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Report: Dell is considering sale of plants, including Forsyth

Fri. September 05, 2008; Posted: 07:52 PM
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Sep 05, 2008 (Winston-Salem Journal - McClatchy-Tribune News Service via COMTEX) -- DELL | Quote | Chart | News | PowerRating -- Sep. 5--Dell Inc. may be considering selling some or all of its manufacturing plants, including the one it opened in October 2005 in Forsyth County, as part of its intensified effort to cut expenses, the Wall Street Journal reported today.

Dell reported on Aug. 28 that it had a 17 percent decrease in net income to $616 million in the second quarter, primarily due to lower prices and restructuring charges. Dell also said at that time it had cut 8,500 of the 8,900 jobs it had planned to eliminate as part of its consolidation effort.

Dell officials could not be reached for immediate comment.

The article said that Dell has talked with computer manufacturers in Asia that could either buy the plants or operate them for Dell on a contract basis.

The Wall Street Journal reported that Dell is considering radically altering its quick-ship, made-to-order strategy because it is considered no longer as competitive. Dell announced in March that it was closing a desktop computer plant in Austin, Texas, which will eliminate 900 jobs.

"One person briefed on the plan said he expects the company to sell most -- and possibly all -- of its factories 'within the next 18 months,' " according to the Wall Street Journal article.

"Other factories could close, this person said. Dell would enter into agreements with the contract manufacturers to produce its PCs. A company that purchases a Dell factory would likely be contracted to continue making computers there for Dell, said one person with knowledge of the talks."

Dell has about 1,150 employees at the Forsyth plant where it assembles desktop computers for business and individual customers. That work force that has been relatively stable for close to 1 1/2 years.

It is not clear how the sale or outsourcing of Dell's manufacturing operations would affect the $37 million in local incentives and up to $268 million in state incentives that it is eligible to receive for building the plant in Forsyth.

It is possible that transferring local and state incentives could be a precedent-setting request.

Dell said in a regulatory filing earlier this year that it is "continuing to expand our use of original design manufacturing partnerships and manufacturing outsourcing relationships."

Analysts have said that Dell could face several obstacles to selling or outsourcing its plants, including its incentive deals with local and state governments in the United States. Absorbing higher labor costs in the United States also could be a disincentive to Asian manufacturers.

To see more of the Winston-Salem Journal, or to subscribe to the newspaper, go to http://www.journalnow.com. Copyright (c) 2008, Winston-Salem Journal, N.C. Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

For full details on Dell Inc (DELL) click here. Dell Inc (DELL) has Short Term PowerRatings of 8. Details on Dell Inc (DELL) Short Term PowerRatings is available at This Link.

    


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