packard’s 17 percent, and 15 percent for the market overall, research company IDC said.

The second-ranked PC maker cut prices by an average of 7 percent in the three months ended Aug. 1, as competition intensified, it said in a regulatory filing on Thursday.

Suppliers including Hon Hai Precision Industry Co (鴻海精密), Compal Electronics Inc (仁寶電腦) and Quanta Computer Inc (廣達電腦) will benefit from higher orders if Dell sells its own production facilities, HSBC’s Wang said.

Hon Hai hasn’t had any discussions with Dell to buy the company’s facilities, Edmund Ding (丁祈安) spokesman for the Taipei-based company said by phone yesterday.

Elton Yang (楊俊烈) and Carol Hsu (許昭瑾), spokesmen for Taoyuan-based Quanta, the world’s largest notebook maker and a supplier to Dell, didn’t answer calls.
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