Sunday, February 07, 2010

Does Dell Still Have Appetite for Buys Post-Perot Purchase?

Dell (NASDAQ: DELL), the Texas-based computer giant, may make acquisitions beyond its deal with Perot Systems. The company still has USD 10bn of cash. They are looking at other targets right now and it's just a matter of finding something that makes sense and Dell’s ability to digest, which again that would depend on where the acquisition is. If it's in the services space, they should be able to digest small things right now. If it's in other spaces around the enterprise, they would probably be more aggressive in pursuing something a little bit bigger.

Dell has been integrating Perot to monetize cost synergies however additional incremental long-term opportunities are primarily geographic in nature, and they will grow as they increase their capacity by geography via organic investments and select bolt-on acquisitions similar to the Bering Point China acquisition that Perot announced in October. It is ironic that a game-changer business model has struggled in the past years with profitable growth vis-à-vis HP and others. In my opinion, this proves once again, a sustainable model should not be solely based upon “faster and cheaper” value proposition to the customers. The only driver of sustainable competitive outperformance is driven by innovation, superior customer experience and resulting brand equity.

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