Dell Acquires Services Company Perot Systems for $3.9 Billion

PC maker Dell has purchased Perot Systems, the IT services solutions company founded by Ross Perot. Perot Systems, which in 2008 generated revenue of $2.8 billion, will become Dell's services unit, fortifying an area Dell believes is ripe for growth.

Dell announced on Sept. 21 that it has acquired Perot Systems, a transaction it values at approximately $3.9 billion. The Texas computer maker has been looking to expand beyond its core PC business, particularly into the enterprise arena, and the technology and services company - founded by two-time presidential hopeful Ross Perot - will help it to do that.

"We consider Perot Systems to be a premium asset with great people that enhances our opportunities for immediate and long-term growth," said Michael Dell, CEO and chairman, in a statement.

"This significantly expands Dell's enterprise-solutions capabilities and makes Perot Systems' strengths available to even more customers around the world. 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 expects that the new company will enable it to provide a broader range of optimally delivered IT services and solutions; extend the reach of its services to additional customer segments; and supply Dell computer systems to additional Perot customers.

In early September, Dell launched an extensive line of products and services, geared toward small, cost-conscious businesses. Service is an important aspect of courting this particular corner of the enterprise, and among its offerings Dell includes a 24-hours-a-day, 7-days-a-week call-in support center.

Dell announced its second-quarter earnings for fiscal year 2010 on Aug. 27, and while revenue was down 22 percent from a year earlier, sales were up from the previous quarter. In anticipation of the announcement, Broadpoint AmTech analyst Dinesh Moorjani remarked in an Aug. 24 research note to investors that service was an area that Dell should look to grow, noting that competitor Hewlett-Packard's operating margin for services was 15.2 percent, to Dell's 4.9 percent.

"Services currently represent 10 percent of Dell's overall revenue and include basic support and asset management services. ... Dell recognizes that it has a significant corporate customer base that it can leverage, and that services is the next logical step to drive growth," wrote Moorjani. "We believe the services opportunity remains largely unexploited, and will be incremental to the top-line, as well as to margins as operating margins for services exceed the corporate average."

According to Dell, Perot Systems provides services that include applications, technology, infrastructure, business processes and consulting. Clients are said to include small businesses, as well as global institutions in commercial segments such as health care and government. The transaction is expected to close in Dell's November-January fiscal quarter. Once complete, Perot will become Dell's services unit and be led by Perot CEO Peter Altabef.

"Today's announcement is the next step in formalizing a relationship that has flourished for some time," remarked Ross Perot Jr., chairman of the board of Perot Systems, in the statement. "When my father founded Perot Systems he envisioned a global information-technology leader. The new, larger Dell builds on that promise and its own successes by taking Perot Systems' expertise to more customers than ever."