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Dell Inc. (DELL) shares have jumped 62% since bottoming out in February as the company slashes costs and indicates it is looking for an acquisition. Despite the big rise, there's likely more to come.

Beginning last year, the Round Rock, Texas-based company has aggressively corralled its expenses, closing several facilities and laying off more than 8,000 employees and is trying to cut $4 billion from its costs by the end of fiscal 2011.

At the same time, Dell is looking for ways it can bolt on growth. Recently, it raised money and hired a mergers-and-acquisition executive. Already, Dell has begun scouting possible targets, according to a person familiar with the situation.

The twin strategies, along with evidence suggesting the computer business that is Dell's bread and butter is stabilizing, have sent the company's shares hurtling higher. If Dell continues chopping costs and finds an acquisition that brings it new products, analysts are optimistic its shares can continue their surge. Over the past three weeks, a dozen analysts have raised their price targets for Dell shares.

"While the macro and business environment remain tough, Dell should benefit from stable demand," said First Global Research analyst Devina Mehra, who recently upgraded Dell to moderate outperform.

Dell declined to comment for this story.

Since touching a 52-week low of $7.84 on Feb. 20, Dell shares have surged amid a steady stream of news from the company indicating it was taking drastic action. On Tuesday, Dell shares closed down 0.8% to $12.77.

While the shares of many technology companies have risen recently, Dell has been a pacesetter. Over the last three months, Dell shares have risen more than 36%, outpacing Hewlett-Packard Co.'s (HPQ) 27% jump and the Nasdaq's 29% rise.

Dell's cost-cutting is a major factor behind the enthusiasm. Goldman Sachs analyst David Bailey, who has a $14 price target, estimates the cost savings mean Dell is getting between three and five cents per share in net earnings for every $500 million in revenue. Last year, Dell posted revenue of $61.1 billion.

Analysts are also excited by the prospects of Dell buying a company. Since 2008, Dell has raised $3 billion, partly for acquisitions, and has a war chest of $9 billion on hand.

Some analysts see the company looking at a Citrix Systems Inc. (CTXS) or Red Hat Inc. (RHT), software and services companies that would fill a crucial hole in Dell's line-up of offerings. Others, such as Collins Stewart's Ashok Kumar, sees Dell trying to break into the smartphone by looking at Palm Inc. (PALM), a company that he says is affordable.

"Dell can afford to expend about a third of its gross cash, or $3 billion, on an all cash transaction," noted Kumar, who has a $13.27 target for Dell. "Palm falls well under this threshold."

Of course, Dell's rapid jump means its shares are now pricier than some of its competitors'. The company's forward price-to-earnings ratio, a key metric for comparing the relative cost of stocks, has recently been higher than Hewlett-Packard's and International Business Machines Corp.'s (IBM).

There is no guarantee Dell will be able to continue delivering the cost-cutting that has helped propel its shares. Nor is it assured the company will be able to conduct smoothly a big acquisition, an area in which Dell has little experience.

But analysts say Dell has another development working in its favor: A recovery in the computer market.

Last year was terrible for the computer industry, which posted its first-ever year-on-year sales decline. Lately, however, there have been signs of a turnaround.

In mid-April, chip giant Intel Corp. (INTC) said the computer industry had bottomed out in the first quarter. Other technology companies, including Cisco Systems Inc. (CSCO), later chimed in with similar sentiments and two industry trackers have reported better-than-expected sales.

That likely will accelerate next year as companies that have put off upgrades can no longer do so. Given estimates that nearly two-thirds of Dell's revenue comes from corporate clients, the company is in a position to benefit.

-By Ben Charny; Dow Jones Newswires; 415-765-8230; ben.charny@dowjones.com