DELL Dell Inc. (MM)

Dell Inc. (DELL) announced a new state-of-the-art research and development (R&D) facility. The world’s third largest PC maker has now announced an R&D center in the Silicon Valley that will make this possible.

The new R&D center will house more than 1,500 people over the next five years and help Dell consolidate four existing operating units in Northern California in phases. All the operating units in that region were acquired by Dell over the last four years. The acquired companies are Zing Systems Inc., currently in Sunnyvale; Ocarina Networks in San Jose; Scalent Systems Inc. in Palo Alto; and Everdream Corp. in Fremont.

Dell expects the center to be operational in the back half of this year, with around 700 employees.

Dell plans to make more strategic acquisitions and hire new people in different departments. The activities will allow the tech giant to expand the capabilities in the existing product portfolio to better serve its huge client base.

In March, Dell opened its first R&D center in Israel to focus on developing storage technologies and cloud computing solutions, which will be embedded in its products worldwide. The R&D center leveraged all the assets of Exanet Ltd., an Israeli storage company that Dell acquired last year.

Apart from this, Dell is also investing in high growth countries such as Brazil, Russia, India and China, and recently announced its plan to expand in India. We remain confident about Dell’s expansion strategy.

Moreover, we are encouraged by Dell’s attempt to shift its focus from PC and server roots to becoming a data-center vendor with a wider scope. However, concerns include soft demand from the Consumer segment, a high debt level and stiff competition from technology majors, such as Hewlett-Packard Co. (HPQ), Apple Inc. (AAPL), International Business Machines Corp. (IBM) and Microsoft Corp. (MSFT).

Currently, Dell has a Zacks #1 Rank, which equates to a short-term Strong Buy recommendation.

 
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