Dell Will Soon Close Perot Deal

Information Week

Computer maker Dell said it successfully completed its tender offer for Perot Systems' shares and is close to completing its acquisition of the Texas-based outsourcer.

The offer gives Dell more than 90% of Perot's outstanding shares. The company announced its intention to acquire Perot for $3.9 billion in September.

It said Tuesday it expects to close the deal "promptly." Dell plans to launch a new unit, Dell Services, into which it will integrate Perot's tech and business services offerings.

The merger could be a boon for enterprises looking to implement new architectures like virtualization and cloud computing—but those benefits will only be realized if Dell can successfully manage the integration challenges that will arise upon the deal's closure.

Dell has the hardware and, to a lesser extent, software needed to form the bedrock of advanced data center implementations.

The company recently partnered with VMware to bundle VMware's View virtualization offering on its Latitude and Optiplex client machines and on PowerEdge servers. It's also customized a line of servers to run Microsoft's cloud-based Azure operating system.

Perot, meanwhile, has expertise around integration, deployment, and management. In September it launched a cloud integration service under which it advises customers on cloud computing architectures, combines offerings from different vendors, and hosts and manages cloud solutions from its data centers.

The question is whether Dell can smoothly integrate a business from a market where it's had little experience. That aside, many observers believe Dell had little choice but to diversify given its falling hardware revenues.

Dell plans to bolt on other acquisitions to enhance Perot's global footprint. To date, Perot has mainly been a player in the U.S. market.

Current Perot Systems CEO Peter Altabef is expected to continue leading the operation. Plans also call for Perot chairman Ross Perot Jr. to join Dell's board. Dell said it believes the acquisition will contribute positively to earnings by 2012.

Dell's Foray Into IT Services

Dell to acquire Perot Systems for $3.9 billion

Story from CNN Money

NEW YORK (CNNMoney.com) -- Computer maker Dell will acquire information-technology company Perot Systems for $3.9 billion in cash, as the PC giant looks to expand beyond its core hardware business, the companies said Monday.

The move marks a strategic shift for Dell, which has stuck with its personal computer and server sales even as its rivals like Hewlett-Packard (HP) and IBM (IBM, Fortune 500) continue to diversify amid slumping hardware sales.

"We've seen this coming, but I'm surprised it took as long as it did," said Gartner analyst John Enck. "This path is a necessary ingredient to future success, which being a hardware-only provider would have limited."

Dell plans to buy Perot for $30 per share, a 67% premium to the IT firm's Friday closing price of $17.91. The deal is expected to be completed during Dell's fiscal fourth quarter ending in January.

Perot (PER) offers technology services in a range of sectors, from health care to government, as well as software and consulting. The unit will remain based in Plano, Texas.

Dell, based in Round Rock, Texas, said in its August earnings report that it expects stronger sales in the second half of the year, although average sale prices on PCs have been falling sharply. Quarterly sales were down 22% to $12.76 billion from $16.43 billion a year ago.
'Gun shy' Dell

Dell was likely "gun shy" about making any deals, despite the fact that its rivals have been diversifying, because of a late-1990s storage networking acquisition that "didn't go anywhere," Enck said. The company phased out that operation in 2001.

"They've been careful about buying a services company, but they've matured," Enck said. "That, coupled with environmental pressures, pushed them to buy because they realized they had to do something different in order to grow."

Perot offers technology services in a range of sectors, from health care to government, as well as software and consulting.

The Perot acquisition will "absolutely" broaden Dell's market share, Enck said, adding that the company will likely wait to digest this acquisition before it plans to make any more additions.

"Dell's rivals are always worried about Dell," Enck said. "Today's announcement will certainly give them pause to reflect."