Sources: Dell is looking to sell Perot Systems for more than $5B to raise cash for EMC deal
Dell Looks to Sell Perot Systems for More Than $5 Billion to Raise Cash for EMC Deal — Dell is looking to sell Perot Systems, a key piece of its technology outsourcing business, for more than $5 billion, sources tell Re/code.
Context & Ripple Effects
Two months after agreeing to buy EMC for roughly $67 billion — a structure of $27.25 a share in cash plus VMware tracking stock that front-loads a huge cash obligation onto Dell — the company is now shopping for the money. Perot Systems, the technology-outsourcing arm that anchored Dell's services push, is the asset on the block at a reported price above $5 billion.
The sale matters because it trades recurring services revenue for deal headroom on the $67B EMC acquisition. How that trade-off plays out is already visible in the arc of related coverage: strong post-deal results paired with heavy deleveraging, and eventually a board revisit of Dell's corporate structure.
First-order effects
- Dell converts a core piece of its outsourcing business into more than $5 billion of cash, directly narrowing the financing gap created by the EMC purchase price.
- Perot Systems' enterprise clients and workforce change hands mid-relationship, and Dell loses the services anchor that let it bundle outsourcing with hardware sales.
Second-order effects
- Stripped of Perot, the combined Dell-EMC leans harder on storage hardware and the VMware tracking-stock economics that made the offer possible — raising the stakes on the very structure used to fund it.
- The cash infusion buys time against the leverage bill that surfaced later: Dell reported Q4 revenues up 58% YoY on EMC while paying down $7 billion of debt, and by early 2018 the board was weighing strategic options including an IPO.
Third-order effects
- If the pattern holds, mega-acquisitions financed with cash plus tracking stock force serial asset sales followed by public-market re-entry — the 2018 board discussion of an IPO is that logic arriving on schedule.
- Services businesses become deal currency rather than strategic ends in themselves: outsourcers get sold to fund product-company consolidation, decoupling implementation work from the vendors who once bundled it.
The trend: Legacy hardware consolidators are financing mega-mergers by selling off services assets, then managing the resulting debt through paydown and eventual return to public markets.