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.
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Kevin Parrish has over a decade of experience as a writer, editor, and product tester. His work focused on computer hardware, networking equipment, smartphones, tablets, gaming consoles, and other internet-connected devices. His work has appeared in Tom's Hardware, Tom's Guide, Maximum PC, Digital Trends, Android Authority, How-To Geek, Lifewire, and others.
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punahou1 It will be interesting to see what the case supplier does to maintain its margins/profit after the reduction in price. Possibly using even thinner or lower quality metal/plastics? Foxconn certainly is not going back to hiring 12 year olds again at the risk of loosing the Apple contract....Reply -
ruel24 Dell's been making junk for years and their service is very poor to say the least. I think they need to look inward to see why their PC sales have slumped. Asus isn't crying one bit about sales.Reply -
janetonly42 Yeah, how else can Dell/Microsoft keep making cheap crap. Had two Dells way back when Pentium III were out, build my own now. Both failed within 3 years, they are even crapier now. I say MS because MS gave them allot of cash recently and I'm sure MS is pulling strings there now.Reply -
DjEaZy ... Dell Demands Price Cuts from Component Suppliers? To profit more? the cheap end of dell laptops are still more expensive than acer's or samsung's offerings, but not necessarily better in anyway...Reply -
elmo2006 This is what happens when you put all your eggs into one basket. Dell is now at the mercy of all these Chinese manufacturers. One of these days and not in the so far distant future, these third world companies will realize that they can do far more damage by demanding higher prices for goods as North America and the remaining so called Developed countries no longer have any form of manufacturing.Reply
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!!! -
rodbowler @elmo2006Reply
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. -
bourgeoisdude janetonly42Yeah, how else can Dell/Microsoft keep making cheap crap. Had two Dells way back when Pentium III were out, build my own now. Both failed within 3 years, they are even crapier now. I say MS because MS gave them allot of cash recently and I'm sure MS is pulling strings there now.Reply
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. -
punahou1It will be interesting to see what the case supplier does to maintain its margins/profit after the reduction in price. Possibly using even thinner or lower quality metal/plastics? Foxconn certainly is not going back to hiring 12 year olds again at the risk of loosing the Apple contract....Reply
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