DealZone

Is Dell overpaying for Perot?

With something like $10 billion in cash, Dell wouldn’t seem to be stretching itself to buy Perot Systems. But the $3.9 billion it is offering represents a 67 percent premium, so Dell shareholders should probably ask themselves whether Perot’s business is worth so much.

Perot is a business service company with a big component dedicated to health information. It was founded in 1988 by Ross Perot — the same Ross Perot who ran for U.S. president as an independent in 1992 and 1996.

Dell’s cash pile is burning a hole in its pocket. It has said it wants to step up acquisitions, and services businesses are a logical target area, with higher margins and steadier revenue than the business of building and selling computers that made Michael Dell (pictured in shades above) the tech mogul he is today.

But why does Perot command such a hefty premium? “We think this acquisition is expensive,” and even pricier than Hewlett-Packard’s purchase of EDS last year, said analyst Shannon Cross of Cross Research. She says the cost-saving benefits are few. Even Dell says cross-selling benefits won’t materialize until 2012.

“Dell investors should be outraged at paying such a large sum for such a small, vertical operation,” said Douglas A. McIntyre of Wall St 24/7.

Dell hunts for a banker

rtr21rzjDell is looking to hire an M&A chief, The Wall Street Journal reports, adding that the computer maker has been interviewing “investment banking and technology industry veterans” for the newly created executive position, and could announce a hire within the next month.

Two bankers have told me in the past few weeks this is the case. One Silicon Valley banker said Dell has been trying to fill the position for quite a while, but no M&A banker worth his or her salt wants to join the company, which is notorious for lagging behind on acquisitions, even as rivals like Cisco, Hewlett-Packard and IBM go forth and acquire every few months.

“Joining Dell is basically as good as saying goodbye to your M&A career,” said a banker who has received feelers from the Round Rock, Texas-based company.

Everyone wants to soak up some Sun

rtxdiroThe Wall Street Journal’s Deal Journal blog wrote a post yesterday about how Sun Microsystems, which has agreed to be acquired by Oracle, now looks “less dumb” than before. In the days after IBM walked away from the negotiating table about two weeks ago, the media was rife with comparisons between Sun and Yahoo, which bungled up a $47.5 billion buyout offer from Microsoft last year.

But now we all know why Sun was driving such a hard bargain with IBM, as Deal Journal says. It actually had some negotiating leverage because Oracle was already waiting in the wings.

Sources told me yesterday that Oracle began courting Sun way back in end-February/beginning-March. Initially, the business enterprise software maker sent feelers to Sun about buying just its software business. After all, Sun’s Java programming language and Solaris operating system work very closely with Oracle products.