Dell pays $3.9bn for Perot Systems

World number two PC maker Dell is to acquire its Texan neighbour, IT services biz Perot Systems.

by
Last Updated: 31 Aug 2010

The deal values Perot – founded by twice US presidential candidate H Ross Perot in 1988 - at around $30 a share. That’s a tasty premium of nearly 70%, which may be why the deal was so promptly wrapped up.

Dell’s founder Michael Dell seems very pleased with the deal, saying ‘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.’

And to be fair, the rationale looks pretty straightforward – especially by the convoluted standards of the tech industry. Dell makes kit, while Perot is a services provider – the combination of the two should present plenty of cross-selling value-add potential.

What’s more, the fact that the two firms are practically neighbours – Dell in Round Rock, Texas, Perot in Plano, a mere 200 miles north up I-35 - should help the notoriously tricky business of post-merger integration go a bit more smoothly too.

But for those who remember the glory days of Dell back in the 90s - when it pioneered direct sales via the web, and practically invented the concept of mass customisation by allowing customers to ‘build’ a PC to their own spec online - it seems a teeny bit of a come down.

For, while IBM sold out its manufacturing arm to the Chinese, and HP became a services rather than products business, Dell continued to stick to its manufacturing roots. Its supply chain was a legendary model of efficiency and its customers – for the most part – were happy bunnies.

For a while it almost looked like Dell might become the Apple of the corporate IT world, a branded provider with at least some of the kind of fanatical loyalty that Steve Jobs and his crew inspire.

So the purchase of Perot, for all its commercial good sense, is tantamount to an admission that you just can’t earn a crust in corporate IT these days without a services/consulting arm to earn a decent margin on. If Dell can’t do it, no-one can.

It also leaves the sometime market leader looking like it’s playing catch up – arch-rival HP last year paid $13.9 for IT consultancy EDS, for much the same reasons. Funnily enough, EDS was also founded by H Ross Perot, so it’s no big surprise that he is a multi-billionaire, is it?

 

In today's bulletin

Dodgy builders fined £130m for price-fixing scam

'Magic circle' lawyers lose their power as fees get slashed

A tale of two Cities as pound dies and FTSE flies

Dell pays $3.9bn for Perot Systems

Nectar card tycoon Mills sets sail for America's Cup

 

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today