By Franklin Paul and Gabriel Madway
NEW YORK/SAN FRANCISCO (Reuters) - DELL (DELL.NQ)Inc plans to buy Perot Systems Corp for about $3.9 billion, paying a steep 67.5 percent premium to expand its technology services business and compete with Hewlett-Packard Co and IBM.
Perot Systems, a computer services provider founded in 1988 by former U.S. presidential candidate Ross Perot, would be the largest ever acquisition by Dell and comes after extended speculation about its M&A strategy.
Dell, which lags far behind HP and IBM in the services arena, is looking to buy a company with a strong focus on serving healthcare and federal government customers. It expects the deal to add to earnings in fiscal 2012, but some analysts thought the price tag may have been too high.
Dell said it would pay $30 per share for Perot Systems. Its Friday's closing price was $17.91 on the New York Stock Exchange.
J.P. Morgan analyst Mark Moskowitz said the price is 1.4 times Perot Systems' sales, compared to HP's purchase of EDS for 0.6 times sales last year. That would make the acquisition a little expensive, although it was good for Dell to lessen its dependence on personal computers, he said.
"We do see the building block as being compelling, but the purchase price seems relatively rich," Moskowitz wrote in a research note.
Perot shares jumped 65 percent to close at $29.56 while Dell shares fell 4.1 percent to $16.01.
The deal comes as large technology companies expand into higher margin IT services to secure stable and recurring revenues as computer hardware becomes cheaper.
Dell is the world's No. 2 maker of PCs, with roughly 60 percent of its revenue coming from that market. The company has been trying to diversify its range of offerings, and services currently comprise only around one-tenth of sales.
HP made a splashy foray into the services segment with last year's $13.2 billion purchase of EDS, founded by Ross Perot in 1962. HP is the world's No. 1 PC maker and No. 2 IT services player, behind IBM.
Kaufman Bros analyst Shaw Wu said Dell is finally taking a step to address some of its weaknesses, but it remains to be seen how much impact the deal will have as Dell's combined services offering would still be much smaller than its rivals.
"This still doesn't have quite the scale to compete ... but it's also not so outrageous it will be difficult to integrate," Wu said.
FOCUSED ON HEALTHCARE, GOVERNMENT
Perot specializes in providing business processes and technology consulting services, with a strong client base among healthcare, government and other commercial segments. More than a third of its 23,000 employees are based in India.
Perot Systems estimates it is the largest provider of IT services to hospitals, operating in roughly 1,000 around the world. Around half its sales come in the healthcare sector, with another quarter in government services.
Perot Systems is expected to become Dell's services unit. It will be run by Peter Altabef, the current chief executive of Perot Systems.
Forrester analyst Paul Roehrig said Dell's services offering has traditionally been tied to hardware support, but the company has been trying to shift into more managed services, which the Perot deal should help facilitate.
"It's a pretty solid deal. Dell needed more firepower in the services space ... they get some great customers in some attractive verticals."
On a combined basis, the two companies have posted services revenue of roughly $8 billion over the past four quarters.
Dell said the deal may open the door to the sale of Dell PCs to Perot's clients, but emphasized that the main target was the expansion in IT services.
"This acquisition makes great sense because of the obvious ways our businesses complement each other and enable us to grow profitably over time," Dell Chief Executive Michael Dell told analysts on a conference call.
The two companies spend a combined $4 billion in the areas they plan to integrate, and Dell hopes to achieve cost savings of about 6 to 8 percent, or $300 million over two years.
Dell currently has about $12 billion in cash and short-term investments, and Michael Dell said the company continues to look at acquisitions. Besides services, Dell has expressed interest in areas such as software.
The Perot family owns roughly 30 million shares of Perot Systems, or a 25 percent stake. Ross Perot Jr, Perot Systems' chairman, will be considered for appointment to the Dell board.
(Additional reporting by Ritsuko Ando in New York; Editing by Phil Berlowitz, Gary Hill)
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