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Dell to buy Perot Systems for $3.9 billion

The PC maker moves into the IT services business with this latest acquisition.

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By Julianne Pepitone, CNNMoney.com staff reporter

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NEW YORK (CNNMoney.com) -- Computer maker Dell will acquire information-technology company Perot Systems for $3.9 billion in cash, as the PC giant looks to expand beyond its core hardware business, the companies said Monday.

The move marks a strategic shift for Dell, which has stuck with its personal computer and server sales even as its rivals like Hewlett-Packard (HP) and IBM (IBM, Fortune 500) continue to diversify amid slumping hardware sales.

"We've seen this coming, but I'm surprised it took as long as it did," said Gartner analyst John Enck. "This path is a necessary ingredient to future success, which being a hardware-only provider would have limited."

Dell plans to buy Perot for $30 per share, a 67% premium to the IT firm's Friday closing price of $17.91. The deal is expected to be completed during Dell's fiscal fourth quarter ending in January.

Perot (PER) offers technology services in a range of sectors, from health care to government, as well as software and consulting. The unit will remain based in Plano, Texas.

Dell, based in Round Rock, Texas, said in its August earnings report that it expects stronger sales in the second half of the year, although average sale prices on PCs have been falling sharply. Quarterly sales were down 22% to $12.76 billion from $16.43 billion a year ago.

'Gun shy' Dell

Dell was likely "gun shy" about making any deals, despite the fact that its rivals have been diversifying, because of a late-1990s storage networking acquisition that "didn't go anywhere," Enck said. The company phased out that operation in 2001.

"They've been careful about buying a services company, but they've matured," Enck said. "That, coupled with environmental pressures, pushed them to buy because they realized they had to do something different in order to grow."

The Perot acquisition will "absolutely" broaden Dell's market share, Enck said, adding that the company will likely wait to digest this acquisition before it plans to make any more additions.

"Dell's rivals are always worried about Dell," Enck said. "Today's announcement will certainly give them pause to reflect." To top of page

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