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Perot Systems Just OK

Perot Systems (NYSE: PER  ) , which is an information technology (IT) consulting firm, said it is close to purchasing a company that should add $8 million in fiscal Q3 revenue. Which company? Management didn't disclose which one. In fact, there's still a chance the deal could fall through. Such confusion is not new for Perot Systems, and it can frustrate investors. So far this year, the company's shares are off 6%.

On Tuesday, management announced that there was an 11% increase in revenue to $635 million for the fiscal second quarter. Still, net income fell from $26 million, or $0.21 per share, to $23 million, or $0.18 per share. A big drag came from the expiration of a major contract with UBS (NYSE: UBS  ) .

Then again, there was a nice boost from a $244 million acquisition of QSS Group in January. It added about $69 million in revenue for Q2 and was neutral to earnings.

Perot Systems' core strength is in the health-care industry, and the company continues to see traction. However, there's some uncertainty with its contract with Triad, which recently sold out to Community Health (NYSE: CYH  ) for $5.1 billion. Might this hamper the growth of the relationship?

Yet again, Perot System's management was unclear on the matter.

Going forward, the company's revenue guidance for Q3 is for $650 million to $665 million. This assumes a pickup in new contracts, as well as the close of its undisclosed acquisition target. In other words, things could be a bit dicey.

It seems that investors would prefer Perot Systems to sell out to a bigger player like EDS (NYSE: EDS  ) , IBM (NYSE: IBM  ) , or Accenture (NYSE: ACN  ) -- or perhaps even do a leveraged buyout (LBO). While there are signs of consolidation in the IT services space, it is never easy to predict these things. And with tightening credit, it could also be tougher to do an LBO. In other words, it seems that investors will continue to pass on these shares.

Further Foolishness:

Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 1,951 out of 33,275 in CAPS. The Fool has a disclosure policy.

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