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Dell Will Spend $1 Billion on Data Centers, Customer Labs

Dell owns Compellent Technologies Inc., whose Storage Center with Network Attached Storage is seen in this handout photo. Source: Compellent Technologies Inc. via Bloomberg
Dell owns Compellent Technologies Inc., whose Storage Center with Network Attached Storage is seen in this handout photo. Source: Compellent Technologies Inc. via Bloomberg

April 7 (Bloomberg) -- Dell Inc. plans to spend $1 billion over the next two years to open 10 data centers and expand customer support to make it easier to sell hardware, software and services to large companies.

The data centers will let Dell handle a wide range of computing tasks for customers, the Round Rock, Texas-based company said today. Dell also plans to open 12 “global solution centers” this year and an additional 10 during the next 18 months. They would pair Dell technical staff with customers.

Dell aims to expand beyond its roots as a personal-computer seller and capitalize on the growth of cloud computing, which involves delivering software and information via data centers. The company is offering a broader selection of products, making acquisitions and hiring sales staff -- all part of a plan to double the size of its data-center business to $30 billion within three years.

Dell rose 6 cents to $14.84 at 4 p.m. New York time on the Nasdaq Stock Market. The shares have gained 9.5 percent this year.

The new data centers, which will house computing, storage and networking equipment, will be located in unspecified parts of the U.S., Europe and Asia, said Steve Schuckenbrock, president of Dell’s services division. Three of the facilities will be in the U.S., he said. The other centers, meanwhile, will be labs aimed at helping customers solve technical problems, Schuckenbrock said on a conference call.

Microsoft’s Azure

The data centers also will help support work Dell is doing with Microsoft Corp.’s Azure software. By the middle of this year, Dell plans to begin offering cloud-computing services that rely on Azure, Carter George, an executive director in Dell’s storage group, said in an interview last month.

Dell said earlier this week it will consolidate four Northern California offices into a new research and development center that will employ as many as 1,500 people within five years. The office would help Dell recruit engineers and other staff to support its growth in data-center computing, the company said.

Under Chief Executive Officer Michael Dell, the company has made acquisitions such as storage maker Compellent Technologies, security-software company SecureWorks, and Ocarina Networks, which makes hardware and software for reducing data storage requirements. It also made an earlier purchase of Perot Systems Corp., a computer-services provider, in November 2009.

The buying spree has been slow to fuel growth at the company, said Shaw Wu, an analyst at Sterne Agee & Leach Inc. in San Francisco. The recent acquisitions have only accounted for 3 percent to 4 percent of revenue, he said in a report last month. Dell also faces competition in data-center services from Hewlett-Packard Co., International Business Machines Corp. and Oracle Corp., said Wu, who has a “neutral” rating on the stock.

“The company remains in a tough fundamental position,” he said.

To contact the reporters on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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