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9/21/2009
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Rajan Chandras
Rajan Chandras
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Dell-Perot Deal Augurs Well for Customers

Hot off the press! In a marriage of convenience, Dell just announced the acquisition of Perot Systems -- a deal that, while not particularly awe-inspiring or exciting, has very positive implications for customers and the combined businesses.

Hot off the press! In a marriage of convenience, Dell has announced the acquisition of Perot Systems -- a deal that, while not particularly awe-inspiring or exciting, has very positive implications for customers and the combined businesses.

Dell and Perot Systems have been "weekend lovers" for a long time -- Dell is based at Austin, TX, while Perot Systems is based near Dallas, a mere 200 miles away. Some analysts have seen this as a compatible consummation long in the making. Nonetheless, it's always satisfying when things happen as expected.

The acquisition price has been set at $3.9 billion -- a nearly 70% premium over market value. Combined sales will be around $57 billion, but the more pertinent number is as follows: the combined services revenue for Dell and Perot Systems will be about $8 billion.There is significant synergy between the two companies in the services sector: Dell service is largely centered on its (dwindling) hardware/infrastructure sales, while Perot Systems is a leader in infrastructure services and outsourcing. Dell desperately needs to shore up sagging revenues; Perot Systems gets an enviable international client base handed to it on a platter.

While Perot Systems is relatively small -- $2.7 billion in sales vs. a much bigger (though not necessarily more solid) $54 billion for Dell -- the real value of Perot lies in the following: Whereas Dell service is, naturally, limited (for the most part) to servicing their technology sales, Perot has expertise across a much broader spectrum of services.

Customers stand to benefit from this synergy in infrastructure implementation and maintenance. As cloud computing, virtualization and "anything-as-a-service" continue to rise slowly but steadily, it appears that infrastructure is leading customer-facing solutions in capabilities and adoption. Server and storage virtualization, for example, are already considered as established mechanisms for cost control and service optimization, while in cloud computing too, companies offering infrastructure services (e.g. Amazon and Google) are way ahead of companies that provide business solutions based on clouds (can you think of even one, offhand?).

The Dell-Perot Systems combination is very smart thinking, and it doesn't just take care of bottom-line financials (combined revenue, profitability, market opportunities etc.). Equally or even more importantly, this deal sets up the combined entity for leadership in infrastructure services for tomorrow's computing paradigm.Hot off the press! In a marriage of convenience, Dell just announced the acquisition of Perot Systems -- a deal that, while not particularly awe-inspiring or exciting, has very positive implications for customers and the combined businesses.

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