Dell Buying Perot Systems For $3.9 Billion

alphadogg writes "Dell has agreed to buy Perot Systems for around $3.9 billion in cash, and intends to make the company its global services delivery division, the companies said Monday.The deal will allow Dell to expand its range of IT services, and potentially allow it to sell more hardware to existing Perot customers, it said. Dell's rival Hewlett-Packard expanded its own global services unit with the acquisition of EDS for $13.9 billion in May 2008. Over the last four quarters, Dell and Perot together had revenue of $16 billion from enterprise hardware and IT services, with $8 billion coming from enhanced services and support, Dell said. Perot's contribution to that is relatively small: In 2008, the company reported total revenue of $2.78 billion."

Re:$3.9 billion in cash

[smaerd]

It's "cash" as in "not in shares of stock".

Re:Sounds good for Dell

[Arthur Grumbine]

"Total Revenue" does not equal "made" in the normal sense. General Motors, now Motors Liquidation Company [yahoo.com] had Total Revenue for the last twelve months of 129 billion dollars. Yet they lost money overall (gross profit = $-1.6B) over that same period of time. What's their worth on the market right now, if you wanted to buy all their shares? 467 million dollars. Perot Systems [yahoo.com] did turn a gross profit of $487 million over the last year, but that puts the buy price at 8 times the yearly profit, maybe a good deal (there's a lot of other factors that are important, though) but not as much of a "steal" as you might have thought.

Generally speaking, speaking in generalities about a particular case is not always the wisest thing to do. Especially in something as complex as buying a multi-billion dollar corporation.

Re:I can just hear

[Red Flayer]

I've met a few people who worked for Perot Systems, and I turned down an offer from them in 2005.

My understanding (from this limited exposure to them) is that Perot Systems operates quite differently from EDS, in that offshoring is limited. Apparently (according to the mid-level managers I'm friends with) Perot Systems is leagues ahead of EDS wrt treatment of employees, keeping jobs onshore, etc. It's possible that the people I know just drank the koolaid, but that's what I've heard.

On another note, Perot Systems lost a lot of jobs in the financial industry in the past year or so. I think it's spin that the press release on the acquisition stresses the healthcare industry jobs... Perot Systems' margins have been shrinking, as have their revenues. I wonder if Dell hasn't bought a ship that's starting to take on a lot of water.