Dell's Call

Two bits of news today and one from last month point to the profound change in direction at Dell, the nation’s No. 2 personal-computer maker, and a company once known strictly as just that—a computer maker.

Well, Dell is closing a computer-making plant, planning to get into the mobile-phone business by making a smartphone for AT&T and wading deeper into services with its planned purchase of Perot Systems Inc.

Dell announced Wednesday it would close its plant in Winston-Salem, North Carolina, as part of a long-term restructuring that has seen the company close one plant in Tennessee and move another from Ireland to Poland. The plant it’s closing is only four years old, and was Dell’s most advanced manufacturing facility when it opened in 2005. Dell will lay off 905 employees.

The Winston-Salem area was stunned by news of the closure. Officials there had heavily recruited Dell, including offering the company state and local incentives worth $280 million to attract the factory. Dell had been seen as a high-tech buffer against the region’s dwindling base of textile-manufacturing jobs.

But Dell has had its own problems, losing market share to No. 1 computer maker Hewlett-Packard. And the company is undergoing a transformation that includes a plan to save $4 billion a year by 2011. By August, the company’s revenue had declined for three straight quarters and CEO Michael Dell said his company needed to diversify beyond personal computers.

And the company is indeed diving into businesses other than computer making.

Dell is going to start making a smartphone using Google’s Android operating system for AT&T’s mobile network, the Wall Street Journal reports. Sources tell the Journal the phone, like the iPhone, has touchscreen instead of a keypad, and comes equipped with a tiny camera.

The move into mobile phones has been expected for some time. In August, Dell showed off a phone it was preparing for China Mobile Ltd., that country’s largest mobile carrier. The Journal reports that the version for AT&T is similar to the one prepared for the Chinese market.

Wednesday's move marks Dell’s first entry into the U.S. cell-phone market, and the Journal reports the company is in talks with other carriers about the phone.

In addition to the cuts it’s making and the exploration of the cell-phone market, Dell has also recently made a big move into the services market, as have rival computer makers. Earlier this month, Dell announced that it would spend $3.9 billion to acquire Perot Systems, which provides IT services.

Dell’s moves mirror those of other computer makers, like its No. 1 rival, Hewlett-Packard, which recently announced it was combining its printer and PC-making businesses and which has also waded into the services business with its purchase of Electronic Data Systems.

But the Perot Systems buy may be a particularly clever move by Dell, since Perot Systems specializes in health care and government services. Tech spending in health care is expected to grow by 10 percent this year, and that growth could get a boost if the Obama administration succeeds in pushing through health care reform.

So what will we think of when we think of Dell two or three years from now? Will we still think of it as a computer maker or as a cross-platform high-tech player?

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Kent Bernhard Jr. is News Editor of Portfolio.com