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Perot Systems Purchase Expands Dell Perot Systems Purchase Expands Dell's Service Offerings
By Mark Long
September 21, 2009 12:10PM

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Dell will acquire Perot Systems for about $3.9 billion to significantly expand its enterprise service offerings. Dell CFO Brian Gladden told investors that the deal is a critical part of a strategy to transform the company. An analyst said the deal gives Dell "immediate credibility" in services, especially outsourcing.
 


Dell has agreed to acquire IT services company Perot Systems for about $3.9 billion in a deal which Dell said it will fund entirely from cash on hand. The respective boards of both companies have already approved the deal, which is expected to close in Dell's January-ending business quarter.

Dell CEO Michael Dell said he considers Perot a premium asset that significantly expands Dell's enterprise Relevant Products/Services capabilities. "There will be efficiencies from combining the companies, but the acquisition makes such great sense because of the obvious ways our businesses complement each other," Dell said.

Moreover, the two companies already have a well-established and productive working relationship, Dell's CEO told investors on Monday. "Jointly we have developed IT-centric solutions and innovative services for our shared customers -- particularly in the health care and federal government" market segments," Dell said.

An Anchor Acquisition

Founded in 1988 by IT industry pioneer and third-party presidential candidate H. Ross Perot, Perot Systems provides applications, technology, infrastructure Relevant Products/Services, business processes and consulting services on behalf of businesses and organizations in North America, Africa, Asia, Europe and the Middle East. In its most recent four quarters, Perot Systems generated $2.6 billion in revenue from applications services (40 percent), business process outsourcing (24 percent), and business structure services (36 percent).

"We believe this is a critical acquisition in our strategy to transform the company," Dell CFO Brian Gladden told investors. "IT services will be a big part of our strategy and we were very focused on getting a great anchor acquisition."

It also was "very important" for Dell to acquire a scalable asset -- something that the company could "use in combination with its direct customer Relevant Products/Services footprint and customer relationships to grow more quickly," Gladden said. "In addition, we think we can bolt on other assets, including our own."

One key benefit of the acquisition is that it gives Dell "immediate credibility" in services, noted IDC analyst Alexander Motsenigos. "This is especially the case in outsourcing, which has been a challenge for Dell," Motsenigos said.

Dell also expects to benefit from Perot Systems' particularly strong off-shore presence. "We will now have 23,000 people providing services out of India as a result of this [deal] -- not including other low-cost geographies," Michael Dell said. "So we think that this is a plus for the combined services organization." (continued...)

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