Dell (NASDAQ:DELL), like Hewlett-Packard (NYSE:HPQ) before it, wants to be the next IBM (NYSE:IBM). The leading PC maker this morning announced a $30-per-share cash bid for Perot Systems (NYSE:PER), a 68% premium over Perot's Friday close.
Perot, which produced $2.8 billion in 2008 revenue, competes with IBM, Accenture (NYSE:ACN), and Hewlett-Packard's EDS business unit for large, technology-driven services contracts. IBM has done well in this area by combining technology sales with consulting gigs. HP has since entered the business via EDS. Now Dell is buying services strength with Perot.
Shares of Dell were down nearly 4% in early trading, leaving CEOs Michael Dell and Ross Perot -- a one-time presidential candidate and favorite target of comedian Dana Carvey -- to defend a deal to skeptical shareholders. Michael Dell seems happy to do so.
"We consider Perot Systems to be a premium asset with great people that enhances our opportunities for immediate and long-term growth," Dell said in a press release. He continued:
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. [Emphasis added.]
Which obvious ways, you ask? That's not clear from the press release. There's no data about combined accounts or known synergies, such as how often Perot consultants recommend Dell's PCs and servers.
"Obvious" instead appears to refer to a simple axiom. To paraphrase a conversation that probably occurred before a contract was signed: "Dell sells services, Perot sells services -- why don't we sell services together? Why should IBM and HP have all the fun?"
Perhaps surface-level synergy is enough. Perhaps Dell will realize extreme value in fiscal 2012, when this deal becomes accretive to GAAP earnings. I still return to a simple thought: If everyone wants to be IBM, why not just own IBM? I have for years, and I'm planning to hold for many more.
But I've had my say. Now it's your turn to weigh in. Can Dell become the next IBM, or is this a desperate move by a desperate follower? Please take a moment to vote in the poll below, and then leave a comment explaining your rationale.
