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

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.

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