Dell Signs Deal to Locate Plant in India

CEO of Dell Michael Dell speaks at a conference Tuesday, Sept 12, 2006 in New York. Dell defended his hand-picked successor's work at the world's largest PC maker Tuesday, saying Kevin Rollins isn't solely to blame for the company's recent missteps. (AP Photo/Seth Wenig) (Seth Wenig - AP)

NEW DELHI -- Dell Inc., the world's biggest personal computer maker, signed an agreement Thursday with the government of Tamil Nadu to locate a manufacturing plant in the southern Indian state to help serve new clients in the fast-growing computer market

The company, based in Round Rock, Texas, said it expects to begin manufacturing in India by early 2007, focusing initially on production of desktop computers, which make up about 70 percent of Dell's current business in the country.

The new facility and related operations will be located at a 50 acre site at a technology park just outside the state capital Chennai, earlier known as Madras.

Dell has a market share of just 7 percent in India, and lags largely because of taxes that result in higher prices for its products. The Indian government imposes higher import taxes on fully assembled computers than computer parts, and Dell currently ships complete computers to India. A plant in India would help the company lower its tax bill, improve delivery time and cut logistics and transportation costs.

This will be Dell's third manufacturing plant in Asia, after those in Penang, Malaysia, and Xiamen, China.

It also has plants in Austin, Texas; Nashville, Tenn., and Winston-Salem, N.C., and in Limerick, Ireland, and Eldorado do Sul, Brazil. A second South American production site is currently under construction in San Paulo, Brazil.

Dell has been battered in the last month by a recall of 4.1 million potentially flammable notebook batteries made by Sony Corp. and by disappointing earnings. It delayed filing its fiscal second-quarter financial report and suspended its share repurchase program earlier this week because of an ongoing federal accounting probe.

Its shares closed unchanged at $21.61 on the Nasdaq Stock Market.