The move to close the desktop facility, along with cutting 9,000 jobs, is part of a plan that looks to save Dell $3 billion during the next three years.
In its ongoing effort to cut costs, Dell plans to close its desktop
manufacturing facility in Austin, Texas,
as part of a plan that will reduce the company's costs by $3 billion during the
next three years.
The PC vendor announced March 31 that it would begin cutting costs and
improving its efficiency in the second half of 2009 fiscal year. Besides
announcing the closing of the Austin
plant, Dell reaffirmed that it plans to eliminate nearly 9,000 positions as
part of the cost cutting.
When the company announced its fourth-quarter results in February, Chief
Financial Officer Don Carty said Dell has already eliminated a total of 3,200
and would eventually reduce its head count by 8,800 employees,
excluding those workers it inherited during some of its recent acquisitions.
cost cuts come as Dell is trying to return to its past profits.
announced its fourth-quarter results in February, Dell's net income was $679
million, or 33 cents per share, which is a 6.5 percent drop from the $726
million in net income the company posted at the same time a year ago. For the
quarter, Dell's revenue increased from $14.5 billion last year to $16 billion
CEO Michael Dell said in a statement that
he plans to focus on five major growth areas during the next three years. These
include the global consumer market, enterprise businesses, notebooks, small and
midsize businesses and the emerging market. Earlier in March, Dell announced
that his namesake company would buy about $18 billion of hardware from China
and that it has poured money into opening facilities in Poland.
"We've analyzed the business and opportunity, so we know-without
question-where our priorities should be. And as we've reignited growth in our
business, we're taking deliberate steps across the company to improve our
competitive position," Dell said in a statement.
All these moves come as the company continues to try to reinvent itself
within a PC market that it has helped define since the 1990s. In the past two
years, it has lost significant ground to Hewlett-Packard, which is now the
world's biggest supplier of PCs. Dell has retained its edge in the U.S.
market, but HP has closed the gap.
Dell also faces new competition from the likes of Acer,
which acquired Gateway in 2007,
and sells a range of low-cost notebooks for
consumers and SMBs. To try to counter this, Dell has moved into PC retailing
and has begun rethinking the direct sales model that it has relied on for
Roger Kay, an analyst with Endpoint Technologies Associates, said Dell is
attempting to reinvent its business much the same way HP did after it bought
Compaq. This required an outsourcing of most its manufacturing, a reduction in
head count and a refocusing of its core businesses.
"A lot of these improvements look a lot like what HP has done," Kay
said. "HP has consolidated a lot of businesses and it outsourced a lot of
its manufacturing to overseas."
In addition to its previous moves, HP
is planning to save $1 billion
in the next year by reducing the number of
its data centers through consolidation.
Kay also said the cost savings is chance for Dell to rethink how it uses its
global supply chain. Although the company built a reputation for managing its
supply chain to squeeze the most savings out of it, Kay said he believes those
days are long gone and Dell needs refocus on the supply chain. Investing in
overseas facilities is one way to better control the supply chain costs, he
Michael Dell is likely to address some of these issues
at a meeting with financial analyst at the company's headquarters April 2 and