Michael Dell said during a keynote in Bangalore, India that his company will be searching for potential acquisition targets among small to medium sized companies that may be able to strengthen its portfolio. The electronics giant is making use of “strong cash flows” to invest in the longer-run, despite the Thailand floodings that led to an industry-wide shortage in hard drives.

“Dell, which has long-depended on government, corporate and consumer technology spending worldwide, has been diversifying from hardware into higher-margin services, but at a slower pace than some rivals.

“You will see us be a serial acquirer using our strong cash flows to enhance our growth and add to our development capability,” Dell said.

The founder and CEO added along the course of his speech that mobile has not impacted the PC industry significantly, which remains one of Dell’s biggest markets. Nevertheless, the manufacturer is ambitious.

Storage and networking

There are two likely areas Dell will be looking to expand in via the new strategy: storage and networking.

Dell dropped a decade-old partnership with partner/competitor EMC to focus instead on its fresh storage portfolio, a great deal of which came from the 2010 Compellent acquisition. The company is likely to push further into this market in 2012.

“Dell’s made some great acquisitions in storage including Exanet (NAS), EqualLogic, Compellent and Ocarina,” notes Wikibon founder Dave Vellante. “Dell has essentially replaced its EMC-related revenue with its own acquired IP. With its channel and huge supply chain, I think Dell can do some damage in the storage marketplace in 2012.”

In the networking space, Dell acquired Force10.  It’s a buy that could be part of Dell’s grand plan further down the road, biting off chunks from Cisco’s share by undercutting the networking behemoth. And the timing is ripe.

“On the networking side, it will take Dell time to integrate the Force10 networking products into its portfolio,” notes Wikibon Senior Analyst Stuart Miniman. “There are rumors that Dell will make an acquisition in the networking application (Layer 4-7) space to compliment the Force10 and storage acquisitions.”