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Dell to double enterprise sales by 2014

More partner deals, more R&D

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Dell is getting tired of just being a box wrapper or manufacturer of other people's enterprise wares. And it is telling Wall Street and its IT customers and rivals that it has a plan to double its enterprise sales to $30bn in the next four years.

In a press conference in Hong Kong last Thursday, Steve Schukenbrock, president of Dell's large enterprise business, said that the company was not necessarily finished acquiring IT services companies after the $3.9bn acquisition of Perot Systems in September 2009. In a report by Reuters, Schuckenbrock said that "services expansion on a geographic basis" was a priority, with "China high on the list."

But don't get too excited by Dell doing any big deals, like the Perot deal it accomplished or the $2.4bn 3PAR deal it lost out on to Hewlett-Packard after an extended bidding war earlier this year. The Wall Street Journal reported that Schuckenbrock said he did not expect Dell to do any "huge" deals, but was looking to get vertical and expand its services in financial services, healthcare, and education.

Perhaps most importantly, Schuckenbrock said that IT spending was getting back to levels the company had not seen since the beginning of the Great Recession. Companies that had put off new projects or system upgrades are now confident enough in the future to get these efforts moving again, Schuckenbrock said. Even still, a lot of the spending is geared toward saving IT costs over the long haul, not the kind of fearful, hopeful, and mostly frivolous spending we saw during the dot-com boom a decade ago.

A report at Bloomberg had Schuckenbrock saying that Dell intended to open two data centers in China, a country that is Dell's second-largest market outside of the United States. (Dell overtook HP this year to become the second largest shipper of PCs in China, behind Lenovo, the indigenous PC maker, which outships Dell three-to-one.)

Dell has two factories and an operations center in Xiamen, in Western China, where the Chinese government is trying to seed industry in an effort to curb massive population migrations from rural areas in the West to its cities on the East coast. In September, Dell announced that it would build another factory and customer support center in Chengdu, another Western China city, which is to be operational in 2011 with around 3,000 employees. Dell also has a product design and engineering center in Shanghai and a support center in Dalian. All told, Dell says that it will spend $10bn on facilities, worker payrolls, R&D, and parts purchases from other Chinese suppliers for Dell for these facilities.

On Friday last week, Brian Gladden, Dell's chief financial officer, was at Bloomberg's offices and said Dell was "going to be patient" and do more deals and boost spending on research and development to double its enterprise business to hit $30bn in annual revenues in fiscal 2014. Dell is looking to spend money on storage and services, and Gladden said the company would even push up R&D spending on enterprise products and services to 10 per cent or more of revenues. That's a huge increase for Dell, which is lucky to spend 1 per cent of revenues on R&D.

Talk returned once again to Dell, the company, possibly going private again to keep Wall Street off the backs of Dell, the man. Gladden stopped in to talk to CNNMoney and said that Dell has lots of cash and had lots of options, including taking the company private with Dell, the man, as the primary shareholder of Dell, the company. He said that Dell's board would be talking about it again when it meets in December. But, Gladden added, even though 26 banks called him to get in on such a deal, he said that he did not believe that it was "going to happen anytime soon." ®

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