What Will Dell/Perot Mean to Dell Reseller Channel Partners?

By Jessica Davis  |  Print this article Print

Dell's reseller channel partners can rest easy following the Dell acquisition of IT consulting firm Perot Systems, says Dell's global channel chief. Dell's move follows HP's acquisition last year of IT outsourcing and consulting company EDS and IBM's strength in the enterprise services market with its IBM Global Services.

Dell’s acquisition of Perot Systems won’t have a major impact on Dell’s reseller channel partners in its PartnerDirect program.

That’s according to Greg Davis, Dell’s global channel chief, who was quick to issue a statement of his own to reassure the company’s channel partners in the wake of Dell’s announcement of the $3.9 billion acquisition of the enterprise services consulting company.

Click here for 'A Tale of Two Services Acquisitions': Dell/Perot and HP/EDS

"The Dell-Perot acquisition is an important step for Dell, and illustrates our continued focus on enterprise computing," says Davis in his statement. "The acquisition expands Dell’s enterprise services offerings, while minimally impacting our PartnerDirect registered and certified partners and the deals they register with Dell. We remain committed to providing the best portfolio of products and services for our channel partners and their customers."

Dell announced Sept. 21 that it planned to acquire Perot Systems, and that the deal was approved by the boards of both companies a day earlier.

Dell’s move follows a similar deal by Hewlett-Packard last year when it acquired IT outsourcing and consulting firm EDS. And while EDS hasn’t delivered the big returns that many had hoped for in the wake of the recession, analysts say that the deal has insulated HP from taking an even bigger hit to revenues during tough economic times.

"EDS is considered to be a successful acquisition at this point; it serves the purpose of a hedge in a down market, and financially it hasn’t dropped as much as other units, showcasing that it is performing this service," says Rob Enderle, principal analyst with the Enderle Group.  

"Services revenue tends to move slowly up or down, and that can be a big advantage in a declining market like we currently have," he adds.  "It could be problematic during a recovery, but it often gets factored out by investors, who like to focus on more high-profile products, making it a stronger benefit in a down market than it is a liability in an up market."

Dell’s acquisition of Perot Systems is likely to help Dell in a similar way, and shores up deficiencies Dell had in its portfolio against IBM with its IBM Global Services and HP with its EDS acquisition.

Last year before the recession began, HP paid $25 per share for EDS, while Dell’s acquisition of Perot Systems calls for a price of $30 per share in a market where so many company valuations have dropped.

Observers point out that Dell needed the services business, and the number of likely acquisition targets that could fulfill that had dwindled.

"Perot is really the last big property that likely can be purchased," says Enderle. "I imagine either or both HP and IBM helped drive up the cost."

Dell says that over the past four quarters Dell and Perot Systems had a combined $16 billion in enterprise-hardware and IT-services revenue, with about $8 billion from enhanced services and support.

Dell says the deal is expected to close in Dell’s November-January fiscal quarter.
Once complete, Perot Systems will become Dell’s services unit and be led from Plano, Texas, by Peter Altabef, Perot Systems' CEO. Dell directors are expected to consider Ross Perot Jr., Perot Systems’ chairman of the board, for appointment to the Dell board, according to Dell.

Dell expects the transaction to be accretive to Dell’s GAAP earnings in its fiscal 2012.

Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com

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