Dell Inc. (DELL) recently announced that it will sell the two-year-old manufacturing facility at Lodz, Poland to a Taiwan-based company Foxconn Technology. Although the company did not mention the sale value. This manufacturing facility mainly serves customers in the Europe, the Middle East and Africa and has a headcount of nearly 1,600 workers.
 
The company mainly manufactures desktop computers, notebook models and servers, as well as storage systems in this plant. The plan is yet to be approved by the European Commission, which could take several months. Sale of the facility is aimed at simplifying and improving efficiency in global operations. Dell has stated that if the deal went through, all employees would be employed by the transferee company.
 
This move is well in line with Dell’s global strategy, since the company has been shutting down plants all over the world with the intention of cutting annual operating costs by $4 billion. Next in line is a U.S plant, which the company plans to close next month, followed by the termination of a manufacturing facility in Limerick, Ireland.
 
The company reported mediocre third quarter numbers, as EPS fell short of expectations and revenues declined on a year-over-year basis.
 
We believe these are welcome moves, as the plant closures will result in substantial operating cost reduction, which would help the company improve profitability in the coming quarters.
 
We are, however, a little concerned about demand supply mismatch going forward, as IT spending has been picking up, which should increase demand for its products.
Read the full analyst report on “DELL”
Zacks Investment Research