Dell Must Get In Takeover Mode

Dell(DELL) has never been keen on mergers and acquisitions.

But as the company strives to climb out of its doldrums, a shopping spree might be just the thing.

The company formerly known as the world's No. 1 PC maker is on a mission to revive slumping sales and profit margins, with founder and CEO Michael Dell vowing to shake up everything from internal operations to its famous distribution model.

To overcome its weakness in the consumer market, Dell has established a new global consumer division and enlisted former Motorola(MOT) executive Ron Garriques, whose pedigree has some investors dreaming of a new generation of Razr-like gadgets.

The only problem is that Dell is no innovator -- a point made clear by last week's underwhelming new line of consumer notebooks.

Bringing a marquee name into the fold is great, but even Apple's(AAPL) Steve Jobs would be challenged to innovate at a company that spends less than 1% of its revenue on research and development.

In the first and second quarters of 2006 (the last for which data is available because of an SEC investigation into Dell's books), Dell spent $129 million and $128 million on R&D, equivalent to 0.9% of total revenue.

Dell spokesman Bob Pearson says the company is devoting significant attention to its design capabilities, but would not comment on R&D spending levels.

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