The Wall Street Journal | Dell Buys Perot Systems

Dell Inc. agreed to buy Perot Systems Corp. for $3.9 billion, paying a fat premium to play catch-up with big tech rivals that have been using the recession to expand beyond their traditional businesses.

Dell said Monday it agreed to buy Perot, which sells information-technology services to institutions, for $30 per class A share -- a 68% premium on Perot's closing price Friday of $17.91.

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Michael Dell at the company's annual shareholders meeting in July.

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The deal is Dell's biggest ever and the most striking move beyond its core personal-computer business, where profits have dwindled. Combining Perot with Dell's existing services would bring Dell an $8 billion a year tech-services business and a shot at competing better with International Business Machines Corp., Hewlett-PackardCo. and others in selling services such as email systems and back-office computers.

"If they'd been out ahead of this thing, they probably wouldn't be paying a high price, and they might not be buying Perot," said Peter Bendor-Samuel, whose company, Everest Group, has consulted with Dell on services strategy. While he said the deal will benefit Dell, he said an earlier entrance into the services area might have allowed Dell to get by with less expensive acquisitions.

Founder Michael Dell built his company by bringing the PC revolution to masses of office workers and consumers. But Dell in recent years lagged behind other corporate-technology companies in diversifying, watching as tech titans like H-P, Cisco Systems Inc. and Oracle Corp. moved beyond their traditional turf -- and into one another's -- in efforts to grab a bigger piece of the tech-spending pie.

Last year, H-P expanded its services division by buying IT services giant Electronic Data Systems Inc. for more than $13 billion. This year, Oracle agreed to buy Sun Microsystems Inc. for $7.4 billion, moving into the computer-hardware market for the first time. Both companies are trying to compete with IBM, which provided a blueprint for the new IT model by buying PriceWaterhouseCoopers Consulting in 2002 for $3.5 billion and subsequently getting out of the low-profit PC business.

To benefit from the Perot deal, Dell will have to expand the company's business beyond its traditional strengths, analysts said. Doing that will require Dell -- which has little expertise in services -- to diversify a business that Perot was unable to expand on its own. Dell will have to do so in a competitive market in which IBM, H-P and Indian tech-outsourcing firms have been aggressive in trying to steal customers from one another.

Services are an increasingly important part of technology sales, as businesses rely on consultants to recommend which products to buy. A risk for Dell, analysts said, is that Perot Systems isn't as big as services arms of Dell's rivals and that it will be difficult to turn it into a global organization along the same lines.

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[r4i software]

Dell is the most leading company in world market so it's product are always been different than others..