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Dell expands in new market

May 16, 2007
By Karla Palomo and Romina Nicaretta
Bloomberg News

Dell, the world's second-biggest personal-computer maker, opened a second plant in Brazil Monday to spur sales in a country where less than a fifth of homes have a computer.

The plant in Hortolandia, 72 miles northwest of Sao Paulo, will produce laptops, desktops and other equipment, according to a statement. Round Rock, Texas-based Dell declined to provide details about output and how much the plant cost to build.

Dell said international shipments surpassed those in the U.S. for the first time in the latest quarter. The company has sought to win customers in countries such as Brazil and China, whose economic growth has spurred consumer spending, after losing sales to competitor Hewlett-Packard.

''It's doubtful that we will have another billion customers in Western Europe, Canada and in the U.S.,'' Terry Kahler, Dell's vice president of Latin America, said in an interview last week. ``What we do think is that the next billion users will come from other countries like Brazil, Russia, India and China.''

Shipments of computers in those four countries nearly tripled from 2000 to 2006, according to Jay Gumbiner, director at research firm IDC Latin America.

Declining interest rates in Brazil, Latin America's largest economy, have fueled borrowing and helped push retail sales 9.4 percent higher in February, the latest period for which data are available.

The new Brazilian plant ensures the company will ''be much closer to where our customers are,'' Kahler said from Dell's headquarters. ``Seventy percent of our customers will be within a few miles of our factory, and we will be able to deliver a better-quality product.''

Dell shares fell 54 cents to $25.27 in Nasdaq Stock Market trading. The stock is little-changed this year.

Only 8.1 million homes out of a total of 51.8 million have a computer in Brazil, according to Alexandre Magalhaes, a senior analyst at Brazilian Ibope Media Information. Brazil's gross domestic product growth accelerated to 4.8 percent in the latest period compared with a year earlier, more than twice the U.S. rate.

The rate in China was 11.1 percent.

Dell's Brazilian operation, which already exports to Argentina, Chile and Colombia, plans to start exporting to other countries in the region thanks to the new plant, Kahler said.

Dell plans to add 70 jobs at its plant in Eldorado do Sul, in southern Brazil, for software development, the company said in an e-mail today. The plant currently employs 750 people.

Founder Michael Dell returned as chief executive officer in January to help the company regain the market lead from Hewlett-Packard.

The company reported in March that fourth-quarter revenue probably totaled $14.4 billion, compared with $15.2 billion in the same period a year earlier.

The figure was preliminary because of an ongoing accounting investigation, which may force Dell to restate results.