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Tuesday, September 16, 2008

Cry me a river, Michael Dell

Dell Computers came to build their shitty, always-crashing PCs in Limerick because it was a) inside the EU and b) the IDA offered them tax incentives to do so.

But now it seems like they're upping sticks sometime very soon. Canny people might have spotted them building a huge new manufacturing plant in Lodz in Poland and wondered about the likelihood of them keeping two EU factories going in the current economic climate.

Well, according to the Wall Street Journal, that's exactly what their intentions are. They're laying off 8,000 people, and it looks like closing Limerick will account for 3,000 of those. This will devastate the Shannon region economically. Not that Dell care, of course.

Their share price plummeted today when the news began leaking out. Good enough for them, I say.

Good enough especially for poor impoverished Dell founder, Michael Dell, whose desperation for some cash is what's behind this latest shafting of the Irish people whose tax helped fund his entry into the EU's lucrative PC market.

Michael Dell's eponymous firm has largely justified the preposterous situation whereby computers made in Ireland cost more here than almost anywhere else because they were providing employment here.

Well, since they won't be for much longer, should we expect a 30% cut in prices? My hairy arse, we should. Dell will relocate to Poland, pay the staff a quarter or less of the Limerick wages and seek to pocket the difference.

And whose pockets will enjoy this sudden deluge of cash? Michael Dell of course, the world's third or fourth richest man, a man who clearly wasn't as tight for cash four years ago, when he gave George W. Bush the maximum $250,000 an individual could contribute for his 2004 re-election campaign.

A man who the poor deluded people of the University of Limerick thought fit to honour.

But there's a recession on, and Dell needs money clearly. After all, he's got a $250,000 annual property tax bill on his 33,000 square feet Austin mansion (see pic above). And fuel costs for his Porsche Boxter, his Hummer and his other vehicles are no doubt rising too.

Dell will be blaming that recession on the need for the firm to abandon Limerick. But of course, the real reason that Dell are moving is because they failed, not just the people of Limerick, but themselves.

Michael Dell took on Steve Jobs at Apple very publicly, spoofing that his firm were the more innovative. But despite Apple's products being overpriced trendy trash, Dell has still seen their share valuation go from less than Dell's to triple Dell's in only a few years.

Dell is a shitty firm who have let down the Irish taxpayer and their loyal Limerick workforce. They make crappy computers which break down and crash a lot. Their customer service is famously abysmal.

I hope the Irish people boycott Dell's products. I hope the University of Limerick demand their honorary degree back. And most of all, I hope Michael Dell ends up unable to pay either that property tax or contribute to anymore redneck political campaigns anytime soon.


Conan Drumm said...

Don't forget the huge numbers employed in 'Dellywood' (aka Cherrywood near Loughlinstown) who moved to new premises there from Bray about six years ago. The site has been dripping redundancies for several months now.

Anonymous said...

But why do you think Dell owe anything to Limerick? They provided a large amount of employment for a good few years, and they have no obligation to stay if they can find a cheaper way of doing business.

Also, regarding the fact that computers are more expensive in Ireland than anywhere else, why blame Dell for charging an amount of money that people were willing to pay?

No-one has forced people who buy Dell computers, so I do not see why it is reasonable for them to charge as much as they can get away with.

All this is how capitalism is supposed to work.

JC Skinner said...

Hey, no need to be anonymous! Your IP address identifies you as posting from Dell in the United States!
(That's a brief disclosure so that other readers can put your comment in context.)

Mick Cooney said...

Nope, had NoScript enabled so never got the option to type in my name.

Your GeoIP software needs to be updated. I'm Irish, and living in Dublin and have no connection to Dell other than the fact that I own a laptop, have family members who own their desktops, and my sister's friend works for them.

JC Skinner said...

Must be a glitch in the system then, Mick.
Somehow your location must have been lost or confused with the plenty of people from Dell HQ in the States who are currrently coming here via the mention on their own website.
Perhaps you're running via a proxy as well as blocking scripts?
Anyhow, in answer to your question, what Dell owe Limerick, and especially their workers, is an explanation rather than the ongoing craven silence.
They also owe the Exchequer a fortune in the IDA tax breaks that they received, and the European revenues they tax laundered through Ireland.
Most of all they owe the Irish people an apology for fleecing them on machines that were being made here in Ireland!
Now is not a very opportune time for you to be singing the praises of capitalism in any case, Mick, given the ongoing crises in the markets and the banking sector.

