Takeover of Perot by Dell

The recent takeover of Perot Systems by the computer giants Dell took a lot of people by surprise – not least Ross Perot himself, who when he first sat down with his Dell counterpart Michael Dell was much of the opinion that he was just going to have a brief chat about being in control of major computing companies. Indeed, that was how it started, and when Dell did broach the idea of a takeover the former Presidential candidate initially nixed the approach. It has all gone through now, though, with Dell paying $3.9billion to take control.

Surprise Move By Dell to takeover Perot

Many people are expressing a mix of surprise at the deal and admiration for Dell’s thinking. Other major computer companies have made the move from hardware to services, not least the big two: Hewlett Packard and IBM, but Dell have done things differently from both. While IBM created its own services department at no small cost, and Hewlett Packard took over EDS – a large and established company in its own right – Dell chose to take over a company which, though wealthy, was pretty small and could integrate directly into the Dell portfolio. While Dell were struggling somewhat financially in the global financial crisis, they had enough money to take over a company that will be making plenty of its own in times to come.

Cunning Tactic by Dell?

With the vast systems experience that Perot brings to bear, they also have plenty of other attractions for Dell. Not least among these is its strong reach in the government and health care industries. As President Obama plans to lift the US out of the financial bad times, he is not afraid to start spending – including his intentions of providing aid to the healthcare industry – and this will make a big difference to what Dell can take from the coming few years. The beauty of the deal – and this may have a little to do with the fact that Ross Perot was the founder of Dell too – is that there is very little, if any, downside for the bigger company.

Some might say that the downside was in the $3.9 billion price tag – believed by the market to be somewhat excessive for a company that generated $2.8 billion in sales in the past twelve months. Some might say that for Perot’s size the price tag was very weighty indeed. This fails to take into account that Perot has done very well for a company of its size and that that size makes it far more manageable as a merger partner than a larger company like EDS. In buying Perot, Dell has inherited a partner which fits right into its structure, filling an existing need and making no-one obsolete.

Conclusion for Dell & Perot deal

In fact, it could be said that this is not a takeover, but the purchase of a handy systems upgrade. It won’t make the profit margin instantly much healthier, but will expand what Dell can offer in future, making a very sound long-term investment.

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