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Dell: Computer Maker Gets By On Scant R&D Budget

Dell Computer spent just 1.3% of revenue for its second quarter on research and development.

While many of the largest technology companies budget 5%, 15%, and higher portions of revenue for research and development, one computing industry star isn't even in the ballpark. Dell Computer spent a paltry 1.3% of revenue for its second quarter ended Aug. 2 -- about $111 million -- on R&D.

The investment is typical for Dell, which has been profitable in the tough PC and enterprise computing markets where others have faltered. A year ago, Dell spent 1.5% of revenue on R&D.

By contrast, Hewlett-Packard spent 6% of revenue, or $983 million, on R&D during its third quarter ended July 31. Sun Microsystems spent 16% of revenue, or $437 million, during its first quarter, ended Sept. 30. And IBM's R&D spending was $1.2 billion, or 6.1% of revenue, for its third quarter ended Sept. 30.

Kevin Rollins, Dell's president and chief operating officer, says the company relies on "collaborative R&D," leveraging the research and engineering investments of its suppliers -- including Microsoft and Intel -- to reduce costs as more business-computing products become standardized. "There are myriad suppliers who have developed the components that go into our systems," Rollins says. "We think there's a lot of hoopla about big research budgets in companies."

Dell is trying to pare $1 billion in costs this year from product design, manufacturing, and other areas, and slipstreaming innovation from other vendors into its products could help.

For example, Dell's network-attached storage products use a component operating system from Microsoft, while products in development could employ technology from Intel and others to offload work from the computers' CPUs to their host adapters.

Return to main story, "Future Funding"

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