Searching for growth and better margins, Dell (DELL-OLD) is expanding its enterprise IT consulting business by acquiring Perot Systems (NYSE:PRE) for $3.9 billion in an all-cash deal. Perot Systems is the IT consulting and integration services company founded by Ross Perot in 1988 four years after selling Electronic Data Systems to General Motors. (EDS is now part of HP (NYSE:HPQ), which bought it last year for $13.9 billion).
The shift to consulting services will make Dell look more like IBM (and HP). Dell has an existing services division, which will be rolled into Perot Systems. Peter Altabef, the current CEO of Perot Systems, will run the combined IT Services business. Both Dell and Perot Systems are based in Texas, which should make the combination go smoother.
Perot Systems will bring about $2.5 billion in annual revenues to Dell at its current run-rate, which is not a lot considering that Dell did $61 billion in revenues last year. And Perot Systems isn’t exactly a profit machine. In the last quarter, its net income was only $31 million, on revenues of $628 million (a 5 percent net margin). Maybe Dell can pump up those revenues by plugging Perot Systems into its existing enterprise customers, which account for about a quarter of Dell’s total revenue.