Dell IT Deal with Towers Watson

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The world’s second largest PC maker Dell Inc. (NasdaqGS:DELL - News) recently confirmed an information technology (NYSE:IT - News) support deal with Towers Watson & Co. (NYSE:TW - News). Financial details of the five-year contract were not disclosed.

Towers Watson is a global consulting firm. It specializes in professional services on risk, human resources and financial management.

Under the deal, Dell’s Services segment will provide extensive transformation and infrastructure services and support to Towers Watson’s data center operations. These would help Towers Watson to better focus on its business growth, in spite of the extensive time that it spends in managing the complex IT environment.

Towers Watson is counting on Dell’s IT support to make its data centers resilient and efficient. What’s more, their supervision will become much easier since nine data centers will be consolidated into two. Dell’s storage and server support services are also expected to lower operating expenses at Towers Watson while simultaneously stepping up business momentum.

Deal wins are a regular phenomenon at Dell.  We believe that Dell’s services are in demand and will drive revenues in the coming quarters.

In June, Dell’s IT services were offered to an affiliate of Hyatt Hotels Corp. (NYSE:H - News). Also, the Nuclear Regulatory Commission selected Dell’s extensive hardware and software support. In March, Dell clinched a six-year IT outsourcing deal with TUI Travel plc, a company under TUI AG, a renowned European travel group.

In February, Dell signed a seven-year deal with the Brooklyn Hospital Center, under which the PC maker agreed to provide its revenue cycle services to the latter.

During the recently concluded first quarter of 2012, Dell recorded a 5% year-over-year growth in its Services segment. The Services portfolio was strengthened by acquisitions of information-security services provider SecureWorks Inc., cloud-based service provider Boomi and cloud-based medical archiving solutions provider Insite One Inc.

In a recent research report published by technology research firm Gartner, the firm expects worldwide spending on IT products and services to grow by 7.1% in 2011, considerably higher than its earlier estimate of 5.6%.

Though we understand that soft demand at the Consumer segment, a high debt level and stiff competition from technology majors will remain concerns, we feel that Dell will continue to capitalize on the increasing IT expenditures and show top-line improvement.

Currently, Dell has a Zacks #2 Rank, which equates to a short-term Buy recommendation.

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