Dell buys Perot Systems for $3.9 bn

World's second-largest PC maker Dell Inc today entered into an agreement to acquire computer services firm Perot Systems for about $3.9 billion, making it one of the biggest deals in the IT space since global financial turmoil hit the sector.

The terms of the agreement between the two-iconic brand were approved by the boards of directors of both companies, a statement from Dell said.

Under the terms of the agreement, Dell would commence a tender offer to acquire all of the outstanding Class A common stock of Perot Systems for $30 per share in cash. The deal would see an entity with $8 billion in services revenue.

"This significantly expands Dell’s enterprise -solutions capabilities. The acquisition makes great sense because of the obvious ways our businesses complement each other," Michael Dell, CEO and founder of Dell said.

Analysts feel Dell's move on Perot is partly motivated by a desire to expand its foothold in computer services.

The expanded Dell would be able to provide a broader range of IT services and solutions and also supply its computer systems to Perot Systems customers.

This is a second biggest deal in the IT space this year. In April, US business software company Oracle Corporation had announced to buy Silicon Valley rival Sun Microsystems for $7.4 billion.

On Nasdaq, Dell shares were quoted over 3.8 per cent down at $16.05 in early trade.

"Dell's move is in line with its competitors. HP last year acquired EDS for a larger play in services. Even IBM and Fujistsu have strong hold in services. Dell though had a services division, they have not been growing at the desired level, said Diptarup Chakraborti, principal research analyst with Gartner.

Analysts feel as the overall, business has slowed significantly in recent years, Dell has been exploring more profitable growth areas such as services.

Chakraborti said that revenues from hardware with is highly commoditised business were also plateauing.

The acquisition comes after Dell lost its No 1 position in the US as a PC maker to HP.

The computer giant expects the transaction, which is subject to customary government approvals and the satisfaction of other customary conditions, to close in November-January.

Over the past four quarters Dell and Perot Systems had a combined USD 16 billion in enterprise-hardware and IT-services revenue.

Once the acquisition is complete, Perot Systems would become Dell’s services unit and would be led by Peter Altabef, the CEO of Perot Systems.

Dell directors are also expected to consider Ross Perot Jr, Perot Systems Chairman, for appointment to the Dell board.

Ross Perot Jr said, "This transaction represents a great opportunity for our company and our associates."