Last week, Dell Inc. (DELL) made a $3.9 billion (U.S.) deal to acquire Perot Systems Corp. (PER) Last year, Hewlett-Packard Co. (HPQ) made a $13.2-billion deal to acquire Electronic Data Systems Corp. Now, Xerox Corp. (XRX) is making a $6.4 billion deal to acquire Affiliated Computer Services Inc.(ACS)
That’s a trend – Richard Tse, an analyst at National Bank, believes that it is now open season on information technology services.
“In our view, similar to other large IT Services transactions (most recently Dell acquiring Perot and HP acquiring EDS), Xerox is looking to: (1) upsell an installed base; (2) obtain a base of recurring revenue; and (3) augment their low hardware margins,” he said in a note.
The trend, of course, again raises the issue of whether Canada’s CGI Group Inc. (CGI) – Mr. Tse reiterated his “outperform” recommendation on the stock – is going to be a target sometime soon. Certainly, the Xerox news failed to do much to CGI shares on Monday. In mid-morning trading, the shares traded at $12.83, up 5 cents or 0.4 per cent.
Last week, the Globe and Mail reported that CGI had not been approached by interested parties, according to the company’s chief executive. Indeed, chief executive and president Michael Roach said that the company will be an IT consolidator rather than a target.
However, that hasn’t blunted takeover speculation, with Cisco Systems Inc. (CSCO), Microsoft Corp. (MSFT) and International Business Machines (IBM) bandied about as potential bidders. For his part, Mr. Tse thinks CGI shares could be worth as much as $17.50 in a takeover deal.