Mick Cooney said...

I don't think there is a proxy going on, but the connection I am using here is going through Irish Broadband, so there might be something going on with their networking.

I cannot really address the issue of silence from Dell, I can only presume they themselves do not yet know exactly what they are doing, and will make announcements once they have something to say.

As regards the tax issue, they were deliberately lowered by the Irish Government to give Ireland competitive advantage over other EU nations, and we were very happy to accept their cash and investment back then. Which Exchequer do they owe the money to?

What the Irish government did was offer very low corporation tax so that most of the money came through Ireland, and thus received those taxes, rather than the tax money going to other governments.

It is probably worth noting that Dell moved a lot of their construction from the US to set up the big factory in Limerick at the time, so by your reasoning, Dell should never have done this in the first place. Would Limerick and Ireland have been better off if they had never established anything in Ireland.

The main problem with the factory in Limerick is that a lot of it isn't highly skilled work, and so we are always going to be vulnerable to places like Eastern Europe out-competing us on cost.

Again you mention that Irish people have been fleeced by overcharging them on computers, but Ireland is just an expensive place to live, cost of living is pretty expensive in Ireland in general. That being said, nobody is required to buy a Dell machine, so if companies can make them a bit cheaper, they would.

Dell is not a charity, its primary concern is to make a profit. Put it the other way, say you are selling something you own. Wouldn't you sell the item for as high a price as you can, all things being equal?

On your comment regarding capitalism, I agree that it isn't perfect, and the current problems with the financial system is definitely not a good thing. But it is still much better than problems we have encountered in the past, our living standards are WAY higher than even twenty years ago, and capitalism is a much better alternative to other forms of economical systems.

Anonymous said...

They 'laundered' money through Ireland? O brother, please spare me the socialism! They came here fully aware of the tax deals on offer and paid up in full - and if you have proof contrary you should go to the Guards.

And as for their 'high' prices, well that's cos they can get away with it cos, well, in Ireland we're rich and when you're a business with high fixed costs and low variable costs that's how you do your pricing. It's generally welfare-enhancing for producers and consumers alike. I'm sure Dell sell their computers cheaper in India but then again you'd have intermittent power supply there, wouldn't you?

JC Skinner said...

I suggest you educate yourself on the phenomenon of tax laundering before you choose to embarrass yourself any further, Mr Anon.

Mick Cooney said...

I am a bit confused on this last point you made.

(And no, the anonymous poster was not me back in stealth mode. ;) )

By tax laundering, do you mean the corporate practice of funnelling all EU-based profits through the Irish company so that they payer the lower Irish rate on the EU-wide profits?

If so, surely this means that while Dell is not paying tax in other countries as a result (or at least, much lower sums), it is paying a much larger sum to the Irish Revenue, since the Irish government is now collecting a smaller piece of a much larger sum.

Other countries are missing out, but I do not see how the Irish government loses anything through the practice?

Or are you referring to something else?

Anonymous said...

Well I'm feeling quite unembarrassed and well-educated here Mr Skinner. If you care to response to my points feel free. If not, happy blogging and all the best! - Mr Anon

JC Skinner said...

That's a very succinct definition of tax laundering, Mick. Hopefully, Mr Anon is now a bit more educated on the matter.
Certainly Dell has been beggaring the exchequers of other EU countries by tax laundering here.
My point is that now, with the imminent loss of 3,000 jobs, Dell won't even be routing their EU taxes through here as it appears they intend to be taxed either in Poland (19%) or, if rumours turn out to be true, through a dedicated tax laundering operation they are considering opening in Cyprus.
I appreciate I should have spelt that out a bit more earlier.
@ Anon, I'd be fascinated to see your argument for how Dell fleecing its Irish customers, who ought to have enjoyed some of the lowest prices (lowest delivery costs) is 'welfare-enhancing'.

Mick Cooney said...

