New Jersey: Dell Inc. is the latest computer hardware firm to increase its focus on the computer services market. Dell’s proposed $3.9 billion (around Rs18,798 crore) buyout of Perot Systems Corp. comes as the former expands into the higher-margin IT services space. Michael Dell, chairman and chief executive of Dell, and Ross Perot Jr, chairman of Perot Systems, spoke in an interview about the deal. Edited excerpts:
Should people now start thinking of Dell more as a services company than a hardware company?
Dell: You know we have been partnered with Perot Systems for several years now. This has been an ongoing discussion actually over the last several years that Ross and I have had. So it’s not a new topic. As you might know, the combination of these two will create an $8 billion services company and Dell has, in its own rights, substantial services assets. The addition of the Perot Systems’ capabilities will broaden the ability for us to serve a much wider set of customers and certainly will take those capabilities to new geographies. So we think it’s a very exciting opportunity and it’s all about growth.
Teaming up: Ross Perot Jr (left).Dibyangshu Sarkar/AFP. (right) Michael Dell. Harikrishna Katragadda/Mint
Ross, would you like to tell us how this specific deal came on the table?
Ross: Well, Michael and I have known each other for a long time and Michael has been a very good client and customer to Perot Systems. And Michael is a very good salesman, as we all know, and Michael has talked to us for a while about this, and we talked again this summer and we realized Michael had a very good vision for Perot System and for the Perot System team. So we realized we can jump on board with Michael and become a Fortune30 company. It can give our Perot Systems team tremendous reach around the world, give us great scale around the world and, as you know, we have these huge opportunities in China and India. Teaming up with Dell will give us great scale in order to capture these opportunities.
Some people say that it’s the Dell model which got you to where arguably you’re one of the most successful start-ups in the history of the planet. But is that chip selling the way you used to do it?
Dell: If you look at our last quarter, we generated $1.1 billion in cash flows from operations. So I feel pretty good about the business that we have. Certainly there’s been a pause and slowdown in buying in our sector, but we have really been transforming Dell in a number of ways and one of the way we are doing that is becoming a solutions integrator, providing the best value solutions, to help companies run a very efficient enterprise architecture and enterprise solutions. And the addition of the Perot Systems’ team will really allow us to extend that to a much broader set of customers and much broader set of solutions.
Perot’s stock was down around $10 per share...you are paying $30 per share. Why did you go all the way to $30?
Dell: We think it is a very fair and full price.
Do you see more caution coming more from the business side at this point or consumer side?
Dell: In commercial organizations, large and small, I will say there has been a gradual improvement month-to-month going from late-spring through to this period. But it’s not a tremendous increase in demand.