Will $3.9b Dell acquisition of Perot Systems payoff?

Dell agreed to buy Perot Systems for $3.9 billion, undertaking its biggest purchase ever to compete with International Business Machines and Hewlett-Packard in computer services. Dell, the second-biggest maker of personal computers, offered $30 a share in cash, about 68% more than Perot’s closing price September 18. The acquisition probably will boost profit in fiscal 2012, Round Rock, Texas-based Dell said in a statement on Monday.

Chief executive officer Michael Dell is pushing into computer services as consumers and companies curb PC purchases to cope with the economic slump. Larger services units helped IBM and Hewlett-Packard withstand the recession better than Dell, whose sales slumped 22% last quarter. The new services business would have annual sales of about $8 billion.

“This significantly expands Dell’s enterprise-solutions capabilities,’’ CEO Dell said in the statement. “The acquisition makes such great sense because of the obvious ways our businesses complement each other.’’

Once the transaction is complete, Perot Systems, based in Plano, Texas, will become Dell’s services unit. The purchase price is more than twice what Dell paid last year for EqualLogic, which was the computer maker’s biggest acquisition until now.

Perot Systems jumped as much as $11.89, or 66%, to $29.80 in trading before US exchanges opened. Dell, which ranks second to Hewlett-Packard in PC sales, fell as much as 5.6% to $15.75.

The acquisition of Perot, founded by former presidential candidate H Ross Perot, mirrors Hewlett-Packard’s purchase of Electronic Data Systems for $13.2 billion last year. EDS, the world’s secondlargest computer services provider after IBM, helped Hewlett-Packard increase services revenue 93% last quarter. Sales in the PC unit fell 18%.

Dell has relied on cost reductions to help prop up profit amid the recession. The company, aiming to save $4 billion a year, has farmed out 40% of manufacturing. Still, profit dropped 23% last quarter. Perot, which sells services to industries including health care, reported an 11% drop in sales and a 3% gain in net income last quarter. The company expects to benefit from the US government’s plans for electronic health records, Peter Altabef, CEO of Perot, said in an April interview. IBM’s sales fell 13% last quarter, while Hewlett-Packard’s total revenue dropped about 2%.

The companies have benefited from long-term services contracts to maintain corporations’ computers and networks. The Perot acquisition, while not subject to a financing condition, will need government approvals and the satisfaction of other conditions, Dell said. Dell to acquire x for $3.9bn.

Agencies

Sun-Oracle deal gets OK from US Justice Dept

Business software maker Oracle Corp said it has received the Justice Department's approval to move forward with its $7.4 billion acquisition of former dot-com-era star Sun Microsystems Inc.

The deal still needs to get the go-ahead from the European Commission.

Clearance by the Justice Department had been held up over questions about the licensing of Java, a programming language that Sun invented that now runs on more than 7 billion electronic devices around the world, including cell phones and personal computers.

Sun's shareholders approved the deal in July. Another potential antitrust question could surround Sun's MySQL database, an open-source product. Some worry Oracle could make MySQL a lower priority as it tries to boost sales of its market-leading database software.

Sun's performance had been shaky for nearly a decade before Oracle outbid IBM Corp. for the Santa Clara, California-based company in April. IBM is one of Oracle's biggest database software rivals, and is a major Sun rival in computer servers.

The Sun acquisition will give Oracle more control over the development of Java, a key technology used in its products, and also thrust the Redwood Shores, California-based company into hardware, a new area for Oracle.

The Justice Department's approval was expected. Oracle's stock rose 17 cents to $22.11 in after-hours trading, having finished the regular trading session up 16 cents to close at $21.94.

Agencies

New technology that will allow users to talk to web

Giving a new dimension to the internet, the Indian research arm of the US-based IT giant IBM has developed a technology that will allow users to talk to the web and create voice sites using mobile phones.

"People will talk to the web and the web will respond. The research technology is analogous to the internet. Unlike personal computers it will work on mobile phones where people can simply create their voice sites," IBM India Research Laboratory Associate Director Manish Gupta said.

For this technology, IBM has developed a new protocol -- Hyperspeech Transfer Protocol (HSTP) -- which is similar to the Hypertext Transfer Protocol (HTTP).

"India now has over 360 million cell phone subscribers. Last month we added 15 million," he said pointing out that the research technology targets ordinary mobile phone users, all of whom may not be literate.

The spoken web is a network of voice sites or interconnected voice and the response the company got in some pilot projects in Andhra Pradesh and Gujarat and the kind of innovations that people came up with were just mind-boggling, Gupta said.

Agencies