Okay, so would you have preferred that Dell didn't employ a whole load of Irish people for ten years (which puts money into the economy as well), and paid a much lower amount of corporation tax on top of that, in return for paying tax in other EU countries.

If that is case, first of all, why do you care about other countries? Allowing for that, do you think such an eventuality would have have been better for Ireland in the long run?

As for your opinion that Dell was fleecing the Irish due to lower transport costs, you have never addressed my point that the price of something is usually a balancing act between what you want to charge and what the customer is willing to pay.

You are essentially saying that Irish people are stupid for paying highly inflated prices when we could have found some other way to pay much lower prices.

Why do you have a problem with Dell charging as high a price as possible?

JC Skinner said...

Where did I say I didn't want Dell to employ people in Limerick? That's a straw man argument, Mick. Feel free to knock it down - it's yours not mine.
Now I am in agreement that the Irish people were stupid to pay such inflated prices. But it's not as easy as you suggest for them to do otherwise.
Those with access to an address in the North could avail of UK prices, assuming they had a sterling credit card. But no one else in Ireland was able to obtain a Dell at the prices they were sold for elsewhere.
I suppose you could have flown to the US and bought one there, but the cost of a return flight would somewhat mitigate against any savings, I'd assume.
There is no grey market facility in this regard, Mick.
The Irish were stupid to pay the inflated prices, but as with Gateway beforehand, they did so in part because they felt they were supporting a business with an Irish base and Irish jobs.

Mick Cooney said...

That was the logical conclusion of your argument.

You were complaining that Dell had set up in Ireland to avail of the tax breaks. If they didn't do that, then they would not have came to Ireland in such a big way, and so would not have created as many jobs in Ireland as they did.

I don't think it is a straw man argument at all, I was attempting to show where your logic lead.

As regards the price of computers in Ireland, there is a very simple solution to the problem of overpriced computers.

Don't buy them.

You might think this is a stupid argument, but it isn't, and I will give you a concrete example of the alternatives.

Do you remember when TV shows used to be sold by the individual video, with two or three episodes on it. From what I remember, no-one bought those.

Then, once the large media companies seemed to realise this, they started releasing full seasons at a much lower price, and people started buying those, presumably because they consider this a reasonable charge.

I take your point about people wanting to support the local economy, but that does not mean they were right to do so. Similar to the current fashion of locavorism, if it is cheaper to buy a product that is manufactured outside of the country, then you are better off doing so.

Should the local product be more expensive, then buying the product on the basis that it is close by is rewarding a business that cannot operate as efficiently as the one that is 'far away', especially when you account for the fact that the more distant business has higher transport costs.

So while I take your point about Irish people being willing to pay higher prices for this, I see that as being their mistake, and not Dell's fault.

That all being said, you are still making the assumption that Dell should not be charging as much as they can for their product. Why do you think this is wrong?

JC Skinner said...

Firstly, that's not the logical conclusion of the argument I made.
I was complaining about Dell LEAVING Ireland AFTER receiving tax breaks from the Irish exchequer and IDA support to enter the EU market.
And I object to Dell's charging more for their products in Ireland because its blatant extortion, nothing more.
Certainly people can boycott the product, and at this juncture I would heartily encourage them to do so.

Anonymous said...

Hold on, you believe Dell are moving to Poland to pay cheaper tax at 19 percent?!
Might want to check your details there..

JC Skinner said...

Factor in the incentives from the Polish government and the likelihood of their opening a dedicated tax laundering office in Estonia or Cyprus, as well as lower labour and transport costs, and you'll see why it won't hurt Dell to route a proportion of their corpo tax through their new Lodz base to keep the Poles sweet.

Anonymous said...

i was with you til you called Apple products "trash"

They're actually quite good.

JC Skinner said...

I work on a Mac every day. It's an enfuriating machine that won't let me do what I want it to because the OS treats the user like a moron.
I use Creative MP3 players on the basis of sound quality, which is, I'd have thought, why everyone should decide on which model to buy.
However, my nipper got an iPod, because they're marketed so well.
Guess who's machine cost half the price, sounds twice as good and doesn't break down?
Clue: Not the Apple product.

JC Skinner said...

And don't get me started on the iPhone!