Dell (NASDAQ: DELL) wants out of the business of owning factories that make PCs. According to The Wall Street Journal, "Dell has approached contract computer manufacturers with offers to sell the plants." Owning the manufacturing facilities cuts Dell's margins.
Analysts believe that in the current environment, where laptops have taken the lead in PC market share, owning facilities that pump out massive numbers of desktops is no longer practical.
Dell could be making a huge mistake in the name of short-term profitability. The company is particularly good at delivering "custom-made" computers quickly. Dell customers can configure the PCs with a large number of special features.
More importantly, Dell will lose some level of quality control if its manufacturing is owned by outside interests. Dell cannot afford to fall behind Hewlett-Packard (NASDAQ: HPQ) and Apple (NASDAQ: AAPL) in terms of the consumer's perception of product quality. Owning factories may hurt profits a bit, but Dell's reputation as a first class provider of PCs is priceless.
Douglas A. McIntyre is an editor at 247wallst.com.
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