This article is more than 1 year old

Dell to buy Perot Systems for $3.9bn

Michael finally gets into services big-time

Michael Dell has finally gained a place at the IT services top table by buying Perot Systems for $3.9bn.

Dell will pay $30 a share for Perot Systems - its stock is currently trading at $17.91, giving a premium of 67.5 per cent. Perot Systems' chairman, Ross Perot Jr, becoming a Dell board candidate.

Perot Systems will become Dell’s services unit and be led from Plano by Peter Altabef, the current Perot Systems CEO. The deal won't affect Dell's earnings positively until 2012 and, Dell hopes, will mean it can sell Dell gear to existing Perot Systems clients.

Perot Systems is an IT services company and was founded in 1988 by EDS founder Ross Perot, currently chairman emeritus. He has run for the US presidency twice.

The company went public in February, 1999, and revenues exceeded $1bn later that year. Today, Perot Systems is a Fortune 1000 corporation with more than 23,000 employees and 2007 revenues of $2.6 billion.

Perot has clients in health-care, government and other commercial segments, from SMEs to the largest global institutions spread across North America; Europe, the Middle East and Africa; and Asia.

Dell has been quite outspoken about the need for acquisition-led growth and recently recruited David Jones, an IBM executive looking after Big Blue's merger, acquisition, and divestiture strategy.

Dell has long hankered after a piece of the IT services business, and had been thought by some to be a suitable partner for EDS. However, it was arch rival HP that snapped up that particular service giant.

Currently Dell has a consultancy services business positioned as being an antidote to large-scale consultancies with a focus on very defined, short-term or modular engagements with measurable and deliverable outcomes.

These seem well-geared to small and medium enterprises wary of getting into the clutches of big consultancies such as Arthur Andersen. A successful Perot acquisition will immediately result in a two-tier consultancy approach which we can expect to be unified somehow over time.

Overall Dell should gain additional standing amongst the ranks of enterprise CIOs and be better able to compete with HP, still integrating its EDS purchase, and IBM with its Global Services arm.

To ram this point home a Dell statement says: "Over the past four quarters Dell and Perot Systems had a combined $16bn in enterprise-hardware and IT-services revenue, with about $8bn from enhanced services and support."

Both companies are Texan with Ross Perot being a bit of a sterotypical ten gallon hat, larger than life, get-out-there-and-do-it entrepreneur. Standing for the presidency twice is all part of the Perot image. One of his noted quotes is: "If you see a snake, just kill it - don't appoint a committee on snakes."

The transaction, subject to customary government approvals and other conditions, is expected to close in Dell’s November-January fiscal quarter. ®

More about


Send us news

Other stories you might like