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Dell offloads services arm to fund EMC acquisition

Dell dumps its services business as it gets ready to take over EMC

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Dell has offloaded its services division, which it acquired from Perot System in 2009, for $900m less than it originally paid for it.

The sale will help fund Dell’s $67bn acquisition of EMC. It demonstrates a clear shift away from rivals Hewlett Packard Enterprise (HPE) and IBM, both of which are pushing the strengths of their services businesses.

In March 2016, HPE CEO Meg Whitman said HPE was in a strong position to take advantage of the disruption in the market, which would occur as result of Dell’s EMC acquisition.

NTT Data, the services arm of Japanese telco NTT, agreed to purchase Dell Services for $3bn. The sale of Dell Services includes Dell Services datacentres in the US, UK and Australia. 

NTT Data said the acquisition will enable the company to establish itself as an IT and business process outsourcing business for the healthcare sector, where Perot traditionally had a stronghold in the US market.

It said the deal would significantly boost its presence in North America, strengthen and expand its global delivery network and bolster its infrastructure services capabilities.

NTT Data’s CEO John McCain said: “Dell Services is a well-run business and we believe its employee base, long-standing client relationships and the mix of long-term and project-based work will enhance our portfolio.

“We are confident this transaction will be positive for clients, employees and shareholders, and will advance our collective vision to be an innovative partner for our clients.”

Read more about Dell/EMC

According to analyst TechMarketView, the purchase by NTT would represent another sizeable investment in IT services by the Japanese firm following its acquisitions of Dimension Data and US services company, Keane, in 2010.

Other acquisitions include Cirquent in Germany, Value Team in Italy and offshore-centric Intelligroup.

“We have been critical of Dell’s acquisitions strategy – or, more to the point, the integration of those acquisitions – in software and IT services,” the analyst said.

“Many of the acquired entities were actually quite interesting and useful add-ons, but Dell failed to take full advantage of these once they were under its ownership. We need to examine the details of the NTT deal further to understand if anything other than Perot is included.”

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