If the markets are right, Michael Dell has paid too much for Perot Systems.
Dell is paying $30 a share cash or about $3.9bn, about half its $7.9bn cash hoard, for all of Perot Systems, the IT services firm founded by H Ross Perot.
Dell says that the expanded company will provide a broader range of IT services and solutions and optimise how they're delivered; extend Perot Systems' reach globally and provide a sales track into more Perot Systems customers. The firms' combined sales for the past four quarters equate to about $16bn, about half coming from services and support.
But analysts are puzzled by the extravagant price Dell has paid for Perot. Most agree that the two Texans share a common can-do culture and autocratic leadership style, but that's it. Dell does hardware; Perot develops and manages systems.
Investors responded by dumping Dell shares, which fell from over $17 to under $16.25, and stocking up on Perot , pushing its share price from $19 to just under $30 a share.
Robert Morgan, a director of outsourcing consultancy Hamilton Bailey, who has done work for Perot Systems, reckons Dell is after Perot's expertise in health care systems.
Electronic healthcare records are the next big thing in the US and Europe, he says, and health IT is "desktop-intensive", giving Dell a massive potential market to exploit using Perot's account control.
Lee Ayling, director of EquaTerra, an outsourcing consultancy, thinks Dell wants Perot's expertise in managing very large IT infrastructures, again to be first in line when clients refresh their technology.
"I've done a number of deals where clients have been keen to buy Dell, but Dell has tried to sell them managed services," he says. "The question has always been, 'where have you done it before?' and the answer up to now has been, 'nowhere'."
Dell faces several problems. Firstly, its hardware business has been hit by the recession. In response it closed its Limerick, Ireland plant, shifting production of mobile PCs to OEM manufacturers in SE Asia, mainly China. It's unlikely that Dell will be able to buy kit cheaper.
Secondly, Perot is a second-tier player in the IT services business. IBM and HP dominate. Also, a series of changes of mind by key European customers saw Perot's market footprint shrink outside the US.
Morgan reckons it will cost a lot for Perot to rebuild that business, something Ayling reckons won't happen for at least 18 months, and then probably on the back of global deals done with US customers.
But there is potential for a game-changing move, Ayling reckons. Dell has made a fetish of simplifying the purchase process for consumers. With cloud computing growing in popularity, Dell might use Perot's software development skills (from India) and iron-clad management expertise to offer businesses cloud based applications.
Morgan thinks this might even go further. With Google and Microsoft starting to offer services in the healthcare arena, there might be room for Dell to deliver the desktop hardware, Perot to deliver specialised health (or other vertical market) software and manage the customer relationships, and for say, Google to provide the back-end processing.
Would that make Dell a contender for the NHS's business? It's probably too soon to tell, but Ayling thinks Europe, which is a less mature managed systems market than Britain, might be a happier hunting ground. In time.