Dell to open 2nd PC plant in Europe

Eric Auchard

SAN FRANCISCO: Dell Inc. is looking to open its second European production plant, its chairman said, and a source familiar with the plan said the company was considering a location in France.

The move by the world's largest personal computer company to locate production in France appears in part designed to shore up its business against rival Hewlett-Packard, one of the few big markets where it outpaces Dell in PC sales.

Michael Dell, the company's chairman and founder, told a news conference in San Francisco that Dell was looking to expand beyond its manufacturing plant in Limerick, Ireland, to feed European demand that is growing around 30 percent a year.

"We are exploring the opening of a second manufacturing plant in Europe," Dell told reporters in response to a question about the computer maker's commitment to the European market. He said the plant will support Dell's growth on the continent.

Dell did not specify in what country the plant would be located. A Dell spokesman declined to comment.

However, an industry source said that the location under consideration was in France. No further details were available.

"We are gaining share there rapidly," Dell said of the European market overall. "It is very important to us."

"There is only one country in the top 10 where our competitor is No. 1 -- France," Dell told reporters, referring to Hewlett-Packard. Dell is No. 2 in France among PC makers.

LOCAL APPROACH VS OUTSOURCING

The European plant expansion would follow a move last month to add a third major manufacturing location in the United States, in a rare example of a high-tech company expanding U.S. production. The plant in North Carolina is expected to hire 1,500 employees over the next five years, Dell then said.

Adding a second plant in Europe also distinguishes Dell from its competition, most of whom now produce most of their PCs through contract manufacturers in Asia. Dell also has production plants in China and Malaysia, but PCs produced there are largely targeted at regional markets, officials say.

He said the forces of industry consolidation that Dell's low-cost manufacturing and distribution model have set in motion over the past decade figure in IBM's reported move to sell a majority stake in its low-margin PC business.

Lenovo, China's largest computer maker, is expected to announce early on Wednesday in China that it is buying control of IBM's PC-making business for up to $2 billion, according to sources familiar with the situation.

Dell said he believed that IBM had been scaling back its commitment to PC products and manufacturing for years.

"I think it's pretty clear that this (PCs) is not a long-term strategy priority for IBM," Dell said.

"It has been a long time since our leading competitors actually made a computer," Dell said, contrasting his company's commitment to manufacturing with rivals such as HP and IBM who depend upon contract manufacturers.

"What you are seeing in a lot of off-shoring is that they basically have given up their competitive advantage," Dell said, adding that his company gains cost advantages by producing and distributing their computers by region.