Dell Demands Price Cuts from Component Suppliers
Dell is looking to cut corners by requesting better prices on components.
Unnamed sources from the upstream supply chain claim that Dell has been demanding lower prices from suppliers in order to reduce its own costs. News of price negotiations arrive after the company said in February that it had entered into an agreement with founder and CEO Michael Dell and Silver Lake to be bought out in a transaction worth USD 24.4 billion.
"We negotiated aggressively to ensure that stockholders received the best possible value and agreed to a $13.65 per share transaction that provides value certainty at a 37% premium above the average price for the 90 days before rumors regarding the transaction surfaced," Dell said in early March.
Meanwhile, the first on Dell's price-cutting list are Catcher Technology and Fuyu Precision Component, a subsidiary of the Foxconn Group, which supplies the metal cases used in laptops and desktops. These are said to be- sold at a higher price level than most other components.
In addition to the current two chassis suppliers, Dell is also reportedly working with Compal Precision Module, a joint-venture between Compal Electronics and Ju Teng. Dell is wanting the company to be a third major chassis supplier that will ultimately help reduce Dell's costs by putting pressure on the current two suppliers.
Sources told DigiTimes that this type of strategy is typical for vendors who are looking for more favorable terms. Although all three chassis suppliers have declined to comment, sources claim that Dell's orders will be "rearranged" in April. Dell is also expected to become more aggressive in demanding price cuts from upstream suppliers now that the company is going private and pushing Enterprise-based PC solutions.
Declining sales in the PC market are undoubtedly forcing OEMs like Dell and HP to negotiate better prices with Taiwan-based component suppliers. Unfortunately, these suppliers are feeling the financial heat as well, reporting poor financial results for February.
Dell demanding lower prices, IBM shifting its Server Farm to Mexico, TATA swallowing up the majority of support departments, customer service outsourced to the Asia Pacific - the writing is on the wall folks
LOL - apologies for the RANT!!!
Dell demanding lower prices, IBM shifting its Server Farm to Mexico, TATA swallowing up the majority of support departments, customer service outsourced to the Asia Pacific - the writing is on the wall folks
LOL - apologies for the RANT!!!
I have to agree. The whole-sale destruction of local industry is short sighted at best. Western nations now have no way to leverage good / better deals from foreign suppliers. All foxcon et al. have to say is "where else are you gonna go?".
It saddens me to see the downward spiral of western civilisation due to poor government policy and corporate greed.
JMHO.
Funny you say that. I remember those old Dimension "chubby cheek" XPS 700 machines (Pentium III). I still see them. I have never seen one that didn't work. Ever. I hated those things because we kept getting calls on them for software issues well after the hardware warranty expired.
Maybe I'm biased because I was in Dell tech support for so long, but other than a few missteps (and some recent Laptops), Dell has the most solid hardware of the bunch. I say a few, but if you happened to buy a bunch of GX270's with bad mobo capacitors, or buy a PC with those stupid Maxtor 20GB/40GB ATA133 drives, I do feel bad for you.
I can't see apple leaving Foxconn, not whilst sales are still this high, I doubt that there is another single company that can put together all of their products, I imagine samsung probably have one of the biggest ranges of factories and i doubt they would go to samsung
In the end, I don't know how much money they'll even be able to save. How much do they pay for their chassis? I mean, a comparable case on Amazon or Newegg isn't gonna cost much more than $50 at worst. That alone isn't going to make Dell's computers more competitive or attractive in pricing. On the other hand, don't really know how much savings they'll be able to negotiate from Intel/Nvidia/AMD on CPU/GPU. Seems like the PSU and motherboard suppliers will be the next targets, likely PSU before motherboard.
Cut $5 off per PC, sell 10 million, and make $50M more profit or 10% more per quarter. They just need that tiny bit off on volume orders.
Actually, they are better now. But while they should be seeing higher profit margins, only their suppliers are. Which is why they are shopping around. You would think that to keep up with competitive pricing that they would ALWAYS be looking for new/better suppliers. But switching suppliers can be risky, that's why a company really has to research suppliers and find very sound and reliable companies that can output the needed product JIT (just in time).
I'm pretty sure that the Chinese already know that N. Americans have more/will pay more. They already sell us mostly premium goods at higher prices. If you don't know that, then you my friend are not very well traveled. Visit the former USSR and you will soon realize that we Americans are being taken for fools.
Intel cpu prices are the main issues for this profit-constrained companies.