Dell buys Perot for $3.9bn

September 22, 2009 by AP | 1 Comment

The Deal

Dell will buy Perot Systems, a technology services company based in Texas, in a transaction valued at $3.9bn
Perot Systems is currently valued at $2.6bn
Dell is offering a premium of 67.5% on all outstanding common stock of Perot, with $30 in cash per share. Perot’s shares had a closing price of $17.91 on Friday.
Perot CEO Peter Altabef will head the joint services unit of Dell.

dell-perot

The Cause

Dell’s revenue from services is $5.1bn. Dell needed a huge jump in this revenue to compete against its global hardware competitors HP and IBM. The best thing Dell could have done is to buy out an already established technology services unit.
Though Dell had good earnings from services, but Dell was never very well known in the services industry.
Perot Systems’ revenue was down 10% in Q1-09 compared to Q1-08, and down 14% in Q2-09 compared to Q2-08. Perot too needed a bigger platform to compete against the low-cost technology solutions companies based in India.

The Effect

The combined revenue of Dell-Perot comes to $7.7bn, inching it closer to the $8.4bn revenue of HP, but still quite far away from IBM’s revenue of ~ $16bn. (revenues are for software and services segment only)
The acquisition could lead to Dell-Perot investing more in India, and expect a few more services based companies being acquired by Dell.
If Dell plans to take HP and IBM head on in the services segment then it might look for more cost-cutting in operations, which means more employment generation in India.

Microreviews